Kiwisaver and Total Remuneration

Kiwisaver and Total Remuneration

With the increase in Kiwisaver contributions from 1 April, a number of our clients have asked whether there is anything they can do to actively manage this cost. It would seem a mild certainty that Kiwisaver contributions will increase in the medium term given the announcements from various political parties. In Australia, the contribution from employers will increase to 12% between 2013 and 2020.

There is a little known clause in the Employment Relations Act that allows for an employee’s salary to represent “total remuneration” for the role they perform. Should your employee decide to join KiwiSaver, the cost of the employer’s contribution will come directly from the employee’s pay.

The vast majority of employers still elect to take the default approach where they make a contribution towards each employee’s Kiwisaver plan. There is no research on the alternative where an employer sets a “total remuneration” and all Kiwisaver costs are met by the employee.

If an employer wishes to adopt the “total remuneration” approach, there is still the requirement to negotiate in good faith with the employee. The Individual Employment Agreement must include a clause detailing the “total remuneration”  which accounts for the amount of the employer’s contribution (if any). An employer cannot simply adopt this as a matter of policy going forward.

There are some very real advantages with “total remuneration” not least the fact that your wages and salaries expenses are certain and all employees are treated equally regardless of whether or not they participate in Kiwisaver. Generate Accounting offers employment advice solely for employers. If you would like to discuss “total remuneration” and want to understand your statutory obligations, please contact Angus for a confidential chat.