On 1 April 2025, New Zealand’s minimum wage will increase. You can find the updated pay rates here.
As a Bookkeeper, you are likely already preparing for client questions and payroll updates, but there is more to this change than just entering new figures.
While most posts will remind you of the basics – adjusting payroll systems, notifying employees, and ensuring compliance – let’s look at some areas that might not be on your checklist yet.
The impact on cash flow and pricing
For businesses operating on tight margins, even a small wage increase can have a significant impact. Have your clients factored this into their cash flow forecasts? If they haven’t, now is the time to help them assess whether they need to adjust their pricing, trim non-essential costs, or review their service offerings.
Employment Agreement reviews
Many employers still use outdated employment agreements that reference specific hourly rates instead of stating that the employee will always receive at least the legal minimum. A wage increase can trigger the need for updates, so it’s worth encouraging your clients to check their contracts to avoid any unintended non-compliance.
Flow-on effects for higher-wage staff
The increase isn’t just about those on minimum wage. Employees earning just above the new rate may expect a pay rise too. If a company maintains a wage gap between junior and senior roles, this could mean broader payroll changes. Have your clients considered the impact on team morale and budget planning?
Automation to reduce wage-related costs
A higher wage bill often pushes businesses to explore automation and efficiency improvements. This could mean looking at software for rostering, time tracking, or even reducing manual processes in bookkeeping. As a Bookkeeper, you can advise on cost-effective tools that support compliance while keeping costs in check.
Contractors vs Employees – a compliance risk
Some businesses may try to cut costs by shifting employees to contractor arrangements. While this might seem like a quick fix, misclassifying workers can lead to significant legal and tax issues. Now is a good time to remind clients of the risks and ensure they are correctly categorising their workforce.
The psychological effect on small business owners
Beyond the numbers, wage increases can be stressful for business owners, especially sole traders and small enterprises. The pressure of increased costs, potential price increases, and managing staff expectations can take a toll. As a trusted advisor, you can help by providing clarity and practical steps to manage these changes effectively.
While the usual reminders about updating payroll systems are important, the 2025 minimum wage increase in NZ brings wider considerations for businesses. Bookkeepers play a key role in helping clients navigate cash flow, employment contracts, automation, and compliance risks. By addressing these less-discussed aspects, you can add real value and strengthen your role as a strategic advisor.
Is your payroll system ready for the changes? More importantly, have you considered the broader financial impact on your clients? Now is the time to start these conversations.
Join professional networks like NZQBA for more resources, support, and opportunities to enhance your bookkeeping services and strengthen your client connections.