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Hiring in New zealand

New Zealand is an island country in the Southwestern Pacific Ocean. Wellington is the capital and Auckland is the largest city. New Zealand Dollar is the official currency. New Zealand has an advanced market economy that is heavily reliant on international trade. The service sector is the largest sector of the economy. This is followed by industry and agriculture. New Zealand’s main trading partners are China, Australia, United States and Japan. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with New Zealand’s legal and tax regulations. Labor Code stipulates that employees are entitled to 4 weeks of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on New Zealand-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with New Zealand’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • Probation periods can last for any amount of time (the standard length is around three to six months) but the length of time must be recorded in the employment agreement.
  • An employer with 19 or fewer employees can use a trial period for up to 90 days as long as this is agreed in the written employment agreement before the employee starts work.

Annual Leave

  • Employees are entitled to at least 4 weeks' paid annual leave a year if they work regular hours in a full-time or part-time job.

Public Holidays

  1. New Year's Day (1st January)
  2. Day after New Year's Day (2nd January)
  3. Waitangi Day (6th February)
  4. Good Friday (10th April)
  5. Easter Monday (13th April)
  6. Anzac Day (27th April)
  7. Queen's Birthday (1st June)
  8. Labor Day (1st May)
  9. Christmas Day (25th December)
  10. Boxing Day (26th December)

Maternity Leave

  • Employees are entitled to take maternity leave if they have been working for their employer for at least 6 months (averaging at least 10 hours per week) by the time of their child’s expected delivery or adoption date.
  • Maternity leave is one continuous period of up to 14 weeks. 
  • It includes an entitlement to at least 8 weeks’ leave after the baby is born. 
  • This means that maternity leave can potentially be longer than 14 weeks if the child is born later than the expected delivery date (EDD) and the women began her leave several weeks before the EDD.
  • Unless paid maternity leave is provided under the employment agreement, there is no requirement under New Zealand law for employers to pay an employee while she is on maternity leave. 
  • Government-funded paid parental leave is available for up to 14 weeks

Paternity Leave

  • Partner's/paternity leave is a continuous period of up to 2 weeks' unpaid leave available to the spouse of a woman who has had a baby, and can be taken at or about the time of birth or adoption.

Sick Leave

  • All employees (including part-time and casual employees) are entitled to 5 days' sick leave if:
    • they have six months’ current continuous employment with the same employer, or
    • they have worked for the employer for six months for:
      • an average of 10 hours per week, and
      • at least one hour in every week or 40 hours in every month.

Work Hours

  • Employment agreements must fix the maximum number of hours to be worked by the employee at not more than 40 hours per week (not including overtime) unless the employer and employee agree otherwise.

Overtime

  • Employers are not obligated to pay more per hour for overtime worked so can continue to pay the same hourly rate when employees have completed 40 hours and then work more hours.

Notice Period

  • The notice period:
    • is the amount of time between notifying that the employment relationship will be ending and the date the employment relationship actually ends
    • is usually the same for employers and employees
    • is usually in the employment agreement
    • is usually required to be in writing.
  • If the employment agreement doesn’t have a notice period, then fair and reasonable notice must be given. 
  • This should take into account length of service, type of job, how long it might take to replace the employee and common practice in the workplace. 
  • Depending on the role 2 to 4 weeks’ notice is often seen as fair

Severance

  • There is no statutory severance pay or redundancy pay scheme in New Zealand. 
  • An employee is only entitled to severance pay or redundancy payment if it is so stipulated in the contract of employment or a collective agreement.

13th / 14th Month Pay

  • No
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • However, bonuses are common especially performance bonuses which have to be paid if they are criteria based.

income tax

  • Resident individuals are subject to income tax on worldwide income. 
  • Nonresident individuals pay tax on New Zealand-source income only. 
  • Generally, the responsibility for determining the taxability of employment income paid to an employee rests with the employer. 
  • Employers are also generally responsible for reporting employment income on behalf of employees and for correctly withholding income taxes through the Pay-As-You Earn (PAYE) withholding tax system. 
  • For employees without tax file numbers, employment income is subject to PAYE at a rate of 45%. 
  • Unless a tax file number is obtained and the employer’s reporting is retrospectively amended to reflect the number, this rate is effectively a final liability for the employee. 
  • Gross income includes all salaries, wages, bonuses, retirement payments and other compensation.

Taxable income (NZD)

Tax Rate (%)

Tax Due (NZD)

Cumulative Tax Due (NZD)

First 14,000

10.5

1,470

1,470

Next 34,000

17.5

5,950

7,420

Next 22,000

30

6,600

14,020

Above 70,000

33

-

-

deductible expenses

Employment Expenses

  • Generally, no deduction is allowed for expenditure incurred in deriving employment income. 
  • It is therefore necessary that employers assess the correct tax treatment of allowances and expense reimbursements at payroll (PAYE) submission time.

Business deductions

  • Deductions are available for expenditure incurred in deriving gross income (other than employment income) or in carrying on a business. 
  • Subject to certain exemptions, entertainment expenditure for self-employed persons is only 50% deductible.

Personal Deductions

  • No deduction is permitted for medical, superannuation, or insurance contributions other than certain premiums for loss of earnings insurance.

Deductible Expenses

Employment Expenses

  • Generally, no deduction is allowed for expenditure incurred in deriving employment income.

Business Deductions

  • Deductions are available for expenditure incurred in deriving gross income (other than employment income) or in carrying on a business. 
  • Subject to certain exemptions, entertainment expenditure for self-employed persons is only 50% deductible.

Personal Deductions

  • No deduction is permitted for medical, superannuation, or insurance contributions other than certain premiums for loss of earnings insurance.

 immigration

Essential Skills Visa

  • The Essential Skills instructions generally apply to an applicant who has been offered full-time employment with a New Zealand employer. 
  • An applicant must provide evidence that he or she is suitably qualified by training and experience to perform the job offered to him or her. 
  • The employer must provide evidence that no suitably qualified New Zealanders can perform the job offered to the applicant (a “labor-market test”). 
  • Work visas under the Essential Skills instructions are generally issued either as lower-, mid- or higher-skilled and for a maximum of either one, three or five years, depending on the skill band of the role. 

Work to Residence Visas

  • Talent (Accredited Employer) Work Visa 
  • The Work to Residence (Talent Visa) instructions apply if an applicant has a job offer from an Accredited Employer. 
  • The job offer must be for a full-time position (at least 30 hours) for 2 years or longer, the annual salary must be at least NZD55,000 and the applicant must be under the age of 56 years. 
  • Work visas under the Work to Residence (Talent Visa) instructions are valid for 30 months from the applicant’s first date of entry into New Zealand. 
  • The applicant becomes eligible to apply for a residence visa after he or she has worked for an Accredited Employer for two years and if he or she meets the residence instructions.

Long Term Skill Shortage List Work Visa

  • To be eligible for a Long Term Skill Shortage List Work Visa:
    • An applicant must be offered a job that meets the Australian and New Zealand Standard Classification of Occupations (ANZSCO) code that is on the Long Term Skill Shortage List
    • The applicant must be qualified to meet the detailed job requirements stated in the ANZSCO and the shortages list
    • The employer does not need to be accredited
  • The job salary does not need to meet the $79,560 minimum but must be at market rates.

Working holiday visas 

  • To qualify for a visa under a working holiday scheme, an applicant must satisfy the following conditions: 
    • He or she must be aged between 18 and 30 (or 35 in some cases). 
    • He or she may not bring children. 
    • He or she must hold a return ticket or sufficient funds to purchase such a ticket. 
    • He or she must have available funds to meet living costs while in New Zealand, as prescribed by the scheme under which the individual is applying. 
    • He or she must meet health and character requirements. 
    • He or she must hold medical and comprehensive hospitalization insurance for the length of the stay if required by the scheme under which the individual is applying. 
    • He or she must be the holder of a valid temporary visa if applying in New Zealand. 
    • He or she must not have been previously approved for a visa under a working holiday scheme. 
  • Applicants who apply for a working holiday visa are not required to provide evidence of a job offer. 
  • If a scheme has an “ordinarily resident” requirement, the applicant’s usual place of permanent residence must be that country. 
  • This requirement is considered to be met if the applicant has not been absent from that country for more than two years immediately preceding the application. 
  • Successful applicants must not undertake permanent employment unless they apply for, and obtain, a work visa that allows such employment. 
  • Successful applicants may also enroll in one or more courses of training or study of up to six months’ duration in total during their visit to New Zealand. 

Entrepreneur category visa 

  • Experienced businesspersons who wish to obtain a work visa to enter New Zealand to establish and operate a business can apply under the Entrepreneur work visa category. 
  • If certain conditions are met, the applicant can eventually obtain New Zealand residence under the Entrepreneur residence visa category. 
  • To apply for an Entrepreneur work visa, applicants must satisfy the following requirements: 
    • They must have a minimum capital investment of NZD100,000. 
    • They must meet or exceed the pass mark on a scale that awards points for factors relating to the likely success of the proposed business and its value to New Zealand. 
    • They must be competent users of English. 
    • They must have a business plan specific to the proposed business. 
    • They must all meet health and character requirements.

Type of Visa/ Permit

Documentation

Validity

Eligibility

Essential Skills Visa

  • 1 acceptable photo
  • Passport or certificate of identity
  • certificates as proof of your good character
  • A medical examination or both as proof of your good health
  • A copy of your employment agreement as evidence of your job offer
  • Original or certified copies of your qualifications
  • Evidence the New Zealand Qualifications Authority (NZQA) recognizes your qualification

1 to 5 years (depending on the skill band of the role)

  • The Essential Skills instructions generally apply to an applicant who has been offered full-time employment with a New Zealand employer. 
  • An applicant must provide evidence that he or she is suitably qualified by training and experience to perform the job offered to him or her. 
  • The employer must provide evidence that no suitably qualified New Zealanders can perform the job offered to the applicant (a “labor-market test”).

Work to Residence: Talent (Accredited Employer) Visa

  • 1 acceptable photo
  • Passport or certificate of identity
  • certificates as proof of your good character
  • A medical examination or both as proof of your good health
  • A copy of your employment agreement as evidence of your job offer
  • Original or certified copies of your qualifications
  • Evidence the New Zealand Qualifications Authority (NZQA) recognizes your qualification
  • Proof of salary
  • Proof of work experience

30 months

  • The Work to Residence (Talent Visa) instructions apply if an applicant has a job offer from an Accredited Employer. 
  • The job offer must be for a full-time position (at least 30 hours) for 2 years or longer, the annual salary must be at least NZD55,000 and the applicant must be under the age of 56 years

Long Term Skill Shortage List Work Visa

  • 1 acceptable photo
  • Passport or certificate of identity
  • certificates as proof of your good character
  • A medical examination or both as proof of your good health
  • A copy of your employment agreement as evidence of your job offer
  • Original or certified copies of your qualifications
  • Evidence of age (must be under 55)
  • Proof of previous work experience
 
  • An applicant must be offered a job that meets the Australian and New Zealand Standard Classification of Occupations (ANZSCO) code that is on the Long Term Skill Shortage List
  • The applicant must be qualified to meet the detailed job requirements stated in the ANZSCO and the shortages list

Working Holiday Visa

  • 1 acceptable photo
  • Passport or certificate of identity
  • certificates as proof of your good character
  • A medical examination or both as proof of your good health

12 months

  • He or she must be aged between 18 and 30 (or 35 in some cases). 
  • He or she may not bring children. 
  • He or she must hold a return ticket or sufficient funds to purchase such a ticket. 
  • He or she must have available funds to meet living costs while in New Zealand, as prescribed by the scheme under which the individual is applying. 
  • He or she must meet health and character requirements. 
  • He or she must hold medical and comprehensive hospitalization insurance for the length of the stay if required by the scheme under which the individual is applying. 
  • He or she must be the holder of a valid temporary visa if applying in New Zealand. 
  • He or she must not have been previously approved for a visa under a working holiday scheme. 

Entrepreneur Category Visa

  • 1 acceptable photo
  • Passport or certificate of identity
  • certificates as proof of your good character
  • A medical examination or both as proof of your good health
  • Proof of fit and proper person
  • Proof of being able to speak English
  • Provide evidence you have:
  • the funds and/or assets to make the capital investment outlined in your business plan
  • you have enough money to support yourself and any family who are coming to New Zealand with you, on top of your capital investment.

12 months (can be extended)

  • They must have a minimum capital investment of NZD100,000. 
  • They must meet or exceed the pass mark on a scale that awards points for factors relating to the likely success of the proposed business and its value to New Zealand. 
  • They must be competent users of English. 
  • They must have a business plan specific to the proposed business. 
  • They must all meet health and character requirements. 

 value added tax

  • A form of value-added tax (VAT), GST applies to most supplies of goods and services. 
  • The narrow category of exempt supplies includes financial services. 
  • The rate applied to taxable supplies is 15% or 0%. 
  • The 0% rate applies to only a few supplies, including exports.

VAT

Standard Rate

15%

Zero Rate

0%

 

 withholding tax

Dividends

  • Dividends paid to a nonresident are subject to a 30% nonresident withholding tax (NRWT) to the extent they are not fully imputed
  • Fully imputed dividends are subject to a 0% NRWT rate where the nonresident has a 10% or more voting interest in the company
  • In most cases, the NRWT rate will be 15%
  • Rates may be subject to further reduction under an applicable tax treaty
  • Resident withholding tax (RWT) may be required to be withheld at source from certain types of dividend payments made to New Zealand resident taxpayers, at a rate of 33%

Interest

  • Interest paid to a nonresident s subject to a 15% NRWT, which may be subject to further reduction under an applicable tax treaty
  • New Zealand also has an approved issuer levy (AIL) regime that allows an approved issuer to pay a 2% levy instead of NRWT on registered securities where the parties are not associated
  • RWT may be required to be withheld at source from certain types of interest payments made to New Zealand resident taxpayers
  • The rates are 10.5%, 17.5%, 28%, 30% or 33%

Royalties

  • Royalties paid to a nonresident are subject to a 15% NRWT, which may be subject to further reduction under an applicable tax treaty

Technical Service Fees

  • New Zealand generally does not levy withholding tax on payments of technical service fees, unless such services fall within the definition of royalties



WHT

Dividends: -

 

Nonresident Withholding Tax (NRWT)

(to the extent they are not fully imputed)

30%

NRWT (fully imputed)

15%

Resident Withholding Tax (RWT)

33%

Interest: -

 

NRWT

15%

RWT

10.5%;

17.5%;

28%;

30%;

33%

Royalties: -

 

NRWT

15%

termination

  • There are several ways in which employment relationships may be ended, such as resignation, retirement, dismissal or redundancy.
  • Resignation is the process where an employee gives notice to their employer of their intention to stop working for the employer.
  • An employee may have abandoned their employment when they are absent from work for an extended period of time without explanation. Not all unauthorized absences are abandonment.
  • A constructive dismissal is where an employee feels they have no choice but to resign.
  • An employer cannot force an employee to retire except in very limited circumstances.
  • An employer may end their employee's employment via a 'dismissal' e.g. for misconduct or redundancy, but a proper process must always be followed.
  • An employer must follow a fair process whenever they want to make an employee redundant.
  • To end an employment relationship notice must be given by one party (the employee or employer) to the other party.

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, parental leave, overtime pay, and notice period
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Parental Leave

Sick Leave

Overtime Pay

Notice Period

Social Security Benefits

 payments and invoicing

  • The tax year in New Zealand runs from 1 April to 31 March of the following calendar year. 
  • Salary and wage earners generally have tax deducted from their salaries at source under the PAYE system. 
  • Income tax on other income is generally due on 7 February (7 April if on a tax agency list) following the end of the fiscal year.
  • Individuals who earn income only from reported sources (for example, employment income, bank interest and dividends) in New Zealand do not generally have a return filing requirement. 
  • Instead, these individuals are generally provided with automated assessments. Individuals who have income from reported sources and from unreported sources are required to amend any automated assessment to reflect their unreported income correctly. 
  • If an automated assessment results in a refund, this will be paid by electronic transfer to the individual’s nominated bank account. 
  • Assessments of tax to pay are written off if under NZD50. An individual with unreported income may choose (or in some cases, be required) to file an income tax return. 
  • Income tax returns are due by the 7 July immediately following the end of the income year, or by the following 31 March if on a tax agency list. 
  • A nonresident individual must file an income tax return showing all taxable New Zealand-source income, except income subject to a final nonresident withholding tax.

ease of doing business 

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank New Zealand ranked 1st in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%

0%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Subject to Contract

Vacations % Employees are normally entitled to 20 days of annual holiday leave each year (5.49% of annual salary)
Notice %

Employees are entitled to 2 weeks of notice after one year of service (2.74% of annual salary)

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 8.23%

 

employer accruals

Additional information (Country Accruals)

   
Superannuation 3.00%
Maternity 14 weeks
Vacations 8.49%
Description New Zealand does not have specific social security taxes. New Zealand's social security system is funded through general taxation. A number of benefits exist under this scheme, aimed at assisting the elderly, sick, widowed, and unemployed. For example, a national superannuation benefit called NZ Super is available to all New Zealanders (citizens and permanent residents) from the retirement age (currently age 65) who have lived in New Zealand for a minimum of 10 years. This is not a “means” tested benefit.
Accident compensation cover is however primarily funded by way of a levy paid by employers and employees (earner premium). A comprehensive range of benefits are available under this scheme if a person has suffered an accidental injury.

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave Employees are entitled to at least 4 weeks' paid annual leave a year if they work regular hours in a full-time or part-time job. This equals 7.69% (4/52 weeks) of annual income
Maternity Leave Maternity leave is one continuous period of up to 14 weeks. Unless paid maternity leave is provided under the employment agreement, there is no requirement under New Zealand law for employers to pay an employee while she is on maternity leave. Unpaid
Sick Leave All employees (including part-time and casual employees) are entitled to 5 days' sick leave if:
• they have six months’ current continuous employment with the same employer, or
• they have worked for the employer for six months for:
o an average of 10 hours per week, and
o at least one hour in every week or 40 hours in every month.
This equals 1.36% (5/365 days) of annual income
Social Security New Zealand does not have a social security system requiring compulsory contributions from employees.
However, under the Accident Compensation Act 2001, levies are payable by employers, employees and self-employed persons to fund the comprehensive no-fault accident compensation scheme, which covers all accidents at home and at work.
The levies are payable on employment income of up to NZD128,470 for the year ending 31 March 2020.
For employers and self-employed persons, the rate of the levy depends on the relevant industry classification.
Subjective

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