Minimum wage and KiwiSaver

August 22nd, 2013 at 11:00 am by David Farrar

Stuff reports:

An employment case that could effectively raise the for workers enrolled in is being “watched closely” by employers, a lawyer says.

The case, which was heard in the Court of Appeal yesterday and could mean an extra $450 a year for those on the minimum wage, was described as of “considerable public interest” by one of three judges assigned to make a final ruling.

Lower Hutt caregivers Vasivasi Faitala and Dalrene Goff took employer TerraNova Homes & Care to court last year, arguing it was unfair that they had to pay their own and TerraNova’s KiwiSaver contributions under their employment agreement.

At the time, the women earned the minimum wage of $13.50 an hour, made up of $13.24 plus 26c for TerraNova’s KiwiSaver contributions.

Most employers pay the contributions on top of an employee’s salary, but some favour a “total remuneration” approach that includes their contribution, on the grounds that it treats all staff equally.

Although that approach was legal, Ms Faitala and Ms Goff argued it was a breach of the Minimum Wage Act, and the Employment Court agreed, ordering TerraNova to pay any compulsory contributions in addition to the workers’ gross salaries.

TerraNova’s lawyer, Elizabeth Coats, told the court yesterday that although the KiwiSaver Act said compensation should be paid on top of a salary, there was a provisional clause that allowed it to be included if both parties agreed.

It will be interesting to see how the Court of Appeal rules. For my 2c I think the employees are in the right, and likely to win.

While you can agree for KiwiSaver to be based on total remuneration, and hence deducted from what would be your gross salary, I don’t think such an agreement can over-ride the minimum wage requirement.

10 Responses to “Minimum wage and KiwiSaver”

  1. flipper (5,304 comments) says:

    I agree with your view DPF.

    Irrespective of whether the KS scheme was/is fair to both employees and employers, the employer contribution was imposed by the Government, so ” the total remuneration” approach to the minimum wage is just sophistry of the worst kind.

    There is no room for this crap, and Phil O’Reilly should be kicking arse, yesterday. Moreover IRD/Dept of Labour (or whatever it is called in 2013) should be taking the employer to the “cleaners”. 🙂

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  2. tom1980 (45 comments) says:

    Writing as an employer, if a firm has to nickel and dime its staff this way there’s something wrong with their business model. Shit on your staff and they’ll shit on your customers. Whatever the flaws of KS may be, it represents people taking responsibility for their future instead of expecting the government to wave its magic money wand when they get to retirement.

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  3. Harriet (7,553 comments) says:

    The problem with this is not that those on the minimum wage will now get it paid on top of their wage – but anyone who may be JUST above minimum wage are going closer towards the minimum.

    It is another case that happens almost each year where by those who are JUST above minimum wage end up closer TOWARDS the minimum!

    If you worker harder/better/smarter than mimimum wage, you should always be moving AWAY from it – not towards it!

    That is always the flow on effect of providing more to minimum wage workers – others suffer – as the employers don’t in all cases increase everyone elses pay/benefits/entitlements when minimum wage workers get increases.

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  4. ross69 (3,651 comments) says:

    I’m amazed that TerraNova are taking the matter through the courts. If they can’t afford to pay the minimum wage, they shouldn’t be in business.

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  5. Viking2 (14,386 comments) says:

    Yep and it will probably cost them more to go to court than the payout. Of course its all about the amount paid by Govt. to them.

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  6. NK (2,071 comments) says:

    I guess it depends on how many employees they have, but 26c “savings” seems stingy at best, and disgusting at worst.

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  7. flipper (5,304 comments) says:

    ross69 (2,804) Says:
    August 22nd, 2013 at 12:22 pm
    I’m amazed that TerraNova are taking the matter through the courts. If they can’t afford to pay the minimum wage, they shouldn’t be in business.
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    Spoken like the true, left wing unionist fool that you are.
    Take your view to its logical conclusion, dickhead, and there will be no jobs for anyone with minimum skills.
    No one, unless it is you rossie, is going to invest (fund/underwrite/operate) in any organisation that does not show a proper return on capital(money/labour). Short version – tax paid profit, if any = return on capital. Business 101.

    But that does not excuse this covert attempt to subvert the MW law.
    In my view the company deserves a good kick in the arse and I have, as DPF is aware by other means, conveyed that message to Business NZ.

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  8. CJPhoto (244 comments) says:

    I disagree on the legal point – given Kiwisaver deductions go to the employees individual account, they are still being paid it. The employee has the option to contribute to kiwisaver or not.

    I do agree however that treating your staff right is most important. Staff should not stay on minimum wage for long that this is an issue.

    I assume other businesses are helping to fund the case as otherwise, it is a stupid decision by TerraNova.

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  9. flipper (5,304 comments) says:

    CJPhoto (146) Says:
    August 22nd, 2013 at 12:52 pm

    Let’s wait and see on the legal issue.
    The KS employer contribution is not part of any wage package unless the parties agree it is.
    But an employer (no , I think an employee) cannot use any device to opt out of the MW and KS law provisions.

    Since KS was imposed under tax (?) law, it is totally divorced from wages paid, is it not?

    We shall see, but I would not back the company..

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  10. PaulL (6,061 comments) says:

    Dunno on this one – seems perhaps to hinge a bit on some esoteric interpretations. Leaving aside the legal question which no doubt the lawyers will sort out, it seems to me that:
    1. We have a minimum wage, and lots of companies pay the minimum wage. Whatever people may think about that, the reality is that for a lot of companies and for a variety of reasons, that is what their staff are getting. A suggestion that if you’re only paying the minimum wage then you should go out of business is non-sensical – basically you’re then saying that we have a minimum wage but everyone should pay more than the minimum wage.

    2. If you have two staff, one of them opts into kiwisaver and another does not, are you obliged to pay the one who opted into kiwisaver more? That seems like another incongruence – it doesn’t quite feel right to me. If you’re paid more than the minimum wage, what is normal practice? If you opt in to kiwisaver, does your take home pay reduce accordingly? Why would it be different for someone on the minimum wage?

    My view, for what it’s worth, is that we should just make Kiwisaver compulsory, then this question would go away. We either increase the minimum wage by 26c or we don’t, but either way it would be clear.

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