By Globalization PartnersMarch 2021
Reading Time: 8 minutes
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New Zealand is an island nation in the South Pacific Ocean. This small country has made a big impression in the business world since it’s known for being the easiest country globally for doing business. With a stable government, business-friendly regulations, and other important advantages, New Zealand may be the ideal country for your company’s international expansion.
New Zealand is known for its dairy and sheep products, and the economy is largely fueled by the agricultural industry. However, New Zealand has the necessary infrastructure and qualified workforce companies need to conduct business in various industries. Though New Zealand doesn’t overburden companies with regulations, some country-specific terms still govern the employment relationship. If you’re interested in hiring New Zealanders, colloquially known as Kiwis, our guide to hiring employees in New Zealand will help you get started.
What to know before hiring in New Zealand
Before you begin hiring someone in New Zealand, you should understand the landscape of the labor force and the key laws that govern the employment relationship. New Zealand’s employment laws are simpler than you’ll find in some other countries. However, international companies still risk non-compliance if they don’t take the time to understand these laws thoroughly or fail to entrust their compliance to an expert.
1. The New Zealand job market
New Zealand’s labor force participation rate is currently around 70 percent. That’s 10 percentage points higher than the world average and three percentage points higher than the average for the world’s East Asia and Pacific region. The labor market is tight, and there are long-term shortages in many industries, which may pose a challenge to recruiters. It’s important that you offer competitive pay and benefits to attract top talent.
New Zealand’s workforce is generally well-educated. However, advanced education attainments aren’t as common as in some other countries. Approximately 29 percent of the adult population has a bachelor’s degree, and just 5 percent has a master’s. Rather than completing a master’s program, it’s more common for New Zealanders to attend a one-year post-bachelor’s program to prepare them for a specific career. Many New Zealanders pursue careers in the country’s biggest industries, including agriculture, construction, and tourism.
Overall, education levels in New Zealand dip a bit lower than the Organisation for Economic Co-operation and Development (OECD) average. However, among New Zealanders aged 25-34, 87 percent have achieved at least an upper secondary education — higher than the OECD average for the age group.
2. Working hours and leave
A standard workweek in New Zealand is 40 hours. Any hours beyond this are considered overtime, though employers are not required to pay more than standard hourly pay for these extra hours. Employees are entitled to paid rest breaks as needed depending on their working hours and unpaid breaks for meals.
Some notable companies in New Zealand have made waves in the business world for adopting a four-day workweek for full-time employees. However, most Kiwis are known for spending a bit of extra time at the office. Full-time employees work 42.7 hours per week on average. Just over 15 percent of employees work more than 50 hours per week.
Employees are entitled to at least four weeks of paid annual leave, though they can opt to take three weeks of leave and exchange the fourth week for cash. New Zealanders also enjoy 11 public holidays off. If employees agree to work on a holiday, they must receive a different day off or 1.5 times their normal pay rate. Employees can also take advantage of sick, bereavement, and parental leave policies.
New Zealand’s currency is the New Zealand dollar (NZD). The government sets a minimum wage and reviews it annually. There is no minimum wage for employees under the age of 16, and employees in training or just starting have a lower minimum wage than all other employees. You can find current minimum wage rates on the Employment New Zealand website from the Ministry of Business, Innovation, and Employment.
In addition to an employee’s salary, you can provide bonuses, though no bonuses are legally required. Note that the government considers frequent and regular bonuses a part of an employee’s earnings, so taxes must be withheld as they are with other paychecks. An isolated bonus, on the other hand, is treated as a lump sum payment.
4. Taxes on employment income
New Zealand uses a Pay As You Earn (PAYE) system for withholding income tax according to progressive rates. In addition to taxes, employees also contribute a small amount of income to New Zealand’s Accident Compensation Corporation (ACC), an insurance scheme that covers costs for injuries. However, New Zealand doesn’t take out separate taxes for social security, payroll, or capital gains.
Employees have the option of joining KiwiSaver, a retirement savings scheme. If employees do not opt-out of this savings plan, employers must make deductions from their employees’ salaries and contribute themselves at a rate of at least 3 percent of an employee’s gross salary or wages.
5. Health coverage
Employers in New Zealand don’t have to provide health insurance policies to their workers since New Zealand residents and some work visa holders automatically receive public health benefits. Heavy government subsidies make healthcare services affordable or even free. Rather than having workers pay into a social insurance scheme, general taxes cover health and other public benefits.
Some people still choose to take out private health insurance policies for extra coverage or to avoid long waits for non-emergency procedures. While employers are under no obligation to provide group policies to their employees, some employers do provide these policies as a special perk.
The cost of hiring an employee in New Zealand
The New Zealand government provides a calculator tool to help you determine what a new hire will cost you based on your industry and other factors. When hiring new employees in New Zealand, you need to budget for the cost of labor — which has risen steadily over time — as well as expenses involved in recruiting those employees. Some recruitment costs for international companies include:
- Company incorporation: To hire employees, you need a business entity in the country. Incorporating your company in New Zealand involves some fees.
- Local experts: To help you follow the relevant laws throughout your business start-up and recruitment phase, you’ll likely need to pay local lawyers, accountants, or consultants.
- Job advertisements: Advertising your vacant positions can sometimes be free, but in most cases, it comes at a cost. Posting a job ad on the popular job site Seek, for example, will cost a minimum of NZ$225 for 30 days of exposure.
- Hiring agency or committee: If you hire through an agency or choose to handle recruitment internally, you’ll have to factor in paying your agency, hiring committee, or any new HR staff you may need.
- Pre-employment screenings: If you want to conduct background checks on prospective hires and choose to outsource this to a third party, this can also add to your hiring costs.
You may also need to factor in travel costs and expenses for setting up an office if you’re establishing a physical company presence in New Zealand. Global expansion can be a major cost commitment, which is why you may want to consider using an Employer of Record (EOR) to help you test out your expansion without committing to establishing a business entity in the country.
What does a company need to hire employees in New Zealand?
Your legal entity in New Zealand could be a branch, which is closely tied to the parent company, or a subsidiary. Establishing a subsidiary in New Zealand affords more independence while still sharing a connection to the parent company, which is why many companies choose this option.
New Zealand stands out among other countries when it comes to starting a business since it can take just one day to complete the process. Through New Zealand’s RealMe® system, you can create one login that works for many agencies with which you must register. Even though New Zealand’s process is fairly streamlined, you still need to complete some important steps, including:
- Reserving your company’s name
- Registering each director and shareholder individually
- Providing the necessary documents, including a company constitution
- Applying for an IRD number
- Registering as an employer for tax purposes
- Registering for goods and services tax (GST)
Depending on your location and industry, you may need to take extra steps to ensure your business complies with the local laws and that you’re ready to hire new employees.
Steps to hiring in New Zealand
Hiring practices in New Zealand are likely similar to the practices you’re used to in your home country, though some of the details will differ. To ensure a successful recruiting experience, you’ll want to be aware of these basic steps for how to hire in New Zealand, including our tips for hiring in New Zealand.
1. Post ads online
First, you need to let job seekers know about your job openings. You can advertise jobs in New Zealand in various locations, including traditional media and online platforms. Kiwis use several online job boards and aggregators to search for positions. In addition to general sites, you may want to advertise in publications or on job boards specific to your industry. You can also post on the professional networking site LinkedIn, which 22 percent of New Zealanders use.
In your job ads, specify whether you’re hiring remote employees in New Zealand or you’re setting up an office or other facility where employees will work. This will also help you choose location settings for your ads to target a specific region if applicable.
2. Sort through applications
New Zealanders are used to submitting cover letters and CVs when they apply for a job. If you’re from a country where more lengthy, detailed CVs are the norm, note that New Zealand CVs tend to be more succinct. You may also want to build questionnaires or skills tests into your application process. Scan through applications, eliminating underqualified candidates and determining who you should invite for an interview.
3. Hold interviews
If scheduling virtual interviews, which is a popular option if you’re hiring remote workers, make sure you take the time difference into account. Otherwise, a London-based company could schedule an interview for noon, not realizing it’s 1 a.m. in New Zealand’s North and South Islands.
During interviews, keep New Zealand’s anti-discrimination laws in mind and refrain from any questions that don’t relate to the interviewee’s ability to perform a job. For example, asking about a person’s religious or political affiliations, age, or sexual orientation would be inappropriate, as it is in many other countries.
4. Make offers and agree on employment terms
Once you’ve identified your top candidates, this is a good time to conduct background checks or, at the very least, confirm a candidate has a legal right to work in New Zealand. This is also when you should create a written employment agreement, which is required under New Zealand law. Your contract should detail the terms of the employment relationship, including the employee’s work location, schedule, responsibilities, benefits, and other key terms.
When you’re ready to make an offer, share the contract with prospective hires and have them confirm their acceptance with a signature. This may come after some negotiation. If you have fewer than 20 employees, you can start with a 90-day trial period, but employees must agree to this in their signed contract.
5. Onboard new hires
Onboarding is when you should ensure new employees understand the ins and outs of their new job duties and your company more broadly. Cover details like dress code for in-person work or how employees log their time if they’re working remotely. Onboarding also involves setting up payroll, including employees’ PAYE and retirement savings arrangements.
Hire New Zealanders with Globalization Partners as your EOR
The easiest and most failsafe option for hiring internationally is to partner with an EOR, like industry leader Globalization Partners. Our team in New Zealand will handle compliance with local laws, onboarding, compensation and benefits, payroll, and more. You can stop worrying about establishing an entity, hiring lawyers and accountants, or risking fines for noncompliance. Instead, Globalization Partners’ simple solution and in-country experts will handle all the complexities of international employment — all you have to do is manage your employees and grow your company.
To get started, learn more about our EOR solution in New Zealand, and consider partnering with Globalization Partners in any of the other 187 countries we have established entities in. We’re ready to help you go global.