Understanding The Upcoming Changes To NZ's Minimum Wage And How They Will Affect Your Business

New Zealand's government has recently announced changes to the minimum wage that will come into effect from April 1, 2023. This increase will have a significant impact on businesses across the country.

The Prime Minister has announced that the adult minimum wage will rise to $22.70 per hour from April 1 2023. This is an increase of $1.50 per hour from the current hourly rate of $21.20 and aligns with the 7.2% rate of Consumer Price Index inflation in the year ended December 2022.

The training and starting-out minimum wages will increase to $18.16 per hour, remaining at 80% of the adult minimum wage. This merits a rise from the current minimum rate of $16.96 per hour.

For an employee who works 40 hours a week, the minimum wage rises to $22.70 per hour, which means they'll earn an extra $60 each week before tax.

Around 222,900 New Zealand workers currently paid between the current and new minimum wage rates will get an increase in their pay packets due to the change in the minimum wage.

The Government will review the minimum wage rate again later this year.

Source: https://www.beehive.govt.nz/release/government-takes-new-direction-policy-refocus

The Minimum Wage

The minimum wage is the lowest rate employers can legally pay their employees, and it applies to all workers aged 16 and over, including part-time and casual employees. The minimum wage is usually reviewed annually and adjusted based on the cost of living, inflation, and other factors.

Importance of Understanding the Changes in Minimum Wage

It's essential to know the new minimum wage rates that will be in place. As announced by the government of New Zealand, the starting-out wage and training wage will increase on April 1, 2023. These changes to the minimum wage will affect businesses in various ways.

As a business owner and employer in New Zealand, understanding how the changes will affect your business will enable you to prepare accordingly.

If your business employs staff at or near the minimum wage, you may need to adjust their pay rates to ensure they are meeting the new minimum requirements.

Additionally, if you have salaried employees who earn close to the minimum wage, you may need to adjust their salaries to comply with the new rates.

The changes to the minimum wage can also have a ripple effect on some other areas of your business, such as overtime rates, holiday pay, and other entitlements. Reviewing your employment agreements and contracts ensures they comply with the new minimum wage rates.

There are also some exemptions to the minimum wage changes, such as for businesses that employ staff with disabilities or employees under 16. Understanding these exemptions and how they may apply to your business will enable you to avoid penalties and legal issues.

4 Benefits of Complying with Minimum Wage Rates

1. Legal Compliance

As an employer, it is your legal obligation to pay your employees at least the minimum wage set by the government. Failure to comply with minimum wage rates can result in penalties, fines, and legal action. Compliance with minimum wage rates ensures your business operates within the law and avoids legal issues.

1. Employee Satisfaction

Paying your employees somewhat is essential for maintaining a positive and motivated workforce. When employees feel they are being paid fairly, they are highly likely to be satisfied with their job; enabling them to be more productive. This can lead to higher and better employee retention rates and a better company culture overall.

1. Reputation Management

Compliance with minimum wage rates can also affect your business's reputation. Paying your employees less than the minimum wage can lead to negative publicity, harming your business's reputation and making it difficult to attract new customers or clients. By complying with minimum wage rates, your business can maintain a positive reputation and demonstrate that it values its employees.

1. Economic Benefits

Employees paid a fair wage can better support themselves and their families. This can increase consumer spending and economic growth, benefiting businesses and the wider community.

Summary

The changes to New Zealand's minimum wage will significantly impact businesses nationwide. As an employer, it's essential to understand the changes, review your employment agreements and contracts, and prepare accordingly to ensure compliance with the new rates. By staying informed and taking all the necessary steps, you can ensure a smooth transition to the new minimum wage rates and avoid potential penalties or legal issues.

Get Professional Help

Accounting professionals can assist small businesses in New Zealand with minimum wage changes in several ways. They can provide guidance on the new minimum wage rates, advise on compliance requirements, and help businesses assess the impact of the changes on their finances.

Additionally, they can assist with budgeting and forecasting, identify cost-saving opportunities, and provide recommendations on managing cash flow during the transition period. With their expertise in financial management, accounting professionals can help small businesses navigate the minimum wage changes and ensure compliance with the new requirements.

Target Accounting is your team of local accountants and business advisors specialising in providing all accounting, taxation, business consultancy, financial and advisory services to clients across New Zealand. We get results by focusing on strong and lasting relationships with our clients – by understanding their business and financial goals to help them reach their full potential.

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