How much does an employee cost in New Zealand? Way more than the salary you first think of. Business owners find this out the hard way when cash flow runs thin and payroll suddenly feels heavier than expected.
You’re not just paying wages. Add KiwiSaver employer contributions, ACC levies, public holidays, sick leave, and the overheads that come with keeping someone on the books. The true cost of hiring an employee can easily be 20–30% more than the advertised salary.
So why does this matter? Because underestimating it is one of the fastest ways to burn through working capital. And right now, plenty of businesses are already stretched. If you’re not across the full picture of employer costs in NZ, you risk making a hire you can’t afford.
This guide cuts through the noise. We’ll break down every expense you need to account for, show you an example calculation, and compare employees with contractors so you can make the right call before committing.
Understanding the real cost of an employee in nz
How much does an employee cost? It’s never just the wage. Business owners get caught out when they forget the extras and wonder why payroll is eating through their cash flow.
Salary vs total employer costs
The payslip is the tip of the iceberg. On top of wages, you’re covering entitlements, levies, and contributions. Ignore them, and you’ll underestimate by thousands.
- Base salary or hourly wage
- KiwiSaver contributions
- ACC levies
- Paid leave entitlements
Why calculating true cost matters for budgeting
Cash flow lives or dies on accurate numbers. If you don’t build in the true cost of hiring an employee, you risk hiring someone you can’t afford. Better to be realistic upfront than scramble later.
IMAGE: Breakdown chart with salary in the centre, overheads around it.
Main employer costs in New Zealand
Employers in NZ carry a standard set of costs. Miss one, and you’ll quickly fall out of compliance.
Wages and salaries
The biggest chunk is still wages. But the legal minimum is only the start. Competitive industries pay far above it, and it’s what you layer on top that really matters.
Employment NZ keeps the wage rules clear, but it’s your job to budget for the full package.
Kiwisaver employer contributions
Every enrolled employee means a 3% contribution on gross pay. For someone on $70,000, that’s $2,100 a year straight out of the business.
ACC levies for employers
ACC levies aren’t optional. They’re tied to your industry. Construction firms pay more than office jobs, but every employer pays something. IRD’s ACC info shows the current rates.
Annual leave, public holidays, and sick leave entitlements
Four weeks of annual leave. 11 public holidays. 10 sick days. All paid. That’s a big slice of time you’re funding without getting productivity back.
We’ve covered more detail in paid break entitlements in NZ.
Key points:
- Four weeks’ annual leave minimum
- Public holidays if they fall on work days
- Sick leave after 6 months, 10 days per year
Additional hidden costs of hiring staff
The hidden costs sneak up on you. They don’t show up on payslips but still drain the bank account.
Recruitment and training expenses
Job ads, interviews, onboarding. Then the first months of lower productivity while your new hire gets up to speed. It all has a cost.
Equipment, tools, and software
Laptops, uniforms, safety gear, software licences. None of it is free, and every employee needs them.
Payroll and hr administration
Running payroll takes time. Software helps, but you’re still paying for admin or risking penalties if you get it wrong.
Health, safety, and insurance coverage
Workplace safety is on you. Training, insurance, and compliance checks add to the total bill.
Important points:
- Recruitment ads + time spent interviewing
- Training costs + lost productivity
- Equipment + IT setup per person
Example calculation – how much does an employee cost in NZ ?
Let’s run the numbers. Salary is $70,000. But the true cost of an employee comes in much higher once you add everything on top.
| Cost Component | Amount (NZD) | Notes |
|---|---|---|
| Base salary | $70,000 | Gross wage |
| KiwiSaver (3%) | $2,100 | Employer contribution |
| ACC levies (1.5%) | $1,050 | Varies by industry |
| Annual leave | $5,385 | 4 weeks leave |
| Public holidays | $2,975 | 11 paid days |
| Sick leave estimate | $1,400 | 10 days |
| Overheads (equipment/admin) | $2,500 | Average per employee |
| Total annual cost | $85,410 | ~22% above salary |
That’s over $15k more than just wages. This is why planning is critical.
Comparing employees vs contractors in nz
Plenty of owners ask the question: is it better to hire staff or stick with contractors?
Cost advantages of hiring contractors
Contractors pay their own ACC, KiwiSaver, and cover their own time off. You pay their invoice, nothing more. For short-term work, this often looks cheaper. See our guide on contractor vs employees.
Long-term benefits of employees
Employees stick around. They build knowledge, loyalty, and stability. Contractors can walk away tomorrow. That’s the trade-off: short-term cost saving vs long-term growth.
MBIE’s guide spells out the legal distinction.
Bonus about how much does an employee cost
The good news? You can manage costs without cutting quality. It’s about planning smarter.
- Trial part-time or flexible hours
- Invest in payroll software to cut admin
- Outsource roles until the business can sustain full-time hires
- Watch out for extras like cash gifts to employees that trigger tax obligations
Conclusion and key takeaways
Hiring staff costs more than just wages. The true cost of an employee includes KiwiSaver, ACC levies, leave entitlements, and the hidden overheads that come with every hire. For someone on a $70,000 salary, the real figure can be closer to $85,000 once you add everything in.
That’s why budgeting properly matters. If you underestimate, cash flow gets squeezed and the business feels it fast. If you plan ahead, you can hire with confidence and know exactly what it will take to sustain your team.
So before you bring someone new onboard, run the numbers. Check your margins. And if you’re unsure, talk to a professional who can guide you through the details. It could be the difference between growing steadily and overstretching.
FAQ about how much does an employee cost
What is the average cost of an employee in nz?
It’s typically 20–30% higher than their base salary once you include KiwiSaver, ACC, leave, and overheads.
Do employers have to pay kiwisaver?
Yes. Employers must contribute at least 3% of an employee’s gross pay if they’re enrolled in KiwiSaver.
How are acc levies calculated?
ACC levies depend on your industry classification and payroll size. High-risk industries like construction pay more than office-based jobs.
Is it cheaper to hire contractors instead of employees?
In the short term, yes. Contractors cover their own levies and entitlements. Long term, employees may offer more stability and loyalty.
What percentage should i add to salary to estimate true cost?
A safe rule of thumb is to add 20–25% to the base salary to estimate the total employer cost.