COVID-19 and the minimum wage

Guidance for employees and employers on updating payroll systems for the 1 April 2020 minimum wage increase during COVID-19 response and recovery.

Last updated: 11 June 2020

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COVID-19 and the minimum wage

The adult minimum wage rate increased by $1.20 from $17.70 to $18.90 per hour on 1 April 2020.

The starting-out and training minimum wage rates increased by 96 cents from $14.16 to $15.12 per hour, and remain at 80% of the adult rate.

The minimum wage increase occurred while New Zealand was at COVID-19 Alert Level 4.

This guidance is for employers and employees to understand their rights and responsibilities regarding the minimum wage. We understand some businesses may have had challenges updating their payroll systems due to COVID-19. If employers were unable to process the change immediately, they had to update it as quickly as they could, and then backpay the amount the employee should have been paid from 1 April onwards.

People who work must be paid at least the minimum wage and all contractual obligations must be met

During all Alert Levels, businesses are legally required to pay workers for work and must continue to meet all contractual obligations. This means employees – regardless of whether they are working from home or their usual workplace – must be paid the new minimum wage, or more if their contracted rate is higher, for each and every hour worked.

Any changes in contracted rate or working hours must first be discussed and agreed with the employee and/or their union. For more information see Hours of work.

The contracted rate cannot be changed to a rate lower than the minimum wage.

If a business couldn’t process the increase for 1 April, they had to process it as soon as possible after, and backpay the amounts employees were underpaid

If employers were unable to process the required pay rate on time, they need to backdate payments for any hours worked (or if the workers were otherwise required to be paid) up to the minimum wage rate from 1 April 2020.

The Government’s wage subsidies are there to support workers impacted by COVID-19

Many businesses will be accessing the Government’s Wage Subsidy or Wage Subsidy Extension, which support employers to maintain employment arrangements and income for affected employees.

A requirement of the Wage Subsidy and Wage Subsidy Extension is to make best endeavours to pay employees at least 80% of their normal wages or salary. If the employee is continuing to work their normal hours, a reduction in their pay to 80% still requires good faith consultation and written agreement.

Employers are required to pass on at least the full value of the relevant subsidy rate, except where the employee’s normal wages are less than the relevant subsidy rate. In this case, the employee should be paid their normal wages and employers can use any excess subsidy to help pay the wages of other affected employees.

If an employee is working (either from home or at a workplace), then they must be paid for each and every hour that they work at their agreed wage rate. This rate cannot be below the minimum wage rate. Minimum wage requirements continue to apply to any work performed or leave used. If the employee is not working then the minimum wage does not apply.

Receiving a subsidy does not change the terms and conditions in the employment agreement so employers and employees need to have good faith discussions about hours and leave arrangements, including changes to patterns of work and agree to any changes to hours or pay. For more information see Hours of work.

Examples of the Wage Subsidy Scheme and the increase to the minimum wage

Example: Elena is a labourer on the minimum wage and normally works 45 hours a week.

She was unable to work from home during the lockdown and had agreed with her employer to only receive 80% of her normal wage during the lockdown period. This was recorded in a variation to her employment agreement. Her employer was not earning any revenue. She expected her weekly wage to increase from $796.50 to $850.50 from 1 April 2020.

Her company was able to pay her $637.20 per week (80% of her wage before 1 April 2020) and this didn’t change when the minimum wage increased on 1 April 2020. Elena had agreed with her employer that for the duration of the lockdown this was acceptable given the financial distress the employer was in. Elena will earn the increased minimum wage for 45 hours a week if she begins working again. 

Example: Robert is an administrative assistant on the minimum wage and normally works 40 hours per week.

Due to a decrease in work, he has agreed with his employer to work 10 hours a week from home while the restrictions are in place. This is recorded in a variation to his employment agreement. Robert is paid the full value of the subsidy ($585.80) as his normal wage is greater than the full subsidy rate and his employer is not in a position to pay more.

The increase in the minimum wage on 1 April 2020 does not impact the amount paid to Robert, as in line with the wage subsidy requirements, he is receiving the full-time subsidy rate of $585.80. His employer needs to ensure that the amount Robert is paid is higher than he would receive if he was being paid the new minimum wage for the hours he works (in Robert’s case, that is 10 hours x $18.90 = $189.00 per week).

Example: Andres is a retail worker on the minimum wage and normally works 30 hours a week.

Prior to the change to the minimum wage rates on 1 April, Andres’s wage was $531 a week. Andres cannot work from home during Alert Levels 2 to 4 and has agreed with his employer to only receive the amount of the Wage Subsidy during this period. Because Andres’s normal weekly wage is lower than the full-time subsidy rate, his employer continues to pay him $531 a week. His employer uses the surplus $54.80 a week to help pay the wages of other employees. 

With the increase to the minimum wage, Andres and his employer agreed that Andres's weekly rate will reflect the statutory rise in the minimum wage even though he is not working. In light of this agreement, Andres’s weekly wage increased to $567.00 from 1 April 2020. His employer pays Andres $567 a week and uses the surplus $18.80 a week to help pay the wages of other employees. 

When Andres is able to return to work at his usual 30 hours a week, Andres’s employer ensures that he continues to be paid the minimum wage for every hour Andres works, or $567 a week. All of the above variations have been recorded in writing.

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