Posted on: Apr 19, 2016

The introduction of the new Employment Standards Legislation from 1 April 2016 places greater emphasis on the requirement for employers to keep clearer records for pay, time, leave and public holidays. The purpose of these changes are to make it easier to assess if employees are receiving their minimum entitlements as set out in legislation.

This change will particularly effect employers with:

  • low salaried employees
  • piece workers or
  • workers with uncertain or flexible hours

It could, however, also impact on employers who have salaried employees if those employees work additional hours that far exceeds their normal hours of work.  If those employees are on a high salary the employer is unlikely to face problems regarding the minimum wage, but there could be other implications such as health and safety risks.

What is now required?

The new standards require employers to keep an accurate record of the hours worked each day by each employee and the pay they receive for those hours. If an employee works regular hours for regular pay and a statement of those hours and pay are recorded somewhere, most commonly in an employment agreement, then this change will not require much effort. However, it becomes more difficult when an employee does not work the hours which are recorded in the  agreement or they don’t have regular hours. In this situation the employer must establish a system of keeping accurate records of the hours worked by the employee and the pay they received for those hours worked.

Most employers, who employee people on wages, will already have a system set up to capture the exact hours worked for the purpose of payroll, however it is not usual for salaried workers to record their exact hours. For salaried employee’s it may be sufficient to record the usual number of hours expected in the employment agreement as well as a statement allowing for extra hours. However, if required to prove that the employee earns at least the minimum wage for each hour worked, the employer would be required to provide evidence to show this to be true. This could become problematic where an employee is on a low salary.

For example, if an employee is on an annual salary of $30,000 based on a 37.5 hour week then they are earning above the minimum wage.  The problem will arise when that employee claims to have worked 40 hours some weeks, if this is true, they will be earning less than the minimum wage for those hours. If challenged about the employee’s minimum entitlements, the employer will have to demonstrate that they have kept an accurate record of the number of hours actually worked and that the employee has been paid at or above the minimum wage for those hours.

Why is record keeping important?

A Labour Inspector may request to see an employer’s pay and time records for any employee. Those records must clearly demonstrate what hours an employee has worked each day and what they have been paid for the hours worked. Failure to produce these records may result in an infringement notice being issued by a Labour Inspector which comes with a penalty of $1,000 per breach and a cap of $20,000 for multiple breaches within each 3 month period.

Where breaches of the new standards are found to be most serious, such as exploitation, sanctions have become tougher. Maximum penalties of $50,000 for an individual and the greater of $100,000 or 3 times the financial gain to the company now apply, this is a drastic change from the previous maximum penalty of $20,000 for a breach by a company.

In addition to the monetary penalty, the law now allows for a company to be publicly “named and shamed” if the Employment Relations Authority or Employment court finds they have breached minimum standards. The new standards have also taken steps to lift the corporate veil by allowing for sanctions against individuals, including managers, within an organisation which has committed serious or persistent breaches of the new standards.  We have written another article on these changes and more – click here to read more.

We think this change in record keeping requirements could have a significant impact for some of our clients.  As such, we recommend including a new clause in your employment agreement templates to reflect the need to record the hours worked.  Please contact us to talk about your situation, and we can draft a clause specifically to suit your needs, and advise you on how to meet these new requirements under the Act.


Disclaimer

This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.