The New Zealand Government has confirmed that minimum wage rates will increase from 1 April 2026. As your trusted payroll partner, The Paymasters wants to ensure you’re fully prepared for these changes and remain compliant with employment law.
The New Rates
From 1 April 2026, the minimum wage rates will be:
- Adult Minimum Wage: $23.95 per hour (up from $23.50)
- Training and Starting-Out Minimum Wage: $19.16 per hour (up from $18.80)
This represents a 2% increase, or 45 cents per hour for adult workers. The training and starting-out rates remain at 80% of the adult minimum wage, as required by legislation.
Who Does This Affect?
Approximately 122,500 New Zealand workers are expected to benefit from this increase. The key groups typically affected include:
- Youth workers
- Part-time employees
- Workers in hospitality, tourism, horticulture, and agriculture
- Retail and cleaning sector employees
- Employees currently earning at or near minimum wage
What Does This Mean for Your Business?
For an employee working a standard 40-hour week on the adult minimum wage, this translates to:
- An additional $18 per week (before tax)
- An extra $936 per year (before tax)
While this may seem modest on an individual basis, for businesses employing multiple minimum wage workers, the cumulative cost can be significant. It’s essential to factor this into your budgeting for the 2026-2027 financial year.
Understanding the Training and Starting-Out Minimum Wage
The training and starting-out minimum wage of $19.16 per hour applies to specific categories of employees:
Starting-Out Workers:
- 16 and 17-year-olds who have not completed six months of continuous employment with their current employer
- 18 and 19-year-olds who have been receiving a specified benefit for six months or more, and have not completed six months of continuous employment since coming off the benefit
Training Workers:
- Employees aged 20 or over who are required to undertake at least 60 credits per year in an industry training programme to become qualified
After six months of continuous employment with one employer, starting-out workers must be paid the adult minimum wage. Employers need to track these milestones carefully to ensure compliance.
Your Action Checklist
To ensure compliance with the new minimum wage rates, take the following steps:
1. Review Your Payroll (Now – February 2026)
- Identify all employees currently earning below $23.95 per hour
- Calculate the financial impact of the increases
- Review your wage structure to address any wage compression issues
2. Update Employment Agreements (March 2026)
- While not always legally required, it’s best practice to provide written notification of wage increases
- Update any employment agreements that specify exact wage rates
- Ensure training and starting-out workers are correctly classified
3. Configure Your Payroll System (March 2026)
- Update minimum wage rates in your payroll software
- Verify that automatic calculations are correct
- Test pay runs before processing the first April payroll
4. Process the First Payroll (1 April 2026 onwards)
- The new rates apply to all hours worked from 1 April 2026
- If you have pay periods that span 31 March and 1 April, you must calculate wages at the correct rate for hours worked on each side of the date
- Remember: minimum wage increases must be implemented regardless of your usual pay cycle
5. Don’t Forget Additional Considerations
- Holiday Pay: Ensure holiday pay calculations reflect the new rates
- Casual Holiday Pay: The 8% casual holiday pay is calculated on top of the hourly rate
- Penal Rates: Time-and-a-half and double-time rates must be calculated from the new minimum wage
- Allowances: Review whether any allowances need adjusting to maintain the effective rate above minimum wage
Wage Compression: An Often Overlooked Issue
One challenge that frequently arises with minimum wage increases is wage compression. This occurs when the gap between entry-level wages and those of experienced employees narrows significantly.
For example, if you have:
- New employees on $23.50 (current minimum wage)
- Experienced staff on $24.50
After 1 April 2026, your wage structure becomes:
- New employees on $23.95 (new minimum wage)
- Experienced staff on $24.50
The differential has shrunk from $1.00 to just 55 cents per hour. This can create morale issues and makes it difficult to reward experience, skill development, and loyalty.
Consider reviewing your entire wage structure and adjusting rates for more experienced staff to maintain appropriate differentials.
Common Compliance Pitfalls to Avoid
Over our 25+ years in the payroll industry, we’ve seen several recurring mistakes employers make during minimum wage transitions:
- Forgetting to update piece rates or commission structures that could result in effective hourly rates below minimum wage
- Misclassifying employees as training or starting-out workers when they don’t meet the criteria
- Failing to track the six-month milestone for starting-out workers
- Not accounting for split pay periods that span 31 March and 1 April
- Overlooking employees on salary who may drop below minimum wage after the increase
The Broader Context
The Government has indicated this “moderate” increase reflects their commitment to balancing support for workers with the economic realities facing businesses. With inflation projected to stabilise around 2% from mid-2026, the increase aims to maintain the real income of minimum wage workers without adding excessive pressure on business costs.
However, this remains a contentious issue. While some argue the increase is inadequate given cost-of-living pressures (particularly when compared to the Living Wage of $28.95), others note that businesses are still navigating challenging economic conditions.
Regardless of the political debate, one thing is certain: compliance is not optional.
How The Paymasters Can Help
Navigating minimum wage changes is just one aspect of payroll compliance. At The Paymasters, we:
- Monitor legislative changes so you don’t have to
- Update payroll systems before deadlines to ensure seamless compliance
- Provide expert advice on wage structures and employment law matters
- Process accurate payroll that reflects all current legislation
- Generate compliance reports for your records and audit purposes
With over 25 years of experience serving businesses throughout New Zealand, our NZPPA-certified team understands the complexities of employment law and payroll compliance. We don’t just process numbers—we provide peace of mind.
Need Help Preparing for the Changes?
If you’re concerned about implementing the new minimum wage rates correctly, or if you’d simply like to ensure your payroll is compliant and optimised, we’re here to help.
Contact The Paymasters today:
- Phone: 0800 399 729
- Email: sales@thepaymasters.co.nz
- Website: www.thepaymasters.co.nz
Don’t leave payroll compliance to chance. Let New Zealand’s payroll experts handle it for you.
The Paymasters Limited is a Christchurch-based payroll bureau with over 25 years of experience providing outsourced payroll services to businesses throughout New Zealand. Our NZPPA-certified team processes approximately 25,000 payslips monthly for around 350 client entities, specialising in compliance management, MYOB system migrations, and white-label services for accounting firms.
Disclaimer: This blog post is for informational purposes only and does not constitute legal or professional advice. While we strive for accuracy, employment law can be complex. For specific situations, please consult with a qualified employment law specialist or contact our team for tailored advice.