Is your business ready for lift in the minimum wage?

Gemma Hogg

The Government has announced that from April 1, 2020, the minimum wage will increase from $17.70 to $18.90 per hour. This will see an increase of 7.27 percent or $1.20 per hour, and will mean an extra $48 per week before tax for employees on a minimum wage working a 40-hour week.

The training/starting-out wage, set at 80 percent of the adult minimum wage, will also see an increase from the current rate of $14.16 to $15.12 per hour on the same date.

All employers in Tairawhiti will be impacted in some way by this wage increase and all employers need to be vigilant to ensure these changes are made and effective by April 1, 2020.

Are you prepared for this increase? Following are some handy hints for you to consider ahead of April 1.

Take a look at what you are currently paying your employees. Do you need to review pay-rates for those employees who, on April 1, 2020, might end up being paid at or just above the new minimum wage?

The minimum wage increase is likely to have a bearing on wage expectations from those employees who are currently receiving more than the minimum wage because of their skills/loyalty.

You may wish to consider whether to maintain wage parity across your employees by offering increases to those above the current minimum wage. There may also be other non-financial benefits, such as flexi-time or training, that you could offer to those more skilled employees in order to keep them motivated and engaged.

Most payroll systems should either automatically update or provide you with instructions on how to adjust settings to manage the increase from April 1, 2020. We recommend that you confirm well in advance and seek the advice of your trusted adviser to see if any further action is required to ensure compliance.

The Government has indicated a further increase to lift the minimum wage to $20 per hour in 2021 so it will be important to start planning towards this potential increase and the impacts it could potentially have on your finances. Understanding the financial impact of the increase is vital so that you can plan and make adjustments accordingly. Preparing an annual budget on a month by month basis with the help of your accountant or trusted adviser, will highlight the effect of the increase both on wage cost and holiday pay liability.

Please ensure you communicate with those employees that will be impacted by this impending change, so they fully understand how it will affect them personally.

If some employees are on the minimum wage now, use the opportunity to confirm the good news that an increase is imminent.

Reach out to your trusted business adviser: At BDO Gisborne, we have HR consultants and payroll specialists on hand to guide you through this transition. No matter what your query is, just reach out, we're here to help.

■ Gemma Hogg is an HR consultant working within BDO Gisborne's People & Performance team. She has experience working across the public and private sectors.