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employment

When can an employer stop paying your Kiwisaver?

Key Takeaway

Employers in New Zealand are generally required to contribute to an eligible employee's KiwiSaver. This obligation can cease or be suspended if the employee opts out within a specific period, takes a savings suspension, reaches New Zealand Superannuation age with sufficient membership, or joins an exempt superannuation scheme. The employer's duty is defined by the KiwiSaver Act 2006.

Employer KiwiSaver Contributions in New Zealand

KiwiSaver is a voluntary, work-based savings scheme designed to help New Zealanders save for retirement [Source: KiwiSaver Act 2006, s 4]. While membership is voluntary, employers have specific obligations regarding contributions for eligible employees. The overarching framework for employment relationships in New Zealand is established by the Employment Relations Act 2000, which sets out principles of good faith and dispute resolution [Source: Employment Relations Act 2000, ss 4, 4A]. However, the specific rules for KiwiSaver contributions are found in the KiwiSaver Act 2006.

Mandatory Employer Contributions

For eligible employees who are KiwiSaver members, their employer must make a minimum contribution, known as a 'KiwiSaver employer contribution' [Source: KiwiSaver Act 2006, s 101(1)]. This contribution is currently 3% of the employee's gross salary or wages and is generally paid in addition to the employee's own contributions [Source: KiwiSaver Act 2006, s 101(1)]. Employer contributions are subject to Employer Superannuation Contribution Tax (ESCT), which is a tax on employer KiwiSaver contributions [Source: Income Tax Act 2007, s RD 3].

When an Employer is Not Required to Make KiwiSaver Contributions

An employer's obligation to contribute to an employee's KiwiSaver can cease or be suspended under specific circumstances defined by law. These are generally not unilateral decisions by the employer but rather conditions linked to the employee's status or choices:

  • Employee opts out during the opt-out period: New employees who are automatically enrolled in KiwiSaver have a limited 'opt-out period' (between the 14th and 56th day of their employment) during which they can choose to leave the scheme [Source: KiwiSaver Act 2006, ss 44, 46]. If an employee opts out within this period, the employer is not required to make contributions, and any contributions already made must be refunded [Source: KiwiSaver Act 2006, s 46(6)].
  • Employee on a savings suspension (contribution holiday): An employee who has been a KiwiSaver member for at least 12 months (or in certain cases of financial hardship, sooner) can apply for a 'savings suspension', which is a period during which they temporarily stop their own KiwiSaver contributions [Source: KiwiSaver Act 2006, s 103]. During an approved savings suspension, the employer is also not required to make contributions [Source: KiwiSaver Act 2006, s 101(3)(b)(iia)].
  • Employee reaches NZ Superannuation age with sufficient membership: Employers are no longer required to make contributions once an employee has reached the age of eligibility for 'New Zealand Superannuation' (New Zealand's government-funded retirement income, currently age 65) AND has been a KiwiSaver member for at least five years [Source: KiwiSaver Act 2006, s 101(3)(a)].
  • Employee is a member of an exempt employer superannuation scheme: If an employee is a member of an 'exempt employer superannuation scheme' (an alternative registered scheme that meets specific criteria and is approved by the Financial Markets Authority), the employer's obligation to contribute to KiwiSaver may not apply [Source: KiwiSaver Act 2006, s 112, s 101(3)(c)].
  • Total remuneration agreement: An employer is not required to contribute in addition to an employee's gross salary or wages if the employment agreement expressly states that the employer's contribution is part of a 'total remuneration' package, and the employer's contribution is accounted for within that total [Source: KiwiSaver Act 2006, s 101(3)(d)]. This means the employer is still contributing, but it's not 'on top' of the stated salary.
  • Cessation of employment: The employer's obligation to make KiwiSaver contributions ceases when the employment relationship ends, as the individual is no longer an 'employee' of that particular employer for KiwiSaver purposes [Source: General employment law principles and the definition of 'employee' under the KiwiSaver Act 2006, s 4].

Employer Responsibilities

Even when contributions are required, employers have specific duties. They must correctly deduct employee contributions, make their own contributions, and pass both on to Inland Revenue (IRD) in a timely manner [Source: KiwiSaver Act 2006, ss 95, 99]. Failure to comply with these obligations can result in penalties [Source: Tax Administration Act 1994, Part 7].

When to Seek Independent Legal Advice

Individuals who have concerns about their employer's KiwiSaver contributions, or believe their rights or obligations are not being met, should seek independent legal advice. Information can also be sought from official bodies such as the Employment Relations Authority, Inland Revenue, or a community law centre. For free legal advice, individuals can contact Community Law Centres.

Key Resources