Is Your Payroll IRD-Proof? The 7-Point Audit Checklist for Kiwi Founders
A 7-point guide for NZ business owners to check payroll against IRD and Holidays Act rules, updated for the 3.5% KiwiSaver rate.
By the Wootz team · Updated Oct 2026 · 6 min read
Don't let the Holidays Act or ESCT rates become a compliance time bomb. Use the interactive tracker, then read the detail behind each point. This is a general guide, not legal or tax advice.
Deep dive: the 7 audit points
1. The “gross earnings” definition
Are you calculating holiday pay correctly? Many businesses miss taxable bonuses or overtime in gross earnings, which leads to underpayments under the Holidays Act.
2. KiwiSaver employer contribution (3.5%)
The default employer rate rose from 3% to 3.5% on 1 April 2026, and is due to reach 4% on 1 April 2028. Check your employment agreements too. Are you paying the contribution on top of salary, or as part of a total remuneration package? This must be set up correctly to avoid disputes.
3. ESCT (employer superannuation contribution tax)
This is the “hidden” tax. You must use the correct ESCT rate for each employee, generally based on their previous year's earnings. Applying one flat rate to everyone can lead to errors.
4. The casual vs permanent test
Do you have staff on 8% pay-as-you-go holiday pay? If their hours have become regular and predictable, they may need to move to standard four-week annual leave. This is a common problem in employment audits.
5. ACC employer levies
Are you using the correct classification unit (CU)? Paying a construction rate for admin staff is an easy way to lose money, while the reverse can mean back-payments.
6. Termination pay accuracy
When a staff member leaves, you generally pay 8% of their gross earnings since their last anniversary date, plus any unused annual leave. This is where many manual errors occur.
7. Records and accessibility
Employment law requires wage, time, holiday and leave records to be kept for six years. IRD requires wage records to be kept for seven, so seven is the safer default. Keep them secure, backed up and easy to produce.
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