Whether you’re a small business or a large corporation in New Zealand, the news that minimum wage is rising is almost always a startling one. The most recent announcement set by New Zealand’s coalition deal is that the minimum wage in New Zealand will be $20 by the year 2021. This is a fairly drastic increase to the current wage of $16.50 per hour. Employers will of course be expected to comply with these changes as they’re rolled out in stages over the next two years, with the first change already on the books as of April 2018.
But what does this mean for you as an employer? How will your business be affected? And how do you go about following NZ employment law to make sure you are complying? And finally, are there any exceptions to these rules? Follow along as we break it down for small and large businesses alike.
The Business Side
Can businesses actually profit from this? Most small business are probably cringing at the thought of trying to fit in extra dollars into the budget for their employee’s pay. Many are struggling as it is to make a profit or even break even, but with an increased budget for wages, it might seem impossible to survive. Let’s look at the business side of the increase and examine how it will affect businesses.
Small businesses suffer the most with these change, as their already tight budgets often don’t account for big changes like this. However, we may find that small business owners find ways to upskill and invest in the employees they have with the increase. Higher pay often means lower turnover, which can help save hiring costs in the long run. It also can mean more investment from the employees themselves, as they may start taking it more seriously than a previously lower paid job.
We’ll likely see employers starting to pass on the extra costs of higher wage employees onto their customers to cover the cost. Things like the base fees or cost of supplies will likely go up. Employers may also need to look at slashing their budget, which can also mean slashing staff numbers if necessary. Again, though, increased wages could lead to more engaged employees as they understand the worth of their job. The change will affect businesses very uniquely depending on how efficient and flexible they are with their budgets.
Another positive employers might see in the long run is a boosted economy. Employees who are paid more will likely spend more, which can have a roundabout affect on your own business as your customers may be getting paid more.
The Roll Out
How soon do employers actually need to make changes? By now, all employers should be following the April 2018 increase and all employees should have been receiving that wage as of 1 April, or received back pay to compensate them back to that date. When the new dates are announced for wage increases, payroll will need to be prepared to increase as of that date, with no exceptions to the date.
Employers need to remember that this is the law set by the Minimum Wage Act in New Zealand. If employers do not follow these new wage rates there can be some pretty hefty fees and penalties. For that reason, make sure you follow the additional specifics below to avoid any unwanted bad publicity or bad blood with employees:
- The new wage rates are calculated gross, before tax.
- The new rates also apply to any leave and holiday rates.
- Employees have the right to complain to the Labour department if they feel they are not receiving the correct wage.
- Labour Inspectors can inspect your wages paid, timesheets, and other records including speaking with employees to determine if incorrect pay has been issued.
- Make sure you pay attention to your hiring process, especially as wages increase. Be aware of things like age discrimination while you hire. While it may feel like you should be able to hire more experienced, and therefore older employees, you could be committing age discrimination, which is illegal.
There are a few exceptions to the minimum wage rules, depending on the type of employees you hire.
- Under 16
If you’ve hired employees under the age of 16 you are not required to pay any type of minimum wage in NZ. This does not mean that your employees do not have their minimum employment rights including things like a right to annual leave and lunch and rest breaks. As soon as your employee turns 16, however, you must begin paying them the current minimum wage.
- Starting out and Training
Starting out employees are typically those between 16 and 17 who have just started working and have less than 6 months of continuous employment under their belt. These employees receive a lower minimum wage. Consult the NZ Employment page here for further details.
Employees in a training programme, often training as apprentices, also fall under a lower minimum wage. Again, however, they still receive the employment minimum rights and must be completing a certain amount of credits for this to apply.
Certain inmates, apprentices, and prisoners may also not be eligible for minimum wage. Make sure you check with the Minimum Wage Act of 1983 and your Human Resources team if you have one to see if your employees fall under this exception.
Regardless of your feelings towards the dramatically increasing minimum wage rates, the fact remains that it is happening, and employers will need to find a way to adjust. Remember that there can be positives out of the change, and a flexible and shrewd business may even begin to see some profit and more engaged and invested employees out this.