Employer of Record (EOR) New Zealand

An Employer of Record (EOR) in New Zealand serves as the legal employer for workers, managing various aspects of employment compliance and administration. Often functioning as a Global Professional Employer Organization (Global PEO), the EOR ensures adherence to New Zealand’s labor laws, including payroll, taxes, benefits, and employment agreements.

Mercans’ Employer of Record services in New Zealand offer a seamless and compliant solution for businesses seeking global expansion without the need for setting up a local entity. With a focus on legal compliance and employee management, businesses can focus on their core activities while we manage the administrative complexities. Partner with Mercans to ensure smooth global mobility and compliant workforce management in New Zealand.

Things you need to know before hiring in New Zealand

Employment Contracts in New Zealand

Key Considerations for Employers

In New Zealand, providing a written employment agreement is a legal requirement for every employee. This contract outlines the rights and responsibilities of both the employer and the employee, ensuring clarity on expectations and entitlements. The agreement must be given before employment starts, allowing the employee to fully understand their role, remuneration, and working conditions. It also provides the opportunity to seek advice before signing, and union-related requirements apply where collective agreements are relevant.

What Must Be Included:

• Employer and Employee Details: Names of both parties, making clear who is involved.
• Job Description: Clear expectations of the work to be done.
• Wage or Salary: The agreed payment rate and method, ensuring it meets at least the minimum wage.
• Working Hours: Specifics on hours worked, including start and end times, and days worked.
• Public Holiday Pay: At least time-and-a-half pay for working on public holidays.

Additional terms can include trial periods, fixed-term agreements with a genuine reason, and any other provisions mutually agreed upon by both parties, such as notice periods or rest breaks.

Compliance and Penalties:

Failure to provide a written agreement can lead to penalties, including infringement fees and further penalties ordered by the Employment Relations Authority. Employers are also required to keep copies of employment agreements and produce them when required.

Minimum Rights:

Even if not listed in the contract, employees are entitled to certain minimum rights by law, such as the right to annual holidays, minimum wage, and protection from unlawful dismissal or unfair treatment in accordance with the law. Any contract must align with these legal requirements and the Employment Relations Act 2000.

By ensuring the employment agreement is comprehensive and legally compliant, employers in New Zealand can build strong, transparent, and mutually beneficial employment relationships.

Working Hours

In New Zealand, employment agreements must clearly outline the working hours of the employee, including:

• The total number of hours to be worked
• The start and finish times
• The days of the week the employee is expected to work

Employment agreements must fix the maximum number of hours at no more than 40 per week, excluding overtime, unless the employer and employee agree otherwise.

If fewer than 40 hours are agreed upon, the working hours should ideally be spread over no more than five days per week. Any deviations must be mutually agreed upon by both the employer and the employee.

Overtime

In New Zealand, overtime pay is not generally required by law. While employers and employees can agree to an overtime rate, there is no legal obligation to pay a higher rate for hours worked beyond standard hours unless this is provided for in the employment agreement or another applicable arrangement.

Typically, overtime rates are more common in hourly wage jobs than in salaried positions. In some cases, employees may receive penal rates, which are additional payments on top of the regular wage. A prime example is work on a public holiday, where the law mandates payment at time and a half if the day would otherwise be a working day for the employee.

Probation Period

A probationary period or trial period in New Zealand is a temporary employment arrangement that allows employers to assess the suitability of a new employee for a role. It serves as a testing phase where both the employee and employer can evaluate if the job and workplace are the right fit. This period is typically used to assess the employee’s performance, attitude, skills, and compatibility with the work environment.

Key elements of a probationary or trial period in New Zealand include:

• Duration: A trial period cannot last longer than 90 calendar days. A probationary period can also be used, but it does not remove dismissal rights in the same way as a valid trial period.
• Employment Agreement: The terms of the probationary period or trial period must be clearly outlined in the employment agreement and agreed to before the employee starts work.
• Termination: During a valid 90-day trial period, an employee cannot bring a personal grievance or other legal proceedings in respect of their dismissal if the employer has complied with the statutory requirements. This does not remove an employee’s ability to raise other issues unrelated to the dismissal itself. By contrast, probationary periods do not remove the right to raise a grievance for unjustified dismissal.
• Notice of Termination: Employers must still provide notice in line with the employment agreement and act in good faith throughout the process.
• Extension and Changes: A trial period cannot be extended beyond 90 calendar days. Any change to probation-related terms should be mutually agreed in writing.

While a probationary period offers flexibility for employers to evaluate new hires, it is crucial to ensure compliance with New Zealand employment law. This includes ensuring that the employee has agreed to the terms before starting work and that the correct process is followed.

13th Month Salary

In New Zealand, there is no legal obligation for employers to provide a 13th month salary. However, some employers offer performance-based bonuses or discretionary year-end payments. These are not mandated by law.

Termination, Severance Pay and Notice Period

Termination of Employment

Termination refers to the ending of an employment relationship between an employer and an employee. It can occur for several reasons, including dismissal, resignation, redundancy, or mutual agreement.

Dismissal:

• Dismissal for Misconduct: Employees can be dismissed for serious misconduct. Employers are required to follow a fair process, including informing the employee of the concerns and giving them a chance to respond.
• Dismissal for Poor Performance: If an employee’s performance is substandard, the employer should attempt to manage the issue through training, support, feedback, and a fair process before proceeding with dismissal.
• Dismissal for Redundancy: If a position is no longer required due to business changes, redundancy may occur. Employers must have genuine reasons and follow a fair process, including consultation and consideration of redeployment options.

Resignation:

• When an employee decides to resign, they must provide notice to the employer, typically in writing. This allows both parties to plan for the transition. In some cases, resignation can be considered constructive dismissal if the employer’s actions made the employee’s position untenable.

Constructive Dismissal:

• Constructive dismissal occurs when an employee feels compelled to resign due to the employer’s actions, such as creating a hostile work environment or failing to address serious issues. Employees who believe they have been constructively dismissed may raise a personal grievance.

Severance Pay

Severance pay is not generally mandated by New Zealand law. In redundancy situations, an employee is only entitled to redundancy compensation if it is provided for in their employment agreement or another binding arrangement.

Eligibility:

• Redundancy: In cases of redundancy, employees may be entitled to compensation only if their employment agreement or workplace policy provides for it.
• Dismissal or Resignation: Severance pay is not usually payable if the employee is dismissed for misconduct or resigns, unless specifically agreed.

Amount and Calculation:

• The amount of severance or redundancy compensation depends on the employment agreement, company policy, or negotiated outcome. There is no general statutory formula.

Payment Structure:

• Final pay typically includes the employee’s outstanding salary or wages, holiday pay and any other amounts owing. Any redundancy compensation is additional only if the employee is contractually entitled to it.

Notice Period

A notice period is the time between when one party informs the other that the employment relationship is ending and the actual cessation of employment. The notice period allows both parties to prepare for the change.

Notice Period in Employment Agreements:

• The notice period is often outlined in the employment agreement. It specifies how much notice an employee or employer must give before termination.

Length of Notice:

• There is no general statutory notice period in New Zealand. If the employment agreement does not specify a notice period, what is reasonable will depend on the circumstances.

Waiving or Reducing the Notice Period:

• Employers and employees may agree to waive or reduce the notice period. In such cases, payment in lieu of notice may apply if agreed or required under the contract.
• If an employee does not work out their notice period, the treatment of payment depends on the employment agreement and the parties’ agreement.

Final Day Responsibilities:

On the employee’s last day, both the employer and employee should ensure a smooth transition. Tasks may include returning company property, handing over work, and completing final documentation. The employer should ensure that all financial obligations are properly settled.

Employees vs Independent Contractors

Understanding the distinction between an employee and an independent contractor is crucial for both employers and workers. The two types of workers are governed by different laws, rights, and obligations. While both contribute to a business’s operations, their legal status and the benefits or protections they receive can differ greatly. Employees are typically entitled to a range of statutory rights under employment law, while contractors operate under different terms and conditions, mainly governed by contract law.

Employees generally work under an employment agreement, receive benefits such as paid leave, and are protected by employment laws, including minimum wage, anti-discrimination laws, and health and safety regulations. On the other hand, independent contractors are self-employed, work based on the terms of a contract for services, and do not enjoy the same legal protections as employees. Instead, contractors are governed by general civil law, which provides them with fewer employment rights but greater flexibility in their work.

In this section, we will explore the key differences between employees and independent contractors and provide a helpful comparison table to clarify their respective legal status and obligations.

Comparison Table: Employees vs Independent Contractors

Legal Tests for Determining Employee vs Contractor Status

In New Zealand, courts and employment authorities apply several legal tests to determine whether a person is an employee or an independent contractor. These tests consider the real nature of the relationship, and no single factor is conclusive. The key tests include:

• Intention Test: This looks at the intention of both parties when entering into the agreement.
• Control vs Independence Test: This test examines who has control over how, when, and where the work is carried out.
• Integration Test: This test considers whether the worker is integrated into the employer’s business or operates independently.
• Fundamental/Economic Reality Test: This test looks at the actual nature of the working relationship, considering factors such as commercial risk and opportunity for profit.

What Happens if the Status is Misclassified?

If a worker is misclassified as a contractor when they should have been an employee, they may miss out on critical benefits like minimum wage, annual leave, and sick leave. They may also face incorrect tax and ACC treatment. Employers also face legal risk and liability for unpaid entitlements if they incorrectly classify workers.

Social Security in New Zealand

In New Zealand, several tax-related matters apply to individuals, ranging from workplace-based superannuation savings to taxes on non-cash benefits and accident compensation premiums. Below is an overview of key taxes affecting employees and employers, designed to help individuals navigate their obligations and entitlements in the system.

KiwiSaver Scheme

• Overview: The KiwiSaver scheme is a voluntary, workplace-based superannuation savings scheme introduced on 1 July 2007. It is available to eligible New Zealand residents and citizens, and auto-enrolment rules can apply for eligible employees who start a new job.
• Contribution Rates: From 1 April 2026, both employees and employers must contribute a minimum of 3.5% of the employee’s gross salary or wages, subject to the scheme rules. A temporary rate reduction may apply in some cases.
• Employer’s Obligations: Employers must calculate Employer Superannuation Contribution Tax (ESCT) on employer KiwiSaver or other qualifying superannuation contributions. Contributions to some other superannuation arrangements may instead be subject to Fringe Benefit Tax (FBT).

Employer Superannuation Contribution Tax (ESCT)

• Overview: Employer Superannuation Contribution Tax (ESCT) applies to employer contributions to approved superannuation schemes, including KiwiSaver.
• Calculation: ESCT rates are based on the employee’s salary and the employer’s contribution. The applicable rate depends on the employee’s income band.
• Other Considerations: Employers may instead pay FBT on contributions to certain schemes that do not meet the ESCT rules.

Accident Compensation Levies

• Overview: New Zealand operates a statutory accident compensation scheme that provides insurance for work-related and non-work-related injuries. This scheme is funded through ACC levies and premiums.
• Employer Premiums: Employers must pay ACC Work levies or premiums, which vary by industry classification and risk.
• Employee Premiums: Employees contribute to ACC through the earners’ levy deducted through PAYE on earnings up to the annual limit.

Fringe Benefits Tax (FBT)

• Overview: Fringe Benefit Tax (FBT) is imposed on employers when they provide non-cash benefits to employees. These benefits can include items such as company cars, loans, and employer-paid health insurance premiums.
• FBT Calculation: FBT can be calculated using either the single rate method or alternate rate methods, depending on the employer’s chosen approach and the type of benefit.
• FBT Filing: FBT is filed either quarterly or annually, depending on the employer’s filing basis.

Payroll in New Zealand

Minimum Wages:

In New Zealand, the minimum wage is determined by the government and is reviewed annually. It applies to all employees aged 16 and over, ensuring that workers receive fair compensation for their labor. The rates are set before tax and vary depending on the worker’s age and status.

Minimum Wage Rates (Effective 1 April 2026)

• Adult Minimum Wage: $23.95 per hour.
• Starting-out Minimum Wage: $19.16 per hour.
• Training Minimum Wage: $19.16 per hour.

The minimum wage also applies to temporary migrant workers in New Zealand, who are entitled to the same minimum wage protections as other employees.

Employees are required to be paid at least the applicable minimum wage for all hours worked, unless a higher rate is agreed in their employment agreement.

Payroll Cycle:

In New Zealand, the payroll cycle refers to the frequency and timing of employee payments, which can vary depending on the employer’s practices and the employment agreement in place. The payroll cycle is crucial for both employers and employees to ensure compliance with employment laws and to maintain clarity around pay expectations.

Pay Period

In New Zealand, the pay period refers to the interval between each paycheck, which may be weekly, fortnightly, four-weekly, or monthly depending on the employment agreement and employer practice.

Payday is the set day employees receive their wages, which aligns with the agreed-upon schedule, such as every Thursday, every second Wednesday, or the last day of the month. Employers should communicate this schedule in the employment agreement to avoid confusion.

If payday falls on a holiday or weekend, employers should inform employees of any changes in advance. Clear communication regarding pay periods, payday schedules, and any adjustments helps prevent disputes.

Mercans’ payroll capabilities

• Payroll Cycle: Experience streamlined payroll management with Mercans’ full-service payroll cycle support in New Zealand. We ensure timely, accurate payments to employees and contractors in local currency, making the entire payroll process efficient and fully compliant with New Zealand’s standards.
• Payroll Setup, Processing, and Administration: Mercans offers more than basic payroll services; we deliver complete, end-to-end solutions. From detailed payroll setup to accurate processing and seamless administration, we handle every step with a focus on precision and compliance. With Mercans, you can trust your payroll is managed by experts, freeing you to focus on your core business.
• Statutory Filings and Payments: Navigate New Zealand’s regulatory landscape with ease. Mercans takes care of all statutory filings and payments, ensuring your business meets compliance requirements on time. Rely on us for accurate submissions, providing peace of mind and confidence in your regulatory compliance.

Personal Income Tax in New Zealand

In New Zealand, personal income tax applies to all residents on their worldwide income, while non-residents are taxed only on income sourced from New Zealand. The country employs a progressive tax system, where the rate of tax increases as income rises.

Personal Income Tax Rates

As of the current tax year, the personal income tax rates in New Zealand are as follows:

These rates currently apply:

• 10.5% on income up to $15,600
• 17.5% on income from $15,601 to $53,500
• 30% on income from $53,501 to $78,100
• 33% on income from $78,101 to $180,000
• 39% on income over $180,000

New Zealand Employee Hiring Cost

When hiring an employee in New Zealand, the employer needs to consider not just the gross salary but also the additional employer costs associated with employing staff. These costs can include mandatory KiwiSaver employer contributions where applicable, ACC levies, ESCT, and other statutory requirements.

Below is an example that outlines the cost of hiring an employee earning a gross salary of NZD 100,000 annually.

Salary Breakdown

For example, for an employee with a gross annual salary of NZD 100,000, the employer would also incur KiwiSaver and tax-related employment costs where applicable. The exact total cost depends on whether the employee is a KiwiSaver member, the relevant ESCT rate, and the employer’s ACC levy classification. Therefore, employers need to consider both salary and additional statutory costs when budgeting for new hires in New Zealand.

Employee Benefits in New Zealand

Mandatory Employee Benefits in New Zealand

In New Zealand, key employee benefits and entitlements include:

• KiwiSaver (Retirement Savings): KiwiSaver is a voluntary, government-supported retirement savings scheme. Where an employee is enrolled and eligible, employers must contribute at least the statutory minimum employer contribution, which is 3.5% from 1 April 2026, subject to ESCT.
• Accident Compensation Scheme (ACC): New Zealand offers accident insurance cover for all citizens, residents, and temporary visitors through the Accident Compensation Corporation (ACC). This no-fault scheme covers injuries regardless of who caused them and helps with rehabilitation and treatment costs.

Supplemental Employee Benefits

In addition to the mandatory benefits, many companies offer supplemental benefits, particularly in competitive sectors such as technology, finance, and pharmaceuticals:

• Group Life/Total Permanent Disability (TPD) Insurance: This benefit is often offered by companies as part of an employee’s insurance plan and provides financial protection for the employee’s family in case of death or permanent disability.
• Group Income Protection (Salary Continuance): A structured insurance plan providing replacement income for employees who are unable to work due to illness or injury.
• Group Private Medical Insurance: While New Zealand’s public healthcare system offers essential coverage, private health insurance is commonly provided by companies in competitive sectors.
• Employee Assistance Program (EAP): EAPs are widely offered to support employees’ mental health and overall wellbeing.

Common Employee Perks

In New Zealand, companies often provide additional perks to attract and retain talent:

• Learning and Development: Many employers support ongoing education with study leave policies.
• Additional Leave Options: Companies may offer additional leave beyond statutory requirements.
• Flexible Working Arrangements: Hybrid work models are common, allowing employees to work both in the office and remotely.
• Business Travel Insurance: Companies often cover the costs of business-related travel.
• Lunch and Beverages Allowances: Some companies provide onsite lunches or other food-related benefits.
• Mobile Phones: Many companies provide employees, especially those in client-facing roles, with mobile phones for work-related use.

Work Permit in New Zealand

In New Zealand, foreign nationals wishing to work are generally required to hold the appropriate visa, unless they are citizens or residents. The country’s work visa policies are designed to balance protection of local employment opportunities with the need to address skill shortages in key industries.

Types of Work Permits

New Zealand offers several types of work visas, depending on the applicant’s employment situation and skills:

• Accredited Employer Work Visa (AEWV): This is the main employer-sponsored work visa route for workers with a job offer from an accredited employer. The employer typically needs accreditation and a valid job check before the worker applies.
• Temporary or Other Work Visas: Other work-related visas may apply depending on the purpose of travel, qualifications, or specific immigration category.
• Entrepreneur Work Visa: For individuals looking to establish or purchase a business in New Zealand, subject to the relevant immigration criteria.

Key Requirements for Work Permits

The requirements for a work visa in New Zealand vary based on the type of visa being applied for. Some general criteria include:

• Job Offer: Applicants commonly need a confirmed job offer for employer-sponsored work visas.
• Employer Accreditation: For the AEWV, the employer must generally be accredited and have completed the job check process where required.
• Skill Requirements: For the AEWV, the applicant must show they meet the job skill requirements, such as relevant experience or qualifications.
• Immigration Health and Character: Applicants may need to provide medical and police certificates depending on the visa category and duration.

Required Documents

To apply for a New Zealand work visa, applicants may need to submit documents including:

• Valid passport
• Job offer letter detailing salary, job description, and other relevant conditions
• Medical certificates and chest X-ray where required
• Police certificates where required
• Passport-sized photographs or digital photo as required by the application process

Application Process

The process to apply for a New Zealand work visa depends on the visa category. For the AEWV, the general process is:

• Employer’s Role: Obtain accreditation and an approved job check where required.
• Employee’s Role: Complete the visa application and provide evidence they meet the job and visa requirements.
• Submission: Submit the application to Immigration New Zealand.

Processing Time

Processing times vary by visa type and applicant circumstances. Immigration New Zealand publishes indicative processing times for each visa category on its website.

By adhering to the work visa regulations, New Zealand ensures that foreign workers contribute to the economy in areas where there are skill shortages while also safeguarding employment opportunities for local workers.

EOR Solutions in New Zealand

• Employer of Record (EOR) for Pre-Selected Candidates: Mercans offers reliable Employer of Record (EOR) solutions for businesses that have already identified candidates they wish to hire in New Zealand. Our comprehensive services cover the entire employee lifecycle, ensuring full compliance with New Zealand’s labor laws, including payroll, benefits, and tax management.
• EOR + Recruitment Services: For businesses looking to source fresh talent in New Zealand, our integrated EOR and recruitment services simplify the process of expanding into the local market. By leveraging our extensive network and expertise, we assist you in recruiting, onboarding, and retaining top talent, making your expansion into New Zealand seamless and efficient.
• Visa Sponsorship and Global Mobility Support: Mercans’ global mobility and visa sponsorship services help businesses manage the complexities of relocating employees to New Zealand. We handle all immigration and compliance requirements, ensuring smooth transitions and full legal adherence for your expatriate employees.
• Assistance on Record (AOR) for Contractor Payments: Our Assistance on Record (AOR) services streamline contractor payments in New Zealand while ensuring compliance with local tax and labor laws. From tax withholding to compliance with New Zealand’s employment regulations, we handle it all, letting you focus on growing your business.
• Transitioning Freelancers to Full-Time Employees: Mercans supports businesses in transitioning contractors or freelancers into full-time employees in New Zealand. We ensure that this process complies with local labor laws, helping you formalize relationships with skilled workers and make them a permanent part of your workforce.
• HCM System Integration: With Mercans’ EOR services, you can easily integrate your existing Human Capital Management (HCM) system for real-time data synchronization and enhanced compliance. Our streamlined approach optimizes workforce management, payroll operations, and legal compliance in New Zealand, helping businesses improve HR processes and operational efficiency.

Best Employer of Record New Zealand

Why Mercans Leads in Employer of Record (EOR) Services in New Zealand:

• Compliance with Key Employment Standards: Mercans ensures strict adherence to New Zealand’s Employment Relations Act and related standards, helping businesses meet local labor obligations and maintain fair, lawful employment practices.
• Independent, In-House Operations: Mercans operates independently, without reliance on third-party providers, delivering customized and responsive EOR solutions based on the unique needs of each client.
• Flexible Employment Solutions: Mercans provides a range of flexible employment options, supporting full-time employees, contractors, freelancers, and expatriates, making it easier for businesses to meet diverse workforce needs efficiently.
• Scalable Support for Large Enterprises: Designed to support growing enterprises, Mercans offers scalable EOR services that adapt to complex organizational structures, allowing companies to navigate New Zealand’s regulatory environment with ease.
• Multi-Currency Payroll Processing: Mercans’ multi-currency payroll system allows for efficient payroll management for companies operating globally, supporting seamless financial operations in New Zealand.
• Expertise in Multi-Country Payroll: With a vast international network, Mercans delivers integrated payroll solutions for companies with operations across multiple countries, ensuring efficiency and consistency for multinational teams.
• Data Security and Compliance: Mercans adheres to GDPR and holds SOC 1 and SOC 2 certifications, ensuring data protection in line with global standards and a strong commitment to client confidentiality.
• ISO-Certified Quality Assurance: Mercans upholds high standards in service and security with ISO 20000 and ISO 27001 certifications, demonstrating excellence in IT service management and information security.
• Application Security Standards: With compliance to OWASP ASVS 3.0, Mercans ensures rigorous security in its applications, safeguarding against cybersecurity threats.
• Social Security Compliance: Understanding New Zealand’s payroll tax, KiwiSaver, ACC, ESCT, and FBT requirements, Mercans helps ensure employee-related deductions and contributions comply with local standards.

By offering a blend of local expertise, regulatory compliance, and scalable solutions, Mercans stands out as a leading choice for Employer of Record services in New Zealand.