KiwiSaver evaluation reports

KiwiSaver automatic enrolment process

Research report 2.2

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Document summary: Documents the findings from qualitative research with employers and employees about the KiwiSaver auto-enrolment process.

Document content:

Executive summary

Report purpose

The purpose of this document is to report the findings of qualitative research about the KiwiSaver auto-enrolment process. The research was conducted with employers and new employees. The purpose of the research was to understand if there are any attitudinal and/or other barriers to auto-enrolment for employers and to assess the motivations for noncompliance with the auto-enrolment process.

Methodology

Twenty in-depth face-to-face interviews lasting up to an hour were conducted with payroll managers/employers of 'non KiwiSaver compliant' companies.¹ Ten employers were located in Auckland, and ten in Wellington. In addition, 50 short interviews were conducted by telephone with new employees² who had started a new job since 1 July 2007 (which is when KiwiSaver started). These interviews took up to 10 minutes. The fieldwork was conducted in November and December 2007.

Research objectives

The research objectives were to understand:

• What are employers' attitudes to KiwiSaver?
• How is this impacting on their interactions with new employees?
• What is the process for enrolling/or not, new employees?
• What are the barriers for employers to auto-enrolling new staff?
• How might these barriers be addressed?

Detailed findings

Employers' perceptions of KiwiSaver

Overall, the employer representatives we spoke to viewed the KiwiSaver scheme positively; employers consider having a retirement savings plan is a good idea for New Zealanders.

Despite the concept of the scheme being appealing, employer representatives had some concerns about aspects of the scheme:

• Compulsory auto-enrolment for new employees - some employers do not like the autoenrolment process being compulsory for new employees, while others thought that KiwiSaver did not go far enough and that it should be completely compulsory.
• Pre-July 2007 KiwiSaver confusion - the implementation of KiwiSaver in July drew some criticism from employers. Some felt "left in the dark" and that no one knew what was going on. Other employers sympathised with Inland Revenue's role in the implementation of KiwiSaver, recognising that the Department had to accommodate the KiwiSaver enhancements announced in Budget 2007 within a short timeframe.
• Non-government guarantee - some employers are concerned that funds invested in KiwiSaver schemes are not guaranteed by the Government. They consider this uncertainty can make some people hesitant about participating in the scheme.
• Employer contributions - employers wonder what the implications of the KiwiSaver contributions will be on their cost structures. As most of those we spoke to were in payroll, they wondered how this would affect their wages and the ability of their company to offer pay rises.

Employer perceptions of the KiwiSaver workload

Overall, employers considered KiwiSaver had had minimal impact on their workloads. Some differences appear to exist between large employers with a high turnover of staff and smaller employers with fewer new employees who have started since 1 July 2007. The representatives of larger employers we spoke to tended to feel there had been some impact on their workload from KiwiSaver in the early set up stages; the volume of new employees they anticipated employing meant they needed to have their systems set up ready to go on 1 July 2007. All employers however, agreed that the workload had been less than they had anticipated.

Starting a new job: KiwiSaver scenarios

Three qualitatively different "starting a new job" scenarios were identified for employers. The table below describes each scenario from the point of view of the employer.

Table 1: Summary of auto-enrolment scenarios since KiwiSaver started on 1 July 2007

New employees' perspectives on starting a new job

It should be noted that 27 out of the 77 individuals (35%) declared themselves ineligible for auto-enrolment at the screening questions.³ This should be taken into account when drawing conclusions from Inland Revenue's current database of individuals who potentially should have been automatically enrolled.

New employees' experiences of starting a new job hinge around three factors; their level of awareness of the KiwiSaver auto-enrolment process, whether or not they are actually autoenrolled by their employer, and whether or not they want to participate in KiwiSaver. New employees report a range of scenarios based on these factors.

While Inland Revenue may not record some new employees as being fully enrolled in KiwiSaver, because their employers are not correctly enrolling them (as described in the KS1 keeper scenarios above), many of the new employees we spoke to did consider themselves enrolled in the scheme (or had been enrolled and had started the process of opting out). A more detailed explanation of some typical interactions from new employees' perspectives is included in this report.

From speaking to new employees for this report, we consider that:

• New employees who want to be in KiwiSaver, and are not auto-enrolled, will tend to arrange to be enrolled in the scheme by actively asking their employer to start the process
• Those new employees who do not want to participate in KiwiSaver will either not mention to their employer that they should have been auto-enrolled, speak to their employer and arrange for automatic enrolment not to occur, or arrange to opt-out if they are autoenrolled, and
• New employees who do not know how to join KiwiSaver may not mention to their employer that they would like to take part in it and are therefore not enrolled; these new employees should be the priority focus for education about their right to be auto-enrolled.

Conclusions and proposed actions

The 'non-compliance' encountered in this research is related to either confusion about the autoenrolment process, or the belief that auto-enrolment is a process that employers have discretion over rather than an obligation that they are required to comply with. The employer representatives interviewed were not deliberately defying their requirement to auto-enrol all eligible new employees.

Suggested solutions are to:

• Ensure employers are aware that they must auto-enrol all eligible new employees
• Help employers be aware of their obligation by highlighting this in the information packs to employers
• Remove any sense of discretion from the auto-enrolment process, so employers are aware they cannot act on the instructions of new employees who ask not to be enrolled, and
• Clarify the process for filling in the KiwiSaver employee details (KS1) form and provide more information about its purpose and importance in the process. Ensure employers are aware of any process differences between those new employees who they auto-enrol and who stay with a default scheme provider, and those new employees who they autoenrol and who choose their own scheme provider.

Ensure new employees are also aware they should be auto-enrolled and empowered to ask their employers to auto-enrol them (particularly if they want to participate in KiwiSaver).

¹ Non-compliant companies are those identified in Inland Revenue administrative data as having hired new employees but these employees not being auto-enrolled in KiwiSaver.

² Please note: new employee is defined as someone who started working in a company since KiwiSaver started on 1 July 2007.

³ For example, some had become self-employed since their data was collected by Inland Revenue, or they had not changed jobs. The latter means that some existing employees were included in the sample.

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Date published: 29 May 2008

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