The adult minimum wage will increase $1.20 from $17.70 to $18.90 per hour on 1 April 2020.
The new rate equates to an extra $48 per week before tax for employees on a 40-hour working week.
The starting-out and training minimum wage rates will increase 96 cents from $14.16 to $15.12, and will remain at 80% of the adult rate.
All employees and employers should take note of the minimum wage changes, as it sets a new relative benchmark for pay negotiations.
Overall, the increase is estimated to boost wages paid in the New Zealand economy by $306 million a year. More than 240,000 workers will have a lift in their income. Key industries with significant numbers of affected employees include accommodation, food services and retail. Affected occupations include service, clerical and sales workers, plus machinery operators, drivers and labourers.
The minimum wage increase is occurring during the COVID-19 Level 4 lockdown. We understand businesses may have challenges updating their payroll systems, or are facing financial difficulties and using the Government’s Wage Subsidy scheme.
Employers should ensure payroll systems and processes are up-to-date to handle the new rates.
By law, employers are required to pay all employees at least the minimum wage. There are penalties for not complying with the minimum wage. Where an employer is found to have breached the Minimum Wage Act, penalties of up to $20,000 (for a company) or $10,000 (for an individual), can be ordered, per breach. In the case of serious breaches stronger sanctions can be ordered such as financial penalties and banning orders.
Employers still have time to make the required updates and avoid the risk of penalties.
Employees affected by the minimum wage increase should check their pay from 1 April to make sure they have received the correct amount based on the new rates, depending on which rate applies to the employee. There are three rates that could apply:
- The adult minimum wage: applies to employees aged 16 years and over who are not starting-out workers or trainees.
- The starting-out minimum wage: applies to employees aged 16 to 19 who are starting work with an employer after being on a benefit, or are undertaking at least 40 credits a year of study to be qualified.
- The trainee minimum wage: applies to certain employees aged 20 years or over whose employment agreement states that they have to do at least 60 credits a year in an industry training programme to become qualified.
Employees who receive a regular payslip should check their hourly-rate calculation.
Employees who don't get a regular payslip, by law can ask their employer at any time to show or give a copy of their wage and time records, and holiday and leave records. Employers must keep these records for each employee.
These records will show employees their pay rate, hours worked and how much they were paid, as well as their holiday and leave information. If there is anything an employee doesn’t understand, an employee can ask their employer to explain it.
Note: The Government has announced its COVID-19 package for employers and employees affected by the coronavirus.