Expand your business into New Zealand - without an entity
Horizons provides global employment solutions for businesses wanting to hire employees and distribute payroll in New Zealand. Through our New Zealand PEO and Employer of Record, we manage your company’s payroll, benefits, and expenses in New Zealand. Additionally, we oversee HR duties, as well as employment and tax compliance.
Horizons will act as your employees’ Employer of Record, which means you can begin doing business in New Zealand without a local entity. This not only allows your business to go to market faster, but also has the potential to save your business thousands in expansion costs.
As the only New Zealand Employer of Record & PEO with an in-house recruitment team, Horizons will source, hire, and onboard your New Zealand workforce. We hire employees in accordance with New Zealand labor regulations and coordinate all expense claims and benefits payments. Although we act as your employees’ Employer of Record, you still maintain full autonomy and control over all employees.
Our New Zealand PEO simplifies your expansion
Horizons enables your business to expand its operations into New Zealand – without setting up a legal subsidiary.
Employment & Labor Laws in New Zealand
📝 Employment contracts in New Zealand
It is standard practice to have a written employment agreement with workers in New Zealand. There are two types of employment agreements that cover all employees: individual employment agreements and collective agreements.
An employer can designate a trial work period of up to 90 days. If an employee has not previously worked for the employer, they can agree to this trial. During a trial period, an employer can terminate an employee’s contract without a specific reason. Furthermore, an employee cannot file for unfair dismissal, unless the employer has violated the law. Note trial periods, may only be used by employers with less than 20 employees.
For employers with a bigger workforce (20 or more employees), probationary periods (distinct from trial periods) can be used. The existence of such a period must also be spelled out in employment contracts, and (unlike trial periods), the employer can file for unfair/unjustified dismissal.
Under New Zealand’s labor laws, there are certain mandatory clauses that must be included in all employment contracts.
Horizons’ New Zealand PEO provides clients with an employment contract template that ensures full compliance with workplace regulations.
⏰ Working hours
The standard work week in New Zealand is Monday to Friday. An eight-hour work day is typical.
📅 Holidays in New Zealand
Workers generally do not work on the following public holidays in New Zealand
New Year’s Day
Day after New Year’s Day
Wellington Anniversary Day
Auckland Anniversary Day
Nelson Anniversary Day
Taranaki Anniversary Day
Otago Anniversary Day
Southland Anniversary Day
South Canterbury Day
Hawke’s Bay Anniversary Day
Marlborough Anniversary Day
Christchurch Show Day
Chatham Islands Anniversary Day, Westland Anniversary Day
Boxing Day (in lieu)
New Zealand has specific rules regarding payroll and taxation that depend on whether your business employs local or foreign nationals. The country also has a progressive income tax that charges a higher rate for the more income a person makes, capped at 30%.
New Zealand has a comprehensive social security system that provides benefits for sickness, unemployment, disability, and retirement. It is largely non-contributory and is funded by general taxation. Most benefits are available to all residents, regardless of their employment history. However, the Accident Compensation Corporation requires all employees and self-employed residents to provide contributions. This fund offers benefits to workers injured on the job.
Most social security benefits have strict residential requirements. State pension funds are paid to citizens and permanent residents 65 and older. These people need to have lived in New Zealand for at least 10 years, five of which must have been after the age of 50.
Citizens and permanent residents who have lived in the country for at least two years can potentially receive unemployment benefits.
For foreign companies conducting business in New Zealand, it is vital to have a firm understanding of the following:
- Individual income tax
- Social security costs
- Payroll tax
- Withholding tax
- Business tax
- Sales tax
🏥 Health insurance
In New Zealand, individuals may be eligible for subsidized healthcare if they are:
- A New Zealand citizen or permanent resident (exceptions apply if you are an Australian citizen or permanent resident – check the Ministry of Health website)
- A work visa holder who is allowed to work in New Zealand for two or more years
- The holder of a work visa that allows them to work in New Zealand for two or more years – when combined with the time spent in New Zealand before obtaining their current work visa. As an example, a person qualifies if they had a visa that allowed them to be in New Zealand for one year, and they now have a work visa that allows them to stay another year.
- An interim visa holder who was eligible immediately before obtaining their interim visa
The government does not fund private healthcare services, such as private hospitals or clinics. Individuals and in some cases, employers, need to pay for these services. There are two main types of private health insurance policies:
- ‘Comprehensive cover’ policies that cover all medical costs, including GP visits and prescriptions
- Policies that provide cover for combinations of specialist care and elective (non-urgent) surgery
🔖 Annual leave
Under New Zealand law, almost all employees are entitled to a minimum of four week’s paid annual leave, for each year after one year’s company service. However, many employers allow workers to use their annual leave before they have reached one year’s company service. This is called ‘leave in advance’. Employment agreements must establish the amount of annual leave that employees are entitled to receive.
To be eligible for the minimum amount of annual leave, workers must work regular hours in a full-time or part-time position. If the employee does not have set hours, the employer and employee can reach an agreement on the set amount of annual leave. Workers who are on short fixed-term contracts may be paid extra, instead of being given leave. However, this must be agreed upon and stated in the employment contract. In these situations, the employee must be paid at least 8% more.
Workers continue to accrue annual leave while they are on parental leave. When they return to work after parental leave, they are still permitted to take four week’s annual leave per year.
If an employee does not take their accrued leave within a year, leave can be carried over to another year. Employers can establish rules over how much time can be carried over. In some cases, employees can also cash in a portion of their unused leave.
😷 Sick leave
Most people in New Zealand receive a minimum of five day’s sick leave each year. When using sick leave, an employee will typically be paid at their normal rate. Employees are able to carry over some of their unpaid sick leave to the following year.
👶 Parental leave
Eligible employees can take parental leave to care for a child. During this time, they may be able to receive payments from the government. Parental leave can include special leave before a baby is born, or negotiated leave to care for a child after they are born. Preterm baby payments are made when a baby is born before the mother’s due date.
Paid parental leave is a government-funded payment an employee receives when they stop working to care for a child under six years of age. The most that an employee can receive each week is $585.80, before taxes. Employees receive 26 week’s paid parental leave when a child is born.
It may be possible for spouses to share parental leave when one of them can transfer a portion of unpaid parental leave to their spouse. This amount comes from the other parent’s 52 week’s unpaid parental leave.
If a parent is the primary caregiver and is eligible for parental leave payments, they may be able to transfer payments to their spouse. The amount they can transfer depends on parental leave requirements and how long their spouse has been employed.
💰 Termination and severance
Severance or redundancy pay should be addressed in the employment agreement. There is not a severance or redundancy pay scheme that is defined under New Zealand law.
Employees are generally provided with notice before termination. However, a specific notice period is not mandated. It is possible for there to be different notice periods for permanent work and trial periods. Many employment contracts stipulate a four week notice of dismissal clause. For trial periods, two week’s notice is customary.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. Horizons’ New Zealand PEO can mitigate risk for foreign companies and provide guidance through this process.
💳 New Zealand compensation and benefits
New Zealand compensation laws
There are three different wage tiers in New Zealand that encompass adult, starting-out, and training. All employees aged 16 and over qualify for the adult minimum wage – which is NZ $17.70 per hour, before tax. New Zealand’s starting-out wage is NZ $13.20 an hour, before tax. The starting-out wage covers:
- 16 and 17-year-olds that have worked for one employer for less than than six months
- 18 and 19-year-olds who meet designated specifications
- 16 to 19-year-olds with an employment agreement that requires 40 credits of industry training per year
For employees classified as training, the minimum wage is NZ $13.20 an hour. Training workers need to be 20 years or older, and have an employment contract that states at least 60 credits of industry training per year.
Minimum Wage Country Comparison Chart
(Per month in USD)
Guaranteed benefits in New Zealand
New Zealand employees are entitled to at least four week’s annual leave per year. They have the option of exchanging one week’s annual leave for cash.
There are 11 public holidays in New Zealand each year. Employees are entitled to a day off on each of these days. When assessing a benefit management plan, employers need to be mindful they provide employees with the statutory minimum of leave entitlements.
Employees are also entitled to parental leave benefits. For employees with children, they’re able to use their sick leave – known as domestic leave – to care for their sick children or another dependent family member.
New Zealand benefit management
Businesses seeking to expand into New Zealand need to budget for supplemental benefits. These benefits can influence an employee to accept a position and to remain with an employer. As an example, employers can elect to offer their employees private healthcare subsidiaries as an additional benefit.
Horizons New Zealand PEO can provide expert guidance to help simplify the process of expanding into the country.
Benefits and compensation restrictions
Whilst collective bargaining agreements (CBAs) are not overly common in New Zealand, employers should confirm whether their employees are covered by one. If this is the case, then employers will need to meet the terms of the CBA, as opposed to statutory minimums.