Definitive Guide to Hiring in New Zealand

Hiring in New Zealand

Hiring employees compliantly in New Zealand means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in New Zealand so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in New Zealand; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in New Zealand

Employment laws in New Zealand are uniquely suited to the country’s way of life, and crucial to understand if you want to employ local talent in this country. Get the details on New Zealand employment laws and New Zealand policies here.

Employee 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 in New Zealand

• 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.

Holidays in New Zealand

Maternity Leave New Zealand

• 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.
• Employees are entitled to take up to 52 weeks of parental leave (26 weeks primary carer leave and a further 26 weeks' extended leave).

Paternity Leave New Zealand

• Employees are entitled to take up to 52 weeks of parental leave (26 weeks primary carer leave and a further 26 weeks' extended leave).

Sick Leave in New Zealand

• All employees (including part-time and casual employees) are entitled to 10 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.

Working Hours in New Zealand

• 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 in New Zealand

• 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.

Termination of Employment in New Zealand

• 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.

Notice Period in New Zealand

• 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 in New Zealand

• There is no statutory severance pay or redundancy pay scheme in New Zealand. 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.
• Payment upon termination includes payment for any unused annual leave or days in liu
• If an employee has been there for: -
  • less than 12 months, he/she will be paid out at 8% of the normal pay rate
  • at least 12 months, he/she will be paid out at the normal pay rate.

New Zealand Salary and Wages

Accurately estimate your costs when employing in New Zealand in 2023. Includes base salary, dependents, benefits, taxes, social contributions, and payroll costs. Monthly or yearly calculation period.

13th / 14th Month Salary in New Zealand

• 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.

• An employer may be required to contribute a percentage of an employee’s gross salary or wages to the KiwiSaver superannuation scheme, for employees that have opted into the scheme.
• KiwiSaver is a voluntary, work-based savings scheme.
• The minimum employee contribution rate is 3% of gross pay (an employee also may contribute at prescribed percentages up to 10%).
• The minimum compulsory employer contribution rate is 3% of an employee’s gross pay.
• The government also will contribute a “member tax credit” in relation to an employee member’s contribution over an annual period at a rate of NZD 0.50 for each NZD 1 contributed by the member, up to a maximum limit of NZD 521.43.
• Non-work accident insurance is funded by premiums paid by employees and the self-employed.
• For the 2022/2023 year, the premium is a flat rate of NZD 1.46 per NZD 100 including goods and services tax (GST) on taxable earnings up to a maximum of NZD 130,911.
• This rate is expected to increase to NZD 1.53 per NZD 100 (including GST) from April 2023.

Immigration New Zealand

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. 

Value Added Tax (VAT) in New Zealand

• 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.

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.

Payroll Accrual in New Zealand

Country Accruals Additional Information

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.

Payroll Accruals Additional Information

Accrued Benefits in New Zealand

Why use Global Expansion to hire in New Zealand

Establishing a branch office or subsidiary in New Zealand can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because New Zealand labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by New Zealand law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into New Zealand. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our New Zealand Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.