How to hire and pay remote workers in New Zealand

Beyond its stunning natural beauty and scenic locales, New Zealand is also home to a skilled workforce and a flourishing tech industry. The government has been adopting a more welcoming immigration policy designed to attract digital nomads and remote workers. Besides, with its stable economy and high living standards, New Zealand is also among the best destinations for remote work in the world.

But if you want to tap into the talent market and hire remote workers in New Zealand, you’ll have to understand the country’s local employment laws. You also have to figure out how to pay salaries, offer employee benefits, manage compliance paperwork, and onboard employees without breaking the law.

This guide covers everything you have to know about hiring and paying remote workers and digital nomads based in New Zealand. We’ll help you navigate regulations, taxes, payroll, benefits, etc. so that you can expand your business in New Zealand confidently. 

How do foreign businesses pay remote workers in New Zealand?

There are a few ways you can manage payroll for your workers based in New Zealand. The method you choose depends on your budget, how quickly you want to scale up, your workers’ preferences, and how involved you want your remote workers to be in the day-to-day operations of your business. 

Open a legal entity in New Zealand

You’ll have to establish a legal entity in New Zealand to hire and pay workers in the country. The first step would be to reserve a company name (costs $10.22 and takes up to 20 working days). If your name reservation is approved, you will be issued a New Zealand Business Number (NZBN) which serves as an official government identifier.

Next, you’ll need to draft a company constitution, apply for registration, and (if successful) proceed to obtain income tax and goods and services tax (GST) licenses from the Inland Revenue Department.

If you register a legal entity in New Zealand:

• You may owe taxes, depending on how many New Zealand-based remote workers you employ and how involved they are in your company’s day-to-day operations

• You’ll be required to calculate, withhold, and remit taxes such as income tax and KiwiSaver contributions. Your company will also be required to offer full-time employees benefits such as healthcare, retirement accounts, and paid time off.

Work with a global employment partner

Alternatively, you could use a global employment service (also known as an employer of record) to hire remote workers on your behalf. An employer of record can manage payroll, pay taxes and levies, process employee benefits, and help you stay compliant with the New Zealand government’s labor regulations. Here are some key services that an employer of record (EOR) can provide.

• An EOR can help you roll out benefits to your employees, no matter where they’re based. Of course, you can always do it yourself, but it will easily take you several months to manually meet different providers for services such as health insurance, dental coverage, etc.

• An EOR can help you pay your remote workers’ salaries and invoices in New Zealand Dollars (the official currency in New Zealand) or any other currencies they prefer to be paid in. If you use a provider like Remote, you can manage payments from our centralized dashboard with a few clicks.

• If you hire full-time employees through an entity your company owns in New Zealand, you may owe corporate taxes on some or all of your company’s profits if they’re sourced from the country. This is what permanent establishment (explained further below) entails. Partnering with an EOR helps you avoid tax liability in every single country where you decide to hire remote employees.

Pay New Zealand workers as contractors

Instead of hiring remote workers in New Zealand as full-time employees, you can hire and pay them as contractors. You’ll only be required to pay the agreed rate stated in the contract based on the number of hours worked. Under New Zealand law, independent contractors are not entitled to statutory benefits such as annual leave, health insurance, retirement accounts, etc.

However, keep in mind that you may get into legal trouble if the authorities determine that the scope of a remote worker’s job actually qualifies them for benefits. If you intentionally or accidentally assign the wrong work employment status to your worker, you may end up paying back payments for income tax, minimum wage, holiday entitlements, plus penalties of up to NZ$30,000.

In what currency do companies pay remote workers in New Zealand?

Wages and salaries can be paid in New Zealand Dollars (NZD). There’s also no law forbidding you from paying your remote workers in foreign currencies such as the U.S. Dollar, Euros, or Pounds.

What are the tax rates for tax brackets in New Zealand?

When you’re hiring globally, it’s important to understand where remote employees pay taxes. Employers are required to withhold taxes from their employees’ paychecks and remit them to the authorities while hiring workers in New Zealand. 

Here’s a breakdown of the personal income tax brackets your employees will fall into. All the amounts below are in New Zealand Dollars (NZD or $).

• $0 to $14,000 = 10.5% 

• $14,000 to $48,000 per year = 17.5%

• $48,000 to $70,000 = 30% 

• $70,000 to $180,000 = $33% 

• $180,000 and above = 39%

Which parts of salary in New Zealand are taxable?

New Zealand levies taxes on all of a resident's income. That includes salaries and wages, capital gains (on RSUs, shares, and stock options), and contract income. Non-residents only pay tax on income from sources based in New Zealand.

Is per diem taxable in New Zealand?

Per diem refers to fixed daily allowances an organization gives an employee to cover their business travel, living expenses, or any expenses they incur while doing their job. This can be a direct payment or a reimbursement of an employee’s personal funds spent on accommodation, transportation, etc.

Per diem payments are part of your gross pay (i.e., your income before taxes) and are subject to taxes.

Is there a difference between allowance and reimbursement in New Zealand?

Apart from wages, there are different allowances provided to employees in New Zealand by way of benefits. Generally, these are taxable, but there are certain exceptions. Benefit allowances include payments towards accommodation, meals, travel, and relocation expenses. 

Employers can reimburse work expenses that an employee makes during the job. These expenses include mileage, meals, clothing, and tools, and are not taxable. If the payment provided to the employee exceeds the work expense, then you have to pay tax on the excess amount.

What payroll deductions are employers required to make in New Zealand?

When you pay an employee in New Zealand their salary or wages, you will have to make payroll deductions towards:

• PAYE (i.e. pay-as-you-earn or income tax)

• Child support

• Kiwisaver employer net contributions

• Kiwisaver employee contributions

• Employer Superannuation Contribution Tax (ESCT)

More information about these deductions is available on the Inland Revenue website.

What is the minimum wage in New Zealand?

New Zealand’s minimum wage is currently fixed at $22.70 per hour for adult workers and $18.16 for freshers and trainees.

How much is overtime pay in New Zealand?

New Zealand doesn’t specify mandatory overtime rates in its legislation. The employer and worker can discuss and agree on an overtime rate.

What are the local labor laws in New Zealand?

Employment law in New Zealand is covered under several laws that protect employees’ rights in the country. These laws promote an equitable working environment for employees who are protected from discrimination against race, sex, religion, or union membership. New Zealand’s labor laws also cover provisions for minimum wages, paid holidays, parental leave, and compensation for employees who are injured on the job.

How to pay contractors in New Zealand?

Hiring remote workers as independent contractors can help you access top talent and grow your team internationally without worrying about offering benefits such as paid vacations, paid time off, and healthcare. You agree on a job description with your freelance worker or contractor, sign a contract, and pay their invoices once the agreed work is delivered. 

There are many ways to pay contractors in New Zealand, including via bank transfer, direct deposit, money order, virtual wallet, or using online payment providers like Wise or PayPal.

While working with contractors in New Zealand, you’ll have to be careful about your workers’ employment status. If the nature of your worker’s job and responsibilities grows to the point where they’re indistinguishable from a full-time employee, the authorities can penalize you for misclassifying your workers. Your business will have to pay accrued taxes, wages, and benefits for the duration of time it’s determined that they were misclassified.

Instead of running the risk of legal trouble and financial penalties, you can easily convert your contractors to employees with Remote. An international payroll provider like Remote can help you make payroll deductions, figure out tax compliance, and pay your workers on time.

How to pay remote employees in New Zealand?

To pay remote employees in New Zealand, you’ll have to establish your own legal entity in the country. The downside to this is that you’ll have to handle compliance matters yourself, and be aware of the risk of permanent establishment.

Basically, this is how permanent establishment works.

1. If your remote employees (who’re based in New Zealand) habitually exercise authority to enter into contracts on behalf of your company, or

2. If your business renders services in New Zealand for a significant time period

— then permanent establishment may be triggered, and your company could be subject to New Zealand’s corporate taxes on some or all of your profits.

Instead of hiring employees directly and exposing your company to the risk of permanent establishment, you can minimize risks by using a global employment provider like Remote. Whether you’re hiring independent contractors or full-time employees based in New Zealand, an EOR will serve as a local entity in the country you’re hiring from. You can use an EOR to:

• Hire employees in New Zealand and around the world, without incurring taxes where your employees are based.

• Manage all the paperwork and compliance required for tax and legal purposes

• Manage payroll and make sure your employees’ salaries (and invoices) are paid on time and in their preferred currency

• Roll out employee benefits like healthcare, dental, vision, mental health counseling, 401k retirement accounts, paid vacations, sick leave, etc.

So, when should you use an EOR? It’s up to you to decide the best course of action based on your resources and business needs. But, if you’re looking to hire international talent without worrying about the hassle of running payroll and managing benefits — choose Remote for the safest and most reliable way to grow your business.

Pay remote workers in New Zealand with Remote

Hiring in New Zealand is an excellent option if you’re looking for high-quality talent. However, there’s a lot of work involved when you're hiring and paying international workers. From understanding local labor laws and regulations to ensuring compliance with tax and compliance practices — global hiring can be a daunting task.

However, partnering with a global employment provider like Remote can take the stress out of the process, and make global expansion simple. Remote can help global businesses to roll out benefits, manage compliance issues, and make payments efficiently — leaving you the time and resources to focus on growing your business.

For strategic advice on hiring remote employees, download our practical guide today! If you’re ready to start onboarding workers in New Zealand with Remote, sign up and get started in minutes.