NZ Minimum Wage Increase 2021: What Can We Expect?

Date Mar 31, 2021
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By Sieg C
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It’s no April Fool’s prank — the minimum wage in NZ is increasing this April 1st of 2021 from $18.90 to $20.00 per hour. The hourly minimum wage for starting-out and training are also set to increase from $15.12 to $16.00. This sums up to about a $44 increase to weekly wages before taxes.

According to the Ministry of Business, Innovation and Employment, this should boost the wages of up to 175,000 workers around the country. This increase in wages is estimated to contribute $216 million to the economy, giving more spending power for Kiwis. The government has initiated this minimum wage increase since 2018.

This is great news for everyone who can keep their job amidst the economic challenges brought by the pandemic. But what about those who lost their jobs? How can this affect the local businesses and employers?

Here’s how this new minimum wage increase in NZ can affect the economy.

More spending power means a better economy

More disposable income means more money to spend. More money to spend means more economic activity, which is better for the economy. Economic activities are essential to revive the economy, especially as we've been in recession because of COVID trade restrictions.

Of course, this is the simplest effect expected by the NZ minimum wage increase. Factors such as demand, supply, and taxes, among many other economic components also play huge roles. But for now, more spending power is one of the key effects for the economy.

More small and local businesses may close

According to the National Party, the minimum wage increase may affect businesses negatively. Workplace Relations Spokesperson says it’s an “economic vandalism” for small businesses because they’re forced to pay the increased wage despite barely keeping afloat during these very difficult times.

With more small and local businesses closing down, the unemployment rate is likely to rise. The rising unemployment rate across the country may see an even more increase because of this minimum wage increase.

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Vulnerable employees may be put in a tight situation

Employers are given three years to plan the minimum wage increase in NZ. So for the most part, businesses are cool with this increase. However, some employers are still not fine with this arrangement, leading them to practice unethical solutions. This leaves vulnerable employees to comply with unruly demands, or else risk losing their job.

That’s why it’s very important to be aware of your rights as well as the most notable changes happening in your payslip. Check out some of the most important changes you need to know.

  • The pay rate increase as well as the start date (April 1st) should be indicated in a letter, email, or contract sent by the employer.
  • You can ask for your previous payslip up to your recent pay to check for your records as well as any changes in your wage.
  • The new minimum wage is valid no matter what type of employment you have — even if you don’t have a valid visa or contract.

Other changes coming this April 1st

Aside from the NZ minimum wage increase in 2021, there are also some financial changes concerning your taxes, benefit tax rates, and benefits payments cut. Take note of the following changes:

  • The new top tax rate of 36% applies to those with an annual income of more than $180,000. It’s expected to affect 2% of New Zealand workers.
  • The new fringe benefit tax (FBT) rate of 69.93% applies to New Zealanders on a 39% marginal tax rate.
  • Job seekers, sole parents, people on Supported Living Payment, and veterans can earn up to $160 weekly before their benefit cut.

While this is still in the works, a bill aiming to double the legal minimum of paid sick leave to 10 days is expected to be enacted before the end of 2021. The government has plenty of changes to implement, so it’s best to keep updated. It’s also recommended to get the best financial support possible, so you’re covered whatever effect these changes have on your life.

Be it KiwiSaver, credit card, personal loans, mortgages, term deposits, and more, get the best financial coverage possible, using glimp’s comparison tool.

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