NEW ZEALAND Law and Practice Contributed by: Ashton Goatley, Henry Willis, Sarah Keene and Erin Hickey, Webb Henderson
Pillar Two With effect from 1 January 2025, New Zealand imple - mented the OECD’s Pillar Two framework by introduc - ing the Income Inclusion Rule (IIR) and the Under - taxed Profits Rule (UTPR). Pillar Two is designed to ensure that profits of large multinational enterprises (MNEs), with annual revenues exceeding EUR750 mil - lion, are taxed at a minimum level of 15% regardless of where they are reported. Additionally, a Domestic Income Inclusion Rule (DIIR) will apply from 1 January 2026, targeting New Zealand-headquartered MNEs to ensure consistent treatment of domestic and foreign income under the global minimum tax regime. General Anti-Avoidance Rule New Zealand also has a general anti-avoidance rule, and a number of other specific anti-avoidance rules (eg, to prevent dividend “stripping” and inappropriate sharing/use of tax losses). 10. Employment and Labour 10.1 Employment and Labour Framework Employment relationships in New Zealand are prin - cipally governed by the Employment Relations Act 2000 (the “ER Act”), which confers a minimum set of employment-related entitlements on employees. Subject to the minimum entitlements provided for in the ER Act and other employment-related legisla - tion, employees and employers are free to enter into “individual” employment agreements on terms agreed between them. The ER Act also provides legal recognition to unions. Under the ER Act, unions are the only parties able to negotiate, and be a party to, a “collective” employ - ment agreement with an employer. Employees must be union members to remain party to a collective agreement. 10.2 Employee Compensation Common forms of compensation for employees in New Zealand are cash and KiwiSaver contributions and, less commonly, equity in the employing entity (eg, shares or options to purchase shares). Key statu - tory benefits for employees in New Zealand include the following.
• Minimum wage rates are set by legislation and are reviewed annually. On 1 April 2025, the adult mini - mum wage was set at NZD23.50 per hour. • Employees are entitled to a minimum of four weeks of annual leave each year. • Employers are required to pay ten days’ sick leave for each 12-month period to employees who are off work for illness or injury. New Zealand’s no-fault Accident Compensation Corporation scheme will also provide up to 80% of an employee’s income on an employer’s behalf for leave resulting from injuries sustained at work. • Employers are required to make contributions to KiwiSaver (New Zealand’s voluntary national work- based retirement savings scheme) if employees have enrolled in it. The minimum employer contri - bution rate is 3%. The default contribution rate will rise to 3.5% for employers on 1 April 2026 and to 4% from 1 April 2028. Share Sale – Change of Control of the Employer In New Zealand, there is generally no effect on an employee’s employment or compensation in a share sale, as the employing entity remains unchanged (despite a change of control of that entity). Change- of-control clauses in employment agreements are not common in New Zealand, but they can be included as negotiated terms between the employer and employ - ee. These clauses are more common in executive or senior management employment contracts. In some transactions, employee incentives may be used to ensure a smooth transition and to retain key staff members in the business. Again, such incentives are more common for executives or senior managers. Asset Sale – Offer of Employment by the Purchaser As discussed in 3.1 Transaction Structures , in an asset sale, employment agreements cannot be trans - ferred by the employer as of right. Except in the case of “vulnerable employees” (see 10.3 Employment Protection ), if the purchaser wishes to employ the tar - get’s employees, the purchaser will need to offer new employment to them. Sale and purchase agreements will often require the purchaser to offer employment on terms no less favourable than the current terms of
406 CHAMBERS.COM
Powered by FlippingBook