Tag Archive for: Employment

The Minimum Wage Increases from 1 April 2018.

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While the Government must review the Minimum Wage annually the new Government has already pledged to get it up to $20 per hour by 2020. The first step to this target is the increase that comes into effect from 1st April 2018

The new minimum wage rates are:

Adult – $16.50 an hour
Starting-out – $13.20 an hour (up from $12.60)
Training – $13.20 an hour (up from $12.60)

If you already pay above the minimum wage there is no obligation to increase it proportionally.

If you have any employees earning less that $16.50 an hour then you MUST increase their pay rate to the appropriate new minimum wage

Employees who are paid wages need to be paid for the actual hours they work. This includes any extra hours completed.

For Salaried staff you need to consider if they are being paid below minimum wage for total hours of work.

Employment Relations Amendment Bill

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The first wave of changes to legislation in the employment arena were announced last week. There was nothing unexpected, except for possibly the usefulness of NZ First to act as a hand brake for more widespread changes.

One of Labour’s flagship policies was the abolition of the 90 day trial period. The great news for SME’s is that if you have 19 or less employees, the trial period will still be available to you. An unexpected turn of events and a moved that has disappointed unions. Unions however did get a number of changes they were seeking.

The purpose of this Bill is to implement the Government’s post-election commitments to restore key minimum standards and protections for employees, and a suite of changes to promote and strengthen collective bargaining and union rights in the workplace. Read here a summary of the changes, and over the next few weeks we will detail how the changes may affect how you operate your business.

Proposed Amendments

Restoring Key Minimum Standards and Protections for Employees
  • Removing the exemption for employers with fewer than 20 employees from the current rules about business transfers, which will allow vulnerable workers of these employers to elect to transfer to an incoming employer
  • Extending the time frame for vulnerable workers to elect to transfer to an incoming employer and placing information and notification requirements on employers in respect of their employees’ personal information
  • Reinstating the right to prescribed rest and meal breaks, as applied previously regarding number and length of breaks within specified work time, with limited exceptions for essential services where certain conditions exist
  • Restoring reinstatement as the primary remedy in unjustified dismissal cases, where the employee requests it and where reinstatement is practicable and reasonable
  • Limiting trial periods to employers with fewer than 20 employees
Collective Bargaining and Unions

The proposed amendments include:

  • Removing the requirement for a union representative to gain consent from an employer before entering a workplace
  • Requiring employers to allow union delegates reasonable time during working hours to perform their duties in respect of the employees of that employer.
  • Reinstating that the parties are required to conclude a collective agreement, and repealing the provisions that enable the ERA can determine that bargaining has concluded
  • Reinstating the ability of unions to initiate collective bargaining 20 days before an employer
  • Repealing sections 44A to 44C that allow employers to opt out of multi-employer collective bargaining once bargaining has been initiated
  • Requiring that collective agreements must contain rates of pay and that rates of pay must be agreed during collective bargaining
  • Repealing the ability of employers to deduct pay as a response to partial strikes
  • Requiring that new employees are afforded the same terms and conditions as the applicable collective agreement relating to their work for the first 30 days of employment
  • Restoring key minimum standards and protections for employees
  • Requiring employers to provide the applicable collective agreement and union contact details and the option to join the union at the same time as they provide an intended individual employment agreement to an employee
  • Requiring that employers provide information about the role and functions of the applicable union when the intended employment agreement is given to prospective employees
  • Encouraging an active choice by a new employee on whether to join the union, and whether to object to the employee’s employer providing the employee’s name and notice of the employee’s choice to the relevant union
  • Extending the grounds for discrimination to include an employee’s union membership
  • Extending the time frame under section 107 for which an employee’s union activities may be considered to contribute to an employer’s discriminatory behaviour from 12 months to 18 months

Personal Liability for Employment Breaches

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Most business owners, directors, managers and employees are unaware that they can be personally liable for penalties and the payment of legislative entitlements. A person who incites, instigates, aids, or abets any breach of an employment agreement is personally liable for a penalty of $10,000 for each breach.

Employer Owes $2.4 Million To Employees

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In a recent investigation into wage payment irregularities at SOE Landcorp, the Labour Inspector found significant issues. The Inspector determined that over the last seven years Landcorp had been incorrectly calculating the entitlements of approximately 1,400 employees.

There appear to be two main areas where Landcorp incorrectly calculated the entitlements:

a) Landcorp did not include the employee’s accommodation allowance into the calculation of gross earnings. This had a flow on impact to the calculation for sick, annual, bereavement and public holiday leave.

b) Landcorp breached the minimum wage for employees who were on salary, but worked long hours during peak season.

The amount owed to 1,400 former and current employees is approximately $2.4 million.

Employers can take several lessons from this decision.

Firstly, even if the employer uses a payroll system to calculate entitlements, it is up to the employer to ensure that the payroll system is calculating this correctly. In Landcorp’s case the payroll system incorrectly excluded the accommodation allowance from the gross salary calculation. MBIE have stated that at the end of June 2017 it has 140 cases which it categorised as payroll audits. Of those 118 had been investigated which led to 53 enforceable undertakings, 29 improvement notices and 2 cases lodged with the ERA.

Secondly, where employers have salaried employees on lower salary levels (less than $55,000 at present) and those employees are working long hours over a peak period of work, the employer must calculate the weekly/fortnightly pay ensure that employee is paid above the minimum wage for every hour they work in that week/fortnight.

“Confrontational” Parking Warden Ordered to Pay $11,500

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The Employment Relations Authority (ERA) ordered Yoon Cheol Hong to pay Auckland Transport (AT) $11,500 following a determination that found Mr Hong was not unjustifiably dismissed from his job as an Auckland Transport parking officer, neither was he unjustifiably disadvantaged before his dismissal.

Mr Hong worked as a parking officer, patrolling Auckland city streets and issuing infringement notices for vehicles parked illegally.

AT required, and trained, its officers in various ‘de-escalation’ techniques to manage members of the public who abused or threatened parking officers. The primary technique was described as ‘detach and walk away’.

AT held concerns because Mr Hong made comments which confirmed AT’s fears that Mr Hong would, while on patrol in the streets, sometimes challenge abusive members of the public rather than ‘detach and walk away’.

The incident that triggered the dismissal process was when a man swore at Mr Hong and threatened to break his neck after getting a parking ticket. Mr Hong called for Police assistance during the incident. AT’s concern was that Mr Hong had refused to follow lawful and reasonable instructions issued by them which placed his own health, safety and welfare together with some of the wider parking team at considerable risk which was completely unacceptable to them.

Mr Hong had told AT when he reached a ‘trigger point’ he would not observe de-escalation methods due to his own views on what was and was not tolerable. AT were concerned that Mr Hong was likely to respond in ways that made inflammatory or potentially inflammatory situations worse. This meant AT had lost trust and confidence in Mr Hong.

The Authority said that it was within the range of reasonable responses for AT to conclude what Mr Hong deliberately did, and would likely continue to sometimes do, was contrary to instructions and was serious misconduct.

Auckland Transport sought $36,500 from Mr Hong to pay back what it had spent to defend itself in the unjustified dismissal case; $35,000 for a two-day investigation meeting and $1500 in costs to oppose the interim reinstatement application.

Auckland Transport’s actual legal costs were said to total $55,868.

Over the course of the employment dispute, Auckland Transport had offered Mr Hong two settlement offers prior to the case being heard by the Authority. Both offers, one for $12,500 and another of $15,000 were not accepted.

The authority ruled Mr Hong’s refusal of these settlement offers were cause for a “steely” approach in awarding costs, hence the award to AT of $11,500.

Paying contractors or working as a contractor

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IRD’s latest update to tax agents includes some clarification around contractors and withholding tax.

There is a misunderstanding that all contractors are now subject to withholding tax. This is not the case. The change is only for contractors hired by a labour hire business.

From 1 April 2017, contractors working for a labour hire business under a labour hire arrangement must have withholding tax deducted from their income.

Activities and examples of a labour hire business
One of the main activities of a labour hire business is arranging for a person to perform work or services directly for:

  • its clients, or
  • clients of another person.

Examples of labour hire businesses are:

  • an on-hire business
  • an employment agency
  • contract management, or
  • recruitment services.

Withholding tax rate
The standard withholding tax rate for this category is 20%. However, a contractor may choose a lower rate (the lowest rate is 10%) when they fill in their Tax rate notification for contractors (IR330C) form.

They can also apply to us for a 0% special tax rate by filling in a Special tax code application (IR23BS) form. We review their tax compliance history before deciding if we’ll issue a 0% rate certificate.

Sub-contractors

Businesses (eg an engineering business) hiring sub-contractors don’t come under the new legislation. The sub-contractors wouldn’t be paid schedular payments so withholding tax isn’t taken out of their payments.

See some examples of what is and is not a labour hire business

Minimum Wage Increase is Just the Beginning

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This article was published on the 2nd November by Chapman ER and sets out some of the employment related financial issues employers are going to face under the new Labour Government.

We recommend you stay up-to-date on matters that effect employers by subscribing to the Chapman ER newsfeed by clicking here and completing the request form.

The minimum wage is increasing. It already feels like old news, particularly in view of the stream of new government announcements. However, that is just the start of measures likely to increase wage costs. The Labour led government has also stated they will change the Equal Pay Bill the previous National government had proposed to prevent a case similar to the $2b aged care workers’ settlement. They are also introducing ‘Fair Pay Agreements’ which will set out minimum employment conditions across industries and sectors for terms such as wages, allowances, weekend and night rates, hours of work and leave arrangements. It sounds like reverting to old Award days to me.

If you are already gulping for air and deciding you will only engage contractors, be aware of the fish hooks of that approach. Within the first 12 months in government Labour has set out to extend the right to bargain collectively to contractors who primarily sell their labour, and investigate measures to improve job security for people in ‘precarious forms of employment’ which includes contracted and sub-contracted workers.

If you are now thinking you will engage youth workers as a more affordable option, there is no respite there. The Labour manifesto states they intend to abolish youth rates within 12 months.

To recap briefly on the minimum wage – it will increase to $16.50 from 1 April 2018. That’s a 4.8% increase.

In the Coalition Agreement it has also been stated that the minimum wage will increase to $20 per hour on 1 April 2021, with incremental steps in between. That is a 27% increase over 4 years. For a full time employee on minimum wage that is an annual salary of $41,600.

What does this mean for employers? To state the obvious, it will increase costs. For employers with proportionally more employees at or near the minimum wage level, that increase in cost will be proportionately higher. Industries that traditionally pay in the lower pay brackets are accommodation & food, wholesale & retail trade, and healthcare & social assistance. (Data source: Treasury)

If you currently have a wage differential between positions, for example a junior line operator, a senior line operator and a supervisor, your employees will want to maintain the differential. As such it is not only minimum wage earners who will expect a significant wage increase.

Unfortunately increasing minimum wage does nothing to improve productivity. I have yet to see employees working harder or smarter as a result of a pay increase. So you are not going to get better outputs as a result.

Some of the key options are:

  1. Absorb the increased costs by accepting lower profits (or in many cases operate at a loss).  One impact of lower profits is a reduction in investment in capital (as return on capital is reduced).
  2. Reduce costs. As labour costs have increased, reducing staff may be the necessary answer, particularly if wages is a high percentage of costs.
  3. Pass on the higher wage cost to customers through increased prices.
  4. Implement productivity improvements (e.g. technology, systems) so you can reduce employee numbers, and/or improve profit margins.
  5. Explore the possibility of changing to a high wage, high value business model.
  6. Sell up, leave the country or hide under a rock for the next three years.

It is important employers start to consider the impacts on their organisation now, and plan for it in advance. Increasing prices incrementally is often more palatable to customers than one large increase. Putting in place plans to increase productivity needs to happen before the business is in trouble. If you need to restructure your staffing this takes time, and again is better done before the business is in distress. Just keep in mind Labour has also stated they want to begin consultation on improving minimum redundancy protection for employees.

And the changes keep on coming.

How to Pay Employees for Upcoming Public Holidays

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Christmas Day and New Year’s Day fall on a Monday this year with Boxing Day and the Day after New Year’s falling on a Tuesday. Labour Day is always on a Monday and falls on 23 October this year.

If you are unsure how your employees should be paid over these statutory holidays, first refer to their individual employment agreement to check that it doesn’t provide for any terms in addition to the statutory minimum requirements. Then establish which of those stat days would normally be a working day for them.

When a public holiday falls on a day that your employee would usually work, regardless of how long they’ve been working for you, then they’re entitled to a paid day off.

Employees are only required to work on a public holiday if it’s a condition written into their employment agreement. If they agree to work, you must:

–          pay them at least time and a half and

–          give them an additional paid day off (a day in lieu).

Next the following applies:

When the Public Holiday would normally be a working day for the employee:

If the Public Holiday that falls on the Monday or Tuesday is ordinarily a working day but the employee does not work then they are paid for that Public Holiday the same as for a normal working day i.e. at their relevant daily pay.

If the Public Holiday that falls on the Monday or Tuesday is ordinarily a working day and the employee does work on those days, then they are paid time and a half for the hours they work, and they are also entitled to an alternative day off (lieu day).

When the Public Holiday is not usually a working day:

If the employee does not normally work on the Public Holiday, in this case the Monday or Tuesday, then they do not get paid at all for those days.

If the employee does not normally work on the days the Public Holiday falls but then does work on those days, they are entitled to be paid time and a half for the hours they work, and not entitled to an alternative day off (lieu day)

If you require further information regarding paying employees for Statutory Holidays click here.

 

Huge Fines for Categorising Employees Incorrectly as Contractors

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The sole director and shareholder of Direct Auto Importers and Cheap Deals on Wheels, Vishaal Sharma, had claimed that his employees were contractors and had denied owing them their minimum entitlements.

Following a Labour Inspectorate investigation however, the Labour Inspectorate disagreed. The failure to categorise his employees correctly resulted in fines of $65,000 to his two businesses.

The ERA found that both Direct Auto Importers and Cheap Deals on Wheels had not only failed to pay minimum wage or correct holiday pay to their employees, but had also failed to provide employee agreements and didn’t keep accurate records of employment.

A Labour Inspectorate manager, Loua Ward, said “An employer cannot avoid their obligations by simply calling their employees ‘contractors’, and any attempts to do so will not be tolerated by the inspectorate. All employees in New Zealand must be provided with written employment agreements and their minimum employment entitlements, such as the minimum wage and holiday pay,” She also added. “If an employer cannot meet these basic obligations, then they should not be an employer.”

Ms Ward also noted that this incident was not the first offence for one of the organisations, Direct Auto Importers. They were taken to the ERA last year by an employee who was able to successfully claim $17,996 in arrears.  She emphasised that as a result of that claim the employer should have known their obligations.

The responsibility lies with employers to provide their employees with all their correct minimum entitlements and ignorance is no excuse.

Direct Auto Importers were penalised to the tune of $50,000 for not paying holiday pay, providing written employment agreements, or keeping wage, time holiday or leave records, and a further $726 in arrears was ordered to be paid to two staff members for holiday pay owed and working on public holidays.

$15,000 was the penalty for Cheap Deals on Wheels for similar breaches and the ERA also set aside an amount of $10,000 in penalties to be arranged for three former employees of the businesses.

This case sets a serious precedent that employers should take note of. If you are in any doubt as to whether your contractors and/or employees are categorised correctly, please contact us for clarification.

This post is supplied by Chapman Employment Relations

Changes to Parental Leave Payments

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There are two main changes to parental leave payments that have taken effect as of 1 June 2017.

 The start of the parental leave payment

Employees may use up their leave entitlements prior to the start of their 18-week parental leave payments starting, even if this takes them past the baby’s arrival. Leave entitlements include annual leave, alternative days, special leave or time off in lieu that accumulated during employment. Before 1 June 2017, the parental leave payment period couldn’t start later than the baby’s arrival.

Pre-term baby parental leave payment

If a baby is born before the end of 36 weeks and the employee is eligible to parental leave payments, they could also get pre-term baby payments.

Employees with a pre-term baby now have more flexibility around returning to work and parental leave payments. Previously, when an employee with a pre-term baby returned to work after they started getting payments, their payments would stop. However, as of 1 June, employees can still get their parental leave payments when they go back on parental leave, as long as it’s no later than the expected date of birth.

For more information regarding the in’s and out’s of parental leave, please contact one of our knowledgeable consultants at Chapman Employment Relations.