As part of a long-term strategy the government announced a plan to steadily increase the minimum wage in New Zealand between April 2019 and April 2021.  The next increase in the minimum wage is due to come into effect on 1 April 2020.

 

Wage Increase

The minimum wage in New Zealand applies to all employees aged 16 years and over, who are full time, part-time, fixed-term, casual, working from home, and paid by wages, salary, commission or piece rates. Employees must be paid at least the minimum hourly wage for every hour worked; there is no minimum number of hours. From April 1 2020 the minimum wage will increase as follows:

 

  • Adult - $18.90 per hour (increased from $17.70)
  • Starting-out - $15.12 per hour (increased from $14.16)
  • Training - $15.12 per hour (increased from 14.16

 

For an adult wage earner this represents an increase of 7.27% and for someone working 40 hours a week it will mean an extra $48 per week before tax.

Employers will need to take steps to ensure they are complying with the increased wage rate. If you have any staff currently on minimum wage you should let them know about the increase taking place. This is also a good opportunity to review when any employees who are currently on starting-out or training wages are eligible to move to the adult rate, alongside informing them of the upcoming wage increase. Your payroll systems may need to be updated to manage the increase from 1 April.  We recommend that you confirm how to do this in advance to ensure compliance.

 

The impact on your business

The recent Covid-19 outbreak is having a significant impact on cashflow for a number of businesses.  In response to this, the government has announced a wage subsidy package. This will provide up to $585.80 per employee each week, paid in a lump sum to employers up to a maximum sum of $150,000 per business. If you would like to find out more about how to apply for this subsidy please click here.

It will be important to review and potentially recalculate your budget for the year in light of the mandatory wage increases. The government has a free Employee Cost Calculator that can be used to calculate the impact wages and wage increases will have on your business.

The minimum wage increase could create expectation that other employees will also achieve wage increases.  You may need to consider whether you intend to maintain wage parity across your organisation by increasing other employees' wages alongside the minimum wage increase or offering alternative forms of non-financial reward. However, we imagine many businesses may be considering a temporary "wage freeze" during these uncertain economic times in the hope of being in a position to "weather the storm" and retain as many staff as possible.

 

If you find your payroll and employment agreements needing a refresh, have any questions about the increase in the minimum wage on your business, or if you have questions or concerns around making an application for the government wage subsidy programme, don't hesitate to contact our employment team for advice.