Minimum Wage Increase in April 2025

From 1 April 2025, the minimum wage in New Zealand will increase. This change will impact many businesses, especially small to medium-sized enterprises. To ensure a smooth transition, it is essential to review your payroll, employment agreements, and financial planning. Our expert advice will guide you through the steps to prepare, helping you stay compliant and manage the financial impact effectively.

New Minimum Wage Rates for 2025

The government has announced the following adjustments:

• Adult minimum wage: $23.50 per hour (up from $23.15)
• Starting-out & training wage: $18.80 per hour (up from $18.52)

These rates apply before tax and deductions, such as PAYE, KiwiSaver, and student loan repayments.

How to Prepare for the Increase

1. Communicate with Your Team

First and foremost, if you have employees on the minimum wage, it’s important to inform them about the change. To maintain transparency, consider sending a written notice or updating their employment agreements. Clear communication helps employees feel valued and avoids misunderstandings.

2. Check Your Payroll Systems

Next, whether you’re on Xero Payroll or another system, ensure your payroll provider or software is updated to reflect the new rates. If you handle payroll manually, take the time to review your records and settings. Failing to make these updates could result in errors or compliance issues.

Additionally, if you have employees on starting-out or training wages, now is a great opportunity to check when they will transition to the full adult wage. Staying ahead of these changes ensures compliance and fair treatment of employees.

3. Review Pay Structures and Internal Equity

As the minimum wage increases, businesses should also consider wage relativity—how different pay levels compare within the company. Employees earning just above the new minimum wage may expect adjustments to maintain fair wage gaps.

Furthermore, assessing how your pay rates compare to industry standards can help with staff retention and morale. Competitive wages can reduce turnover and improve workplace satisfaction.

4. Adjust Your Business Budget

A wage increase doesn’t just affect direct wages; it also impacts holiday pay, KiwiSaver contributions, and ACC levies. Therefore, updating your financial forecasts now will help you manage these rising costs.

If you haven’t already, take time to review your pricing, cash flow, and cost structures. Making proactive adjustments now can prevent financial strain later.

5. Ensure You Meet Legal Obligations

Understanding the legal aspects of the minimum wage is crucial. The new rates apply to all hours worked, whether employees are paid:

• Hourly
• On salary
• By commission
• Based on piece rates

However, some exceptions exist. For example, the minimum wage does not apply to employees under 16 or those with a minimum wage exemption permit due to a disability.

Final Thoughts

This wage increase is a great opportunity to review payroll processes, employment agreements, and budgeting strategies. Taking action early will help ensure compliance while keeping your business financially stable.

If you need guidance on managing wage changes or business budgeting, get in touch with our team today for expert advice. We are here to help your business navigate these updates smoothly.