Business owners must ensure they are prepared for the recently announced minimum wage increase, which will come into effect on April 1, 2023.
The current adult minimum wage of $21.20 will increase to $22.70. This $1.50 hourly increase aligns closely with the Consumer Price Index inflation rate of 7.2 percent for the year ended December 2022.
Approximately 222,900 workers will be impacted by this increase. Employers must ensure their payroll system is prepared to implement it, and should notify impacted workers of the increase they will receive.
This latest increase to the adult minimum wage means that a 40-hour worker will receive an extra $60 per week (before tax), with a total minimum weekly payment of $908.00 (before tax).
While this provides much-needed financial assistance for lower paid workers, it places additional strain on employers, who are also feeling the impact of supply-chain cost increases and the effects of the pandemic response. Business Central remains concerned that these increased costs will be passed on to consumers, further fuelling the already high increases in inflation.
Since early 2018, the minimum wage has now increased by $6.95 per hour, or a total of 44 percent. This has created some real challenges in terms of what businesses do with workers who have traditionally been paid in the bracket immediately above the minimum wage. The real cost increases for businesses have been considerably more than just for those at the minimum rate.
While this level of increase is potentially motivating for minimum-wage workers, it could have the opposite effect on other workers whose wage rates have not been reviewed, and who are now only paid marginally above the minimum rate. Employers have already had to respond to this challenge over recent years; it will be the same challenge in 2023.
The Training and Starting-Out minimum wages will also both increase to $18.16 to ensure they remain at 80 percent of the adult minimum. It is also timely to review those workers who receive these and consider whether they are now eligible for the adult rate.
Training Minimum Wage
The training minimum wage applies to workers aged 20 years or over, whose employment agreement states that they must do at least 60 credits a year of an industry training programme to become qualified in the area they are working in. This rate does not apply to workers who are being trained at work in on-job training programmes.
Starting-Out Minimum Wage
This applies to workers who are:
• 16 and 17 years old, and who have not completed six months of continuous employment with their current employer. After six months service they are eligible for the adult minimum wage.
• 18 and 19 years old who have 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 receiving a benefit. After six months service they are eligible for the adult minimum wage.
• 16 to 19 year olds whose agreements state they have to undertake industry training for at least 40 credits a year in order to become qualified in the area they are working in.
Median Wage Rising
The median wage — the minimum rate used for hiring under an Accredited Employer Work Visa (AEWV) — went up to $29.66 per hour from February 27, 2023 (unless exempt).
The median wage exception for the tourism and hospitality industries will also be changing from April 2023, rising from $25 per hour to $28.28 per hour.
Again, the challenge for employers here is how to manage the internal relativities and fairness of pay between workers who arrive from overseas versus those who are local.
Economic Downturn
At the time of writing, the GDP for the December 2022 quarter was reported as falling by 0.6 percent. This was a bigger fall than expected. The current trend will be exacerbated by the destruction that Cyclone Gabrielle has brought to our regions. All in all, 2023 is going to be a challenging year for our local businesses.
Undoubtedly, we will be talking more about this in future columns.
■ Business Central is pleased to announce the appointment of Jannine O’Meara to the position of employment relations consultant in Hawke’s Bay and Gisborne. Hailing from Hawke’s Bay and Gisborne, Jannine now lives just outside Havelock North with her husband and three sons. Having spent 11 years in Jakarta, Indonesia, the family are enjoying being back in New Zealand, and, in particular, living on the East Coast. Jannine is well placed to help employers with their people issues, having had extensive HR experience with Fletcher Challenge Forests, and most recently with Wattie’s. Her contact details are: jannine.omeara@businesscentral.org.nz or 022 454 1979
