Don’t be reluctant to join KiwiSaver
Q. I haven’t joined KiwiSaver up till now as times are tough in the building industry and my employer has not been warm to the idea. My wife has been a member since it started and she has over $17,300 in her Scheme. Do you think I should join or have I already missed out on most of the perks?
A. Although most employers seem to support the idea of KiwiSaver, I have heard of employers who actively discourage their employees from joining the Scheme. This is short sighted as workers with a good retirement savings plan are usually more motivated and productive.
When KiwiSaver started in 2007 employers were not required to contribute, but from April 2008 they were required to contribute 1% and this went up to 2% from April 2009. From April 2013 this will increase to 3% (as will the minimum contribution for employees).
It is by no means too late to join KiwiSaver. The ‘kickstart’ of $1000 is still given to each and every new KiwiSaver customer and all eligible savers (those over 18 and under 65) will receive Member Tax Credits of up to $521 per year as well.
If you are currently on $50,000 per year your employer’s contribution will amount to $1000 per year, going up to $1500 from 1 April next year. If you have some knowledge about the business, you will know what impact this may have on his cashflow.
The employer’s contribution must be on top of your regular salary, so your take home pay should not be reduced by their contribution. In reality, once employees have joined KiwiSaver some employers will take that into consideration when giving them salary increases, to offset the cost. Unless you are on the minimum wage or have specific salary increases detailed in your employment contract, there is not much you can do about this. In the case of a large employer, it is likely that everyone will be treated equally and fairly. In a smaller workplace (where you may be the only person doing a particular job) it will come down to negotiation.
I understand your reluctance to sign up to KiwiSaver if times are tough in your industry, and you want to be on good terms with your employer. However, your boss may respect you for signing up even if he grumbles about it. To make it easier for him, download the KS2 form from the Inland Revenue website, fill it in and give it to him. Your contributions should commence from your next pay cheque, and will be forwarded to Inland Revenue with the monthly (or fortnightly) PAYE returns.
Some employers get behind in their PAYE and other tax payments due to cash flow problems. Making tax payments on time is one of the first rules of business and Inland Revenue comes down hard on business owners who get behind (unless they are granted an extension of time arrangement). If you suspect that is the case you may be wise to start looking around for another job.
As published in the Hawkes Bay Today 5 June 2012