Payroll and HR Guide

Work-related incident

First five days or less "first week compensation"

• If an employee has a work-related accident, the employer has to pay "first week compensation" equivalent to 80% of the employee’s earnings and can’t make the employee take the time as sick leave or annual leave.

• If an employee is getting "first week compensation" for a work-related accident, an employer and employee can agree that the employer will top up the first week from 80% to 100% by using one day of the employee’s sick leave for every five days’ leave.

More than five days

• If the period of leave on ACC is more than five days, the employer and employee can agree that the employer will top up the ACC payment from 80% to 100% by using one day of the employee’s sick leave for every five days’ leave taken.

Non-work-related incident

First five days or less "first week compensation"

• Employee can use sick or annual leave for first five days.

More than five days

• If the period of leave on ACC is more than five days, the employer and employee can agree that the employer will top up the ACC payment from 80% to 100% by using one day of the employee’s sick leave for every five days’ leave taken.

Reimbursing allowances

• Generally non-taxable
• Reimbursing the employee for expenditure incurred in connection with (i.e. has a receipt) employment e.g. wet weather gear, work-related travel

Benefit allowances

• Generally taxable
• To compensate the employee for conditions of their service e.g. dirty work, remote working, use of private motor vehicles

Businesses can have an "annual closedown" for their whole business or a part of it. They must give their employees at least 14 days’ notice.

Employees are required to use their annual holidays ("annual leave") to cover the closedown period. If the employee does not have enough annual leave, the employer will consult with the employee on how to manage the time off. This may include unpaid leave or leave in advance.

New employees who have not yet completed 12 months must be paid their holiday pay of 8% of their total earnings up to the closedown start date, minus annual leave they’ve taken in advance.

Employers can make a deduction if:

• Required by law e.g. PAYE, student loan, child support, KiwiSaver.
• For a lawful purpose, and is reasonable and the employee has given written consent e.g. to recover an overpayment (Note: If consent was given via a generic deductions clause in the employment agreement, you must consult with the employee before making a deduction under that clause. It should not be a surprise to the employee to find out that there has been a deduction from their pay).
• They are recovering an overpayment in limited circumstances without consent (such as being on strike).
• It’s court-directed.
• Union-related deductions e.g. membership fees, bargaining fees.
• Lending companies – only with the employee’s consent.
• Board and lodging – only with the employee’s consent.

Even if the employee has consented to deductions from their wages, they can withdraw their consent at any time.

ESCT is deductible from employer contributions to superannuation schemes, including contributions to KiwiSaver.

Income plus superannuation contribution rates

• $0 to $18,720 – 10.5%
• $18,721 to $64,200 – 17.5%
• $64,201 to $93,720 – 30%
• $93,721 to $216,000 – 33%
• Over $216,001 – 39%

Every employee must have a written employment agreement. When hiring, you must provide a copy of the proposed agreement and provide the candidate a reasonable opportunity to seek advice. If requested by the employee, you must, as soon as is reasonably practicable, provide them with a copy of their agreement.

When constructing an employment agreement, there are mandatory, recommended and optional clauses, and you should not include anything that contravenes the law. If you don’t include a clause, the relevant law still applies.

Mandatory clauses

• Parties
• Position
• Type of work and type of worker
• Duties/description of the work performed
• Place of work
• Hours of work
• Remuneration
• Public holidays
• Resolving employment relationship problems
• Employee protection provision
• Employee acknowledgement
• Trial period/probationary period, if being used
  

Recommended clauses

• Rest and meal breaks
• Rules, policies and procedures
• KiwiSaver
• Reimbursement for approved work expenses
• Deductions from wages
• Leave entitlements
• Indemnity
• Health and Safety
• Variations to this agreement
• Conflicts of interest
• Performance management process
• Disciplinary process
• Termination
• Redundancy
• Abandonment
• Severability
• Agreement replaces any previous agreements
• Intellectual property
  
• Confidentiality
• Non-solicitation
• Restraint of trade
• Return of company's property

Permanent (employed on an ongoing basis)

Considerations

• Unless there is a genuine reason for a fixed term, or the work is intermittent/ irregular (casual), the employment is likely to be permanent.

Common mistakes

• Not following a fair process when terminating the employee’s employment.

Fixed term (employed for a fixed period)

Considerations

• There must be a genuine reason e.g. Project, parental leave cover, funding, seasonal peak – see s66 of the ER Act.
• Employers can't use a fixed-term agreement instead of a probationary period to test whether an employee is right for the job. This wouldn't be a genuine reason for a fixed term.
• Fixed-term employees have the same employment rights and responsibilities as permanent employees, except their jobs will finish at the end of the fixed term.
• 8% Holiday Pay as opposed to annual leave entitlement if the fixed term is less than 12 months.

Common mistakes

• Not having a genuine reason for fixed-term employment.
• Using a fixed-term contract to trial an employee.
• If the fixed term reasons/details are not included in the agreement, could be considered a permanent employee.
• Risk of employing someone on back-to-back fixed-term agreements when they should be on a permanent agreement.

Casual (as and when required, no expectation of ongoing work, no clear working pattern)

Considerations

• "Casual employee" isn't defined in employment legislation, but the term is usually used to refer to a situation where the employee has no guaranteed hours (no regular work pattern) and/or no ongoing expectation of employment.
• The employer doesn't have to offer work to the employee, and the employee doesn't have to accept work offered.
• Casual workers are typically utilised because it's hard for the employer to predict when work needs to be done, or when it needs to be done quickly.
• Each time the employee accepts an offer of work it is treated as a new period of employment.
• Employment rights and responsibilities also apply to casual employees, but the way in which annual holidays or sick and bereavement leave are applied can vary for these employees.

Common mistakes

• If an arrangement starts off as casual, but becomes regular/a clear work pattern, and then the employee suddenly is told not to come into work, this could be an unjustified dismissal.
• Sometimes casuals are called in to cover peak times or vacancies. This should be a fixed-term agreement.

Employees have the right to request a flexible working arrangement, however this doesn't mean requests are always granted.

The employee must provide details of the requested change in writing (e.g. days, hours, location), when they would like it effective from, and why. Importantly, they must also address what the impact would be on the business and how the business could accommodate their request without suffering a negative impact.

Employers should acknowledge receipt of the request and have one month to provide a decision in writing. Employers can only decline if the request conflicts with a collective agreement, or if there are one or more recognised business grounds:

• Cannot reorganise work among existing staff
• Cannot recruit additional staff
• Negative impact on quality
• Negative impact on performance
• Not enough work during the periods the employee proposes to work
• Planned structural changes
• Burden of additional costs
• Negative effect on ability to meet customer demand

Good faith underpins all employment relationships and is intended to ensure employees and employers treat each other fairly using common sense. Good faith includes the following three elements:

• Parties must not act in a misleading or deceptive way.
• Parties must be responsive and communicative.
• Before making a decision that may result in employees losing their job, the employer must give the affected employees sufficient information to be able to understand the proposal and then give them a proper opportunity to comment.

New Zealand has progressive or gradual tax rates. The rates increase as your income increases.

Tax rate for each dollar of income from 1 April 2025

• $0 to $15,600 – 10.5%
• $15,601 to $53,500 – 17.5%
• $53,501 to $78,100 – 30%
• $78,101 to $180,000 – 33%
• $180,001 and over – 39%

• Employment Relations Act 2000
• Equal Pay Act 1972
• Holidays Act 2003
• Health and Safety at Work Act 2015
• Human Rights Act 1993
• Injury Prevention, Rehabilitation & Compensation Act 2001
• Minimum Wage Act 1983
• Parental Leave and Employment Protection Act 1987
• Privacy Act 2020
• Protected Disclosures (Protection of Whistleblowers) Act 2022
• Wages Protection Act 1983
• Crimes Act 1961

See http://www.legislation.govt.nz/ for more information.

KiwiSaver is a voluntary long-term savings initiative that has an automatic enrolment criteria. New employees must be provided with a “Your Introduction to KiwiSaver KS3”, and then complete either a “KiwiSaver Deduction Form KS2” or “Opt-out request KS10”.

KiwiSaver contribution rates

• Employee – 3.5, 4, 6, 8 or 10%
• Employer – 3.5%
• Member tax credit – 25c for each $1 contributed by an employee, to a maximum of $260.72 (employees earning more than $180,000 per annum do not receive the government contribution)

KiwiSaver changes

From 1 April 2026, the following changes to KiwiSaver took effect:

• The minimum employee and employer contributions each increased from 3% to 3.5%.
• Employer contributions are now compulsory where an employee is a member of KiwiSaver and aged 16 or 17 (this is an expansion of the pre-existing 18 to 65 age bracket).
• Employees are able to seek a temporary rate reduction to 3% for a period of between three and 12 months, with the ability to renew. From 1 April 2028, the minimum employee and employer contributions will increase to 4%.

Annual leave

• Purpose – Rest, relaxation and recreation
• Eligibility – After 12 months continuous service.
• Entitlement
  • Four weeks every 12 months.
  • If agreement can’t be reached as to when the employee will take their annual leave, the employer can give them 14 days’ notice to take annual leave.
  • Employees can request to "cash up" up to one week’s entitlement per entitlement year (however employers do not have to agree).
• Calculation – Paid at the greater of average weekly earnings or ordinary weekly pay.

Annual – pay-as-you-go holiday payments

• Purpose – To compensate employees where it is impractical to take leave i.e. they work intermittent or irregular hours, or will not become eligible for annual leave over the course of employment
• Eligibility – Casual or fixed-term for less than 12 months.
• Entitlement – 8% of gross earnings.
• Calculation – 
  • 8% of gross earnings.
  • Must be listed as an identifiable component of pay in a separate line in payslips.

Sick

• Purpose – If the employee or someone who depends on them for care is sick or injured.
• Eligibility – Six months continuous service OR after six months service working an average of 10 hours a week and at least one hour every week or 40 hours every month.
• Entitlement – Employees are entitled to 10 days of paid sick leave every 12 months. If an employee has unused sick leave at the end of a 12-month period, it is added to the next year's entitlement – up to a maximum of 20 days of sick leave.
• Calculation – Relevant daily pay or if daily pay varies, average daily pay.

Bereavement

• Purpose – If someone close to them passes away.
• Eligibility – Six months continuous service OR after six months service working an average of 10 hours a week and at least one hour every week or 40 hours every month.
• Entitlement –
  • Three days for the bereavement of an immediate family member or miscarriage or stillbirth.
  • One day for the bereavement of any other person, if the employer accepts they’ve had a bereavement. This can be taken at any time and for any purpose relating to the bereavement. It does not have to be taken straight away or on consecutive days.
• Calculation – Relevant daily pay or if daily pay varies, average daily pay.

Family violence

• Purpose – If an employee is affected by family violence.
• Eligibility – Six months continuous service OR after six months service working an average of 10 hours a week and at least one hour every week or 40 hours every month.
• Entitlement – Ten days per year (does not accumulate). Employee can also request a short-term flexible working arrangement for up to two months.
• Calculation – Relevant daily pay or if daily pay varies, average daily pay.

Jury service

• Purpose – When an employee is summoned for jury service.
• Eligibility – They must attend and their employer must allow them to attend (however the employee can request to be excused or have their service deferred).
• Calculation – Employers don’t have to pay employees while they do jury service, but many choose to "top up" the money the employee gets from the Ministry of Justice so that they get their normal pay.

Alternative day

• Purpose – To allow employees who work on public holidays that are otherwise working days for them to take a day off at an alternative time.
• Eligibility – They must have worked on a public holiday that was also an otherwise working day.
• Entitlement – When the employee takes the alternative day off, they have the whole day off that they choose (irrespective of how many hours they worked on the public holiday).
• Calculation – Relevant daily pay or if daily pay varies, average daily pay.

Parental

• Purpose – An employee or their partner to take time off after having a baby or a child under the age of six comes into their care.
• Eligibility – Six- or 12-month criteria.
• Entitlement 
  • All employer parental leave (Primary carer leave and Extended leave) is unpaid. Eligible employees can apply directly through Inland Revenue for government-funded Paid Parental Leave (PPL):
    • Primary Carer leave – up to 26 weeks.
    • Extended leave – up to 26 weeks.
    • Partners leave – for partners, up to two weeks.
    • Special leave – for pregnant employees, up to 10 days unpaid for pregnancy-related reasons.
    • Negotiated carer leave – for employees who don’t qualify for primary carer leave but do qualify for paid parental leave. 
  • Employees can work 64 Keeping in Touch (KIT) hours during their PPL without losing their entitlement, as long as it is not within the first 28 days after the child is born.

All employees must be paid the relevant minimum wage each pay period. If a low-paid salaried worker works additional hours, you must work out whether a top-up payment is required for that pay period (it is illegal to average hours over a season or period of time, i.e. It doesn’t matter if in an earlier pay period they did fewer hours. It doesn’t average out).

Adult hourly rate

• $23.95
• All employees 16 years and over

Starting out

• $19.16
• Employees aged 16 and 17 who haven’t done six months of continuous service with their current employer.
• Employees aged 18 and 19 who have been on a paid benefit for six months or more.
• Employees aged 16 to 19 who have to undertake industry training for at least 40 credits a year.

Training

• $19.16
• Employees aged 20 years or over whose employment agreement states that they have to do at least 60 credits a year e.g. an apprentice.

If an employee is using a personal vehicle for work purposes, you may agree to compensate them for mileage. Available options are:

• The Inland Revenue mileage rate for motor vehicles
• Other published mileage rates (e.g. AA rates)
• Actual costs

The current Inland Revenue mileage rates for motor vehicles are (2025 income tax year):

First 14,000 kms (tier one)

• Petrol – $1.17 cents
• Diesel – $1.26 cents
• Petrol hybrid – $0.86 cents
• Electric – $1.08 cents

After 14,000 kms (tier two)

• Petrol – 37 cents
• Diesel – 35 cents
• Petrol hybrid – 21 cents
• Electric – 19 cents

It is recommended to keep a logbook of kilometres travelled, as without one, the tier one rates are limited to the first 3,500km travelled.

Employees can only be required to work on a public holiday if it is in their employment agreement and it falls on an "otherwise working day" (a day that an employee would have been working had they not been taking it as a public holiday, sick leave, bereavement leave, annual holiday or alternative holiday).

“Mondayisation” happens when public holidays that are attached to calendar dates, e.g. Anzac Day, fall on a weekend and are moved to the following Monday. It only happens if the employee does not normally work on the calendar date of the actual holiday.

• If an employee normally works on the day of the public holiday’s calendar date, there is no Mondayisation for them and their public holiday benefits apply to the calendar date.
• If an employee would normally work on both the calendar date of the public holiday and the possible Mondayisation date, their public holiday is on the calendar date. They do not get two public holidays.

Both the Holidays Act and Employment Relations Act require employers to keep certain records. This ensures everything is done correctly and prevents misunderstandings. It is best practice to keep all records listed as "must keep" for a minimum of seven years.

Must keep

• Name
• Address
• Age
• Start date
• Independent Contractor Agreement (ICA) / Collective Employment Agreement (CEA)
• IR330
• Type of work
• Hours of work completed in each pay period. Total hours are not enough, there must be a record of the work pattern. For a regular pattern, a description of that in the employment agreement is sufficient, however any changes or additional hours must be recorded e.g. on a timesheet.
• Wages for each pay period and how they’ve been calculated
• Holiday and leave record:
  • Leave – balances and entitlement dates, dates of any leave taken and the payment for any taken.
  • Public holidays – dates, number of hours worked, payment, alt days if applicable
  • Alt days – cash value if cashing in
• Board and lodging if applicable
• Termination – date, final pay calculation
• Employment relations leave if applicable. 
• As of 30 March 2025, employers must hold a copy of employees’ individual employment agreements, or individual terms and conditions of employment, in a readily accessible place. The employee must not hold the only copy of the agreement or individual terms and conditions of employment. 

Should keep

• Wage deductions (PAYE, student loan, superannuation etc)
• Requests to transfer public holidays
• Requests to cash up annual leave
• Dates when changes are effective from – e.g. a change in hours, change in remuneration
• Personal contact details – e.g. cell phone number
• Emergency contact info
• Bank account details
• Work permits if applicable

New and existing employees wishing to change their tax code must complete an IR330. It will state:

• The tax code to use
• The rate of tax to take out of their wage and pay to Inland Revenue (called PAYE. PAYE includes the ACC earners’ levy to cover the cost of non-work injuries)

A trial period of up to 90 days can be applied to a new employee. An employee cannot be on a trial period if they have worked for that employer before.

For a trial period to be valid, the correct wording must be included in the employment agreement, and it must be signed before the first day of employment. A trial period is not a free pass to being an unreasonable employer.

The provision will allow you to dismiss an employee within the trial period, without following a full dismissal process and without the employee being able to bring a personal grievance or other legal proceedings about their dismissal, however employees can still bring other kinds of personal grievances (for example, allegations of discrimination or harassment).

If the employer does not give the employee notice by the end of the trial period, then they are no longer on trial and their employment will continue.

Trial periods cannot be used for migrants being employed on an Accredited Employer Work Visa.

It is best practice to include wording in the employment agreement like, "This agreement may be varied by agreement in writing signed by both parties". Even if there is no clause, it is best practice to detail the change in writing and get the employee's signature to confirm their agreement with the change. If the variation is due to a change in legislation, it might be more appropriate to send a letter/email and not require it to be signed and returned.

If an employee refuses to sign a variation, there may be grounds to enter into a formal process if your request is fair and reasonable e.g. a reduction in hours because they have been consistently absent for many months.