Understanding Your Payslip - New Zealand
📄 Understanding Your Payslip - New Zealand
Your payslip shows how your gross pay becomes your net take-home pay through various deductions and contributions. Understanding each line item helps you verify you're being paid correctly, identify errors, plan your budget accurately, and understand your employment entitlements. This guide explains every component of a New Zealand payslip in plain English.
Gross Pay Components
Gross pay is your total earnings before any deductions. It includes your base pay plus any additional payments.
What Makes Up Gross Pay:
| Component | What It Is | How Calculated |
|---|---|---|
| Salary/Wages | Your base pay for hours worked | Annual salary divided by pay periods, or hourly rate × hours |
| Overtime | Extra hours beyond normal | Usually time-and-a-half or double-time rates |
| Allowances | Additional payments for specific purposes | Car allowance, tool allowance, meal allowance |
| Bonuses | Performance or one-off payments | As agreed in employment contract |
| Commission | Sales-based earnings | Percentage of sales or performance-based |
| Holiday pay | Pay while on annual leave | Your ordinary weekly pay or average weekly earnings |
Understanding PAYE (Income Tax)
Pay As You Earn (PAYE) is income tax deducted from wages before you receive them. Your employer withholds it and pays IRD on your behalf.
How PAYE Works:
- Based on tax rates for different income brackets
- Calculated on your gross pay each pay period
- Amount depends on your earnings and tax code
- Progressive system - higher earnings taxed at higher rates
Tax Codes Explained:
| Tax Code | When Used | What It Means |
|---|---|---|
| M, ME, SB, S, SH | Main job, single income source | Standard tax rates with low-income threshold |
| SB SL, S SL, etc | Have student loan | Same as above plus student loan deductions |
| Secondary codes (SB, S, SH) | Second job or additional income | No low-income threshold, higher deduction rate |
| CAE | Casual agricultural employee | Specific rate for seasonal agricultural work |
| EDW | Election day workers | Special rate for electoral workers |
| ND | No declaration made | Higher withholding rate applied |
Critical: Wrong tax code means wrong amount of tax deducted. Too little = you'll owe IRD at year-end. Too much = interest-free loan to government until you get refund. Verify your tax code is correct for your circumstances.
💰 Other Deductions and Contributions
ACC Earners Levy
The Accident Compensation Corporation (ACC) earners levy funds accident cover for all New Zealanders. Automatically deducted from wages.
How ACC Levy Works:
- Small percentage of your gross earnings (rate changes annually)
- Covers you for accidents both at work and outside work
- Provides income support if injured and unable to work
- Covers medical treatment costs for accident injuries
- Everyone pays it - not optional
KiwiSaver Contributions
If you're enrolled in KiwiSaver, contributions are automatically deducted from your pay.
How KiwiSaver Deductions Work:
| Element | How It Works | Notes |
|---|---|---|
| Your contribution | Minimum 3% of gross pay, can choose up to 10% | Your choice of contribution rate |
| Employer contribution | Minimum 3% of gross pay | Goes to your KiwiSaver, not on payslip deduction |
| Calculated on | Gross pay before tax | So reduces your taxable income slightly |
| Savings suspension | Can apply to pause contributions | Employer contributions may also stop during suspension |
Student Loan Repayments
If you have a student loan and earn above the repayment threshold, automatic deductions apply.
Student Loan Repayment Details:
- Repayment rate: Set percentage of gross income above threshold
- Automatic deduction: Employer withholds and pays IRD directly
- No interest in NZ: Living in NZ means interest-free loan
- If overseas: Interest applies if living abroad, different repayment rules
- Shows on payslip: As "Student Loan" or "SL" deduction
Other Possible Deductions
Voluntary Deductions:
- Union fees: If you're a union member
- Insurance: Life, income protection, health insurance through employer
- Childcare: Workplace childcare facility fees
- Social club: Workplace social club subscriptions
- Charitable donations: Payroll giving to charities
Involuntary Deductions:
- Child support: If you have child support obligations
- Court-ordered deductions: Fines, reparations
- IRD debt: Tax debt repayment arrangements
📊 Leave Balances and Entitlements
Annual Leave (Holiday Pay)
After working for an employer for one year, you're entitled to minimum four weeks annual leave. Your payslip should show your accrued balance.
How Annual Leave Accrues:
| Aspect | How It Works | What To Check |
|---|---|---|
| Accrual rate | Four weeks per year of employment | Balance should increase with each pay period |
| First year | May be able to take leave in advance by agreement | Check your employment agreement |
| Payment rate | Higher of ordinary weekly pay or average weekly earnings | Should maintain regular income while on leave |
| When taken | Balance reduces by amount of leave taken | Verify reduction matches leave actually taken |
| On termination | Unused balance paid out | Check final pay includes accrued leave |
Sick Leave
After six months employment, entitled to minimum five days sick leave per year. Unused days carry over, capped at maximum amount.
Sick Leave Entitlement:
- Accrual: Five days per year after six months employment
- Carry over: Unused days roll over to following years
- Maximum: Can accumulate up to cap (check current regulations)
- Usage: For your own illness or injury, or caring for dependent
- Evidence: Employer can request medical certificate after three days
- On termination: Unused sick leave NOT paid out (unlike annual leave)
Other Leave Types
Public Holidays:
Paid leave for public holidays if they fall on days you would normally work. Alternative holidays if you work a public holiday.
Bereavement Leave:
Entitled to paid bereavement leave for death of close family member or person you had significant responsibility for.
Parental Leave:
Eligible employees entitled to unpaid parental leave, plus government-funded paid parental leave for primary carer.
Verifying Your Leave Balances
What to Check Each Payslip:
✅ Checking Your Payslip and Common Issues
How to Verify Your Payslip Is Correct
Step-by-Step Verification:
- Check gross pay: Does it match your salary/hours worked/overtime?
- Verify tax code: Is it correct for your circumstances?
- Check PAYE amount: Does it seem reasonable for your income?
- Verify KiwiSaver: Correct percentage being deducted?
- Check student loan: If applicable, is deduction correct?
- Review other deductions: Recognise all deductions listed?
- Verify net pay: Matches what hit your bank account?
- Check leave balances: Accruing and tracking correctly?
Common Payslip Errors
| Error Type | What Happens | How to Fix |
|---|---|---|
| Wrong tax code | Too much or too little tax deducted | Provide correct tax code to employer immediately |
| Incorrect hours | Underpaid or overpaid for time worked | Notify payroll with timesheets/evidence |
| Missing overtime | Overtime hours not paid | Provide records of overtime worked |
| KiwiSaver wrong rate | Wrong percentage deducted | Confirm chosen contribution rate with employer |
| Leave not accruing | Annual/sick leave balance not increasing | Raise with employer, check employment agreement |
| Student loan not deducting | Should be deducting but isn't | Provide IRD notice to employer, avoid year-end debt |
Understanding Your Net Pay
Net pay (take-home) is what remains after all deductions. This is the amount that should hit your bank account.
The Journey from Gross to Net:
When to Raise Issues
Raise With Employer Immediately If:
- Net pay doesn't match bank deposit
- Hours or pay rate incorrect
- Tax code wrong
- Missing payments (overtime, allowances, bonuses)
- Deductions you don't recognise
- Leave balances not tracking correctly
Keep Records:
- Save all payslips (digital and/or paper)
- Keep timesheets or records of hours worked
- Note when leave is taken
- Document any discrepancies raised with employer
- Compare payslips to bank deposits regularly
Your Rights
You have the right to receive accurate, timely pay for work performed. If employer makes errors or refuses to correct them, you can seek help from Employment New Zealand or raise a personal grievance. Don't ignore payslip errors - they rarely fix themselves and can accumulate into significant problems over time.
Final insight: Your payslip is more than just a receipt for your pay - it's a record of your employment entitlements, tax obligations, and retirement savings. Understanding each component helps you verify you're being paid correctly, track your leave entitlements, ensure proper tax deductions, and catch errors before they become major issues. Check your payslip every pay period - it takes minutes but protects your financial interests.
🎯 Test Your Knowledge
Quiz on Understanding Your Payslip
Related guides
- First Job and Payslip Guide NZ, a related guide in the same area.
Related tools and guides
- What is my take-home pay: each payslip line explained by calculation.
- Take-home pay by salary: net pay across the whole salary range.
- YTD earnings calculator: check the year-to-date figure is on track.