Hiring Your First Employee in NZ: A Complete 2026 Guide for New Companies

Before You Hire: What New NZ Employers Must Know

Hiring your first employee in New Zealand is exciting — and comes with significant legal obligations under the Employment Relations Act 2000, the Holidays Act 2003, and the Minimum Wage Act 1983. Getting things right from the start saves you from costly disputes, IRD penalties, and Employment Relations Authority proceedings later.

This guide walks through every step, in order, for new NZ companies hiring their first employee in 2026.

Step 1: Register as an Employer with IRD

Before your first employee starts, you must register as a PAYE employer with Inland Revenue. Do this via myIR — it takes around 10 minutes. You'll need:

• Your company's IRD number (registered when you incorporated)
• The date your first employee will start
• An estimate of your annual wages bill

Once registered, IRD will set your PAYE filing frequency (usually twice-monthly for small employers). You must deduct PAYE from every payday and file electronically via payroll software or myIR.

Step 2: Write an Employment Agreement

Every NZ employee must have a written employment agreement before they start work — this is a legal requirement under the Employment Relations Act. The agreement must include:

• The names of the employer and employee
• A description of the work to be performed
• An indication of where the work is to be performed
• The agreed hours (or an indication of the arrangements for hours)
• The wage or salary payable
• A plain language explanation of the services available for resolving employment relationship problems (Employment Relations Act s65)

You must also give the employee a reasonable opportunity to seek independent advice before signing, and genuinely consider any changes they propose (the "good faith bargaining" obligation).

Types of agreement: Individual employment agreements are most common for first hires. Collective agreements apply when a union is party. Fixed-term agreements are legal but require a genuine reason for the fixed term stated in the agreement — using a fixed term to avoid giving permanent obligations is an ERA breach.

Step 3: Set Pay at or Above Minimum Wage

As of 1 April 2025, the NZ minimum wage is NZ$23.15 per hour (adult). There is also a starting-out rate (NZ$18.52/hr) for workers aged 16–19 in their first 6 months with a new employer, and a training minimum wage (NZ$18.52/hr) for workers in certain training situations. Paying below minimum wage is a serious breach — IRD actively monitors and enforces this.

Step 4: Enrol Them in KiwiSaver

Most new employees must be automatically enrolled in KiwiSaver on their first payday (unless they're already a member, or are exempt). As an employer you must:

• Enrol new employees automatically (employees can opt out within 8 weeks)
• Deduct the employee's KiwiSaver contributions (default 3%, employee can choose 3%, 4%, 6%, 8%, or 10%)
• Pay the employer's mandatory 3% contribution on top of wages (this is an additional cost, not taken from wages)
• Remit both through myIR with your PAYE filing

Step 5: Understand Holidays and Leave Entitlements

Under the Holidays Act 2003, employees earn leave entitlements from day one:

• Annual leave: 4 weeks of paid annual leave, which accrues and becomes available after 12 months. Before 12 months, employees can ask for annual leave in advance.
• Public holidays: 12 NZ public holidays per year (e.g. Waitangi Day, Easter, Christmas). If an employee works a public holiday, they get time-and-a-half pay plus a day in lieu.
• Sick leave: 10 days per year, available after 6 months (or after 6 months at a new employer). Unused sick leave carries over (up to a maximum).
• Bereavement leave: 3 days for a close bereavement, 1 day for other bereavements.
• Family violence leave: 10 days per year.

Holidays Act compliance is complex. Many NZ employers (including large ones) have underpaid leave by miscalculating "relevant daily pay." Use payroll software (Xero Payroll, FlexiTime, iPayroll) from day one — don't track leave in a spreadsheet.

Step 6: Set Up Payroll Software

Manual PAYE calculations are error-prone. NZ-compliant payroll software automatically calculates PAYE, student loan deductions, KiwiSaver, and leave entitlements, and files directly with IRD. The main options for new NZ companies:

• Xero Payroll — integrated with Xero accounting; good for 1–50 staff
• FlexiTime — NZ-built, strong Holidays Act compliance, integrates with Xero/MYOB
• iPayroll — bureau-style, used by payroll providers and accountants
• MYOB Payroll — bundled with MYOB accounting

Monthly cost is typically NZ$15–60 for 1–5 employees. Worth every cent given the compliance risk of manual payroll.

Common Mistakes New NZ Employers Make

1. Starting someone without a signed employment agreement. You must have it in place before their first day — not "in progress."
2. Using a fixed-term agreement without a genuine reason. "To see if it works out" is not a valid fixed-term reason under NZ law.
3. Paying below minimum wage. All time worked must be paid at or above minimum wage, including training time.
4. Treating a contractor as an employee (or vice versa). The ERA uses a substantive test (not just what the contract says). Misclassification can mean you owe years of PAYE, KiwiSaver, and leave.
5. Missing the 90-day trial period rules. A 90-day trial period (which prevents unjustified dismissal claims) is only valid if: (a) included in the employment agreement BEFORE the employee starts, (b) the company has fewer than 20 employees, and (c) the employee has never previously worked for the employer.
6. Forgetting to pay for public holidays. Even if your business is closed, employees who would otherwise have worked are entitled to a paid day off.

What Suppliers Will Call You About

Once you incorporate and hire, expect inbound from: recruitment agencies (permanent and temp placements), payroll and bookkeeping providers, business insurance brokers (employer liability), HR consultants (employment agreements, handbooks), and workplace health & safety advisors. Some of these relationships are worth building early — a good HR consultant can draft your employment agreement template for NZ$300–800, saving you far more in ERA risk.

Resources

• Employment NZ — Starting Employment — government guide to employment agreements and obligations
• IRD — Employing Staff — PAYE registration and filing
• KiwiSaver for Employers — enrolment and contributions
• Employment Relations Authority — resolving disputes