Minimum Wage Increases 1 April 2022
There’s a lot of concern amongst employers, with the Government’s increase of the NZ minimum wage to $21.20 per hour from 1 April 2022. This is a $1.20 increase from the previous rate.
As a business owner, you need to be ready for the increase in minimum wage rates.
If you have not yet talked to your accountant, payroll provider or your finance/HR teams now is the time. It is also an opportunity to check and ensure your employment records, processes and systems are current.
The details of the increase are:
- Adult minimum wage will go up, from $20.00 to $21.20 per hour.
- Starting-out and training minimum wage will go up from $16.00 to $16.96 per hour.
- All rates are before tax and any lawful deductions for example PAYE tax, student loan repayment, child support.
For someone working a 40-hour week on the minimum wage, this increase will see them earning an extra $48 a week, and almost $2500 more each year.
If you have salaried employees, you need to make sure that their total remuneration meets minimum wage requirements for each individual pay period. You need to account for any overtime, meetings, or time spent opening and closing stores. If these activities bring total remuneration below the minimum wage rate, you’re breaking the law.
1. Advise the team
If you have employees on the minimum wage, let them know about the increase they will be getting. You should send them a letter or email (variation of employment contract) advising them of the new wage.
2. Check your payroll systems and processes
Talk to whoever runs your payroll system: your payroll provider, accountant, lawyer, and HR or finance people to make sure they are ready to implement the change.
If your system is manual or computer-based you should check and confirm the settings will be adjusted for the new rates (for our payroll clients, we will do this for you).
If any of your employees are on starting-out or training wages, now is a good time to check when they will be eligible to move onto the adult rate.
If any employment agreements (contracts) are not current or you did not give one to your employees, now is an ideal time to discuss this in good faith with your employees. Update the contract with any terms and conditions that were agreed to by both parties before the contracts were last reviewed. Make sure they include all the mandatory clauses a contract should have by law. A useful tool is the employment agreement builder, if your employees do not have one, or we can help with that.
3. Employee pay relativity
You may also wish to consider potential impacts on your business due to internal wage relativity (eg how employees are paid compared to each other) and external benchmarking (eg how your pay rates compare to others in your industry or sector). Higher-up employees may possibly want to negotiate a pay increase to keep the relative difference.
4. Update your business budget
Look at your budgets and cashflow now. You should add any expected increased costs to your short and medium-term budget forecasts, to help you plan for and manage the effect of higher wage and holiday pay liabilities.
If your business is expecting significantly increased costs, you may wish to review your pricing, taking into consideration any possible reaction by customers.
5. Upskill on minimum wage obligations
Now is also an ideal time to ensure you know the details around the minimum wage, including that:
- It applies to all hours worked, unless both parties agree to a higher rate in the employment agreement.
- It applies to employees paid with a salary or piece rates or commission.
Note the minimum wage does not apply in some situations including:
- employees under 16 years of age
- where a Labour Inspector has issued a minimum wage exemption permit to an employee who has a disability that limits them carrying out the requirements of their work.
If you are not sure what to do from here, get in touch.
Information correct at time of publishing and is of a general nature. Professional advice from your business partners should be sought.