On-farm accommodation
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5 min read
Good employee accommodation on-farm contributes to a positive employer-employee relationship and needs to be warm, dry and safe. As an employer, you have specific legal obligations including complying with healthy home standards and lodging a bond with Tenancy Services. Tenants also have responsibilities. It’s important each party understands and actions their responsibilities. Employees could, and should, ask questions about rent, bond, maintenance, and property insurance before they move in.
Employee
Farm accommodation can vary immensely; you may be offered a house on your own, a house to share with other staff, or the option to live off farm in a house of your choice.
Always walk through the accommodation on offer by a potential employer before agreeing to live there and ask these key questions:
- How will rent be paid and how much?
- How much bond do I need to pay?
- Who mows the lawns?
- Who do I report damage or maintenance issues to?
- What happens with rubbish collection?
- Does the property come with any furniture or whiteware, landline or WiFi access, is electricity or gas included?
- Is the property insured?
The questions above should be answered in the Terms and Conditions of a Service Tenancy Agreement, which must be signed by you and your employer. For more tenancy information visit Tenancy Services
Employer
You are considered a landlord if your employees pay you rent, or their accommodation is included in their total remuneration as part of their employment agreement. This is called a Service Tenancy Agreement.
All service tenancies need a written tenancy agreement. Even if the tenant doesn’t pay rent, its still a service tenancy. It is best practice to have a Tenancy Agreement separate to the Employment agreement however sometimes it is incorporated.
You are entitled to ask for a bond and this must be lodged with Tenancy Services within 23 days of receiving a full or part payment. Before you sign any tenancy agreement, ensure you discuss and agree with your employee the maintenance duties you expect them to fulfill and their frequency (for example, tasks such as mowing lawns at least fortnightly, or cleaning the carpets annually).
As a landlord, you have legal obligations and requirements under the Healthy Homes Standards which include minimum standards for things like insulation, ventilation and working smoke alarms.
Landlords are also legally required to tell tenants if the property is insured and the amount of excess the tenant may be liable for if they cause damage to the property they live in. This is done with an insurance statement as part of any new service tenancy agreement.
Before staff move in, both the employer and employee must complete a property inspection report for each room together, noting any damage. Take photos of the damage and keep them with the inspection report for reference.
Conduct regular property inspections to check for any issues that require maintenance and/or damage. Be realistic about the difference between damage and what would be considered normal wear and tear. Some employers use a professional property management company to help them set up and maintain these good tenancy practices.
Frequently asked questions
How is value assigned to accommodation?
Good employers and landlords value accommodation fairly. The IRD requires fair market rent to be charged for accommodation provided to employees. The tenancy services website describes market rent as ‘the amount a landlord might reasonably expect to receive, and a tenant might reasonably expect to pay, for a tenancy’. Rent needs to be similar to the rent charged for comparable properties in similar areas.
Check out the market rent calculator but note that most rentals are not service tenancies. Regular tenancies often have a higher value because the tenant can choose the location and house size; options which rarely exist with a service tenancy.
How does an employee pay for accommodation?
Accommodation should be included in the Total Package Value (TPV), or total earnings offered by an employer as part of the terms and conditions of employment. To fulfil IRD requirements, it’s important the provision of accommodation is recorded as a taxable benefit and PAYE is paid by the employee on the value of the accommodation. An employer can choose to:
- Take the rent out of the person’s wages after tax has been paid on the total value package. We strongly recommend this practice.
- Pay an accommodation allowance (which covers the amount of the accommodation) on top of the employee’s wages and then deduct the rent back from the employee once tax has been paid on the total wages.
If the employer and employee agree the employer will deduct rent from pay. The amount of rent paid for accommodation must be clearly written into the tenancy agreement (which can sometimes be found within the employment agreement) and the employee must agree in writing to the deduction of rent from their wages. If they do not agree then an employer cannot deduct it.
Find out about Service tenancy and employment agreements and why you must have them.
We suggest your employment agreement includes any accommodation or other wage deductions and that they are specific.
How does the value of accommodation relate to minimum wage thresholds?
In relation to both minimum wage legislation, and any minimum wage thresholds set by immigration policy, the rent is recognised as part of the total value package, i.e. the hourly threshold calculation can include the rent paid by the employee.
Wages must be paid for every hour worked on the farm, within each pay period (but never more than a fortnight) for minimum wage and employees on work visas. Wages cannot be averaged over a season
Should sharemilkers or contract milkers pay the farm owner rent for all the houses on the farm?
The sharemilker is not required to pay the farm owner rent for any houses supplied, if they are used for staff working on the farm. This is considered part of the infrastructure of the business contracted for use by the sharemilker, the same as any other building e.g. cowshed or calf sheds. If the sharemilker or contract milker is not using any of the houses on the farm, there must be a discussion and agreement between them and the farm owner about how those assets are used.
Is the landlord, the farm owner, or is it the sharemilker/contract milker?
If you are a sharemilker or contract milker, you are the landlord and can charge rent for the properties supplied. You are also responsible for conducting property inspections and for any damage caused by tenants.
Who is responsible for ensuring the house meets the required standard?
The farm owner is responsible for any capital structural requirements, such as meeting healthy home standards. The sharemilker or contract milker is responsible for managing the tenancy on a day-to-day basis e.g. checking smoke alarms are working and conducting property inspections.
Who is responsible for damage?
Between farm owners and sharemilkers/contract milkers:
It is important for farm owners and their sharemilker or contract milker to discuss who will be liable to pay for damages. Have the discussion as soon as possible and the outcome you’ve both agreed to included in your contract. Your respective insurance companies should be included in the discussion as each company will have its own requirements and will have the experience to make sure each party is covered and not unfairly penalised in the event of damage.
Between landlord and tenant:
Responsibility for fixing the damage depends on who or what caused it. If the damage occurred because something was simply old then it is almost always the responsibility of the accommodation owner. If the damage was purposefully caused by negligence or actions of the tenant, then they may be liable.
Tenants must tell the landlord straight away if they are aware something needs to be repaired or maintained, no matter how it happened or who caused the damage.
Find out more on the Tenancy Services website.
What about the employees contents?
Employees should take out their own contents insurance as the landlord’s house insurance will not cover their contents.
What happens if drugs are found in the accommodation?
You should consider both the employment agreement and the tenancy agreement before taking any action. We recommend testing any rental property between tenancies and include a clause about testing the house for drug contamination.
For more information visit the Tenancy Services website.