Your easy guide to paying employees
When you start a company, you need to decide what — and how — to pay your employees.
Types of pay and rates
Basic pay
Basic pay is the employee’s base income before employers take out any deductions or make any additional payments like allowances, overtime or bonuses.
Gross pay
Gross pay — also sometimes called “gross wage” — refers to an employee’s compensation without deductions for taxes and other obligations.
Net pay
Net pay — or “take-home pay” — is an employee’s total income after all deductions from their paycheck.
Minimum wage
In New Zealand, there's a defined adult minimum wage for all workers aged 16 and older who are:
not starting-out workers or trainees, or
involved in supervising or training other workers.
The only way that an employer can pay less than the minimum wage (otherwise known as the starting-out rate) is if the employee falls into an exception category outlined by Employment NZ.
There's also a training minimum wage, used for employees who are apprentices. An apprentice has the same minimum rights and protections under employment law as any other employee but may be paid the training wage.
Paying employees under 16
There's no minimum wage for employees under 16, but all the other minimum standards and employment rights and obligations apply. When an employee turns 16, they must be paid the relevant minimum wage.
Download our FREE payslip template here
What entitlements and wages are available to employees?
All employees have minimum employment rights or entitlements under New Zealand law that are the responsibility of the employer.
Minimum employment rights
a written employment contract (agreement) that’s kept updated and is available when they ask for it.
get advice or support from someone they trust before signing the contract.
be paid at least the minimum wage if they’re 16 years or older.
get mandatory rest and meal breaks
get paid for public holidays and other leave and holiday entitlements including sick leave, bereavement leave, annual leave and parental leave.
be treated fairly and to a proper process if they lose their job through being fired or made redundant.
be protected from unlawful discrimination because of their age, ethnicity, sex, disability or religious beliefs.
be protected from adverse treatment (being treated badly or unfairly) because they might be affected by family violence.
work in a safe workplace with proper training, supervision and equipment.
There are also instances where employers and employees can negotiate certain terms and conditions in their employment agreements.
Unions and collective agreements
Employees can choose whether to join a union. Unions negotiate collective employment agreements and advocate on behalf of employees.
A collective employment agreement is approved and signed after collective bargaining. The agreement sets the terms and conditions of employment of union members who are covered by the agreement.
Fair Pay agreements
The Fair Pay Agreements system brings together unions and employer associations to bargain for employment terms for all covered employees in an industry or occupation. The system includes support for bargaining parties to help them navigate the bargaining process and reach an outcome, as well as processes to ensure compliance.
Pay secrecy
In New Zealand, employees have the right to share information about their pay and employment terms and conditions. They're also entitled to ask other employees about their pay and employment terms.
Employees also have the right to not share pay and employment information, and to keep this information private if they choose. The only time an employee may be required to keep their pay a secret is if a confidentiality clause has been agreed to in the employment contract.
6 tips for determining employee pay rates
1. Research industry standards
It’s always a good idea to research industry standards and the market rate. Not only do you need to meet New Zealand’s employment laws, but you also want to offer competitive salaries to attract top talent. This process is an important part of making sure you’re ready for your first hire.
Investigate what other similar companies are currently paying for like roles. You can conduct research online or talk to other managers in your industry.
2. Find out a candidate’s pay expectations
After you’ve discussed the position’s salary and benefits with the candidate, find out if this meets their salary expectations. If a candidate hopes for a higher salary than you can afford, remember that you may be able to sweeten the deal with additional benefits like more time off or remote-work options.
3. Consider experience
Consider the level of experience you want and need for the role. Top talent is highly experienced, but that experience may cost you more than you can afford.
4. Determine the cost of benefits
Employee benefits also play an important role in employee cost. This includes mandatory benefits like KiwiSaver contributions, paid time off, and insurance as well as additional expenses like training and equipment costs.
5. Stay up to date with changes in employment laws
Check out small business resources to help you manage your employer obligations. Find out information about your rights and responsibilities as an employee or employer in New Zealand via Employment NZ.
7. Seek professional advice.
If you’re still unsure what to pay your staff, turn to the pros! Payroll officers, HR specialists and business consultants can all offer invaluable insight.
How to pay employees
Employers need to pay their employees the correct amount, on time, while meeting regulatory compliance requirements. They’ll need to consider the following:
Payslips
Companies distribute payslips to employees within 1 working day of every payday through either paper or electronic means.
Download our FREE payslip template here
Income tax
Employees earning a wage or salary are taxed directly from their pay. This is known as PAYE (pay as you earn). As an employer, you're responsible for deducting and paying PAYE income tax on your employees' behalf. Using automated payroll taxation software can keep you compliant and prevent errors.
Payday filing
Payday filing is a New Zealand government initiative that manages how businesses report on employee payments including salary and wages, PAYE, and other deductions to the Inland Revenue (IR).
You must file an employment information form every time you pay your employees. This is based on the date you pay employees. When you file your employment information form, you must include the pay day and pay period your employee worked. With payroll or accounting software, employers can report this information automatically to the IR each time they process payroll.
Recordkeeping
Employers must keep all wage, time, leave and holiday records for seven years that comply with the Employment Relations Act 2000 and the Holidays Act 2003.
Manage your payroll with MYOB
When you’ve decided what to pay your employees, the next step is to work out how you’re going to do it and remain compliant with your tax and reporting obligations. This is where MYOB comes in, with software to automate your payroll so it’s always up to date, compliant, on time and accurate.
Free up more time to concentrate on what you do best, while having confidence that your payroll is one less thing to worry about. What’s more, with the MYOB business management platform you can add on new modules and capabilities across all your core workflows - customers, employees, supply chain, projects, finance, accounting and tax - so you’re future-ready as your business needs evolve.
At MYOB, we have you covered. Try FREE for 30 days.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.