How Much Should You Pay Staff? A Complete Guide to the Minimum Wage Act NZ

One of the fundamental responsibilities of business owners and managers in New Zealand is to ensure that employees are paid fairly and in accordance with the law. 

The Minimum Wage Act is a crucial piece of legislation that outlines the minimum pay rates employers must provide. 

In this blog post, we will discuss the key aspects of the legislation, the different types of minimum wages, and how your business can stay compliant.

The Act aims to protect workers from exploitation and provide a basic level of income for employees to maintain a decent standard of living.

Minimum wage legislation applies to any employee who works full-time, part-time, fixed-term or casual, and regardless of whether they’re on a salary, wage or commission. Some industries do have certain allowances to what the minimum wage rate includes. 

For example, agricultural industries can employ workers and offer them an employment agreement that includes accommodation as well as other goods and services, alongside a wage or salary.

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Adult Minimum Wage

The adult minimum wage applies to employees who are 16 years of age or older and are not starting-out workers or trainees. The adult minimum wage is set to increase to $22.70 per hour (before tax), from April 1 2023. 

However, the minimum wage rate is constantly changing, so always check the Ministry of Business, Innovation and Employment (MBIE) website for the latest information on national minimum wage increases.

Starting-Out Minimum Wage

This rate applies to workers aged 16 to 19 years who are either entering the workforce for the first time or are undertaking industry training. The starting-out wage is 80% of the adult minimum wage, and as such is being increased to $18.16 per hour, in line with the increase for adult employees.

Training Minimum Wage

The training minimum wage applies to employees aged 20 years or older who are completing recognised industry training. The training minimum wage rate is also set at 80% of the adult minimum wage, and is increasing to the same rate of $18.16 per hour.

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Minimum wage exemption permits are allocated by labour inspectors, and employers can apply for an exemption in the event that they’re taking on an employee who may meet an exemption permit. 

Employers will need to show how the suggested wage is fair and equitable, and that the disability does affect the employee’s ability to earn the minimum wage for work allocated. 

The labour inspector will review and assess before agreeing, and they must also make sure the employee is agreeable with the suggested rate as well.

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Keep On Top of Any Changes to the Minimum Wage Rates

Each year, the New Zealand government reviews the current minimum wage rates, and adjusts accordingly if necessary.

Savvy business owners can maintain compliance by watching out for any minimum wage increase, and updating the relevant employment agreement to the new wage rate.  

Keep Accurate Records

Employers are legally required to maintain accurate records of employment agreements, signed contracts, employee wages, hours worked, and leave entitlements. 

These records should be kept for at least seven years – even if the employee has left – and be readily available for inspection by labour inspectors.

Pay Staff Correctly 

On top of making sure your employees are paid the right amount, you must also make sure you’re paying them in accordance with their employee contract. 

That means paying them in line with an agreed timeframe or date, seek their consent to change that frequency, and always include payment for anything on top of their regular wage – such as overtime or annual leave.

Always Be Prepared to Adjust Your Wages 

As an employer, it's crucial to stay up-to-date with changes in employment laws and regulations to ensure compliance and avoid legal consequences. Be proactive in reviewing and adjusting employee wages as necessary to comply with the current minimum wage rates, and don’t let your employees be the one to make that request.

Be Open with Your Employees 

Make sure your employees – whether new or tenured – are aware of their working rights and any changes to those rights. Openly communicating with your workers on these topics can encourage higher employee retention and job satisfaction, and also makes sure you remain compliant.

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Risks range from mild to severe, and include financial penalties and legal consequences. 

There are many avenues an employee can take if they have a minimum wage issue with an employer, and each avenue may have a different path and outcome. 

An employee can contact bodies such as the Employment Relations Authority, the Labour Inspectorate, Employment Court or even the Human Rights Review Tribunal, if they have been unable to speak to their employer directly to try and resolve the issue that way.

The specific outcomes of any of these avenues depend on factors like the severity and frequency of non-compliance, but can include consequences such as:

• Financial penalties: The Ministry of Business, Innovation and Employment (MBIE) in New Zealand can impose fines on employers who breach minimum wage laws. The amount of penalties will vary depending on factors such as the number of employees affected by it. One set of penalties handed to a liquor store in 2021 found the business owner had breached minimum employment standards, and was required to pay $50,000. They were also personally liable for $20,000 in penalties. The key issue in that instance was the failure of the company to pay the minimum wage for all hours worked by certain employees, as well as record keeping, holiday and leave breaches.
• Legal action: The Inspectorate branch of the MBIE exists to investigate and engage in legal action against companies and employers who have been found to be non-compliant with the minimum wage laws. Such legal action involves court orders, proceedings and injunctions.
• Reputational damage: On top of legal and financial penalties, employers risk severe reputational damage if they're found to be non-compliant. Unlike financial or legal consequences, the damage to a company’s reputation can be irreversible, and much more expensive in the long run through the loss of future revenue and customers.
  
  

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