Minimum Wage Increase

Navigating New Zealand’s wage landscape: Minimum wage, median wage, and living wage explained

by Tanya Gray | Mar 12, 2024 | Compliance, Salaries & wages

Contents

Introduction
Minimum wage
Median wage
Living wage
Conclusion

Introduction

Understanding the various wage metrics is crucial for both employers and employees in New Zealand. The country has a well-defined wage structure, consisting of minimum wage, median wage, and the living wage. In this post, we’ll delve into the key differences between these three measures, shedding light on their significance in the Kiwi job market.

1. Minimum wage

The minimum wage is the lowest legal remuneration that employers can pay their employees. Effective April 1, 2024, businesses should prepare for an upcoming hike in minimum wage rates. The adjusted rates are as follows:

The adult starting wage will increase from $22.70 to $23.15 per hour.

The starting-out and training minimum wage will rise from $18.16 to $18.52 per hour.

This increase reflects the government’s commitment to ensuring that workers receive a fair and equitable wage, keeping pace with the rising cost of living.

2. Median wage

The median wage, currently set at $31.61 an hour as of the June 2023 quarter, plays a pivotal role in the immigration system. As of February 28, 2024, the new median wage rate has been adopted into various immigration categories:

Wage thresholds for the Skilled Migrant Category, the Green List Straight to Residence and Work to Residence visas, and the Parent Category residence class visa will increase in line with the median wage ($31.61 an hour).

The wage threshold for the Transport Sector Work to Residence Visa will also increase in line with the new median wage (excluding bus drivers).

However, it’s important to note that this increase does not apply to the Accredited Employer Work Visa (AEWV), which remains at the current rate of NZD$29.66 an hour. The pause also applies to AEWV-linked work visas set at or indexed to the median wage rate from February 2023, including Partner of a Worker Work Visa, variation of conditions for AEWVs, legacy Essential Skills work visas, interim visas granted under the Skilled Migrant Category, and Partner of a Worker work visas.

This pause allows time for decisions to be taken on alternatives to the median wage threshold, ensuring that it attracts the workers New Zealand needs and fills genuine skill shortages.

3. Living wage

The living wage goes beyond legal minimums and median wages. It is an income level deemed sufficient to cover basic necessities, allowing individuals and families to live with dignity. While not legally mandated, the living wage is advocated for by various organizations and community initiatives as a guideline for fair compensation.

As of September 1, 2023, the Living Wage hourly rate stands at $26.00. This rate is carefully calculated every five years through a comprehensive review of prices, expenses, and calculation methods. The Living Wage rate aims to provide workers and their families with the basic necessities of life, enabling them to live with dignity and participate as active citizens in society. The 2023/24 rate represents a $2.35 or 9.9% increase from the previous year.

Conclusion

In conclusion, navigating the wage landscape in New Zealand involves understanding the minimum wage, median wage, and living wage. Employers must not only comply with legal minimums but also consider median and living wages for fair compensation and a positive work environment. The recent adjustments in median wage rates have implications for immigration policies, highlighting the interconnected nature of wages and broader societal considerations.

For expert advice on optimizing your wage structure and ensuring compliance, contact ConsultingHQ today. Our team is dedicated to providing tailored solutions that align with your business needs, promoting fair compensation practices and legal adherence.

Contact us to find out how we can help your business.

How to prepare for the minimum wage increase on 1 April 2023

by Tanya Gray | Mar 30, 2023 | Salaries & wages

Contents

How to prepare for the minimum wage increase on 1 April 2023
Checklist to ensure you’re ready for the minimum wage increase

How to prepare for the minimum wage increase on 1 April 2023

The Government announced in February that there will be an adult minimum wage increase (not to be confused with the median wage) of $1.50 per hour to $22.70 per hour on 1 April 2023. This is a 7.2% increase and is in line with the Consumer Price Index Inflation rate as at end of December 2022.

The Starting-Out and Training minimum wage rates will remain at 80% of the adult minimum wage, which means they’ll both go up to $18.16 per hour.

NB: All rates are before tax and any lawful deductions such as PAYE tax, student loan repayments, and child support.

The minimum wage increase applies to all businesses and employers in New Zealand. As a business owner, you need to ensure that you are ready for the change. If you haven’t yet talked to your accountant, payroll provider or your finance/HR advisors, now is the time. It’s also an opportunity to check your employment records, processes, and systems.

Note that 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.

Checklist to ensure you’re ready for the minimum wage increase:

If you have any employees currently on the minimum wage, communicate verbally with them (if you can) to tell them about the increase they will be getting and when.
Follow up in writing by letter or email with a variation of employment that confirms the new wage rate.
Check your payroll system and processes (which may be your payroll provider, accountant, lawyer, and HR or finance people) to make sure they are ready to implement the changes.
If your system is manual or computer based, check and confirm that the settings will be adjusted in time for the minimum wage increase.
If any of your employees are on Starting-Out and Training minimum wage rates, now would be a good time to review their records and note when they will be eligible to move onto the adult rate.
If any employment agreements (EAs) 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 EA with any terms and conditions that were agreed to by both parties before the EAs were last reviewed.
Internal and external pay relativity: in these times of skills shortages, you should consider the potential impacts on the business due to internal wage relativity. For example, look at how your employees are paid compared to each other – including doing a fairness check. Also undertake external benchmarking. For example, how do your pay rates compare to others in your industry or sector? Employees higher-up may possibly want to negotiate a pay increase to maintain the relative difference. Be mindful that you don’t want to lose good people who feel they have been left behind pay-wise, by what amounts to relatively small sums.
Budgeting: 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.
The Government will review the minimum wage rate again later this year.

Get in Touch

Even something as straightforward as a minimum wage increase can involve complexities so if you have questions or feel you could do with some HR assistance, please get in touch.