A recent decision of the Court of Appeal has shown that those of you who are on minimum wage cannot legally be expected to pay your employer’s Kiwisaver contributions. The case of Terranova Homes and Care Limited v Faitala and Goff CA 175/2013 [2013] NZCA 435 involved two care home workers who were earning minimum wage. The employers, Terranova Homes and Care Limited, were deducting the Kiwisaver employer contribution from their minimum wage payments.
Since the 13th December 2007 there has been the ability, under the Kiwisaver Act 2006, for parties to an employment relationship to contract out of the Act. This essentially means that, if the employee agrees, the employment contract can reflect that the employee pays their employer’s Kiwisaver contribution from their wages.
However in the Terranova case the Court held that when an employee is being paid minimum wage, it is unlawful for the employer to expect the employee to pay the Kiwisaver contribution. This would be contrary to section 6 of the Minimum Wage Act 1983, which states very clearly that every worker shall be “entitled to receive from his employer payment for his work at not less than the minimum rate”.
The employer’s Kiwisaver contribution was not paid to the employee but to the Kiwisaver provider and did not constitute the statutory concept of payment for work performed by the employee under the Minimum Wage Act.
If employers expect minimum wage earners to pay the employer contribution then the clear message from the Court was that the employer in this situation was obliged to pay the two percent contribution in addition to the minimum wage or if the parties agreed the gross wage must amount to the minimum wage plus two percent. The Court held that the Minimum Wage Act was “designed to impose a floor below which employers and employees cannot go” and was aimed at preventing the exploitation of workers.
Whether you are an employee or employer you need to ensure that the process is legally correct for you. We are specialists in employment law and can advise you on these and other important employment law matters.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co who normally advises you, or alternatively contact:
Kirsten Maclean
(03) 477 8870 or (09) 379 0055
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.