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Managing employee pay relativity under the new minimum wage

The New Zealand Government announced in February that the adult minimum wage would increase to $22.70 per hour from 1 April 2023. 

This is an increase of $1.50 per hour from the current hourly rate of $21.20 and aligns with the 7.2% rate of Consumer Price Index Inflation in the year ended December 2022. 

The upcoming minimum wage increase only legally applies to the minimum rate of pay – there’s no requirement that every single employee receives a $1.50 wage increase.

However, you may have some workers who are already earning $22.70 an hour.  These employees will fall into the minimum pay rate bracket following the increase on 1 April. Despite there being no legal requirement to provide a pay rise here, this can raise issues about how more adept employees are paid compared to less qualified or experienced workers.

For example, an employee already earning $22.70, who suddenly makes the same income as a less skilled colleague, may feel resentful or frustrated that your company isn’t recognising their seniority or capability. Employees in this situation may be keen to negotiate a pay increase to maintain the relative pay difference.

In determining a strategy for managing pay relativity, it’s essential to manage affordability, properly understand workforce expectations, and manage them proactively.

Again, there’s no legal obligation to increase the pay rate for anyone earning at least $22.70 an hour already. But, with an eye on employee morale and workplace dynamics, you could consider the following if pay relativity comes up:

  • Increasing an employee’s $22.70 an hour wage by $1.50 an hour (to maintain the relative difference between their salaries and the minimum wage).
  • Increase an employee’s rate by an amount that keeps a differential rate and is reflective of individual ability and performance. You’d need to substantiate this increase through a performance review.
  • If remuneration increases are not affordable for your business at this time, are there other non-cash benefits you can offer your more experienced workers, such as mentoring or training and development opportunities?

All minimum pay changes must appear in the next pay slip after 1 April 2023. It’s possible to delay the increase; for example, if the administrative load makes it impossible to meet the deadline. But you’d still be required to backpay affected employees to 1 April as soon as possible. You should proactively communicate this to your staff if you find yourself in this situation.

As an employer, you’ll need to keep up to date with the latest minimum pay changes and pay all your employees at least the minimum wage. This year’s pay increases may introduce significantly greater wage costs to your business. In this case, you may also want to think about pricing strategies and budget forecasting to account for your higher wage and holiday pay obligations.  

Adult Minimum Wage

$22.70 per hour

This wage is the most commonly used by Kiwi businesses and applies to all employees who are 16 years of age or older, provided they do not qualify for the starting out or training wages.

Starting-Out Wage

$18.16 per hour

 Workers aged 16-19 who are entering the workforce for the first time.

  • this only applies to 16 and 17 year olds during the first 6 months of their employment. Or 18 or 19 year olds who have been on a benefit for 6 months or more prior to their employment and only for their first 6 months of continuous employment following them being on a benefit
  • it also applies to 16 – 19 year olds if they are doing at least 40 credits in a training programme just like the training minimum wage

Training Minimum Wage

$18.16 Per Hour

This category of wage applies to employees aged 20 years or over who are completing recognised/accepted industry training involving at least 60 credits in order to become qualified.


Published in Business, Health & Safety, Environment in WIRED Issue 68 / March 2023 by Fencing Contractors NZ