Minimum wage and KiwiSaver shake-up is here

New Zealand employers are being urged to urgently review their payroll and employment practices as significant minimum wage and KiwiSaver changes come into force on 1 April 2026, as advisers warn the cost of getting it wrong is higher than ever.

The adult minimum wage rises to $23.95 per hour, with flow‑on increases for starting‑out and training wages. At the same time, KiwiSaver contribution settings will begin a phased shift that could add further pressure to already‑stretched small and medium‑sized businesses.

The Government has confirmed the following minimum wage rates:

• Adult minimum wage: $23.95 per hour
• Starting‑out wage: $19.16 per hour
• Training wage: $19.16 per hour

These rates apply to all employees aged 16 and over, including part‑time, casual, fixed‑term and remote workers. Minimum wage rules also cover workers who are paid by commission or on piece rates, meaning employers must ensure their total pay still averages out to at least the minimum wage over the relevant period.

Training wage eligibility applies to employees aged 20 and over who are completing 60 credits per year towards an approved industry qualification. The starting‑out wage is available for certain 16‑ to 19‑year‑olds who meet specific criteria, such as being new to the workforce or in relevant training.

KiwiSaver settings will also begin to shift:

• The default contribution rate will increase from 3% to 3.5%, as the first step in a phased rise to 4% by 2028

• Employees may still opt down to a 3% contribution rate, but their settings will reset to the default rate after 12 months unless they take further action
• Sixteen‑ and 17‑year‑olds who opt into KiwiSaver will now be entitled to compulsory employer contributions

These changes mean employers will need to ensure their payroll systems correctly handle both the new wage rates and the updated KiwiSaver rules.

‘Cost of getting it wrong continues to rise’

Ashlea Maley, associate director – operations at employment relations advisory firm Peninsula New Zealand, said the timing of the changes is challenging for smaller operators.

“The current economic climate is placing significant pressure on small businesses, with many facing rising payroll obligations at a time when operating conditions are already tough,” Maley said.

“We’re seeing a noticeable increase in employers seeking guidance, as the cost of getting things wrong – particularly around unfair dismissal and wage compliance – continues to rise.

“As wage theft has become a criminal offence, unintentional underpayments have much more dire consequences for small businesses now. We urge business owners to take this opportunity and review their internal systems and processes. With new regulations coming into effect, employers need to act cautiously, stay informed, and make sure every part of their operation is compliant.”

Maley said the pressure is being felt particularly acutely as the end of the financial year approaches.

“This EOFY period is proving to be one of the toughest we’ve seen in recent years. Businesses are making hard calls – letting staff go, restructuring, or in some cases closing their doors altogether,” she said.

“We’re supporting a growing number of employers navigating redundancies brought on by uncertainty and escalating costs.

“The message to business owners is clear: in this climate, compliance isn’t optional. It’s essential to protect your people, your operations, and the long‑term viability of your business.”

What employers need to do now

Maley said employers cannot afford to leave preparations until the last minute, stressing that both payroll changes and staff communication need to be in place.

“It’s important that we pay our employees their minimum wage entitlements and businesses should ensure that payroll is ready to implement the minimum wage increase,” she said.

She recommends that employers check their payroll systems are updated for the new wage rates and KiwiSaver defaults, review employment agreements to ensure they reflect the new minimums and any KiwiSaver-related provisions, confirm which employees are on minimum wage, starting‑out, or training rates, and verify they still meet the eligibility criteria, and apply the new minimum wage from the first full pay period after 1 April, not halfway through a pay cycle.

Maley also emphasised the importance of formal documentation and clear communication.

“Speak to the employees who may be affected by this increase and formalise the change in a variation letter,” she said. “Keep your employees up to date about the KiwiSaver changes as well. You could outline this in a memo to all staff and direct them to Inland Revenue to explore the option of opting back to the 3% contribution.”

With younger workers set to gain from compulsory employer KiwiSaver contributions at 16 and 17, Maley said employers should make sure this group is not overlooked in internal communications.

“Young workers and trainees are often the most affected by changes to starting‑out and training wages, and now some of them will also see an impact via KiwiSaver,” she said. “Employers need to be really clear about what’s changing, when it takes effect, and how it will show up in their pay.”

Risks of not being prepared

Failing to prepare for the April changes could expose businesses to significant financial and legal risk, Maley warned.

“Being unprepared for these changes can have negative consequences for employers. A business can face penalties and fines for non‑compliance,” she said.

“An employee could also raise an unjustified disadvantage claim for being underpaid. Failure to pay the minimum wage may also invoke criminal prosecution under the Crimes (Theft by Employer) Act, also known as wage theft.”

Beyond penalties, Maley said non‑compliance can damage staff morale and employer brand at a time when many businesses are already struggling to retain talent.

“Employees talk, and underpayments – even if accidental – can erode trust very quickly,” she said. “In a tight labour market, that’s the last thing a small business needs.”

Taking a proactive approach

While the changes add to the compliance burden, Maley believes they also present an opportunity for employers to strengthen their practices.

“This is the right time to step back and look at the bigger picture – not just wages and KiwiSaver, but broader HR and payroll systems,” she said. “If you can get your processes in order now, you’ll be in a much stronger position to deal with whatever comes next.”

She encouraged businesses that feel overwhelmed by the changes to seek advice early rather than risk costly mistakes.

“A proactive approach can save employers time, money and a lot of stress down the track," Maley concluded.