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Payroll processing can be a time-consuming activity for your business, especially when you are not an expert in this area. New Zealand has an extensive set of employment laws aimed at keeping workplaces fair. However, for you, as an employer, this often means having to outsource some activities like payroll, to allow you to handle more strategic tasks which ultimately affect your business’s bottom line. One of your payroll responsibilities as an employer is making deductions (PAYE, KiwiSaver, Student Loan) from your employees’ salaries and wages and paying these to Inland Revenue. You are also required to make a KiwiSaver employer contribution to their chosen schemes. This article will help you understand: 

  • your KiwiSaver contributions obligations as an employer;
  • how to set up your employees’ KiwiSaver; 
  • how to calculate and pay KiwiSaver deductions; and 
  • how to work out your Employer superannuation contribution tax (ESCT) liability.

What is the KiwiSaver Employer Contribution?

KiwiSaver is a voluntary savings scheme created by the New Zealand government to help citizens and permanent residents of the country save for retirement. As an employer, you have to deduct KiwiSaver contributions from your employees’ pay and also contribute at least 3% of their earnings to their chosen superannuation schemes. Your employees can choose to belong to any one of the current KiwiSaver providers in New Zealand or change their scheme at any time.

Your KiwiSaver Employer Contribution Obligations

From educating your employees about Kiwisaver to making employer’s compulsory contributions, your employer responsibilities include: 

  • providing information about Kiwisaver to all new and existing employees; 
  • enrolling eligible employees;
  • deducting KiwiSaver contributions from your employees’ salaries and wages;
  • making compulsory employer contributions to your employees’ chosen schemes;
  • paying ESCT or PAYE (if you include employer contributions as part of your employees’ gross salary or wages);
  • paying all KiwiSaver contributions to Inland Revenue by the due dates;
  • managing your employees’ opt-out and suspension requests. 

How to Set Up Your Employees’ KiwiSaver

To join KiwiSaver, your employees have to be New Zealand citizens (or entitled to live in New Zealand indefinitely) and consider New Zealand their place of residence. There are specific rules for employees under the age of 18. You can check your employees’ eligibility on the Inland Revenue website.

When you hire someone new or an existing employee requests information from you, you are required to provide them with a KiwiSaver information pack (KS3) within seven days and ask them to complete a KiwiSaver deduction form (KS2).

The KS2 form includes the rate at which you need to deduct KiwiSaver contributions from your employees’ pay and specifies if they are on a savings suspension. You are required to keep the completed forms along with other employee records for seven years. 

For each employee that you automatically enrol, you also need to complete a New employee and KiwiSaver details (IR346K) before their first payday, along with their Employment information form (IR348) that includes their first pay.

You can download the guides, deduction and opt-out forms from the Inland Revenue website.

When Your Employee Is Not a KiwiSaver Member

If your employee is over 18 and under 65 years of age, they will automatically enrol in KiwiSaver, unless they are exempt (contractors, secondees and casuals). Once enrolled, your employees have eight weeks to decide if they want to stay with KiwiSaver.

Other age groups can join anytime by:

  • completing a KS2 form; or
  • contacting a KiwiSaver scheme provider.

If you have nominated a preferred KiwiSaver scheme as an employer, you have to:

  • communicate this to your new employees in writing;
  • provide them with your scheme’s investment statement; and
  • start making deductions from their first payday.

When Your Employee Is Already KiwiSaver Member

If your new employee is already a member of a Kiwisaver Superannuation scheme, they have to provide you with either:

  • a completed KS2 form; or 
  • a letter from Inland Revenue to confirm that they are on a contributions holiday.

If they do not provide you with either of these, you need to make deductions at the default rate of 3%.

How to Work Out Your KiwiSaver Employer Contribution and Your Employees’ Deductions 

Every payday, you will need to work out:

  • your employee KiwiSaver deductions;
  • your KiwiSaver employer contribution; and 
  • your ESCT liability.

To determine how much you need to deduct from your employees’ gross salary or wages, you will need:

  • your employees’ chosen contribution rate from their KS2 form (or use the default rate of 3% if they do not specify one); and
  • the KiwiSaver calculation tables included in the Inland Revenue’s PAYE deduction tables.

As an employer, New Zealand law (the Kiwisaver Act) requires you to contribute to your employees’ KiwiSaver scheme. This is on top of their salary or wages, which include any bonuses, commission, extra salary gratuity, overtime and any other before-tax payments, such as ACC or paid parental leave payments. Your minimum contribution rate is 3%, but you can choose to contribute more than this.

You are required to send your employer and employee contributions to Inland Revenue every month as part of your payday filing. Inland Revenue then forwards these contributions to your employees’ chosen KiwiSaver providers.

Tip: The easiest way to file your payroll information with Inland Revenue is online, either from your accounting software or through myIR online service.

How to Work Out Your ESCT Liability

The cash contributions you make to your employees’ superannuation accounts are liable for ESCT. You need to choose an ESCT rate for each employee, which depends on:

  • how much your employee earns; and 
  • how long they have worked for you.

To deduct ESCT, you can:

  • include the contributions in your employees’ gross salary or wage and use PAYE rules; or 
  • use ESCT rules.

You can read more about your ESCT employer obligations on the Inland Revenue website.

Key Takeaways 

From informing new and existing employees about KiwiSaver to making compulsory employer contributions, in New Zealand, you are legally required to: 

  • provide your employees with a KiwiSaver information pack (KS3) within seven days of them starting work or requesting;
  • ask them to complete a KiwiSaver deduction form (KS2) and choose a contribution rate;
  • set up your employees’ KiwiSaver and provide them with information about your employer’s chosen scheme;
  • deduct contributions from your employees’ pay;
  • make compulsory employer contributions to your employees’ chosen schemes;
  • determine your ESCT liability;
  • pay all KiwiSaver employer contributions and ESCT to Inland Revenue by the due dates;
  • manage your employees’ opt-out and suspension requests; and 
  • keep appropriate records. 

If you need help understanding your KiwiSaver obligations or registering as an employer with Inland Revenue, LegalVision’s experienced employment lawyers can help. Call 0800 005 570 or fill out the form on this page.

FAQs

Do employers have to match KiwiSaver?

As an employer, New Zealand law requires you to contribute at least 3% of your employee’s gross salary or wages to their KiwiSaver scheme. This is on top of your employee’s pay unless you are already paying into another eligible scheme for them. However, you can contribute more if you wish. Employees’ contributions range between the default rate of 3% and 10%.

Is KiwiSaver paid on top of salary?

You are required to pay KiwiSaver employer contributions on top of your employees’ gross salary or wages. This means that if you choose to contribute the minimum rate of 3%, you effectively pay your employees 103% of their agreed payment if they are a KiwiSaver member.

Do employers have to pay tax on KiwiSaver contributions?

You have to pay employer superannuation contribution tax (ESCT) on all your employer contributions to KiwiSaver schemes (and other complying funds). An exception is unless you have agreed with your employee to treat some, or all, of your contribution as salary or wages under the PAYE rules.

Do employers have to pay KiwiSaver to casual employees?

The KiwiSaver’s automatic enrolment rules do not apply to temporary and casual workers in New Zealand. Some other exemptions include workers under 18, casual agricultural workers or anyone on a temporary contract of fewer than 28 days. However, if they are eligible, they can choose to join by completing a KS2 form and providing it to you as their employer.

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