Staff pressured on KiwiSaver

Commerce and Consumer Affairs Minister Kris Faafoi says he would be worried if employees were being encouraged by their bosses not to contribute to KiwiSaver.

Employers must offer the retirement savings scheme to their staff, and contribute an amount equal to 3 per cent of an employee’s pay.

But there are avoidance strategies, and some commentators say employers may be taking advantage.

The first way employers can skip contributions is by offering salary packages that include them.

That means an employee could choose, say, to be paid $100,000 a year in the hand – or $97,000 plus $3000 of employer contributions into their KiwiSaver account.

KiwiSaver provider AMP’s research showed that low-paid workers at small businesses preferred to receive the money now rather than have it in their KiwiSaver funds – and their employers were not making clear the other benefits of the scheme.

Faafoi said it was legal to provide a total package but it had to be negotiated in good faith.

He had asked officials for more information on how common it was for people to opt to take the money upfront.

‘‘KiwiSaver is about ensuring people have a good standard of living in retirement so I would not want to see that undermined.’’

David Boyle, group manager of investor education at the Commission for Financial Capability, said it seemed to be increasingly common. More than 2.7 million people are in KiwiSaver, but just over a million contribute less than $1000 a year. The number of people on a contributions holiday has soared.

Boyle said there were questions about how often those contracts were really negotiated in good faith, without pressure on the employee.

Many people were also caught out if they shifted from a permanent role into a contract position for which the employer had no KiwiSaver obligation.

‘‘It’s something I’m particularly worried about and concerned that we are not sure how big the issue is.’’

Employers can also skip the requirement to automatically enrol new staff members and start contributing if they offer their own workplace savings scheme that is deemed to be just as good as KiwiSaver.

Ryan, who did not want his surname used, said his company made it clear it did not want staff in KiwiSaver.

Instead, it contributed $100 a month to its own scheme, matching employee contributions.

‘‘You do not need to be a mathematician to quickly realise that myself and all employees miss out on hundreds of dollars every month in KiwiSaver. To make things worse, if we do contribute to KiwiSaver on top of this, the Government rules say that a minimum contribution must be 6 per cent – usually made up 3 per cent by employer and 3 per cent employee.’’

He said 6 per cent was a lot for people on an average wage. Most were left thinking they were better off not bothering if all the money going into KiwiSaver was their own.

An Inland Revenue spokesman said employees in workplaces with their own super schemes could still opt for KiwiSaver if they would prefer it. If an employer contributed less than 3 per cent to their own workplace scheme, they must pay the difference to a KiwiSaver scheme, if the employee was a member.

‘‘Inland Revenue undertakes a range of activities to help ensure employers are aware of and meet their KiwiSaver obligations. However, as with all aspects of running a business, employers need to take some ownership for understanding and meeting their responsibilities – just as they would with health and safety requirements or complying with employment laws.

‘‘This includes working with an employee where they have concerns they may not be receiving the correct amount of KiwiSaver contributions.’’