Workplace Relations and Safety Minister, Michael Wood, has announced an increase in minimum wages. The increase, set to take effect in April, will see the training minimum wage boosted to $16.96 and the lowest-paid workers earning a higher $21.20 an hour. This 6% increase is expected to benefit about 300,000 workers.
Thanks to the increase, those working 40-hour workweeks can expect to receive an additional $48 a week and about $2,500 more a year. Wood says the increase was in response to the contributions made by minimum wage workers during the pandemic. He also called on frontline workers to continue helping to keep the country running, even as the Omicron variant takes hold. He added that the pay raise would help stimulate spending amongst the workers, resulting in more revenue for businesses.
However, not everyone is happy with the news. During a Radio New Zealand interview, New Zealand Council of Trade Unions president, Richard Wagstaff, expressed disappointment with the increases, saying that the unions had hoped for more from the government. He also noted that there were expectations that the government would introduce fair pay agreements that would introduce a more sophisticated approach to setting basic conditions for industries.
On the other end of the spectrum are the employers. Business NZ chief executive, Kirk Hope, termed the big increase as a slap in the face for struggling businesses. He said that the pay hike was coming at a time when businesses were facing challenges due to labour shortages, lack of capital, and supply chain problems. The pressure of labour shortages has contributed to wage growth in sectors like trades where the current national median hourly pay has risen to $27 an hour.
Hope lamented the short notice given for the increase that would make it difficult for businesses to adequately prepare. He is calling on the government to increase its support to businesses affected by the compulsory increase.
Some tax experts are also highlighting the fact that this change means that some minimum wage workers will be pushed into the third-highest tax bracket. In this tax bracket, earnings between $48,000 and $70,000 are taxed at 30%. Minimum wage earners that work over 43 hours a week are expected to enter into this tax bracket.
According to Deloitte partner, Robyn Walker, having minimum wage earners pushed into middle tax bands indicated a problem with prevailing marginal tax rate settings. She noted that with ACC levies and taxes, there was limited financial benefit derived by such workers from the minimum wage increase.
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