Employment Law NZ: Employer Obligations and Employee Rights

Published Tuesday 13 January 2026

Table of contents

• Hire the right person for the job
• Understanding employee rights and your obligations
• Managing leave, holidays and breaks
• Your employees are your most valuable asset: choose wisely
• Frequently asked questions about employment law in NZ

Key takeaways

• Create comprehensive job descriptions with specific role requirements, compensation ranges, and key responsibilities while maintaining detailed candidate records throughout the hiring process to ensure fair and legally defensible decisions.
• Verify that all employees have valid IRD numbers and complete tax code declarations on the IR330 form before their first pay, as processing payroll without proper IRD verification is illegal and can result in penalties.
• Maintain accurate employment records for seven years after an employee leaves, including payroll records, employment agreements, leave records, and tax forms to meet IRD compliance requirements and avoid audit difficulties.
• Establish clear performance standards, communication protocols, and mutual obligations in writing to prevent employment disputes and create measurable expectations that protect both employer and employee interests.

Hire the right person for the job

You can also read more in our Hiring guide.

1. Create a clear job description

Clear job descriptions protect you legally and attract the right candidates. They must include:

• Role requirements: Specific skills, experience, and qualifications needed
• Compensation range: Salary or wage brackets to set expectations
• Key responsibilities: Daily tasks and performance expectations

Keep detailed records of each candidate throughout the process. Document their strengths, weaknesses, and interview responses; you'll need these for fair, defensible hiring decisions.

You can get started with our free job description template.

2. Determine who is doing the recruiting

Recruitment planning involves mapping out who handles each hiring task to ensure legal compliance and efficiency. The full process typically takes 4-8 weeks and includes:

• Job advertising: Writing descriptions, posting roles (2-3 hours)
• Candidate communication: Responding to applications, scheduling interviews (5-10 hours)
• Screening and interviews: Assessing candidates fairly and consistently (8-15 hours)
• Decision communication: Notifying successful and unsuccessful candidates (1-2 hours)

Consider outsourcing to your team or a recruiter if you lack time for proper due diligence.

3. Ensure each employee has an Inland Revenue number

IRD number verification is legally required for all New Zealand employees before their first pay. Without proper IRD numbers, you cannot process payroll legally and may face penalties.

Each employee must provide:

• Their IRD number: Unique 8-9 digit tax identifier
• Tax code declaration: Completed on official IR330 form
• Proof of eligibility: To work in New Zealand

You also need your own employer IRD number. Apply online through the IRD website if you don't have one.

4. Maintain accurate tax records

Tax record keeping requires maintaining specific employment documents for seven years after an employee leaves. Non-compliance can result in IRD penalties and audit difficulties.

Required records include:

• Payroll records: Wages, deductions, PAYE, KiwiSaver contributions
• Employment agreements: Signed contracts and any variations
• Leave records: Annual leave, sick leave, public holidays taken
• Tax forms: IR330 declarations and any IRD correspondence

Store records securely with backup systems. Cloud-based accounting software automatically handles most compliance requirements.

5. Understand your obligations

Employer obligations include ensuring new employees complete all legal requirements correctly. Even experienced workers may not understand current NZ employment law requirements.

Your legal duties include helping employees with:

• Tax setup: Ensuring correct tax codes and IRD registration
• KiwiSaver enrollment: Checking eligibility and processing applications
• Employment agreements: Explaining terms, conditions, and rights
• Record accuracy: Verifying personal details and payment methods

Here's how you can help:

• Ask your employee to complete a tax code declaration (IR330); Inland Revenue can help you or your employee figure out the right tax codes
• Check employee eligibility for KiwiSaver and enrol them if they are not yet; Inland Revenue has a guide for employers to help you out with this
• Keep a wage record showing how much you pay your employee
• Set up a holiday and leave record
• Talk to your accountant, tax agent or Inland Revenue to ensure you understand your obligations and get everything right

6. Remember key dates and tasks

Employment compliance dates include specific deadlines that, if missed, can result in penalties or legal issues. New employees initially increase your administrative workload until systems are established.

Critical deadlines to track:

• First pay date: PAYE and KiwiSaver deductions must be correct
• Employment agreement signing: Must be signed within 30 days of starting
• KiwiSaver enrollment: Must be completed within prescribed timeframes
• Holiday pay calculations: Annual leave entitlements begin immediately

Use IRD's tax due date calculator and set calendar reminders for all compliance deadlines.

7. Understand the rights of your employees

Employee rights are minimum legal entitlements that every New Zealand worker receives, regardless of what's written in their contract. Employment agreements cannot reduce these rights - only improve them.

Minimum rights you must provide:

• Minimum wage: Currently $22.70 per hour (April 2024)
• Maximum hours: 40 hours per week unless agreed otherwise
• Annual leave: 4 weeks paid leave after 12 months employment
• Sick leave: 10 days per year after 6 months employment
• Public holidays: 12 statutory holidays with time-and-a-half pay
• Bereavement leave: 3 days for immediate family members
• Safe work environment: Right to refuse dangerous tasks
• Fair treatment: Protection from discrimination and harassment

You can find out more information, and download free resources and detailed guidelines, from the Employment New Zealand website.

8. Understand workers' protection and compensation

ACC coverage is mandatory workplace injury insurance that all New Zealand employers must provide. You cannot opt out, and failure to pay levies can result in penalties.

Your ACC obligations:

• Employee contributions: Deducted automatically from employee wages through PAYE
• Employer levies: Annual payment based on your industry risk and payroll size
• Injury reporting: Must report workplace accidents within 48 hours
• Coverage verification: Ensure all workers are covered before they start

Use ACC's levy calculator to estimate your annual costs; rates vary significantly by industry type.

9. Set up a payroll system

Payroll systems calculate wages, deductions, and tax obligations while ensuring legal compliance. Incorrect payroll processing can result in IRD penalties and employee disputes.

Your setup options:

• DIY payroll: Requires understanding of tax codes, leave calculations, and IRD reporting
• Accountant/bookkeeper: Professional setup with ongoing compliance support
• Payroll service: Specialized providers handle all calculations and filings

Essential compliance features:

• Automatic tax calculations: PAYE, ACC, KiwiSaver deductions
• IRD integration:Electronic filing of employment information
• Leave tracking: Annual leave, sick leave, public holiday calculations
• Audit trails: Detailed records for IRD requirements

Look for accounting or payroll software that meets these requirements.

10. Keep a file for each employee

Employee record keeping is a legal requirement under New Zealand employment law. Inadequate records can result in compliance issues, disputes, and inability to defend employment decisions.

Legally required information:

• Personal details: Full name, address, IRD number, visa status
• Employment terms: Signed contract, job description, pay rates
• Tax information: IR330 forms, tax codes, PAYE records
• Leave records: Entitlements, balances, leave taken
• Payment details: Bank account, preferred payment method

Retention period: Keep all records for seven years after employment ends. Digital storage through HR or accounting software ensures compliance and easy retrieval.

You can find more details here on what information you should collect.

11. Be clear about goals and expectations

Clear expectations prevent employment disputes and create measurable performance standards. Undefined roles can lead to confusion, poor performance, and potential legal issues.

Essential elements to establish:

• Performance standards: Specific, measurable job outcomes
• Communication protocols: Reporting lines, meeting schedules, feedback processes
• Professional development: Training opportunities, skill building expectations
• Mutual obligations: What you provide (support, resources) versus what they deliver (results, commitment)

Document all expectations in writing and review them regularly during performance discussions.

Understanding employee rights and your obligations

In New Zealand, employment law establishes the minimum rights and conditions for all employees. These standards apply even if they aren't written into an employment agreement, and you can't offer terms that are less than the minimum.

Your core obligations as an employer include providing:

• A written employment agreement for every employee
• At least the minimum wage for all hours worked
• A safe workplace, free from harm and discrimination
• Correct payment for leave and holidays

Meeting these obligations helps build trust and ensures you stay compliant, giving you peace of mind to focus on your business.

Managing leave, holidays and breaks

Correctly managing time off is a key part of your responsibilities. It ensures your team feels valued and stays refreshed, while keeping your business compliant with the law.

Key entitlements to manage include:

• Annual holidays: Four weeks of paid holidays each year after 12 months of employment
• Public holidays: A paid day off on public holidays if it's a day the employee would normally work
• Sick leave: Ten days of sick leave per year after six months of continuous employment
• Bereavement leave: Time off to grieve after the death of a family member or loved one
• Rest and meal breaks: Employees are entitled to paid rest breaks and an unpaid meal break, with the number and length depending on the hours worked in a day

Your employees are your most valuable asset: choose wisely

Whether you're hiring one employee or several, it's important to follow the steps above. And don't forget to think about how you will retain and reward excellent work. There are many ways to do this other than salary and wages, for example incentives and non-financial rewards.

Remember that your employees are your company's most valuable asset. Good people are hard to find. And hiring can be time consuming and expensive.

If you get the process right, you'll ensure you hire the right people. And if you look after your employees, they'll stay with you longer and your business will perform better.

For more hiring information check out our Hiring guide, or try Xero for free to see how Xero’s online accounting software can support your business.

Frequently asked questions about employment law in NZ

Here are answers to some common questions about employment law in New Zealand.

How do I get free employment law advice in NZ?

You can get free information and guidance from the Employment New Zealand website. For specific issues, you can also contact your local Community Law Centre for free legal advice.

How many breaks do employees get in an 8-hour shift in NZ?

For an eight-hour shift, an employee is generally entitled to two paid 10-minute rest breaks and one unpaid 30-minute meal break.

What happens if I don't follow employment law correctly?

Failing to follow employment law can lead to disputes, personal grievances, and investigations by the Ministry of Business, Innovation and Employment. This can result in financial penalties and damage to your business's reputation; in cases of serious non-compliance with corporate duties, the government may even issue a public notice of its intention to remove a company from the register.

Do I need a lawyer to create employment contracts?

While you don't legally need a lawyer, it's a good idea to get legal advice when creating employment contracts. Using a professionally reviewed template ensures your agreements are compliant and protect both you and your employee.

How often should I review my employment practices?

It's wise to review your employment agreements and practices at least once a year, or whenever employment laws change. This helps you stay up-to-date and avoid compliance issues.