Hiring your first employee in NZ: what to set up, and the cash gap before they pay their way

Most first-time employers sweat the paperwork and under-plan the money. The paperwork is a checklist you can finish in an afternoon. The money is different: you start paying a wage on day one, and the extra work that wage is meant to unlock turns into cash weeks or months later. This feature covers both, in the order you’ll need them.

What do you have to set up before your first employee starts?

Business.govt.nz’s hiring steps are a sound spine. Here they are with the dates that matter:

1. Register as an employer with Inland Revenue. Business.govt.nz is blunt: if this is your first employee, you need to register. Do it before the first payday, not after.
2. Issue a written employment agreement and role description. It has to suit the type of employee (full-time, part-time, fixed-term or casual). Keep a signed copy and give the employee easy access to theirs.
3. Get the agreement signed before day one. This matters more than it looks; see the trial period section below.
4. Collect an IR330 tax code declaration and the IRD number. Without a declaration, you can’t apply the right tax code.
5. Handle KiwiSaver. Eligible employees are enrolled and you pay an employer contribution of at least 3.5% of gross pay from 1 April 2026. Our KiwiSaver employer contributions page has the mechanics, including ESCT.
6. Explain your health and safety procedures on the first day, and keep a record that you did.
7. Set up payroll. Payroll software or a bookkeeper is usually cheaper than getting a filing wrong.

Check the wage against the floor, too. The adult minimum wage has been $23.95 an hour since 1 April 2026, and the starting-out and training rate is $19.16. See what the 2026 minimum wage costs an employer if your offer sits close to it.

Does the 90-day trial period work for a first hire?

Yes, and it’s now open to everyone. Employment New Zealand confirms that since 23 December 2023 every employer, whatever the size, can use a trial period of up to 90 days.

The catch is timing. The trial has to be agreed in good faith, written into the employment agreement, and signed by the employee before they start work. Employment New Zealand says that if they haven’t signed before they begin, the trial period isn’t valid. A handshake on Monday and paperwork on Wednesday will not do.

Spell out four things in the clause: the length (never more than 90 days), that the clock starts on the first day, that you may end the job during that window, and that the employee gives up the usual right to bring an unjustified dismissal claim. Everything else stays as normal. You still owe the pay, leave, a safe workplace and good faith, and a trial doesn’t excuse a careless process. Plan the first-month check-ins in your diary before the person starts, so a decision at day 80 isn’t a surprise to either side.

One exception: Immigration New Zealand doesn’t allow trial periods for migrant workers on an Accredited Employer Work Visa.

What happens on the 20th after the first payday?

This is where the first-time employer’s cash register takes a hit. Under the Inland Revenue rules, employers with less than $500,000 a year of PAYE and ESCT pay deductions once a month, by the 20th of the following month. Your employee’s PAYE and KiwiSaver deductions sit in your account until then, which can feel like spare cash. It isn’t. It’s their tax.

Filing is separate: employment information goes to Inland Revenue within 2 working days of every payday when you file electronically. PAYE and payday filing has the full detail. The practical habit is to move PAYE, KiwiSaver and ESCT into a separate account each payday so the 20th is never a surprise.

Can the business carry the wages until the hire pays off?

Here’s the part no checklist covers. Three things stack up in the first few months:

• Ramp-up. New people take weeks to reach full output, and you’re paying the full wage throughout.
• Customer payment lag. Extra sales don’t turn into cash until the customer pays. On 20th-of-the-month terms, the average delay can be 5 to 8 weeks.
• Set-up costs. Tools, a phone, a laptop, uniform, advertising and your own time training.

The cure is to model it before you sign the offer.

Illustrative example. A Tauranga joinery owner takes on a workshop assistant on $28 an hour, 40 hours a week. The assumptions are the owner’s own, not benchmarks.

Item	Figure
Weekly gross wage (40 × $28)	$1,120
Employer KiwiSaver at 3.5%	$39.20
Weekly cost before ACC, leave accrual and equipment	$1,159.20
One-off set-up (tools, phone, advertising)	$3,000
Gross profit the assistant brings in at full output	$2,000 a week
Ramp-up	Weeks 1–4 nothing, weeks 5–8 half, week 9 on full
Customer payment lag	6 weeks

Because of the lag, cash from work done in week 1 doesn’t arrive until week 7. By the end of week 14, the owner has paid out 14 × $1,159.20, or about $16,229, but has received only the gross profit earned in weeks 1 to 8, which is $4,000. Add the $3,000 set-up and the business is about $15,200 out of pocket at its lowest point, in week 14.

From week 15 the money turns: each week brings in $2,000 against $1,159.20 of cost, a net gain of about $841. At that rate, it takes roughly 18 weeks to claw back the $15,200, so the hire pays for itself in cash terms around week 32.

Two honest caveats. This leaves out ACC, holiday accrual and the owner’s own time, so the real gap is bigger. And if the assistant only produces $1,500 a week of gross profit, the weekly gain shrinks to about $341 and the payback runs past a year. Test the number you’re relying on before you hire. The true cost of an employee page will help you with the full on-costs.

How do you test your own version?

Take twenty minutes with a spreadsheet:

1. Work out the weekly full cost: wage, KiwiSaver, ACC allowance, leave.
2. Estimate gross profit per week at full output, and be conservative.
3. Set a ramp-up, in weeks, with a percentage for each.
4. Add your real debtor lag from your accounts.
5. Run cumulative cash week by week and find the lowest point.
6. Compare the lowest point with your cash reserve. If the reserve is thinner than the gap, you have a funding question, not just a hiring question.

If the numbers are tight, ask whether a contractor or fewer hours gets you the capacity more cheaply. Our contractor or employee feature shows the break-even hours. Also use the GST and provisional tax planner to make sure a new wage bill isn’t landing on top of a tax date you’ve underfunded.

What if the gap is bigger than your cash?

That’s common, and it isn’t a sign the hire is a bad idea. A busy owner turning down work because there’s no one to do it is the classic reason to hire, and the gap is the price of the timing. Waiting until the cash pile is comfortable often means waiting until the work has gone to someone else.

If your forecast shows a low point your reserve can’t cover, a working capital option sized to the gap can let you hire now and repay from the extra gross profit. If you’d like to see what’s possible, it takes about a minute to see if you qualify.

Ready to hire? Let’s check the funding side too

Taking on your first person is a big step, and the best time to look at funding is before the offer letter goes out, not after the third payday. We help New Zealand owners fund exactly this kind of growth step, and unsecured and cash-flow options typically run from $5,000 to $500,000, depending on your turnover and bank statements.

Here’s how it works. The enquiry takes about 60 seconds, and there’s no credit check when you enquire, so asking won’t touch your credit file. We don’t send your details to a pile of lenders; one team handles it. A real person reads what you’ve written, looks at your situation and calls you. All we ask is that you fill the form in accurately, so we can match the right option first time.

See if you qualify →