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 Minimum Wage Act 1983 is the primary legislation in New Zealand that sets the minimum wage rates employers must pay their staff.
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.
There are three main types of minimum wages in New Zealand:
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.
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.
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.
A minimum wage exemption permit can be provided to employees who meet certain requirements to allow an exemption, such as an employee living with a disability that affects how they can conduct their work.
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.
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.
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.
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.
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.
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.
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:
By understanding the different types of wages and staying up-to-date with the latest minimum wage rate, employers can ensure they meet their legal obligations and provide fair compensation for their staff.
If you’re feeling unclear about your obligations as an employer, contact Pay Cat today to find out how our automated payroll compliance features can help!