Minimum wage workers and Kiwisaver............. the saga continues.

Wednesday February 27th, 2013


If you are on the $13.50 an hour minimum wage, can the employer take its 26c Kiwisaver employer contribution out of that?
No, said the Employment Court in a ruling late last year, but that decision is being appealed.
The court found the employer Terranova Homes & Care Ltd was in breach of the Minimum Wage Act in a case brought by the Service and Food Workers Union involving two minimum wage care givers.
Terranova had been deducting its employer 26c Kiwisaver contribution out of their gross pay, reducing it to $13.24 an hour.
The court found the employer’s compulsory contributions had to be paid in addition to the women’s gross salary or wages.
In its discussion of the issues the court said the purpose of the Minimum Wage Act (MWA) was to ensure workers received a base wage for their work to enable them to meet daily living expenses for themselves and their family.
“There is nothing to suggest that it builds in a component for saving for retirement. Rather it is designed to meet the basic necessities of day-to-day living.’’
The court concluded a deferred payment to an employee of a compulsory statutory employer contribution did not constitute payment by an employer for work performed by an employee for the purposes of the MWA.
Terranova had argued that under the Kiwisaver Act it was able to take a ‘’ total remuneration approach’’ incorporating the employer contribution in the caregivers’ pay and that this comprised payment for their work.
The court found that the section of the Kiwisaver Act relied on by Terranova did not refer to the Minimum Wage Act.
“It does not purport to deal with the way in which an employer contribution for an employee who is on the minimum wage is to be dealt with.’’
It did not state parties were free to agree to contractural terms and conditions overriding the minimum wage legislation.
Section 6 of the Minimum Wage Act ‘’expressly prohibits such an approach’’.
If Parliament had intended for employer contribution to be able to be deducted from the minimum wage, ‘’ we consider that it would have done so expressly’’.
For an employee on the minimum wage an employer was obliged to pay the 2% contribution in addition to the minimum wage or ( if the parties agree) the gross wage must amount to the minimum wage plus 2%.
Terranova has appealed the Employment Court decision and the Service and Food Workers Union has cross-appealed. The case is expected to come before the Court of Appeal this year.
We’ll keep you posted on this.
- Elspeth McLean

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