NZ New Company Hiring First Employee: A Complete Guide for 2026

Before You Hire: What Every New NZ Company Needs to Know

Hiring your first employee is one of the most significant decisions a newly incorporated NZ company makes. It unlocks growth but also triggers a set of legal obligations that catch many first-time employers off guard. This guide covers the key steps in the correct order.

Step 1: Write a Compliant Employment Agreement

Under the Employment Relations Act 2000, every employee must have a signed written employment agreement before they start work. This is not optional. 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
• Agreed hours or an indication of the arrangements relating to hours
• The wage or salary payable

For a new company, the most common agreement type is an individual employment agreement (IEA). If you use the 90-day trial clause (see below), it must be explicitly included in the written agreement signed before the employee starts. A trial clause added after the start date is legally invalid.

Many new NZ employers use a template IEA from Employment New Zealand (employment.govt.nz/starting-employment) as a starting point, then have an employment lawyer review it. Cost: NZ00 to NZ00 for a lawyer review. Worth it for your first hire.

Step 2: Register as an Employer with IRD

Before paying your first employee, you must register as an employer with Inland Revenue (IRD) and set up payday filing. This is done through myIR at ird.govt.nz.

From your first payday, you must file an Employment Information (EI) return within two working days of each payday. EI returns include each employee's gross earnings, PAYE deducted, KiwiSaver contributions, and student loan deductions. Late filing triggers penalty notices from IRD.

PAYE rates in 2026 depend on the employee's annual income: 10.5% on income up to NZ4,000, 17.5% up to NZ8,000, 30% up to NZ0,000, 33% up to NZ80,000, and 39% above NZ80,000. You also deduct the ACC earner levy (NZ.60 per NZ00 of earnings in 2026) from the employee's pay.

Step 3: Enrol Your Employee in KiwiSaver

New employees who are New Zealand citizens or permanent residents and aged 18 to 65 must be automatically enrolled in KiwiSaver when they start a new job. The employee has 56 days to opt out if they choose to.

As an employer, you must contribute a minimum of 3% of the employee's gross salary to their KiwiSaver scheme. This is a real cost on top of the salary you have agreed to pay. Budget for it from day one.

The employee's minimum contribution is also 3% of gross earnings, deducted from their pay. Both the employer and employee contributions are paid to IRD via the payday filing process and then forwarded to the employee's scheme provider.

If an employee opts out within the 56-day window, your employer contributions stop but you may still owe contributions for the period before the opt-out. Track opt-out dates carefully.

Step 4: Register for ACC

When you hire an employee, you become liable for ACC work levies. ACC covers work-related injuries and is funded by levies on wages.

Your employer work levy rate depends on your industry (ANZSIC classification). Common rates in 2026:

• Office and professional services: approximately NZ/bin/bash.31 per NZ00 of payroll
• Retail: approximately NZ/bin/bash.50 per NZ00 of payroll
• Construction: approximately NZ.50 to NZ.00 per NZ00 of payroll
• Hospitality: approximately NZ.00 to NZ.00 per NZ00 of payroll

ACC will assess your levy when you register and will invoice you annually. In your first year, you pay based on projected wages. The following year you are assessed on actual wages paid. Keep accurate payroll records from day one.

Step 5: Understand Holiday and Leave Entitlements

Under the Holidays Act 2003, employees are entitled to:

• Annual leave: Four weeks per year (paid at the greater of the ordinary weekly pay or the average weekly earnings rate). Leave accrues after 12 months of continuous employment.
• Sick leave: 10 days per year after six months of continuous employment (or six months after completing six months of sick leave). Unused sick leave can accumulate up to 20 days.
• Bereavement leave: Three days for close family members, one day for others.
• Public holidays: 11 NZ public holidays per year, paid if it falls on a day the employee would otherwise work.

New employers frequently make two mistakes: calculating annual leave at the end of the year rather than accruing it, and misclassifying commission and irregular payments when calculating the average weekly earnings rate. Get your payroll software to handle this automatically (Xero Payroll, MYOB, or PayHero are common NZ choices).

Step 6: The 90-Day Trial Clause

Employers with fewer than 20 employees can include a 90-day trial clause in the employment agreement. This allows you to dismiss the employee within the first 90 days without risking a personal grievance claim for unjustified dismissal.

The rules are strict:

• The clause must be in the written agreement and signed before the employee starts work.
• It can only be used for employees who have not worked for you before.
• You must still follow a fair process (give notice, pay all entitlements) when ending the employment.
• The trial clause does not protect against personal grievances for discrimination or harassment.

Once your headcount reaches 20 employees, you can no longer offer a 90-day trial to new hires. Use it while you qualify for it.

Common First-Employer Mistakes

• Treating an employee as a contractor to avoid PAYE and KiwiSaver. IRD and the Employment Court look at the substance of the relationship, not the label. If you direct when and how the work is done, it is likely employment regardless of what you call it. Misclassification penalties are significant.
• Paying the minimum wage net instead of gross. The minimum wage in 2026 is NZ3.15/hour gross. You cannot pay NZ3.15 and then deduct PAYE on top.
• Forgetting the employer KiwiSaver contribution when budgeting. A NZ0,000 salary actually costs you NZ2,100 (NZ0k salary + NZ,100 employer KiwiSaver at 3%).
• Not signing the employment agreement before the start date. A trial clause in an agreement signed on day one of employment is legally invalid.

Getting Help

Employment New Zealand (employment.govt.nz) provides free templates and guidance. For your first hire, consider using an HR adviser or employment lawyer to set up your template agreements correctly. The upfront cost of NZ00 to NZ,500 is a fraction of the cost of an employment dispute later.

Many NZ accountants also offer payroll setup services and can connect you with a compliant payroll system. If you are already working with an accountant for your company tax, ask them to help with payroll registration at the same time.