Minimum wage hike – how will it impact your business?

Do the changes in hourly pay ‘strike a balance’?

BY HRD 02 Apr 2021

The New Zealand government has increased the national minimum wage to $20 an hour in a move that stands to benefit some 175,500 workers. The decision was made despite calls to postpone the rollout, as businesses continued to confront the economic toll of the COVID-19 pandemic.

However, the government – which has gradually raised wages in the past four years – pushed through with the latest hike on 1 April. The $1.14 bump in hourly pay amounts to an additional $44 a week (before taxes) for employees who render 40 hours of work a week earning minimum wage, and a $216m increase in total wages across the country. Meanwhile, the minimum wage for trainees and youth who are “starting out” will be pegged at $16 an hour.

The wage hike formed part of Prime Minister Jacinda Ardern’s campaign promise. Ardern called the changes “real and long-overdue improvements to the support we provide our most vulnerable”.

The Council of Trade Unions hopes the increase will protect the working poor “struggling to meet the costs of basics” like food and housing. “COVID showed us all just how crucial many jobs are to the functioning of our society, jobs in health, cleaning, on our border or supermarkets. Many of these crucial roles are poorly paid. It’s time we valued those being paid the minimum wage more, and this increase is one way of doing just that,” said CTU President Richard Wagstaff.

Similar questions over the impact of the pandemic, however, prompted other sectors to call for the delay of the wage hike. In December 2020, the Ministry of Business, Innovation and Employment asked the government to postpone the hike to October and to roll back the increase by 25 cents to support business recovery.

Despite these concerns, Ardern maintained that the decision considered both the welfare of minimum-wage earners and the needs of businesses. “Our job as government is to constantly strike that balance of ensuring that our lowest-paid workers are earning enough to meet their cost of living and to thrive. At the same time balancing that against the ability of employers to sustainably keep people on,” the prime minister said.