Are you an employer looking to hire remote talent in New Zealand? Look no further; in this article, we will discuss the cost of hiring employees in New Zealand and what to look out for. Avoid surprises or hidden costs.
Cost overview for hiring in New Zealand
The cost of hiring employees in New Zealand will depend on the job you are looking to fill. For example, a skilled employee such as a software developer or web designer, may cost more than an administrative assistant. Costs will also vary depending on the experience and qualifications candidates have.
There could also be recruitment fees, payroll costs, and training expenses that need to be taken into account. Keep other benefits and public holidays in mind. When considering hiring remotely in New Zealand, make sure you factor in all these additional costs. These costs can vary depending on the type of employee, industry, region, and other factors.
Mandatory Costs
Minimum Wage & Average Salary
Wage and salary expectations of employees in New Zealand depend on a few factors, such as position, industry, location, experience, and qualifications. It's important to consider the cost of living in any given area when determining expectations - this can significantly impact an employee's wages or salary.
Nonetheless, the minimum wage in New Zealand, as of April 2023, is NZD$22.70 (~USD$13.72) before tax. The average gross salary is approximately NZD$56,160/year ~(USD$35,304) or NZD$27/hour (~USD$16.97). However, the average gross salary differs from region to region, city to city, and industry to industry.
In Auckland, for example, the average salary is NZD$75,086 (~USD$47,202), but in Wellington, the average salary is NZD$84,406 (~USD$53,061). Similarly, an average gross salary in IT is NZD$82,976 (~USD$52,162), while an average gross salary in hospitality is NZD$59,940 (~USD$37,681).
Income taxes also vary from 10.5% at the lowest level (up to NZD$14,000) to 33% at the highest level (NZD$70,000 – $180,000). Employers should take this into consideration when determining salaries.
Overtime Pay
Although employers and employees in New Zealand may agree upon an overtime rate, no specific legislation stipulates its requirement regardless of the number of hours worked. Despite this, all hours worked must be paid.
Paid Leave
Employees in New Zealand are entitled to 4 weeks of paid leave as well as various types of paid leave. New Zealand observes 12 public holidays, all of which must be paid by the employer. In case an employee works on a public holiday, they are eligible for an additional 150% pay for their work hours and a compensatory day off on any other day. It is possible for an employer and an employee to make a written agreement to reschedule an entire public holiday for the employee. However, the substitute day must be a regular working day for the employee.
Parental Leave
Employees who take parental leave from their employment for a child are entitled to receive up to 12 weeks of parental leave payments funded by the government's public treasury.
To qualify for a parental leave payment, the employee must provide written notice of their intention to take parental leave to their employer and take the leave in respect of a child. In addition, employee parental leave entitlements can be transferred to their spouse under certain conditions outlined by Inland Revenue.
An employee's entitlement to extended parental leave in New Zealand depends on whether each parent has worked for their employer for six or twelve months. The leave can be shared when both parents meet the criteria, whether taken together or consecutively.
Those meeting the twelve-month criterion may take up to 52 weeks of unpaid leave, less primary carer leave (maximum of 26 weeks' unpaid leave). If one parent has worked for less than twelve months, they can still split the maximum parental leave allowance (up to 52 weeks) with the other eligible parent. However, this cannot exceed 26 weeks of unpaid leave (less primary carer leave). Two weeks of partner's leave do not count towards this entitlement.
Other Types of Leave
Employees in New Zealand are also entitled to other various forms of special leave under the law. A female employee who is pregnant can take up to 10 days of special leave without pay linked to pregnancy before taking primary carer leave.
Employees affected by domestic violence can take ten days of paid leave, separate from annual, sick, or bereavement leave, and request short-term flexible working arrangements. Primary carer leave is available to female employees after giving birth, with an option for the spouse/partner to take over.
Employers must provide appropriate facilities and breaks for women breastfeeding at work, either paid or unpaid. This is in addition to rest and meal breaks, or face penalties.
New Zealand law grants partner's leave to employees following specific terms. This leave must be taken in a single uninterrupted period not exceeding two weeks for those meeting the 12-month employment criteria. Or, a week for those who meet the six-month employment criteria.
Partner's leave can be taken either 21 days before the expected delivery date or the date the employee's partner becomes the primary carer of an under-six-year-old child. This ends 21 days after the child's birth through discharge, or the date the employee's partner becomes the primary carer of the child.
Employers must also grant jury duty leave and voting leave. Other types of leave that are not legal requirements but may occur include long service leave, unpaid leave, and garden leave.
"Garden Leave" is a term not defined in employment legislation but refers to a situation where an employee remains employed, receiving full pay but not going to work. It can be useful if mutually agreed between the employee and the employer.
Sick Leave
All New Zealand employees, including part-time and casual employees, are entitled to 10 days of sick leave if they meet certain employment criteria. Employers can request proof of sickness or injury for leave longer than three consecutive calendar days but are responsible for paying sick leave. If an employee doesn't meet the criteria, they can use their carried-over sick leave balance from the previous year.
The sick leave must be paid at the employee's relevant daily or average daily pay, but only on working days. Unused sick leave can be carried over, with a maximum limit of 20 days, subject to employer-employee agreement, and is not payable on termination.
Severance Pay
In New Zealand, severance is not mandatory. Employees are eligible to receive it only if it is stated in their employment agreement.
It is important to note that any unused annual leave, salary, and other entitled benefits are payable until the end date. The notice period for termination of employment should follow the employee's agreement. The employer should decide whether the employee should work during their notice period or be compensated instead.
Social Contributions & Other Taxes
When paying their employees through payroll, employers are required to withhold tax and remit it to the Inland Revenue Department. Additionally, contributions made by employers to approved superannuation funds, including KiwiSaver or other registered superannuation schemes, are subject to Employee Superannuation Contribution Tax (ESCT).
The ESCT is typically deducted from the employee's total salary or wages and employer superannuation cash contributions paid in the previous year. This is done at a progressive rate that is appropriate for that employee. It is important for employers to understand and correctly calculate ESCT deductions to fulfill their tax obligations under New Zealand law.
Income - ESCT Rate
- $0 to $16,800: 10.50%
- $16,801 – $57,600: 17.50%
- $57,601 – $84,000: 30%
- $84,001 – $216,000: 33%
- $216,001+: 39%
KiwiSaver is a voluntary workplace-based retirement savings program available to all New Zealand employees over the age of 18. Employers must contribute to the scheme for all eligible employees. ESCT is calculated for both employer and employee at a minimum rate of 3% each of the gross salary.
In terms of fringe benefits tax (FBT), employers are responsible for it and it is tax-deductible. FBT is paid on non-monetary benefits such as motor vehicles and medical insurance. Allowances for business-related expenses are not usually taxable, and certain benefits like relocation costs and business tools are exempt from FBT.
Net Remuneration in NZD - Rate
- Less than 12,530: 11.73%
- 12,531 – 40,580: 21.21%
- 40,581 – 55,980: 42.86%
- 55,981 – 129,680: 49.25%
- 129,681+: 63.93%
Recruitment Costs
Currently, in New Zealand, the average hiring time is 50.3 days, while the longest duration reported is 86 days. The cost of hiring a new employee has doubled to an average of NZD$23,860 per candidate in New Zealand due to advancements in salary expectations and time-consuming recruitment processes. It is essential to note that overlooking the necessary actions to retain staff can create sizable financial implications for a business.
Optional Costs
Training Costs
Training costs can arise when employers hire new employees or when they need to upskill their current employees. Training costs can include the following:
- Training courses: Employers may need to pay for their employees to attend training courses.
- On-the-job training: Employers may need to train their new employees on the job.
- Mentoring: Employers may need to hire a mentor to train their employees.
- Materials: Employers may need to purchase training materials such as books, videos, and other resources.
Employee Benefits
Employers may choose to provide additional benefits to their employees, such as health insurance, coworking costs, remote work allowance, office space costs, life insurance, or gym memberships (~USD$ 40.69).
Retention Costs
Employers may need to spend money to retain their employees, such as offering salary increases, promotions, or other incentives.
Hire from New Zealand with Borderless
In conclusion, hiring an employee in New Zealand comes with many costs. These costs can include recruitment costs, wage costs, tax costs, superannuation costs, training costs, and other costs. Employers need to be aware of these costs to budget correctly and ensure they are complying with New Zealand laws and regulations.
When it comes to hiring remote employees in New Zealand, employers should look out for any hidden costs, too. This could include the cost of providing the necessary equipment and software, as well as any training required. It is important to factor in these costs when considering the overall cost of hiring remote employees in New Zealand.
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Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
