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Are you ready for the minimum wage increases on 1 April 2023?

The main details of the increase are:

  • Adult minimum wage will go up, from $21.20 to $22.70 per hour.

  • Starting-out and training minimum wage will go up from $16.96 to $18.16 per hour.

There are also key changes in New Zealand payroll calculations for the new financial year:

  • The annual ACC earner levy rate is increasing from 1.46 percent to 1.53 percent

  • The annual ACC earner levy threshold is increasing to $139,384

  • The student loan threshold is increasing to $439 per week

When there is an increase in minimum wage pay rates, you need to consider several factors to ensure you can manage your business effectively while complying with NZ employment law.

Here are some key considerations:

  • Maintain employee pay relativity 
    This is the way in which employees are paid compared to each other or compared to others in your industry or sector. In a small business, it's important for owners to ensure that employees are paid fairly based on their skills, responsibilities, and experience. If one employee is paid significantly more or less than others, it can cause tension and dissatisfaction among the team. Consider establishing a pay structure that considers these factors. Regularly review and adjust salaries to maintain fairness and keep up with industry standards. Employees on higher wages may possibly want to negotiate a pay increase to keep the relative difference. This can help to create a positive work environment and retain talented employees.

  • Review and update your business budget 
    Any increase in wage pay rates will directly impact your labour costs. You will need to calculate the total increase in wages and adjust your budgets accordingly. Add any expected increased costs to your short and medium-term budget forecasts. This will help you plan for and manage the effect of higher wage and holiday pay liabilities. You may need to increase prices to offset the cost of the wage increases and maintain profitability. 
    To work out the updated cost of your employees, use the MBIE Employee cost calculator.

  • Check your payroll systems and processes
    If your system is manual or computer-based you should check and confirm the settings will be adjusted for the new rates. 
    We can review your existing payroll system, suggest payroll software to suit your business needs, convert and implement new software as well as train you on what to do. Or we can do it all for you. Set aside time with me to discuss how our payroll services can save you time.

  • Check your employee information
    If any of your employees are aged 16-19, on starting-out or training wages, now is a good time to check when they will be eligible to move onto the adult rate.
    Note: the minimum wage does not apply in some situations including employees under 16 years of age. 

  • Check your employment agreements
    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 lawIf you want to take the risk of preparing your own employment agreements, MBIE provides the Employment agreement builder.
    We have a couple of HR Consultants we can refer you to for assistance in this area. Flick me an email if you would like their contact details.

  • Advise your team
    If you have employees on the minimum wage, let them know about the increase they will be getting. Do the same if you give pay increases to any other staff too. Send a letter or email with a variation of their employment contract advising them of their new wage.

Overall, an increase in minimum wage pay rates requires careful consideration and planning to ensure you can manage the impact on your business effectively.

In response to the increased wage costs, now is the perfect time to consider new technology or innovation to increase efficiencies. Do your staff have the tools & equipment they need to be efficient in their work? Is there an app that would remove a manual time-consuming process?

We’re all about working smarter so book a time with me to chat about what your business needs are today and what your future plans might be.