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Minimum wage in New Zealand

New Zealand payroll

Social security benefits in New Zealand

Other employee benefits in New Zealand

Simplify your global payroll with CXC

Payroll in New Zealand

Managing payroll in New Zealand can be quite a challenge, especially for international companies. Not only is there a need to navigate through wage calculations and pay disbursements, but you must also keep up with the intricacies of local tax laws and regulations, including PAYE (Pay As You Earn) and other statutory requirements. Mishaps in payroll management can result in fines, audits, or legal complications, which may lead to dissatisfied employees.

Payroll outsourcing in New Zealand

To navigate these complexities, modern companies are increasingly turning to payroll outsourcing. This strategic approach relieves the burden of understanding and staying updated with the local compliance landscape. Established payroll providers, such as CXC, are experts in the field, well-versed in the nuances of local laws, regulations, and compliance obligations.

This ensures payroll is managed efficiently and accurately, reducing the risk of payroll errors and associated penalties. Most importantly, outsourcing allows businesses like yours to focus on their core operations without being sidetracked by the administrative payroll process and compliance, saving you time and resources in the long run.

In this detailed guide, we delve into all the aspects you need to manage payroll effectively in New Zealand. We cover essential topics such as the minimum wage, social security contributions, employee benefits, and other critical factors to ensure that your payroll operations are fair, compliant, and conducted with the utmost integrity. Moreover, you’ll gain the knowledge necessary to execute payroll with confidence, supporting your company’s growth and employee satisfaction in this dynamic market landscape.

Minimum wage in New Zealand

The current minimum wage in New Zealand is 23.15 NZD per hour for workers 16 years of age and older, effective April 1, 2024. This increase means that employees working 40 hours per week will earn an additional 18 NZD each week before tax.

Employers in New Zealand can offer a salary that is above the minimum wage. The minimum wage rates established by the government are designed to set the lowest amount that can be paid to workers. There is no maximum limit on how much more an employer can pay their employees.

Offering a salary above the minimum wage can reflect the employer’s valuation of the employee’s skills, experience, and the market demand for these skills. This practice is not uncommon, especially in industries that require specialised skills or in competitive job markets were attracting and retaining talented workers is crucial.

In addition, employers should also be aware that there are different types of minimum wages in New Zealand, such as training and starting-out wages, which may apply under certain conditions.

For those employing individuals under a visa, there may be specific wage rate requirements to meet immigration criteria.

Minimum wage after tax

The minimum wage in New Zealand for 2024 is 23.15 NZD per hour before taxes. For someone working full-time, with a standard working week of 40 hours, this equates to an annual gross income of 48,152 NZD. After taxes, an individual earning the adult minimum wage in New Zealand can take home approximately 39,949.67 NZD per year, which is around 768.26 NZD per week or 3,329.14 NZD per month.

New Zealand payroll

Payroll laws in New Zealand

There are several laws and regulations governing payroll operations in New Zealand to ensure employees are paid fairly and in compliance with the country’s labour standards. The major laws covering payroll include:

Employment Relations Act 2000 (ERA 2000): This act provides the foundation for employment relationships, including good faith obligations, collective bargaining, and the resolution of employment disputes.
Holidays Act 2003: Governs employee entitlements to public holidays, annual holidays, sick leave, and bereavement leave, ensuring workers are compensated correctly for time off.
Minimum Wage Act 1983: Sets out the minimum wages that must be paid to employees, including special rates for training and starting-out workers, ensuring all workers receive a fair minimum wage.
Wages Protection Act 1983: Regulates the payment of wages, ensuring that employees receive their correct wages and deductions are made legally.
Parental Leave and Employment Protection Act 1987: Outlines employees’ entitlements relating to parental leave, including maternity, paternity, and adoption leave, supporting workers’ rights to take leave associated with childbirth or adoption.
KiwiSaver Act 2006: Establishes a voluntary, work-based savings initiative to encourage long-term saving for retirement, including employer contributions to employees’ KiwiSaver accounts, which impacts payroll operations.
Income Tax Act 2007: Details the requirements for deducting Pay As You Earn (PAYE) tax from employees’ wages, along with other payroll-related deductions like student loans and child support payments.

These laws collectively ensure that the payroll process in New Zealand is fair, transparent, and upholds the rights and obligations of both employers and employees. Employers must stay informed and comply with these regulations to avoid any legal repercussions.

Payroll rules to keep in mind in New Zealand

To ensure that employees are paid fairly and on time, there are payroll rules set in place that employers should keep in mind, including:

Keeping accurate and detailed employee records: Employers must keep this record for a period of seven years. These records include information about wages, time worked, holiday, and leave entitlements. Failing to keep these records correctly can result in penalties of up to 100,000 NZD for employers.

In addition, employers must guarantee the full and timely payment of wages, as well as the lawfulness of any deductions, including taxes and KiwiSaver contributions. To remain compliant, employers should stay updated with the latest changes in local laws and regulations.

Employer payroll tax in New Zealand

There are several payroll-related taxes and deductions that employers must withhold from their employees’ earnings and remit to the Inland Revenue Department (IRD). Here is a list of the main payroll taxes for which employers are responsible:

PAYE (Pay As You Earn): This is the income tax that employers need to deduct from employees’ or contractors’ salary, wages, or schedular payments.
Accident Compensation Corporation (ACC) Levies: Employers pay ACC levies, which provide coverage for work-related injuries.
KiwiSaver contributions: If the employee is a member of the KiwiSaver retirement scheme, the employer must deduct the employee’s chosen contribution rate from their pay and submit this to IRD. Employers are also required to contribute a minimum amount towards the employee’s KiwiSaver.
ESCT (Employer Superannuation Contribution Tax): This tax is applied to the employer’s contributions to their employees’ KiwiSaver or other registered superannuation schemes.
Student loan repayments: If the employee has a student loan, the employer has to deduct repayments from their salary or wages once their income is above a certain threshold.
Child support: If instructed by the IRD, employers may be required to deduct child support payments if instructed by the IRD.

Payroll tax rate in New Zealand

Payroll taxes for businesses vary depending on the type of entity. Most companies are taxed at 28%, while Māori authorities are taxed at 17.5%.

For individuals, the tax rate is determined based on their income bracket, and specific rates apply for different types of income and benefits. An essential part of payroll in New Zealand is the Pay As You Earn (PAYE) system, which includes deductions for income tax and accords with the KiwiSaver scheme, where employees can choose a contribution rate of either 3%, 4%, 6%, 8%, or 10% of their before-tax pay, with 3% being the default rate.

Payroll cycle in New Zealand

The payroll cycle frequency is largely at the employer’s discretion; however, the most common payroll frequencies are monthly or biweekly. This flexibility allows businesses to choose a payroll schedule that best fits their operational requirements and cash flow considerations.

13th month salary in New Zealand

The concept of a 13th month salary is not a standard or legally required practice in New Zealand.

The social security system in the country provides support to individuals and families in a variety of situations, including unemployment, disability, and retirement. One of the key components is the New Zealand Superannuation, a universal pension scheme for people aged 65 and above.

These benefits are administered by Work and Income and can include support for living expenses, assistance for health and disability-related costs, help with urgent costs, and payments for carers of individuals with health conditions, injuries, or disabilities.

For example, living expenses benefits might cover heating and power bills, and urgent costs benefits could assist with house maintenance or bereavement-related expenses. Support services include pension schemes such as New Zealand Superannuation or Veteran’s Pension, and social security agreements that New Zealand has with other countries to support people who have lived or worked overseas.

There are also social security benefits relating to relationships, such as support for those in violent relationships or experiencing a family breakdown.

The system also includes contributions towards the KiwiSaver scheme, which is a voluntary, work-based savings initiative to help with long-term savings for retirement, with employers matching the contribution of their employees to the scheme.

Social security contributions in New Zealand

In New Zealand, the social security contributions primarily consist of the compulsory employer contributions to the KiwiSaver scheme and the Accident Compensation Corporation (ACC) levy.

Employers are required to match their employees’ contributions to KiwiSaver, which is a long-term savings initiative to help with retirement. The minimum contribution for KiwiSaver is set at 3% of an employee’s gross salary but can be chosen by employees to be higher, up to 10%.

Moreover, all businesses in New Zealand contribute to the ACC, a no-fault scheme that covers the cost of treatment and recovery for all citizens, residents, and temporary visitors who suffer personal injuries.

KiwiSaver in New Zealand

KiwiSaver is a voluntary, work-based savings initiative in New Zealand aimed at helping residents save for their retirement. Managed by independent KiwiSaver providers, members can choose a scheme to manage their savings, and it is designed for all New Zealand citizens and permanent residents living in the country. Membership does not affect eligibility in New Zealand. KiwiSaver allows for regular contributions to be made directly from an individual’s pay or via direct payments to their scheme provider.

Other employee benefits in New Zealand

Businesses often offer non-statutory employee benefits to attract, retain, and motivate top-tier talent. These benefits, not mandated by law but offered voluntarily, play a crucial role in creating a competitive workplace and can significantly enhance employee satisfaction and loyalty.

Here are some commonly provided non-statutory employee benefits in the New Zealand market:

Health insurance in New Zealand

Coverage for medical, dental, or optical treatments can distinguish your company as an employer who genuinely cares about the wellbeing of its staff.

Retirement savings plans in New Zealand

Contributions to KiwiSaver that exceed the required employer contribution rate or other retirement fund options can help employees feel secure about their future.

Professional development in New Zealand

Investing in your employees’ growth through training, courses, and certifications not only helps their professional development but also benefits your organisation by enhancing their skills and knowledge.

Flexible working arrangements in New Zealand

Offering flexibility in work hours or the opportunity for remote work can significantly enhance work-life balance for your employees, which can lead to increased job satisfaction and productivity.

Wellness programs in New Zealand

Initiatives such as gym memberships, wellness apps, or on-site wellness facilities support employees’ health and fitness, which can reduce healthcare costs and absenteeism.

Employee Assistance Programs (EAP) in New Zealand

Providing confidential counselling services for personal or work-related issues shows a commitment to employees’ mental health and overall wellbeing.

Performance bonuses and incentives in New Zealand

These can motivate employees to excel and align their goals with the strategic objectives of your business.

Additional leave in New Zealand

Offering additional leave beyond statutory requirements—like study leave, volunteer days, or enhanced maternity and paternity leave—can make your company more attractive to employees.

Implementing these benefits can set your business apart in a competitive market. It’s essential to communicate these benefits effectively to your workforce to ensure they are fully utilised and appreciated. Always consider the specific needs and preferences of your workforce when choosing which benefits to offer.

Simplify your global payroll with CXC

At CXC, we understand the challenges involved in managing global payroll. That’s why we’re committed to making international payroll as smooth and seamless as possible. Whether you need to manage your entire workforce across several countries or just a handful of international remote workers, we provide payroll services tailored to meet your specific business needs and requirements.

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