Can a sole trader employ staff? Absolutely. It’s one of the biggest misconceptions in business — that being a sole trader means working solo forever. But in reality, once the workload gets too heavy or you want to grow, hiring someone is not only possible… it might be exactly what your business needs.
Whether you’re running a small trade, managing a service-based business, or building a brand from home, you can absolutely bring people on board — as long as you follow the right steps. Yes, there are rules around tax, payroll, and compliance. But they’re manageable. And we’ll walk you through each one.
In this guide, we’ll cover what it means to employ staff as a sole trader in New Zealand, how to get started, what your legal responsibilities are, and when it might be time to consider switching to a company structure.
Let’s get started.
Can a sole trader legally employ staff?
Can a sole trader employ staff? Yes, they can. In New Zealand, being a sole trader doesn’t limit your ability to hire. It simply defines your business structure — not your workforce size. If your business is growing and you need help, hiring someone is absolutely an option.
Whether you’re a tradesperson bringing on an apprentice or a designer needing admin support, you’re allowed to take on staff as long as you meet all legal and tax responsibilities.
IMAGE: Flowchart showing “Sole Trader” branching out to “Employee 1, Employee 2…”
For more information: Employment NZ – Hiring Employees
What are my responsibilities as an employer?
Once you hire your first employee, you step into a new role — that of an employer. This comes with legal, financial, and administrative responsibilities.
Register as an employer with IRD
Before paying anyone, you must register as an employer with Inland Revenue. This ensures you’re compliant with PAYE deductions, KiwiSaver contributions, and ACC levies.
Steps include:
- Register online via the IRD website
- Get a MyIR account set up for employer services
- Familiarize yourself with filing systems
Useful read: How to register as a sole trader
Understand your payroll obligations
Running payroll is more than just transferring wages. You’re also responsible for complying with employment law.
You must:
- Deduct and submit PAYE
- Contribute to KiwiSaver (employer share)
- Track leave balances
- Follow minimum wage and holiday pay rules
Bullet points – Key payroll obligations:
- File payday reports after each pay run
- Provide payslips and keep wage records
- Use written employment agreements
- Comply with MBIE standards
How to manage payroll as a sole trader
Payroll doesn’t have to be hard. Today’s tools make it much easier to stay compliant and pay your team correctly.
Your options:
- Do payroll manually (high risk)
- Hire a bookkeeper or accountant
- Use a cloud payroll solution
Top tools for sole traders:
- Xero Payroll
- MYOB Essentials
- Smartly
Read our article to find out what is the best accounting tool for your business: MYOB vs Xero
Features to look for in payroll tools:
- IRD filing integration
- Payslip automation
- KiwiSaver auto-calculations
- Leave tracking and public holiday adjustments
When should a sole trader consider becoming a company?
Hiring staff as a sole trader works — up to a point. But as your team and revenue grow, you might benefit from the protections and credibility of a company structure.
Switching can bring tax planning benefits and limit personal liability. It’s also preferred by some clients or lenders.
Table: Sole trader vs company structure for employers
| Criteria | Sole Trader | Company |
|---|---|---|
| Can employ staff? | Yes | Yes |
| Liability | Full personal liability | Limited liability |
| Admin cost | Low | Medium–High |
| Tax flexibility | Less | Greater (e.g. imputation credits) |
| Perception | Small-scale | Professional/legal entity |
For more information: Companies Office NZ
Bonus: checklist before hiring your first employee
Use this checklist to ensure you’re ready before making your first hire:
Hiring readiness checklist:
- [ ] Registered as an employer with IRD
- [ ] Chosen a payroll system
- [ ] Have a compliant employment agreement
- [ ] Understand PAYE and KiwiSaver rules
- [ ] Budgeted for wage + tax costs
- [ ] Reviewed health and safety basics
- [ ] Set up record-keeping tools
You might be interested to read: KiwiSaver for self-employed
Need support on any of these steps? Contact us — we work with sole traders every day.
Conclusion
Yes, a sole trader can hire staff — and many do. The process isn’t as intimidating as it sounds when you break it down into clear steps. From registering with IRD to choosing the right payroll tool, the key is understanding your obligations and preparing ahead.
Taking the leap to employ your first team member could be exactly what your business needs to grow. Just make sure you’ve ticked all the legal boxes and set yourself up for success.
FAQ about can a sole trader employ staff
Can a sole trader legally hire employees in New Zealand?
Yes. Sole traders can legally employ staff as long as they comply with tax and employment laws.
Do I need to form a company to hire employees?
No. You can employ staff as a sole trader. However, forming a company may offer added protections and flexibility.
What taxes do I need to pay when employing someone?
You’ll be responsible for PAYE, KiwiSaver employer contributions, and ACC levies.
Should I use payroll software as a sole trader?
Yes. Payroll software simplifies IRD filing, generates payslips, and helps ensure compliance.
How do I get started with hiring my first employee?
Register with IRD as an employer, set up payroll, create an employment agreement, and understand your legal obligations.