Migrant employers need to get the record straight…
Employers hiring migrants have been making headlines lately for breaching immigration and employment law. Leading immigration lawyer Aaron Martin and solicitor Eleanor Gregan of Davenports Harbour Law discuss the most common mistakes made by migrant employers and how to avoid them.
From 1 April 2017, employers who incur a penalty for breaching employment standards have faced a stand-down period preventing them from recruiting migrant labour. The stand-down period is for six months, one year, 18 months, or two years, depending on the severity of the breach.
This is to protect migrant workers from exploitation and unfair labour practices.
Some of the businesses that have incurred penalties have actually been owned by migrants themselves. There seems to be a lack of awareness of employment law, particularly the rules for maintaining staff records for holiday pay and entitlements, and health and safety laws.
If you are a migrant business owner who employs staff, it’s essential you know and follow New Zealand employment law. If you don’t, not only will you face penalties for your business but you may jeopardise your immigration status.
We asked employment law expert Eleanor Gregan at Davenports Harbour Law about the errors employers make when employing staff. To help you avoid an accidental breach, here are the seven most common mistakes:
1. Failing to retain documentation and records
The Employment Relations Act (s. 130) and Holidays Act (s.81) require employers to keep wage, time, holiday and leave records. Gregan says that keeping the proper records is “the most important thing” when it comes to employing a migrant. Labour inspectorates, Work Safe NZ, and immigration officers will frequently check in to make sure you are compliant, and it’s important you have documentation to show them. If you fail to keep correct and up-to-date records, you might be fined, lose migrant hiring privileges, or have your employees’ visa applications declined. If you are a migrant yourself, you could become liable for deportation if the defaults are proven to be indicative of exploitation.
The simplest way to ensure you are keeping adequate records is to keep a file for each employee. This makes it easier to keep track of everything and ensure it is up to date. Each employee file should have at least:
- An employment contract signed by both parties
- Correct tax documentation including an IR330 tax declaration form
- The employee’s KiwiSaver forms. Whether or not an employee wants to join KiwiSaver you need to ensure you have the correct documentation, which can be found when on the IRD’s website under forms and guides.
- PAYE payment receipts and wage book information including any incurred leave.
Documentation can vary depending on each circumstance, so it’s essential you know exactly what each employee file needs. A good employment lawyer can help you to make sure you have everything covered and avoid any unnecessary trouble.
Accurate records ensure all employees are treated fairly and receive their correct pay, holiday and leave entitlements. Also, if any issues arise with employee performance, clear job descriptions, annual performance review and appraisal records and documentation of any performance improvement processes are essential.
Employee personal files must be kept for seven years.
2. Failing to provide and adhere to a proper employee agreement
When an employee starts work, the employer and the employee must agree to and sign an employment agreement. This is New Zealand law. At minimum, the agreement must include a job description and details on: the place of work, the type of employment (employee/contractor/seasonal etc), employee rights (such as annual holidays), hours, wages, and termination agreements. A full list of requirements are listed on the Employment New Zealand website resource: Things an Agreement Must Contain.
It is important to consider the type of contract you are providing (e.g., contractor versus employee contract) as the requirements and obligations differ. An employment agreement is a legal document that needs to be taken seriously and prepared correctly. Seeking advice from an employment law expert is the safest way to ensure you get it right.
A detailed explanation of employee types can also be found on Employment New Zealand’s website under Types of Employee.
3. Failing to pay your employee their entitlements
Employees are entitled to at least the relevant minimum wage, public holiday pay, overtime, lunch, paid rest breaks, and leave (annual leave, sick leave, bereavement leave, parental leave, and jury service leave). Employment New Zealand has a full breakdown of these rights on their website under Minimum Rights of Employees.
It is an offence to fail to pay your employees correctly, so it is best to ask a specialist if you are unsure.
4. Not meeting employment tax obligations such as PAYE and tax deductions
All employees pay PAYE (Pay As You Earn) income tax. As an employer you are required to collect the PAYE from your employees’ wages and send it to Inland Revenue (IRD). PAYE covers taxes on the employee for different types of employment and allowances (such as work-related expenses or benefit allowances), KiwiSaver, ACC, and any legal deductions requested by the court or IRD (e.g., fines, student loans, or child support).
If you don’t pay these taxes correctly, you may lose your right to employ migrants and face serious visa issues. The IRD website has further details about all of the different taxes, but to make sure you are meeting your legal obligations I strongly advise you seek advice from an employment lawyer.
5. Paying your employee the wrong amount
Last year the Government introduced changes to the immigration rules, including adjustments to the skilled migrant points system, new work visa rules, and salary bands. An employer must now provide higher wages for a lower skilled job to obtain a work visa for longer than twelve months or residence visa for an employee. I’ve explained the system in my previous article; Immigration Law Changes NZ September Update.
The new legislation also comes with an employer compliance regime. If the employer fails to pay the employee the required amount for that band, they risk fines, loss of migrant employment rights, and loss of migrant visas.
The new rules are complex. I highly recommend you seek correct professional advice to determine which salary band your employee comes under.
6. Employing under the wrong ANZSCO code or visa
Gregan says she frequently deals with cases where a migrant’s ANZSCO code “doesn’t actually match what their job is”. Often the employer can’t hire an employee because they can’t find the correct ANZSCO code, or the potential employee doesn’t meet the criteria for ANZSCO requirements.
To avoid penalties including losing your migrant employment rights, you need to be sure about which ANZSCO code to use. I have explained ANZSCO codes further in an article “Time To Ask For A Pay Rise” which you can find on the New Zealand Immigration Law website.
If you are struggling to understand the codes, it’s best to contact a professional.
7. Failing to comply with New Zealand law
The majority of issues that attract the attention of Immigration New Zealand usually arise unintentionally, due to a lack of knowledge. If an international organisation or individual has a business here, they have a responsibility to understand and adhere to New Zealand law. As Gregan explains: “If you’ve got a good understanding of New Zealand laws and an employment agreement that reflects those laws, you’re already on the front foot with Immigration New Zealand.”
Gregan recommends that employers from overseas or employers who are new to New Zealand or never operated business before seek expert advice to ensure compliance and to show Immigration New Zealand they are willing to comply.
If you breach New Zealand employment legislation, you may face jail time, fines, loss of rights to hire migrants, and revoking of visas for both you and your employee.
At New Zealand Immigration Law we are here to help you avoid these problems and to find solutions. If you get this right when you start your business, you will save both time and money.
For more information, get in contact with us to see how we can help.