Calculating Base Salary – Work to Residence (Talent) Visa
Early last year, we shared with you our observation on Immigration New Zealand (INZ) toughening their approach on calculating wage/salary rates to assess skill levels, especially in the Essential Skills work visa category. In that update, we advised that we were also seeing INZ apply this approach to the Work to Residence (Talent) visa policy.
Fast forward a year; our team has noted a significant increase in employers choosing to become accredited and consequently seeking to use the Work to Residence (Talent) policy for their employees instead of the Skilled Migrant Category, which was significantly tightened in 2017. With the increasing activity and interest in this visa category, we have received numerous requests for guidance and clarification on the applicable policy, and often, how to calculate the minimum base salary to ensure compliance.
As most employers will be aware, the Employer Accreditation, and consequently, the Work to Residence (Talent) visa scheme is a great tool for employers, even those with only a small number of migrant staff. This is because it offers workers a residence pathway while at the same time encouraging retention of the staff member for at least 24 months.
One of the key requirements of this category, however, is for the applicant to have a minimum base salary of at least $55,000 per annum, based on a 40 hour week, not including overtime or any other allowances such as tool or uniform allowances, medical insurance and accommodation. In our experience, this requirement is generally the most prohibitive aspect of this visa category as many employers are unable to justify a salary increase to this level across many of the industries impacted by the Skilled Migrant Category changes. We do note, however, that in some instances, it is possible to restructure an employee’s remuneration package in order to ensure the minimum base salary requirement is met. We often assist employers with the strategy surrounding this on a case by case basis.
We recently sought a legal opinion from INZ to clarify how the minimum base salary should be calculated on behalf of an employer. As above, the current policy requires an eligible employee to be paid a minimum base salary of $55,000 per annum which must be calculated on the basis of a 40 hour working week. Interpretation issues for this aspect of the policy arise when the employee works more than 40 hours per week.
When we contacted INZ we suggested that the current policy can be interpreted to suggest that INZ should only be looking at the first 40 hours of an employee’s role. Accordingly, this should be acceptable and meet the policy criteria provided any hours above this are paid at least the minimum wage.
After some consideration, whilst agreeing with us that the policy wasn’t very clear, INZ responded to advise that the intent of the policy was to ensure that applicants can be assessed against a threshold (a salary of $55,000) that applies for 40 hours’ work per week. If a person is required to work more than 40 hours, they must ensure that the salary that is actually assessed against the $55,000 threshold is the salary paid to the person for a 40 hour week. Therefore, the employee’s salary over 40 hours, and the salary under 40 hours, should not be calculated at two different rates.
As an example, if an employee is contracted to 45 hours of work per week and is paid a salary of $60,000 per annum, this would not meet the requirements of the policy, as the hourly rate works out to be $25.64 per hour which equates to $53,333 per annum based on 40 hours*:
*45 hours X 52 weeks = 2,340 hours
$60,000 ÷ 2,340 hours ≈ $25.64 per hour X 40 hours =
$1,025.64 per week
$1,025.64 X 52 weeks = $53,333 pa.
INZ’s response on this issue should provide clarity to many employers struggling to find a balance between supporting their employers, and keeping salary/wage costs to a sustainable level.
We continue to engage with INZ on a range of policy interpretation matters on an ongoing basis, and will be happy to assist you and your staff by liaising with INZ on your behalf, should you find yourself facing immigration issues.
Partner, Lane Neave
t +64 3 353 1063
m +64 21 222 2363
Partner, Lane Neave
t +64 3 372 6323
m +64 21 1306 540