Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Giving a pay rise is one of the best ways to recognise good work and keep great people in your business. But it’s also one of those moments where a “quick email” can accidentally create confusion (or even a dispute) later on.
A properly structured pay rise letter does more than confirm a new rate. It records the agreed change, aligns with your employment documentation, and helps you stay on the right side of New Zealand employment law.
In this guide, we’ll walk you through how to write a clear pay rise letter (with an easy template) that’s legally sensible and tailored to small business realities in New Zealand. We’ll also include a copy-and-paste template you can adapt, plus practical tips on what to include (and what to avoid).
Why A Pay Rise Letter Matters (Even If Everyone’s Happy)
It’s tempting to keep things informal when you have a good relationship with your team. But pay is one of the most common sources of misunderstandings in employment relationships, especially when businesses grow, staff move between roles, or payroll systems change.
A written pay rise letter helps you:
- Create a clear record of what has changed (rate, hours, salary vs wages, effective date).
- Confirm agreement between you and the employee, which is important because changes to key terms should generally be discussed in good faith and properly documented (and in many cases, agreed) rather than changed informally.
- Avoid payroll disputes about backpay, overtime rates, allowances, or what “starts next pay cycle” actually means.
- Keep employment records tidy (which matters if you’re audited, sell the business, or need to manage performance later).
- Stay consistent with the employee’s Employment Contract and any policies or remuneration review processes you’ve set up.
In NZ, employment relationships are governed by obligations of good faith. Even where you’re doing a positive thing (a pay increase), you still want the documentation to be clear and fair.
What NZ Employers Need To Check Before Issuing A Pay Rise Letter
Before you send a pay rise letter, do a quick legal and practical check so you don’t accidentally create inconsistent obligations.
1) Is The Pay Rise A Change To The Employment Agreement?
Often, yes. Pay is a key term of employment. A pay rise usually changes a core term and should be recorded in writing.
Some employment agreements allow for remuneration reviews and increases in accordance with internal policies. Even then, it’s still best practice to confirm the new rate in writing so there’s no ambiguity.
2) Have You Confirmed The Type Of Pay (Wages vs Salary)?
Be careful about language. “Salary” and “hourly rate” are not the same thing, and the wrong wording can create confusion about:
- overtime and additional hours
- public holiday payment calculations
- deductions and allowances
- time in lieu / TOIL arrangements
If you’re changing someone from hourly to salary, or changing their hours as part of a remuneration change, you’re no longer dealing with a simple pay rise letter. In that case, get advice and consider a formal variation to their agreement.
3) Are You Still Meeting Minimum Entitlements?
Most pay rises increase compliance comfort, but you should still ensure:
- the new rate is at least the applicable minimum wage
- any pay structure doesn’t undermine minimum entitlements (for example, trying to “roll up” leave in a way that isn’t allowed)
- you’re calculating holiday pay correctly
This is particularly important if you have casual or irregular-hours staff, because rates and pay calculations can get messy fast. If you’re unsure about leave and entitlements, it’s worth checking your arrangements for casual workers’ leave entitlements.
4) Are There Other Terms Changing At The Same Time?
Sometimes a “pay rise” is bundled with other changes, like:
- a promotion or new position title
- new responsibilities
- a change in hours (eg reducing or increasing shifts)
- a new bonus or commission structure
If multiple terms are changing, your letter needs to be extra clear about what is changing and what is staying the same.
For example, if the employee’s role is evolving and their hours are being adjusted, you should document it properly (and not just squeeze it into a pay rise email). This comes up a lot when businesses start reducing staff hours or reshaping roles.
How To Write A Pay Rise Letter Template (What To Include)
A good pay rise letter template is short, clear, and specific. You don’t need pages of legal language - you just need the essential details recorded in a way that can’t be misunderstood later.
In most cases, your pay rise letter should include:
Key Details
- Employee name and (optionally) position title
- Your business name and who the letter is from
- Date of the letter
- Effective date of the new pay rate (be precise)
- Old pay rate and new pay rate
- Pay frequency (weekly/fortnightly/monthly) where relevant
- Whether it’s a salary or hourly rate
- Confirmation that other terms remain the same unless otherwise stated
Optional (But Often Helpful) Details
- brief context (eg annual review / performance review) without overpromising
- a line confirming the employee should ask questions if anything is unclear
- a request for acknowledgement (signature or email acceptance)
What To Avoid In A Pay Rise Letter
This is where many employers accidentally create risk. Try to avoid:
- Vague effective dates like “starting next pay cycle” without stating the date.
- Promises you can’t guarantee, such as “you’ll receive a pay rise every 6 months”. If you want a review process, describe it as a review (not a guarantee).
- Linking pay to inappropriate criteria. If you refer to personal characteristics or sensitive matters, you could create discrimination risk.
- Changing multiple terms without clarity. If you’re changing pay and hours and duties, document each change clearly.
- Inconsistent wording that conflicts with the employment agreement.
If you’re also changing incentive structures, commission, or bonus arrangements, consider documenting that separately (or as a separate schedule) so it’s easy to understand and enforce. Sprintlaw can help with arrangements like a commission agreement when pay is performance-based.
Pay Rise Letter Template (NZ Employers Can Copy And Adapt)
Below is a practical pay rise letter template you can adapt for your business. You should tailor it to the employee’s situation and your existing documentation.
Tip: If your employee is on an individual employment agreement, this letter usually operates as a variation/confirmation of the pay term. If they’re covered by a collective agreement or you have a more complex remuneration structure, get advice before relying on a generic template.
Template: Pay Rise Letter (Hourly Rate)
[Your Business Name]
[Business Address]
[Date]
Private & Confidential
[Employee Name]
[Employee Address or Email]
Dear [Employee Name],
Re: Confirmation of Pay Increase
We’re pleased to confirm an increase to your pay in your role as [Position Title].
With effect from [Effective Date], your hourly rate will increase from $[Old Rate] per hour to $[New Rate] per hour (gross), paid in accordance with our normal payroll cycle.
Unless otherwise agreed in writing, all other terms and conditions of your employment remain unchanged.
Please confirm your agreement to this change by signing and returning a copy of this letter, or by replying to this email with your confirmation.
If you have any questions about this change, please let us know.
Kind regards,
[Name]
[Title]
[Your Business Name]
Acknowledged and agreed:
_________________________
[Employee Name]
Date: _____________________
Template: Pay Rise Letter (Salary)
[Your Business Name]
[Business Address]
[Date]
Private & Confidential
[Employee Name]
[Employee Address or Email]
Dear [Employee Name],
Re: Confirmation of Salary Increase
We’re pleased to confirm an increase to your salary in your role as [Position Title].
With effect from [Effective Date], your annual salary will increase from $[Old Salary] per annum to $[New Salary] per annum (gross), paid in accordance with our normal payroll cycle.
This salary is intended to cover your agreed hours of work as set out in your employment agreement, unless otherwise agreed in writing.
Unless otherwise agreed in writing, all other terms and conditions of your employment remain unchanged.
Please confirm your agreement to this change by signing and returning a copy of this letter, or by replying to this email with your confirmation.
Kind regards,
[Name]
[Title]
[Your Business Name]
Acknowledged and agreed:
_________________________
[Employee Name]
Date: _____________________
Common Scenarios That Need More Than A Simple Pay Rise Letter
Sometimes you can use a pay rise letter template as-is. Other times, you’ll want a more tailored document (or at least a careful redraft) because the pay change is tied to a broader change in the employment relationship.
Pay Rise Plus Promotion Or Major Role Change
If the employee is moving into a new role (new responsibilities, reporting lines, KPIs, or changes to how the role is structured), you might need an updated employment agreement or a more detailed variation letter.
This is especially true if the role change affects:
- hours of work and availability requirements
- eligibility for overtime
- commission/bonus entitlements
- confidentiality and restraints (where appropriate)
Pay Rise For A Contractor (Not An Employee)
Be careful about who you’re actually dealing with. Contractors aren’t employees, and the documentation should be consistent with the contractor relationship. If you’re not sure whether your worker is genuinely a contractor, it’s worth checking because misclassification can create significant risk.
Where it is a contractor relationship, you’d usually record the change as a variation to the services agreement rather than an “employee pay rise letter”. A tailored contractor arrangement and scope of work can help keep the relationship clear.
Pay Rise With Changed Hours Or Availability
If you’re increasing pay but also changing hours (or expecting “reasonable additional hours” with no clear boundaries), document it carefully. Many disputes start when pay goes up and expectations quietly change alongside it.
If you need to restructure work patterns, it’s better to deal with the hours change directly and transparently, rather than hoping the pay rise “covers it”.
Backdated Pay Increases
Backdating can be fine, but it must be crystal clear. If you’re backdating:
- state the effective date
- state whether backpay will be processed (and when)
- ensure payroll can calculate it correctly
Backdating without clarity is one of the fastest ways to create payroll confusion and resentment - even when your intention is positive.
Key Takeaways
- A written pay rise letter helps you clearly record changes to pay and reduces the risk of misunderstandings later.
- Your pay rise letter should include the effective date, old and new rate/salary, pay type (hourly vs salary), and confirmation that other terms remain unchanged.
- Avoid vague wording and accidental promises (like guaranteed future pay rises) that can create enforceable expectations.
- If the pay rise is bundled with a promotion, changed hours, commission, or other new obligations, you may need a more detailed variation or updated employment documentation.
- Make sure your pay arrangements remain compliant with minimum entitlements and are consistent with the employee’s Employment Contract and your internal processes.
- Even when it feels straightforward, getting the documentation right from day one is a simple way to protect your business as you grow.
Note: This article is general information only and is not legal advice. If you’d like help tailoring a pay rise letter or updating your employment documents to match how your business actually operates, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
