Two significant payroll changes take effect on 1 April 2026, and they both hit your bottom line on the same day. The adult minimum wage is increasing to $23.95 per hour, and the default KiwiSaver contribution rate is rising from 3% to 3.5% for both employees and employers.
If you employ anyone on or near the minimum wage — or anyone contributing to KiwiSaver at the default rate — your payroll needs to be updated before your first April pay run. Getting either of these wrong doesn’t just mean unhappy employees. It means non-compliance, and that comes with consequences.
Here’s everything you need to know, and more importantly, what you need to do about it.
The Minimum Wage Increase: What’s Changing
From 1 April 2026, the adult minimum wage rises from $23.50 to $23.95 per hour — an increase of 45 cents, or approximately 2%.
A critical point that employers must understand: the new rate applies to all hours worked from 1 April 2026. This means if an employee works a shift on 1 April that isn’t paid until a later pay run, those hours must be paid at the new $23.95 rate — not the old rate. The date the work is performed determines which rate applies, not the date the pay is processed.
The training and starting-out minimum wages are also increasing, from $18.80 to $19.16 per hour. These rates remain set at 80% of the adult minimum wage.
For an employee working 40 hours per week on the adult minimum wage, this translates to an extra $18 per week or $936 per year before tax. Across New Zealand, approximately 122,500 workers currently earning below the new rate will be directly affected.
Who needs to take action?
It’s not just employees currently earning exactly $23.50 per hour who are affected. Any employee earning between $23.50 and $23.95 will need a pay increase to meet the new minimum. This includes part-time and casual staff — the minimum wage applies per hour regardless of how many hours someone works.
If you have employees on the training or starting-out minimum wage, those rates need updating too. Remember, the starting-out minimum wage applies to 16 and 17-year-old employees who haven’t completed six months of continuous employment with their current employer.
The wage compression issue
One of the less obvious impacts of a minimum wage increase is wage compression. If your lowest-paid employees move up to $23.95 but your more experienced staff remain on $24.50, the pay differential between entry-level and experienced workers shrinks. This can create resentment and retention problems.
While you’re not legally required to increase wages across the board, it’s worth reviewing your broader pay structure to ensure you’re maintaining meaningful differentiation between roles and experience levels. Employees notice when the gap between their pay and the minimum wage narrows, even if their actual dollar amount hasn’t changed.
KiwiSaver: The Default Rate Is Going Up
This is the change that will affect the widest number of employers, and it’s the one most likely to catch people off guard.
From 1 April 2026, the default KiwiSaver contribution rate increases from 3% to 3.5% — for both employees and employers. This means if you have employees contributing at the current default rate of 3%, both their deduction and your matching contribution will automatically need to increase to 3.5%.
The timing detail that matters: the new 3.5% rate takes effect on the first pay period paid on or after 1 April 2026. So if your pay run covers a period ending in March but the actual payday falls in April, the new rate applies to that entire pay. Don’t wait until a pay period that starts in April — it’s the payment date that triggers the change.
This is a compulsory change. It’s not optional, and it applies to every employer with KiwiSaver-enrolled staff on the default rate.
The bigger hit for employees on total remuneration packages
The figures above assume the employer’s KiwiSaver contribution is paid on top of the employee’s salary — which is how many employment agreements are structured. But not all.
Some employers use a total remuneration approach, where the employee’s salary or hourly rate is deemed to include the employer’s KiwiSaver contribution. Under this arrangement, the employer’s contribution isn’t an additional cost to the business — it comes out of the employee’s total package.
This matters because when the default employer contribution rises from 3% to 3.5%, employees on total remuneration packages get hit twice. Their own employee contribution increases from 3% to 3.5%, and the employer’s larger contribution is also deducted from their total package — reducing their nett cash pay further.
The result is a noticeably larger reduction in take-home pay compared to employees whose KiwiSaver employer contributions are paid on top of their salary. The employee’s KiwiSaver balance grows faster — which is the long-term benefit — but the short-term cash impact is sharper, and employees may not be expecting it.
If you have staff on total remuneration arrangements, this is worth communicating clearly before the first April pay run. An unexpected drop in take-home pay without explanation will generate questions, frustration, and potentially a loss of trust. A brief, transparent explanation ahead of time goes a long way.
The temporary rate reduction option
Employees who want to remain on the 3% contribution rate can apply to Inland Revenue for a temporary rate reduction. Applications have been open since 1 February 2026 through myIR — full details are available on IRD’s temporary rate reduction page. This is not a hardship application — no proof of financial difficulty is required.
If approved, the reduction lasts between 3 and 12 months. When it expires, the employee’s rate automatically reverts to 3.5% unless they reapply or choose a different rate.
Here’s the important detail for employers: if an employee successfully applies for a temporary rate reduction to 3%, you as the employer can choose to match at 3% rather than 3.5%. However, this is your choice — you’re not required to reduce your contribution just because the employee has.
You’ll find out about an employee’s temporary rate reduction in one of two ways: either the employee will show you a letter confirming the period their reduction is active for, or Inland Revenue will send you a letter directly advising which employee has been granted the reduction and the period it covers. Watch for both — don’t assume IRD will always be the one to tell you.
And here’s the compliance trap to be aware of: once your employee’s temporary reduction period ends and they move back to the higher contribution rate, you as the employer must increase your contribution back to at least the default 3.5% rate (or whatever higher rate you choose). If you were matching at 3% during the reduction period, you can’t simply continue at 3% once the employee reverts. This is an easy one to miss, particularly if the reduction period expires mid-year and nobody flags it in your payroll.
New obligations for 16 and 17-year-old employees
From 1 April 2026, employees aged 16 and 17 who are KiwiSaver members and contribute from their wages now qualify for compulsory employer contributions.
Previously, employers were only required to contribute for employees aged 18 to 65. This is changing. If you employ young workers who are enrolled in KiwiSaver and making contributions, you will need to make matching employer contributions from 1 April.
This is a detail that could easily be missed, particularly in industries like hospitality, retail and agriculture where younger workers are common. Check your payroll system settings to ensure they’re configured to apply employer contributions for this age group.
Your April 2026 Payroll Action Checklist
With both changes landing on the same date, a structured approach will help ensure nothing falls through the cracks.
Before 1 April:
Review all employee pay rates and identify anyone currently earning between $23.50 and $23.95 per hour who will need a pay increase. Remember, the new minimum wage rate applies to all hours worked from 1 April — even if those hours are paid in a later pay run. Don’t forget employees on training and starting-out rates — check for anyone below $19.16. Consider whether wage compression means you should adjust rates for employees earning just above the new minimum as well.
Confirm how many employees are contributing to KiwiSaver at the current default 3% rate. These will all need to move to 3.5% from the first pay period paid on or after 1 April — not the first pay period that starts in April. Check whether any employees have notified you of an approved temporary rate reduction to remain at 3%. If so, decide whether you will match at 3% or continue at 3.5%.
Identify any employees on total remuneration packages. These staff will see a larger reduction in take-home pay than those whose employer contributions are paid on top of salary. Plan a clear communication to these employees before their first April payslip so the change isn’t a surprise.
Review your payroll system settings. Most cloud-based payroll systems will handle the minimum wage update automatically, but don’t assume this. Check that rates are actually changing correctly. For KiwiSaver, verify that your system is configured to apply the 3.5% default rate from April and that any temporary reductions are correctly reflected.
Check whether you employ any 16 or 17-year-old KiwiSaver members. If so, ensure your payroll system is set up to process employer contributions for these employees from 1 April.
Budget for the increased costs. The combination of minimum wage increases and higher KiwiSaver employer contributions will increase your total employment costs. Even if the individual amounts seem modest, they compound across your workforce.
On or after 1 April:
Run a test check on your first April pay run before finalising it. Verify that minimum wage rates have been applied correctly, KiwiSaver deductions and employer contributions reflect the new 3.5% default rate, any temporary rate reductions are correctly applied, and contributions for 16-17 year old employees are processing.
Communicate with your team. Let employees know about both changes before their first April payslip. Many won’t be aware that their KiwiSaver deduction is increasing, and a proactive explanation avoids confusion and payroll queries later.
The Compliance Risk of Getting This Wrong
Underpaying the minimum wage is a breach of the Minimum Wage Act 1983. It doesn’t matter whether the underpayment was intentional or an oversight — the obligation to pay at least the minimum wage is absolute. The Labour Inspectorate has the power to investigate complaints, issue improvement notices, and impose penalties.
Similarly, failing to make correct KiwiSaver employer contributions is a breach of the KiwiSaver Act 2006 and can result in penalties from Inland Revenue.
For employers who are already stretched thin managing payroll alongside running their business, these April changes add another layer of complexity. If your payroll processes aren’t robust, or if you’re relying on manual calculations, the risk of errors increases with every legislative change.
When ‘Set and Forget’ Becomes ‘Set and Regret’
Both of these changes serve as a reminder that New Zealand’s employment and payroll landscape doesn’t stand still. Each year brings new minimum wage rates, legislative updates, and regulatory changes that employers must incorporate into their payroll processes.
A payroll system that worked perfectly last month may not be compliant next month. And a payroll process that relies on one person remembering to make manual updates is a process that’s one oversight away from non-compliance.
If you’re finding that each new change adds more stress, more risk, and more time away from actually running your business — it may be time to ask whether there’s a better way to handle your payroll.
Need Help Getting Your Payroll Ready for April?
At The Paymasters, we handle all of this for our clients. When the minimum wage changes, we update it. When KiwiSaver rates shift, we adjust them. When new obligations arise for younger employees, we implement them. Our clients don’t need to worry about remembering, checking, or double-checking — because we do it for them.
Whether you’re a new business setting up payroll for the first time or an established business looking for a better way to manage compliance, our NZPPA-qualified team is here to help.
If you’d like to talk about how we can take the payroll burden off your plate, contact us for a confidential discussion.
Sources:
Ministry of Business, Innovation and Employment. (2025). Minimum Wage Review: Setting the 2026 Rates.Inland Revenue. (2026). KiwiSaver Changes. ird.govt.nz/kiwisaver-changesInland Revenue. (2026). Changes to the KiwiSaver Contribution Rate. ird.govt.nzInland Revenue. (2026). Temporary Rate Reduction. ird.govt.nz/temporary-rate-reduction
Business.govt.nz. (2026). Upcoming KiwiSaver Changes. business.govt.nz