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Home » Countries » Oceania » New Zealand

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as New Zealand – which is characterized by an innovate, international and reliable workforce, modest employment and tax laws, a robust infrastructure network connecting to the Pacific and beyond, and leading sectors in agriculture, horticulture, mining, fishing, finance, tourism, and tech – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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New Zealand – The Economy

The economy of New Zealand is a highly developed free-market economy. It is the 52nd-largest national economy in the world when measured by nominal gross domestic product (GDP) and the 63rd-largest in the world when measured by purchasing power parity (PPP).

New Zealand has a large GDP for its population of 5 million, and sources of revenue are spread throughout the large island nation. The country has one of the most globalized economies and depends greatly on international trade – mainly with Australia, Canada, China, the European Union, Japan, Singapore, South Korea, and the United States. New Zealand’s 1983 Closer Economic Relations agreement with Australia means that the economy aligns closely with that of Australia.

The service sector dominates the national economy, followed by the industrial sector, and agriculture. International tourism is also a significant source of revenue. Large-scale manufacturing industries include aluminum production, food processing, metal fabrication, wood, and paper products.

Mining, manufacturing, electricity, gas, water, and waste services accounts for approximately 16.5% of GDP. The information technology sector is also growing rapidly.

The major capital market is the New Zealand Exchange (NZX). New Zealand’s currency, the New Zealand dollar (informally known as the “Kiwi dollar”) also circulates in four Pacific Island territories. The New Zealand dollar is the 10th-most traded currency in the world.

New Zealand ranks highly in international comparisons of national performance, such as quality of life, education, protection of civil liberties, government transparency, and economic freedom. New Zealand is also a member of the United Nations, Commonwealth of Nations, ANZUS, OECD, ASEAN Plus Six, Asia-Pacific Economic Cooperation, the Pacific Community, and the Pacific Islands Forum.

Small and Medium-Sized Companies

In New Zealand, SMEs are defined as businesses with 0-49 employees. Small and medium-sized enterprises (SMEs) make a significant contribution to the New Zealand economy:

  • accounting for 97% of all New Zealand businesses
  • employing more than 630,000 people or 29% of all New Zealand employees
  • generating 28% of New Zealand gross domestic product.

However, this does not include businesses with zero employees such as sole operators and self-employed. These figures are similar to 2017, indicating a steady reliance on SMEs as part of the New Zealand economy.

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The Main Sectors of the New Zealand Economy

New Zealand focuses on the following key sectors, which all have a significant impact on the country’s economy:

  1. Agriculture – The agricultural sector is the largest industry in the country. Pastoral farming and horticulture make up most of the agricultural sector. Beef cattle rearing is practiced in Northland while dairy farming is the main activity in the wetlands of Taranaki, Northland, Southland, Manawatu, and Waikato areas.

    Sheep farming is also practiced in many of the rural areas in the country, and the sheep are used for wool production and meat. Raw wool and wool products are exported.

    New Zealand produces 2.2% of the global milk output ranking it the 8th among the world’s largest milk producers. The biggest milk processor in the country is Fonterra, and it processes about 95% of the milk from the farms. Other big dairy companies include Synlait, Westland Milk Products, and Tatua Co-operative Dairy Company. The cattle in the country feed on grass though they are fed hay during winter.

    Venison is one of the country’s exports with New Zealand exporting the largest amount of farmed venison. Pigs and goat farming is also practiced but in smaller quantities. New Zealand is known worldwide for canned corned beef.

    In 2021, $31.2b was made from New Zealand’s global food and beverage exports.

  2. Horticulture – Horticulture in New Zealand makes up a big part of the agricultural sector. Most of the horticulturists major on fruits like peaches, plums, nectarines, drupe, cherries, and apricots.

    Kiwifruit is the horticultural product with the highest export value in the country. New Zealand accounts for about a quarter of the world’s kiwifruit produce. Blackcurrants, grapes, and berries are also grown in the country. Avocados are also grown in the Bay of Plenty and Northland.

  3. Forestry – Forestry, though a small sector globally, contributes to 4% of the national GDP in New Zealand and timber accounts for a percentage of the exports in the agricultural sector. Plantation forests are located all around the country as the natural forests had started getting depleted.

    Australia imports a big chunk of timber from New Zealand which is mostly used by the paper-making industries. Other importers include the US, Japan, China, and South Korea.

  4. Fishing – Fishing is one of the major industries in New Zealand, and their fishing territory is about 2.5 million square miles. The fishing zone is ranked sixth in size globally.

    With the ninth-longest coastline of any country and ideal ocean temperatures, New Zealand’s aquaculture industry is one of the most efficient and sustainable forms of protein production on the planet.
    New Zealand seafood products are exported to over 80 countries, and are prized for their high quality, with high demand from chefs around the world.

  5. Energy – New Zealand currently has the fourth-highest renewable electricity percentage in the OECD, currently at around 84% and growing. Furthermore, the New Zealand Ministry of Business, Innovation and Employment estimates there is approximately 14,700 MW of potential additional capacity – providing ample scope for investment opportunities across the clean-energy value chain.

    Prices are globally competitive, supported by New Zealand’s high annual average capacity factors of around 50% for hydro, up to 95% for geothermal, and 40% for wind (which is among the highest in the world).

  6. Tourism – New Zealand welcomed a record 3.8 million visitors in 2018, a 57 percent increase since 2009. Visitor numbers are forecast to reach 5.1 million a year by 2025. Tourism spending is also increasing, with a Government and industry focus on developing high-value attractions and year-round visitation. Domestic tourism also has a market value of $23.7 billion (TNZ, Domestic Tourism Insights May 2020).

Compliance Highlights

  • Inland Revenue (Te Tari Taake) – Inland Revenue plays a critical role in improving the economic and social wellbeing of New Zealanders. Inland Revenue collects 80% of the Crown’s revenue as well as collecting and disbursing social support program payments and providing the government with policy advice.

  • Employment New Zealand – Employment New Zealand is part of the Ministry of Business, Innovation and Employment. On their website, you will find practical, operational, and best practice employment information that will help employers and employees understand what they can do and how they should do it.

  • Labor Inspectorate – this authority works to ensure minimum employment standards are complied with, so that:
    • all employees receive their minimum employment rights
    • all employers operate in fair marketplaces free of non-compliant businesses that may have an unfair advantage.

The Labor Inspectorate ensures compliance with employment standards by identifying and investigating breaches and taking enforcement action. The Inspectorate provides early resolution assistance for some complaints about breaches of employment standards. It also works with industry and sector leadership and other key parties to strengthen the systems that underpin employment standards compliance.

Labor Contracts Law

In New Zealand, an employment contract, or employment agreement, must be concluded in writing. The agreement could either be a collective agreement (which is between employees, employers, and unions), or an individual contract (which is between an employee and employer), which can be indefinite or fixed term. Here are the conditions of each agreement:

  1. An individual contract (indefinite or fixed-term) – an individual contract is the best type for employees that are not involved a trade union or collective agreement, or where one is not involved and must be treated as an individual. This type of employment agreement must include:

    – the names of the employer and the employee
    – a description of the work to be performed
    – an indication of the place of work and the agreed hours
    – the wage rate or salary, and how it will be paid
    – an explanation on how to help resolve employment relationship problems, such as advice that personal grievances must be raised within 90 days
    – statement of public holiday payments (if needed), which must be at least time and a half (150%) for work done on those days
    – protection in cases of restructuring

  2. Fixed-term employment contract – Fixed term agreements are practiced but are only allowed if there is a genuine reason. They must be based on reasonable grounds for having a fixed term and the employer must inform you of this reason before employing you, as well as how and when your employment will end.

    The conditions to be included in the fixed-term employment agreement are to be the same as the individual agreement, and the rights of fixed-term employees are the same as permanent employees, but the agreement type must include:

    – an explanation of why the role is only for a fixed term
    – a specification of when the agreement ends

  3. Collective agreements – A collective employment agreement covers two or more employees and are negotiated by the employer and a union on the employees’ behalf. This type of agreement can involve more than one employer and more than one union.

    In order to be covered by a collective agreement, an employee’s job must be within the scope of the agreement, and they must be a member of the union that negotiated it. A new employee being covered by a collective agreement will have the minimum terms and conditions set out in the agreement. As an individual, they can negotiate additional terms.

    The following terms must be included in the collective agreement:

    – what work or which group of employees the agreement covers
    – the wage or salary rates payable to the employees covered by the agreement
    – a clause requiring employees to be paid at least time and a half during work on public holidays
    – services for resolving employment relationship problems
    – a clause setting out how the agreement may be amended
    – a clause stating the date the agreement will end, or the event that will the agreement to an end
    prospection of restructures, as for most industries, a clause is required to state how the employer will protect the employees if the business is restructured

Minimum employment rights must be complied with, even if they are not included in the employment agreement or if the agreement states something less than the minimum entitlement. Any changes to the employment agreement must be agreed to by both the employer and the employee, and the employer cannot make any changes without the employee’s consent.

Employers are required to keep a copy of the employment agreement or the current signed terms and conditions of employment. The employer must also keep an intended agreement if the employee has not signed it. Employees are entitled to a copy of their employment agreement on request. Failure to ensure the employment agreement is in writing may result in a fine of NZ$1,000 per employee.

There is also a 30-day rule for new employees concerning employment agreements. For the first 30 days of employment, new employees are to be employed under the terms consistent with the with the applicable employment agreement if one is in place. An employee and employer may also agree on additional terms that are more favorable than those in the collective agreement.

After the 30-day period has expired, the employee and employer must come re-negotiate and agree on different terms and conditions on the individual employment agreement. However, if the employee has joined the trade union that has helped negotiate the terms of the collective agreement, the reconvening does not need to take place.

Payroll – Tax Contributions and Benefits

Income Tax:

In New Zealand, an individual’s liability to pay income tax is determined by their residency, as well as the source of their income. Residents are taxed on their worldwide income, whilst non-residents are subject to tax only on income from sources in New Zealand.

Taxable income includes:

  • Income from salaries, wages, or self-employed work
  • Benefits and student allowances
  • Assets and investments such as KiwiSaver and rental income
  • Overseas income

New Zealand’s tax system is based on self-assessment – individuals’ income tax is normally withheld by employers and paid directly to the Inland Revenue Department (IRD) monthly on the employees’ behalf.

However, individual tax returns are still required, and the following tax forms are sent to the individual to confirm or modify the tax assessments for the previous year – a tax assessment form, a request to confirm or provide new information about your income, as well as a message to complete an individual tax return (which can be received by post or online via myIR).

Health and Social Insurance: In New Zealand, there are no public social security contributions. However, both the employers and employees are encouraged to contribute to a KiwiSaver program – which is a private, voluntary scheme to help employees save for their retirement or help purchasing property.

Employers must pay 3% of an employee’s salary monthly, whilst an employee may choose to have 3%, 4%, 6%, 8% or 10% of their salary to be withheld monthly for their KiwiSaver fund.

Employees are automatically enrolled (if eligible for the fund) on starting a new job, unless they elect to opt out with a certain period.

Sick Leave & Pay: Employees are entitled to a minimum of 5 days of paid sick leave per year after the first six months of continuous employment, with an additional five days of paid sick leave after each subsequent 12-month period. Sick Leave is paid by the employer.

Annual Leave: All full-time employees in New Zealand are entitled to a minimum of 28 paid leave days per year.

Holiday Leave: There are 11 national holidays that are observed in New Zealand:

  • New Year’s Day: 1st January
  • Day After New Year’s Day: 2nd-4th January (depending on which one is a working day)
  • Waitangi Day – 6th/7th February
  • Good Friday – March/April
  • Easter Monday – March/April
  • ANZAC Day – 25th April
  • Queen’s Birthday – 6th June
  • Matariki – 24th June
  • Labor Day – 24th October
  • Christmas Day – 25th December
  • Boxing Day – 26th December

Employees may be required to work depending on the employment contract or the nature of the business they work in. For work performed on public holidays, employees must be renumerated at least 150% of normal pay, as well as an alternative holiday or day off to take later.


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