Secondment Salary In New Zealand: Who Pays And Key Contract Terms

If you run a small business, secondments can be a practical way to bring specialist skills into your team quickly, cover a temporary gap, or support a client/project without hiring permanently.

But one question comes up almost immediately: who pays the worker during the secondment? In other words, how does secondment salary work - who pays the person, how do you set the salary and any charge-out rate, and what should the paperwork say so you don’t end up with a messy employment dispute.

Below, we break down how secondment salary arrangements usually work in New Zealand, what you should decide upfront, and the key contract terms to include so your business is protected from day one.

What Is A Secondment (And Why Secondment Salary Can Get Confusing)?

A secondment is where a worker (usually an employee) is temporarily assigned to work:

• in another part of the same business (internal secondment), or
• for a different business (external secondment), often a client, supplier, partner, or related company.

Secondments are typically for a fixed period, or for the life of a project, with the expectation the worker returns to their original role after the secondment ends.

The reason secondment salary can get confusing is that there may be multiple “layers” of payment:

• the employee’s pay (what lands in their bank account),
• the cost allocation between businesses (who ultimately bears the cost), and
• a commercial charge-out (what one business invoices the other, which may include a margin).

From a legal and risk perspective, you want to be really clear about:

• who the employer is during the secondment,
• who controls the day-to-day work, and
• who is responsible for paying wages and meeting employment obligations.

This is also where having a solid Employment Contract (and a well-drafted secondment agreement or variation) makes a big difference.

Who Pays Secondment Salary In NZ?

There isn’t a single “one size fits all” approach. Who pays, and how the cost is shared, depends on what the parties agree and (crucially) what happens in practice day-to-day. In many cases, businesses use one of the following models and document it clearly.

1) Home Employer Pays The Salary (Most Common)

In many secondments, the worker remains employed by the “home” employer (the business that already employs them). That employer continues to:

• run payroll and pay the employee their wages/salary,
• make PAYE deductions and KiwiSaver contributions (if applicable),
• administer leave entitlements (annual leave, sick leave), and
• manage ongoing employment recordkeeping.

Then the host business reimburses the home employer (sometimes at cost, sometimes with a markup).

Why small businesses like this model: it avoids the host business needing to onboard the worker as an employee, and it helps preserve continuity under the existing employment arrangement.

2) Host Employer Pays The Salary (New Employment Relationship)

Sometimes the worker is employed by the host business for the secondment period (or transferred across). This is less common for short secondments, but it can happen where the host business needs full control and direct employment arrangements.

If you go down this route, you need to be careful about:

• whether the original employment ends (and if any notice/termination obligations apply),
• whether you’re creating a fixed-term arrangement (which has specific requirements in NZ), and
• what happens at the end of the secondment (do they return, do they stay, do they leave?).

If you’re effectively switching the contracting party under an existing arrangement, you might also need a Deed of Novation so responsibilities move cleanly from one entity to another.

3) Split Payments Or “Top-Ups” (Higher Risk If Not Documented)

Some secondment salary structures involve split arrangements, such as:

• home employer pays base salary, and host pays an allowance, bonus, or overtime; or
• home employer pays normal salary, and host reimburses travel and accommodation directly to the employee.

This can work, but it’s the kind of setup that creates confusion fast if the documentation is vague (especially around tax treatment, approval of expenses, overtime approvals, and who is responsible if there’s a dispute).

As a starting point, try to keep payroll going through one employer unless there’s a strong reason not to.

What The Law Expects You To Get Right

Regardless of the model you use, New Zealand employment law still expects wages to be paid correctly and on time, and minimum employment standards to be met. Key legal frameworks that may be relevant include:

• Employment Relations Act 2000 (good faith obligations and employment relationship rules),
• Wages Protection Act 1983 (restrictions around deductions from wages), and
• Holidays Act 2003 (annual leave, sick leave, public holidays and pay rules).

Where secondments can get legally tricky is when the paperwork says one thing, but the host business effectively controls the person like an employer in practice. If you’re unsure how the arrangement will be viewed, it’s worth getting advice early, because missteps here can be expensive to unwind later.

How To Set Secondment Salary (Practical Approaches For Small Businesses)

Setting secondment salary is usually about balancing fairness for the worker, cost certainty for the businesses, and clear incentives for the project to succeed.

Common approaches include:

Keep Salary The Same (And Adjust Only What’s Necessary)

For many secondments, the simplest approach is to keep the employee on their existing salary/wage and treat the secondment as a temporary change in duties and reporting line.

This works particularly well if:

• the role is broadly similar in seniority and workload, and
• the secondment is short (e.g. 3–6 months).

Even if you keep the same pay, you’ll still want to clarify the operational details in writing (who approves leave, who signs off timesheets, who manages performance day-to-day).

Increase Salary Or Add A Secondment Allowance

If the secondment involves:

• higher responsibilities,
• unusual hours,
• travel or relocation, or
• a higher-cost location,

it may be appropriate to pay a secondment allowance (or temporarily uplift salary).

From a small business perspective, the key is to document whether that uplift:

• applies only for the secondment period, and
• reverts automatically when the secondment ends (and what the “revert” date is).

This is often done through a contract variation - and a Deed of Variation can be a clean way to capture the temporary pay change and any special conditions.

Set A “Cost Recovery” Rate Between Businesses (Different From Salary)

Don’t mix up the worker’s secondment salary with what the host business pays the home business.

It’s common for the businesses to agree one of the following reimbursement methods:

• At cost: the host reimburses wages plus agreed on-costs (for example, payroll administration and any employer contributions/levies that apply).
• At cost plus margin: the host pays cost plus an agreed percentage (often used where the secondment is effectively providing services).
• Fixed monthly fee: predictable, but needs a clear process if hours blow out.
• Hourly/day rate: useful for part-time secondments or mixed duties.

If one business is invoicing the other, you should also consider whether GST applies and how you’ll treat reimbursable expenses. This is general information only (not tax advice) and it’s worth confirming the GST and invoicing treatment with your accountant or the IRD guidance for your specific setup.

Overtime, Time Off In Lieu And Hours Of Work

Secondments sometimes come with a hidden workload problem: the worker ends up doing the seconded role and part of their original role, or works longer hours due to travel and client expectations.

To avoid disputes later, decide upfront:

• what the ordinary hours of work are during the secondment,
• whether overtime is expected and how it’s approved, and
• whether time off in lieu is available and how it’s tracked.

Even a short clause can prevent misunderstandings - and it’s worth aligning this with your policies and working overtime expectations.

Key Contract Terms To Include In A Secondment Arrangement

A secondment can involve two agreements running at once:

• the employment agreement between the worker and their employer, and
• a secondment agreement (often between the home employer and host business, sometimes tripartite including the worker).

For small businesses, the goal is to keep the arrangement simple, but still cover the key risks.

1) Who The Employer Is (And What That Means)

Be explicit about whether the worker remains employed by the home employer or becomes employed by the host. This affects:

• who can issue lawful instructions as an employer,
• who manages performance issues and disciplinary processes, and
• who is responsible for meeting minimum employment standards.

If your documentation is unclear, you risk a situation where both businesses assume the other is handling an obligation (and the worker is stuck in the middle).

2) Salary, Allowances And Payment Logistics

Your secondment paperwork should clearly set out the secondment salary arrangement, including:

• the salary/wage rate during the secondment,
• any secondment allowance and when it starts/ends,
• who pays (payroll entity) and how often, and
• how bonuses/commission (if any) are calculated during the period.

It’s also smart to cover what happens if the secondment ends early - for example, whether the allowance stops immediately or at the end of a pay cycle.

3) Term, Extension And Early Termination

Secondments often go longer than originally planned. Your agreement should cover:

• the start date and end date (or project milestone end),
• who can extend the secondment and how (e.g. written agreement),
• how much notice is required to end the secondment early, and
• what happens when it ends (return to original role, redeployment, or something else).

This is a classic area where “we’ll sort it out later” turns into a dispute - especially if the worker’s original role has changed while they were away.

4) Reporting Lines And Day-To-Day Control

Spell out who the worker reports to day-to-day (host manager, home manager, or both). This should include:

• who approves leave,
• who sets priorities,
• who reviews performance during the secondment, and
• who can direct the worker to work overtime or travel.

Clear reporting lines reduce the risk of conflicting instructions and burnout.

5) Expenses, Travel And Reimbursements

Secondments often involve additional costs. Your documents should say:

• what expenses are covered (travel, accommodation, meals, vehicle costs),
• whether there are caps/limits,
• the approval process (and required receipts), and
• who pays the expenses (host directly vs reimbursement to home employer).

If reimbursements are coming out of wages, make sure you’re not accidentally creating unlawful deductions (this can intersect with the Wages Protection Act rules).

6) Confidentiality, IP And Use Of Systems

Secondments can expose your business to real risks around confidential information, customer lists, pricing, and know-how. If the worker will access host business systems, you should address:

• confidentiality obligations owed to the host business,
• ownership of work product (IP) created during the secondment, and
• return/deletion of information at the end of the secondment.

If personal information is being accessed or shared (e.g. client/customer data), make sure your Privacy Policy and data handling processes are consistent with the Privacy Act 2020.

7) Health And Safety Responsibilities

Health and safety can’t be an afterthought. Under the Health and Safety at Work Act 2015, both the home employer and host business may have duties depending on what’s happening on the ground.

Your agreement should cover practical points like:

• who provides the induction and training at the host site,
• who supplies equipment/PPE,
• how incidents are reported, and
• how the businesses coordinate if there’s a notifiable event.

This is one of those areas where clear communication and documentation can prevent serious harm and major liability.

Common Risks For Small Businesses (And How To Avoid Them)

Secondments can be a win-win, but the risks usually show up in the same predictable places.

Misunderstanding Who Can Manage Performance

If the host business isn’t happy with performance, can they “discipline” the worker? Usually not directly, if they aren’t the employer.

A clean approach is to require the host to raise concerns with the home employer, and for the home employer to manage any formal employment processes (while still taking the host’s feedback into account).

Accidental Employment Or Contractor Misclassification

Sometimes a “secondment” is really a labour supply arrangement, or the worker isn’t actually an employee of the home business at all. If the arrangement is more like contracting, you may need a different document set, like a contractor vs subcontractor assessment and a tailored working as a contractor structure.

If you are engaging a non-employee resource, a proper Contractor Agreement can be critical to clarify deliverables, payment terms, and IP.

Disputes Over Charge-Out Rates And What’s Included

One business might assume “salary reimbursement” includes everything, while the other assumes it’s just base wages.

To avoid awkward invoices and relationship damage, define in writing whether the charge-out includes:

• KiwiSaver employer contributions
• ACC costs
• annual leave and public holiday costs
• training and onboarding time
• equipment and software licences

This is commercial hygiene - and it matters just as much as the employment side.

Secondment Ends, But The Job Doesn’t “Go Back” Neatly

In the real world, teams change and roles evolve. If the worker’s original position is no longer available (or has materially changed), you can end up in a tricky situation.

That’s why it’s important to document what role the worker returns to, and what happens if the role is not reasonably available (including whether you’ll consult on alternatives).

These issues can become especially sensitive if restructuring is happening, so it’s worth getting advice sooner rather than later.

Key Takeaways

• Secondment salary isn’t just about what the worker is paid - you also need to document who runs payroll, who reimburses whom, and whether a margin applies between businesses.
• The most common model is that the home employer continues paying the employee, and the host business reimburses the cost (either at cost or cost plus margin).
• Be clear about whether the worker’s pay stays the same, increases temporarily, or includes a secondment allowance - and when any uplift starts and ends.
• Your secondment paperwork should cover employer identity, reporting lines, term and early termination, expenses, confidentiality/IP, and health and safety responsibilities.
• Watch out for common small business pitfalls like unclear performance management authority, disputes over what “salary reimbursement” includes, and messy transitions when the secondment ends.
• Secondments are much smoother when you have strong legal foundations in place from day one, including a clear Employment Contract and properly documented variations or secondment terms.

If you’d like help documenting a secondment arrangement, setting up the right employment paperwork, or pressure-testing the commercial terms between the two businesses, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.