There’s a lot more to paying your employees than setting up a fortnightly automatic payment.
Make your job easier by putting the right systems in place and keeping accurate records.
Payment of wages(external link) — Employment Agreement Builder
Find out what you know about hiring and managing people.
Glenn is the new manager of an orchard in Hastings. As he recruits pickers at a "bin rate" of $35 for each bin of apples, he tells them the average is three bins a day.
As Ollie, the owner, prepares to approve pay after the first week of harvest, he notices some pickers aren’t earning the daily minimum wage. They all work eight hours a day, but those picking three bins are only earning $105 a day instead of the $169.60 they’d earn if paid the hourly minimum wage.
Employment law states the amount earned by piece rate workers can’t be less than the minimum wage. If underpaid, these workers can ask a labour inspector to investigate.
For employees on piece rates, the amount earned an hour, day or week can’t be less than minimum wage. Glenn’s pickers could earn more than the minimum wage if they pick more, but they can't earn less than the minimum wage.
There are three minimum wage rates:
Minimum wage rates(external link) — Employment New Zealand
The Government has introduced Fair Pay Agreement legislation into Parliament. The Fair Pay Agreement system will bring together employers and unions within a sector to bargain for minimum terms and conditions for all employees in that industry or occupation. The Fair Pay Agreement system is expected to commence shortly after the Bill has passed, anticipated to be at the end of 2022.
Ragna owns a Thai restaurant in Queenstown. As the summer season approaches, she hires extra staff, including teenagers looking for work over the school holidays.
She sees it as a win-win situation. The students get valuable work experience, and she saves money by paying them the starting-out wage.
One of the students is Abi, a Thai immigrant who previously helped out in her family’s restaurant in Bangkok. Ragna asks Abi to supervise the other new hires in the kitchen, leaving her free to run the front-of-house.
But Ragna is breaking the law. Employees who are supervising or training other workers are entitled to be paid at least the adult minimum wage. Abi should be paid the adult minimum wage at all times.
Calculating annual holiday payments(external link) — Employment New Zealand
If your employees work on a public holiday, you must:
You need written permission from your employees for any deductions that aren’t required by law.
Taking money from pay(external link) — Employment Agreement Builder
When you pay your employees’ salaries or wages, you legally have to make deductions to cover:
PAYE (pay-as-you-earn income tax): This includes the ACC earners' levy. The amount of PAYE you deduct depends on the employee’s tax code and how much they earn.
Understanding PAYE deductions(external link) — Inland Revenue
KiwiSaver: You need to deduct the employee’s contributions to their chosen KiwiSaver investment scheme, add your own compulsory employer contributions, and pay ESCT (employer superannuation contribution tax) on your employer contributions.
Try Inland Revenue’s calculator to see how much you might have to pay.
PAYE / KiwiSaver deductions calculator(external link) — Inland Revenue
As an employer, you could be asked by an employee or the government to make other tax or non-tax-related salary or wage deductions on the employee’s behalf. This includes:
For some other types of pay, like holiday pay and bonuses, you might have to deduct extra tax for Inland Revenue. These include:
Holiday pay: If you agree to an employee’s request to receive up to a week’s holiday pay as cash, it will need to be taxed as a lump sum payment.
Bonuses: Frequent and regular bonuses are taxed by adding the amounts to gross wages for the period in which they were earned. A one-off, annual, redundancy or retirement bonus is taxed as a lump sum payment.
Taxing lump sum payments(external link) — Inland Revenue
Allowances: There are different rules for different types of allowances
Allowances(external link) — Inland Revenue
Special benefits: Some benefits are covered by PAYE, and others are taxed as schedular payments
Special benefits(external link) — Inland Revenue