KiwiSaver changes will hurt employees

Plans to change the way employers pay KiwiSaver contributions reveal how little the government understands about the basics of its own savings scheme, says Business NZ.

The Minister of Labour, Trevor Mallard, yesterday announced a plan to amend the Employment Relations Act to make it unlawful for employers to pay different amounts to KiwiSaver employees and those not on the scheme.

But Business NZ chief executive Phil O’Reilly says it is unlawful for an employer to deduct the employer contribution from the employee, without first giving them a pay increase of at least that amount.

“The minister’s own officials told him so in briefing papers two weeks ago.”

Mr O’Reilly says the latest changes further bungle the government’s handling of employer contributions

“First, employers were ambushed by the announcement of compulsory employer contributions on Budget day, which required considerable amendment before they would work. Now we’re hit again with an equally badly thought out announcement.”

An additional proposal to make it unlawful to offer different pay increases to employees who are members of KiwiSaver and those who are not is also unnecessary, says Mr O’Reilly.

“An employee who joins KiwiSaver is better off overall than someone who does not join. They get a $1000 start up contribution, a tax free employer contribution, they got a tax credit of $20 a week from the government and they earn interest on their savings – none of which is available to a non KiwiSaver member.

“Saying it’s not fair because an employee who voluntarily joins KiwiSaver has to reduce their take home pay (by the amount of their own contributions) simply shows the government has no idea what it’s doing here,” says Mr O’Reilly.

“This is basically saying the employer should pay an employee the amount the employee wants to save. It’s going to add huge uncertainty to wage bargaining.

“How can employers plan with certainty if they have to pay everyone the same increase, then cop even more costs when some employees decide to join KiwiSaver? And how can they reward good employees with better pay if they can’t offer different increases based on performance, whether or not an employee is in KiwiSaver?”

Mr O’Reilly says this will simply force employers to be extra conservative with pay increases, in order to accommodate the potential extra cost if the employee later joins KiwiSaver.

“Employees will be ones who suffer in the end, which can only rebound on the government, since they are the country’s largest employer.

“Government should be careful before it starts demonising employers who have been doing no more than following the law.”