Big Hike in Living Wage
05 April 2024From 1 September 2024, the Living Wage will leap to $27.80, an increase of $1.80 or 6.9%. This is on top of a 10% increase last year when the Living Wage was reassessed.
The Living Wage is reassessed every 4-5 years, with increases in other years determined by the annual increase in the average ordinary time hourly rate.
The problem with that approach is the increase reflects wage increases in the past year and carries the cost forward to the current year when the economy is very tight and many businesses are under extreme pressure.
There is no legal obligation to pay the Living Wage. However, this level of increase shows the perils of linking one’s pay rates to the Living Wage, because you run the risk of incurring large cost increases over which you have no control.
A recent case in point concerns InfraCore, a Rotorua Lakes Council-controlled organisation (CCO).
Employees went on strike for better pay, following eight months of unsuccessful pay negotiations between InfraCore and its unionised employees, who primarily work in Rotorua’s parks, cemeteries, and water service departments.
After five days of strike action, InfraCore agreed to pay its employees the Living Wage as a minimum rate. This would align InfraCore with other local councils across the Bay of Plenty region, which pay their employees a minimum of $26 an hour – the current 2023/24 living wage rate.
If InfraCore has linked its entry pay rates to the Living Wage, then come 1 September it will be under pressure to automatically accept another 6.9% increase.
Minimum Wage vs. Living Wage
- Current Minimum Wage = $23.15 (from 1 April 2024)
- Current Living Wage = $26.00 (rising to $27.80 from 1 September 2024)
While employees must be paid at least the Minimum Wage rate, employers may voluntarily elect to pay employees the Living Wage. The latter is said to reflect the income necessary to provide workers and their families with the “basic necessities of life” and enable them to “live with dignity.”
If your organisation can afford to pay the Living Wage that will be beneficial in terms of recruitment and retention and potentially workplace productivity, but the point is you should maintain control of your wage costs.
For more information contact: Tony Teesdale 021 920 323, Justine O’Connell 021 920 410, Michelle Battersby 021 993 735, or Esther Cohen-Goh 021 178 4111