Hiring a Nanny: Your PAYE Duties as a Household Employer
Paying someone to look after your children in your home makes you an employer. That sentence alone stops a lot of people, because it conjures payroll software, an accountant and a set of obligations that feel absurdly heavy for one person working three afternoons a week.
The good news is that New Zealand has a specific rule for exactly this situation, and for most families it removes the payroll work entirely. The bad news is that it removes only the tax work. The employment law duties do not shrink with the hours, and those are the ones that cause real trouble when they are missed.
The three things to remember
A private domestic worker averaging no more than 30 hours a week for you is an IR56 taxpayer who pays their own PAYE. Above that, you must register as an employer and deduct it. And every employee needs a written employment agreement, whatever the hours.
Calling the nanny a contractor and paying them a flat hourly rate with nothing else attached. Whether someone is an employee or a contractor is not decided by what you agree to call them. A nanny working in your home, at hours you set, doing work you direct, is very likely an employee, and treating them as a contractor does not remove your obligations. It just means you have not met them.
The 30 hour fork
Inland Revenue treats a part-time private domestic worker as an IR56 taxpayer. The category explicitly covers a home helper, a caregiver, a support person giving a full-time carer a break, a nanny or a gardener.
Part-time here has a specific meaning: no more than 30 hours a week on average, for each employer. Under that, the worker is responsible for their own PAYE. You pay them their gross wage and Inland Revenue deals with them directly.
That last point matters more than it looks. Because the test applies to each employment separately, a nanny doing 20 hours for you and 20 hours for another family is a part-time private domestic worker in both, and neither household has to run a payroll.
What does not change at 30 hours
This is the part that gets missed. The 30 hour rule is a tax administration rule. It decides who sends the PAYE to Inland Revenue. It does not decide whether someone is an employee, and it has no effect at all on their employment rights.
A nanny working six hours a week is an employee with the same core entitlements as one working forty. All of the following apply regardless of hours.
| Obligation | What it means in a household |
|---|---|
| A written employment agreement | Required for every employee. It must be provided before work starts, and you must keep a copy. |
| At least the minimum wage | The adult minimum wage is $23.95 an hour. Paying a flat daily or weekly rate that falls below it for the hours actually worked is a breach. |
| Annual leave | Four weeks of paid annual leave after twelve months. Paying holiday pay as you go at 8% is only permitted in limited situations, such as genuine casual work or a fixed term under twelve months. |
| Public holidays, sick leave and bereavement leave | All apply. Sick leave entitlement begins after six months. |
| Wage and time records | Full and accurate records, kept for seven years. |
| Good faith and a fair process | Ending the arrangement badly can support a personal grievance, even for a few hours a week. |
A written agreement covering hours, rate, duties, notice, and what happens when you go on holiday or the children are sick prevents most household employment disputes before they start. Employment New Zealand publishes a free agreement builder. An afternoon spent on it is worth considerably more than the same afternoon spent reading about personal grievances afterwards.
Employee or contractor, and the gateway test
The employee versus contractor question changed recently. A gateway test came into law on 21 February 2026 and is not retrospective. A worker who meets all of the gateway criteria is a contractor; a worker who does not is assessed under the existing common law test, which looks at control, integration into the household, and the economic reality of the arrangement.
For a typical nanny the common law test points firmly at employment. You set the hours. You direct the work. The nanny does not send substitutes, does not advertise to the public and carries no real commercial risk. That is an employee, and describing the relationship differently in a document does not change it.
A worked example
Suppose you engage a nanny for 20 hours a week at $28.00 an hour.
Now change one thing. The children start school, then the arrangement shifts to 35 hours a week during term time. Once the work is regularly above 30 hours, the position flips: you become responsible for PAYE and must register as an employer. That transition is the single most common way a household ends up accidentally non-compliant, because nobody revisits the arrangement when the hours creep up.
School starting, a new baby, a return to full-time work or a change of nanny are all moments to check which side of 30 hours the arrangement now sits on. It is an average, so an occasional busy week does not flip it, but a settled new pattern does.
If you do become the employer
Above 30 hours the household runs a real payroll. Register as an employer with Inland Revenue, have the nanny complete a tax code declaration, deduct PAYE and any student loan or child support, handle KiwiSaver including the compulsory employer contribution, and file employment information each pay period.
The employer PAYE cost calculator shows the full cost of employing someone at a given wage, including the parts that sit on top of the hourly rate. The PAYE calculator works out the deductions on each pay. At that point a small payroll service usually costs less than the time it takes to do it properly.
ACC, insurance and the things nobody mentions
Employees are covered by the accident compensation scheme, and the earners' levy is collected through PAYE, whoever is paying it across. Where the nanny is an IR56 taxpayer, that levy comes out of the PAYE they calculate themselves.
Two other things are worth checking before someone starts work in your home.
Au pairs are not a separate category
An au pair living with the family and receiving board plus pocket money is still, in most arrangements, an employee. Board and lodging provided as part of the remuneration has its own treatment and there are limits on what may be deducted for it. Calling the arrangement a cultural exchange does not remove minimum wage or leave entitlements, and this is an area where families are frequently and genuinely surprised.
What this guide does not cover
Home-based early childhood education services, nannies engaged through an agency that employs them itself, and workers funded through individualised funding or carer support all have their own arrangements, and in several of those the agency or funder is the employer rather than you. Immigration requirements for a worker on a visa are separate again. This is general information rather than employment law or tax advice, and anything heading towards a dispute is worth taking to Employment New Zealand early.
Test Your Knowledge
Ten questions on employing someone in your home.
Sources: Inland Revenue on IR56 workers and private domestic workers, the IR356 IR56 taxpayer's handbook, and Employment New Zealand on employee or contractor status and on minimum employment rights. The gateway test took effect on 21 February 2026 and is not retrospective. Minimum wage and entitlements change; check the current rates before relying on them.
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