Once you start employing staff it is important to know your responsibilities as an employer. Below is a quick overview of what you need to do.
The difference between an employee and a contractor?
An employee is a person employed to do any work for hire or reward under an employment agreement. The hire or reward is almost always a wage or salary. Employees have all minimum employment rights under employment laws.
Self-employed people are sometimes referred to as contractors, or independent contractors; these terms mean the same thing. A contractor is engaged by a principal to perform services under an independent contractor agreement.
Contractors are self-employed and earn income by invoicing the principal for their services. A contractor pays their own tax and ACC levies.
Registering as an employer
You can use your own IRD number if you are a sole trader or your business IRD number is you are a company to register as an employer.
Fill the Employer registration form IR334, you can do this either online through the IRD website or you can print, sign and post the completed form to your nearest Inland Revenue office.
Your responsibilities as an employer
When you employ staff, you are responsible for deducting the correct amount of tax and other contributions as per below from their wages and paying this to the IRD via the PAYE system.
- PAYE
- KiwiSaver contributions, unless they opt out of kiwisaver
- child support payments if any
- student loan payments if required
If any of your staff are members of KiwiSaver then you must pay your employers’ contribution to their fund. This is a minimum of 3% of their annual pay.
You also need to account for and pay Pay fringe benefit tax, if you supply fringe benefits, eg company cars or parking spaces, to your employees.
PAYE/PAYEDAY Filing
Depending on how often you pay your employees you will need to file PAYE returns and pay this to the IRD. You can read more about PAYDAY filing here.
Records you need to keep
You need to keep complete records for all employees, these include:
- Employment and contractor agreements
- Making sure all new employees fill in a Tax Code Declaration (IR330)
- All contractors fill in a Tax rate notification for contractors (IR330C) – if they don’t you will need to deduct tax from the payments made to them at the no-notification rate.
- Records of returns filed to the IRD. Employer deductions (IR345) and Employer monthly schedule (IR348)
- wage information (includes hours/days worked)
- copies of certificate of exemptions
- copies of special tax codes
- copies of special tax rate certificates.
All your pay records must be held in New Zealand for at least seven years.
