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How much does an employee really cost?

Updated: Nov 24, 2023

The true cost of an employee in New Zealand can be hard to pinpoint, but one thing is certain - they represent a significant investment to any business.



When hiring a new employee, businesses must factor in not only their salary or wages but also associated costs such as payroll taxes and employee benefits like insurance and training. These costs can have a huge impact on a business’s bottom line. It is also important to factor in the costs associated with employee liability.


Employees can be liable for a wide variety of costs, such as negligence or breach of duty, and this must be taken into consideration. Liability insurance is available to cover these costs, but this comes at an additional cost to the business. The cost of this insurance will vary depending on the size and complexity of the business and should be included in the overall cost of hiring a new employee.


On top of wages, businesses must also factor in taxes and benefits like KiwiSaver, provide deductions for PAYE (pay as you earn), ACC Levy and sometimes other types of superannuation. This can account for up to 25% of the total costs associated with employing a worker. All of these deductions can either be paid on top of the employee's salary or taken out of the employee’s salary and make up the ‘gross’ salary that the business ultimately pays.


On top of all these costs, businesses must also factor in the cost of recruiting a new employee, such as recruitment agencies or job postings. Depending on the size and complexity of the role, this can add significantly to the cost of hiring an employee.


Finally, businesses should consider how much it costs to train, develop and keep great employees. This might include investing in job seminars, conferences and other development opportunities. By taking the time to invest in their employees, businesses can reap rewards in the long run, as they become more productive and efficient.


When all these costs are taken into consideration, the true cost of an employee in New Zealand can be substantial. Businesses should take the time to consider all potential costs when taking on a new employee so that they can make sound decisions when it comes to their bottom line.


Call us to discuss further if you need advice regarding any of these processes.


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