Increase to Minimum Wage 1 April 2022 - Employers to be prepared

Employers need to be ready for increases to minimum wage rates on Friday, 1 April 2022, and it's a good time to get employment agreements in order, after significant changes to employment law over the past few years.

Changes to minimum wages in New Zealand are:

• Adult minimum wage increases from $20.00 per hour to $21.20 per hour.
• Minimum wage for starting out and training increases from $16.00 to $16.96 per hour.
• All rates are before tax and any lawful deductions, for example PAYE tax, student loan repayment or child support.

Advice for employers:

• Notify employees on minimum wage of the changes that will impact their pay, including confirmation in writing.
• Ensure payroll systems and processes are updated and any change in pay rates are implement.
• Check for pay relativity - What impact does the minimum wage change create for how different roles are paid? Are adjustments to the pay of other roles warranted to ensure internal relativity? It's also a good time to consider whether pay rates are consistent with the market.
• Ensure budgets are updated to take account of the changes in wages, keeping in mind the increase in holiday liability.
• Review employment agreements - Do these remain compliant? Have they been updated with legislation changes to sick leave that were introduced last year? Do they need to be updated with clauses to cover other employment matters, such as managing Covid-19 (flexible working provisions, location of work/remote working, vaccinations and other health and safety considerations)? Another key area is the need for agreements to accurately provide reasonable compensation for the availability of employees and notice of shift cancellation.

For those uncertain about starting out and training wages, we summarise these following.

Starting out wage:

• The starting out wage applies to 16-17 year olds who have not yet completed six months service with their employer.
• The starting out wage also applies to 18-19 year olds who have received a benefit for six months or more, and have not completed six months continuous employment with their employer.
• Employers aged 16-19 who are required under their employment agreement to undertake industry training for at least 40 credits a year, as directed by their employment agreement, will also be entitled to the starting out wage.

Training wage:

• The training wage applies to employees aged 20 or over who are required to undertake industry training for at least 60 credits as directed by their employment agreement. 

The adult minimum wage applies to employees aged 16 years and older to whom the starting out and training wage does not apply. Presently, there are no minimum wage requirements for employees aged under 15 years.

For help to review employment agreements and minimum entitlements in employment, you can contact the team of specialist employment lawyers at DTI Lawyers on 07 282 0174, or email [email protected].