Payroll In New Zealand

Benefits and Compensation in New Zealand

What are Employee Benefits?

Employee benefits are the perks and incentives given to employees in addition to their salary. These include sick leave, bonuses, childcare, health insurance and others. The benefits are decided based on the prevailing industry standards and the policy the company drafts.

Employee benefits are pretty comprehensive and benefit the employees and the organization. When a company provides good benefits to employees, employee turnover reduces significantly. Also, businesses can use these incentives to attract new talent to their respective organizations. 

There are several collective bargaining agreements that companies need to stick to while creating a benefits plan for the employees. All the companies in New Zealand give these perks and incentives to the employees to retain the top-most talent. It also helps companies to attract skilled candidates available in the market.

Apart from the mandatory benefits, several companies offer supplementary benefits to employees, like oral and vision insurance, etc. These benefits might differ from company to company as no laws govern them. 

Compensation Laws in New Zealand

The benefits and compensation policy in New Zealand is governed by several laws and policies laid down by the government. These laws dictate how the employees receive benefits. Some of these laws include the following:

  • As per the labor laws, the minimum wage for all employees in New Zealand is 21.2 NZD per hour. All employers must pay their employees at least the minimum wage. 
  • The Parental Leave and Employment Protection Act of 1987 guarantees both mothers and fathers minimal rights to unpaid parental leave in connection with the birth or adoption of a child.
  • According to the Equal Pay Act of 1972, no employer may deny, withhold, or fail to provide any individual with the same terms of employment, working conditions, fringe benefits, opportunities for training, promotion, etc., based on the sex of the employee. 
  • The Holidays Act of 1981 establishes minimum rights to 11 days of public holidays annually, five days of special leave for every 12 months of employment, and three weeks of paid annual vacation.
  • Employers and employees are required to take action to ensure a safe workplace under the Health and Safety in Employment Act of 1992;

How to Design an Employee Benefits Program for Employees in New Zealand?

Let’s examine some necessary steps to create a compensation and benefits policy in New Zealand. 

Step 1: Fix a budget and decide on the goals

Before creating your benefits plan, you must discuss it with the senior management and fix a budget. Once you have a budget, you can identify and set the objectives you want to achieve with the benefits plan. Some common objectives could be staying within the budget while drafting the plan, benchmarking the plan against the competition, etc. Whatever goals you set, they should adhere to the government’s labor laws. 

Step 2: Know the industry standards and the expectations of your employees

Before creating a benefits plan, you must lay a strong foundation by conducting thorough research and understanding the industry standards other companies provide to their employees in New Zealand. 

Once you have an overview of the industry, you must understand what the employees expect from a benefits plan. You can conduct an internal survey and use the survey results to identify the benefits the employees most covet. 

Step 3: Make the benefits plan flexible and accommodating

The compensation structure you create after incorporating all the benefits must be flexible and factor in the employees’ diverse needs. You must select different criteria that can be made flexible and calculate the employees’ gross compensation accordingly. 

Companies should let the employees know how they can avail of all the benefits provided to them.  

Step 4: Communicate

Once you have a benefits plan, you must inform all the critical stakeholders. You must effectively communicate how these benefits can be used and try to collect some feedback on them. 

You can analyze the feedback and incorporate the advice if you find something beneficial. If the feedback suggests that a benefit will go unutilized, you can make a few changes or remove it altogether. 

Step 5: Analyze

Analyzing the benefits plan is crucial before you make it official. Businesses go through several changes every month. A good benefits plan will sustain all these changes and still remain effective. Therefore, you should test the plan in different business scenarios to understand its effectiveness. 

You must also thoroughly review the document to spot any flaws or errors. If you spot any, make changes in real-time. You must also develop a few performance metrics to understand how well the benefits plan is used. 

Types of Guaranteed Benefits in New Zealand

Here are a few mandatory benefits that employees in New Zealand enjoy while they are employed in the country:

Minimum wage

  • The minimum wage is the minimum amount that must be a part of the worker’s compensation in New Zealand. 
  • The minimum wage in New Zealand is 21.2 NZD per hour. However, if you have people aged 16 or 17 working for you, the minimum wage for them stands at 16.96 NZD per hour.
  • The minimum wage for the industrial trainees employed in New Zealand is 16.96 NZD per hour. 

Working hours and overtime

  • There are no statutory minimum working hours in New Zealand. However, the employees must work around 7.5 to 8 hours daily.
  • Employees who work beyond 8 hours are entitled to overtime pay. The overtime payment is either stated in the employment contract or is decided by the collective bargaining agreements. 
  • In most cases, employees who work overtime get 150% of their regular salary as overtime payment. 

Paid leaves

  • Once the employee completes a year in the organization, they are entitled to four weeks of paid leaves. 
  • If the leaves remain unused, the employees are compensated for those leaves. 

Public holidays

  • There are ten public holidays in New Zealand. The employees who work during these days are entitled to overtime pay. 

Sick leaves

  • Once employees complete six months with the company, they are entitled to a sick leave of ten days a year. 
  • New Zealand passed the Holiday Amendment Bill to increase the number of sick leaves from five to ten leaves. 
  • If the employees cannot use their sick leaves in the current year, they can carry them forward to the following year. However, they will be able to have a maximum of 20 days of sick leaves in the next year. 

Maternity leaves

  • Maternity leaves are referred to as primary caregiver leaves in New Zealand. 
  • Maternity benefits in New Zealand can be availed by pregnant female employees, their spouses, or any other person taking up the baby’s primary responsibility. 
  • Pregnant employees can avail of 26 weeks of maternity leave. The employee can take the first six weeks off before the due date and the remaining 20 after the baby is born. 
  • The employees on maternity leave are paid a gross salary of anywhere between 177.00 NZD to 585.80 NZD. 

Paternity leaves

  • Paternity leaves are referred to as partner leaves in the country. 
  • A partner of a pregnant employee can take 21 days of leave before the due date and 21 days after the child is born.
  • However, if the child stays in the hospital for more than 21 days, the number of leaves can be increased. 

Employee Benefits for Expatriates

Foreign workers in New Zealand are entitled to the same advantages and benefits as domestic employees. Expats in New Zealand can take advantage of health insurance and travel reimbursements, which all employers typically provide. In addition to the mandatory benefits, expats have access to the following perks:

  • The cost of lodging or housing
  • Traveling costs
  • Meal allowances

Expatriates are eligible for all perks that the employer agreed upon while signing the employment contract. Employers should include the list of perks in the employment contract so that there is a clear understanding between both parties in the future.

How are Employee Benefits Taxed in New Zealand?

Most benefits in New Zealand are subject to tax. An employee receives the income after the tax on benefits has been deducted from it. Benefits like superannuation, veteran’s pension, and different kinds of allowances like jobseeker support are taxable. The rate of taxes is different for different kinds of benefits. For instance, if you avail of Young Parent payment, the net weekly tax rate ranges between 254.38 NZD to 566.00 NZD based on your age and income. 

The tax rate on other mandatory benefits exercised by New Zealand employees depends on the employees’ income slab. These rates are the same for domestic employees and ex-pats working in New Zealand.

Restrictions for New Zealand Benefits and Compensation

In New Zealand, most perks and benefits employees avail of are subject to tax. To determine the employee’s tax burden, you must know how much these benefits are worth. The employer is responsible for timely remitting all tax payments to the appropriate federal departments and the bodies handling employees’ taxation and social security.

Before developing compensation and benefits in New Zealand, be sure your company is duly incorporated, and you have business authorization to operate there. Employers must give their workers the minimum wage as determined by the government. You must carefully consider New Zealand’s labor laws when putting together a compensation package in New Zealand. Also, while collective bargaining agreements are not very common in New Zealand, you must adhere to them if they dictate any aspect of employees’ compensation. 

Supplemental Benefits for Employees in New Zealand

Apart from the mandatory compensation and benefits in New Zealand, employees are also entitled to several supplemental benefits. Some of these benefits include the following:

Education allowance

Companies in New Zealand offer education allowance to employees who want to take online courses or go for higher education. These allowances motivate the employees to upskill themselves and return to the job with a better knowledge base.

Transport allowance

While several companies in New Zealand provide employees with a personal vehicle, others compensate for the employees’ travel expenses. 

Health insurance

While there are several medical benefits for employees in New Zealand, some employers provide them with additional health coverage. These insurance policies provide broader coverage. Hence, the employees don’t have to bear the cost of any treatments. Some companies also provide oral and vision insurance coverage to their employees. 

Remote working

Employees in New Zealand can work from their homes for a few days a week. This gives them the flexibility to manage their homes and work simultaneously. In New Zealand, several companies also follow a 4-day working system. 

How Multiplier Can Help with Benefits Management in New Zealand

When starting a business online, you need to onboard talented professionals who can contribute to their fullest and grow the company. Employers must abide by local laws and ordinances when making employment contracts and providing employee benefits. A global PEO platform like Multiplier can assist you in implementing this strategy.

Multiplier gives you access to knowledgeable specialists familiar with various business-related issues. We help you adhere to New Zealand’s labor laws. With the aid of our qualified professionals, you won’t need to establish a countrywide subsidiary to manage the workforce effectively. By doing this, you can expand into new markets and reduce your labor costs.

Frequently Asked Questions

A probation period in New Zealand can last for about 90 days.

New Zealand employers provide wellness and a parking allowance to their employees. These allowances are not common in other countries.

New Zealand follows a GST system. A 15% GST is applicable in New Zealand.

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