KiwiSaver law changes expensive for employers

The "total remuneration" approach to KiwiSaver has been effectively banned in legislation rushed through Parliament under urgency last week.

Wednesday, September 10th 2008, 7:11AM
In essence, the new law says a KiwiSaver member cannot be offered lesser terms (or be otherwise disadvantaged) in comparison with a "comparable" non-member employee of similar skills, experience and circumstances.

The government’s rapid U-turn on total remuneration and KiwiSaver isn’t good law and shouldn’t have been rushed through Parliament, Chapman Tripp says.

It agrees there is a legitimate policy debate around whether or not total remuneration should be allowed.

Proponents say this approach ensures non-KiwiSaver members aren't disadvantaged and total remuneration also gives employers certainty about their wage and salary costs.

On the other hand, KiwiSaver becomes a less attractive proposition for total remuneration employees as they bear a greater cost if they join the scheme, and they don't get any "free money" from their employer. This cost (and disincentive to join) will grow, as the compulsory employer contribution moves from 1% to 4% over the next three years. Government has also expressed concern that total remuneration allows employers, if they choose, to pocket the Government funded employer tax credit when it is the employees who actually meet the costs of the scheme.

Chapman Tripp says because the law was rushed it has a number of technical problems and unintended consequences which have the potential to create real uncertainty, and which will need to be fixed.

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