If you employ staff in New Zealand, you are responsible for deducting PAYE, student loan repayments, and KiwiSaver contributions from wages — and filing employment information with IRD every payday. Getting payroll right protects your employees and avoids costly penalties.
Employers must file employment information (EI) with IRD each payday — this replaced the monthly employer schedule in 2019. You deduct PAYE, student loan repayments (12%), and KiwiSaver employee contributions (3%–10%) from gross wages, and make employer KiwiSaver contributions (minimum 3%). PAYE and other deductions are paid to IRD twice monthly (large employers) or monthly (small employers with PAYE under $500,000/year). Use payroll software (Xero Payroll, MYOB, IPayroll) to automate filing.
Employer Registration
Before paying any employee, you must:
- Register as an employer with IRD (via myIR)
- Get your employee’s IRD number and completed IR330 (tax code declaration)
- Enrol in KiwiSaver (unless using a complying fund)
- Set up payroll software or a manual system
Payday Filing — What You Must File
Since 1 April 2019, payday filing is mandatory. Every time you pay employees, you file an Employment Information (EI) return with IRD within two working days (for electronic filing) or 10 working days (for paper — not recommended).
The EI return contains:
- Employee IRD number
- Gross wages paid
- PAYE deducted
- KiwiSaver employee contributions deducted
- KiwiSaver employer contributions made
- Student loan deductions
- KiwiSaver status (enrolled/opted out/not eligible)
Most payroll software (Xero, MYOB, iPayroll, PayHero) files directly to IRD electronically via the Payroll API.
What to Deduct from Gross Wages
For each pay period, calculate and deduct:
| Deduction | Rate | Notes |
|---|---|---|
| PAYE | Based on employee’s tax code and earnings | Use IRD’s PAYE tables or payroll software |
| Student loan | 12% of income above repayment threshold ($24,128/year = $464/week) | Only if employee has student loan (SL tax code) |
| KiwiSaver employee contribution | Employee’s chosen rate: 3%, 4%, 6%, 8%, or 10% | Default 3% if not elected |
| Child support | IRD-specified amount per employee | Only if you receive an instruction from IRD |
What You Must Add (Employer Costs)
| Employer payment | Rate | Notes |
|---|---|---|
| KiwiSaver employer contribution | Minimum 3% of gross wages | Before ESCT deduction |
| ESCT | Deducted from employer contribution | Based on employee’s ESCT rate (linked to their income) |
| ACC earner levy | Included in PAYE tables — not a separate employer cost | IRD collects from PAYE |
KiwiSaver employer contribution example:
- Gross wages: $1,000/week
- Employer contribution (3%): $30/week
- ESCT on employer contribution (e.g., 33%): $9.90
- Net employer KiwiSaver contribution to fund: $20.10
When to Pay IRD
| Employer type | PAYE liability | Payment frequency | Due dates |
|---|---|---|---|
| Small | Under $500,000/year PAYE | Monthly | 20th of the month following the payday |
| Large | $500,000+ PAYE/year | Twice monthly | 5th and 20th of the month |
Payment includes: PAYE + student loan deductions + net KiwiSaver employer contributions + ESCT.
New Employee Checklist
When a new employee starts:
- Get their IRD number
- Give them an IR330 (tax code declaration) to complete
- Get their KiwiSaver opt-in or opt-out form
- Automatically enrol them in KiwiSaver if they are 18–65 and not already a member
- Record their elected KiwiSaver rate (default 3%)
- Set up their profile in your payroll software
New employees must be automatically enrolled in KiwiSaver within 8 weeks of starting — unless they opt out within the opt-out period (2–8 weeks after starting).
Employee Leaves
When an employee leaves:
- File a final EI return for their last pay period
- File an IR345 (employer’s deduction form) if required
- Provide a Confirmation of Payment Summary (the equivalent of a payslip with year-to-date amounts) — employees use this for their tax return if they cannot find the information in myIR
Common PAYE Mistakes to Avoid
| Mistake | Consequence |
|---|---|
| Using the wrong tax code | Employee under- or over-pays PAYE; IRD may chase the difference |
| Not filing EI on payday | Late filing penalties (up to $1,000 per month) |
| Not making KiwiSaver employer contributions | IRD can recover contributions plus penalties |
| Paying wages in cash without deducting PAYE | Employer is personally liable for the PAYE shortfall |
| Failing to enrol new employees | KiwiSaver compliance breach |
Payroll Software Options in NZ
| Software | Best for | Pricing (approx.) |
|---|---|---|
| Xero Payroll | Businesses already using Xero | Included in Xero plans from $50/month |
| MYOB | Established NZ businesses | From $60/month |
| iPayroll | Dedicated NZ payroll focus | From $25/month + per employee fee |
| PayHero | Modern cloud payroll | From $10/month + $2–3 per employee |
| SmartPayroll | Simple payroll | From $10/month |
| PaySauce | Hospo and retail focus | From $10/month + per employee |
All of these integrate with IRD’s payday filing system directly.
Frequently Asked Questions
I have a casual employee who works irregularly. Do I still need to file EI every payday?
Yes — every payment to an employee, including casual and irregular workers, requires an EI filing. Many payroll apps handle this automatically.
Can I pay contractors without PAYE?
If the person is genuinely a contractor (not an employee), no PAYE applies — they manage their own tax. However, some contractor payments are subject to schedular payments (withholding tax deducted at source). See Schedular Payments NZ.
I underpaid PAYE by mistake. What do I do?
File a corrected EI return and pay the difference. IRD is generally understanding about genuine errors if corrected promptly. Persistent underpayment or deliberate avoidance is treated much more seriously.