July Newsletter

In this edition:

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 employees electing to work for an accredited employer to use the Work to Residence (Talent) pathway to seek New Zealand residency; 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, both from employees and their employers; for guidance and clarification on the applicable policy, and often, how to calculate the minimum base salary to ensure visa issue.

Most employees will be aware that one of the key requirements of the Work to Residence  category 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 have assisted many employers in this area to support their migrant employees.

INZ’s toughing stance around the calculation of remuneration is a reflection of the government’s increasing focus on eradicating migrant worker exploitation. With the recent media attention on this topic; we have encountered many employers who are reluctant to support work visa applications, either due to a lack of understanding of the policy/requirements around salaries/wages, or in fear of drawing INZ’s scrutiny on their payment processes/systems. Usually however, any confusion on this issue can be quickly cleared up with some policy interpretation advice at the outset. This has a dual benefit of setting employers at ease regarding the visa process and also allowing employees to enter into better informed discussions/negotiations with their employers.

We recently sought a legal opinion from INZ to clarify how the minimum base salary should be calculated. 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 and their employees struggling to find a balance between supporting their employees to secure appropriate visas, 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 employer mange the issues outlined in this article, should you find yourself facing an immigration hurdle on rates of pay.

We are also happy to liaise with your employer to explain these technical immigration requirements and support both you and them through any visa application process.  The trick is finding a middle ground that suits both an employer and their prospective employee, and we are good at finding that.

For further information or assistance with emigration please contact Lane Neave Lawyers on + 64 3 379 3720 or email liveinnewzealand@laneneave.co.nz.

Demand for labour remains strong despite slower growth

The pace of growth in New Zealand’ economy has slowed down from a fairly frenetic average of 3.5% a year from 2015-18 to close to 2% now. This slowdown can be seen in the annual pace of jobs growth slowing to 1.5 in the past year from an average also of 3.5% for the past four years Why the slowdown?

There are three main reasons. First, the booming tourism sector has cooled off. Visitor numbers to New Zealand have soared by 35% in the past four years but growth in the past year has fallen to near zero. The boom has caught everyone by surprise and highlighted a lack of visitor accommodation, insufficient education of foreign drivers, inadequate provision of rest stops for people driving themselves around in vans, and pressure of numbers for some key activities such as walks along main tramping routes.

The slowdown therefore is in some regards a positive thing. It is giving councils time to get facilities up to scratch and for more hotels to be built.

The second reason why New Zealand growth has slowed down is a sharp rise in business pessimism following election of the centre-left government late in 2017 and a resulting decline in capital spending.

Third, it is hard for an economy to keep growing strongly in the absence of either a surge in productivity or rapid growth in resource availability. But like everywhere else around the world in recent years productivity growth has drastically slowed in New Zealand. And labour availability is very poor.

Barely a week goes by without some sector bemoaning the lack of staff – horticulture, construction, hospitality, teaching, nursing, forestry, bus driving and so on. This lack of staff is catching many businesses unprepared and some try to power ahead and boost output, not realising that the cost of extra resources, training, poor quality work etc. can easily exceed the extra revenue.

New Zealand firms are having to change the way they think about growth, redirecting their planning away from simple volume increases toward focussing on the highest yielding outputs and the highest profit customers. This has two major implications.

First, demand for labour is high and given our positive outlook for growth in coming years is likely to remain so. But second, a simple bums on seats approach to recruiting people is not going to work. There are increasing examples of businesses hiring people who simply do not have the skills, motivation, and basic level of professionalism and simple comprehension to undertake basic tasks correctly. New Zealand’s labour market has reached the bottom of the barrel.

Businesses are changing the way they do things and that often requires people with skills completely absent in the current queue of unemployed people. More skilled people are needed and perhaps if this were the 1960s in New Zealand we would see extra special government-driven efforts made to attract people from offshore. This applied back then in the residential construction sector.

But these days the government, while open to immigration, is not accepting of increased immigrant numbers amidst concerns about low wages growth and exploitation of migrants – usually by their own non-Western ethnic group unfortunately. And because addressing these exploitation concerns is not possible through restricting people coming in from newer migrant source countries since rules were changed in the late-1980s, potential migrants from those older source countries like the United Kingdom cannot be outright favoured in the points system approach.

New Zealand’s labour shortages are likely to continue until the next (unpredictable) recession comes along.

Article provided by Tony Alexander – Chief Economist, Strategy & Business Performance, BNZ. 


Invest in overseas financial assets in New Zealand

It’s very common for new immigrants to transfer their overseas financial assets and foreign currencies to New Zealand in addition to their New Zealand investment and settlement funds. A number of my immigration clients have done that. Those clients wish to keep foreign assets as part of their asset allocation and do not wish to convert into NZD dominated assets. From my observations, those investors have done that for two main reasons.

Firstly, its easy to invest globally from New Zealand. Local investors invest overseas to gain exposure to a diversified industries, themes and regions in their portfolio. The infrastructure for investing in overseas financial markets are well developed in New Zealand. Investors can get a complete service for investing overseas, from access to research, advice, trade execution, custody, performance monitoring to annual tax reporting.

Secondly, New Zealand has an investor friendly tax system. The most topical tax issue this year was the current government announced they would not pursue capital gain tax. Many new immigration investors take advantage of their four years transitional tax residence status in New Zealand, that they don’t need to pay New Zealand tax on their overseas investment income, such as dividends and interests from overseas shares and bonds.

How do you go about this?

You start by choosing an investment advisor. They should explain about their license including what type of adviser they are, the scope of advice they provide, their qualifications and experiences, fees and remuneration and complaints process. The scope, the nature and the type of the advice are important. An accountant’s opinion to confirm your tax status would be useful.

Investment advisors have access to research providers and custodians. Research can be provided in house, from external sources or a combination of both. You can ask the investor advisor the details to determine the scope of the research.

Some advisors offer a wider range of market access than others. While there are overseas service providers operating in New Zealand via on-line access, you should trade through advisors with local licences and regulated under New Zealand laws. If something goes wrong, it would be hard to pursue legal matters across if dealing with advisers outside New Zealand.

Local custodians can provide New Zealand tax reports, which would save your accountant’s time to file your New Zealand tax. Here are issues dealing in offshore jurisdictions that can be solved by the New Zealand advisers.

Article provided by Ally Cui – Director, Private Wealth Adviser, JBWere 

Ally Cui can be contacted on Ally.Cui@jbwere.co.nz or +64 (9) 365 0888.

Key projects drive job growth

The Winter solstice has just been and gone with the shortest day and longest night.

Business in New Zealand tends to follow the seasons with Winter generally being a quieter period of the year.  This is especially true for Cantabrians, who are still recalibrating their local economy after the boom years following the earthquakes of 2010 and 2011.

However, the rest of New Zealand is relatively buoyant for this time of the year.  Our Auckland, Wellington and Invercargill branches are experiencing skill shortages in most key areas.

Construction and infrastructure industry requirements are still driving local economic activity.

Two recent examples highlight this. Firstly, more than 700 construction projects worth $10 Billion are forecast to descend on the Otago region over the next fifteen years.  Secondly, the Provincial Growth Fund has invested more than $68 million to grow the Hawkes Bay economy.

Article provided by Steve Baker – Enterprise Recruitment and People.

Enterprise Recruitment and People has a national presence. We remain interested in providing obligation free advice to offshore candidate’s about their chances of securing employment in New Zealand. Steve can be contacted on steve.baker@enterprise.co.nz or 00 64 3 3530680.


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