For business owners or managers who employ team members currently earning less than $20 per hour, the increase to the minimum wage is going to have a direct impact on your business.

This may bring tension or stress to many businesses, especially given the ongoing changes to leave obligations that are being imposed on employers, including Matariki Public Holiday, Domestic Violence Leave, 10 days sick leave, and the addition of bereavement leave for miscarriage.

Whether you support these changes or not, this is not all bad news as it will also positively affect the lives and incomes of many New Zealanders, but small business owners need to be preparing for the impact of these. 

Lou Morey, lead HR consultant at HR Connect, discusses the increase to the minimum wage. 

First, what’s changing?

• Adult (16+) minimum wage will go up from $18.90 to $20.00 per hour.
• Starting-out and training minimum wage will go up from $15.12 to $16.00 per hour.

Managing this increase will not only impact those employees who receive an increase to their hourly rate, but your business overall in various ways. Consider the following ideas for action to both ensure you comply with the relevant legislation, but also mitigate the impact on your bottom line, team morale and employee engagement.

Communicate the increase

If you have employees on the minimum wage, let them know about the increase they will be getting. You should send them a letter or email (variation of employment terms and conditions) advising them of the new wage.

Check your payroll systems and processes

Talk to whoever manages your payroll system to make sure they are ready to implement the change.

If your system is manual or computer-based you should check and confirm the settings will be adjusted for the new rates.

Employee pay relativity

This is potentially the biggest impact on your business and is an unintended consequence of the base increase.

Internal wage relativity is how employees are paid compared to each other; employees on higher pay rates may possibly want to negotiate a pay increase to keep the relative difference. 

As any increases under this scenario are not required by law, you may consider offering non-financial benefits, such as flexitime or development opportunities that you could offer to keep them motivated and engaged or you could consider delaying the increases for this group.

Update your business budget

You should add any increased costs to your short and medium-term budget forecasts, to help plan for and manage the effect of higher wage and holiday pay liabilities.

As your business costs will consequently increase, you may wish to review your pricing, taking into consideration any possible negative impact on your trade or customer reaction.

Talk to your HR provider about how best to reward your people and protect your business profits.