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Largest Increase to the Minimum Wage in a Decade

Published January 15, 2018 (last updated December 7, 2020) Author: Employsure

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Employers need to be prepared for the minimum wage to increase by 75 cents to $16.50 an hour from April 1, 2018. The largest minimum wage increase since 2008 will impact all businesses, across all industries, who pay at the current minimum wage.

While the Government, unions, and activists say the costs of minimum wage hikes are negligible, small business will feel the greatest impact. Jen Tweed, managing director of Employsure, says the victims of minimum wage hikes are the employers who struggle to offset those costs: “the cost of doing business becomes more challenging as mandatory wage increases are introduced. Small business employers often need to choose between reducing the number of staff to keep up with rising costs or increasing their prices” she said.

Minimum wage increases are a topical public debate because employees, customers, and employers are all impacted: “price increases passed on to customers, at a time when customers are more price sensitive than ever could put small businesses at risk of fierce competition.”

Jen Tweed suggests some small businesses will find ways to offset higher labour costs, such as raising prices and reducing hours, “to make up for higher costs, some employers will raise prices, cut hours for their existing employees, reduce staff numbers, or start working more shifts themselves.”

Workplace Relations and Safety Minister Iain Lees-Galloway announced the boost, the first of a commitment to phase in an increase to $20 by 2021. “The increase to $16.50 per hour will benefit approximately 164,000 workers and their families, and will increase wages throughout the economy by $129 million per year,” he said. He also confirmed that within the Government’s first 12 months, it would abolish starting-out rates and consider changes to the training wage.

“It is important that we achieve this goal in a fiscally responsible way, which is why we are signalling to employers in advance of our plans to incrementally raise the minimum wage and spread the increases as evenly as possible each year,” Lees-Galloway said.

According to Jen Tweed, not all employers will be required to increase employees’ wages, provided the rates currently paid are above the increased minimum wage rates being introduced however, “if employers pay at the current minimum wage rates, they should start forecasting the increase to their wages bill, and increase pay only for any hours worked from 1 April 2018.”

What will the new Minimum Wage rates be?

Effective 1 April 2018, the minimum wage is mandatory to be paid to an employee irrespective of the hours worked or job responsibilities are as follows:

Adult Minimum Wage – $16.50 Per Hour

This wage is the most commonly used by Kiwi businesses and applies to all the employees who are 16 years of age or older, provided they are not involved in training or supervising other employees.

Starting-Out Wage – $13.20 Per Hour

Workers aged 16-19 who are entering the workforce for the first time are the only type of employees entitled to starting-out wages. This wage is unconfirmed, as the government has previously suggested removing this category.

Training Minimum Wage – $13.20 Per Hour

This category of wage applies to employees aged 20 years or over who are completing recognised/accepted industry training involving at least 60 credits in order to become qualified.

Being fully aware of the wage increases is something that is vitally important to running a business. Employees have to be paid at least the minimum hourly wage rate for every hour worked. Employsure ensure you are aware of your obligations and remain up to date on any legislative changes that will impact your business. Employers should start preparing for the minimum wage changes now by speaking to an Employsure specialist on 0800 675 700.

Your story

Are you concerned about how the minimum wage increase will impact your business? Email [email protected] to share your point of view.

About Employsure

Employsure is one of New Zealand’s largest workplace relations advisers to small and medium businesses, with over 5,500 clients. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

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