By law, anyone working for you in return for food or accommodation is most likely an employee. You may also be their landlord.
Workers are sometimes brought in by businesses to do seasonal or casual work in exchange for accommodation or board. Arrangements like this are common in industries like farming, hospitality and tourism. Workers are often seasonal or casual, backpackers, travellers and WWOOFers.
If you provide your workers with meals or a place to live, there are employment, tenancy and tax rules to follow. Some of these rules exist to protect workers, to ensure everyone gets the pay they are entitled to and healthy accommodation to live in.
We’ve brought together the relevant laws and rules with links to more information to help you get it right.
Most workers are employees, not volunteers – even if they work a few hours a week.
A worker is most likely an employee if they meet ANY of the following criteria:
Who is an employee(external link) — Employment New Zealand
FAQs working for accommodation [PDF, 486KB](external link) — Employment New Zealand
They must be a New Zealand or Australian citizen or have a visa that allows them to work, eg a residence visa or a working holiday visa.
Things to consider before hiring migrants(external link) — Immigration New Zealand
All businesses must meet minimum employment standards. These employer requirements include:
You can’t directly pay an employee in accommodation only. Payment for work must be in money.
However, employers can arrange accommodation for their employees and deduct the cost from their wages if agreed. This rental agreement must be in writing in either:
It should be separate from the employment agreement, or able to be separated.
The value of the work being performed must be written in the employment contract and agreed to by the employee. Take note that the job can’t be dependent on the employee staying in the accommodation.
For more about tenancy agreements and landlord considerations, see the section below: Are your employees also your tenants?
As an employer, you’ll need to estimate the value of the accommodation you’re providing. Think about what is likely to be paid for similar accommodation in a similar location. For example, if an employee is staying in a backpacker hostel, the room rate might be a good estimate to use.
If there is no specific agreement about the cost of the accommodation to be deducted from an employee’s wages, then the maximum an employer can deduct is:
Further information about deductions can be found on the Employment New Zealand website.
Deductions(external link) — Employment New Zealand
If you are providing accommodation for your workers to live in, you are also likely to be their landlord. Tenancy law will probably apply to you and you’ll need a tenancy agreement. This type of tenancy is called a service tenancy.
If you have arranged for a third party to provide accommodation, eg a motel, then you may not be considered the landlord. In this case, the motel or other person/organisation would be the landlord. It really comes down to who is providing the accommodation.
If you are the landlord, there is minimum information that you must provide that relates to the tenancy. This can be included in the employment agreement or you can have a separate tenancy agreement.
Tenancy Services has further guidance about what you need to do when providing accommodation for workers.
Service tenancy(external link) — Tenancy Services
As a landlord, the accommodation you’re providing must meet all the minimum requirements for rental properties, including building, health, and safety requirements. For example, you’ll need to provide working smoke alarms, keep the property in a maintained, liveable condition and make sure the accommodation is not overcrowded.
Laws and bylaws(external link) — Tenancy Services
You’ll also need to be across the existing insulation requirements and the new healthy homes standards. These are minimum requirements for rental properties to improve heating, insulation, ventilation and drainage, reduce moisture and stop draughts. New and existing requirements come into effect in stages from 1 July 2019 to 1 July 2024. Check out our recent article on existing insulation requirements and the healthy home standards to learn more about what you need to do and by when.
Tenancy Services has a helpful checklist for landlords that sets out the minimum requirements you need to meet.
Landlord compliance checklist(external link) — Tenancy Services
Sometimes tenancy law does not apply. One exception might be if workers stay in provided accommodation only when they are working, but live elsewhere when they are not. For example, if a team stays in shearing quarters on a farm during the week when they are working, but return to where they live permanently on their weekends off, then the shearing quarters would probably not be covered by tenancy law.
There are tax rules to follow if you’re providing a place to stay or food for your workers. Some of these include:
Tax implications of working for accommodation(external link) — Inland Revenue
For workers, it will be important to determine whether they are an employee or independent contractor. If your workers are employees, then you’re responsible for deducting and paying PAYE income tax on your employees’ behalf. Employers must deduct for things like KiwiSaver, child support and student loans. If the worker is a contractor, they will have their own tax considerations.
You may be able to claim expenses incurred in providing accommodation and other benefits to a worker. For example, the cost of groceries, heating and bed linen could be tax deductible. PAYE paid to Inland Revenue will also be deductible.
There may be GST implications too. You will be liable for GST on accommodation supplied to workers if it’s in a commercial dwelling, like a hotel, motel, farm stay, inn, hostel, or camping ground. If the accommodation is a private residence, like a house, then it is not liable for GST.
If you supply your employees with other non-cash benefits apart from accommodation, you may have fringe benefit tax obligations. For example, use of a car or subsidised transportation.
If you provide accommodation for your workers, the facilities must be maintained to keep your workers healthy and safe.
This applies if:
WorkSafe New Zealand has guidance on buildings, facilities and amenities for worker accommodation that applies to all industries.
Worker accommodation [PDF, 50KB](external link) — WorkSafe NZ
Workplace and facilities requirements(external link) — WorkSafe NZ