Thankfully there is an easy way to remove any confusion, and in just two easy steps.
Step 1: Offer your employee a fair salary for the job they will do.
Step 2: If you have accommodation available onfarm, ask your employee if they would like to rent it for a nominated amount per week. It must be a fair market rate.
If they say yes, you should both sign a wage deduction form – a simple form that confirms your employee authorises you to deduct the agreed rent from their wages after tax.
Then ensure this rent is clearly deducted from the total salary in the pay slip.
If they prefer to live off-farm, they should organise that themselves. You then rent the accommodation to someone else, whether that is another employee or otherwise.
Doing it this way means it is very easy to manage a minimum wage. Simply divide the salary by 26 (assuming you pay fortnightly) and then again by the minimum wage (currently $14.75). This gives you the hours your employee can work in any given fortnight. Remember this is the maximum hours before minimum law standards are breached. It isn’t a target for most positions onfarm.
If you decide to pay your employees a salary in another form, different to that outlined above, then you probably can’t use the total salary package towards calculating minimum wage.
We strongly recommend the above method because:
- Employees know exactly what their salary is
- Employers know exactly what they are paying for a specific job
- Employees can easily compare farm salaries to salaries offered in other industries
- The dairy industry should attract more people because salaries are transparent
- Employees with a choice of where to live are more likely to be happy and therefore productive.
- And what are the negatives? In my opinion there aren’t any. But the ones commonly mentioned are:
- What if my employee doesn’t choose the house onfarm?
If you offered it at true market rent then financially you won’t be worse off because you can rent it to someone else for the same money.
Once they get used to an employee living off-farm most farmers really don’t mind. If you do mind you can specify in the job description the employee must live onfarm. However, you can’t then include the rent for the purposes of calculating minimum wage because it is a non-cash benefit.
Won’t my employee have to pay more tax if I charge true market rates as rent?
Possibly. However, it’s only fair that dairy employees pay the appropriate tax for the salary they receive, just as they would in any other industry.
Accommodation onfarm really can be this simple. Ask around – a lot of farmers are now doing it this way. It’s great for managing your risk and it’s great for the employment relationship – a real win-win.
For more information visit www.dairynz.co.nz/people.
• Jane Muir is DairyNZ’s people team leader.
