The True Cost of an Employee Per Hour in New Zealand
Salary is only the start. Add KiwiSaver, ACC, overheads, leave and non-billable time to find what an hour really costs.
An employee on $70,000 a year does not cost you $70,000, and they do not cost you $33.65 an hour. Once you add employer contributions, overheads and the hours nobody can bill, the real number is closer to $65 for every hour you can actually charge for.
Here is how to work it out for anyone on your team, step by step, using New Zealand rules.
The quick answer
True cost per billable hour = total yearly cost of the employee ÷ billable hours per year
For a $70,000 employee that is $86,919 ÷ 1,338 hours = $64.96.
Want to skip the maths? Use our free charge-out rate calculator and choose One employee.
Step 1: Add the costs on top of salary
| Cost | How to work it out | Example |
|---|---|---|
| Salary | Gross yearly pay | $70,000 |
| Employer KiwiSaver | 3.5% of gross pay (the employer minimum from 1 April 2026) | $2,450 |
| ACC work levy | Rate depends on your industry classification. The example uses 0.67% | $469 |
| Overhead loading | Share of rent, software, equipment, admin and management, as a % of salary. The example uses 20% | $14,000 |
| Total yearly cost | $86,919 |
Check current KiwiSaver and ACC rates each year. Your ACC levy is on your ACC invoice, and it varies a lot between industries.
Step 2: Work out the hours they are actually at work
A full-time year is 52 weeks × 40 hours = 2,080 paid hours. But in New Zealand an employee is entitled to 4 weeks of annual leave, 12 public holidays and 10 days of sick leave each year. Allowing for that:
| Weeks | |
|---|---|
| Weeks in a year | 52 |
| Annual leave | − 4 |
| Public holidays (12 days) | − 2.4 |
| Sick leave (allow 5 days) | − 1 |
| Weeks at work | 44.6 |
44.6 weeks × 40 hours = 1,784 hours at work. That is $86,919 ÷ 1,784 = $48.72 per hour worked.
Step 3: Allow for time you cannot bill
Even at work, nobody bills every hour. Meetings, admin, training, sales and internal projects all take time. If this person bills about 75% of the hours they are at work:
1,784 × 0.75 = 1,338 billable hours, so $86,919 ÷ 1,338 = $64.96 per billable hour.
That is the employee’s real cost rate. Charge less than this and every hour they bill loses money.
A shortcut that lands in the same place
Many businesses skip Step 2 and use 2,080 hours with a lower billable %, around 65%, to cover leave and non-billable time together. $86,919 ÷ 2,080 ÷ 0.65 = $64.29. Close enough for pricing, and it is what our calculator uses.
From true cost to charge-out rate
To make a 25% margin on this person’s time, divide the cost rate by 0.75: $64.96 ÷ 0.75 = $86.62 an hour. Not sure why it is 0.75? See margin vs markup, or read the full method in how to calculate your charge-out rate.
Common mistakes
- Dividing salary by 2,080. $70,000 ÷ 2,080 = $33.65, roughly half the true cost of a billable hour.
- Forgetting leave and public holidays. You pay for them, but nobody bills during them.
- Leaving out overheads. Rent, software and management time are part of every hour.
- Assuming everyone is 100% billable. Track it, then use the real figure.
Track real cost on every project
In ProWorkflow you can set a cost rate for each staff member, so every hour they log is costed at their true rate. Project profitability then shows live cost, spent and margin as the work happens. See how to set up cost and charge rates.
Hiring in Australia or the US too? See the Australian version and the US fully burdened labor rate guide.
FAQ
How much does an employee really cost in NZ?
In our example, a $70,000 employee costs $86,919 a year, 24% more than their salary, once KiwiSaver, ACC and a 20% overhead loading are added. Per billable hour that is $64.96, almost double the $33.65 you get by dividing salary by 2,080.
What is the employer KiwiSaver rate?
The employer minimum is 3.5% of gross pay from 1 April 2026. Check Inland Revenue for the current rate.
How many working hours are in a year in NZ?
2,080 paid hours for a 40-hour week, but about 1,780 hours at work once annual leave, public holidays and some sick leave are taken out.
What billable % should I use?
Use your own timesheet data. Track a month of billable hours against hours worked. This is where a project management tool like ProWorkflow helps: every hour is logged against a project or task, so you can see your real billable % and base pricing decisions on accurate data, not assumptions.
