12 July 2008 Media Statement

Government moves to make KiwiSaver fairer

The government is going to amend the Employment Relations Act to ensure employers meet their obligations to pay contributions to their employee's KiwiSaver accounts, Labour Minister Trevor Mallard said today.

This will address the situation that has seen some employees paying their employer’s contribution to their KiwiSaver account out of their own salary.

"I have had reports of employers paying KiwiSaver and non-KiwiSaver members differently, and the government intends to clearly specify that this sort of behaviour will be illegal," Trevor Mallard said.

"We originally left this issue to employers and employees to agree to in their employment agreement negotiations on the understanding that employers would take the extra costs into account across the entirety of their workforce. This clearly hasn’t happened.

"Many employers are embracing KiwiSaver and this is to be commended. However, there is no way that it is fair for one employee to be paid less each week in their take home pay than an employee doing the same tasks, simply because they choose to be in KiwiSaver and the other employee doesn’t.

"This is particularly an issue for employees on ‘total remuneration’ packages, which some employers have insisted include the employer’s one per cent compulsory contribution to KiwiSaver.

"In some particularly bad cases this has meant that the employee gets a one per cent pay cut, which the employer uses to pay their compulsory contribution, while pocketing the $20 per week tax credit the government provides them.

"The $20 per week tax credit will compensate employers for their contribution to employees earning up to $104,000 a year in the first year (2008/09).

"Another type of unlawful behaviour will be where an employer could offer non-KiwiSaver members a four per cent pay rise, and offer KiwiSaver members a three per cent pay rise.

"KiwiSaver members should not be treated less favourably, and the government will change the Employment Relations Act to make it unlawful to offer lesser terms and conditions to a KiwiSaver employee on the basis of their KiwiSaver membership. Such action would give rise to a personal grievance."

He says the law changes would not affect employers’ eligibility for the employer tax credit, and employers and employees would still have to operate within the good faith bargaining framework in the Employment Relations Act. The law change would come into force on the date the amendments are introduced to the House, but would not effect employment agreements already entered into before that date.

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