The adult minimum wage is set to increase by $1.50 on 1 April 2023, to $22.70 gross an hour. This is the largest minimum wage increase in the last five years in New Zealand. The training and starting-out minimum wages will also both increase to $18.16 gross an hour.
Our Employment and Workplace Solutions team have eight practical tips to help employers prepare.
- Check your employment agreements- If an employee does not have an employment agreement or it is out of date, now is the time to address this. It is important that all employment agreements have the minimum clauses that are required by law, which includes the wages or salary payable.
- Send variation letters to the employees affected - If you have employees on the minimum wage, you need to advise them of changes to their pay in writing. If you are amending or adding terms and conditions, do not forget to adhere to the fair bargaining requirements.
- Payroll - Make sure your payroll system is ready for the changes. If an employee is on the starting-out or training wage, now is a good time to check when the employee is eligible to move on to the adult rate.
- Revise your pricing - Labour costs will increase if existing employees are on the minimum wage. If you have not recently carried out a review of your pricing strategy, now is the time to do so. This review can identify areas that may require change, such as reducing staff, increasing customer pricing, adopting job share arrangements, reviewing discounts offered and how you bundle services/ goods.
- KiwiSaver - If an employee’s remuneration package includes the employer’s compulsory KiwiSaver contribution, the employee must be paid at least the minimum wage plus the compulsory contribution.
- Prepare an annual budget - The minimum wage increase will impact the affected employee’s leave entitlements. Ensure your annual budgets are updated to take account for the increase in holiday liability.
- Review other employee wages - Employers should look at whether adjustments need to be made across all employee wages to ensure pay relativity. Although not legally required, employers should consider introducing financial and non-financial benefits to keep those staff motivated and loyal. Employers should investigate whether pay rates are consistent across the relative industry.
- Salaried workers – Review salaried employee hours to ensure that any extra hours worked do not result in breaches of the minimum wage. You may need to adjust the salaried employees' pay to comply with the new rates.
The upcoming increase to the minimum wage will significantly impact businesses nationwide. Employers need to understand the changes, review their existing employment agreements, and prepare accordingly to ensure compliance. If you have any questions, please contact our Employment and Workplace Solutions team on [email protected] or 03 441 2743.