Saving through the workplace makes it easier for people to save consistently for their retirement. As KiwiSaver is administered through the workplace, employers play an important part in KiwiSaver and have a number of obligations.
Employees between the age of 18 and 65 will be automatically enrolled in KiwiSaver when they start a new job* (unless you have a similar scheme approved by the Government Actuary). They then have from the end of week two through to the end of week eight to decide if they wish to remain in KiwiSaver or opt out.
Existing employees are not enrolled automatically but they can join KiwiSaver. They can do this by letting you know they want to opt in or by contacting their chosen KiwiSaver scheme provider. It’s important to remember that if an employee chooses to opt in to KiwiSaver, they can’t opt out.
Employees can choose to contribute either 3%, 4%, 6%, 8% or 10% of their gross (before tax) salary or wages to KiwiSaver. These contributions are then taken from their net (after tax) salary or wages and put into their KiwiSaver account. After contributing regularly from their salary or wages for 12 months, they can apply for a temporary break from saving (a ‘contributions holiday’).
You must contribute a minimum of 3% of your employees’ gross salary or wages to KiwiSaver. You’re required to make contributions to an employee’s KiwiSaver account if they’re over 18, and have contributions deducted from their salary or wages (other eligibility criteria apply). Contributions to existing superannuation schemes may count towards compulsory employer contributions (if certain conditions are met). See www.kiwisaver.govt.nz for more details. From 1 April 2012, all employer contributions to KiwiSaver will be subject to employer superannuation contribution tax (ESCT). For full information on ESCT, visit www.ird.govt.nz/changes/employers/esct.
Savings are locked-in to KiwiSaver until the employee reaches the age of eligibility for New Zealand Superannuation (currently 65). There are exceptions to this, for example significant financial hardship, serious illness, death, or permanent emigration.
If you'd like to know more about how KiwiSaver works you can check out www.kiwisaver.govt.nz.
Choosing a preferred KiwiSaver provider (also referred to as an ‘employer-chosen scheme’) for your business can simplify things for you and your employees, and provide your business with a number of benefits. For example, having a preferred KiwiSaver provider could help ensure your employees are provided with consistent KiwiSaver information from one source.
Choosing a preferred KiwiSaver provider for your business does not count as giving KiwiSaver advice, and employees can still select another provider if they wish.
*Exceptions from KiwiSaver automatic enrolment criteria include: casual and temporary employees employed under a contract of service for 28 continuous days or less, election day workers, private domestic workers, casual agricultural workers employed for less than three months, people who hold temporary visitor or student permits, and employees that remain on the same payroll when a business is taken over or amalgamated, or if they’re relocated with the same employer. For more information visit www.kiwisaver.govt.nz.