One-third of all dairy farm workers in Southland could be underpaid, a labour survey indicates.

Labour inspectors for the Ministry of Business, Innovation and Employment visited 10 dairy farms in Southland in August.

The visits were part of a long-term operation to identify breaches of employment law, with particular focus on a practice called "seasonal averaging" and failure to keep accurate time and wage records.

Labour inspectorate central region manager Kris Metcalf said three of the 10 dairy farms visited in the first phase of visits in Southland did not have accurate records of the hours their employees worked.

When the department looked at the employees' original employment agreements, it found the employers - one farm owner and two sharemilkers - had each underpaid their employees, he said.

Dairy farm employees must be paid at least the minimum wage of $13.75 an hour for the total hours they work in a week.

"If they work 60 hours a week they need to be paid at 60 hours at the minimum wage," Mr Metcalf said.

The department was now requiring the three Southland employers who had underpaid their farm workers to pay the arrears, Mr Metcalf said.

"If the arrears are not paid the next step will be to proceed to the Employment Relations Authority for a determination."

Any practice of averaging out pay across a season, especially for those workers earning low salaries, was likely to breach the minimum wage rate set in legislation, he said.

He believed the results of the farm visits in Southland were indicative of what was happening in the industry as a whole.

"It's an industry practice that has been going on for a long time . . . it's a practice that needs to change."

Southland Federated Farmers president Russell MacPherson said employees were the most important resource on farms and three out of 10 employers not complying with the law was too many.

"One out of 100 would be disappointing," he said.

All employers should record the hours their farm workers did and pay them at least the minimum hourly rate in the busy weeks, he said.

Mr MacPherson said the law was not conducive to seasonal work because of the peaks and troughs in the hours worked.

Many farmers would prefer the law to allow them to pay their workers a set amount each week, provided the hours averaged out to the contracted agreement and the workers were paid at least minimum wage, he said.

He believed employers would get around the law by paying their workers an hourly rate instead of a salary.

He questioned if that was good for the farm workers because they would have to budget in the busy times for the low wages they would receive in the quiet times.

Mr Metcalf said the second phase of the labour inspections of Southland farms was now under way, and a third phase concentrating on farmers who hired migrant workers would take place next year.

The inspections were also being rolled out this month in other dairy strongholds, Waikato, Hawke's Bay and Taranaki.

evan.harding@stl.co.nz