An employer's guide to KiwiSaver obligations
KiwiSaver is a government-backed initiative that helps New Zealanders save for their first home or retirement with pay deductions and employer contributions. First introduced in 2007, the scheme has been a success, with an estimated 2.8 million Kiwis enrolled today.
As an employer, you are responsible for enrolling all eligible employees, deducting their contributions from their pay, and adding your regular employer contributions. End of financial year (EOFY) is an excellent opportunity to sit down and ensure your KiwiSaver systems are up to scratch.
Here’s the lowdown on how it works – and what you need to sort before EOFY.
KiwiSaver is for all New Zealand citizens and permanent residents living or normally living in New Zealand.
Employees are automatically enrolled if they are eligible, starting work with a new employer and aged between 18-65.
Employees receiving a salary or wage are enrolled when starting a new job, but they can opt-out.
Existing eligible employees and self-employed people can opt-in by asking to be enrolled or choosing a provider and signing up directly.
Once enrolled, an employee has two to eight weeks to opt-out if they change their mind.
Employees can contribute between 3 and 10% of their before-tax pay to KiwiSaver, and the default rate is 3%.
As an employer, you must make a minimum contribution of 3% per employee unless you are already contributing to another super fund for them. You can choose to match contributions or make voluntary contributions above 3%.
KiwiSaver contributors apply for a government contribution on behalf of their members each year. This amount depends on how much the member contributed between 1 July to 30 June – with a cap of $521.43.
Your responsibilities as an employer
As the employer, you must:
Automatically enrol employees
As an employer, you must enrol your eligible employees into KiwiSaver. That includes anyone over 18 who isn’t registered unless they have chosen to opt-out – which they must do within two to eight weeks of joining.
Contribute the minimum
You must contribute the minimum employer contribution – currently 3% of an employee’s gross salary or wages.
As the employer, it’s your responsibility to deduct employee contributions from their salary or wages and pay them to Inland Revenue or a complying fund. If you pay directly to IRD, it will distribute these contributions into KiwiSaver funds.
You must keep KiwiSaver contribution records on file for at least seven years.
Pay tax on contributions
Employers are required to pay tax on the employer contributions – employer superannuation contribution tax (ESCT).
You must stop payments if your employee has a savings suspension or if you’re notified by IRD or the employee that contributions are to stop.
What happens if things fall through the cracks?
There’s a lot to absorb as an employer, but it could be costly if you get something wrong. Here’s what you can expect with late or repeat failed payments or failing to follow protocol:
IRD will send reminders before it issues a fine or penalty. This may happen for a few reasons:
Not providing KiwiSaver info to employees or IRD
Not making the correct deductions
Not automatically enrolling new eligible employees (unless the employee is exempt)
Not making compulsory employer contributions
Fines and penalties
If you fail to pay contributions on time, you could face a penalty of $50 a month for small employers or $250 a month for a large employer. Standard tax penalties and knowledge offences also apply for non or late payments.
If you repeatedly fail to meet your obligations, IRD may take you to court, register debt against your company or issue a summary judgment. If you’re the director or shareholder of a company, you could also face personal liability.
Staying on top of your KiwiSaver obligations is one way of showing you value and care about your employees. Failing to do that won’t benefit your reputation – you could lose some of your best employees and struggle to attract new ones.
FAQs about KiwiSaver for employers
What’s a saving suspension?
At some point, an employee may want to take a break from contributing to their KiwiSaver. To be eligible, they must have contributed to KiwiSaver for at least 12 months.
If one of your employees requests a break, they must apply for a savings suspension and have this approved by IRD. Once approved, you must stop deducting until the end of their chosen savings suspension. The default suspension period is three months, but employees can opt to suspend payments for up to a year.
What if my employee wants to opt-out?
If they’re not yet enrolled in KiwiSaver, employees can opt-out of the scheme instead of signing up. Alternatively, if they’ve joined the scheme and have second thoughts, they must complete and submit an opt-out form within 14 days of joining. Employees can opt out between the end of week two and week eight of commencing employment – on or after day 14 and on or before day 56.
Withdrawing from KiwiSaver
While KiwiSaver is generally intended as a retirement fund, there are other reasons for withdrawing funds – including buying a first home, serious illness or financial hardship, or a permanent move to a new country.
If your employee asks about withdrawing their funds, encourage them to speak to a financial adviser or their KiwiSaver provider so they can understand their options. As an employer, you shouldn’t be offering financial advice.
Get your KiwiSaver ducks in a row
As a business owner or manager, you probably have enough on your plate without dealing with complex legislation and compliance. That’s where a business management platform like MYOB can be invaluable. Payroll software can automate many key parts of the compliance process, from automatic checks and record-keeping to tracking contributions, contribution holidays and generating KiwiSaver return reports. Because all your payroll and employee details are managed in one place, it’s much easier to keep on top of those crucial KiwiSaver details.
Want to simplify the way you manage KiwiSaver? At MYOB, we have you covered. Try FREE for 30 days.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.