Making deductions

Employers play an important role in the KiwiSaver initiative by calculating employees' contributions, deducting the correct amount from their pay, and forwarding it to us. 

Contribution rates

Employees can choose a contribution rate of either 2%, 4% or 8% of their gross pay. 

Gross pay means total salary, including:

• bonuses
• commission
• extra salary gratuity
• overtime, and
• any other remuneration of any kind before tax

but (from 1 April 2008) excluding:

• redundancy payments
• certain benefits, grants and payments made to an employee for overseas accommodations costs or other costs associated with living overseas.

This means that compulsory employer contributions are not required for the excluded salary components.

 

If an employee does not select a rate on their KiwiSaver deduction form (KS2), make deductions at the default rate of 2% from 1 April 2009.

Employees can:

• make lump sum contributions through us or direct to their scheme provider
• change between the three contribution rates (2%, 4% or 8%) by advising you of their new contribution rate.

Employees can't:

• change their contribution rate more frequently than every three months unless you agree.

Scheme providers may offer other services for members, such as life insurance. Payment for these services must go direct to the scheme provider, and cannot count towards the KiwiSaver contribution rate.

Employer contributions

Employers are required to contribute the equivalent of 2% of their employee's gross salary or wages from 1 April 2009.

For the year beginning 1 April 2008 employers, were required to contribute the equivalent of 1% of the employee's salary.

Contributions made to existing superannuation schemes reduce the amount of compulsory employer contribution employers are required to pay if certain conditions are met.

If any of your employees are receiving the Job Support Scheme allowance, you will need to include these payments in the calculation as the scheme payments will be included as part of the employee’s gross income.

Calculating deductions

KiwiSaver calculations tables are included in the PAYE deduction tables (IR340 and IR341) to help make it easier for you to work out how much to deduct. The PAYE calculator is also available and can be used to calculate members' KiwiSaver deductions. You need to make sure new employees' KiwiSaver contributions and compulsory employer contributions start from their first pay.

Special tax code or student loan repayment rate certificate IR23

Any KiwiSaver contributions that are or will be made from an employee's salary or wages must be in addition to their special tax code or student loan repayment rate. For example, if an employee is on a special tax code or stydent loan repayment rate of 30% and they are making KiwiSaver contributions at 2%, total deductions from their salary or wages will be 32%.

Forwarding deductions

Forward member deductions and employer contributions to us along with your Employer monthly schedule (EMS) (IR348 and IR349). The EMS and Employer deductions form (IR345) include fields for KiwiSaver employee contributions and compulsory employer contributions. These forms can be filed online if you are registered to use our ir-File service. Please make sure you complete all fields on the form.

Deductions from accident compensation payments

If you participate in the Accident Compensation Corporation's (ACC) Partnership Programme or have an ACC employer reimbursement agreement, you continue paying an employee after an accident. In this case, you must continue to deduct any KiwiSaver contributions that were applicable before the employee's accident.

To stop member contributions being deducted from their salary or wages, the employee must apply to us for a contributions holiday. If the employee continues to make contributions, you may choose to continue making employer contributions but you don't have to.

When ACC (and not you) pays the employee weekly compensation, you don't need to make member contributions from those payments unless the employee instructs ACC to make deductions. You also don't need to make compulsory employer contributions, although you may choose to make them.

Contributions made in error

Please let us know if you make an error in deducting contributions or making compulsory employer contributions from an employee's pay. If necessary, we'll refund any contributions made. If employer contributions are included, these will be repaid to you.

You can amend KiwiSaver information the same way you make Employer monthly schedule amendments, by completing an Employer monthly schedule amendment (IR344) form. If you have a small number of amendments, call us on:

• 0800 377 772, or
• 04 978 0763 if calling by cellphone

and we'll update them over the phone.

Amendments to KiwiSaver information and resulting refunds will take longer to process if we have to request the refund from the member's scheme.

 

Resignation and retirement benefits

Make deductions as normal at 2%, 4% or 8% from the final payment of salary or wages made up for the employee. This means you must make deductions from any salary, wages or allowances you intend to pay, including all bonuses, commission, extra salary, gratuity, overtime pay, extra pay, or other remuneration of any kind.

KiwiSaver has some specific exclusions to the term "salary and wages" where you intend to make ongoing payment to the employee after they retire. One of these relates to periodic payments by way of pension, retiring allowance, superannuation or other allowance or annuity relating to the person's past employment.

To learn more about these exclusions, contact us.

Payroll subsidy

There is a subsidy available to help cover your administration costs. The subsidy is set at $2 per employee per payday. It is payable to listed payroll intermediaries that carry out PAYE and related payroll functions for employers with up to five employees.

Find out more about

• Employees with special circumstances
• Employees exempt from automatic enrolment
• Compulsory employer contributions

 

 

Date published: 03 Apr 2009

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