Offsetting Employer KiwiSaver Contributions

Posted by Bruce on 12 September 2008

On 3 September a rushed amendment to the Employment Relations Act was passed that impacts on every employer offsetting their contributions to KiwiSaver within the remuneration package paid to employees.   The prospect of total remuneration arrangements being under threat had been signalled as long ago as July - what had not been anticipated had been the lack of consultation that occurred with the wording of the amendments made, and the possible far reaching implications.  

In brief, the changes were tacked into the Employment Relations (Breaks and Infant Feeding) Amendment Bill just as it was about to be passed.   They result in employees having ground for a personal grievance if their employment is adversely affected because they are a KiwiSaver or complying superannuation fund member.   This is generally accepted as meaning that if your employer reduces your take home pay to take into account its compulsory KiwiSaver contribution, resulting in you getting less in the hand than someone who is not a KiwiSaver, you can bring a personal grievance claim.   That had been anticipated.   The law amendment outlaws total remuneration arrangements to that extent, but was predictable in light of earlier announcements by the Minister of Labour.  

The concern now is that with the wide scope of what may be included as an adverse affect, the reform goes beyond that anticipated position.   Many employers are now in the position of needing to revisit the terms of employment they are offering, even though they would not previously have considered themselves a target for this reform.   And there is no transition period - agreements entered into on or after 2 September 2008 are caught, as are variations to older agreements.  

ASFONZ is currently working hard as a matter of urgency with industry experts and relevant officials to gain some greater clarity around the intended impact of this reform upon employer superannuation scheme contributions.   In light of earlier political comments made, we understand that the amendment was not intended to cut across workplace superannuation arrangements.   Unfortunately, the wording of the legislation leaves the position open to argument, and experts are divided.   We are hoping to get some official clarity within the next few days, and will issue a newsflash at that time. For now, we urge our employer members to take a cautious approach with respect to setting new employment arrangements and varying existing arrangments where any form of adjustment to take into account KiwiSaver contributions is involved.