Employee benefits in New Zealand: All you need to know

New Zealand, an island nation in the South Pacific with a population of 5.1 million, is known for its beautiful landscapes. It also has a strong economy and consistently ranks highly on quality of life measures — making it an attractive place to do business.

In addition, New Zealand is home to a growing collection of highly educated English-speaking workers open to global and remote work roles. New Zealand is a progressive nation known for prioritizing health, well-being, and work-life balance. The nation has rapidly embraced the culture of flexible work.

Before you expand your hiring horizons to New Zealand, you must understand the local legal requirements, especially those relating to regulatory compliance and employee benefits. The Pacific island nation strongly enforces employment laws, so you will need in-depth knowledge of the country's rules as you build your team. Failing to keep up with local laws could put you at risk of non-compliance, resulting in serious fines and penalties.

We want to make it easy to understand your obligations as an employer of Kiwi talent. As an experienced employer of record with entities all over the world, Remote knows that managing a competitive and compliant benefits package across multiple countries (including New Zealand) can be simple, inexpensive, and scalable.

In this guide to benefits for workers in New Zealand, we’ll explain the mandatory benefits you must provide as well as additional perks you can offer to give your business an edge in the local market. We’ll cover the following key areas:

• Who is entitled to benefits in New Zealand?

• Statutory and common employee benefits

• Supplemental benefits to consider for Kiwi employees

• How to set up and manage benefits for international employees

Who is entitled to employee benefits in New Zealand?

All employees in New Zealand have minimum employment rights under the law, including full and part-time employees. On the other hand, independent contractors are not covered by most employment-related laws. This means that they don't receive annual or sick leave, and they have to pay their own taxes.

It is critical to define employees correctly. If you mistakenly hire someone as a contractor when they are an employee, you may later be held liable for extra costs, including:

• Unpaid taxation

• Unpaid minimum wages

• Holidays and leave entitlements

You even place any IP developed by the worker at risk, opening up complexity around ownership.

Regardless of whether you view an individual as an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship, and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification.

This situation is called misclassification and can result in additional fines and penalties. For example, in 2019, two businesses that misclassified employees as contractors were penalized $55,000 by the Employment Relations Authority in New Zealand. With flexible and remote work rapidly increasing in popularity, these punishments are set to rise significantly.

For more detailed information about understanding this concept, be sure to read our dedicated guide to misclassification.

Benefits for Kiwi contractors

We strongly urge employers to consider offering a benefits package to contractors. Just because these entitlements aren’t mandated in New Zealand, doesn’t mean you shouldn’t still provide equitable compensation to contractors because of their employment status alone.

If you value your contractors, benefits can build strong trust and connection with your business, especially in a remote context. You do still need to be careful of triggering permanent establishment or misclassification dangers with the types of benefits you provide.

Value-based benefits like paid time off, flexible working hours, and parental leave provisions can often keep you on the safe side of this legislation (more on this in our guide to offering benefits to international contractors).

An employer of record (EOR) like Remote should be able to give you more specific advice to minimize associated risks according to the employment legislation of New Zealand (or any other nation).

Statutory and common employee benefits

Statutory benefits, also known as mandatory benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leave, parental leave, worker's compensation insurance, and paid sick leave.

Annual leave entitlements in New Zealand

Employees are entitled to four weeks of paid annual leave following a year of service. Annual holidays are paid the greater of either the employee's weekly earnings at the beginning of the annual leave or the employee's average weekly salary for the 12 months immediately before the end of the last pay period before the annual holiday.

The calculation should include any commission the employee received. If a worker leaves before completing 12 months of work, their annual holiday pay is 8% of gross salary minus any holiday pay already received. Workers in New Zealand are also entitled to 11 paid public holidays per year.

Sick leave

The New Zealand government passed the Holidays Amendment Bill to increase the minimum employee sick leave from five to 10 days per year (after six months of continuous employment). If an employee already receives 10 or more sick days per year, they will not be impacted.

Under the new law, workers will only be able to carry over 10 unused sick days each year, up to a maximum of 20 days. This applies to full-time and part-time employees. After the initial 10 days, workers are entitled to another 10 days of sick leave for every 12 months of employment. Employers must pay employees their daily pay for sick leave.

Bereavement leave

Employee benefits in New Zealand include days off to deal with the death of a loved one. After six months of employment, all employees are entitled to the following paid bereavement leave:

• Three days when a spouse or partner, parent, child, sibling, grandparent, grandchild, or parent of a spouse or partner dies

• One day if you agree that they have suffered a bereavement involving another close person not mentioned above

Maternity and parental leave

Maternity leave (known as Primary Carer Leave in New Zealand) is available to female employees, their spouses or partners, and employees who will have the primary responsibility for the care of a child under six years old.

An example of this could be adoption. Female employees are entitled to 26 weeks of maternity leave and are paid between 177 and 585.80 NZD by the government per week before tax.

Maternity leave starts on the due date or the date childbirth starts. In any other instance, leave begins when the employee becomes the primary caregiver.

Parental leave (known as Partner's Leave in New Zealand) entitles partners to leave starting 21 days before the due date or the date the employee's partner or spouse becomes the primary caregiver for a child under six years of age.

Rest breaks

Employee benefits in New Zealand include the right to regular rest and meal breaks. How many and for how long depends on the number of hours they work. For example, an eight-hour workday must have at least two 10-minute paid rest breaks and one 30-minute unpaid meal break.

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Pension plans and retirement

New Zealand Superannuation (NZ Super) is the government pension paid to New Zealanders aged 65 or older. Any eligible person 65 or over and a legal resident of New Zealand can receive retirement benefits regardless of how much they earn through paid work.

The amounts are set by the government each year and are paid every two weeks. The after-tax rate for couples who both qualify is 66% of the average ordinary wage after tax. For single people, the after-tax New Zealand superannuation rate is around 40% for that average wage.

If an employee has served in the armed forces during a war or recognized emergency, they can apply for a Veteran's Pension. In some cases, the spouse or partner may also qualify for one. The only caveat is that a worker can get either a Veteran's Pension or NZ Super, but not both.

Kiwisaver is an additional voluntary program designed to make saving for retirement easier for New Zealanders. Employers who do not have a physical presence in New Zealand may choose whether they offer KiwiSaver in their workplace. Remote strongly encourages this to help enable local employees to prepare for their future.

If you decide to participate, you must automatically enroll eligible new employees. Then you make deductions from the employee's first paycheck and continue unless they decide to opt-out.

Employees can choose a contribution rate of 3%, 4%, 6%, 8%, or 10% of their gross salary. The compulsory contribution for employers is 3% of your employee's gross salary or wages. This 3% is in addition to their gross salary or wages. Your contributions to existing superannuation schemes may reduce the number of compulsory employer contributions you are required to pay. Also, employer contributions may be taxed unless you and the employee have agreed to treat some or all of the employer contribution as salary or wages.

Minimum wage

The minimum wage in New Zealand is currently 20 NZD per hour and 160 NZD per day (based on an eight-hour day). Minimum wage rates apply to both full-time and part-time employees. But employers and employees may agree to any wage rate if it is not less than current minimum wage rates.

Overtime

New Zealand does not have a minimum requirement for working hours. However, common full-time hours are 8 hours per day. All working hours over the standard amount are to be paid as overtime. Overtime payments should be stipulated in the employment contract and agreed upon between the employee and the employer.

Insurances

Public health care is free or low-cost in New Zealand if an employee is a citizen or resident. The Accident Compensation Corporation (ACC) provides compulsory personal injury insurance for everyone in New Zealand, whether a citizen, resident, or visitor.

This means that if your employee is injured by an accident, ACC may pay some of their medical and rehabilitation costs. ACC is paid for by employers (at 0.08% of gross salary), and employees (at 1.21% of gross salary), and is a no-fault scheme. The coverage applies regardless of who caused the accident.

Employers who do not pay ACC can be liable for significant penalties. Most employees are automatically covered, and the cost cannot be deducted from their wages or salary.

Additional benefits to consider for New Zealand employees

Private Health Insurance

While the New Zealand government provides free public health care to its citizens, all employers can offer supplemental health insurance to stay competitive in the market to help attract top local talent. Remote provides private health insurance as a core benefit to all customer employees in New Zealand.

Private insurance inclusions can range from dental to optical coverage as well as other specialized private insurance that the public sector may be too limited to comprehensively include. This will help employees pay for additional medical care such as emergency room visits, hospital stays, outpatient surgery, and other potential extra costs.

Indeed, offering health cover, or other additional insurance benefits (like dental insurance, vision insurance, and life insurance), can be such an effective way to build trust with new hires and separate your offer from that of a competitor.

Bonuses

Employee benefits plans in New Zealand sometimes include a provision for an annual bonus. Some companies choose to provide employees with a 13th-month salary payment at the end of the year as a reward for solid performance, although there is definitely no legal requirement in this regard. Ultimately, the distribution of bonuses is at your discretion.

While we advocate for additional benefits to demonstrate your commitment and care for your team, sometimes monetary rewards aren’t as motivating or satisfying for your team. Value-based benefits (especially perks that facilitate better work-life balance) can be more inexpensive for the employer, and more valued by the employee.

Home office stipend

Employees are not only interested in traditional benefits. Many Kiwis are actively seeking roles with companies that embrace the concept of work-life balance and enable flexible working from home.

One way to reinforce that culture is by offering remote-work benefits like a home office stipend. This is a relatively inexpensive benefit that offers significant increases in employee efficiency and productivity.

Allowances to compensate for the likely increased cost of internet, electricity and phone contracts will also help to provide specific support for New Zealanders working from home.

Flexibility in work hours

Remote work has also shown that the regular nine-to-five grind can be replaced by a bit more flexibility.

The provision of flexible work hours in a contract adds value towards work-life balance, which again is continuously changing alongside remote and hybrid work environments.

Personal development

Employees want their employer to contribute to their growth. Affordable perks like investing in personal development help workers learn new skills. These programs also improve employee retention while showing your team that you care about their professional advancement.

Fitness memberships

Remote employees who do not have access to an on-site gym still want to stay healthy. A small provision to help them pay for a fitness membership will go a long way to making your employees feel valued. For remote teams, memberships for online classes like yoga make attractive options.

Educational assistance

Many companies offer additional educational assistance as part of their employee benefits in New Zealand. This perk would reimburse workers for enrolling their children in private schools overseas or international schools in-country.

Providing cost-effective benefits packages to remote workers

You can tweak your benefits package to suit the nature of the work required from your remote workers to include benefits such as more paid time off, or even assistance with meals, travel expenses.

There are also more traditional approaches like stock options or profit-sharing, which lend themselves well to responsibilities with high ownership and impact.

The key is to spend less on vanity perks and actually focus on benefits that let employees live the lives they want — which is made possible by their situation as remote professionals. You can read our guide to affordable perks small businesses can offer remote teams to learn more.

How to set up and manage benefits for international employees

Complex international hiring as well as managing payment and benefits for global workers is a challenging task because the processes involved are incredibly difficult to manage internally.

You need a solution that allows you to stay compliant with all of the local labor laws in each country of operation.

Instead of building a fully-owned local legal entity with a specialist HR function in each new market, an employer of record (EOR) provides a cost-effective, fast, and secure alternative to help you grow your team across borders.

When should you use an employer of record?

If you don’t have an established process to manage the complicated parts of scaling global hiring in New Zealand, or in any other country – an EOR like Remote will give you immediate relief.

Remote’s EOR service gives you the advantage of dedicated local employment experts that can offer the insight you need to create a strong benefits package, a compliant employment contract, and a competitive offer to your candidate.

Remote manages the complicated parts of international employment. The combination of Remote’s simple software hub, and our team of global HR experts combine to organize all the tiny details of managing a distributed team.

Our team of global employment experts handles the complexities of running your global HR operations in the backend and our software puts everything in one dashboard where you can:

• Manage payroll and time off

• Handle local employment taxes

• Stay compliant with statutory benefits

• Offer competitive and equitable global compensation packages

• Scale your global team faster

You can learn more about how Remote simplifies international hiring so you can scale your distributed team faster.

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