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Hire in New Zealand
Taxes and Social Security Contribution
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A thriving and stable economy and a strong focus on innovation are just two of the factors that make New Zealand an attractive hiring destination for global companies. The country’s excellent ease of doing business rating – New Zealand has been leading the ranks of the World Bank’s Ease of Doing Business Report for several years in a row – is yet another argument in favor of setting up shop in the island state in the APAC region.
The fact that the local language is English is a practical bonus that plays in favor of international employers growing their global teams. What’s more, employers in New Zealand pay hardly any social security contributions.
New Zealand’s Employment Relations Authority mandates that all employment contracts must be in writing. An employment contract should at least comprise the following mandatory information:
Identification of both parties
Basic salary as well as other compensation or benefits
Notice periods for employment termination
Options for resolving problems with regard to the employment relationship
Employment contracts can be concluded for a fixed term or for unlimited time. Fixed-term contracts are, however, only permitted where the employer can give a valid business reason for not offering a permanent position. Furthermore, the law distinguishes between full-time, part-time and casual employment contracts.
New Zealand employment law distinguishes between probationary periods and statutory trial periods. The latter are available to employers with less than 20 employees only. The maximum duration is 90 days. During this time, employment may be terminated at any point without indicating a reason. Probationary periods can be defined by all employers regardless of company size, but must be agreed upon in advance.
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There are no legal regulations of employee standard working hours. In any case, the expected weekly working hours should be detailed in the employee’s individual employment contract. As a standard, full-time employees in New Zealand work between 7.5 and 8 hours per day.
Work performed in addition to the employee’s regular working hours counts as overtime. There are no legal requirements for employers to provide overtime pay, but waged employees should be paid for overtime at higher rates which are to be determined in their employment contract. It is also possible to include overtime pay regulations in the company policy.
Payroll frequency in New Zealand is determined by the employer. The most common pay schedules are weekly, bi-weekly and monthly payment.
In April 2022, the hourly minimum wage will rise to NZD 21.20 per hour. The minimum hourly pay for trainees is set at NZD 16.96.
Under current employment regulations, employees get 10 paid sick days per year – provided they have been working for their employer for no less than 6 months. Before the Holidays Amendment Bill entered into effect in July 2021, the annual sick leave entitlement was limited to 5 days. The new law also allows employees to carry over up to 10 unused sick days into the following year – limited to 20 days of sick leave at the time.
There are no legal provisions for a 13th month salary, but it is common to offer employees a performance-based bonus.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for New Zealand.
Employees and employers in New Zealand are subject to the following tax and social security contribution rates (valid for the 2021/2022 tax year running from 1 April 2021 to 31 March 2022). * Individual income is taxed progressively based on the following tax bands: Up to NZD 14,000: 10.5% NZD 14,000 – NZD 48,000: 17.5% NZD 48,000 – NZD 70,000: 30% NZD 70,000 – NZD 180,000: 33% Over NZD 180,000: 39%
28% corporate tax rate
15% VAT (standard GST rate)
up to 39%
Individual income tax rates:
10.5% – 39% *
around 4% of employee salary
3% KiwiSaver (minimum contribution rate, higher rates of 4%, 6%, 8% or 10%) – not mandatory
roughly 1% ACC levy (occupational and non-occupational accident compensation) – varies depending on the industry
4.21% of employee salary :
3% KiwiSaver (minimum contribution rate) – not mandatory
1.21% ACC levy – 1.39% incl. GST (1.27% starting from April 2022 – 1.46% incl. GST)
Employees in New Zealand are entitled to 4 weeks of paid annual leave. This benefit is available to employees who have completed their first year of service with their employer. In addition, the country observes 11 public holidays. However, their number is due to increase to 12 paid days off in 2022.
Primary carer leave (i.e. maternity leave) in New Zealand covers 26 weeks and is paid by the government. The leave can start up to 6 weeks before the expected due date. If the leave has to start earlier than 6 weeks prior to the expected date of birth due to medical conditions, the mother is still entitled to 20 full weeks after giving birth.
On top of that, pregnant employees are allowed to take up to 10 days of unpaid leave for pregnancy-related appointments. Primary carer leave entitlements also extend to employees who become the primary carer of an adopted child of less than 6 years of age.
Fathers and partners of the pregnant employee are entitled to either 1 or 2 weeks of partner’s leave, depending on whether their length of service with their current employer surpasses 6 or 12 months. This leave is unpaid and must be taken within a specific timeframe around the child’s birth, which is 21 days before and 21 days after the birth. In addition, partners may share any unused primary carer leave.
In addition to primary carer and partner’s leave, parents can take so-called extended leave. The extended leave can be shared between both partners. It is also possible for both partners to take the leave at the same time. As for partner’s leave, the exact leave entitlement depends on the service length of both parents. If both parents have been employed by their current employer for more than 12 months, then they can share up to 52 weeks of extended leave between them (less 26 weeks of primary carer leave). Extended leave is unpaid.
Other leave entitlements include bereavement leave and family violence leave.
Employment relationships in New Zealand cannot be terminated at will. Instead, employers need to present a lawful reason for dismissal. Such reasons include:
Employment termination due to gross misconduct may result in the employee’s immediate dismissal. In all other cases, employers must respect the contractual notice periods. Notice periods are typically between 2 and 4 weeks. Alternatively, employers can provide pay in lieu of notice.
In cases where no notice period has been determined in the individual employment contract, employers are required to respect a “reasonable” notice period which is determined based on various factors such as length of service and industry standards.
There is no legal obligation to provide redundancy compensation. Unless employer and employee have agreed on severance pay, an employee’s final pay thus only includes remuneration for the hours worked and for any unused annual leave days.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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