Employee Cost Calculator

When hiring an employee in New Zealand, the true cost is significantly more than the base salary. On top of salary, employers must account for: KiwiSaver employer contributions (minimum 3% of gross salary for eligible employees); ACC employer levies (ranging from approximately 0.18% to over 4% depending on industry risk classification); annual leave accrual (8% of gross earnings equating to 4 weeks leave per year under the Holidays Act 2003); and the cost of 10 days sick leave per year (pro-rated for new employees). Additionally, employers may face costs for: public holidays (12 per year); employer superannuation contribution tax (ESCT) on KiwiSaver contributions; recruitment, onboarding, and training; and any additional benefits offered. A commonly used rule of thumb is that the true cost of an employee is 1.2 to 1.4 times their base salary. For a $60,000 salary, true employment cost may range from $72,000 to $84,000. Source: Employment NZ (employment.govt.nz); ACC (acc.co.nz).

The ACC employer levy is calculated based on your business's industry risk classification, which is assigned by ACC according to the nature of your business activities. Every year ACC publishes a schedule of levy rates by industry classification (using the Australian and New Zealand Standard Industrial Classification, or ANZSIC, code). Low-risk industries such as office-based professional services are assigned rates as low as approximately 0.18% of liable earnings, while high-risk industries such as forestry, construction, and agriculture can have rates exceeding 4%. The levy is calculated as a percentage of your employees' total liable earnings (which includes wages, salaries, and certain allowances, but excludes overtime and other non-liable payments). As an employer you pay the Residual Claims Levy and Work Account levy components. ACC invoices employers annually based on payroll information. You can check your industry's classification and current levy rate on the ACC website. Source: ACC — Levy Rates (acc.co.nz).

The Holidays Act 2003 is the primary legislation governing employee leave entitlements in New Zealand. It entitles employees to: four weeks annual leave per year (accruing from the first day of employment, but not available tō tāke until after 12 months); 10 days sick leave per year (from 24 November 2021, increased from 5 days); 12 public holidays per year; and bereavement leave (3 days for immediate family, 1 day for other people). The Act has been notoriously complex for payroll calculation, particularly for variable-hour, shift, and casual workers. The Act requires that annual leave pay be calculated as the greater of: the employee's ordinary weekly pay at the time of leave; or their average weekly earnings over the 52 weeks preceding the leave. This "greater of" rule makes leave calculations complex for workers with fluctuating incomes. A government review of the Holidays Act has been under way, with reform expected. Source: Employment NZ — Holidays Act 2003 (employment.govt.nz).

Employers in New Zealand have several mandatory obligations under the KiwiSaver Act 2006. When you hire a new eligible employee (a NZ citizen or permanent resident aged 18 to 65), you must automatically enrol them in KiwiSaver unless they have previously opted out or are already a member. Employees have 8 weeks to opt out if they do not wish to join. For enrolled employees, you must deduct their elected contribution rate (3%, 3.5%, 4%, 6%, 8%, or 10% of gross pay) from their wages and pay it to IRD with their PAYE. As an employer, you must also contribute a minimum of 3% of the employee's gross salary or wages to KiwiSaver — this is a mandatory employer contribution. The employer contribution is subject to Employer Superannuation Contribution Tax (ESCT), which is calculated at the employee's marginal tax rate and withheld before the contribution is paid to the fund. Employers cannot claim the employer contribution as a wage cost for income tax purposes — it is treated as a separate deductible expense. Source: IRD — KiwiSaver for Employers (ird.govt.nz/kiwisaver).