New Zealand is a developed economy that ranks highly in its international comparisons regarding national performance on the quality of life, civil liberties, education, economic freedom, and government transparency. New Zealand has ranked 14th in the 2019 Human Development Index and third in the 2020 Index of Economic Freedom due to a developed economic market.
While the economy underwent significant economic changes following the 1980s, transforming it into a liberalized free-trade economy, it brought out a few service sectors that dominated the national economy. With the service sector contributing the most to the GDP of New Zealand, the industrial sector, agriculture, and international tourism continue to be a significant source of revenue.
With the growth in revenue of several sectors of the economy, New Zealand is a high-income country that has shown a steady increase in the GDP, which stands at US$226.566 billion, giving a per capita of US$36,254 (2021 estimate).
The estimated population of New Zealand is 5,122,840 individuals (census 2021), with the economy’s most prominent and busiest cities that include Wellington, the capital city, and Auckland is the most populous city in New Zealand.
Apart from being a highly skilled workforce, the country focuses on providing education to its residents. While schooling is compulsory from the age of 6 – 16, your child’s education would be free from the ages of 5 to 19 at state schools – for New Zealand citizens or permanent residents.
The country is known to have eight state-funded universities with various degrees in a pool of subjects to choose from that have strengths in specialized professional degrees. All listed universities are recognized internationally and work with universities in several countries on research, teaching programs, and development.
Although it is relatively easy to grow your business and hire talent in New Zealand, considering a skilled and educated population in different sectors, employers must be aware of the local tax compliances, benefits, and payroll aspects in New Zealand.
Here is where New Zealand’s PEO or an Employer of Record can help. Multiplier’s PEO solution acts as your co-employers. We assume responsibility for all your HR operations in New Zealand’s PEO – onboarding, payroll, compliance management, employment contracts – while you focus on business matters in the country.
Why Use a New Zealand PEO?
New Zealand is a developed country that is also known to have an advanced market economy.
The workforce in New Zealand also exhibits nearly one-quarter of highly skilled workers who live overseas, mainly in Australia and Britain, the most significant proportion of any developed nation.
With an educated and skilled workforce, the economy also benefits from a high level of innovation and technology. Alongside a rise in acceptance of working online, the work-life balance that New Zealand offers has led to an increase in employees opting for remote work post-covid-19.
Being the developed country that New Zealand is, and the number of skilled workforces that the country exhibits, the labor codes and employment laws effectively protect employees’ and workers’ rights while preserving employers’ rights and legitimate interests of business expansion.
Therefore, the employment law applies to all companies – national or foreign, and all the employees regardless of their citizenship.
Though understanding the labor laws are relatively straightforward, compliance is an area that requires assistance when looking for international talent, especially in New Zealand.
Suppose you are starting your business or are looking to hire talent to expand your business. In that case, there is a need to understand all the details of taxes, employment contracts, compliance, and matters related to the labor code.
New Zealand PEO Costs
Usually, PEOs charge based on two pricing models – fixed and variable. A PEO based on the fixed pricing model charges a transparent fee ranging between $200 – $1000 per employee per month.
Multiplier is one such PEO solution. Our costs for Russia start from $200 per employee. The final price depends on the complexity of employment laws of the employees’ jurisdiction.
Our prices ensure that you get the most out of your employee spending. Every employee hired through our PEO also receives HR support, benefits management, and a live dashboard to track workforce spending in real-time.
How to Hire in New Zealand
New Zealand is known to have a strong economy that ranks high on quality of life measures consistently; it is an attractive place to expand your business and hire talent to expand your team. The country is known for its natural beauty, quality of life, and other benefits that attract remote workers and businesses worldwide to settle and expand to New Zealand.
With a GDP (real growth rate, as of 2019) at 2.8%, the country’s cost of living index is at 79.14, making New Zealand as an economy a great place to expand your business and relocate your employees.
With the cost of living index that attributes a positive perspective, living and expanding in New Zealand will enable you to achieve a higher quality of life and find highly skilled talent to expand your team.
While entering New Zealand to expand your business and your global team is reasonably straightforward, an unfamiliar area would be aspects like the hiring process and where to hire from, the local labor law requirements, payroll, taxation, and compliance.
Partnering with a New Zealand PEO like Multiplier can help navigate the areas that require professional assistance such as HR, payroll, and compliance aspects. Multiplier is one of the leading global PEO and EOR platforms that assist global brands in gaining a competitive edge. You can book a demo to understand how Multiplier efficiently handles your global HR operations while you focus on the growth aspect of your business.
However, if you are looking at doing the hiring and onboarding process in-house, below are a few tips and tiny details you may want to keep in mind while expanding your business in New Zealand and complying with local laws.
New Zealand Employment Contracts
A signed employment contract protects the interests of the employers as well as the employees. The terms of employment set out in the contract helps in mitigating any risks to the employer when hiring a new employee.
The employment laws of New Zealand require all employers to issue and keep a written Employment Contract for every employee. The employers are required to give the employment contracts within a window of 30 days of hiring the employee.
Failure to issue the employment contract would attract fines to the employer.
The issued employment contract typically outlines the employee’s entitlements, including compensation, benefits packages, compensation, termination notice period, job description, and vacation/leave time. Suppose the employer fails to provide salary and the work hours. In that case, the employee has the right to pursue legal action against the employer wherein the employment contract serves as evidence for their agreement in court.
As there are different laws for contractors, employers shall use Independent Contractor Agreements for contractors and not employees.
In such scenarios, a New Zealand PEO like Multiplier can help you generate compliant contracts as soon as you hire and onboard your talent from the economy.
The working hours for employees in New Zealand should typically be 40 hours a week, usually five days a week. However, if the number of hours worked is less than 40 hours per week, the employees and the employers must try to fix the number of hours which shall not be beyond five days a week.
Forty hours of working hours a week excludes the overtime hours that the employees would be required to work as per work requirements.
There is no legal requirement for employers to pay the employee more than the standard pay scale for overtime. However, most employers pay time-and-a-half as overtime pay with a cap on the number of hours on a working day. Post that, double-time for any additional overtime on that day.
Any changes in the working hours shall be agreed upon in writing in the form of an employment contract.
The employees will be paid as per the contract, equivalent to the minimum wages outlined by the authorities or higher.
The current minimum wage rates (before tax) in New Zealand are as of 1 April 2021 and apply to employees of the age of 16 or above:
Type of Minimum Wage
8 Hour Day
40 Hour Week
80 Hour Fortnight
- The minimum wage, as mentioned above, is per New Zealand Dollars.
- Employees have to be paid minimum wage rate or above as agreed by the employer and the employee.
- Employees with disabilities can apply for and hold an exemption from the minimum wage rate. You can find further details on exemptions here.
- The scope of minimum wage rate also applies to migrant workers and individuals of work Visas as it is for New Zealand citizens.
- There are no minimum wage rates for employees under the age of 16. However, all standards, employment rights, and obligations apply. As soon as the employee turns 16, relevant minimum wage or above shall apply.
Employment benefits in New Zealand
Employment benefits are key if, as an employer, you are looking to retain your employees with your organization for an extended period. This also acts as an attractive feature to motivate employees in giving better outputs and give in better quality service while at work.
These may include benefits such as leaves, vacation policies, maternity leaves, sick leaves, healthcare insurance, and any additional benefits you may want to provide to appreciate the time and hard work.
You can now have all the benefits for your employees in just one click with the PEO and EOR platform – Multiplier.
Leaves and Vacation
As compared to international standards, New Zealand workers are entitled to a good amount of leaves.
There is a minimum of 4 weeks of annual leave Exchange of one week’s leave for cash can also be availed. The employees are also entitled to 11 public holiday days, sick leaves, and maternity leaves alongside the annual leaves.
There are 11 public holidays and other anniversary dates that fall in a year. Further details on what the public holidays are here.
However, a few details to note are –
- An employee is entitled to extra pay if an employer requests the employee to work on a public holiday.
- The employee can also take a holiday on another day if the additional pay is not availed.
Maternity Leave and Childcare Leave
Maternity Leave: Employees who have been working with the company for 12 months or more for an average of 10 hours a week are entitled to maternity leave. The maternity leave includes:
- Maternity leave is continuous leave up to 14 weeks.
- An employee is entitled up to 8 weeks from when the child is born.
- The employer may allow the mother to take more than the 14-week entitlement upon discussion between both parties. The employee can avail of the extended leave up to 52 weeks.
- A 3-month notice is to be given by the employee with relevant documentation to the employer to avail of maternity leave.
- Paid maternity leave is not mandatory as per law. However, if mentioned in the employment contract, the employee is entitled to paid maternity leave.
- The paid maternity leave can be availed of NZ $177.00 to NZ $585.80 by the government per week before tax.
New Zealand is a fairly developed country that provides support to working parents.
New parents are entitled to paid parental leaves up to 26 weeks. If your child is sick, the employees are entitled to claim the sick leave entitlement.
The employees can also use the sick leave for dependents like children, parents, or your spouse.
However, parental leave as per law when the employees would take over the care of the child is entitled to:
- 52 weeks of unpaid parental leave,
- 26 weeks of government-funded parental leave payments if they will be the ‘primary carer’ of a child born
However, the employees have to first choose from:
- Annual leave
- Alternative days
- Special leave
- Time off in lieu of parental leave
As of July 2021, the minimum sick leave entitlement for an employee working in New Zealand is ten days per year. For every 12 months, the entitled sick leave for an employee is at least 10-days’ sick leave.
Unused sick leave can be carried forward to the following calendar year.
Employees are entitled to 10 days of paid sick leave in a year and accumulate up to 20 days of sick leave in a calendar year.
The employers cannot provide sick leaves to the employee on a pro-rata basis.
Insurance and Social Security
Insurance and social security are crucial to keeping the employees motivated to continue working, especially during the post-covid times.
However, in New Zealand, to avail benefits of social security and insurance benefits, the employee must be a resident of New Zealand or must have stayed in the country for a period of:
- Ten years from the age of 20 and,
- Five years from the age of 50.
There is no compulsory social security system for employers to provide to their employees. Though it is voluntary, the government has set up a scheme under KiwiSaver where employers and employees contribute 3% of their salary to the scheme.
Social Security Rate
Social Security Rate for Employers
Social Security Rate for Employees
The employees are provided accidental covers by their employers, which is at 1.39% of their salary.
There are a few more additional benefits that employees of New Zealand are entitled to if you are planning on hiring your global talent from the country. However, a few additional benefits are indiscretion to the employer when choosing the right talent, while the other additional benefits may fall under compliance.
- Community assistance and buying extra holiday
- Gym membership and Childcare
- Auto-enrolment and compulsory enrollment into New Zealand’s pension scheme with contributions 4% or 8% of the employee’s salary
- Life, disability, and income protection insurances depend on the suitability and the discussion between the employee and employer.
- A better work-life balance
Probation period and termination
The probation period for the employees in New Zealand is for 90 days or three months, which will be mentioned in the employment contract and should be agreed upon by both parties.
Suppose during the probation period; the work hasn’t gone well. In that case, the employer has to give written notice to the employee with sufficient information to find themselves another source of income. The employers will explain the reasons for dismissal, and the employee must get an opportunity to respond to the reasons stated.
If the employee gives a satisfactory performance during the probation period, the terms in the employment contract shall continue as mentioned even after the probationary period.
An employee can resign at any point in time by giving written notification to the employer stating the reason for resignation and providing the correct notice period as specified at the time of signing the employment contract.
While accepting a resignation is not a formal requirement for the employer, once the employee gives a written notice and the notice period as per the employment contract is being served – the employer shall not withhold the employee’s resignation.
The employer, while dismissing the employee, would want to
- Act in good faith
- Have a good reason
- Follow a fair and reasonable process
- Have an open mind when dealing with problems that do not result in constructive solutions.
The significant reasons for dismissal of the employee by the employer should involve:
- Serious misconduct
- Repeated misconduct
- Performance issues
The employer must give a notice of termination as per the employment contract unless it is serious misconduct.
The employer also need not pay the employee who wishes to leave the organization immediately without serving the notice period.
If an employee is dismissed and was not during the probation period, the employee has the right to ask the employer for a written statement of the reasons for dismissal. The employee can ask for a written request up to 60 days after discovering the dismissal. The employer must provide the written statement within 14 days of such a request.
When the dismissal of an employee happens during the probation period, the employer needs to explain if asked, but this can be verbal.
Taxes in New Zealand
Understanding that being compliant with employment law in New Zealand can be challenging because the rules and being compliant are complex and subject to frequent change.
Consequently, this may place a significant burden on admin and payroll staff while they already have enough to deal with in helping a company’s New Zealand operation be established.
The process is why a global PEO managed services provider can be a tremendous asset in making sense of all the regulations and ensuring seamless compliance right from the start.
New Zealand follows a progressive tax model where the tax rates increase with an increase in income. The personal tax years in New Zealand typically run from April 01 to March 31 each year.
The employers must deduct the appropriate amount of income tax from salary and wages before paying the wages to the employees. This is known as tax deducted at the source. Apart from this, financial institutions must deduct relevant taxes for any capital gains, for example – dividends, etc. – before paying out the dividends (subject to income tax rates).
Withholding of taxes can be either done for residents or non-residents of New Zealand depending on the status of the individual; wherein the Non-Resident Withholding Tax is at a higher rate in comparison to the Resident Withholding Tax.
Underpayment and overpayment of taxes are calculated at the end of every year by the tax authorities. The individuals who may not have paid the correct amount of income tax may submit all relevant documents – Personal Tax Summary, for ease of calculation.
Employee Income Tax:
(The salary is in New Zealand dollars.)
0 – $14,000
$14,001 – $48,000
$48,001 – $70,000
$ 70,001 – $180,000
Other tax rates to keep in mind if you are expanding your business in New Zealand are as below:
Capital Gain Tax
Goods and Service Tax
The Inland Revenue Department collects taxes in New Zealand on behalf of the Government.
How can Multiplier Help?
With Multiplier’s PEO/EOR solution, treading into a new market is as seamless as confidently ice-skating.
We can help you onboard your preferred candidate, handle HR issues and payroll, and ensure compliance with local laws. By partnering with our EOR in New Zealand, you avoid the hassle of setting up a foreign branch or subsidiary.
Once you have chosen your desired talent, start generating and customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Russian Roubles with a single click. Hire and expand using the best SaaS-based PEO service in New Zealand. Contact us to grow your business today.