If you’re running a small business (or a growing organisation) in New Zealand, it’s completely normal to wonder whether board members are paid - and if they are, how you’re supposed to set it up properly.
For many founders, “the board” starts out as you and a co-founder making decisions at the kitchen table. But as the business grows, you might bring in independent directors, set up a formal board, or add stronger governance around accountability and strategy. That’s usually when the big question comes up: do board members get paid, and what are the rules?
The good news is there’s no single “yes or no” answer - because it depends on what type of entity you have (company, charity, trust, incorporated society), what your governing documents say, and what’s been properly approved. What matters most is making the decision transparently, documenting it properly, and getting the legal, tax and conflict-of-interest settings right from day one (including getting accounting/tax advice where needed).
What “Board Members” Means (And Why It Matters For Pay)
Before you decide whether board members are paid, it helps to be clear about what “board member” means in your situation. In New Zealand, the rules can differ depending on the structure you’re operating under.
Company Board Members (Directors)
If you run a company (limited liability company), the board is made up of directors. Directors have governance responsibilities under the Companies Act 1993 and owe duties to the company. These duties exist whether or not a director is paid.
In practice, “board member pay” in a company is usually one of the following:
- Directors’ fees (a fee for governance and board duties)
- Salary/wages (where a director also has an operational role, like CEO)
- Reimbursement of expenses (travel, training, accommodation)
If you’re setting up governance properly, you may also want to document the director’s role and expectations clearly (for example, via a Directors Service Agreement).
Charities, Trusts, And Not-For-Profits (Trustees / Committee Members)
If you’re operating as a charity or trust, board members might be trustees. If you’re an incorporated society, they may be on a committee. These structures often come with different expectations around remuneration, including stricter conflict management and requirements to follow your governing rules.
Even where payments are allowed, the “why” and “how” matters a lot - especially because donors, funders, and regulators may scrutinise governance payments closely.
So, when asking “do board members get paid?”, the better question is:
- What type of organisation are we?
- What does our constitution/trust deed say?
- What process do we need to follow to approve payment properly?
Do Board Members Get Paid In NZ Companies?
Yes - in many New Zealand companies, board members are paid. But it’s not automatic, and it’s not something you should “just start doing” without checking the legal and governance settings around it.
Directors’ Fees: The Common Approach
For small businesses, the most common arrangement is paying directors a directors’ fee for governance work. This might reflect:
- attendance at board meetings
- reviewing reporting and financials
- strategic planning and oversight
- risk management and compliance support
- use of professional expertise and industry connections
Directors’ fees are often paid periodically (e.g. monthly or quarterly) rather than like a wage based on hours worked.
When A Director Is Also “Working In The Business”
It’s also common (especially in founder-run companies) for a director to be hands-on day-to-day. In that case, your director might also be paid as an employee or contractor for operational work.
That’s where things can get messy if you don’t document it clearly. A good starting point is separating:
- governance duties (director responsibilities, board decisions)
- operational duties (running the business, sales, delivery, management)
If the director is also genuinely an employee of the company, an Employment Contract can help clarify expectations, responsibilities, and pay structure (and reduce disputes later).
What About “Paying The Board” In Early-Stage Startups?
If you’re still in early-stage growth, you might not have cash to pay directors - and that’s okay. Many boards start unpaid (or only reimbursed for expenses), especially when directors are founders or close supporters.
But if you’re bringing in an independent director, paying a fee can be a practical way to reflect their time and responsibility - and to set a professional tone for governance.
How Do You Approve Director Pay Properly?
This is the part that business owners often skip, but it’s where most legal risk sits. It’s not just about whether board members get paid - it’s about how you approve it.
Check Your Company’s Constitution And Shareholder Settings
Your company’s Company Constitution (if you have one) may set rules around director remuneration, including:
- whether directors can be paid
- who approves payment (board vs shareholders)
- any caps or decision-making thresholds
- conflict-of-interest procedures
If you don’t have a constitution, you’ll rely on the Companies Act 1993 default position and proper shareholder/board processes. In many cases, directors’ remuneration (or the total amount of it) needs shareholder authorisation unless your constitution provides another method - so it’s worth checking before anything is paid.
Use Clear Resolutions (And Record Them)
If directors are approving payments to themselves, you need to handle that carefully - because it can raise conflicts of interest. The safest approach is to document:
- what is being paid (fees, reimbursements, salary)
- the amount and timing
- who approved it and when
- how conflicts were managed
This is often done via a Directors Resolution and/or a shareholders resolution, depending on your structure and what your constitution says.
Why Conflict Management Is A Big Deal
Directors have duties to act in the best interests of the company and not misuse their position. When a director is involved in decisions about their own pay, it can create a perception (or reality) of self-interest.
That doesn’t mean it’s automatically prohibited - it just means you should manage it properly, follow the required approval pathway, and keep a clear paper trail. A simple but effective step is to have a clear Conflict Of Interest Policy so everyone understands the disclosure and approval process.
What Can Board Members Be Paid For (And What Should You Avoid)?
Once you’ve confirmed that board members can be paid in your situation and you’ve set up the approval process, the next step is working out what kind of payments are appropriate.
Common (And Usually Safer) Payment Types
- Fixed directors’ fee (e.g. an annual amount paid monthly)
- Per-meeting fee (useful if board meetings are irregular)
- Committee fee (e.g. for audit/risk committee work)
- Expense reimbursements (with receipts and clear rules)
Some payments aren’t necessarily “wrong”, but they tend to create more legal and governance risk if not structured carefully:
- Success fees or commissions tied to deals (can undermine independence)
- Large one-off bonuses that aren’t clearly linked to duties
- Backdated payments (especially if not properly approved at the time)
- Personal expenses disguised as business expenses
Even if something is technically allowed, it may still look problematic to shareholders, investors, auditors, or future buyers doing due diligence.
Remember: Directors Can Have Personal Liability
It’s also worth keeping in mind that director decisions aren’t risk-free. Directors can face personal exposure in certain circumstances (for example, where legal duties are breached or there’s reckless conduct).
If you’re bringing in directors, or taking on a more formal governance structure, it’s worth understanding the bigger picture around personal liability as a company director so you can set expectations and protections early.
Tax, Payroll, And Practical Setup For Director Payments
Even if you’ve handled the corporate approval side, you still need to pay board members in a way that makes sense for tax and accounting. This is where a lot of businesses trip up - not because they’re doing anything intentionally wrong, but because the categories are easy to mix up.
Directors’ Fees vs Salary: Why The Difference Matters
Directors’ fees are generally treated differently from wages. A salary/wage arrangement usually implies an employment relationship (with PAYE deductions and employer obligations). Directors’ fees are often taxed differently (and may involve withholding obligations in some situations), but the correct treatment depends on the facts - including whether the director is engaged personally or through another entity, and the nature of the role.
The “right” approach depends on the person’s role and the company’s setup, so it’s worth aligning your legal documents with your accounting treatment - and confirming the tax position with your accountant or the IRD guidance.
GST And Invoicing
Some directors will invoice through their own business or company (especially if they sit on multiple boards). That can raise GST questions if they’re GST-registered, and whether GST applies can depend on how the services are supplied and documented.
You don’t need to solve all of this alone - but you do want your legal arrangements to match how payments flow in real life, so you’re not fixing it later under pressure (for example, during an audit, investment round, or sale).
Documenting Expectations And Duties
Board payment disputes often aren’t about the amount - they’re about misunderstandings:
- What work is included in the fee?
- Are directors expected to do “extra” advisory work?
- Is email support and investor introductions included?
- What happens if the director steps down mid-year?
Clear documentation helps prevent those headaches. It also supports stronger governance, because everyone knows what’s expected and what’s being paid for.
For a deeper look at director remuneration structures (especially where directors also have operational roles), it can help to understand how company directors get paid in practice.
Key Takeaways
- Board members can be paid in New Zealand - but the rules depend on whether you’re a company, charity, trust, or incorporated society and what your governing documents allow.
- For NZ companies, board member pay commonly takes the form of directors’ fees, and sometimes salary/wages if a director also has an operational role in the business.
- You should check your Company Constitution (if you have one) and make sure payments are approved through the right process. In many cases, shareholder authorisation is required unless the constitution provides otherwise, particularly where directors are effectively approving payments that benefit themselves.
- Use proper documentation (like a Directors Resolution) and manage conflicts with a clear Conflict Of Interest Policy to reduce governance risk and build trust with shareholders and stakeholders.
- Be careful to distinguish between directors’ fees, salary/wages, and expense reimbursements, and make sure your tax/payroll treatment matches the legal and practical reality (and get accountant/tax advice if you’re unsure).
- Good governance is part of protecting your business from day one - especially because directors can face real exposure in some situations, including personal liability as a company director.
If you’d like help setting up board remuneration properly, documenting approvals, or putting the right governance documents in place, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
