Every employee over 16 must be paid at least the relevant minimum wage unless they have a minimum wage exemption permit.

Labour Inspectors may issue minimum wage exemption permits to employees who have a disability that limits them carrying out the requirements of their work. A minimum wage exemption permit means that the person named in the permit has a lower minimum wage rate for the specific job and only for the period stated in the permit.

The Minimum Wage Act 1983 allows Labour Inspectors to issue minimum wage exemptions in certain circumstances to people with disabilities. Labour Inspectors will issue a minimum wage exemption if they think it is reasonable and appropriate. They will not issue one if they think the employee should be paid the relevant minimum wage if the wage offered is unfair, or if the employee disagrees with the rate of pay offered.

How to apply for a minimum wage exemption

First, the employer and the employee should discuss the job and possible wage rates. The employee needs to be told that they can have an independent representative, union representative or advocate present during these talks. The employer and employee have to negotiate the wage rate in good faith, that is, openly, honestly and without misleading each other. When doing this, the parties need to consider how the employee could earn a higher rate of pay by doing things such as the employer:

  • providing more training, supervision and/or support
  • matching the content of the job to the employee’s abilities
  • making physical changes to the workplace, or changing the way the work is done
  • offering the employee a different job
  • having flexible working hours.

If the employee is a union member, the union will need to agree to the employee being paid at a different rate than the pay rate in the collective agreement. If after this discussion, the parties have negotiated and agreed to a proposed wage that is less than the minimum wage, the employer should contact a Labour Inspector as soon as the employment relationship begins, and before the employee physically starts working. The Inspector will visit the workplace to confirm that the process and the wage rate are fair and reasonable. The Labour Inspector won’t backdate the exemption earlier than the date they were notified so in some instances the employer may need to pay the employee minimum wage for a period of time if the employee has already started work before the exemption has been issued.

Showing that the wage is fair

The parties will have to give reasons for the wage rate that has been negotiated. To do this, it may be helpful to use a wage assessment tool (you can ask the Labour Inspector for a wage assessment tool) to estimate the employee’s job performance and to provide concrete evidence for why the proposed wage rate is reasonable. The Labour Inspector will need to be satisfied that the employee agrees with the rate.

Before approving the negotiated wage rate, the Labour Inspector will want to confirm that:

  • the employee’s disability really stops them from earning the minimum wage for the work they do
  • the wage rate relates to the employee’s ability to do the work
  • the employee has been given the opportunity to have an independent representative, support person or advocate with them when discussing the wage rate
  • the work is suitable for the employee and they will get appropriate supervision, training and support from the employer
  • the employer is offering the employee an employment agreement that meets all other minimum employment standards, eg sick leave, annual holidays, etc
  • the wage rate is consistent with the wages of other people in similar circumstances who have minimum wage exemptions to do similar work
  • the employer has done everything that can reasonably be expected to be done to help the employee do the job to the best of their ability.

A Labour Inspector may cancel a minimum wage exemption permit if they think it is no longer reasonable and appropriate.

If an employee has any concerns about how the wage rate may affect their benefit or tax exemption they can contact Work and Income (external link) .

For more information, contact us.