The ministry’s treatment of workers’ wages is different from that of Inland Revenue (IRD) and ACC. But Federated Farmers is being careful about commenting on the issue which is also vexing the Institute of Chartered Accountants (NZICA).
Katie Milne, the federation’s employment spokeswoman, said “Federated Farmers and DairyNZ are working with the MBIE’s labour inspectorate to clarify what farmers can and cannot do in regards to seasonal averaging and the minimum wage. Discussions to date with MBIE have been helpful, with our goal being to obtain an equitable outcome for our farming members.”
But Milne had shown her delight when a New Plymouth accountant aired the issue, and gave advice, at the federation’s Dairy and Sharemilkers’ section combined council meeting in Wellington in late February. Marilyn Davies, chair of the NZICA’s Regional Advisory Group, referred to an employment case last year that had focused on an employee’s pay entitlement.
The worker had left the job after working long days during the busy part of the season, but had been paid according to an average rate for the full season.
A Stratford farmer was ordered to pay more than $6000 in backpay to the worker, who was judged to have been paid below the minimum wage during the period when he was employed. The Employment Relations Authority said a salary payment “cannot be used as a mechanism to avoid the rates set out in a minimum wage order”.
The ministry climbed on the bandwagon and went door-knocking in Northland, Waikato and Taranaki.
“And it opened up a can of worms,” Davies said.
Failures to keep proper records of hours worked were among the several compliance breaches uncovered. Many farmers didn’t have current employment agreements or variations to employment agreements and weren’t paying the minimum wage.
None of her clients had been caught out, Davies said. But she knew many accountants whose clients had run into problems around two issues:
Seasonal averaging of wages means wages are the same for working weeks of perhaps 60 hours through spring as they are for working 20-30 hours when the workload eases later in the season.
The house which is provided free of charge to workers is treated differently by government treatments. For calculating gross wages, the MBIE disregards the value of this housing.
“We are not condoning that anyone gets paid less than the minimum wage,” Davies said. .
“There are other industries like agricultural contactors and teachers that use averaging and we think averaging works because the employee is getting paid regularly a standard amount, rather than having their pay increased and reduced.”
At the council meeting Davies said seasonal averaging had worked for 100 years
“We hope Federated Farmers will climb on the bandwagon with us and try to get a special variation,” Davies said, pointing out that the current practice is against the law.
How a farm worker’s house should be treated when calculating wages was also causing problems. The NZICA contends the value of the house should be included in the gross wage. The ministry disagrees, but when it is excluded many farmers are found to be paying less than the minimum wage.
Davies agreed with a farmer delegate who asked whether they were better to pay the employee the full amount and then have them pay rent.
To compound the difficulties, the ministry and IRD have differing views. For tax purposes, and ACC purposes too, the house is calculated as part of the worker’s gross income. For employment law it is not.
The ministry wants the value of the freely provided accommodation excluded from the worker’s gross pay and the wage then divided into hours worked to get an hourly rate.
Sharemilkers are not affected, Davies explained, because they are self-employed, required to live on the farm and different rules apply.
There are other rules that differentiate farm employees from contractors.
“You would get into all sorts of problems if you treated them as self-employed when they were later discovered to be employees because you were giving them direction,” Davies said.
“It’s very dangerous to go down that line without good advice.”
A great deal of non-compliance was going on, she said.
“And the ministry is telling the industry to clean up its act – that’s the message coming through from the farmers being visited.
“They are being given an appropriate period of time to sort themselves out.”
Davies advised the federation to review its standardised employment agreement that allows for averaging. Problems arose when somebody was being paid less than $40,000 and left the job in the spring, rather than working for a full season, she agreed. Wage top-ups then would be called for.
Milne did not disguise her delight at what Davies said about averaging.
“I could I give you a hug,” she said.
“I’ve been talking to them [the ministry] and wanting to get this sorted.”
Federated Farmers Dairy chairman Willy Leferink called for a standard approach among government agencies and said the federation should sit around a table with both MBIE and IRD officials.
Mark Ross, the federation’s general manager policy and advocacy, said “we will definitely be following up on this to get some solution”.
