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employment

Kiwisaver employer contributions: Legal requirements

Key Takeaway

Employers in New Zealand are generally required to contribute at least 3% of an eligible employee's gross salary to their KiwiSaver scheme. This obligation applies if the employee is over 18, under 65, and making their own contributions, unless specific exemptions apply. These requirements are primarily governed by the KiwiSaver Act 2006.

KiwiSaver Employer Contributions: Legal Requirements in New Zealand

KiwiSaver is a voluntary, work-based savings scheme established to help New Zealanders save for their retirement [Source: KiwiSaver Act 2006, s 4]. While employee participation is voluntary, employers have specific legal obligations regarding contributions for their eligible employees.

Overview of Employer KiwiSaver Contributions

An employer contribution refers to a payment made by an employer into an employee's KiwiSaver scheme. These contributions are distinct from the employee's own contributions, which are deducted directly from their pay.

Mandatory Employer Contributions

Employers are generally required to make contributions to an employee's KiwiSaver scheme if certain conditions are met. These conditions are:

  • The employee is a KiwiSaver member [Source: KiwiSaver Act 2006, s 101D(1)(a)].
  • The employee is aged 18 or over but has not reached eligibility to withdraw funds based on age (currently 65 years old and has been a KiwiSaver member for 5 years) [Source: KiwiSaver Act 2006, s 101D(1)(c), s 101D(1)(d)].
  • The employee is contributing from their pay (excluding situations where the employee has opted out, is on a contributions holiday, or is a member of a complying fund) [Source: KiwiSaver Act 2006, s 101D(1)(a)].

If these conditions are met, the employer must contribute at least 3% of the employee's gross salary or wages [Source: KiwiSaver Act 2006, s 101B]. Employer contributions generally begin from the employee's first pay day after the employer receives notice of their KiwiSaver membership [Source: KiwiSaver Act 2006, s 101D(2)(a)].

Situations Where Employer Contributions Are Not Required

There are specific circumstances where an employer is not legally required to make KiwiSaver contributions, although they may choose to do so voluntarily:

  • Age-related eligibility: If an employee is under 18 years old [Source: KiwiSaver Act 2006, s 101D(1)(c)] or is 65 years old or over and has been a KiwiSaver member for 5 years or more [Source: KiwiSaver Act 2006, s 101D(1)(d)].
  • Contributions Holiday: If an employee has elected a 'contributions holiday', also commonly known as a 'suspension of contributions', which temporarily stops their own KiwiSaver deductions from their pay [Source: KiwiSaver Act 2006, s 102].
  • No Employee Contributions: If the employee is not making contributions from their pay, for example, if they have opted out of KiwiSaver entirely or are contributing voluntarily outside of payroll deductions [Source: KiwiSaver Act 2006, s 101D(1)(a)].
  • Complying Fund: If an employee is a member of a complying fund, which is a superannuation scheme that meets specific criteria and is exempt from KiwiSaver employer contributions [Source: KiwiSaver Act 2006, s 101D(1)(e)].

Employer Superannuation Contribution Tax (ESCT)

Employer superannuation contribution tax (ESCT) is a tax that employers must deduct from their KiwiSaver contributions before paying them to the employee's scheme. It is similar to PAYE (Pay As You Earn) in its application [Source: Income Tax Act 2007, s RD 64]. The rate of ESCT depends on the employee's income from the employer for the 12 months before the deduction [Source: Income Tax Act 2007, s RD 64(2)].

Employment Relations Act 2000 Relevance

While the specific requirements for KiwiSaver employer contributions are detailed in the KiwiSaver Act 2006, the Employment Relations Act 2000 (ERA 2000) provides the overarching framework for all employment relationships in New Zealand [Source: Employment Relations Act 2000, s 3]. This means that while employment agreements must be in writing [Source: Employment Relations Act 2000, s 59] and may include details about KiwiSaver, these terms must be consistent with the obligations set out in the KiwiSaver Act 2006 and cannot undermine an employee's statutory entitlements [Source: Employment Relations Act 2000, s 63]. Any disputes regarding a breach of an employment agreement concerning KiwiSaver contributions may be addressed through the dispute resolution processes outlined in the ERA 2000 [Source: Employment Relations Act 2000, Part 9].

Compliance and Penalties

Employers have a legal obligation to comply with the KiwiSaver Act 2006. Failure to meet these obligations, such as not making required contributions, can result in penalties [Source: KiwiSaver Act 2006, s 138]. Unpaid KiwiSaver contributions are treated as unpaid wages, and the employer may be liable for the shortfall [Source: KiwiSaver Act 2006, s 101F].

When to Seek Independent Legal Advice

Navigating the intricacies of employment law and KiwiSaver obligations can be complex. Employers or employees with specific questions or concerns about their rights and obligations related to KiwiSaver contributions should seek independent legal advice. Information can be obtained from official government bodies or free services such as Community Law Centres.

Key Resources