KiwiSaver employer guide: Understanding employer contributions

Are you an employer in New Zealand? Here's everything you need to know about KiwiSaver, including what your employees are entitled to and how to set up a scheme.

Published 13 May 2022

Updated 15 Feb 2024

6min read

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In New Zealand, if you went out and bought a lotto ticket tomorrow, your chances of winning are about 1 in 38 million. Not great odds – in fact, research has shown that you’re more likely to be related to the Queen of the United Kingdom than you are to win the big first division prize pot. Still, it’s probably not worth getting that tiara either.

The reality is, if you want to work towards financial stability for the future, it takes time and savings. That’s where New Zealand’s KiwiSaver scheme comes in. It’s a voluntary savings scheme that enables you to save for retirement, although under certain criteria, there’s also the option of dipping in early to make that first home purchase. It’s work-based, which means when new employees join KiwiSaver, employers facilitate and contribute towards payments.

If you’re a New Zealand employer, you must factor in KiwiSaver as part of your payroll. Here’s our comprehensive guide so you can ensure you’re ticking every box.

Understanding KiwiSaver as an employer

What is KiwiSaver?

KiwiSaver is a voluntary, work-based savings scheme designed to help New Zealanders save for their retirement (and for some eligible employees, a first home deposit).

How does KiwiSaver work?

KiwiSaver scheme payments are made through wage deductions in the employee’s pay, facilitated and supported by employers. Employers have a legal obligation to ensure their staff are automatically enrolled into the KiwiSaver scheme, unless they choose to opt out.

In terms of payments, employees have the option of paying either 3%, 4%, 6%, 8% or 10% of their pay (before tax) through wage deductions. If they don’t opt out or choose a specific rate, they’ll automatically pay 3%. The employer will also contribute their own set amount of additional money.

Are KiwiSaver contributions compulsory for employers?

In short, yes. Employers must make contributions to KiwiSaver as well as the employee.

Compulsory employer contributions to the scheme have to be channelled through Inland Revenue, along with the employee contributions and employer superannuation contribution tax (ESCT) through payday filing. This is designed to reduce the impact on cashflow and compliance costs.

An exception to this rule is if the employee has a savings suspension, is ineligible or if they’ve chosen to opt out of the scheme.

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How much do employers have to contribute?

Employer contribution to Kiwisaver must be a minimum of 3% of your employee’s gross salary or wages. Like the employee contribution, this must be calculated in each pay run.

There is the option of voluntarily increasing that contribution, which can be an effective way for employers to attract and retain talent. Some employers will choose to match their employee’s contributions at 4% or more.

Employees can only change their contribution percentage every three months.

Can employers deduct KiwiSaver contributions from employees’ pay?

Employee contributions to KiwiSaver are made as a deduction from their pay. Your employee should tell you which rate to use via their KiwiSaver deduction form. Once you know that, you can work out the contribution that should be coming out of their gross pay.

If paperwork isn’t your favourite activity, you can choose to collect and automate all that information through an online platform. This is something Employment Hero can help with, allowing employees to submit their information for automated payroll reporting to Inland Revenue.

The employer’s contribution should not be deducted from the pay. That is an additional spend by the employer.

What happens if employers don’t pay for KiwiSaver?

If an employer doesn’t pay for KiwiSaver, they aren’t complying with the KiwiSaver Act 2006, and, therefore, breaking the law. Inland Revenue keeps a close eye on cases such as these and will work to recover unpaid contributions.

That’s why it’s essential that employers are meeting their responsibilities. If you choose to outsource your payroll, KiwiSaver should be a critical topic of discussion with your payroll provider to ensure that you’re compliant with the law.

Setting up your KiwiSaver for your business

How does an employer pay KiwiSaver?

Facilitating KiwiSaver payments is the responsibility of employers. They need to provide information to Inland Revenue in regards to the employee’s KiwiSaver contribution. They should also ensure that employee deductions and their own employer contribution are paid to Inland Revenue along with PAYE.

Keeping physical or digital records, as with all payroll matters, is critical. Employers have to maintain records of which employees are KiwiSaver members, as well as their individual contribution rates and any opt-out forms from those not in the scheme. All payslips should also show KiwiSaver deductions and employer contributions.

If that sounds overwhelming, there are ways to make this easier. HR and payroll software like Employment Hero is designed to safely record information and automate a lot of these processes, so you’re compliant with minimal work required.

How do I set up KiwiSaver for new employees?

When you hire new employees, and they’ve opted into KiwiSaver, the following steps will get them set up:

Fill in this form and send it to Inland Revenue before the employee’s first payday. Alternatively, you can upload employee details from your payroll software into the IRD portal.
Ask your employee to fill in a KiwiSaver deduction form.
With that information, calculate the employee deduction per pay period, as well as your employer contribution and ESCT (check out our guide below).
Pay Inland Revenue the designated amount alongside PAYE – the funds will then be moved to the employee’s chosen KiwiSaver provider.

Do employers have to contribute to KiwiSaver for casual employees?

It depends – if casual employees are working for you on an irregular basis and get holiday pay alongside their wages, you don’t have to automatically enrol them in KiwiSaver. However, if they’re eligible they can choose to join KiwiSaver through you, and you will also have to make a minimum of 3% contribution to the KiwiSaver funds.

It is not compulsory to enrol temporary employees who are consistently working for you for 28 days or less. That time period is measured from their first day of employment and is not affected by the hours or days that they actually work.

Beyond that 28 day period, you do need to enrol your temporary employees and begin employer contributions.

How to calculate KiwiSaver contributions

In order to stay on top of your employer Inland Revenue tax return and cashflow, you’ll need to know the total amount of employee KiwiSaver deductions, your employer contributions and the employer superannuation contribution tax (ESCT).

Here are our steps for calculating those three figures for one employee:

Employer superannuation contribution tax (ESCT)

It’s important that ESCT is deducted from all employer contributions to KiwiSaver schemes. This also includes additional voluntary contributions on top of the standard 3%.

Working out the rate of ESCT must be done per individual employee, as it depends on their salary and their length of employment. You can find a guide on rate bands and calculations here.

Who are the registered KiwiSaver providers?

All scheme members can choose which KiwiSaver provider they want to manage their KiwiSaver fund. That information is then provided by the provider to Inland Revenue, who join the dots with the information provided by the employer.

Please note – employers cannot give employees financial advice, but they can assist employees in accessing information on the options available.

The registered New Zealand KiwiSaver providers are:

Here at Employment Hero, our New Zealand employees are supported through KiwiSaver and have the opportunity to manage their contributions through the Employment Hero portal. Find out more about how you can use Employment Hero to keep up to date with your KiwiSaver contributions and obligations.

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Disclaimer: The information in this article is relevant as at 10 May 2022, and has been prepared by Employment Hero Pty Ltd ABN (11 160 047 709) (Employment Hero). The views expressed herein are general information only and are provided in good faith to assist employers and their employees. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article.

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