The 2022 minimum wage increases and the law

Introduction

1. During the 24 March 2022 ‘mini-budget,’ the Government announced it would incrementally raise the national minimum wage from the existing $2.68 to $4.00 an hour by 1 January 2023.  What does the law allow?

National Minimum Wage increase

2. The Employment (National Minimum Wage) (Amendment) Regulations 2022 were gazetted on 7 April 2022, imposing a new national minimum wage of $3.01 effective from 1 April 2022.  As this actually backdates the minimum wage by six days, employers with affected workers must ensure that they have not inadvertently underpaid staff.

3. The increase to $4.00 per hour will take place in three further increments:

• On 1 July 2022 to $3.34 per hour
• On 1 October 2022 to $3.67 per hour and
• On 1 January 2023 to $4.00 per hour.

Industry-specific minimum wage increases

4. In order to align other prescribed wage rates with the new national minimum wage, specific increases have also been made to minimum wage rates in the sector-specific Wages Regulations. These increases are also retroactive, effective from 1 April 2022 and occur in four stages.

Click the links above to view the various Regulations.

Impact

5. After five years without movement, the first increase to the national minimum wage represents a 12% hike. The total minimum wage increase from April 2022 to January 2023 will be around 50%. Sector-specific increases are at similar levels (around 31%-50% from March 2022 to January 2023, varying by sector and worker class). Although an increase was long overdue, adjusting to sudden and steep increases in labour costs may be a challenge for some businesses in the current business environment.

The Regulations arguably violate the law

6. The new Regulations were purportedly made under the Minister’s general power in section 264 of the Employment Relations Act 2007 to make regulations on the advice of the Employment Relations Advisory Board governing a range of matters including “wages and salaries criteria”.

7. However, in our view s. 264 does not give the Minister power to set new statutory wage rates. These powers are contained in Division 2 of Part 6 of the Act.  But these powers also require the Minister to make Wages Regulation Orders only on the recommendation of a tripartite sector-specific Wages Council after a compulsory wide public consultation process.   While the Minister has not used the Wages Councils system since 2015, the Act still provides for them.

8. In 2015 Munro Leys questioned the Minister’s purported power to increase the National Minimum Wage under section 264 of the Act and suggested that the move might be ultra vires (“outside the law”). The issue was not taken up at the time. It remains a potential defence for anyone who might be prosecuted for breaching the new Regulations.

Implementation

9. However, since Regulations are treated as validly made until a court declares otherwise, employers with affected workers should comply with the new Regulations. Workers with contracts providing for remuneration below statutory minimums must be paid the statutory minimum from 1 April 2022. Notices of the new Regulations are also to be displayed in the workplace for affected employees.

Contact

Contact Jon Apted, Glenis Yee or Ronal Singh for further information on this Alert.

Disclaimer

The information and opinions in this Legal Alert are for general information purposes only. They are not intended as specific legal or other professional advice and should not be relied upon or treated as a substitute for specific advice. Munro Leys can accept no responsibility for any loss arising from reliance on the general information contained in this Legal Alert.