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KiwiSaver Compulsory Employer Contributions - change may be coming

Compulsory Employer Contributions – do you pay on top of salary or wages, or do you include it in your pay rates?

For those that include the employer KiwiSaver contributions in the wages or salary you offer an employee, you may no longer be able to do this thanks to a Bill presented in parliament last month.  

Do you include KiwiSaver? Don’t know? Check with payroll.

The intention of the Employment Relations (Protection for KiwiSaver Members) Amendment Bill is to strengthen the safeguards available to KiwiSaver members.  

In 2008, the safeguards were loosened somewhat, enabling employers to offer the same pay rate, but if you were a KiwiSaver member, the 3% compulsory employer contributions could be deducted from your pay rate or considered part of your total remuneration package.  Employees who are KiwiSaver members would receive less remuneration than those who chose not to be KiwiSaver members. The initial intention was to pay compulsory employer contributions on top of the employee’s wages or base salary to prevent KiwiSaver members from receiving less take-home pay or less favourable employment terms.  

Many of the businesses and organisations that we work with already pay KiwiSaver on top of wages, so this will be a non-event and you won’t need to do anything.  However, there are a few organisations that don’t.  Their reasons have ranged from wanting to reduce or contain their wages cost, to offering the employee the choice of what they do with their money because some have other schemes they are paying into. 

What to do if you need to change the way you calculate KiwiSaver.

If you are a business that considers the compulsory employer contributions to be included as part of the employees pay rate, then you may need to plan for changes to your employment agreements, and your payroll system.  You may also need to plan for an uplift in your wage costs going forward.  

To be clear this Bill has nothing to do with the employee contributions that the employer deducts on the employee’s behalf at the rate the employee nominates.  This change only relates to the compulsory employer contributions.

The Bill is only in the initial stages of the process but if you are keen to pre-empt this and want to make the change to paying your compulsory employer contributions on top your employee’s pay rate now, then get in contact. We can guide you through the change process and even help you to review your employee benefits.  

Our disclaimer

I’d like to remind you that while this article provides commentary on an employment law topic, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer or a suitably qualified employment relations specialist for any questions about your workplace.