Ensure that the accommodation your new employee and any family will inhabit, is better than appropriate, and able to become a happy and secure home for them.
- Walk through the house/accommodation and consider what needs improving or replacing to ensure the house is warm, safe and dry. Then action those changes. It must be at a likeable standard as per the Residential Tenancy Act and the Health and Safety Act.
- Consider what changes you could make which would positively impact living in the house. This might include paint, a deck, a new oven or a place to put wet weather gear. If your budget allows then action one, or some, of these suggestions.
- Work through a tenancy agreement (this may be in the employment agreement) when your new employee moves in and both of you sign it. This process should include you both detailing and agreeing the condition of each room of the house and the grounds to prevent dispute later.
- Take note of any improvements to the property they suggest and see if you are able to complete them. It is likely you will be repaid by a more motivated employee.
- Ensure your accommodation is in a good state and ready for your new employee.
- Complete regular reviews of state of the house and consider what improvements you could make.
- Clearly outline from the start what maintenance of the property you require, such as lawns mown every two weeks.
- You must give 48 hours notice before entering the property unless there are extenuating circumstances.
Quick Questions & Answers
What value do I put on accommodation?
As an industry to maintain our reputation as good employers it is important to value accommodation fairly. If employees understand the financial benefit they are gaining, it allows a true comparison of total pay to other industries.
The IRD require a fair market rental is charged for accommodation provided to dairy farm employees. They expect that a “reasonable and appropriate process” is followed in determining the Market rental rate and this will include having a documented process that can be made available for review.
Market rent is described in the Residential Tenancies Act as the amount of rent a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay, for a tenancy.
This means it needs to be similar to the rent charged for similar properties in similar areas. This can prove a little difficult if there are not many rentals in your area. Some ways of agreeing a fair market rental include considering;
- a valuation from a registered valuer;
- an estimate from a real estate agent or property manager, or other suitably experienced person;
- a review of comparable properties on internet sites that advertise rental property (for example, TradeMe).
- Talking to your accountant
- Checking valuation company information services such as QV https://www.qv.co.nz/property-trends/rental-analysis
Other factors that might be considered include:
- The location of the accommodation – including desirability, access to amenities, etc;
- The specific functional characteristics of the accommodation – including the number of bedrooms, size, parking, etc;
- The condition of the accommodation;
- Any restrictions of use.
How does an employee pay for accommodation?
Accommodation is often incorporated into the Total Package Value (TPV), or total earnings, that you offer as part of the terms and conditions of employment.
To fulfil IRD requirements you can either:
a) Take the rent out of the person's wages after tax has been paid. Note: the provision of accommodation is a taxable benefit so it is liable for PAYE.
b) Pay an accommodation allowance (which covers the value of the accommodation) within an employee’s wages and then deduct the rent back from the employee once tax has been paid on the total earnings or wages.
c) Pay Fringe Benefit Tax on the value of the accommodation.
Options a) and b) are essentially the same, there is just more paperwork in option b). Option c) is the only method which can be considered free rental.
The amount of rent paid for accommodation must be clearly written into the employment agreement and the employee must agree in writing to the deduction of rent from their wages. If they do not agree then no deduction can occur.
Find out more about employment agreements and why you must have them. Make sure your agreement includes any accommodation or other wage deductions and that they are specific.
Learn about your other legal responsibilities as an employer.
What do I need to know about carrying out a property inspection?
The following rules apply to property inspections:
- You must give your employee / tenant at least 48 hours notice before a property inspection.
- This notice cannot be given more than 14 days ahead of time.
- Only one inspection can be done every four weeks.
- Inspections must be completed between 8 am and 7 pm.
You should complete a thorough property inspection with your employee before they move in, accurately documenting the condition of the property. This helps ensure that you don't wrongly blame your new employee for any existing damage and any new damage, either careless or deliberate, is easily identified.
What is the relationship between accommodation and the minimum wage?
The Ministry of Business, Innovation and Employment outlines that:
- “An employer must pay its employees at least the relevant minimum wage set annually under the Minimum Wage Act 1983. The minimum wage must be paid for each hour worked on the farm. Wages cannot be averaged over a season.
- Employees must be paid their wages in money, and cannot be paid through other non- cash benefits except deductions from their wages agreed by the employees for accommodation or other goods or services.”
So in effect both employer and employee may agree that the employer will provide accommodation to an employee, and also that the cost of that accommodation will be deducted from the employee’s wages.
This then allows you to use an employees wages including the rent portion when reviewing an employees hours to assess that they have been paid at least minimum wage for every hour worked.
What level of accommodation do I need to offer?
This depends on the quality of staff you want to employ. Good quality farm accommodation is likely to attract quality job applicants and employees. It is also likely to help you retain these employees.
The Health and Safety at Work Act 2015 details that PCBUs providing accommodation they own, manage or control to employees (where occupancy is necessary for work purposes because other accommodation is not reasonably available), they must, so far as is reasonably practicable, maintain the accommodation.
Further to this there is general guidance about farm worker accommodation. Including a basic list of conditions that the property must include.
These are the bare necessities you must provide, but it is best to be honest and consider if your accommodation will result in an employee who lives and works in their best health, mentally and physically. If the answer is no, then think about, and implement changes to improve it.
Of particular interest is insulation which is now required to be a term detailed in the tenancy agreement. Ceiling and underfloor insulation will be compulsory in all rental homes from 1 July 2019 where it is reasonably practicable to install.
Can I set rules for those inhabiting my accommodation?
Generally no, you must allow the tenant enjoyment of the premises. Although you own the property it is your tenant's/employee's home and you must allow them peace, comfort and privacy to live in.
In return your tenant/employee must not disturb the peace, comfort and privacy of neighbours (which might include you) and other tenants, or allow anyone visiting the property to do so.
Several “rules” are allowed to be negotiated as part of the tenancy agreement. These include if pets are allowed, the number of people living in the accommodation and the ability to sublet the property. Any terms or conditions specified in the tenancy agreement which are outside the Residential Tenancies Act 1986 are considered invalid (even if signed by both landlord and tenant).