When New Zealand's minimum wage went up to $23.95 per hour on 1 April 2026, many tradies updated their payroll systems—but forgot to update their quote templates. This oversight silently erodes profit margins on every job quoted under the old rates.
In this guide, we'll walk through the exact steps to recalculate your labour rates, identify where your pricing may have slipped, and ensure your quotes remain profitable.
Why Your Profit Margin Shrinks After a Wage Increase
Here's the core problem: if your charge-out rate for labour was locked in six months ago based on wage costs at that time, you're now paying more but charging the same.
Example: - Old scenario: Employee earning $23.50/hr (before April increase). Your all-in labour cost was $29.38/hr (25% on-costs). You quoted at $60/hr. - New scenario (post-April): Employee now earning $23.95/hr minimum. Your all-in labour cost is now $29.94/hr. You're still quoting at $60/hr.
Your margin just dropped by $0.56/hr on every labour-charged job. Over a year, that's $1,120 in lost margin per full-time employee.
Step 1: Calculate Your True All-In Labour Cost
The wage is only half the story. Your total employment cost includes:
- Base wage: $23.95/hr (or your employee's actual rate)
- KiwiSaver employer contribution: 3% of gross (if applicable)
- ACC levies: Approximately 1.5% of gross for typical tradie roles (check ACC.co.nz for your exact classification)
- Leave entitlements: Annual leave (4 weeks), sick leave (5 days), public holidays. Typically 9–10% of gross
- Payroll costs: IRD compliance, accounting, admin time. Roughly 2–3% of gross
Calculation: - Base: $23.95 - KiwiSaver (3%): $0.72 - ACC (1.5%): $0.36 - Leave (9%): $2.16 - Admin (2.5%): $0.60 - Total all-in cost: $27.79/hr
Not $23.95. That 17% buffer is the difference between a competitive quote and a loss-making one.
Check your own figures with our Labour Cost Calculator — it accounts for your specific ACC classification and contribution rates.
Step 2: Add Your Overhead and Profit Margin
Your charge-out rate isn't just labour cost. You need to cover:
- Vehicle and fuel: Petrol, diesel, maintenance, registration, insurance
- Tools and equipment: Depreciation, replacement, repairs
- Insurance: Public liability, professional indemnity, vehicle
- Office and admin: Phone, internet, accounting, software subscriptions
- Training and compliance: Health & Safety, LBP renewal, certifications
- Tax and compliance: IRD, ACC, GST
A typical overhead rate for tradie businesses is 30–50% of labour cost. Use your own business data: divide your total annual overheads by total billable labour hours.
Example overhead calculation: - All-in labour cost: $27.79/hr - Overhead rate (40%): $11.12/hr - Subtotal: $38.91/hr - Desired profit margin (25%): $9.73/hr - Charge-out rate: $48.64/hr
Our Job Costing Calculator lets you input your exact overheads and target margin to see your rate in real time.
Step 3: Audit Your Current Quote Templates
Go back through your last 10 quotes. Write down the labour rate you used for each.
If you quoted at $50/hr, $55/hr, or $60/hr — but your new all-in cost is $27.79/hr with overheads at $38.91/hr — you're either: 1. Underquoting (rate too low), or 2. Operating with margins too thin (rate doesn't cover overheads + profit)
The April wage increase should have triggered a review. If you didn't do one, your active quotes and jobs are now quoted at outdated rates.
Step 4: Update Your Quote Templates
Create a new quote template reflecting your April 2026 rates. Most job management software (Tradify, Fastcrew, ServiceM8) lets you set labour rates per trade or per job type.
Update it for: - Each trade you employ (electricians, carpenters, plumbers may have different overheads) - Callout vs. fixed-price work (callout rates are usually higher) - Onsite supervision vs. direct labour
Document the date of the update. If you're mid-contract and rates have changed, you can justify an adjustment by referencing the statutory minimum wage increase.
Step 5: Communicate Rate Changes to Clients
For new quotes going forward, the increase is built in. But what about existing clients or contracts?
For fixed-price jobs already quoted at the old rate: Eat it. You locked that price in.
For time-and-materials or progress-billed work: If the contract allows, reference the April wage increase. Construction Contracts Act 2002 allows for price adjustment clauses if the contract includes one.
For repeat clients: Send a professional note:
Following the statutory minimum wage increase to $23.95/hr in April 2026, we've reviewed our labour rates effective [date]. Future quotes will reflect our updated cost structure. Thank you for your continued business.
This sets expectations without sounding defensive.
Step 6: Review Quarterly, Not Just Annual
Minimum wage increases occur annually (1 April). But your other costs — fuel, materials, ACC levies — can shift mid-year.
Set a reminder to review your labour rates each April. Take 30 minutes to recalculate all-in costs and check whether your charge-out rates still deliver your target margin.
If they don't, adjust. Your business depends on it.
Common Mistakes to Avoid
Not separating wage from all-in cost. $23.95/hr wage ≠ $23.95/hr charge-out rate. Include on-costs.
Forgetting ACC. It's often listed on your bill separately, but it's a real cost. Don't leave it out of your labour costing.
Using a flat 25% overhead rate. If you're a large operation with multiple vehicles, that might be 50%. If you're solo, it might be 15%. Know your own numbers.
Assuming old quotes will remain profitable. They won't if costs have risen. Revisit active jobs and adjust where the contract allows.
Not updating job management software. If Fastcrew or Tradify still has your old rates, your quotes will be wrong. Update immediately.
Tools and Resources
- Labour Cost Calculator — Input your wage, ACC classification, and KiwiSaver to calculate all-in cost
- Job Costing Guide — Plug in overhead rate and profit target to see your exact charge-out rate
- Markup vs. Margin Calculator — Avoid the classic 42% markup = 42% margin mistake
- ACC.co.nz — Verify your exact ACC levy rate
- IRD Employment Guides — Employer obligations and withholding tax rates
The Bottom Line
The April 2026 minimum wage increase to $23.95/hr is a hard deadline to review your labour rates. If you haven't already, do it this week. Update your all-in costs, recalculate your charge-out rates, and audit your active quotes.
A 30-minute review now could save you thousands in eroded margins over the next 12 months.
Download our free NZ tradie templates at tradietools.nz/templates/ — including labour rate worksheets and quote templates pre-built for the April 2026 wage increase.
Fastcrew users can use the app's built-in labour rate management to sync rates across all jobs and quotes in minutes.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.