NZ Employment Law for New Companies: What You Must Do Before Hiring Your First Employee

Hiring your first employee is exciting. It is also the moment your company becomes an employer under the Employment Relations Act 2000 - a legal status that carries significant obligations. Get it right from day one and you avoid Personal Grievance claims, IRD penalties, and Employment Relations Authority proceedings. Get it wrong and the consequences are expensive and time-consuming to fix.

The Employment Agreement: Not Optional

Under the Employment Relations Act, every employee must have a written individual employment agreement before they start work. No employment agreement means you are in breach of the ERA from day one. The agreement must include:

• Names of employer and employee
• Description of the work
• Location of work
• Agreed hours (or provisions relating to hours if not fixed)
• Wage or salary payable
• What happens when there is a dispute

You must also give the employee a copy to take away and consider, and allow them reasonable time to seek independent advice (usually at least 10 working days).

Practical tip: Employment New Zealand provides template employment agreements that are a legal starting point. A lawyer review is advisable for non-standard roles.

Minimum Wage (2026)

The adult minimum wage in New Zealand from 1 April 2026 is NZ$23.50 per hour (check Employment New Zealand for current rates). The starting-out and training minimum wage rates are lower but have specific eligibility criteria. Most new employees will be on the adult rate.

Leave Entitlements

Under the Holidays Act 2003, employees who have worked for 12 months are entitled to:

• Annual leave: 4 weeks per year (calculated on the greater of ordinary weekly pay or average weekly earnings)
• Sick leave: 10 days per year after 6 months of employment (or if they have worked an average of 10 hours per week)
• Bereavement leave: 3 days for the death of a close family member; 1 day for others
• Public holidays: 11 public holidays if they fall on a day the employee would otherwise have worked

The Holiday Act is notoriously complex for calculating leave payments when hours are variable. Getting this wrong is the most common cause of employer back-payment obligations discovered during IRD audits.

KiwiSaver Obligations

As soon as you employ someone aged 18-65 who is eligible, you must:

• Automatically enrol them in KiwiSaver (unless they opt out within the opt-out period)
• Deduct their chosen contribution rate (3%, 4%, 6%, 8%, or 10%)
• Make employer contributions of at least 3% of their gross salary
• Remit both to IRD via payday filing

Employees have 56 days to opt out if they do not want to be enrolled. After that, they are in and must make contributions.

Payday Filing

Every time you pay your employees, you must file employment information with IRD within 2 working days of the payday. This includes PAYE deductions, KiwiSaver contributions, student loan repayments, and child support. This is done through your payroll software (Xero, PayHero, iPayroll, etc.) which files automatically.

ACC Employer Levies

As an employer, you pay ACC levies on your employees' liable earnings. The rate depends on your industry classification (your Work levy rate). These are calculated and paid through your tax return. Employees also pay a Work levy through their PAYE deductions.

Health and Safety

Under the Health and Safety at Work Act 2015, you are a PCBU (Person Conducting a Business or Undertaking) with duties to workers, including employees. You must:

• Identify and manage workplace risks
• Provide a safe work environment
• Have a plan for incidents and emergencies
• Consult with workers on health and safety matters

For most small offices, this means a basic hazard register, a documented emergency evacuation plan, and fire extinguishers. For construction, manufacturing, or other higher-risk industries, obligations are more substantial.

Privacy Act Obligations

Employee records are personal information under the Privacy Act 2020. You must store them securely, allow employees to access their own records, and not share them without authority.

Get Help Before You Hire

Most new company founders who get employment law wrong do so not through negligence but through ignorance. An hour with an employment lawyer or HR advisor before you make your first hire will save you significant costs down the track.

FreshFirms connects new NZ companies with lawyers, HR consultants, and accountants who specialise in employment setup. Find an employment lawyer in your region or find an accountant to set up your payroll and KiwiSaver obligations.