Observation (CEACR) - adopted 2002, published 91st ILC session (2003)

Minimum Wage-Fixing Machinery Convention, 1928 (No. 26) - New Zealand (Ratification: 1938)

The Committee notes the information provided by the Government in reply to its previous observations. It also notes the discussion held in the Committee on the Application of Standards of the International Labour Conference at its 86th Session in June 1998. The Committee notes with interest the adoption in October 2000 of the Employment Relations Act, as well as the new Minimum Wage Regulations in 1999, and the draft legislation that has been introduced into Parliament to amend the Minimum Wage Act. The Committee also notes the comments made by the employers’ organization "Business New Zealand" concerning the application of the Convention.

Establishment of a minimum training wage

1. The Government indicates the adoption in 1999 of the Minimum Wage (Industry Training) Regulations, replacing the Minimum Wage (Training in the Nature of Apprenticeship) Regulations, 1992. The latter permitted the exclusion from the scope of the Minimum Wage Act of persons undergoing training in certain industries that they specified. The new Minimum Wage Regulations are no longer limited to certain categories of activity, but exclude from the scope of the Minimum Wage Act any persons who have concluded a training agreement with their employer with a view to achieving at least 60 credits a year (representing approximately 600 hours of training), which entitles them to have their qualification recognized within the National Qualifications Framework.

2. The Government also indicates that it has introduced into Parliament an amendment to the Minimum Wage Act of 1983 to determine a minimum wage for persons undergoing training who are excluded by the Minimum Wage Regulations of 1999 from the scope of the Minimum Wage Act. It also indicates that the level of the minimum training wage will be set at the same level as the applicable minimum wage for young persons under 18 years of age.

3. The employers’ organization "Business New Zealand" observes in its comments that the draft referred to by the Government has not yet been adopted by Parliament and that, although it is intended to set a minimum training wage, it does not give an indication of the level at which the wage is to be set. Business New Zealand expresses concern at the adverse effects of minimum wage increases, and particularly any increase in the youth minimum wage. It adds that, while minimum wages may have their place, they may also have the unintended consequence of depriving individuals of the chance to become established on the labour market or, in the case of minimum training wages, to have the opportunity to train for the occupation of their choice. Business New Zealand also questions the assumption that the introduction of a minimum training wage would be of automatic benefit to those whom it is intended to assist. Finally, it regrets the lack of statistical information available at the national level on the negative effects on the employment of young persons of lowering the age at which the adult minimum wage becomes payable from 20 to 18 years and considers that statistics showing a decline in the number of persons employed could be interpreted in this sense.

4. The Committee requests the Government to provide information with its next report on developments relating to the adoption of the draft amendment to the Minimum Wage Act. It also requests the Government to make its observations on the comments forwarded by Business New Zealand.

Participation of the employers’ and workers’ organizations concerned
in the application of minimum wage fixing machinery

5. The Committee notes the information provided by the Government in its report on the consultation of the employers and workers concerned. It notes the information supplied by the Government on this matter at the 86th Session of the International Labour Conference (June 1998) and the commitment that it made to provide a detailed report on the various points raised by the Committee in its previous observation. In its report, the Government provides a summary of the procedures which have been applicable since 2000 to the holding of consultations with organizations of employers and workers and any other interested parties. The Government states that, since that date, it has invited all the interested parties to participate in the annual adjustment of minimum wages. It emphasizes in particular that the employers’ organization Business New Zealand and the New Zealand Council of Trade Unions have been associated with this process on equal terms. The Government adds that, although the consultation procedure and the submissions made are generally received in writing, it also holds meetings in which the above two organizations can put forward their views on minimum wages. These views are then incorporated into the annual report on the review of the minimum wage. The final decision on changes to minimum wages is made by the Minister of Labour.

6. The Committee however regrets to note that, despite its previous very detailed comments on the fundamental role of consultations with organizations of workers and employers on the minimum wage fixing machinery, when the Minimum Wage (Industry Training) Regulations were adopted in 1999, only the New Zealand Employers’ Federation appears to have been consulted, in addition to other institutions such as the Ministry of Youth Affairs, the Ministry of Women’s Affairs and Skill New Zealand (the industry training fund agency).

7. The Committee wishes in this respect to strongly reaffirm that one of the essential obligations set out in the instruments on minimum wages is that the minimum wage fixing machinery must be determined and applied in consultation with the organizations of employers and workers, who must participate on an equal footing and be able to exert a real influence on the decisions taken, as emphasized in the conclusions adopted by the Committee on the Application of Standards of the International Labour Conference during the discussion of the application of this Convention by New Zealand in 1998. It recalls in this respect the provisions of Article 3 of the Convention, by virtue of which representatives of the employers and workers concerned shall be consulted before the minimum wage fixing machinery is applied and during its operation. Such consultation shall in all cases be held on equal terms. The Committee therefore requests the Government to indicate the measures that it intends to adopt in order to ensure full compliance with the obligation to consult employers’ and workers’ organizations on equal terms in decisions relating to minimum wages.

The minimum wage for young workers

8. The Committee notes the changes which have occurred since its previous comments and following the discussion held by the Committee on the Application of Standards of the International Labour Conference at its 86th Session in June 1998 in relation to the establishment of different minimum wage rates depending on the age of the workers. It notes that since 2000 the Government has adopted measures related to the minimum wage of young workers. It has also extended the adult minimum wage to young persons of 18 and 19 years of age and has reviewed the rate of the minimum wage applicable to young workers. Since then, this usage has been set at 80 per cent of the adult minimum wage, compared with 60 per cent before. The minimum wages currently applicable to young persons and to adults are respectively: 6.40 dollars an hour, 51.20 dollars for a working day of eight hours and 256 dollars for a working week of 40 hours for the former; and 8 dollars an hour, 64 dollars for a working day of eight hours and 320 dollars for a working week of 40 hours for the latter. These hourly rates are also applicable to additional hours worked over 40 hours a week. While noting these favourable developments, the Committee is bound to reiterate its previous comments on this subject and to refer once again to paragraphs 169-181 of its 1992 General Survey on minimum wages, where it indicated that, even though minimum wage instruments contain no provisions providing for the fixing of different minimum wage rates on the basis of such criteria as sex, age or disability, the general principles laid down in other instruments have to be observed in order to prevent any discrimination, inter alia, on grounds of age, and particularly the principles contained in the Preamble to the Constitution of the ILO, which specifically refers to the application of the principle of "equal remuneration for work of equal value". With regard to age, paragraph 171 of the above General Survey specifies that the quantity and quality of work carried out should be the decisive factor in determining the wage paid. The Committee therefore recalls that, as indicated by the Conference Committee on the Application of Standards, even though the minimum wage Conventions do not forbid the determination of lower minimum wage rates for young workers, the measures in this respect should be taken in good faith and should incorporate the principle of equal remuneration for work of equal value. The reasons that prompted the adoption of lower minimum wage rates for groups of workers on account of their age and disabilities should be regularly re-examined in the light of this principle. The Committee therefore requests the Government to provide information in future reports on any developments relating to the issue of the difference in minimum wage rates based on age and strongly hopes that the Government will be in a position to inform the International Labour Office in the near future of the progress achieved with a view to the full application of the principle of "equal remuneration for work of equal value".

Application of the Minimum Wage Act

9. The Committee notes the explanations provided during the discussion of this subject in the Committee on the Application of Standards of the International Labour Conference at its 86th Session (June 1998) and the changes in the national regulations respecting the supervisory system and penalties for the enforcement of the national minimum age provisions, and particularly the new procedures established by the Employment Relations Act, which entered into force on 2 October 2000 and which enable, in accordance with the requirements of Article 4, paragraph 2, of the Convention, a worker to whom the minimum rates are applicable and who has been paid wages less than these rates to recover, by judicial or other legalized proceedings, the amount by which he or she has been underpaid, subject to such limitation of time as may be determined by national laws or regulations. The Committee notes in particular section 131(2) of the above Act, by virtue of which employees may recover the difference between the wage actually paid and the minimum wage, notwithstanding the fact that they have accepted by any expressed or implied agreement a lower rate.

10. With regard to the communication of information to employers and workers on the minimum rates of wages in force and the organization of a system of supervision and sanctions to ensure that wages are not paid at less than the applicable minimum rates, the Government indicates that the adoption of the Employment Relations Act has established a new procedure applicable in the event of violations of the regulations on minimum wages. In the context of this new procedure, following a complaint by an employee, the labour inspection services may, in the event of the failure of a demand notice addressed directly to the employer, commence an action on behalf of an employee before the Employment Relations Authority to recover wages due and against any employer who does not abide by the obligation to pay the minimum wages due in their totality. Under the new legislation, workers are also entitled to go directly to the above authority and may also decide, in common agreement with the employer, to have recourse to mediation by the authority free of charge. The Government states that the Department of Labour focuses on prevention by organizing information campaigns intended to ensure compliance with the national legislation on minimum wages through increased awareness of it. It adds that 20 labour inspectors, supported by 19 staff in the Employment Relations Service of the Department of Labour, provide assistance in the field of minimum wages through a free telephone line or by electronic mail. The Government adds that any complaint received by the Labour Inspection Services from a person other than a worker gives rise to an investigation, where appropriate, leading to action. The Government also states that the Employment Relations Act gives entitlement to paid leave for employment relations training for members of trade unions, thereby allowing them to increase their knowledge in this field. The Committee also notes the establishment of the Employment Relations Education Contestable Fund, financed by the State and intended to allow members of a trade union and other workers and employers to improve their knowledge of the subject. According to the Government, this approach is compatible with the objectives of the Employment Relations Act, namely to ensure productive and cooperative employment relationships based on the principle of good faith and to resolve employment problems at an early stage by providing information and mediation services, which consequently reduce the need for sanctions. It is from this perspective that, according to the Government, the power of inspectors should be viewed to issue demand notices to employers, the intention of which is to recover the sums due to workers, rather than engaging in legal recovery procedures and imposing penalties. The primary focus in such investigations and compliance actions is, according to the Government’s report, to recover any underpayment of the minimum wage.

11. The Government also provides statistical information on the estimated number of workers receiving the statutory minimum wage, as well as information on the number of requests for information concerning minimum wages through the free telephone service (an average of 14,000 a year since 1998), the number of complaints to the labour inspectorate for violations of the legislation on the adult minimum wage (which rose from 93 in 1998 to 222 in 2002), the number of complaints to the labour inspectorate for violations of the legislation on the youth minimum wage (an average of 15 a year since 1998) and the number of compliance actions brought to the Employment Relations Authority and the Employment Tribunal (actions under the Employment Contracts Act), which have averaged eight a year since 1998.

12. In this respect, Business New Zealand emphasizes that minimum wage infringements are rare in New Zealand and that where they are suspected both employees and unions have access to wage records and enforcement mechanisms. It adds that all the industrial relations legislation, including the minimum wage legislation, applies to every enterprise of whatever size.

13. While noting the information provided on the number of complaints lodged with the labour inspectorate, the number of requests for information and the actions of the labour inspectorate, the Committee requests the Government to continue making all the necessary efforts to ensure the appropriate application of the provisions of the Convention and to continue supplying information to the International Labour Office so that the Committee can assess the extent to which the Convention is applied.