NZ Payroll Changes 2026: What Kiwi Businesses Must Know

KiwiSaver, Minimum Wage, ACC, the $200K threshold, contractor test & the new Employers Leave Act, what you need to action before and after 1 April 26.

What’s New in Payroll for 2026 and What You Need to Know

If you’re a business owner, payroll administrator, VA or bookkeeper in New Zealand, 2026 is not a “business as usual” year. A series of significant payroll and employment law changes have either already taken effect or are on the horizon — and understanding them is critical to keeping your business compliant, your employees paid correctly, and your costs under control.

Here I summarise the key changes you need to be across, along with practical steps to help you act now. These are the kinds of changes that, if misunderstood, often show up months later as back pay, compliance issues, or unexpected payroll cost blow outs.

1. KiwiSaver Contribution Increases: The Hidden Risks

From 1 April 2026, both employer and employee KiwiSaver contributions increase from 3% to 3.5%. This is the first stage of planned increases, with a further rise to 4% scheduled for 2028.

Key points to know:

Employers already contributing above 3.5% are not affected — these are minimum rates.
Employees can apply via MyIR for a temporary reduction, holding their contributions at 3% for a period. Applications opened 1 February 2026. Employers can match the reduced rate while the exemption is in place.
Critically, employers must ensure their KiwiSaver contributions do not push an employee’s effective pay below the minimum wage — particularly for those in total remuneration arrangements.
16 and 17-year-olds can now opt into KiwiSaver (since July 2025), and mandatory employer contributions for this age group start from 1 April 2026. They are not mandated for automatic enrolment however.
The Government contribution has reduced from 50 cents to 25 cents per dollar contributed (effective 1 July 2025), and eligibility is now capped at employees earning $180,000 or less per year.

Business owners should budget accordingly and review employment agreements to ensure KiwiSaver is correctly defined within remuneration structures.

2. Minimum Wage Adjustments from 1 April 2026

The adult minimum wage increases to $23.95 per hour, and the starting out and training wage increases to $19.16 per hour, both effective 1 April 2026. This means for any hours worked from 1 April onwards, and all hours worked prior can be at the previous minimum wage rate.

These changes flow directly into:

Public holiday calculations
Alternative holiday rates
Commission top-ups
Total remuneration packages
And KiwiSaver costs

Through payroll audits, it’s been found that minimum wage settings are still incorrectly configured in many systems — even where businesses believe their software updates automatically.

Your 5-Step Action Plan:

Review base rates for anyone near the minimum, including trainees and new starters.
Check whether any allowances or “bundled” pay arrangements are still compliant after the increase.
Update employment agreements with amendments to contracts where pay rate clauses need to reflect the new rates.
Stress test your rosters to check whether overtime or penalty-type arrangements create unexpected cost blowouts.
Review variable hours arrangements to avoid accidental underpayment.

3. ACC Earner Levy Increase

The ACC Earner Levy rate increases from $1.67 to $1.75 per $100 of liable earnings (inclusive of GST). The maximum liable earnings threshold also increases to $156,641.

Payroll software should update automatically, but it’s always worth manually verifying your calculations. Employees will notice a small reduction in their take-home pay as a result of the increased levy. If you have automatic payments set up for payroll, these will need to be adjusted.

4. Student Loans: No Changes This Year

Good news — there are no changes to student loan thresholds for 2026. The repayment threshold remains at $24,128 per year ($464 per week). However, it’s still worth checking that SLCIR and SLBOR extra payments are configured correctly in your payroll system.

5. Your 1 April Software Review Checklist

Before and after 1 April, review the following in your payroll system:

Minimum wages — ensure no one falls below the new rates for all hours worked from 1 April, especially those on piece rates, total remuneration, or box rate arrangements.
ESCT rates — these are only ever updated on 1 April. Confirm they are correctly updated within your software.
Tax calculations — test against the IRD Online PAYE calculator.
If anyone holds a special tax code certificate, a new certificate is required or the non-declaration rate (45%) will apply.
ACC rates — confirm the new rate has been applied.
KiwiSaver — verify the increase to 3.5% has been applied correctly.
Student loans — confirm thresholds, minimum payments, and any extra payments (SLCIR/SLBOR) remain correct.

6. Employment Relations Act Changes

Three significant changes to the Employment Relations Act took effect on 21 February 2026.

$200,000 High Income Threshold

Employees earning over $200,000 in total remuneration may now lose their unjustified dismissal protections unless this is expressly opted into via their employment agreement. Importantly:

Bonuses and commissions count toward the $200,000 threshold.
The threshold may shift year to year for employees with variable pay.
Many businesses will need to review and update their employment agreements and policies.

Limited Remedies for Personal Grievances

Employees who contributed to the situation causing a personal grievance may now lose access to remedies such as reinstatement or compensation. This is expected to significantly reduce settlement values and the frequency of ERA cases.

30-Day Rule for Collective Agreements Removed

New employees no longer need to start on the terms and conditions of a collective employment agreement for their first 30 days. This gives employers and new employees more flexibility in negotiating individual terms from day one.

New Gateway Test for Contractor Classification

A new gateway test has been introduced to help determine whether a worker is genuinely an independent contractor or should legally be treated as an employee. This matters enormously for payroll, as misclassification can trigger:

Holidays Act exposure
Leave liabilities
Back-dated pay obligations
Personal grievance risk

To meet the gateway test as a contractor, all four of the following criteria must be satisfied:

There is a written agreement specifying the worker is an independent contractor.
The business does not restrict the worker from working for another business (including competitors).
The business does not require the worker to be available at specific times or for a minimum number of hours, or the worker can subcontract the work.
The business does not terminate the contract if the worker does not accept an additional task or engagement.

The most practical way to manage this risk is to ensure your contractor agreements genuinely reflect the reality of the working relationship — not just what you want the relationship to be called.

7. A New Holidays Act Is Coming: The Employers Leave Act

The most significant change on the horizon is a complete replacement of the Holidays Act. The Employers Leave Act has passed its first reading in Parliament, with the Government aiming to pass it before the next election. A 24-month implementation window is anticipated.

This reform shifts from a complex ‘weeks and days’ model to an hours-based system. Key features include:

Hourly Rate Model – Day One Accrual

Leave calculations move to an hourly rate model, which is intended to be simpler and more consistent for employees with variable hours.

Annual leave and sick leave begin accruing from the very first day of employment, based on a percentage of hours worked.

Annual leave accrues at 0.0769 hours per contracted hour (equivalent to four weeks for those with stable hours), and sick leave at 0.0385 hours per contracted hour (equivalent to 10 days per year for a standard five-day-a-week worker), capped at 160 hours.

Casual Staff: 8% Replaced by 12.5% Leave Compensation Payment

The current 8% “pay as you go” holiday pay for casual workers will be replaced by a 12.5% Leave Compensation Payment (LCP), paid each pay period. The LCP must be shown separately in payroll records and pay statements.

Leave Compensation Payment for extra hours

The 12.5% Leave Compensation Payment (LCP), paid each pay period to permanent employees working more hours than contractually agreed. This means having set hours by agreement, and anything over and above that, will have the 12.5% LCP included each pay. When it comes time to take leave, the leave will be paid based on contracted hours at the currently hourly rate.

Key “Fish Hooks” to Watch

There are several proposed elements causing real concern for businesses:

Parental Leave Accruals: Annual leave would continue to accrue while an employee is on parental leave, despite performing no work. This creates a significant and stacked cost for employers who must simultaneously fund a replacement worker AND ongoing leave accruals for the absent employee.
Casual Staff Costs: The 12.5% LCP applies even where casual employees would not ordinarily qualify for sick leave. This represents a meaningful increase in labour costs for businesses relying on casual workers.
Bonuses and Commissions Excluded: Variable earnings such as bonuses and commissions will not be included in the hourly leave pay rate, meaning employees on performance-based pay could receive leave payments significantly lower than their normal earnings. This may create a practical disincentive to take leave.

Submissions on the Employers Leave Act are open until 14 April 2026. If you haven’t already, making a submission is strongly encouraged — the cumulative cost impact of some proposals is significant for small businesses.

Importantly, the current Holidays Act is not going away. Employers must continue applying the existing legislation until the new Act is fully passed and implemented. If your team is not yet confident with the current Act, now is the time to invest in training.

What To Do Right Now

The volume of change in 2026 is significant, but manageable with the right preparation. Here’s where to start:

Run through the 1 April software checklist above and verify all settings in your payroll system.
Review employment agreements, particularly for high-income employees (near or above $200,000), contractors, and casual workers.
Assess your contractor arrangements against the new gateway test criteria.
Budget for increased payroll costs, including KiwiSaver, minimum wage, and ACC changes.
Invest in upskilling — particularly around the current Holidays Act — before the new legislation arrives.
Visit employment.govt.nz for detailed employer guides and IRD’s online PAYE calculator to verify your calculations.
If you’re involved in payroll, consider joining the NZ Payroll Practitioners Association (NZPPA) for ongoing resources and professional support.

Final Word

The payroll and employment law landscape is changing at pace. For bookkeepers and payroll professionals, staying ahead of these updates isn’t just about compliance — it’s about being a trusted advisor to the businesses you serve.

The clients who come through 2026 in the best shape will be those whose advisors helped them act early, review their documents, and understand what these changes actually mean in practice. We have a free replay of the webinar we did on this. You can watch it here.

The landscape is constantly changing — but with the right support, it doesn’t have to be complicated, and you don’t have to do it alone.

Categories: : Legislation Updates, Payroll