Essential KiwiSaver for Employers: Understanding Your Responsibilities

Introduction to KiwiSaver for employers

• KiwiSaver is a work-based savings program helping New Zealanders save for retirement through a KiwiSaver account. Employees who do not qualify for automatic enrolment, such as those aged under 18 or 65 and above, may still opt in to join KiwiSaver.
• Employees aged 18 to 64 are automatically enrolled in KiwiSaver when starting a new job, while those aged under 18 or 65 and above can join KiwiSaver by opting in.
• Employers have key obligations to support employees’ KiwiSaver contributions, including deducting employee contributions and making employer contributions. Employers must automatically enrol eligible employees and provide the KiwiSaver information pack within seven days of their start date. Employers should also select a preferred KiwiSaver scheme or an employer chosen KiwiSaver scheme to support employees who do not choose their own provider.
• KiwiSaver members can access savings early mainly for a first home; other early withdrawals are limited and regulated.
• Employers must follow specific steps to comply with KiwiSaver requirements, including providing a KiwiSaver information pack to new employees.
• The KiwiSaver scheme is designed to help employees save for retirement, with contributions from employees, employers, and the government.

Employer Obligations

• Employers must administer KiwiSaver as part of their business responsibilities, including facilitating employee enrollment and managing KiwiSaver savings contributions. Employers must also ensure all existing eligible employees are enrolled in KiwiSaver and manage their contributions appropriately.
• Employers must contribute a minimum of 3% of an employee’s gross salary or wages to their KiwiSaver account, subject to employer superannuation contribution tax (ESCT). The terms of KiwiSaver contributions should be clearly outlined in the employment agreement, including how contributions are calculated and paid.
• Employers must deduct employee KiwiSaver contributions from salary or wages and pay them to Inland Revenue, who then distributes the contributions to the employee’s KiwiSaver provider. Employer and employee contributions are based on the employee’s pay and must be paid to a complying fund. Both employers and employees are responsible for contributing to KiwiSaver, and employers must ensure they are meeting their obligations to pay contributions on time.
• Employers are required to pay contributions through the PAYE system to a complying fund such as KiwiSaver.
• Employers must keep accurate KiwiSaver records, including employee and employer contributions, all forms related to KiwiSaver (such as deduction and opt-out forms), and pay required taxes, such as ESCT.
• Employers must also manage employee opt-out requests and savings suspension requests in accordance with KiwiSaver rules. Employees must complete the correct opt-out form and submit it within the required timeframe.

Kiwisaver Employee Contributions

When joining KiwiSaver, the employee chooses their contribution rate, which can be 3%, 4%, 6%, 8%, or 10% of their before-tax pay.

Once an employee becomes a member of KiwiSaver, they are responsible for contributing at their chosen rate.

If an employee does not choose a contribution rate, the default rate of 3% applies, and the employer must deduct this amount from the employee’s pay.

Employees can change their contribution rate every three months, and employers must apply the new rate to the employee’s pay.

Employee contributions are an essential part of the KiwiSaver scheme, and employers must ensure that they are deducted correctly and paid to the member’s KiwiSaver provider.

Kiwisaver Employer Contributions

• Employers are required to make compulsory employer contributions of at least 3% of each employee’s gross salary or wage to their KiwiSaver account. This is in addition to the employee’s regular pay and cannot be deducted from their salary or wage.
• All employer contributions are subject to employer superannuation contribution tax (ESCT), which must be deducted from the employer contribution before it is paid into the employee’s KiwiSaver account. 
• Employers have the option to make voluntary contributions above the compulsory 3% rate, further supporting their employees’ retirement savings.
• It is essential for employers to ensure that all KiwiSaver contributions are calculated correctly and paid on time to avoid penalties or fines.
• Compulsory employer contributions are a key part of the KiwiSaver scheme, and employers must not reduce an employee’s take-home pay to cover these contributions.
• Staying compliant with employer contribution requirements helps employers meet their obligations under the KiwiSaver scheme and supports employees in building their retirement savings.

Learn more: Understanding Employer Superannuation Contribution Tax (ESCT)

KiwiSaver Account Management

• Employers must manage their employees’ KiwiSaver accounts, including deducting employee contributions and making employer contributions. Employers must also manage accounts for each KiwiSaver member, ensuring all contributing activity is processed correctly.
• Employers must also keep accurate records of employee and employer contributions, as well as any changes to contribution rates or savings suspensions. These records should include details of both employer and employee contributing activity.
• Employers must ensure that they are using the correct KiwiSaver scheme provider and that employee contributions, calculated based on the employee’s gross pay, are being paid to the correct account.
• Employers must also manage any opt-out requests or savings suspension requests from employees, in accordance with KiwiSaver rules.

Contribution Rates and Calculations

• The contribution rate for employees can be 3%, 4%, 6%, 8%, or 10% of their before-tax pay, and the employer must deduct the chosen rate from the employee’s pay.
• The employer contribution rate is a minimum of 3% of the employee’s gross salary or wages, and is subject to employer superannuation contribution tax (ESCT).
• Employers must calculate the correct contribution amounts for each employee, taking into account their salary or wages, contribution rate, and any changes to their employment status.
• Employers must pay contributions on time to ensure compliance with KiwiSaver regulations and avoid penalties for late payments.
• Employers must also ensure that they are paying the correct amount of ESCT on their employer contributions.

Tax Implications

• Employer superannuation contribution tax (ESCT) is payable on employer contributions to KiwiSaver accounts, and must be paid by the employer.
• ESCT is calculated as a percentage of the employer contribution, and the rate varies depending on the employee’s income.
• Employers must also consider the tax implications of employee contributions, including the potential impact on the employee’s take-home pay.
• Employers must ensure that they are meeting their tax obligations in relation to KiwiSaver, including paying ESCT and providing accurate information to Inland Revenue.

Managing Employee Opt-Outs

• Employees can opt out of KiwiSaver within a certain timeframe, usually within 8 weeks of starting a new job.
• Employers must manage employee opt-out requests in accordance with KiwiSaver rules, including providing the employee with a notice of their right to opt out.
• Employers must also ensure that they are not deducting KiwiSaver contributions from an employee’s pay if they have opted out of the scheme.
• Employers must keep accurate records of employee opt-out requests, including the date of the request and the reason for opting out.

Changes to Employee Circumstances

• Employers must monitor and respond to any changes in employee circumstances that may impact KiwiSaver contributions, such as changes in salary or wages, opt-out requests, or savings suspension requests.
• If an employee joins or leaves a KiwiSaver scheme, or changes their contribution rate, employers must be notified and update payroll records accordingly.
• Employers are responsible for deducting the correct KiwiSaver contributions from an employee’s pay and ensuring these are paid to the appropriate KiwiSaver scheme provider.
• Employees who are automatically enrolled in KiwiSaver have the right to opt out within a specified period, and employers must process these opt-out requests promptly.
• Accurate record-keeping of all changes, including savings suspension requests and opt-out notifications, is essential for meeting KiwiSaver obligations and ensuring compliance with the scheme.

Consequences of Non-Compliance

• Employers who fail to meet their KiwiSaver obligations, such as making compulsory employer contributions or deducting employee contributions correctly, may face penalties, fines, or legal action from Inland Revenue.
• Non-compliance with KiwiSaver obligations can result in significant financial consequences for employers, including back payments and interest on missed contributions.
• It is crucial for employers to understand and fulfill all KiwiSaver obligations to avoid these risks and maintain good standing with Inland Revenue.
• Employers should also be aware of the rules regarding exempt employers; while some may be exempt from automatically enrolling employees, they are still required to make any compulsory employer contributions for eligible employees.
• Ensuring compliance with all aspects of the KiwiSaver scheme protects both employers and employees and supports the integrity of the retirement savings system.

Best Practices for Administration

• Employers should maintain accurate and up-to-date records of all employee contributions, deductions, and any changes to employee circumstances affecting KiwiSaver.
• Using a reliable payroll system that can automatically handle KiwiSaver deductions and contributions helps ensure accuracy and compliance.
• Providing a KiwiSaver information pack to all new eligible employees and automatically enrolling them in a KiwiSaver scheme is a key employer responsibility.
• Employers must be prepared to process opt-out requests and savings suspension requests in accordance with KiwiSaver rules, ensuring these are handled promptly and correctly.
• By following these best practices, employers can meet their KiwiSaver obligations, support their employees’ retirement savings, and avoid administrative errors or compliance issues.

Review and Audit

• Regularly reviewing and auditing KiwiSaver administration processes is essential for employers to ensure all employee contributions and deductions are accurate and up to date.
• Employers should check that all required contributions are being made and that their payroll system is correctly managing KiwiSaver deductions and payments.
• Promptly identifying and correcting any errors or discrepancies helps avoid penalties and ensures compliance with KiwiSaver obligations.
• Staying informed about changes to KiwiSaver rules or regulations and updating internal processes as needed is crucial for ongoing compliance.
• Employers can seek guidance from Inland Revenue or their KiwiSaver scheme provider to clarify any uncertainties and ensure all obligations are being met, supporting both the business and its employees.

Don’t risk costly mistakes with your KiwiSaver administration. Contact Business Like NZ Ltd today to discuss your accounting requirements and discover how we can help you maximize legitimate deductions while staying compliant with tax regulations.

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