Taking on your first employee is a significant milestone for any New Zealand small business. While it marks an exciting period of growth, it also introduces you to a world of employment obligations that might seem overwhelming at first. Let’s explore what you need to know to ensure you’re complying with New Zealand employment laws when bringing your first team member on board.
The New Zealand employment framework provides strong protections for workers, making it essential for new employers to understand their responsibilities from the outset. The employment relationship in New Zealand is governed primarily by the Employment Relations Act 2000, the Holidays Act 2003, the Health and Safety at Work Act 2015, and the Privacy Act 2020.
When hiring your first employee, the foundation of your legal relationship will be the employment agreement. New Zealand law mandates that all employees must have a written employment agreement, even for casual or part-time roles. This isn’t just a formality—not having a written agreement can result in penalties.
Your employment agreement should outline key terms and conditions, including:
It’s worth noting that while you can download templates online, customising the agreement to your specific business circumstances is crucial. Many small business owners find value in having a legal professional review their employment agreements to ensure compliance.
Paying at least the minimum wage is non-negotiable in New Zealand. As of April 2024, the adult minimum wage is $23.50 per hour, and this rate typically increases annually. If your industry is covered by a collective agreement, you may need to pay rates specified in that agreement.
Beyond the basic wage, you’ll need to set up systems for:
Setting up payroll software or engaging a payroll service can help ensure you’re calculating and reporting these correctly to the Inland Revenue. Remember that keeping accurate wage and time records is a legal requirement, not an optional extra.
New Zealand has generous leave provisions compared to many countries. Your employee will be entitled to:
After 12 months of continuous employment:
After 6 months of continuous employment:
One area that often catches out new employers is the complexity of holiday pay calculations under the Holidays Act. The calculation methods vary depending on whether your employee works regular or irregular hours, so familiarising yourself with these rules is important.
The Health and Safety at Work Act places significant responsibilities on employers to provide a safe working environment. Even if you’re running a small operation that seems low-risk, you’re required to:
For new employers, a good starting point is conducting a simple risk assessment of your workplace and documenting how you’ll address identified hazards.
Recently, New Zealand has reintroduced 90-day trial periods for all employers, regardless of size. This provision allows you to assess a new employee’s suitability without the risk of a personal grievance claim for dismissal. However, to be valid, the trial period must:
When using trial periods, it’s still good practice to provide feedback and support to your new team member throughout this period. Many successful employment relationships have begun with a trial period, so view it as a chance to develop your new hire rather than just as a safety net.
Taking on your first employee is certainly more complex than many business owners anticipate, but with the right preparation, it can be a smooth and rewarding experience. By understanding and respecting the legal framework, you’re not just protecting yourself from potential issues down the line—you’re laying the groundwork for a positive workplace culture that will serve your business well as you grow.
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