New Zealand Payroll and Benefits Guide
What global businesses need to know about payroll in New Zealand
Did you know that New Zealand was the last large habitable land mass in the world in which humans settled? While other parts of Earth can trace their human history back several thousand years, the first Polynesians only discovered the ‘Land of the Long White Cloud’ around 700 years ago.
Despite its geographical isolation in the south-west corner of the Pacific Ocean, New Zealand’s history as a former British colony and member of the Commonwealth means its trade links are strong. Its population of just over five million people are well-educated and skilled, and having English as its primary language is a major advantage. New Zealand now has a largely service-driven economy, a major change from its agriculture-based past where there was a major reliance on exporting lamb, wool and dairy products.
New Zealand stands out as a very progressive nation, and many of its payroll and employment regulations reflect this, including recently extended provisions for parental leave. This, and all the other key facts you need to know, are covered in this guide to running payroll in New Zealand.
Getting Started
New Zealand is known as one of the easiest countries in the world to start and run a business, and has invested heavily in making the set-up process as fast, smooth, and digitized as possible. For example, choosing a business name can be done online, as can registering with several government agencies using a single RealMe login, getting a New Zealand Business Number, and registering for Goods and Services Tax.
Companies should check with local authorities about the rules in their relevant area before they set up, especially with regard to certain lines of business in particular geographical locations. All businesses will require a bank account, an accountant, and a lawyer, although these are easily found for incoming foreign enterprises. However, setting up a bank account in New Zealand requires a representative of the company to be present in person.
Employment Considerations
Written employment contracts are mandatory in New Zealand and must comprehensively stipulate every element of the employer and employee’s responsibilities. Collective bargaining is uncommon and workers will negotiate their own contractual arrangements in accordance with their skill level and previous experience.
New Zealand’s rules around working hours and overtime are relatively flexible. There is a maximum working week of 40 hours, not including overtime, and employees should not work more than five days a week. However, the amount of hours worked and rates of overtime pay are up for negotiation, and should be mutually agreed between employers and employees. Most employers will generally offer overtime rates of between 150% and 200% of normal pay in contracts.
Probation periods can run for anything up to six months, and should be defined in employment contracts. A period of at least three months is standard in most cases. Notice periods are normally between two and four weeks, but should be specified and agreed upon in contracts of employment.
Compensation and Severance
New Zealand has both a national minimum wage and a ‘living wage’. The latter is used by more than 340 accredited employers in New Zealand, with the principle being that their employees earn enough to cover all their key living costs. As of April 2025, the minimum wage was increased to NZD 23.50 per hour (approx. £10.10; $13.30; €11.50) and as of September 2025 the living wage was increased to NZD 28.95 per hour (approx. £12.50; $16.40; €14.20).
Bonuses are awarded in some situations, but it’s important to note that different tax rules apply for employees depending on the frequency: regular bonuses are taxed in the same way as their normal salary, whereas annual bonuses or retirement payments are treated as lump sums.
Severance pay normally only applies in cases of redundancy. However, for terminations, employees should receive normal pay all the way up to the end of their employment, and pro-rated pay for any unused annual leave.
Tax and Social Security in New Zealand
Income taxes are generally withheld by employers and paid to the Inland Revenue on a Pay-As-You-Earn (PAYE) basis. New Zealand has five progressively higher rates of income tax – while the rates have remained the same over the last few years, the thresholds for each one have gradually been revised upwards. As of 2025, the lowest of 10.5% applies to the first NZD 15,600 of annual income (approx. £6,700; $8,900; €7,700); the highest of 39% was introduced recently and applies to all income over NZD 180,000 (approx. £77,000; $102,000; €88,000).
The corporate tax rate in New Zealand is relatively high at 28%. The Goods and Services Tax (GST) rate is 15%, and is applied to most goods and services bought in New Zealand and some bought outside, but businesses are able to claim back the GST they’ve paid out.
At the time of writing, proposals have been put before the New Zealand parliament that would introduce some significant tax-related changes, particularly around how remote workers and non-residents are taxed. Keep a close eye out for further developments in this area during 2026.
New Zealand has an opt-in employee superannuation scheme called KiwiSaver, with some major changes to the scheme in the process of being implemented:
- Previously open to all employees aged 18 or over, eligibility will extend to 16 and 17-year-olds on April 1 2026
- The minimum contribution made by each party (employee and employer) is currently 3%, but will rise to 3.5% on April 1 2026, and 4% on April 1 2028
- The additional contribution made by the government of 50% of employee contributions has already been reduced to 25%, up to a maximum of NZD 260.72 per year (approx. £110; $150; €130)
- Anyone earning more than NZD 180,000 per year (approx. £77,000; $102,000; €88,000) no longer receives any government contribution
The only other social security contribution aside from KiwiSaver is accident compensation, paid by employers at 1.53%. In addition, employees with student loans are required to pay through their employee wages, which means employers have to arrange to have the funds withheld and transferred to the appropriate parties.
Holidays and Leave
Every part of New Zealand marks 12 days of public holidays each year. Eleven of these are observed nationally, while each province individually observes its own anniversary day. Holidays that don’t fall on a Monday or a Friday are regularly moved to the nearest Monday for public holiday purposes.
Paid leave entitlement is 20 days per year, once an employee has completed one year of service. Unused leave can be carried over into the following year, and should also be paid off if employment is terminated. Fixed-term employees on contracts of less than 12 months in length don’t receive any leave as such, but receive an 8% holiday pay bonus instead.
New Zealand’s rules around maternity and parental leave are relatively complex, some of which were expanded by new legislation that took effect in July 2025. Primary carers of a child can take up to 26 weeks, paid by social security up to a maximum of NZD 788.66 per week. They can also apply for a further 26 unpaid weeks after this, although employers can choose to provide a payment during this time if they so wish. Partners of primary carers can also take two weeks unpaid parental leave, and there are also now additional state payments available to mothers who give birth prematurely (before 36 weeks).
Sick leave entitlement is a maximum of ten days per year, for employees who have at least six months’ service. Sick leave can be carried over, up to a maximum of 20 days in any one year.
New Zealand payroll: a summary
New Zealand is a very interesting case from a payroll and employment perspective. Some areas of its rules and regulations are very simple (such as working hours and overtime), while others are extremely complicated (including the minimum and living wage, and parental leave). Recent legislatory changes, and upcoming ones in areas such as KiwiSaver, underline the importance of keeping up-to-date with developments in order to stay compliant. A global payroll partner can help you in this endeavor by connecting you to in-country expertise.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.