The New Zealand Workplace Relations and Safety Minister has announced that the minimum wage for adults will be rising to $23.15 per hour from the existing rate of $22.70. This is an increase of 45 cents per hour. The increase will be effective from 1 April 2024.
The training and starting-out minimum wages will also both increase to $18.52 per hour, remaining at 80% of the adult minimum wage. This is a rise from the current minimum rate of $18.16 per hour.
What does this mean for business owners?
- Increased Labour Costs – For every employee that is working 40 hours per week, an employer will need to pay an equivalent additional $18 per week. Whilst this increase isn’t large, it can have a very large impact depending on the number of minimum wage an employer has employed.
- Increased Operating Costs – As a result of increased labour costs, overall expenses will increase, and without additional revenue coming in to counteract this increase, expected net profit will fall.
How to prepare for the increase?
- Advise your team – Ensure that all relevant staff are made aware of the increase. Employees should be notified that they will see an increase in their hourly wage. We recommend this to be undertaken in writing. Update any finance and management employees so they are aware to update any metrics or processes that they have dependent on labour costs.
- Check your payroll systems and processes – Applications or systems (eg: excel) that create calculations based on the minimum wage of employees should be updated to reflect the new cost.
- Reconsider your pricing strategy – With increase in operating expenses, the costs used to create/sell your product or services will increase, resulting in lower margins. Reconsider whether any adjustments need to be made to your prices to ensure an appropriate level of profit is being made.
If you require any help, talk to us here at Zest.