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Minimum wage obligations and how to meet them

Minimum wage obligations and how to meet them

Minimum wage obligations and how to meet them

Tuesday 26 November, 2019

Did you know that employers are obliged to pay salaried employees at least the minimum wage for every hour that they work? Many employers think that they can average hours worked to comply with minimum wage legislation, but the courts have expressly stated that this is unacceptable.

Employers must pay their employees a minimum of $1,416 per fortnight, assuming two 40-hour working weeks, and $17.70 per hour[1] for every hour over 80 hours worked in a fortnight. The Government has indicated that minimum wage rates will increase to $18.90 per hour in 2020 and $20 per hour in 2021.

A significant number of employers have been caught out by failures to ensure staff are paid minimum wage obligations, both in New Zealand and overseas. Earlier this year, celebrity chef George Calombaris was fined after his company underpaid 515 current and former employees. In 2018, the UK Government named nearly 180 employers who had underpaid minimum wage workers, including such well-known businesses as Wagamama, Mariott Hotels and Birmingham City Football Club.

Recently in New Zealand, a business that operated liquor stores and a dairy in Auckland was ordered to pay nearly $200,000 in penalties and unpaid wages for minimum wage breaches. In 2018, a company operating 82 Burger King restaurants was required to stand down from hiring migrant employees for 12 months as a consequence of failing to pay one employee the minimum wage for all hours worked.

It is essential that employers comply with minimum wage requirements because directors, partners, and senior managers can be held personally responsible for breaches. Penalties of up to $100,000 for companies and $50,000 for individuals can apply.  Directors, partners, and senior management can also be personally liable for unpaid wages. The Labour Inspectorate has indicated that it will continue to pursue directors, even if the company fails or is deliberately closed down.

Employers have an obligation to keep sufficient records to demonstrate that the employer has complied with its minimum wage obligations. A good starting point is to require employees to complete time sheets, as this makes it easy to monitor compliance with minimum wage obligations.

If you have any questions about your obligations as an employer, please contact our employment team.

[1] As at 20 November 2019.

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