Top tips for employers to prepare your business for minimum wage changes and the year ahead

From 1 April 2023, the adult minimum wage rises to $22.70 from $21.20 per hour (an increase of 7% from the current minimum wage).[1] DTI Lawyers employment law team set out a checklist of steps that you can take to prepare your business for the change and year ahead:

Update wage rates / salaries: 

• Review wages for all employees and apply the minimum wage increase. 
• Remember that the training and starting out wages also increase to $18.16/hour (up from $16.96/hour) – being 80% of the adult minimum wage. 
• A tip for salaried workers - a 40 hour week equates to a minimum wage salary of $47,216. ($22.70 x 40 hours x 52 weeks)
• There is no change to the living wage which increased in 1 September 2022 and remains at $23.65/hour. The living wage is a voluntary benchmark designed to represent the amount of money required for workers to fully participate in society.
• Confirm pay rate changes by sending a written variation to affected employees’ terms of employment. (See our advice about updating employment agreements below). 

Payroll:

• Ensure your payroll personnel and/or provider are prepared to implement the required changes to wages. 
• Note from 1 April 2023:
• The ACC Earner Levy will increase to 1.53% per $100 liable earnings (an increase from 1.46%). This will also need to be updated to all employee net pay automatic payments.[2]
• The Student Loan Threshold will increase to $439 per week (from 1 April 2023 to 31 March 2024). Ensure payroll calculations and deductions are consistent this change.[3]
• At the first pay of the new financial year, employers are required to review each employee’s ECST rate to ensure that the rate is correct. This can be calculated by the total gross earnings plus employer KiwiSaver contribution in the last 12 months.[4]

Update employment agreements:

• A variation to wages is a great time to review employment agreements to ensure that all terms of employment are up to date with current legislation and best practice. For example, consider whether leave provisions reflect changes to sick leave and public holidays introduced over recent years. 
• If new employment agreements are being prepared for employees, ensure that employees are given reasonable time to review them, seek independent advice and ask any questions before signing.

Review wage rate relativity:

• Unless contractually obliged to review rates of pay, there is no obligation on an employer to do so, nor increase the pay rate of an employee already on or earning above the minimum rate.
• However, employers are wise to consider the potential impact of minimum wage rate increases on the relative pay rates for other employees – within the business, and within your business sector (i.e. benchmarking). 
• Anticipate that employees will seek an increase in wages to maintain their relativity and prepare for how your business may respond to these requests, and communicate in good faith. 

Update the budget:

• Understanding the financial impact of any wage increases are vital to ensure business planning can take account of the adjustment. This might include reviewing pricing strategies as the cost of operating your business will increase with any increased wage costs.

Review employment records:

• Employers have obligations to keep accurate wage, time, holidays and leave records. Failure to do so can attract costly penalties against an employer, and create unnecessary employment relationship problems due to the uncertainty this can create. Updating wages is an opportune time to review records and ensure that they are compliant.
• Wage and time records must include:
• General information such as the employee’s name, address, age (if they are under 20), their usual work, what kind of employment agreement they are under, and if it is a collective agreement when it expires.
• Specific information such as hours worked each day, wages paid and the method of calculation, education leave, etc.
• Holiday and leave records must include general information as well as:
• When the employment commenced, hours worked, current annual and sick leave entitlements, dates on which leave has been taken, payments made for leave, any annual leave paid out, public holidays worked etc.

Update employee details:

•  Reviews are a good time to check with employees that their personal details are up to date, for example contact information, and any matters that may have arisen that could affect their employment (e.g. changes to any license status, conflict of interest declarations and any secondary employment commitments).

Need help to ensure your workplace is compliant? 

Employers don’t need to figure it out alone and good quality advice from specialised, experienced professionals saves time, resourcing and minimises headaches and stress down the track. 

For advice on employment law changes, how they apply to your workplace and can be implemented effectively, please don’t hesitate to contact our specialist employment lawyers at DTI Lawyers. We are experts and would be pleased to assist you. We also work alongside other professional advisors, including accountants, to support your business. 

You can contact us on 07 282 0174, or reception@dtilawyers.co.nz