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Thriving, Not Just Surviving – The Living Wage

For supporters of the living wage, ‘earning a living’ should always mean earning enough to live comfortably. Are you new to the living wage? Find out how it is calculated, how it differs from the minimum wage, and the pros and cons of implementing the living wage in your business. What is the living wage? The living wage refers to a base level of pay that allows employees to afford housing, food, healthcare, and other necessities. The goal is to increase the standard of living, while ensuring the minimum number of people fall beneath the poverty line. The New Zealand living wage is based on local living costs and calculated by the New Zealand Family Centre Social Policy Unity, before being published by the Living Wage Movement. From 1 September 2025, the Living Wage hourly rate will become $28.95, an increase of $1.15 on the 2024/2025 rate. What is the minimum wage? The minimum wage is a base rate of pay before tax that all employers must pay employees. Like many other countries, the minimum wage in New Zealand is enforced by law. Paying an employee less than the minimum wage is illegal, even if you agree a reduced rate with your employee. New Zealand was the first country in the world to establish a Minimum Wage Policy in 1894. Minimum wage laws have been modified ever since to promote equal pay and higher living standards for Kiwis. How much is the New Zealand minimum wage? There are three categories of New Zealand minimum wage: Adult minimum wage: This applies to all employees who are over 16 and not categorised as trainees or starting-out. Trainee minimum wage: This applies to employees aged 20 years or over whose employment agreement states they must complete at least 60 credits a year of an industry training program. Starting-out minimum wage: This applies to 16-17-year-olds who have completed less than 6 months of continuous service with an employer. After 6 months they receive the adult minimum wage. This category also applies to 18-19-year-olds without 6 months of continuous service who have received social security benefits for 6 months or more. The Ministry of Workplace Safety and Relations announced minimum wage increases to $22.70 for adults and $16.18 for trainees and starting-out employees. These revised rates came into effect on 1st April, with over 225,000 Kiwis enjoying an increase in pay. Key differences between the living wage and the minimum wage The living wage should not be confused with the minimum wage, which is the lowest amount an employer can pay as mandated by law. The key difference when the living wage is compared to the minimum wage is the calculation criteria. The New Zealand minimum wage is based on inflation rates and wider economic conditions. The living wage amount is based on more specific variables, such as the local cost of housing, food, and healthcare. Although the New Zealand minimum wage is mandated by law, the living wage is optional for employers. Employer considerations for the living wage The living wage has long been a point of heated debate. Central to the movement is the belief that no one who works for a living should be poor. However, those who oppose the movement believe it places businesses under increased financial strain. If you are contemplating implementing the living wage in your business, here are a few key challenges and benefits to take into consideration: Challenges ❌ Benefits √ Reduced competitiveness: Companies that commit to increased overheads by paying more may struggle to be competitive. This is particularly likely if they are in a global market with rival businesses in low-wage countries. Reduced competitiveness: Companies that commit to increased overheads by paying more may struggle to be competitive. This is particularly likely if they are in a global market with rival businesses in low-wage countries Cost-push inflation: Many economists argue the living wage can lead to cost-push inflation. This is because increases in costs are likely to be passed on to consumers. Improved retention: There is a direct correlation between wage rates and employee retention. By paying your staff more, you can remove one of the most common motivations for seeking alternative employment opportunities. Reduced employment: Increases in labour costs may lead to fewer job opportunities company wide. It could even lead to the outsourcing of certain roles to reduce the wage bill. Reputational benefits: Customers are voting with their wallets when it comes to businesses involved in social and economic issues. Setting an ethical example is an effective way to enhance your reputation among a customer base Boosting the economy: By paying more, your company will help raise the public’s spending power. As more businesses opt-in to the movement, purchases of goods and services will increase, and the economy is likely to flourish. Unsure about wages in your business? Peninsula has worked with thousands of businesses across Australia and New Zealand, supporting them with employment relations and workplace health and safety. You can call our 24/7 Advice Line today on 0800 365 515 to get all your questions about wages answered.

Guide

Employment Leave Act Passed. What are the Changes You Need to Know?

Changes to employee leave marks a significant reform milestone of New Zealand's employment legislation. Created to replace the current Holidays Act 2003, the framework of the Employment Leve Act has been designed to make annual leave more transparent and easier for business owners and employees to understand. While this is a major change to how you as a business owner will need to calculate and manage leave entitlements, you don’t need to take any immediate action. The New Zealand Government has built in a 24-month transition period, starting on 7 August 2026, before the new leave system is fully in effect. This provides you with the necessary time to update business systems, employee forms and contacts, and discuss the changes with your team to ensure a smooth transfer. What is changing? The new legislation simplifies leave calculations and improves clarity for business owners and employees. Current system: All employees are entitled to four weeks’ annual leave after twelve months’ continuous employment. New system: Employees start accruing annual leave from their first day of employment. This is calculated at a rate of no-less than 0.0769 hours per standard hour worked. This equates to four weeks’ leave for employees who's standard 38 hour week does not change during a year. Annual and sick leave will also accrue in hours rather than weeks or days. This is based on an employee's standard hours of work. Sick leave accrues at 0.0385 hours per standard hour worked. Annual, sick, bereavement, and family violence leave become available from the first day of employment. A single hourly rate will be used to calculate all leave payments. A new 12.5% Leave Compensation Payment will apply to additional and casual hours worked, instead of accruing annual and sick leave based on those hours. Payslips will be mandatory and will need to include more details about leave and pay information, making entitlements easier to understand. Employees will be able to cash up to 25% of their annual leave balance each year. A new "Otherwise Working Day" test will determine leave entitlements for employees with irregular work patterns. The penalty relating to annual leave payments for employees returning from parental leave will be removed. To help you with the transition of calculating leave, the Act includes detailed formulas so you can convert existing employee leave balances from weeks and days into hours. When the new Act officially comes into force in August 2028, the converted leave will be paid as if it were leave accrued under the new Act. Transitioning to the new legislation The 24-month implementation period: There will be a 24-month implementation period between when the Act received Royal assent and when it comes into force on 6 August 2028. This provides time for payroll providers and employers to make necessary changes to business systems. Until the Holidays Act 2003 is repealed and the new Act comes into force in 2028, all existing rules still apply. This means you still must comply with the current Holidays Act and ensure you’re providing your employees with the correct entitlements and payments. Three years to update your employment agreements After the Act officially comes into force on 6 August 2028, there will be an additional year for employers and employees to agree to contract terms consistent with the new legislation framework (for example, by providing a compliant accrual rate for annual leave). In that year, if terms have not been updated, employers must comply with any provisions in the employment agreement more favourable than those in the Act. If employment agreements are not updated one year after the Act comes into force, new minimum statutory terms override any conflicting provisions in employment agreements. This provides you and your employees with an opportunity to proactively negotiate employment agreements. Casual employees Current system: Employers and workers can agree to pay 8% of gross earnings each pay period instead of paid annual leave if work is intermittent or irregular, but use of “Pay as you go” is not required. For sick leave, many casual workers do, technically, become entitled to sick leave – although they are unlikely to benefit from this entitlement in practice due to impracticality and compliance issues. New system: As in the case of additional hours, a leave compensation payment (LCP) (set at a rate of 12.5% of a worker’s ordinary hourly rate) will be paid for each ‘casual’ hour of work in every pay period, instead of that work accruing annual and sick leave. What does this mean for employers? At this stage, the most important message is: Business as usual continues for now. Current Holidays Act requirements remain in place until the new legislation comes into force 6 August 2028. This two-year lead-in period to allow for payroll and system changes. A year will be available after 6 August 2028 to update employment agreements where necessary. What should you do next? Before making any changes to your current business operations, as an employer it’s recommended you: Continue complying with the current Holidays Act 2003 requirements and obligations. Stay up to date with new information as it becomes available from the MBIE. Consider how the new hours-based accrual leave system could affect your workforce and payroll processes. Peninsula is here to help This reform represents one of the most significant changes to leave legislation in decades. However, the transition timeframe has been intentionally designed to give your business and employees time to understand the changes, update systems, and implement any necessary adjustments without causing disruption to your business operations. Peninsula will continue to provide practical guidance as further information becomes available. Need help understanding New Zealand’s Employment Leave Act? Peninsula can help. Our team provides 24/7 advice for your business and industry. Call us on 0800 215 024. Please Note: This article is general information only. The contents of this article does not constitute legal advice and is not intended to be a substitute for legal or other professional advice and should not be relied upon as such. Your specific circumstances after publication may affect the completeness or accuracy of this information. To the maximum extent permitted by law, we disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, currency and reliability of the information on this website, and to seek professional advice where necessary. Nothing contained on this website is to be interpreted as a recommendation to use any product, process or formulation. For clarity, Peninsula does not recommend any material, products or services of any third parties.

Blog

When Can I Force an Employee to Take Annual Leave?

Large amounts of unused employee annual leave can be a huge financial strain for businesses. If an employee decides to resign, desiring to take annual leave as part of final payment, or they want to take their built-up leave all at once for an extended holiday, it has can potentially leave a business owner in a vulnerable financial position. Here we discuss if you can force an employee to take annual leave, and provide suggestions on how to handle this tricky situation. What is excessive annual leave? Every employee in New Zealand gets at least four weeks of paid annual leave each year, (except casual and some fixed term employees). Annual leave is intended to give staff a chance to rest and relax away from work. Although employees start accruing leave from their first day of work, the entitlement to take annual leave in NZ comes into effect after 12 months of employment, unless you wish to allow employees to take leave in advance. How to discuss forced annual leave As a business owner with multiple employees, it’s always best to reach out to your employee in the first instance. Making time for a good-natured chat about the leave entitlements could resolve the issue, as most issues can be solved with an amicable discussion. Genuinely having a desire to reach a mutual agreement together is the best way to approach the delicate subject of excessive amounts of annual leave. How do I direct an employee to take their annual leave? If after you have consulted with your employee and you just cannot agree on when the annual leave is to be taken, then you can direct the employee to take their leave. You must do this with 14 days’ notice to the employee to be legally compliant. You can also require employees to take annual leave if you regularly closedown for a particular period every year, such as over the Christmas and New Year break. Remember, you also need to give 14 days’ notice in this case as well. Directing an employee to use excessive annual leave A direction to take annual leave must be in a written form, such as an email or letter, providing the employee with 14 days’ notice. As a business owner, it’s important to handle excessive annual leave sooner rather than later, as this heavily built-up leave can be a financial liability. It can leave you short-staffed if employees decide to take their leave in a long chunk, or if they hand in their notice, (cashing out the annual leave). Next steps Encouraging your employees to take long weekends off, even short mini-breaks can help your business avoid a bottle-neck of future leave requests. This may reassure you as a business owner that financial liabilities are being reduced, and that productivity is maintained as employee mental health is boosted with well-deserved time off from work. Remember, talking to employees is the first step to finding a mutual agreement over any excessive unused annual leave entitlements. Tailored HR for you With years of experience in employment relations, Peninsula is committed to supporting New Zealand businesses. Our managed hr services are tailored for your industry, business, and staff needs. Chat with our team today to get all your tricky annual leave questions answered. This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.