Rea Williams from The Fresh Desk cleaning company during the announcement of the 2016 New Zealand Living Wage rate.

The 2016 New Zealand Living Wage rate has been set at $19.80 an hour and will come into effect on July 1.

The living wage is the hourly rate which advocates claim a worker needs to participate as an active citizen in the community.

The new rate is 55 cents more than the 2015 rate of $19.25.

ROSS GIBLIN/FAIRFAX NZ In 2015, workers marched to support the living wage.

The first New Zealand living wage rate of $18.40 was set in February 2013, with yearly increases based on the average movement of hourly wages.

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The new rate reflects an average wage movement of 2.8 per cent.

Living Wage movement Aotearoa New Zealand convenor Annie Newman said the rise of 55c an hour was modest but it would mean an extra $4.40 a day, or $22 for a 40-hour week for a worker on the Living Wage.

The New Zealand living wage rate has been calculated through research carried out by Charles Waldegrave from the Family Centre's social policy research unit, with help from Dr Peter King.

Each adjustment had been based on the annual wage movement to June the previous year to remain consistent with the timeframe used to identify the original figure.

"Because this is a living wage, it is important that it is regularly updated to enable workers and their families to earn a decent income, so they can not just survive, but participate in society," Newman said.

In the same timeframe, chief executives of New Zealand's biggest companies had enjoyed an average pay rise of 10 per cent, their biggest rise since 2010, she said.

ANZ New Zealand's chief executive David Hisco, received $4.27 million in 2014, an increase of $250,000 from the year before.

"The extreme differences in increases for those at the top and bottom of the earnings ladder continues to contribute to escalating inequality in New Zealand."

Newman said there was a growing understanding of the value of the living wage.

"The living wage is not only good for workers and their families, but it is good for employers and local economies."

New Zealand Council of Trade Union president Richard Wagstaff said

the living wage was a timely reminder of what needs to happen with the minimum wage.

Too many people were living in poverty, he said.

Rather than small top-ups, there needed to be a minimum wage policy to sustain a higher level.

New Zealand's living wage employers are a mix of small to medium businesses, community organisations and unions.

Last year, there were 27 fully-accredited living wage employers in New Zealand. There are now 47.

In 2013 Wellington City Council adopted a living wage policy for its staff, and in 2015 it began extending the payments to contractors.

In December Porirua City Council started an examination into whether it would pay its employees a living wage.

Pivotal Thames general manager Kyle Radersma​ said he started paying the living wage about five months ago.

The previous owners of the business were staunch supporters while he was an employee for them.

When he took over the printing company, the living wage was part of the company culture and it was important his 28 employees were paid fairly, he said.

"They come to work and feel valued. They are happy to go the extra mile."

Tony Sutorius​ from Unreal Films in Wellington said the living wage was about creating a common good that was comparable with New Zealand values.

Accredited Living Wage employers have until July 1 to move to the new rate.