Payroll in New Zealand

Payroll Process in New Zealand

New Zealand has a progressive and advanced payroll system.

In addition to paper-based payroll process management, the Ministry of Business, Innovation & Employment specifies how payroll systems in New Zealand can be used to calculate different leaves and holidays. Under the Holidays Act 2003 and the Wages Protection Act 1983, employers using payroll systems and payroll services in New Zealand:

• Must stay compliant with mandated statutory holiday and leave entitlements and payments
• Update payroll systems to reflect changes in employee work patterns, schedules, etc.
• Make deductions only as specified by law such as PAY tax, education loan repayments, and child support

To simplify matters more, the Ministry of Business, Innovation & Employment provides helpful resources for payroll professionals, including personnel handling payroll tax in New Zealand. covering areas such as:

• Applying a Holidays Act 2003 Assurance framework to organizations
• Understanding general payroll compliance issues in New Zealand
• Assisting to recruit and develop payroll professionals

All that said, of course the payroll process in New Zealand isn't limited to the above mentioned concerns. Market presence and experience supported by legal expertise is what should inform any payroll process management activities in New Zealand.

Payroll Processing in New Zealand

The expanding web of payroll laws, policies, and requirements in New Zealand and beyond needs extensive resources to process.

If you're considering processing payroll in New Zealand or to provide payroll services in the country on your own, you can see how much work and resources are needed. Beyond minimal compliance requirements, you'll need to establish a legal entity there so you can process payroll in New Zealand independently.

Or, you can use payroll outsourcing in New Zealand to help you manage your payroll needs.

Skuad: Payroll Processing in New Zealand

At Skuad, you're provided with unmatched payroll solutions in New Zealand to help you:

• Manage payments for your independent contractors in 160+ countries
• Calculate the cost to hire automatically
• Streamline payouts with $0 onboarding fees and optimum exchange rates
• Simplify legal complexities by staying complaint using our sophisticated auto-pilot mode
• Provide custom benefits packages
• Secure your payroll data across all your processing phases

Payroll Management in New Zealand

Managing payroll is a complex process, more so when hiring and paying employees and independent contractors abroad. In New Zealand,  just as in any jurisdiction, payroll expertise is indispensable.

To manage payroll in New Zealand as an international employer, you need to consider matters related to hours and wages including:

• Pay and wages, including wages, salaries, commissions, and piece rates
• Rests and breaks, including paid and paid hours for meals, breastfeeding, and more
• Hours of work, covering in-writing hours of work between employers and employees
• Keeping accurate records for audit and tax compliance purposes, including records of wages and leaves

Payroll Compliance in New Zealand

To stay payroll-compliant in New Zealand, you need first to understand in-depth Zealand's laws and regulations regarding employee pay, benefits, social security, deductibles, and more.

The minimum payroll compliance requirements in New Zealand, just as anywhere else, cover basic statutory entitlements mandated by law. Failing to comply is damaging to employers not only financially but also reputationally. It's no surprise that an understanding of New Zealand's labor laws in general, and payroll regulations in particular, is indispensable if a business is actively looking to engage local NZ talent.  

To understand such requirements, a closer look is needed at the laws, regulations, and policies governing payroll compliance in New Zealand.

Payroll Components in New Zealand

Governing New Zealand's labor relations is a wide range of laws and regulations. That's why, payroll- and non-payroll-related laws and regulations can't be readily or easily separated, unless you've adequate legal expertise. For current purposes, though, here is a list of New Zealand's most important employment legislation:

Employment Relations Act 2000:

• Provides a comprehensive legal grounding for relationships between employers, employees, and unions
• Protects and regulates employee rights for collective bargaining, dispute resolution, and grievances
• Promotes effective and enforceable employment standards

Holidays Act 2003:

• Guarantees statutory rights for annual, sick, and bereavement leaves
• Regulates payment for public holidays and any related off-days

Wages Protection Act 1983:

• Regulates wage deductions under certain circumstances
• Prohibits payment-for-employment policies
• Prevents restrictions by employers to control how employees spend wages

Minimum Wage Act 1983:

• Provides for an annually-reviewed minimum wage
• Forms a basis for a standard 40-hour working week

Parental Leave and Employment Protection Act 1987:

• Guarantees rights to paid and unpaid leaves for parental reasons
• Protects employees on parental leave

Equal Pay Act 1972:

• Prohibits discrimination in pay rates based on sex
• Vests the Employment Court with the power to outline equal-pay principles

Health and Safety at Work Act 2015:

• Protects employee health and safety at the workplace

Human Rights Act 1993:

• Prohibits discrimination in employment based on sex, race, or age
• Guarantees the Human Rights Commission can help in resolving complaints of unlawful discrimination
• Guarantees the Human Rights Review Tribunal can hear arguments brought by employees against employers related to breaches of the Human Rights Act 1993

Privacy Act 2020:

• Governs an employer's right to manage an employee's personal information
• Guarantees the Privacy Commissioner has the powers to investigate any Privacy Act 2020 breaches
• Guarantees the Human Rights Review Tribunal can handle claims related to any Privacy Act 2020 breaches

Protected Disclosures Act 2000:

• Protects whistleblowers against any potential retaliation from employers because of any serious wrongdoing

In New Zealand, payroll compliance can be best understood by breaking down payroll components into:

Compensation

This is defined under types of pay as follows:

• Wage and penal rates. Negotiable and usually payable on a per-hour basis
• Salary. Set at a fixed amount per year and must be mentioned in writing in the employment agreement
• Commission. Could be paid as a percentage of an overall value (as in sales), as a capped amount, or as an unlimited amount
• Piece rates. Paid based on pieces delivered by an employee (number of bins of fruit picked, for example)
• Working for accommodation. Prohibited since all employees must be paid in money, regardless of accommodation arrangements
• Payment for training. Only mandatory if required by the employer and if part of the employee's normal working hours
• Payment for clothing. Only mandatory if necessary for safety requirements at the workplace or if negotiable between the employer and the employee as a workplace uniform

Working hours

The hours of work in New Zealand are regulated by law as follows:

• Set at a maximum of 40 hours, or five days, per week (excluding overtime) based on the employer-employee agreement
• Could be changed based on the employer-employee agreement but must guarantee the minimum wage for all the time worked

Overtime

Overtime pay is not explicitly specified in New Zealand's laws. Instead, employers and employees can negotiate overtime pay on a case-by-case basis.

Social security

In addition to New Zealand Superannuation — a flat-rate public pension scheme — New Zealand introduced in July 2007 KiwiSaver, a voluntary pension savings scheme offered by private-sector providers.  

Sick leave

• Set at a minimum of 5 to 10 days per year as of July 24, 2021
• Mandated by law for sick or injured employees or dependents
• Can be increased to five more days per year after six months of employment or 12 months after lasthe t sick leave

Parental leave

Detailed information, along with with ways to calculate leave entitlements including changes under COVID-19, can be found at parental leave.  

Public holidays

For a complete list of public holidays in New Zealand covering 2022-2024, check public holidays and anniversary dates.

Payroll taxes

These fall under the personal income tax type taken by employers as PAYE (Pay As You Earn) from employee salary or wage and paid to Inland Revenue Department (IRD), New Zealand's tax authority, as follows:

39% — $180,001

33% — $70,001-$180,000

30% — $48,001-$70,000

17.5% — $14,001-$48,000

10.5% — $0-$14,000

Other laws

These include:

• Remuneration Authority Act 1977
• Accident Compensation Act 2001
• Union Representatives Education Leave Act Repeat Act 1992
• WorkSafe New Zealand Act 2013

Employee Benefits in New Zealand

In addition to all statutory benefits mentioned above, New Zealand provides some additional attractive benefits and allowances including for

• Exceptional credentials or skills an employee brings to a job role
• Unique responsibilities an employee has performed in a leading role
• Inconvenient work-related features or conditions
• Traveling time

By now you should understand the legal complexities in store for an employer actively preparing payroll for New Zealand prospects, and what risks may be ahead if you're not fully compliant.

You needn't pore over stacks upon stacks of compensation and compliance fine prints to realize how Skuad is your payroll savior in New Zealand and beyond.

Wait no more and request a demo at Skuad.