Salary and Wages in New Zealand

“Salary and wages” refers to how you pay people working for you. Whether it’s an hourly wage or a fixed salary, NZ law has rules that all employers must follow.

Getting salary and wages right matters. If you don’t, you risk fines, unhappy staff, or legal issues. For example, paying under minimum wage is illegal. Also, employees expect transparency: how much pay, what tax is deducted, when they’ll get paid. Especially in places like Auckland, where cost of living is high, pay expectations are real.

In this guide you will learn:

• Clear definitions: wages vs salary
• NZ minimum wage rules
• How to use PAYE, tax, and related deductions
• What obligations you, as an employer, have

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What are Wages and Salary in NZ?

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What is wages?

• Wages are payments based on how many hours someone works. You may pay per hour or per week.
• Wages can include extra payments like penal rates (for working nights, weekends), overtime, or shift loadings. If someone works extra hours, you may need to pay more.
  
  

What is salary?

• Salary is a fixed annual amount. An employee earns the same amount every pay period (e.g. monthly or fortnightly), regardless of small changes in hours.
  
  
• Even with salary, you still must ensure that on an hourly basis the payment does not fall below the minimum wage if hours fluctuate.

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What is the Difference Between Salary and Wages NZ?

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Paid based on hours worked

• Wages: ✔
• Salary: Usually fixed regardless of small hour variations

Variable pay

• Wages: Changes with hours, overtime, loadings
• Salary: Little to no variation if hours are stable

Best for irregular hours or changing rosters

• Wages: ✔
• Salary: Less flexible

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Example:

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Imagine a café in Auckland. A server works 30-35 hours one week, 45 hours next week. If paid wages, you pay extra at a higher rate or overtime for that extra. If the salary and fixed hours are set (say 38 hrs/wk), you pay the same each week but need to check the minimum wage effect.

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Minimum Wage in New Zealand

• As of 1 April 2025, the adult minimum wage is NZD $23.50 per hour.
  
• Starting-out wage and Training minimum wage are NZD $18.80 per hour.
  
• These minimums apply to employees aged 16+ (with conditions for starting-out / training).

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PAYE, Deductions, Tax and Calculators

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What is PAYE?

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PAYE (Pay As You Earn) means you, the employer, deduct tax from your employee’s salary or wages and send that to Inland Revenue. 

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How to work out PAYE and deductions

• Use the IRD PAYE calculator for salary or wages. It helps you calculate tax to withhold.
  
• Also check the tax brackets (how much tax at different income levels).
  
• Deductions can include KiwiSaver, student loan repayments, child support (if applicable) etc.

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Legal Employer Obligations

Employment Agreement

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You must have a written employment agreement. It should state whether the employee is paid by salary or wages. It should cover hours, pay period, overtime or other rates.

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Payslips & Records

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You must provide payslips, keep accurate records of hours worked, payments made and deductions.

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Meeting Minimum Wage & Other Rates

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Even if salaried, for roles where actual hours drop, check you must still meet minimum wage obligations. Failing to do so can lead to legal issues.

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KiwiSaver and Salary & Wages Definition

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For KiwiSaver contributions, the law defines what “salary and wages” includes (e.g. bonuses, certain payments) and what it doesn’t. You need to follow those definitions.

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What Employers Should Do Now

• Review all employment agreements. Make sure they clearly say salary or wages, hours and/or overtime rates.
• Use the latest minimum wage rates.
• Use IRD calculators to set PAYE correctly.
• Ensure your payroll software or provider is updated.
• Train managers to understand the difference between salary and wages so staff are paid correctly.

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