Two thousand public servants will receive a pay boost, which will bring them up to earning the living wage.
Employees in core public service work will receive a hourly rate of at least $20.55 an hour, the 2018 living wage, Minister of State Services Chris Hipkins announced on Friday.
"This decision is about supporting fair pay and employment conditions for a decent standard of living for all New Zealanders," Chris Hipkins said.
The new hourly rate - an annual equivalent of $42,744 - includes full-time, part-time and casual employees.
This will be implemented in a one-off payment by September.
"This government strongly believes that every worker should be in a situation where the pay they receive means they can at least make ends meet," Mr Hipkins said.
"Most of the workers who will benefit work in 13 government departments, and work in jobs including clerical and administration workers, welfare workers, contact centre workers and assistant customs officers.'
The Government will foot the estimated $7.23 million bill to make the change.
"In subsequent years, the rate will be subject to bargaining between government employers and unions such as the New Zealand Public Service Association.
"We know there is no one-size-fits-all solution to the problem of low pay."
The pay boost is for the lowest paid public servant workers and is one of the Government initiatives to tackle the pay difference between employees.
The announcement has been welcomed by Living Wage Movement Aotearoa New Zealand who say it is "fantastic news".