Key Remuneration Issues for this Financial Year

This article was published in the August Issue of NZ Management Magazine.

With New Zealand entering into the new financial year’s (usually an April or July start), now is the time for business leaders to address potential issues for upcoming 12 months.

The new financial year is always a time of change. New projects start, new recruits are hired and new budgets are passed – all resulting in a fresh atmosphere and goals for the future. 

Of course, during this period, it’s critical for business leaders to keep abreast of what’s happening outside their enterprise. It’s easy to focus on internal events as we pass into the new financial year, keeping an eye on wider issues is also key.

So, what are the key remuneration issues to consider in the new financial year?

The Labour-NZ First-Greens Government 

The government is now well established and starting to make clear policy decisions, particularly around the labour market. As a result, business leaders should be aware of how these changes could impact their remuneration.

Increasing the minimum wage in New Zealand to $20 an hour by 2021 is a good example of what may affect your business. This could result is some fairly large wage increases across businesses and industries that are traditionally lower paid such as parts of the public sector, hospitality, retail, not-for-profits. The ‘living wage’ is also on the agenda – the hourly wage that a worker needs to pay for the basics of life as well as transportation, housing and childcare. With the rising cost of living, many advocacy groups believe this figure should drive the minimum wage. From September, a living wage will be introduced into the core public service – affecting around 2,000 employees. It will be interesting to note how this impacts the sector and can act as an example for other groups (well, the government hopes it will). 

Rising Expectations in the Market

Changes to the labour market at the government level are impacting the expectations of the employment market. Over the last four to five years, we’ve seen many 1-3 per cent wage increases across several sectors as well as the large residential care workers settlement last year. The increases for the residential care workers were very large (between 20-40%) and they’ve recently extended to another 5,000 workers who are doing similar roles in mental health. While there’s no denying that lifting the wages of certain lower-paid industries is positive for those particular employees, it puts pressure on other sectors to do likewise – something that might not be possible under certain economic conditions.  

What’s stopping people from saying ‘I work hard, I think I’m equally deserving and I think my work is just as important – what about my wage?’ The feedback from our clients is suggesting that budgets are designed for small increases, but perhaps not for larger increases as some are demanding. 

At the time of writing, nurses are planning to strike – marking the first major industrial action in New Zealand for several years. In recent times, we’ve seen a rise in fair pay industry agreements, pay equity and trade unions – a sign that various groups are growing increasingly concerned with their working environments and are looking to the government to respond. As such, more industries could see industrial action over this government’s term. A caveat is that union membership is low in the Private Sector so they are more likely to be in the Public Sector. 

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