Minimum Wage in New Zealand – Frequently Asked Questions

Is there a separate legislation relating to minimum wages in New Zealand?

New Zealand was the first country to implement a national minimum wage, enacted by its government through the Industrial Conciliation and Arbitration Act 1894. Current minimum wage law is described in the Minimum Wage Act 1983. The Minimum Wage Act 1983, as amended. Minimum Wage Order 2016 gives effect to the current minimum wage. The Minimum Wage (New Entrants) Amendment Act 2007 provided that the rates for 16- to 17-year-olds and those in training cannot be lower than 80% of the adult rate.

Do one or more minimum wages exist that is/are determined by law?

Minimum wage rates are stipulated by a single statute. The adult minimum wage applies to all employees aged 16 and over who are not starting-out workers or trainees, and all employees who are involved in supervising or training other employees. The starting-out wage applies to starting-out workers aged 19 years or less. The training minimum wage applies to employees aged 20 years or over. Under the starting-out wage, eligible 16-to-19-year-olds can be paid 80% of the adult minimum wage for 6 months or for as long as they are undertaking recognised industry training of at least 40 credits per year. Under the training wage scheme, after completing 3 months or 200 hours of employment (whichever is completed first) at not less than 80% of the minimum adult rate, the worker is entitled to be paid at the minimum adult rate.

At what level is minimum wage determined?

The statutory minima apply to all workers nationally. Higher minima are often - for ~25% of the workforce - determined at the establishment level through collective bargaining.

On what basis is minimum wage calculated?

Minimum Wage is calculated on hourly basis.

Are governmental bodies, employer and/or trade union representatives involved in minimum wages setting?

The Workplace Relations Minister (formerly Minister of Labour) may make recommendations to the Governor-General regarding the adjustments that should be made to that minimum rate. The Governor-General may, by Order in Council, prescribe a minimum adult rate of wages payable to workers.

How are upratings (adjustments) of minimum wage/s decided upon?

There is no legal requirement to consult, although Workplace Relations Ministers (formerly Labour Ministers) frequently consult informally and without statutory compulsion with employer and trade union representatives on a wide variety of matters related to pay and employment (including the minimum wage).

Which are the components of minimum wage in New Zealand?

There is no cost-of-living adjustment or other variable allowance added to the minimum wage rate.

How frequently is the fixed component of minimum wage updated?

The Workplace Relations Minister (formerly Minister of Labour) shall, in each year ending on 31 December, review any minimum rate prescribed pursuant to section 4, 4A, or 4B of the Minimum Wage Act 1983.

How frequently are the variable components of minimum wage updated?

There is no variable component to the New Zealand minimum wage.

What is/are the yardstick/s on which minimum wage upratings are based?

The Workplace Relations Minister is under no legal obligation to use any particular 'yardstick' on which to base minimum wage increases. When increases to the minimum wage are announced (annually), the government typically makes reference to (but, again, is not compelled to consider) CPI and (increasingly) decent/living standards (but not to wage indexation, which is rare in New Zealand) as justification for any changes (or not) to the minimum wage.

What is the national poverty line? (In national currency)

$375/week for 1 parent + 1 child; $580/week for 2 adults + 2 children. There is no official ‘poverty line’ in New Zealand in the sense of measures to which the government has given formal legitimacy. There is also no formal agreement in New Zealand about exactly how to measure poverty or material hardship. The 'unofficial' poverty line (below which household income is considered to be 'low') adopted by the Ministry of Social Development (MSD) is 60% of an ‘equivalised’ (to allow for economies of scale) median disposable income for a household with two adults and two children, after deducting housing costs. (The OECD uses a 50% threshold for its international comparisons.) After deducting housing costs, the poverty line (2014) for a household with two adults and two children rests at $580 per week or $30,160 (in 2013 NZD) annually; for a sole parent with one child it is $375 per week or $19,500 annually. [See Perry, B (2015) Household Incomes in New Zealand: Trends in Indicators of Inequality and hardship 1982 to 2014, Wellington: Ministry of Social Development.]

How often is the poverty line updated?

MSD updates typically its 'unofficial' poverty line annually, once a year, based on the Household Economic Survey (HES), which collects comprehensive information relating to household income and expenditure in New Zealand. The HES is run over a 12-month period beginning 1 July and ending 30 June the following year. Respondents are asked about their spending and income in the year before their interview date; as a result, expenditure and income data effectively cover a two-year period.

When was the poverty line last updated? (Specify YYYY/MM)

The MSD’s annual Household Incomes Report provides information on the material well-being of New Zealanders as indicated by their household incomes from all sources from 1982 to 2014. The December 2015 Report uses data from Statistics New Zealand’s 2013-14 Household Economic Survey (HES) to update the previous report in the series which had information to 2013. The interviews for the 2013-14 survey were carried out in the year to 30 June 2014, and asked about incomes in the twelve months prior to interview.

What is the percentage of minimum wage relative to the current poverty line?

Percentage of minimum wage relative to the current poverty line is105.2%. Adult minimum wage = $610 for a 40-hour week; Poverty line = $580/week for 2 adults + 2 children.

How is minimum wages compliance regulated?

The Employment Standards Legislation Bill came into force on 1 April 2016. Changes include strengthening enforcement of employment standards, including the Minimum Wage Act 1983.

The Ministry of Business, Innovation and Employment's (www.employment.govt.nz) The Labour Inspectorate monitors and enforces compliance with employment standards in New Zealand. Labour Inspectors investigate potential breaches impartially before making a decision. In cases where rights have been breached repeatedly or blatantly, Labour Inspectors may look at penalty actions, publicise the case and even aim to remove employers from the labour market. For less serious breaches of employment standards (e.g., one-off accidental mistakes) an inspector might use tools such as enforceable undertakings or improvement notices, to require employers to change their workplace practices and repay any arrears owing.

The Employment Relations Authority, an independent institution established under the Employment Relations Act 2000, now hears only cases involving minor to moderate breaches of employment standards, including the Minimum Wage Act 1983. For serious, ongoing and sustained breaches of the law, cases will now be heard at the Employment Court, a specialist judicial body. The new law provides an indicative list of factors for the Employment Court to consider when determining whether a breach of minimum standards is serious, such as the amount of money involved, how long the breach has gone on for and whether it was intentional or reckless.

Which legal sanctions can be applied if compliance is lacking?
Labour Inspectors may apply to the Employment Relations Authority or Employment Court for a penalty against an employer or person involved in a breach of employment standards. Employees can apply for penalties against an employer too, but not against a person involved in a breach.

Cases heard at the Employment Court now carry maximum penalties of $50,000 for an individual and the greater of $100,000 or three times the financial gain for a company. Maximum penalties at the Employment Relations Authority remain at $10,000 for an individual and $20,000 for a company.

Labour Inspectors may apply to the Employment Relations Authority to recover from the employer (or people involved in a breach), wages or other money owed as a result of the breach of minimum entitlements. Employees can do this too, but they need the permission of the Authority to take an action against a person involved in a breach.

Under the recently enacted Employment Standards Legislation Bill, employers are now publically named if the Employment Relations Authority or Employment Court finds they have breached minimum standards.

In addition, either the Employment Relations Authority or Employment Court may, by means of a compliance order, require an employer (or representative of that employer) to do any specified thing or to cease any specified activity for the purpose of preventing further non-observance of or non-compliance with employment standards, including the Minimum Wage Act 1983. Individuals also now face the possibility of being banned as employers by the Employment Court if they commit serious or persistent breaches of employment standards. Accountability has been extended to persons other than the employer, such as payroll officers, who are knowingly and intentionally involved in breaches of employment standards.

Are sanctions often being applied?

There has been a notable trend in New Zealand of MBIE's Labour Inspectors bringing legal action against employers, particularly in the hospitality sector and primary industries such as dairy and viticulture, for failing to meet minimum employment standards, including payment of statutory minimum wages.

Are employer and/or trade union representatives involved in compliance procedures?

Labour Inspectors work with employers and employees (and their representatives) to ensure that workplaces follow at least the minimum employment standards and laws. However, there is no formal role for employer and/or trade union representatives in compliance procedures. Whereas these parties may take a complaint to the Labour Inspectorate on behalf of an employee and/or employer, employer and/or trade union representatives are generally not directly involved in compliance procedures.

To whom/Where can individuals complain, if they think they are earning less than minimum wage?

If a person (including an employer) has not observed or complied with the Minimum Wage Act 1983, Labour Inspectors can bring an action before the Employment Relations Authority to recover money payable by way minimum wages. If an employer pays less than the legal minimum, the employee can also commence an action before the Employment Relations Authority for recovery of that money.

The Employment Relations Authority may, in turn, make a compliance order, which requires a person to do, or to desist from any specified thing or activity, for the purpose of ensuring future compliance or observation of the agreement or Act. Labour Inspectors may apply to the Employment Court for a declaration of breach for a serious breach of minimum entitlements. Labour Inspectors are the only people (i.e., employees and their representatives can’t do this) who can apply to the Court for a declaration of breach. Labour Inspectors may do this if they think the employer seriously breached or was involved in a serious breach of a minimum entitlement provision. Labour Inspectors may also apply to the Employment Court for sanctions against a person who doesn’t comply with (or is deemed unlikely to comply with) an order, determination, direction or requirement made by the Employment Relations Authority.

Trade unions and the New Zealand Council of Trade Unions will provide advice and support to both members and non-members who feel they've been paid less than the statutory minimum wage. However, unions play no direct role in the formal complaints process or compliance procedures.

Any person (being an employee, employer, union, or employer organisation) who alleges that a person has been affected by non-observance or non-compliance of New Zealand's employment standards, including the statutory minimum wage, may take action against another person (including a company) by applying to the Employment Relations Authority (http://era.govt.nz/) for a compliance order of the type referred to above.

Which month of the year is minimum wage rate revised in New Zealand?

Under the Minimum Wage Act 1983, as amended, any Minimum Wage Order will take effect from 1 April.

loading...