It’s essential that accommodation expectations and legal requirements are understood by both parties.
Farm accommodation can vary immensely; you may be offered a house on your own, a house to share with other staff, or the option to live off farm in a house of your choice.
Always walk through the accommodation on offer by a potential employer before agreeing to live there and ask these key questions:
- How will rent be paid and how much?
- How much bond do I need to pay?
- Who mows the lawns?
- Who do I report damage or maintenance issues to?
- What happens with rubbish collection?
- Does the property come with any furniture or whiteware, landline or WiFi access, is electricity or gas included?
- Is the property insured?
You are considered a landlord if your employees pay you rent as part of their employment agreement. As a landlord, you have legal obligations and requirements as part of healthy home standards - including insulation requirements and working smoke alarms.
There must be a signed Service Tenancy Agreement (the correct agreement for providing on-farm accommodation) between you and your employee. You are entitled to ask for a bond and this must be lodged with Tenancy Services within 23 days.
As a landlord, you are legally required to tell tenants if the property is insured or not and the amount of excess that the tenant may be liable for if they cause damage to the property they live in. This is done with an insurance statement as part of any new service tenancy agreement.
Before staff move in, a property inspection report for each room needs to be completed together by the employer and employee and any existing damage recorded; take photos of any damage and file with the inspection report as a reference. This is a good time to discuss and agree with your employee on tasks you would like done and how often such as mowing lawns at least fortnightly, for example.
Conduct regular property inspections to check for any issues that require maintenance and/or damage. Be realistic about what is damage and what would be considered normal wear and tear.
Tenancy Services – key documents and links
Commonly asked questions
How is value assigned to accommodation?
Good employers and landlords value accommodation fairly. The IRD require fair market rental is charged for accommodation provided to employees. The tenancy services website describes market rent as ‘the amount a landlord might reasonably expect to receive and a tenant might reasonably expect to pay, for a tenancy’. Rent needs to be similar to the rent charged for similar properties in similar areas. Check out the market rent calculator.
What is the relationship between accommodation and the minimum wage?
The Employment New Zealand website states:
- 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.
This means both the employer and employee agree that accommodation will be provided by the employer and the cost of the accommodation will be deducted from the employee’s wages. You can then use the employee’s wages and rent portion together to determine that they have been paid at least minimum wage for every hour worked.
How does an employee pay for accommodation?
Accommodation is usually included in the Total Package Value (TPV), or total earnings offered by an employer as part of the terms and conditions of employment.
To fulfil IRD requirements an employer can either:
- 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.
- Pay an accommodation allowance (which covers the amount 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 wages.
- 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 don’t agree then an employer can’t deduct it.
Find out 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.
What notice period must an employer/landlord give tenants before entering the property?
- No notice is required if an employer/landlord is doing section maintenance, e.g. mowing lawns, trimming trees etc., but you cannot enter the dwelling.
- An employer/landlord must give 24 hours' notice to enter the property for maintenance.
- An employer/landlord 48 hours' notice to do a property inspection.
Should sharemilkers pay the farm owner rent for all of the houses on the farm?
The sharemilker should not have to pay the farm owner rent for any houses supplied, as long as they are being used for staff that are working on the farm. This is considered part of the infrastructure of the business, the same as any other building e.g. cowshed or calf sheds.
Is the landlord the farm owner, or is it the sharemilker/contract milker?
If you are a sharemilker or contract milker, you are the landlord and can charge rent for the properties supplied. You are responsible for conducting property inspections and for any damage from tenants.
Who is responsible for ensuring the house meets the required standard?
The farm owner is responsible for any capital structural requirements, such as meeting insulation standards. The sharemilker or contract milker is responsible for managing the tenancy on a day-to-day basis e.g. checking smoke alarms are working and conducting property inspections.
Who is responsible for damage?
It is important for farm owners and their sharemilker or contract milker to discuss who will be liable to pay for damages. Standard contracts don’t currently take this into account. As it stands, if a house is destroyed or damaged, the sharemilker or contract milker could be responsible for the whole cost to repair or replace.
It’s important to have this discussion as soon as possible with the farm owner, and have the outcome that you’ve both agreed to, included in your contract. Your insurance companies should both be included in the discussion as each company will have its own requirements and will have the experience to make sure each party is covered and not unfairly penalised in the event of damage.