Hiring your first employee is a milestone — but plenty of NZ tradie businesses get the numbers wrong and end up losing money on every hour the new person works. The sticker price on a wage is only part of the picture. Once you add KiwiSaver, ACC, leave entitlements, and overheads, the real cost of employing someone is typically 30–40% higher than the base hourly rate.
This guide breaks down every cost component so you can quote confidently and set a charge-out rate that actually covers your costs.
The Base Wage: Where It Starts
From 1 April 2026, New Zealand's minimum wage is $23.95 per hour (adult rate). Most qualified tradies command well above this — a journeyman electrician or licenced plumber typically earns $32–$45/hr depending on region and experience.
For this guide, we'll use a $35/hr base wage as a worked example — realistic for a mid-level tradesperson in Auckland, Wellington, or Christchurch.
Mandatory On-Costs You Must Add
1. KiwiSaver Employer Contributions
As an employer, you must contribute a minimum of 3% of each employee's gross wages to KiwiSaver. This is non-negotiable under the KiwiSaver Act 2006 and is collected alongside PAYE by IRD.
At $35/hr: 3% = $1.05/hr
Note that employer contributions are not tax-deductible in the same way wages are — IRD applies an Employer Superannuation Contribution Tax (ESCT) on top, which further adds to your payroll cost. At most income levels, ESCT is 33%.
ESCT on $1.05 contribution: roughly $0.35/hr
2. ACC Employer Levies
As well as the employee's ACC earner levy (deducted from their pay), you as the employer pay a separate Work levy based on the industry. For most construction and trades work, the ACC work levy rate in 2026 sits around $1.20–$1.80 per $100 of liable earnings, depending on your risk classification.
Using a mid-range rate of $1.50 per $100:
At $35/hr: 1.5% = $0.53/hr
You can get your exact rate from ACC's website using your ANZSIC code.
3. Annual Leave
Under the Holidays Act 2003, employees are entitled to at least four weeks' annual leave per year. The practical cost to you: you're paying someone for four weeks they're not billable.
The standard way to account for this is to add 8% to gross wages (4 weeks ÷ 52 weeks = 7.69%, rounded to 8%).
At $35/hr: 8% = $2.80/hr
4. Sick Leave
Since 2021, NZ employees are entitled to 10 days of paid sick leave per year (previously five). For a full-time employee working 2,080 hours per year, 10 days equals 80 hours — or about 3.85% of annual hours.
At $35/hr: 3.85% = $1.35/hr
5. Public Holidays
New Zealand has 11 public holidays per year. Employees who work on them are entitled to time-and-a-half plus an alternative day. Employees who don't work get paid their "relevant daily pay" anyway.
Treating all 11 as non-billable days: 88 hours ÷ 2,080 = 4.23%
At $35/hr: 4.23% = $1.48/hr
Use our Holiday Pay Calculator to see exactly what public holidays cost in your situation.
The Worked Example: $35/hr Employee
| Cost Component | Rate | Per Hour |
|---|---|---|
| Base wage | — | $35.00 |
| KiwiSaver (3%) | 3.00% | $1.05 |
| ESCT on KiwiSaver | ~33% of contribution | $0.35 |
| ACC Work Levy | 1.50% | $0.53 |
| Annual leave | 8.00% | $2.80 |
| Sick leave | 3.85% | $1.35 |
| Public holidays | 4.23% | $1.48 |
| Employment subtotal | $42.56/hr |
So before you've paid for a single tool, vehicle kilometre, or training course, your $35/hr employee already costs you $42.56 per productive hour — a 21.6% increase on the base rate.
Run your own numbers with our Employee Total Cost Calculator.
Overhead Costs: The Part Most Tradies Forget
The on-costs above are just the statutory minimums. There are real overhead costs that belong in your rate calculation too:
Tools and PPE
Hard hats, boots, hi-vis, harnesses, and hand tools — expect to budget $500–$1,500 per employee per year, or $0.24–$0.72/hr.
Training and Licences
First aid certificates, site safe cards, trade-specific CPD, LBP licence fees — typically $300–$800/year per person, or $0.14–$0.38/hr.
Vehicle and Travel
If you provide a ute or van for the employee, factor in fuel, WOF, rego, insurance, and depreciation. A mid-size ute costs roughly $15,000–$22,000/year to own and operate, not counting the purchase price. Even splitting vehicle costs across billable hours, this adds $3–$6/hr.
Admin and Management Time
Every employee creates payroll processing, PAYE filing, timesheets, and performance management. Budget at least 1 hour of admin per 10 hours worked — often more.
Recruitment and Onboarding
One-off costs when hiring: job ads, interviews, reference checks, and induction training can run $1,000–$5,000 depending on the role. Spread over a two-year employment term, that's $0.24–$1.20/hr.
Realistic All-In Cost
Adding $4–$7/hr for the overheads above:
Total true cost: $46–$50/hr for a $35/hr employee
That's a 31–43% premium on the base wage.
Setting Your Charge-Out Rate
Knowing your true employment cost is only step one. To build a profitable business, your charge-out rate needs to cover:
- The employee's true cost per hour
- Your own time (you're often not fully billable while managing a team)
- Business overheads (rent, insurance, software, accounting)
- A margin for profit and reinvestment
A common rule of thumb in the NZ trades industry is to charge out employees at 2.0–2.5x their base wage. At $35/hr base:
- 2.0x = $70/hr charge-out
- 2.5x = $87.50/hr charge-out
That might sound high, but once you've accounted for the true cost ($46–$50/hr) and added your overhead and margin, a charge-out rate below $70 is often a loss-maker.
Use our Hourly Rate Calculator to model your specific situation.
PAYE and Payroll Obligations
As an employer you must:
- Register as an employer with IRD before your employee's first day
- Deduct and file PAYE each payday using myIR or payroll software
- File an Employment Information (EI) return each pay period
- Pay KiwiSaver and ESCT to IRD alongside PAYE
- Issue payslips for every pay run
- Keep payroll records for at least seven years
IRD's New Employers Guide is the best starting point if you haven't hired before.
Tools That Help
Managing employee payroll manually is error-prone and time-consuming. Many NZ tradie businesses use Fastcrew, which combines timesheets, job costing, and payroll in one app built specifically for the trades. It integrates with Xero and MYOB so your accountant gets clean data at tax time.
For PAYE filing, IRD's payday filing system makes it compulsory to report every payday — another reason to have automated payroll rather than a spreadsheet.
The Bottom Line
Hiring a tradie on $35/hr doesn't cost you $35/hr — it costs you $46–$50/hr once you factor in KiwiSaver, ACC, leave, and basic overheads. Get this wrong in your quoting and you'll work hard, bill plenty, and still end up short at the end of the year.
Do the maths before you commit to your next hire. If the charge-out rate your market will accept doesn't cover the true employment cost plus a margin, it may be better to stay lean until you can justify the rate increase.
Download our free NZ tradie templates at tradietools.nz/templates/ — including an Employee Cost Breakdown spreadsheet and a Charge-Out Rate Worksheet.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.