Contents
NZ piece-rate legislation overview
Average Daily Pay and RSE workers
Calculating minimum wage top-up
Importance of compliance and penalties for non-compliance
How to simplify piece-rate payroll management with a payroll system
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- Minimum wage auto top up
- Paid break calculations
Clarity for horticultural payroll
While the processes of planting and harvesting have their complexities, there’s another dimension equally intricate yet often overlooked: payroll calculations.
Now, if you’re involved in the horticulture sector, you’d know that many workers are paid based on a piece-rate system. It’s an approach that rewards efficiency and can be beneficial for both employers and employees. But with its benefits come challenges, especially understanding the intricacies of piece-rate payroll calculations and ensuring that everything aligns with the New Zealand payroll legislation.
That’s why we’ve written this comprehensive guide, dedicated to untangling the web of calculations, top-ups, breaks, and offer practical advice to make your payroll process smooth and compliant.
Understanding piece-rate pay
What exactly is a piece-rate pay? Piece-rate pay, at its core, is the wage paid to a worker based on the quantity of work completed, rather than the hours worked. This system encourages workers to complete their tasks as efficiently as possible because their earnings are directly tied to their output, not to the amount of time they spend working. It is common in industries where tasks can be clearly defined and the output of each worker can be easily measured. This method is especially popular in the horticulture industry where tasks like fruit picking or pruning are quantifiable.
In the context of the horticulture industry, piece rates are often used to pay workers for picking fruits or vegetables, pruning trees, or performing other clearly quantifiable tasks. For instance, if a worker is paid based on the number of baskets of apples they pick, rather than the hours they spend, they’re on a piece-rate system. The advantage for employers is that piece rates can provide a strong incentive for employees to work quickly and efficiently, which can help to increase productivity. For employees, piece rates can offer the opportunity to earn more than they might under an hourly wage system, depending on how quickly and effectively they work.
Let’s consider an example from the horticulture industry in New Zealand: Imagine a kiwifruit orchard where workers are paid under a piece rate system. For every bin of kiwifruit that a worker picks, they receive $25. If a worker picks 10 bins of kiwifruit in a day, they would earn $250 (10 bins * $25/bin) before tax. The more bins a worker picks, the more they earn.
It’s straightforward in theory, but it can become intricate when it interacts with NZ’s employment laws.
NZ piece-rate legislation overview
New Zealand’s payroll legislation, particularly the laws around minimum wage top-up and paid break requirements, can get complicated for employers. Here’s the overview:
- Minimum Wage Top-Up: No matter how a worker is paid, they must never earn less than the minimum wage over a pay period. If a piece-rate worker’s total earnings don’t reach this minimum threshold, employers are required to top up their wages to ensure they meet this standard.
- Paid Breaks: Workers are entitled to paid rest breaks and unpaid meal breaks. The exact number and duration depend on the length of their work period.
Piece-rate and RSE workers
The horticulture and viticulture industries in New Zealand often experience seasonal peaks in labor demand, especially during harvesting and pruning times. Due to these peaks, domestic labor may sometimes be insufficient to meet the demands. The Recognised Seasonal Employer (RSE) scheme addresses this by allowing employers to recruit overseas workers, primarily from Pacific countries.
Given the seasonal nature of the work, many employers in these sectors use piece rates to incentivize workers to be more productive. The more they pick or produce, the more they earn. This kind of remuneration structure can be particularly attractive to RSE workers, as many aim to maximize their earnings in a limited time frame before returning to their home countries.
The piece rate system and the RSE scheme are interconnected mechanisms that help address labor needs in New Zealand’s horticulture and viticulture sectors. Both systems, when managed ethically and legally, can create a win-win situation: industries get the labor they need, and RSE workers have the opportunity to earn money to support their communities back home.
You can find out more about RSE workers and the different employment types in our blog post here.
Average Daily Pay and RSE workers
When we talk about RSE workers, their income predominantly comes from piece rates. This presents a unique challenge when addressing issues like sick leave, statutory holidays, or any other form of alternative leave. Here’s why: With their income being so variable, how do we ensure they’re compensated fairly during these off days?
The solution: Average Daily Pay.
Because of the inconsistency in the working patterns of RSE workers, during periods like sick leaves, holidays, or alternative leaves, they are compensated based on their average daily earnings. This guarantees a fair compensation model that is reflective of their usual earnings.
When it comes to annual leave, the calculations undergo a slight change. Given their fluctuating work hours, the leave RSE workers accrue is based on gross earnings, not default hours (because, let’s face it, determining default hours for them is next to impossible). So, if an RSE worker decides to take a day’s annual leave, how do we compute it? The answer lies in comparing their Ordinary Weekly Pay and Average Weekly Earnings where the worker will be entitled to the higher hours of the two.
Lastly, similar to fixed-term contract employees, RSE workers have a choice. They can discuss and decide if they wish to receive 8% of their gross earnings with each paycheck or accrue that leave to receive a lump sum at the end of their employment. Typically, many RSE workers opt for the former, preferring that extra bit of pay with every pay cycle.
Calculating minimum wage top-up: Making sure everyone gets their due
Let’s break it down:
- Determine Total Earnings: Firstly, calculate the total earnings from piece-rate tasks over the pay period. For instance, if a worker picked 100 baskets of strawberries at $2 each, their total earnings would be $200.
- Calculate Total Hours Worked: Record all hours the worker was engaged in tasks.
- Check Against Minimum Wage: Multiply the total hours worked by NZ’s minimum wage rate ($22.70 per hour as of 1st April 2023). If this amount is higher than the piece-rate earnings, the difference is the top-up required.
Example: For 10 hours worked, at a minimum wage of $22.70/hr, the total minimum wage would be $227. If the worker only earned $200, you’d need to top up by $27.
Calculating paid breaks: A well-deserved break, well-calculated
Paid breaks are a little trickier. Here’s how you go about it:
- Determine Break Entitlement: For every 4 hours worked, a worker is entitled to a 10-minute paid break.
- Calculate Break Pay: Multiply the average hourly rate for the day (total earnings/hours worked) by the fraction of the hour the break took.
Example: If the worker earned an average of $30/hour and took a 10-minute break, they’d be entitled to $30 x (10/60) = $5 for that break.
Importance of compliance and penalties for non-compliance
NZ’s employment legislation isn’t just guidelines – they’re compulsory. Non-compliance can lead to hefty financial penalties. But beyond that, there’s potential damage to your business reputation, which can affect your relationship with workers and partners. It’s not just about money; it’s about trust.
As stated in a position statement from the official Employment New Zealand website,
Labour inspectors check that breaks are paid and provided for by employers. Penalties can be ordered for failures to comply with requirements for paid rest breaks and meal breaks”. The statement underscores the vigilant monitoring and the real consequences for businesses failing to ensure that their employees receive their rightful breaks.
Additionally, in light of the 2023 updates shared by Immigration New Zealand concerning RSE workers, changes are afoot. Starting October 1st, 2023, these workers will experience modifications to their sick leave entitlements and minimum wage. Notably, they’ll be granted two days of sick leave from the commencement of their employment, with an additional two days awarded each month. By the time they reach their four-month work anniversary, they’ll have accumulated a total of 10 sick leave days. Furthermore, the minimum wage has been adjusted to $24.97 (up from $22.70, factoring in a 10% increase).
Given these evolving standards and expectations, the message for employers is to stay informed, remain proactive, and ensure they’re not just meeting but exceeding the required standards.
How Crystal Payroll can help
At Crystal Payroll, we’ve designed our system to simplify and streamline these calculations so you can have the accuracy without the headache. Our payroll system has features tailor made for the horticulture industry and ensures that you’re always compliant with NZ payroll legislation, making minimum wage top-up and paid break calculations a breeze.
Here’s a look into what our payroll software can do for you to automate minimum wage top-up and paid break calculations.
Minimum wage auto top up
Crystal can ensure that workers will not be paid under the minimum wage with our auto-top up functions. From simply adding the days in which RSE employees are working at their piece rate items, the system will automatically top-up the employee if they meet under their contracted rate.
Below is an example of the system not needing to top-up due to the piece rate items earning more than their contracted wage rate.
Here is one where the employee needs a top-up to meet their contracted rate.
Paid Break Calculations
Crystal Payroll automates the paid break calculations within the system, so as the employer you will only need to input in the number of paid breaks each employee had during the week.
Simplify your payroll today
So why do these calculations alone when we’re here to help? Not only do we help with the tricky formulas, but we also update you on legislative changes, ensuring you’re always ahead of the curve.
Seeking to further ease your payroll processing? Consider our Crystal Timesheets add-on. This feature empowers your employees, allowing them to record piece rates and hours worked. Not only does this foster transparency, but it also cuts down the processing time considerably, as a significant chunk of the task is handled by the employees themselves.
If you’re interested in integrating Crystal Timesheets into your system, Click here to learn more and elevate your payroll processing experience.
Let’s work together to ensure your piece-rate payroll calculations are accurate, seamless, and hassle-free.
