The New Zealand accommodation industry is being warned by the Labour Inspectorate that they need to stop disguising employees as volunteers following a nationwide investigation which revealed dodgy employment practices.

The investigation was launched following a number of complaints about businesses taking advantage of schemes such as Willing Workers on Organic Farms (WWOOFing) and VolunteerX, an online advertiser for travellers taking on work in exchange for accommodation.

"Businesses cannot evade their obligations as employers by calling their workers volunteers and then simply rewarding them with a bed in a dormitory, food and Wi-Fi rather than a fair wage," said Labour Inspectorate general manager George Mason.

"This practice is unfair to businesses that do follow the law and pay their employees. It damages the prospects of people seeking employment in the industry and also takes advantage of the good nature of travellers who may not know what their employment rights are," Mason said.

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The investigation revealed many so-called "volunteers" were working up to 32 hours per week in exchange for accommodation and food rather than a wage. "They are taking advantage of these workers," Mason said.

"Key indications that a worker should be regarded as an employee rather than a volunteer include being paid or rewarded for their work, that the worker expects to be rewarded, that the business is making an economic gain from their work, the work is integral to the business, and the workers hours are controlled," he said.

"Wherever a worker is being rewarded in a business at whatever level, the Labour Inspectorate's starting position is that these people are employees and minimum employment standards apply. This means providing clear documentation for these workers, with written employment agreements, accommodation agreements, keeping wage and time records, paying wages in money, and paying tax."

The arrangements have also caused concern by potentially breaching immigration and taxation laws.

Mason said accommodation was the main focus of the investigation but MBIE understands there are others involved in the practice including the fashion industry.