Why is an Au Pair classified as an employee?
In New Zealand, an Au Pair will be the employee of their Host Family. It can sometimes be difficult to assess whether a person is an employee or a self-employed contractor. The difference is important, as different rules relating to employment standards will apply depending on a person's employment status. The things to look at include:
Who makes the tax payments to the Inland Revenue Department?
Who provides the equipment?
Who controls how and when the work is done?
Who has the power to hire other people to do the work?
Was the intention to be a self-employed contractor or an employee?
Is there any written agreement or correspondence that shows your intention?
An Au Pair lives with a Host Family who provides the 'necessary equipment' (e.g. their home environment, nappies, food etc) for childcare. An Au Pair does not 'control their own hours' of work as they must adapt to Host Family/child routines and provide childcare when required by their Host Family e.g. when the parents are working. Host Families make the tax payments to the IRD not Au Pairs (we believe it is unreasonable to expect a young, foreign national to pay tax directly to the IRD). Host Families also have the 'power to hire' other people to do the work e.g. a nanny or cleaner - Au Pairs do not have this power. It is very clear from asking these basic questions that an Au Pair is an employee and not a self-employed contractor in New Zealand.
Au Pairs typically enter New Zealand on a Working Holiday Visa or Student Visa. New Zealand does not have a specific 'Exchange Visitor Visa' programme for Au Pairs and other foreign workers like in the United States of America e.g. the USA J1 Visa. Anyone working in New Zealand on a Working Holiday Visa or Student Visa enjoys the same benefits and rights under New Zealand employment law as per any another employee in New Zealand. Therefore, in New Zealand, an Au Pair will become the employee of their Host Family and as such all Host Families in New Zealand must comply with the Employment Relations Act and other employment laws including:
- The Holidays Act
- The Minimum Wage Act
- The Health and Safety in Employment Act.
As employees, Au Pairs are entitled to holiday pay, public holidays, sick leave and annual leave in New Zealand. Au Pair Link provides all Host Families with an industry leading Individual Fixed Term Employment Agreement and can supply you with best practice industry information regarding taxation and employment legislation. For further information on the difference between a self employed contractor and employee please visit the Department of Labour website.
Minimum Wage Act - Deductions for Board and Lodging
The adult minimum wage in New Zealand applies to all employees over the age of 16 years old. As employees, Au Pairs must be paid in accordance with the Minimum Wage Act.
- Adult Rate = $13.75 per hour (as of 1 April 2013)
- Per 8 hour day = $13.75 x 8 hours = $110.00 per day
- Per 40 hour week = $13.75 x 40 hours = $550.00 per week.
If, for example, an Au Pair is working 40 hours per week on the Au Pair 123 programme – the net cash payment to the Au Pair is set at $200.00 per week. However, this figure is below the minimum wage level for 40 hours per week of work. Hence, an agreed deduction amount for board or lodging must be taken into account. Au Pair weekly wages are net cash payments exclusive of PAYE tax and board or lodging. As a result, board or lodging must be included as part of the total gross package provided to your Au Pair – on which PAYE tax is calculated.
Section 7 of the Minimum Wage Act specifies standard percentages that must be used to calculate board or lodging – as a percentage value of the total minimum wage amount. The percentages specified in Section 7 of the Minimum Wage Act must be used in the absence of an Individual Employment Agreement (a contract between the Host Family and their Au Pair) stating a fixed and agreed amount for board or lodging. The Minimum Wage Act deductions for board or lodging are:
- Board = a maximum 15% deduction
- Lodging = a maximum 5% deduction.
Instead of using the default percentages under the Minimum Wage Act (which are set very low), Au Pair Link recommends that all Host Families sign an Individual Fixed Term Employment Agreement with their Au Pairs to agree on an alternative fixed value for board or lodgings. Au Pair Link will provide all our Host Families with relevant calculations, a payroll service and a template Individual Fixed Employment Agreement to use.
All Au Pair PayLink payroll clients must have an Individual Fixed Term Employment Agreement signed with their Au Pair (i.e. your Employee) to ensure compliance with Section 7 of the Minimum Wage Act 1983. Au Pair Link will provide all Host Families with an Individual Fixed Term Employment Agreement template. A copy of this Agreement must be supplied to Au Pair Link prior to the payroll service commencing.
The ACC work levies are calculated on your Au Pair's gross income for the year. The payment is generally around $200 - $300 for a full year (12 months) depending upon the level of earnings for the year and the current rate set by ACC. ACC levies are billed directly to the Host Family at the end of the financial year (generally around August) and are to be paid directly by the Host Family.
Employment questions and problems
Please contact us to discuss any queries that you may have about becoming an employer. Alternatively, if you have any questions or concerns you can contact the New Zealand Department of Labour toll free on 0800 20 90 20 or visit their website at www.ers.dol.govt.nz