New Zealand PEO Services

Working in New Zealand

When it comes to striking a good work-life balance, the Kiwis know a thing or two. The average working hours in New Zealand are typically between 37 and 40 hours a week across five days, so they work hard — but they also like to relax. Holiday entitlement is generous by international standards, and Kiwis often use their free time to enjoy all that this spectacular country has to offer. From metropolitan cities to national parks, mountain trails and sandy beaches, there’s plenty to see and do. 

In recent years, several job sectors — including transport and logistics, engineering, manufacturing, trades and services — have also expanded into New Zealand, providing attractive opportunities for international companies hoping to plug the skills gap. Small and medium-sized enterprises do particularly well here and account for a huge number of New Zealand businesses (even the country’s big companies are considered small by international standards!).

Although New Zealand has three official languages (English, Maori and New Zealand Sign Language), most business is done in English — enabling a smooth transition for businesses from all over the world.

Salary pay date

The law doesn’t prescribe a legal pay date. However, PEO Worldwide employees are paid on the last working day of the month.

Variable salary

If an employee is contractually entitled to commission, this will form part of the employee’s gross pay for the purposes of calculating their holiday pay entitlements.

If commission is truly discretionary, this will need to be clearly stated in the contractual documentation. It’s important to make it clear that any payments are made at the company’s/client’s sole discretion and that the company has the right not to pay commission even if the conditions for payment have been met.

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New Zealand social security system

New Zealand residents and some work visa holders benefit from the public health system in New Zealand on a free or low-cost basis due to heavy government subsidies. New Zealand residents can choose to take out medical insurance for private healthcare, although many New Zealanders don’t opt for this additional cover. Non-residents can also use healthcare services at a cost but should get medical insurance from their home country.

Pension/retirement provision

KiwiSaver is a voluntary savings initiative designed to make it easier for New Zealanders to save for their future. For most individuals, KiwiSaver is work-based which means the employer will enroll the employee (if not already a member) and if certain eligibility criteria are met.

Employee contributions are deducted out of their salary and they can choose a contribution rate of either 3%, 4%, 6%, 8% or 10% of their gross salary or wages. The compulsory employer contribution rate is 3% of an employee’s gross salary or wages if they are a member, but the employer can contribute more if they wish.

Private healthcare

Occupational health insurance is not typically common in New Zealand as this is a taxable benefit and can be subject to Fringe Benefit Tax (FBT) and arduous to administer.

Employer costs

Employer Superannuation Contribution Tax (ESCT) is a tax which is deducted from the cash contributions made by the employer to employees’ superannuation accounts, including KiwiSaver. The rate of ESCT to deduct can vary for each staff member.

Employer of Record in New Zealand

Trial period

Trial periods can only be used by companies with 19 or fewer employees.

The maximum possible trial period is 90 days, and this is subject to certain conditions.

For a trial period provision to be enforceable, it must be entered into before the employee starts work for the first time with the employer.

Trial period provisions are interpreted strictly by the courts as they deny employees statutory protection against being unjustifiably dismissed. Accordingly, it’s important to ensure the employment agreement is signed before the employee commences employment.

Restraint of trade (non-compete)

There are two main types of restraint-of-trade clauses in New Zealand:

Restraints of trade in New Zealand are generally considered to be void and unenforceable as they are considered to be anti-competitive. Over time, however, the courts have come to allow employers to rely upon restraints providing the employer has a legitimate business interest to protect. Legitimate business interests include confidential information and customer connections.

For a restraint of trade to be enforceable, it must be reasonable in terms of geography, scope and time. However, due to the nature of the co-employment relationship, we can never warrant that such clauses would be enforceable.

Working hours

For professional roles, the norm is 40 hours per week.

An employee can only be made to work on a public holiday if:

Rest breaks

During an eight-hour work period, employees have the right to:

Sickness

Employees are entitled to sick leave (paid time off work) if an employee, their spouse, partner, dependent child or other person who depends on them is sick or injured. All employees (including part-time employees) are entitled to five days’ sick leave if they have six months’ current continuous employment with the same employer or if they have worked for the employer for six months for an average of 10 hours per week and at least one hour in every week or 40 hours in every month. This is known as ‘the work test’.

For each 12-month period after meeting the above, each employee gets at least five days’ sick leave.

If at any time in the future there’s a period when their employment is not continuous, or they don’t meet the work test, then they’ll have to requalify for entitlement to sick leave. The employee will not lose any existing unused sick leave that they’re entitled to.

Casual employees could also be entitled to five days’ sick leave after six months’ employment if they have worked at least 10 hours per week on average over that six-month period and no less than one hour every week or 40 hours every month. If in any year the casual employee doesn’t meet the criteria, then they don’t get any new sick leave entitlement; however, they can use their sick leave balance which may have carried over. An employee may requalify for sick leave as soon as they meet the criteria.

Sick leave entitlements are not pro-rated in any way. For example, even if a part-time employee only works three days a week, they still get five days’ sick leave a year and can accumulate up to 20 sick days a year.

Unused sick leave entitlement can be carried over to the following year (maximum thresholds apply). Unused sick leave is not paid out upon termination of employment (unless provision is included in the employment agreement). Cash benefits for temporary incapacity to work, otherwise known as sick pay, compensate for lost income from the employee’s salary when they must take absence due to temporary incapacity to work.

The maximum amount of sick leave that can be accumulated under the Holidays Act 2003 is 20 days. However, the employer and employee can agree that sick leave can accumulate to more than 20 days in the employment agreement or through workplace policies.

A bill was introduced to Parliament on 1 December 2020 and is currently before the education and Workforce Select Committee to increase employees’ minimum entitlement to sick leave from five days to 10 days per year. If these changes come into force, an employee would first become entitled to 10 days’ sick leave on their next entitlement date. This means that employees who have not worked for their current employer for six months when the law comes into force will receive 10 days’ entitlement as soon as they become entitled to sick leave. Employees who already have a sick leave entitlement when the legislation comes into force will become entitled to 10 days’ sick leave on their next entitlement date. (That is, on the 12-month anniversary of when they last became entitled to sick leave.)

HR in NZ

Additional leave

Bereavement leave

After six months’ continuous employment with the company, the employee will be entitled to three days’ bereavement leave on the death of the employee’s partner, parent, child, sibling, grandparent, grandchild or partner’s parent. The employee will be entitled to one day’s bereavement leave on the death of any other person if, having regarded the factors in the Holidays Act 2003, the company accepts that the employee has suffered a bereavement.

Parental leave

There are different entitlements available to parents depending on whether they’re employees and if they meet the six or 12-month eligibility criteria. Further comprehensive information is available on request.

Family violence leave

Employees are entitled to family violence leave if they have six months’ current continuous employment with the same employer or they have worked for the employer for six months for an average of 10 hours per week and at least one hour in every week or 40 hours in every month.

If eligible, employees are entitled to a minimum of 10 days of paid family violence leave, irrespective of when the family violence took place. The leave can also be taken to support a child who is a victim of family violence.

Holiday entitlement

The statutory minimum holiday entitlement is four weeks of paid annual holiday (annual leave) each year, after 12 months employment. The waiting period can be waived in the employment agreement if required.

Public Holidays

Friday 1 January New Year’s Day
Saturday 2 January (Monday 4 January) Day After New Year’s Day**
Monday 8 February Waitangi Day*
Friday 2 April Good Friday
Monday 5 April Easter Monday
Monday 26 April Anzac Day*
Monday 7 June Queen’s Birthday
Monday 25 October Labour Day
Saturday 25 December (Monday 27 December) Christmas Day**
Sunday 26 December (Tuesday 28 December) Boxing Day**

The Holidays Act 2003 governs the holidays but does not generally set dates for them. Some holidays are set by legislation (e.g., Waitangi Day Act 1976, ANZAC Day Act 1966, Sovereigns Birthday Observance Act 1952), while others are religious holidays (Easter and Christmas). In addition to public holidays, there are also provincial anniversary days which are observed locally by custom and practice and are generally prescribed by regional or city councils.

Note:

‘*’These public holidays are observed on the actual day when they fall on a weekday. When they fall on a Saturday/Sunday:

  • If the employee would normally have worked on the Saturday/Sunday, the public holiday is observed on the Saturday/Sunday
  • If the employee would not normally have worked on the Saturday/Sunday, the public holiday is observed on the following Monday/Tuesday

‘**’ From 1 January 2014, the public holiday for ANZAC Day and Waitangi Day are ‘Monday-ised’ if they fall on a Saturday or Sunday and the employee would not normally have worked on that Saturday or Sunday.

The NZ Government recently announced that Matariki would be made a public holiday starting from June 2022 (Friday the 24th). The timing of the holiday will change slightly each year based on the Māori lunar calendar, but it’s expected to always fall on a Monday or Friday.

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Published date: 14 May 2020
Review date: 14 May 2021