Salary Averaging and Minimum Wages


“Hey Dad, how are your plans going for extra help on the farm?” asks Pebbles.

Freddy looking up from his iPhone, “Huh? Oh, Pebbles, do you know how these things work? I’m trying to follow the cricket scores.”

“Not my strongest suit Dad, but I can see what I can do.”

“Here, thanks Pebbles. Yeah, it looks like I’ve got things in shape for some extra help around the farm for getting the feed crops off.  Do you remember the exchange student we had a few years back? Well, he loved the farm life so much, he wants to work for an entire year.”

“Ok…but…”

“Not to worry Pebbles, I’ve told him that he needs to have the appropriate Visas to allow him to work, he is already registered with IRD from his last stay here, and I’ll make arrangements with IRD for pay deductions.” States Freddy with confidence. “What could go wrong?”

“Have you budgeted for how you’ll afford the extra cost of wages, and manage scheduling for weather shutdowns?” Pebbles asks handing Freddy his phone, “These things are a curse.”

“It’s no problem, we’ll just average his salary for a fortnight’s pay. If the work is busier in some weeks he’ll be able to work fewer hours in others. It’s all swings and roundabouts – that’s what we’ve done before and Barney is doing the same thing on his farm.”

“Hey Dad, regardless of what the Rubbles do, you need to be aware there is a new Court decision about salary averaging. Basically, the decision states that employees must be paid at least minimum wage, now $14.25 per hour, for every hour that an employee works. This case now confirms that averaging a salary over a 12 month period is not going to help an employer in a minimum wage claim, as people previously thought.”

“So what does this really mean for me?  You know I pay my farmhands much more than the minimum wage,” exclaims Freddy. “But, I pay them to work and not sit idle.”

“Yes, I know but, I would say that this case has direct implications for any workers that have to be flexible in the actual hours that they work.  This case makes it clear that if your farmhands work a heavy week one week, you won’t be able to balance that by allowing them to work a lighter week the next week, while still paying the same weekly salary. If the number of hours worked in one week means that your farmhands will receive less than the minimum wage, for the hours worked that week, you will have to top up their weekly pay to meet the difference.” 

 “Ok, Pebbles, I’ll give this more thought,” Freddy says looking furtively at his phone. “After I check the cricket scores. This is important work.”

“Fair call Dad, but let me know before you do anything, just to be sure. Ok?” Pebbles cautions.

“Always dear.”

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 

 

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