Compensation laws vary widely by country, making it essential for companies to have a full grasp on the statutory provisions before expanding to a new country. On top of any guaranteed benefits, you’ll also need to research common supplemental benefits to stay competitive in your target market.
New Zealand compensation laws
New Zealand has 3 different minimum wage tiers — adult, starting-out, and training. Employees aged 16 and older qualify for the adult minimum wage, which is NZD 22.70 an hour (before tax). The starting-out wage is NZD 18.16 an hour (before tax) and covers:
- Employees aged 16 and 17 working for an employer for less than 6 months. After 6 months, the employee must be paid the adult minimum wage.
- Employees aged 18 and 19 who have been paid 1 or more social security benefits for 6+ months. Specified security benefits include unemployment benefit, sickness benefit, young parent payment, among others.
- Employees aged 16 to 19 whose employment agreement requires industry training for at least 40 credits a year to become qualified in the area they are working in.
The minimum wage for training workers is NZD 18.16 an hour. To qualify as a training worker, the employee needs to be 20+ years old and have an employment agreement that requires at least 60 credits of industry training a year.
Guaranteed benefits in New Zealand
Employees in New Zealand are entitled to a minimum of 4 weeks of annual leave when they have worked for their employer for at least 12 months — and also have the option of cashing out up to 1 week of this entitlement. The country has 11 public holidays where employees are entitled to a paid day off, as well as 10 days of paid sick leave after 6 months of service and another 10 days every 12 months, up to a cap of 20 days, unless agreed otherwise with the employer.
Expecting employees or workers taking permanent responsibility for the care of a child under 6, are entitled to parental leave if certain requirements are met. Employees who’ve worked for at least an average of 10 hours a week for 12+ months before the expected due date or the date they assume responsibility for the child, are entitled to:
- 26 weeks of primary carer leave
- 26 weeks of government-funded parental leave, if the employee is the primary carer of a child born or coming into their care
- 52 weeks of unpaid extended leave
New Zealand benefits management
In addition to New Zealand compensation laws, you’ll also have to consider any supplemental benefits that may not be mandatory but are expected by employees. For example, employees in New Zealand have access to free or low-cost public healthcare due to government subsidies. However, workers also have the option to choose private healthcare, which employers can opt to provide as an additional benefit.
Although not a legal entitlement, many employees are granted certain allowances on top of their salary. Companies often use these to recognize any notable qualities, skills, or special responsibilities.
Restrictions for benefits and compensation
Collective Bargaining Agreements (CBAs) are becoming increasingly common in New Zealand. If there is a CBA in place, you’ll need to prioritize the minimum terms and conditions of the CBA over the statutory minimums.
New Zealand competitive benefits planning
Growing your business in a new country can lead to exciting opportunities with the right planning. Developing benefits packages is one of many processes you’ll need to navigate.
New Zealand employee benefits plans
Your benefits plan can be a significant contributor to your success in New Zealand. While you’re legally required to provide specific benefits, additional perks can boost your recruiting efforts and show existing employees that you care about their wellbeing.
Possible perks include:
- Holiday bonuses
- Educational opportunities
- Transportation allowances
- Health insurance allowance
- Flexible working options
- Company cars
Required benefits
The labor laws in New Zealand describe a series of benefits employers must provide to their workers. Required provisions include:
- Annual leave
- Public holidays
- Retirement fund contributions
There are several regulations within these requirements, including leave allowances and contribution percentages. Make sure you understand these details to remain compliant.
Designing New Zealand employee benefits plans
Designing a benefits plan can be challenging in any country. While companies must account for the necessary financial resources, it’s important to acknowledge employees’ needs as well. You can achieve this balance with research and planning.
1. Establish your company’s budget and goals.
Companies need to stay within spending capacity when providing benefits. Set an annual budget by projecting your income and accounting for other expenses, such as inventory needs and taxes.
You should also use this early planning stage to establish your goals and determine how your benefits can help you meet them. For example, if you aim to improve your company’s retention rate, you can add more benefits to your plan and maintain a smaller workforce.
2. Learn about your industry and employees.
Employees are more likely to stay with an employer if they feel supported in the workplace. You can improve your competitiveness by meeting industry standards and fulfilling employees’ needs.
The best way to gain an understanding of in-country expectations is through research. Look into benefits packages at companies similar to yours to identify industry standards. You can also learn more about local workers’ needs through interviews and surveys.
3. Design your plan.
With your budget and research in mind, you can identify the best benefits to include in your plan. Start by allocating funds to the country’s required benefits and use your remaining budget for some of the top perks you identified in your research.
The average cost of benefits
Every employer pays a different amount for benefits based on company size and the type of provisions, which is why you should set a benefits budget based on your unique needs. Make sure to factor in other expenses, like taxes and payroll.
How to calculate employee benefits
Calculations will vary based on the type of benefits you offer, but the labor laws provide some guidance for the required provisions. Retirement fund contributions, for example, have a set percentage for employers.
The compulsory employer contribution requires employers to contribute 3% of employee earnings in a KiwiSaver scheme or complying fund.
How are employee benefits taxed in New Zealand?
New Zealand has a fringe benefits tax (FBT) for specific benefits. Employers are responsible for this tax, and it applies to most provisions outside standard income. There are 4 categories of FBT:
- Contributions to employee funds
- Provided goods and services
- Provided low-interest loans
- Provided motor vehicles for private use
There are several regulations and exceptions around FBT, so it’s essential to determine whether you owe taxes on your fringe benefits. Be sure to consider FBT as you build your budget.
Employee health benefits
With universal health coverage, New Zealand does not require employers to provide health insurance schemes to their workers. The country’s universal system covers inpatient and outpatient services, mental health support, long-term care, and prescription medication. However, residents are responsible for copayments in some circumstances.
Partner with G-P to build your everywhere workforce.
As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.
Learn more about our platform and request a proposal today.