It’s going up: the minimum wage is increasing

From 1 April 2024, the adult minimum wage will rise from $22.70 per hour to $23.15 per hour.

This means it will be illegal for any employees who are entitled to the adult minimum wage to be paid less than $23.15 from 1 April 2024. At the same time, the minimum wage for starting and training employees will also go up from $18.16 to $18.52 per hour.

Did you know that increases to the minimum wage directly affect nine per cent of the working NZ population? Here our experts explain this year’s wage increase, and how your business should prepare for it.

1. Inform your employees

All employees earning the current minimum wage must be paid at the new rate from 1 April 2024. The same applies to those employees earning the youth minimum wage or starting and training rates. As an employer, you must notify your employees who earn minimum wage about this pay increase on Monday, 1 April 2024, with a written variation to their existing agreement. You can send this notification via email or letter.

2. Check-in with your payroll systems: are they ready to go?

It might feel like the most obvious next step in the process, but trust us, sometimes it can be overlooked! So, have you set aside time with your payroll manager or the person who manages your payroll system to ensure everything’s ready for this change?

We put a lot of faith in our technology, often it’s a set-and-forget situation, but even automated systems can make mistakes. And if you’re still running a paper-based or manual payroll process, then you must be 100 per cent confident that the wage calculations are correct from 1 April 2024.

3. It’s time to double-check: your contracts and agreements need to be up to date

This increase provides a great opportunity to review contracts and agreements, and if you uncover a contract or two that’s out of date – don’t panic! It’s the perfect time to get your record-keeping up to date and ensure you’re compliant.

4. Managing pay relativity obligations

While this upcoming minimum wage increase only legally applies to the minimum rate of pay, you may have some workers who are already earning $23.15 an hour, bringing them into the minimum wage bracket following the 1 April increase. And, because of this, this can raise issues about how more experienced employees are paid compared to less qualified or experienced workers.

For example, an employee already earning $23.15, who suddenly makes the same income as a less skilled colleague, may feel frustrated that your company isn’t recognising their seniority or capability. Employees in this situation may be keen to negotiate a pay increase to maintain the relative pay difference.

When figuring out a strategy to manage pay relativity, it’s essential to consider affordability and properly understand the workforce expectations, and how to manage them proactively.

With an eye on employee morale and workplace dynamics, you could consider the following if pay relativity comes up:

• Increasing an employee’s $22.70 an hour wage by $1.50 an hour (to maintain the relative difference between their salaries and the minimum wage).
• Increase an employee’s rate by an amount that keeps a differential rate and is reflective of individual ability and performance. You’d need to substantiate this increase through a performance review.
• If remuneration increases aren’t affordable for your business at this time, are there other non-cash benefits you can offer your more experienced workers, such as mentoring or training and development opportunities?

It’s important to note that there’s no requirement that every single employee receives a wage increase.

All minimum pay changes must appear in the next pay slip after 1 April 2024.

As an employer, you’ll need to keep up to date with the latest minimum pay changes and pay all your employees at least the minimum wage. This year’s pay increases may introduce significantly greater wage costs to your business. In this case, you may also want to think about pricing strategies and budget forecasting to account for your higher wage and holiday pay obligations.

If any of the information in this article has raised any questions about the upcoming increase to the minimum wage or you have another workplace matter you need assistance with, please reach out to our workplace relations experts via our 24/7 HR Advice Line. Additionally, a comprehensive HR compliance audit can help ensure your business is meeting its wage obligations and avoiding costly compliance issues.