Employees and volunteers
Most workers are employees, not volunteers – even if they work a few hours a week. It’s important to get their legal employment status right.
A worker is more most likely an employee if they meet any of the following criteria:
- The worker is paid for their work – including if workers are given free accommodation or food, or if the cost is being deducted from their wages.
- The worker expects to be rewarded for their work.
- The business makes money as a result of the work done by the worker.
- The work is integral to the business and an employee would normally do it.
The hours of work are controlled or scheduled.
Permission to work in New Zealand
All workers must be allowed to work in New Zealand. To work in New Zealand, a person must be a New Zealand or Australian citizen or have a visa that allows them to work – for example a residence visa or a working holiday visa.
Minimum standard for employees
All employers must meet minimum employment standards. These employer requirements include:
- ensuring employees have the right to work in New Zealand
- having employment agreements in writing
- paying their employees at least the relevant minimum wage in money
- keeping a record of hours worked, wages paid and leave taken
- ensuring employees have minimum holiday and sick leave entitlements
- meeting all other legal requirements – for example PAYE, ACC, and health and safety.
Paying a person with accommodation
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 meet the following criteria:
- It must be in writing in either a tenancy agreement or an accommodation agreement.
- 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 agreement and the employee must agree to it.
How much to charge
As an employer, you 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’s no specific agreement about the cost of accommodation, you may deduct from an employee’s wages. This is calculated at the relevant minimum wage rate, no more than 15% for board or 5% for lodging.
Tax you might have to pay or can claim
Payroll deductions
For workers, you must determine if they are an employee or independent contractor.
If your workers are employees, you’re responsible for deducting and paying PAYE income tax on your employees’ behalf. You must deduct for things like KiwiSaver, child support and student loans.
If the worker is a contractor, they’re responsible for their own taxes.
Claiming expenses
You may be able to claim expenses from providing accommodation and other benefits to a worker. PAYE paid to Inland Revenue will also be deductible.
Examples of costs that could be tax deductible are:
- Groceries
- Heating
- bed linen.
GST
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), it’s not liable for GST.
Fringe benefit tax
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.
Tax for employees
All employees must complete a tax code declaration (IR330) and apply for an IRD number.
If employees are also your tenants
Whoever is providing the accommodation is the landlord.
If you’re 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, like a motel, you may not be considered the landlord. In this case, the third party would be the landlord.
Tenancy rules to follow
If you’re the landlord, there’s minimum information that you must provide that relates to the tenancy.
You can either:
- include this in the employment agreement
- have a separate tenancy agreement.
Tenancy Services has further guidance about what you need to do when providing accommodation for workers.
As a landlord, the accommodation you’re providing must meet all the minimum requirements for rental properties, including building and health and safety requirements. For example, you’ll need to:
- provide working smoke alarms
- keep the property in a maintained, liveable condition
- make sure the accommodation isn’t overcrowded.
Healthy homes standard
You’ll also need to be across the healthy homes standards. These are minimum requirements for rental properties to:
- improve heating, insulation, ventilation and drainage
- reduce moisture
- stop draughts.
New and existing requirements come into effect in stages from 1 July 2019 to 1 July 2025.
Exceptions
Sometimes tenancy law doesn’t apply. One exception is if workers stay in provided accommodation only when they’re 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.
Health and safety
If you provide accommodation for your workers, the facilities must be maintained to keep your workers healthy and safe.
This applies if:
- you own, manage or control the accommodation
- your workers need to stay in the accommodation for work purposes because no other accommodation is available.
WorkSafe New Zealand has guidance on buildings, facilities and amenities for worker accommodation that applies to all industries.
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