Is your company deducting the Employer KiwiSaver contribution from your employees' pay?
A new Bill, introduced to Parliament on 8 June 2023, aims to revolutionise the employer's role in KiwiSaver contributions. Titled "The Employment Relations (Protection for KiwiSaver Members) Amendment Bill," this legislation addresses concerns raised by Consumer New Zealand regarding the 'total remuneration' approach used by some employers. This approach permits employers to deduct their mandatory employer contribution to an employee's KiwiSaver from the employee's pay, rather than making the contribution on top of their pay.
The Bill seeks to close this loophole, providing greater safeguards for KiwiSaver members while sparking a debate about fairness and benefits. The proposed changes would impact both employers and employees, potentially resulting in a paradigm shift in compensation structures. Some employers argue that the 'total remuneration' method ensures equitable benefits for all employees, irrespective of their involvement in the KiwiSaver scheme. The opposing perspective is that total remuneration clauses lead to employees effectively paying for their employer's contribution as well as their own.
Currently, employers are not legally obligated to offer workers enrolled in KiwiSaver the same terms of employment, salary or wages, conditions of work, fringe benefits, or opportunities for training, promotion, and transfer, as a worker who is not enrolled in the scheme. The Bill will introduce an additional ground for employees to raise a personal grievance against their employer if being a member of a KiwiSaver scheme (or complying with a superannuation fund) adversely affects their employment.
An employee will be adversely affected if they are a KiwiSaver member and they are not afforded the same terms and conditions of employment and treatment as other employees, solely or partly because they are a member of a KiwiSaver scheme. Employees will also be adversely affected if their salary or wages are less than the salary or wages of other comparable employees, and the reason for the discrepancy is due to the employer deducting the employer's mandatory KiwiSaver contribution from the employee's pay.
If the Bill is passed:
While the Bill offers more protection for KiwiSaver members and employees, it could result in a significant cost increase for employers who have been operating the 'total remuneration' approach. If passed, employers would need to pay an additional 3% on top of the employee's current pay.
It would be a risky strategy for the employer to reduce the employee's pay to account for the increase in cost to the employer. We do not recommend for employers to unilaterally change the terms and conditions of employees.
If the Bill becomes law, employers will need to change their employment agreements and the way employees are paid.
However, these changes are not immediate, as Bills undergo a series of stages before becoming law.
If you have any enquiries relating to this topic or article, please contact:
Melissa Johnston (Partner)
PH: 09 306 6729
© McVeagh Fleming 2023
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.