When a valued employee asks for a pay rise, it can raise questions about affordability, payroll costs and fairness across the team. This practical guide helps Kiwi business owners review the employee’s contribution, calculate the full cost, check cash flow and manage the conversation and payroll changes with clarity and care.

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Your Best Employee Wants a Pay Rise. What Should You Do Next?

The question lands when you are already juggling jobs, customers, invoices, payroll and the daily demands of running a business:

“Can we talk about my pay?”

Your mind starts moving quickly.

Can the business afford it?

How much will it really cost?

What happens if other employees ask for the same increase?

What happens if this person leaves?

A pay rise discussion can feel personal, emotional and financially uncomfortable. But it can also become a valuable opportunity to understand your employee, recognise good performance and take a closer look at the financial health of your business.

The strongest decisions usually begin with two things:

A calm conversation and clear numbers.

Begin With Curiosity

You do not need to give an immediate answer when an employee asks for a pay rise.

Take a breath, thank them for raising the matter and invite them to explain what has prompted the request.

You might say:

“Thank you for talking to me about this. I would like to understand what has prompted the request, then I can review everything properly and come back to you.”

Listen carefully.

The request may be connected to:

• Increased responsibilities

• New skills or qualifications

• Stronger performance

• Changes in the market rate

• A competing job offer

• A long period since their last pay review

• A feeling that their contribution has gone unnoticed

A genuine conversation can reveal far more than the amount they are requesting. Sometimes the employee is looking for recognition, development opportunities, clearer responsibilities or confidence that they have a future within the business.

Kiwi employers must consider and respond to pay-rise requests in good faith. A pay increase may also need to be provided where it is required under an employment agreement or workplace policy, or where an employee’s rate must increase to remain above the legal minimum wage.

A clear and consistent pay-review process is especially valuable. When employees understand how pay decisions are made, conversations can feel calmer, fairer and easier to manage.

A pay rise may look like one simple increase, but the total employment cost grows with it.

Work Out the Real Cost of the Increase

Before agreeing to a pay rise, calculate the full financial effect.

For example, a $2 per hour increase for an employee working 40 hours each week represents:

$2 × 40 hours × 52 weeks = $4,160 in additional gross wages each year

That figure is the starting point.

Depending on the employee and your business, you may also need to consider:

• Employer KiwiSaver contributions

• Employer superannuation contribution tax

• ACC levies

• Overtime and penal rates

• Allowances

• Bonuses or commission arrangements

• Holiday and leave pay calculations

• The effect on charge-out rates and job margins

• Whether similar roles will also require review

• Additional staffing or replacement costs if the employee leaves

From 1 April 2026, the minimum compulsory employer KiwiSaver contribution increased to 3.5% of gross salary or wages for eligible employees, unless a temporary rate reduction or another exception applies. Employer contributions are also generally subject to employer superannuation contribution tax. ness levies are calculated using liable earnings and the levy rate that applies to the business classification. This means an increase in payroll can also contribute to a higher levy cost. er that matters is the total employment cost, together with the value and capacity the employee brings to the business.

Check the Current Minimum Wage

At the time of writing in July 2026, the adult minimum wage is $23.95 per hour.

The starting-out and training minimum wage rates are $19.16 per hour.

These rates came into effect on 1 April 2026 and apply before tax and lawful deductions. Employers should always check the current rates before processing a change, as minimum wage rates are reviewed regularly. Where an employee already earns above the minimum wage, a regular review can help you understand whether the rate still reflects the role, performance, responsibilities and current employment market.

Look Beyond the Bank Balance

A healthy bank balance today does not automatically mean the business can comfortably carry a higher wage every week.

Before making a decision, review your expected position over the coming months.

Consider:

• How much cash is expected to come in?

• Which invoices remain unpaid?

• Are any large supplier bills approaching?

• When are GST and PAYE payments due?

• Does the business experience seasonal quiet periods?

• Are current jobs producing enough profit?

• Have material, fuel or supplier costs increased?

• Are your prices and charge-out rates still appropriate?

• Will the pay increase remain manageable during a slower month?

A simple cash-flow forecast can help you see whether the increase is sustainable.

You may discover that the business can afford the increase now. You may also find that prices, job margins, overdue accounts or business expenses need attention first.

This is where accurate bookkeeping becomes especially useful. Clear records allow you to make the decision using real figures rather than the amount sitting in the bank on one particular day.

A valued employee’s skills, reliability and contribution may be worth far more than the cost of a pay rise.

Consider the Employee’s Contribution

Pay decisions work best when they are connected to clear and consistent criteria.

Review areas such as:

• Skills and qualifications

• Quality of work

• Reliability and attendance

• Productivity

• Customer feedback

• Initiative and problem-solving

• Additional responsibilities

• Ability to work independently

• Contribution to team culture

• Support provided to apprentices or newer employees

• Revenue, job output or profit influenced by the role

• Consistent performance over time

A valuable employee may generate or protect far more income than the cost of their proposed increase.

Replacing an experienced employee can also bring recruitment costs, training time, lost productivity, disrupted customer relationships and additional pressure on the remaining team.

Pay rates and review criteria should be applied fairly. Kiwi employers cannot set different pay rates based on protected personal characteristics such as gender, race, ethnic or national origin, age, disability, family status, religious belief, sexual orientation or union activity.

Benchmark against other businesses

The amount another business pays may provide useful context, although every role and employment package is different.

When researching market rates, look at:

• The employee’s actual responsibilities

• Their experience and qualifications

• Your location and industry

• The complexity of the work

• Hours and working conditions

• Vehicle, phone, tools or equipment provided

• Training and development opportunities

• Bonuses or allowances

• Flexibility and workplace culture

• Opportunities for future progression

A role with a strong workplace culture, steady hours, supportive leadership and clear development opportunities may carry value beyond the hourly rate.

The aim is to create a complete employment package that feels fair, sustainable and clearly understood.

A Pay Discussion Does Not Have to End With an Immediate Yes or No

After reviewing the conversation, financial position and employee’s performance, several pathways may be available.

Approve the increase

Where the employee’s performance supports the request and the business can carry the cost, confirm the new rate, effective date and any related conditions in writing.

Offer a staged increase

A portion of the increase may begin now, followed by another review on an agreed date. The arrangement should be clearly documented.

Create a development pathway

Explain which skills, responsibilities or performance measures would support a future increase.

Be specific about:

• What improvement is expected

• How it will be measured

• What support or training will be provided

• How long the review period will be

• The date of the next discussion

The employee should understand what consistent performance looks like and how they can progress.

Review the wider package

In some situations, the discussion may include training, additional flexibility, responsibilities, allowances or another benefit.

Any change should be checked carefully for payroll, tax and employment implications and then recorded in writing.

Decline the request with a clear explanation

Where the business cannot support an increase, explain the decision respectfully.

Give the employee a clear understanding of:

• How the decision was reached

• What the business can currently manage

• What would need to change

• When the matter can be reviewed again

Clarity gives the employee something practical to work towards and helps preserve trust.

Become Proactive With Pay Reviews

The easiest pay discussion is often the one that has already been planned.

A simple system may include:

• Clear job descriptions

• Pay ranges for different roles

• Regular performance conversations

• Recorded training and new responsibilities

• Agreed review dates

• Consistent performance measures

• Payroll reports showing total employment costs

• Cash-flow forecasts prepared before each review

Regular reviews allow you to recognise progress before an employee begins feeling overlooked.

They also create a clearer link between skills, performance, responsibility and pay.

Update the Paperwork and Payroll Correctly

Once a new rate has been agreed, make sure the change flows through every relevant record and system.

You may need to:

1. Confirm the agreement in writing.

2. Update the employee’s employment agreement or written variation.

3. Record the new rate and effective date.

4. Update the payroll software.

5. Check KiwiSaver, tax codes, deductions and allowances.

6. Review holiday and leave calculations.

7. Process the correct rate from the agreed pay period.

8. Check the payslip carefully.

9. File the correct employment information with Inland Revenue.

10. Keep supporting records securely.

Employers must keep accurate wage, time, holiday and leave records for six years, including records for employees who have left the business. es filing employment information electronically generally need to complete payday filing within two working days of each payday. error in the effective date, hourly rate or payroll setup can flow through to PAYE, KiwiSaver, leave balances and future pay calculations, so it is worth checking everything carefully.

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How Office Management Solutions Ltd Can Help

At Office Management Solutions Ltd, we understand that pay discussions can create a lot of questions for a business owner.

We can help you bring the financial and payroll information together so you can approach the decision with greater clarity.

Our bookkeeping, payroll and business support services include:

• Payroll processing

• Wages and PAYE support

• Payroll reports

• Accurate wage and leave records

• Cash-flow reporting

• Job cost tracking

• Bank reconciliations

• GST support

• Accounting and payroll software setup

• Payroll software training

• Xero support

• MYOB support

• Fergus support

• CashManager, ACE Payroll, IMS Payroll and Farm Focus support

• General bookkeeping and business administration

Based in Alexandra, OMS provides practical bookkeeping and payroll support for businesses throughout Central Otago and further afield through in-house and virtual services. We can help you understand what the figures are showing, calculate the payroll effect of a proposed increase and make sure an approved change is processed accurately.

Employment agreements and legal decisions may require support from an employment-law or human-resources specialist. OMS can work alongside your advisers by keeping the payroll, bookkeeping and financial records clear and up to date.

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FREQUENTLY ASKED QUESTIONS

• Does a Kiwi employer have to give an employee a pay rise?

  An employer usually has no legal obligation to provide a pay rise or conduct a pay review unless it is required under an employment agreement or workplace policy. An employer must also increase a rate where necessary to meet the current minimum wage. Pay-rise requests should be considered and answered in good faith. mployees discuss their wages with each other?

  Yes. Employees can choose to discuss or disclose their pay. Since August 2025, employers cannot take adverse action against an employee because they participated in a protected remuneration discussion. Employees may also choose to keep their pay private. uch does a $1 per hour pay rise cost?

  For an employee working 40 hours each week, a $1 hourly increase equals approximately $2,080 in additional gross wages over 52 weeks. Employer KiwiSaver contributions, ACC levies and other employment costs may also need to be considered

• Should a pay rise be confirmed in writing?

  Yes. The agreed rate of pay should be included in the employee’s written employment agreement or a written variation. The effective date should also be recorded and updated in the payroll system. ong should payroll records be kept?

  Employers must keep wage and time records, together with holiday and leave records, for six years. This requirement continues even after an employee has left the business. bookkeeper help with a pay-rise decision?

  A bookkeeper can help calculate the payroll cost, prepare cash-flow information, review financial reports and process an approved change accurately. Employment-law advice and changes to employment agreements may also require guidance from an employment specialist.

A Clearer Way Forward

When a valued employee asks for a pay rise, pause before reacting.

Listen to what they are saying.

Review their contribution.

Calculate the true cost.

Look at your cash flow and margins.

Then make a decision that the business can sustain and explain it with care.

A good pay conversation can strengthen trust, recognise valuable people and encourage everyone to understand what growth looks like within the business.

When the bookkeeping and payroll records are clear, the conversation becomes easier because you have solid information in front of you.

Let’s have a quick coffee and see how we can help.

Office Management Solutions Ltd
Your Local Bookkeeping & Business Support Team

Central Otago
kathy@omsolutions.co.nz
027 534 7569
www.omsolutions.co.nz/booking

Summary: Cash flow management is about more than simply checking what is in the bank today. For many Kiwi Tradies and business owners, cash flow stress often comes down to timing, unclear records, delayed invoicing, unpaid invoices, GST surprises, and job costs that are hard to see clearly.

With better bookkeeping systems in place, it becomes easier to understand what money is coming in, what needs to go out, and what may be due soon. Clear records, faster invoicing, regular invoice follow-ups, tidy GST records, and better job cost tracking can help business owners feel calmer, clearer, and more in control.

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Cashflow can feel like one of the most stressful parts of running a trade business.

One week, the bank balance looks healthy. The next week, supplier bills, wages, GST, fuel, materials, insurance, and loan payments all seem to land at once.

For many business owners, this can feel random and frustrating. You are busy on the tools, doing the work, looking after customers, organising jobs, quoting, ordering materials, and trying to keep the team moving. Then suddenly, the money side feels tight again.

But often, cash flow stress is not simply a sign that the business needs “more money.”

It can be a sign that the business needs clearer records, better timing, stronger bookkeeping systems, and more visibility over what is really happening.

That is where good bookkeeping can make a big difference.

Why your Bank Balance Can Be Misleading?

Checking the bank balance is a common habit for business owners.

It gives a quick snapshot of what is sitting in the account today, but it does not show the full picture.

Your bank balance may not show:

• invoices still waiting to be paid

• supplier bills coming up

• GST that needs to be set aside

• wages or subcontractor payments due soon

• materials already purchased for jobs not yet completed

• upcoming loan, vehicle, or insurance payments

• jobs that looked busy but had low margins

This is why cash flow for tradies can feel confusing.

A full bank account does not always mean the business is in a strong position. And a low bank balance does not always mean the business is failing.

The real question is:

What money is coming in, what money is going out, and when is it all happening?

That timing matters.

Cash Flow Problems Are Often Timing Problems

Many businesses are doing good work and still feel short on cash.

This often happens because money is going out before money comes in.

For example, you may need to pay for materials, wages, subcontractors, fuel, vehicle costs, and supplier accounts before the customer has paid their invoice.

On bigger jobs, that gap can become even more noticeable.

You might be covering the cost of the job for days, weeks, or even longer before the money arrives back into the business.

That does not always mean the job was bad. It may simply mean the timing needs to be managed more carefully.

Good cash flow management helps you see these gaps before they become stressful.

Fast Invoicing Makes a Real Difference

One simple way to improve cash flow is to invoice quickly.

When a job is finished, or when a stage of work is complete, the invoice should be sent as soon as possible.

Waiting a week or two to send an invoice can quietly stretch the time before you are paid. Then, if the customer has 7-day, 14-day, or 20th-of-the-month payment terms, the wait becomes even longer.

For busy tradies, invoicing can easily slip to the end of the day, the weekend, or “when I get time.”

But delayed invoicing can create delayed cash flow.

A clear process helps. That might mean setting aside regular admin time, using accounting software properly, or having someone help keep invoices moving.

The sooner the invoice goes out, the sooner payment can come in.

Deposits and Progress Payments Can Help on Bigger Jobs

For larger jobs, deposits and progress payments can help reduce pressure on the business.

This is especially helpful when there are upfront costs for materials, labour, subcontractors, or equipment.

Instead of carrying the full cost of the job until the end, a deposit or staged payment structure can help the money come in at more practical points along the way.

For example, a business might have:

• a deposit before work begins

• a progress payment after materials are ordered

• a staged invoice when part of the job is completed

• a final invoice when the job is finished

The exact setup will depend on the type of work, the agreement with the customer, and what is fair and reasonable for the job.

The important thing is to think about payment terms before the work begins, not after the cash pressure has already started.

Unpaid Invoices Need a Clear Follow-Up Process

Unpaid invoices can put real strain on a trade business.

It can feel awkward to follow up, especially when you have a good relationship with the customer. But once the work has been done, that money belongs back in the business.

A clear process makes this easier and less emotional.

This might include:

• checking unpaid invoices weekly

• sending a polite reminder before the due date

• following up as soon as an invoice becomes overdue

• keeping notes of conversations

• having clear steps for repeat follow-ups

• knowing when to stop waiting and take the next step

The longer an invoice sits unpaid, the harder it can be to collect.

That is why accounts receivable should not be left to chance. A simple follow-up system can help protect your cash flow and give customers a clear reminder of what is due.

Pricing, Margins and Job Costs Affect Cash Flow Too

Sometimes cash flow feels tight because the money coming in is not leaving enough room after costs.

This is where pricing, margins, and job costs matter.

A job can look good on the surface because it brings in revenue. But if materials, labour, fuel, subcontractors, rework, travel time, and admin time have not been allowed for properly, the profit left at the end may be much smaller than expected.

And when margins are too tight, there is very little buffer.

That can make it harder to pay bills, cover GST, invest in tools or vehicles, or take a steady income from the business.

Good bookkeeping records help tradies understand which jobs are actually profitable and which ones may be quietly draining time and cash.

This visibility can support better quoting, pricing, and decision-making.

GST Records Need to Be Clear Too

GST can also create cash flow pressure if it has not been tracked properly.

When GST payments come around, it can feel stressful if the money has already been used for other business costs.

Keeping clear GST records helps you understand what needs to be set aside and when payments are due.

This is where regular bookkeeping support can help. Instead of trying to tidy everything up at the last minute, your records can be kept clearer throughout the month.

That makes GST less of a surprise and gives you a calmer view of what is coming.

Visibility Helps You Feel More in Control

One of the biggest benefits of good bookkeeping is visibility.

When your records are up to date, you can see more than just the bank balance.

You can look at reports such as:

• Profit and Loss – Shows how much profit your business made by comparing income and expenses over a period.

• Aged Receivables – Lists outstanding customer invoices and how long they have been overdue.

• Unpaid Bills – Shows supplier bills that are due or awaiting payment.

• GST Reports – Summarises GST collected and paid to help prepare and review GST returns.

• Job Costs – Tracks the income and expenses for individual jobs or projects to measure profitability.

• Cash Flow Forecasts – Predicts future cash coming in and going out to help manage business finances.

• Income and Expenses by Category – Breaks down income and spending into categories so you can see where your money is coming from and where it is going.

These reports help tell the story of what is happening inside the business.

They can show whether customers are paying on time, whether costs are creeping up, whether jobs are priced properly, and whether the business has enough cash coming in to cover what is going out.

For many business owners, this creates a sense of relief.

Instead of guessing, you can make decisions with clearer information.

Better Bookkeeping Systems Can Reduce Cash Flow Stress

Cash flow stress often builds when things are sitting in too many places.

Receipts in the ute. Invoices waiting to be sent. Supplier bills in the inbox. Job notes in a notebook. Payments sitting unmatched in the software. GST records needing a tidy-up.

It becomes hard to see what is really happening.

A better bookkeeping system helps bring these pieces together.

That might include:

• regular receipt uploads

• faster invoicing

• weekly unpaid invoice checks

• clearer payment terms

• job cost tracking

• monthly reports

• GST records kept up to date

• tidy accounting software

• practical admin routines

These are simple things, but together they can make the business feel much more organised.

And when the money side feels more organised, the whole business can feel lighter.

How OMS Can Support business owners:

At Office Management Solutions Ltd, we understand that many business owners would rather be on the tools than stuck behind a screen trying to catch up on paperwork.

That is why OMS provides practical bookkeeping and business admin support for local businesses, including Kiwi Tradies and trade business owners.

We can help with:

• Invoicing/Sales support

• Unpaid invoice follow-ups

• GST records

• Purchase receipt management

• Payroll support

• Job cost tracking

• Financial Reports

• Business admin systems

• General office support

The goal is not to make things complicated. The goal is to help you feel clearer, calmer, and more in control of the business side of your trade business.

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A Simple Place to Start

If cash flow has been feeling stressful, you do not need to fix everything at once.

• Start with one simple check.

• Are your invoices going out quickly?

• Are unpaid invoices being followed up?

• Are your receipts and GST records up to date?

• Do you know which jobs are making money?

• Do you have a clear view of what is coming in and going out over the next few weeks?

Small steps can make a big difference.

To help, we have created the free Tradie Bookkeeping Health Check, a simple checklist to help business owners keep on top of receipts, invoices, GST, payroll, vehicle records, cash flow, and job costs.

Download the free checklist or get in touch if you would like support with your bookkeeping and business admin.