KiwiSaver. We’ve all heard of it, but are we making the most of it? Do you know your legal obligations as an employer when it comes to a KiwiSaver scheme? How about the benefits of joining for both you and your employees?
As a business owner and employer, you must make contributions to your employee’s KiwiSaver accounts. Staying on top of these responsibilities ensures your employees’ financial futures and avoids penalties if you don’t do what you are legally required to.
And it’s not just your staff who benefit from the right KiwiSaver scheme, there are also advantages to signing up yourself. But where do you start?
KiwiSaver for Your Employees
KiwiSaver is a voluntary savings scheme that helps set New Zealanders up for retirement. Employees can make contributions from their salary or wages and are also entitled to contributions from their employer and the government. The government gives individuals over $500 a year towards KiwiSaver and employers must contribute at least 3% of their before-tax total pay.
With all this free money flying around your employees have every incentive to join KiwiSaver, and as their employer, it’s up to you to ensure smooth sailing.
Legal Obligations As An Employer
Under the KiwiSaver Act 2006, employers must make regular KiwiSaver deductions and contributions every payday. Administering KiwiSaver as part of payroll management includes the following responsibilities:
- Sign up new staff to KiwiSaver and respond to opt-out requests.
- Provide information to Inland Revenue about your employee.
- Provide information packs about KiwiSaver to employees.
- Make compulsory employer contributions during payroll.
- Deduct KiwiSaver contributions from employee’s pay.
- Work out and administer appropriate tax (ESCT) reductions.
- Keep good records of contribution rates, PAYE deductions, and any saving suspensions or opt-out requests.
New and Existing KiwiSaver Members
A new staff member may already be signed up to KiwiSaver from a previous role or may need to be enrolled. Within seven days of a new staff member starting, employers need to give out information on joining KiwiSaver or avenues to opt-out. KiwiSaver is not compulsory, but it is automatic, so new staff will have to opt-out if they don’t want to stay. Once enrolled, they have eight weeks to decide if they want to continue.
As an employer, you must send Inland Revenue the employees’ completed forms and details before their first pay-date. You can find more information on the required paperwork at the ird.govt.nz website.
While waiting to hear back from Inland Revenue you must still deduct contributions at the employee’s chosen rate, even if they have chosen to opt-out. Continue this until you receive an official notification on what to do next.
Your Own KiwiSaver
Working hard and putting every cent back into your business is the norm for most self-employed business owners. So setting up your own KiwiSaver, although vital for your employees, might not be at the forefront of your mind. You’re not alone – with only 40% of self-employed workers or business owners contributing to a KiwiSaver compared to 73% of permanently employed workers, it looks like it is regularly avoided or forgotten.
Benefits for Self-Employed/Business Owners
There are still benefits to having your own KiwiSaver scheme. As a business owner, you don’t get those extra contributions from your employer (you’d be paying yourself!) but you are still entitled to government contributions. The government gives out 50 cents for every dollar contributed to your KiwiSaver fund up to a maximum of $521 per year. Getting this full amount means only having to save $20 a week – an achievable goal. It’s like a reward for being a good saver.
Still confused or unsure where to start? Finding it hard to balance managing your business and setting up KiwiSaver schemes for employees and yourself? That’s where we can help.
Contact our friendly team today to set up a free Discovery Session that will assist you, your business, and your employees with setting up and managing your KiwiSaver schemes. Time for everyone to save a little time and money.