The Government has announced an increase of minimum wage from $20 to $21.60 an hour to commence from April 1st this year.
Impact for employees
Workplace Relations and Safety Minister Michael Wood has confirmed this wage increase will directly benefit around 300,000 workers and will help households most affected by Covid-19. For someone working a full time, 40-hour week, this will see them bringing in an additional $48.00 a week, almost $2500.00 a year. This increase follows a record high for inflation in New Zealand, with an annual rate of 5.9% for 2021. One of the ideas behind this increase in wages is that it will encourage consumer spending across the economy, which would in turn support businesses. Annie Newman, from the E tū union, said the increase would benefit the country’s lowest-paid workers, including many essential workers who were providing vital services during the ongoing Covid crisis. Minimum wage increasing in line with inflation is positive for households she said.
Impact for businesses
On the flip side of this positive news for workers is the impact these increases will have on businesses. The increase to the minimum wage comes at a time when businesses, especially small businesses are struggling due to the ongoing impacts and disruptions from Covid-19. Employers and Manufacturers Association (EMA) chief executive Brett O’Riley said the announcement was a “kick in the guts for many businesses.” He said that if the Government is looking to ease the pressure for businesses, given rising costs throughout the country, then there were other ways to do this. "This increase comes at a time when businesses are under extreme pressure from fast-rising costs in labor, capital, and in their supply chains, and when some are fighting for their very existence," said Business NZ chief executive Kirk Hope. It is a rather large increase in wages, in a very short period of time, and there is a concern in the media that businesses have not been given the time to prepare for it. For businesses just starting out, there will be extra costs to consider which may require some extra planning and pressure. The media has expressed particular concern with the timing of the wage increase, given that all of New Zealand is currently in the Red traffic light setting, which adds extra pressure to businesses as there are more restrictions that the public must adhere to, making the current trading environment even more difficult.
Time will tell whether the increase in the minimum wage will cause a negative impact on businesses and their financial viability.
If you have concerns or questions about how the minimum wage increase might affect your business, Godfreys Law can help. Get in touch directly with one of our employment team (details below) or call us on (03) 366 7469.
Sally Cunneen
(03) 6617166
sally@godfreys-law.co.nz
Andy Ogilvie
(03) 6617166
andy@godfreys-law.co.nz
Brad McDonald
(03) 3672685
brad@godfreys-law.co.nz
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