Paying teachers the minimum wage and salary assessments

Hon Nikki Kaye
MP for Auckland Central
Parliament Buildings
Wellington 6160

Dear Ms Kaye

PAYING TEACHERS THE MINIMUM WAGE AND SALARY ASSESSMENTS

Thank you for your 5 April 2019 letter requesting that our Office investigate whether the Ministry of Education (the Ministry) and Education Payroll Limited (EPL) are paying teachers less than the minimum wage. You also raised concerns about the apparent time taken to make teacher salary assessments.

What we have done and found

We have discussed these matters with our appointed auditors for the Ministry and for EPL, and obtained information from the Ministry.

This letter sets out what we have determined. We cannot provide a legal ruling on whether the Ministry and EPL have complied with the minimum wage legislation. That is outside of our mandate.

However, based on our work performed, we understand that there is a relatively small number of teachers yet to receive back pay to correct earlier payments that were less than the minimum wage.

We do not propose further inquiry work at this time because of the steps planned and already taken by the Ministry and EPL to resolve these matters.

Payment of teacher salaries and the minimum wage

EPL provides payroll services to schools on behalf of the Ministry of Education. Those services need to give effect to the provisions of the employment agreements of people working in schools. They also need to meet the requirements of the minimum wage legislation.

When the minimum wage increased, the provisional rate that some teachers start on (until a salary assessment process confirms their rate of pay, based on their qualifications and experience), was not adjusted to be in line with the new minimum wage. In effect, the change in the minimum wage should have led to a change in the provisional rate.

As a result, some teachers were paid below the minimum wage in 2018/19 and prior to that. The Ministry told us that this is not acceptable, it should never have happened, and the Ministry regrets that it occurred.

We understand that, of the teachers who were paid less than the minimum wage:

• 655 current teachers were affected from 1 April 2019 and received a back-payment on 8 May 2019;
• 845 current teachers were affected prior to 1 April 2019, and received back pay for arrears on 19 June 2019; and
• 276 were affected prior to 1 April 2019, are no longer teaching, and will receive a back-payment as soon as is possible, recognising that the Ministry or EPL might not have current contact information for those people.

The Ministry told us that this situation happened because “the appropriate controls were not in place to recognise and increase teacher rates in the payroll system in line with annual minimum wage adjustments” where the effect of those adjustments overtook the rates in employment agreements.

We understand that, from 8 May 2019, controls were put in place to ensure that all teachers are paid at least the minimum wage from 1 April 2019.

The Ministry has also confirmed that controls were already in place for other school employees to ensure that they are paid at, or above, the minimum wage.

The Ministry and EPL have plans to formalise the process for ensuring that teachers are paid at, or above, the minimum wage before the next minimum wage adjustment.

In our view, all of those controls should have already been in place. It is the Ministry’s responsibility to have controls in place to ensure that it is complying with all relevant legislation.

Processing of salary assessment forms

The Ministry has a Master Services Agreement with EPL. EPL processes about 8300 salary assessments annually. The requirement about the timeliness of salary assessments is not outlined in that agreement but is instead specified as a business requirement. The business requirement is for EPL to process a salary assessment within 15 working days of receiving complete documentation for processing. Performance against that requirement is reported publicly in EPL’s annual report.

Performance against the business requirement is calculated based on the number of working days that EPL has complete documentation for processing. If extra information or clarification of information is required from schools and teachers, the time taken to obtain that is not included in the count of working days. In those instances, EPL does not consider that it has complete documentation. The count of 15 working days starts from receipt of complete documentation. We have asked our appointed auditor of EPL to include some testing of this performance measure in the 2019/20 annual audit work.

The Ministry told us that there were three salary assessments during 2018/19, out of about 8300 processed annually, that were not completed within 15 working days. It has also told us that it is working with the New Zealand School Trustees Association to encourage schools to start the salary assessment process before a teacher starts work.

Given the public interest in these matters, we will be publishing a copy of this letter on our website.

Thank you for raising your concerns with us.

Yours sincerely

Jane Rogers
Sector Manager, Schools