Professional Employer Organisations & workers compensation: A guide for NZ businesses

Hiring through a Professional Employer Organisation (PEO) offers New Zealand businesses a powerful way to access talent, streamline HR and manage compliance. But when it comes to workers compensation and workplace injury obligations, the co-employment model introduces questions that many businesses are not fully prepared for. 

Who carries the liability when an employee is injured? How does New Zealand’s ACC scheme interact with a PEO arrangement? And what happens when your workforce crosses borders?

This guide breaks down the main points employers need to know. 

As always, this isn’t legal advice, so we’d highly recommend you seek independent legal counsel if you have any concerns around employment issues.

What is a Professional Employer Organisation (PEO)?

A Professional Employer Organisation is a third-party provider that enters into a co-employment relationship with your business. Through this arrangement, the PEO takes on significant HR and administrative functions, such as payroll processing, benefits administration and compliance management, while you retain control over day-to-day work direction and operational decisions.

The result is shared responsibility: the PEO becomes the employer of record for specific purposes, while your business remains the worksite employer. It’s a practical model for businesses that want access to enterprise-level HR infrastructure, without the overhead of building it internally.

How the co-employment model works

Under co-employment, both your business and the PEO hold employer responsibilities, but in different areas. The PEO typically manages HR compliance, payroll, insurance and employment contracts, while you manage performance, task delegation and workplace culture. Your employees work at your direction but are formally employed through the PEO structure. 

This split of responsibilities is what makes workers compensation considerations particularly important to understand upfront.

PEO vs EOR: what’s the difference

While a PEO operates through co-employment, an Employer of Record (EOR) takes on full legal responsibility for the employee in a given jurisdiction. With an EOR, your business has no formal employer relationship at all. 

The EOR handles all employment obligations independently. A PEO, by contrast, shares those obligations with you. That distinction matters for how liability is handled in a workplace injury scenario.

How workers compensation works in New Zealand

New Zealand operates one of the most distinctive injury compensation systems in the world. Rather than relying on employer-funded workers compensation insurance in the traditional sense, the country uses a no-fault accident compensation scheme managed by ACC, the Accident Compensation Corporation.

ACC vs workers compensation

ACC provides coverage for personal injuries, including workplace injuries, for everyone in New Zealand, regardless of fault. This replaces the right to sue for compensatory damages in most circumstances. Employees who are injured at work receive weekly compensation for lost income, cover for treatment costs and support for rehabilitation, all through ACC rather than a direct employer liability claim.

Employers fund ACC through annual levies, which are calculated based on industry risk classification and total payroll. These levies are not optional and form a central part of the employment compliance framework in New Zealand.

Who is liable for workplace injuries under a PEO arrangement

Under a PEO co-employment model, liability for workplace injuries can sit with either party depending on how the arrangement is structured and documented. In most cases, the PEO holds the employment contract and may therefore carry primary obligations around ACC levy payments and initial injury response processes. However, your business, as the worksite employer, remains responsible for maintaining a safe working environment under the Health and Safety at Work Act 2015.

In practice, this means both parties share exposure. If a workplace injury occurs on your premises and is found to result from a failure in your health and safety practices, your business may still face liability under health and safety law, even if the PEO is handling the ACC side of the claim.

What happens when employees work across jurisdictions

When employees work in multiple jurisdictions, injury coverage can become complicated quickly. ACC only covers injuries that occur in New Zealand or, in some cases, while an employee is temporarily working overseas on behalf of a New Zealand employer. If an employee is primarily based abroad or an injury occurs in another country, local workers compensation laws may apply instead of ACC. This is an area where clear documentation and legal advice are essential.

Workers compensation responsibilities in a PEO co-employment model

Getting clarity on who handles what before any injury occurs is critical. Ambiguity in a PEO arrangement can lead to gaps in coverage and compliance issues that surface at the worst possible time.

Which party holds the ACC levy obligation

The obligation to pay ACC levies generally falls on the party that acts as the employer for payroll purposes. In a PEO arrangement, this is typically the PEO, since payroll is run through their entity. The PEO will often collect ACC levy contributions as part of its billing to your business, packaging this into the overall cost of the service.

It is important to confirm this in writing as part of your PEO agreement. You should understand exactly which levies are being paid, at what rate and for which industry classification. Errors in classification can result in underpayments and these can fall back on your business to remedy.

How a PEO handles workplace injury claims

When an employee is injured, the PEO should manage the ACC claim submission process, coordinate with medical providers and support the employee through the rehabilitation process. However, your business still has a direct obligation to report serious workplace injuries and incidents to WorkSafe New Zealand under health and safety legislation, regardless of the PEO relationship.

A well-structured PEO agreement will outline the injury response protocol clearly, including notification timelines, claim lodgement responsibilities and how ongoing case management is handled. If your current PEO agreement does not address this, it is worth raising as a priority.

Coverage gaps to watch for

Even in a well-managed PEO arrangement, certain coverage gaps can emerge. Key ones to check for include:

• Misclassification of industry type, leading to incorrect ACC levy rates.
• Unclear responsibility for reporting obligations under the Health and Safety at Work Act 2015.
• Employees working remotely from home with no workplace safety assessment on record.
• Absence of a clear injury response protocol in the PEO service agreement.

Reviewing these areas proactively will help you avoid compliance issues and protect both your employees and your business.

Workers compensation for international employees under a PEO

As New Zealand businesses increasingly look beyond their borders for talent, workers compensation complexity grows significantly. The protections available to a New Zealand-based employee under ACC don’t automatically extend to employees located overseas, even when those employees are engaged through a PEO.

Employees working outside New Zealand

ACC cover for employees temporarily working overseas on behalf of a New Zealand employer is available in limited circumstances, generally where the overseas work is short-term and the employment relationship is firmly based in New Zealand. For employees who are permanently based in another country, ACC will not apply and local workers compensation legislation will govern instead.

This creates a compliance obligation that goes beyond ACC. Your business needs to ensure that any overseas employees are covered by the appropriate workers compensation scheme in their country of residence, and that premiums or levies are being paid correctly in that jurisdiction.

How different countries handle workers compensation through a PEO

Workers compensation systems vary significantly from country to country. In Australia, for example, workers compensation is state-based, meaning obligations differ depending on whether your employee is based in New South Wales, Victoria, Queensland or elsewhere. 

In the United States, each state has its own workers compensation laws, with requirements around insurance coverage and claims management varying considerably. In some countries, employers are required to purchase private workers compensation insurance rather than contributing to a government scheme.

A PEO operating in those countries should be equipped to manage these requirements on your behalf, handling local compliance as part of the co-employment arrangement. When evaluating a PEO for international use, it is essential to confirm they have genuine in-country expertise, not just a general ability to process payroll across borders.

Ensuring no coverage gaps across borders

Preventing workers compensation coverage gaps when employing across multiple countries requires a systematic approach. Before onboarding any international employee through a PEO, confirm the following:

• The PEO is registered and compliant in the employee’s country of work.
• Workers compensation insurance or levies are being paid in the correct jurisdiction.
• The service agreement clearly outlines who is responsible for injury claims in each country.
• There is a documented process for managing and escalating workplace injury incidents, regardless of where they occur.

It is also worth reviewing your PEO arrangement periodically as your workforce grows. What works for a team of five employees in two countries may not be sufficient when you scale to 50 employees across a dozen markets.

Managing workers compensation confidently with Employment Hero

Workers compensation and ACC obligations are not the kind of thing you want to figure out after an incident. Getting the structure right from the beginning, understanding where liability sits and ensuring coverage is in place for every employee, whether they are based in Auckland or Amsterdam, is what sets compliant businesses apart.

HeroForce helps New Zealand businesses manage the complexity of co-employment arrangements, supporting your HR, payroll and compliance functions through one integrated platform. Whether you are managing a local team or building a global workforce, we make it easier to stay on top of your obligations.

Talk to our team to find out how Heroforce can support your growth ambitions and keep your workers compensation obligations on track.

The information in this article is current as at 28 May 2026 and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its affiliates (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. Some information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.