Clarification on Minimum Wage Rates for Part-time, Salaried Employees in New Zealand

The Court of Appeal has issued a judgment articulating how the minimum wage rates apply to a part-time, salaried employee.   Mount Cook Airline Limited v E Tū Incorporated [2024][1] overturns a previous Employment Court ruling on how the minimum wage rates should be applied. 

Mount Cook Airline Limited is an airline based in Christchurch.  It has a mixture of employee types including full-time and part-time cabin crew.  The part-time cabin crew work 6 days per fortnight and the full-time cabin crew work 9 days per fortnight.  The salary is paid on a pro-rata basis meaning the part-time cabin crew receive two-thirds of the salary of the full-time cabin crew.

The union, E Tū, on behalf of the part-time cabin crew, raised a minimum wage claim. It argued that the part-time salaries breached the minimum wage rates set out in the Minimum Wage Order.

Minimum wage statutory scheme

There are four categories of minimum wage rates for adult workers in New Zealand. The four categories and the current 2024 rates are as follows:

1. for a worker paid by the hour or by piecework, $22.70 per hour;
2. for a worker paid by the day, $181 per day and $22,70 for each hour exceeding 8 hours worked on a day;
3. for a worker paid by the week, $908 per week, and $22.70 per hour for any hours exceeding 40 worked in a week;
4. in all other cases, $1816 per fortnight and $22.70 per hour for each hour exceeding 80 hours worked in a fortnight.

It is well settled in New Zealand that a salary cannot be used to offset busy periods of the year, with quieter periods. That is because the above wage rate categories make it clear that the maximum length of time you could analyse the pay versus hours worked for minimum wage compliance, is a fortnight. If you pay employees monthly, you must still comply with the fourth category which is to ensure that the minimum fortnightly wage rate has to be paid each fortnight in respect of the hours worked in that same period.

Court of Appeal analysis

E tū claimed, that the part-time, salaried employees were receiving less than $1,600[2] per fortnight, and therefore this was a breach of the minimum wage rate for the fortnightly pay category.

The Court of Appeal reviewed the minimum wage scheme and stated there were two competing interpretations:

1. The “minimum rate of wages” of $1,600 per fortnight is a fixed minimum sum that an employee who is not paid by the hour, day, or week must receive, regardless of hours worked during that same period; or
2. The “minimum rate of wages” of $1,600 per fortnight is a rate of wages and not a fixed amount. It is a rate based on a full-time 80-hour fortnightand therefore it should be pro-rated to reflect actual hours worked for part-time employees.

The Court of Appeal stated both interpretations are potentially open but it preferred the second, pro rata approach, for the following reasons:

• The Court concluded the concept of “rate” implies a proportional relationship between two things, in this case, time worked and compensation.
• The Court stated the Act envisages a single hourly rate, i.e., the four mimimum wage rate categories, are all different ways of expressing the same minimum hourly rate across different time periods.
• The pro rata approach aligns with the overarching goal of minimum wage legislation to ensure fair compensation for all workers, irrespective of their employment status. To apply interpretation one, would lead to part-time, salaried employees receiving more for each hour worked, compared to their full-time colleagues.

[1] Mount Cook Airline Limited v E Tū Incorporated [2024] NZCA 19

[2] $1,600 was the applicable fortnightly minimum wage rate at the time of the claim.  The same category today, is $1816 per fortnight.

What to know more?

The outcome of the Court of Appeal judgment is that the minimum wage rates for a part-time, salaried employee, paid either weekly, fortnightly or monthly, can be prorated based on their actual hours worked.

Employers and employees grappling with complex salary, wage, or hourly rate arrangements should contact our specialist Employment Team.

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