Many business owners find KiwiSaver complex and a minefield in terms of compliance and making sure they are meeting the requirements according to the law. It is your responsibility to understand your obligations around KiwiSaver and to keep up to date with developments. Here we provide a brief summary of what is expected of you as an employer.
Once a new employee has signed their contract, at the same time as you provide them with their IR330 Tax code declaration form, you should also provide them with a:
If the employee does not return the forms, you should start making deductions at the default rate of 3%.
Even if they opt-out, you need to send Inland Revenue the full name, IRD number and address of any new employee you are automatically enrolling, using the KiwiSaver employee details (KS1) form. These forms can be easily found by typing their name or form code into Inland Revenue’s website at www.ird.govt.nz.
New employees can’t opt-out of KiwiSaver until they have been in the job for two weeks. If they do wish to opt out, this should happen within 8 weeks of starting. Employees who opt-out can expect to receive a refund of any money deducted from their salary or wages for Kiwisaver within 3 months of opting out.
If the employee chooses to join KiwiSaver and the opt-out period lapses, they can’t opt-out at a later date (although Inland Revenue will allow for late opt-outs in exceptional circumstances). However they can take a contributions holiday once they have been a KiwiSaver member for 12 months. A contributions holiday can be between 3 months and 5 years and you as the employer are not obliged to contribute to the employee’s KiwiSaver scheme during this time.
Inland Revenue allocates employees to a default KiwiSaver scheme which they can then leave if they select a different provider. As an employer, you can voluntarily choose your own provider for your business. If the employee doesn’t make an active choice of provider, they will default to your chosen provider.
You must contribute a minimum of 3% to any contributing employee’s KiwiSaver fund but you can choose to make a larger contribution if you wish. You must deduct employer superannuation contribution tax (ESCT) from your contribution at a rate of between 10.5% and 33% – see the table at the following link for more information on ESCT: http://www.ird.govt.nz/payroll-employers/make-deductions/deductions/super-contributions/esct.html
It is therefore important that you remember the following points when it comes to KiwiSaver:
- You are required to automatically enrol employees when they start working for you if they meet the criteria (are between the ages of 18 and 65, live in New Zealand and are a New Zealand citizen or entitled to be in New Zealand indefinitely). There are certain exemptions, which you can find at the following link: http://www.ird.govt.nz/kiwisaver/employers/how/working-with-employees/exempt-from-auto-enrolment/.
- You are required to deduct the contributions from your employees’ salaries at their desired contribution rate.
- You are required to make your own contributions to employees who are contributing to Kiwisaver at a minimum rate of 3%.