NZ minimum wage increase April 2019

By Vaughan Granier

An April Fool’s trick? Nope: it’s a minimum wage increase.

On 01 April 2019 there’ll be a big increase to the minimum wage rates payable to employees across New Zealand. It’s another step in the Government’s plan to reach an adult minimum wage of $20 by 2021. At least 210,000 employees, in many industries, will be affected; and it’s important for you, as an employer, to stay compliant.

There are three minimum wage rates, and I’ve summarised the changes in a handy table:

You can see that the adult minimum rate has been increased by $1.20 per hour. The adult minimum rate is payable to all employees, 16 years and older, who are not “starting out” or “trainee” employees.

The adult minimum rate is also the minimum amount per hour that must be paid to any employees who are supervising others as part of their job, regardless of age.

The starting out / trainee minimum wage is 80% of the adult minimum wage.

Who qualifies as a ‘Starting Out’ employee?

• 16 and 17-year-old workers who’re in their first 6 months of employment with their employer. (After 6 months with the same employer they’re no longer considered as ‘starting out’ and must receive the adult minimum wage.)
• 18 and 19-year-old employees who’ve been paid one or more social security benefits, for six months or more, and who haven’t completed six months’ continuous employment with an employer since they started being paid a benefit*.

*These benefits include: jobseeker support, sickness, unemployment, young parent/youth, emergency and sole parent benefits, as well as others.

• 16 to 19-year-old employees, whose employment agreement states that they need to qualify for at least 40 credits of industry training per year before they can receive a qualification in their field.

Who qualifies as a ‘Trainee’ employee?

• Employees aged 20 years and over whose employment agreement requires them to complete 60 credits per year of industry training to be qualified in their field. This includes apprentices.
• ‘Trainee’ status doesn’t apply to employees being trained at work.
• ‘Trainee’ status doesn’t apply to any employee supervising or training others (such employees must be paid the adult minimum rate).

Forewarned is forearmed

Even if you pay your workers above the minimum wage, don’t think that these increases won’t still affect your business – especially if you pay close to the minimum. As the Ministry of Business, Innovation & Employment pointed out in its Minimum Wage Review 2018,

“Changes to the level of the minimum wage can affect not just those receiving the minimum wage but also those who are paid close to it. When the minimum wage increases, some employers increase the wages of workers paid above the minimum wage to maintain wage relativity to the minimum wage. The flow-on effect is also considered to be a consequence of employers benchmarking their wages to the minimum wage as regular increases to the minimum wage rate can be useful for their initial wage-setting…Referred to as pay parity, this can have a significant impact on businesses.” (p. 37)

The Government is planning to increase the adult minimum wage to $18.90 in April 2020, and then to $20 in April 2021. So while an increase in the minimum wage might be a welcome boost for many employees, if a high proportion of your workforce is on minimum wage, or close to it, it might be time (if you haven’t already) to crunch the numbers and work out a plan to assess and minimise the impact on your business.

Vaughan Granier is National Workplace Relations Manager for HR Assured NZ.