Hire Staff in New Zealand without Establishing a Local Entity.
As one of the southwest Pacific’s most developed and economically powerful countries, New Zealand offers incredible business opportunities. Additionally, New Zealand offers free trade agreements with various partners across the globe, offers a high standard of living for its residents and has major trading partners in various countries. The country also boasts low inflation and one of the world’s strongest economies. These factors contribute to the country representing some of the most promising opportunities in the world today.
In order to simplify the process of expanding to New Zealand, New Horizons Global Partners offers complete PEO services to help foreign businesses hire staff in New Zealand.
Why Use a PEO in New Zealand
Using a PEO in New Zealand can provide your company with a competitive advantage. You can deploy staff faster and delegate employer liabilities to a local trusted expert without having to undergo the expense or commitment of establishing a branch office or subsidiary. Companies choose us as their PEO for many reasons, including:
- They want to expand their business to New Zealand but are not fully ready to establish a separate legal entity
- They want a cost-effective solution to set up their business in New Zealand
- They want to test the market in New Zealand before making a full investment
When working with an established PEO like New Horizons, you can rest assured that your employment structure will be set up in a manner compliant with local labor laws. We use best practices to streamline the employment process. We also manage payroll, human resources duties and tax compliance matters, taking these tedious burdens off your shoulders so that you can concentrate on business operations.
This system allows you to set up a team much faster and offer a better hiring experience to your new recruits. The employee is assigned to work on your team and is under your direction and control. When structuring employment with workers in New Zealand, we consider the following factors.
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 in the country: individual employment agreements and collective agreements. Under New Zealand’s labor laws, there are certain mandatory clauses that must be included in these agreements. New Horizons provides clients with an employment contract template that is in compliance with these rules.
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
- Waitangi Day
- Good Friday
- Easter Monday
- Anzac Day
- Queen’s Birthday
- Labor Day
- Christmas Day
- Boxing Day
Under New Zealand law, almost all employees are entitled to a minimum of four weeks of paid annual leave each year after they have worked with their employer for at least a year, but many employers let workers use their annual leave before their anniversary with the company. This is called leave in advance. Employment agreements must establish the annual leave that employees are entitled to receive.
To be eligible for the minimum amount of annual leave time, workers must work regular hours in a full-time or part-time position. If the employee does not have set hours, the employer can discuss leave with the employee and they can reach an agreement regarding four weeks’ leave. Workers who are on short fixed-term contracts may be paid extra instead of being given leave, but this must be agreed upon and stated in the employment agreement. In these situations, the employee must be paid at least 8% more.
Workers still build up annual leave while they are on parental leave. When they return to work after parental leave, they are still permitted to take four weeks’ annual leave a year.
If an employee does not take his or her accrued leave time within the year, they can carry over their leave to another year, but the employer can establish rules about how much time can be carried over. The agreement may state that the employee can cash in some of their unused leave or the employer may be able to take part or all of the unused leave after a fair process.
The employment agreement states when employees are paid for their time off and how the pay is determined. The employee is typically paid their normal weekly pay or the average they earned a week over the last twelve months before the leave.
Most people in New Zealand receive a minimum of five days of sick leave each year. During this period, the employee usually gets paid their regular wages. If their loved one is sick, the employer can ask for a doctor’s certificate to this effect after three days. Workers can carry over some of their unpaid sick leave to the following year.
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 may include special leave before the baby is born or negotiated leave to care for a child after he or she is born. Preterm baby payments are made when the baby is born before the mother’s due date. The amount of parental leave a person can take depends on the situation.
Paid parental leave is a government-funded payment a parent receives when they stop working to care for a child under six years old. The most that an employee can receive each week is $585.80 before taxes. If a person had a baby on or after July 1 2018, they can get 22 weeks of paid parental leave. If the baby was born on or after July 1, 2020, they can get 26 weeks of paid parental leave.
It may be possible for spouses or partners to share parental leave where the worker can transfer some of their unpaid parental leave to the other spouse or partner. This amount comes from the other parent’s 52 weeks of 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 or partner. The amount they can transfer depends on if the parent meets the parental leave requirements and how long the spouse or partner has been employed.
New Zealand recognizes “probationary” and “trial” work periods. Each of these have different rules and the terms regarding this period should be specified in the employment contract. Probation serves as the beginning of the employment relationship in which the employee can demonstrate his or her skills and the employer can assess them for potential sustainability for permanent employment. There is not a specific limit on how long the probationary period lasts. During a probationary period, the employer is required to follow a clear disciplinary or dismissal procedure and cannot terminate the employee without reason.
Trial Work Period
An employer can designate a trial work period of up to 90 days. An employee who has never worked for the employer before can agree to this arrangement. Typically, if there is a trial period, there is not a probationary period. During a trial period, an employer can terminate the employee without a specific reason and the employee cannot file for unfair dismissal unless the employer has violated the law.
Severance or redundancy pay may be addressed in the employment agreement. There is not a severance or redundancy pay scheme that is defined under the law in New Zealand. Employees are generally provided with notice before termination. However, a specific notice period is not provided by law. Nonetheless, it should be “reasonable.” Information regarding notice periods should be included in the employment contract. It is possible for there to be different notice periods for permanent work and the trial period. Many employment contracts contain a four weeks’ notice of dismissal clause. For trial periods, two weeks’ notice is often customary.
Tax and Social Security in New Zealand
New Zealand has specific rules regarding payroll and taxation that depend on whether your business employs local New Zealand employees or foreign nationals. Married couples are taxed separately in New Zealand on all forms of income. Expats can offset their taxable income with relevant business expenses.
New Zealand has a progressive income tax that charges a higher rate for the more income a person makes, capping off 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, but the Accident Compensation Corporation requires all employees and self-employed residents to contribute to it. This fund provides 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 who have lived in New Zealand for at least ten years, five of which must have been after the person was 50.
Citizens and permanent residents who have lived in the country for at least two years can potentially receive unemployment benefits.
Foreign companies are largely concerned with compliance regarding:
- Individual income tax
- Social security costs
- Payroll tax
- Withholding tax
- Business tax
- Sales tax
Benefits of Working with New Horizons
Working with a PEO eliminates most of these concerns. Contact New Horizons Global Partners today to learn more about our payroll, human resources and employment services and how they can help your business.