Can you legally pay someone less than minimum wage in New Zealand?

COVID-19 has posed some tricky legal questions

Can you legally pay someone less than minimum wage in New Zealand?

New Zealand’s minimum wage experienced a bump earlier this year, benefitting a predicted 175,500 workers across the country.

In March, Prime Minister Jacinda Ardern announced that one of the Labour government’s key manifesto pledges would come into effect from April 1, 2021, increasing the current minimum wage rate from $18.90 to $20 an hour.

All employees aged 16 years and older must be paid at least minimum wage for every hour worked, but there are a handful of exceptions.

Starting-out minimum wage and training minimum wage

These variations in the minimum wage aim to make it easier for young people to secure their first opportunity in the workplace, before advancing to adult minimum wage after six months of continuous employment. Those on training wages are likely to be apprentices, but will only be eligible if they’re taking part in approved industry training programmes, rather than simply being trained on the job. As of April 1 2021, training and starting-out minimum wage are both $16 an hour.

Employers may pay a starting-out minimum wage to workers who are:

  • 16 or 17 years old and have not completed six months of continuous employment service with their current employer.
  • 18 and 19, who have been paid one or more social security benefits for six months or more, and who haven’t completed six months’ continuous employment with an employer since they started being paid a benefit
  • 16-19-year-old employees whose employment agreement states they have to undertake industry training for at least 40 credits a year in order to become qualified in the area they are working in

A training minimum wage applies to employees who are:

  • aged 20 years or over whose employment agreement states that they have to do at least 60 credits a year of an industry training programme to become qualified in the area they are working in.

Read more: How to legally terminate redundant employees

Minimum wage exemptions

Aside from those training or starting-out their careers, a small number of people with a disability may be issued exemption permits by labour inspectors. These allow them to be paid less than minimum wage if they’re not able to carry out all the requirements of the job.

Employees under 16

Under NZ’s labour law, there is no minimum wage for workers aged under 16, however standard employment rights and obligations do still apply.

Minimum wage and COVID-19

As a result of the pandemic, disputes surrounding fair pay have made their way into New Zealand’s Employment Relations Authority and Court. In Gate Gourmet New Zealand Ltd v Sandhu, workers at the airline catering company argued they should have been paid minimum wage because they were ready, willing and able to work, even while the business was partially closed during New Zealand’s initial lockdown and they were not given shifts.

Under the Minimum Wage Act, if an employee is ready, willing and able to work but their shift is cancelled by the employer without notice, in most cases they are still entitled to be paid unless otherwise stated in the employment agreement.

Read more: $33K award for NZ café worker

The employees were paid 80% of their normal salary so for those on minimum wage, it was reduced to below the statutory rate. The five employees took their case to the Employment Relations Authority before an appellate decision was made in the Employment Court.

The Court ruled that for the purposes of the Minimum Wage Act, being ready, willing and able to work is not the same as working, and therefore, the employees were not entitled to be paid minimum wage.

However interestingly, the Chief Judge in the ruling disagreed, arguing that the employees’ inability to work was through no fault of their own and there is no lawful mechanism to reduce minimum wage. She said the decision contradicted the common law rule of the Minimum Wage Act, impacting those hardest hit by the pandemic.

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