NIC vs. ACC Levies10 July 2013
A while back I looked into the New Zealand tax code, because I was sure that the UK practice of padding out employer costs with National Insurance was a UK-specific thing that goes a long way to killing jobs in the UK. As it turned out, New Zealand has this thing called ACC Levys that follow National Insurance's model of employer and employee contributions, but at a level that is still a lot less than National Insurance. For comparison purposes I assumed the supposed national average salary of £26,500, which at current exchange rates is the equivalent of $50,200.
UK CostIn the UK, National Insurance includes employer contributions that are in addition to what appears on pay-slips. For simplicity I used a tax calculator which for a gross salary of £26,500 results in a take-home pay of of £20,837.76 and an employer NIC of £2,594.95. That works out as a total employer cost of £29,094.95.
NZ CostIn New Zealand, there is no National Insurance, but there are the Accident Compensation Corporation levies. The exact levy is industry-dependent and there are discounts available, and the best fit charge code I could find for IT was 24235 (software publishing). To cut a long story short, this amounts to $191, including GST. Using an online calculator, total PAYE tax came to $8,080 income tax and $853 ACC earners' levy, which means take-home pay of $41,266 costs your employer $52,396.
In summaryAlthough the UK and New Zealand have similar taxes on earnings, the UK has substantially higher costs that are hidden from the employee. In terms of cost to employer, a Kiwi gets 79% of this, but a Brit only gets 72%. To add insult to injury, the New Zealand ACC levies come with the benefit that the state pays for accidents, so stuff like car insurance are not compulsory. In contrast, National Insurance is part of general taxation rather than the originally-intended pension pot, and it is not even remotely fully funded.