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Wage cut may be worth opting in
Q.        I have an interesting issue with an employer.  The contract he offered me stipulates that if I opt-out of KiwiSaver, fine, but if I opt-in, my pay is instantly reduced by the amount he'd have to contribute, so I've been opting out; however, I've been working there 6 months and by his own admission I've singlehandedly built the business up from losses to a state of profit. I've had one pay rise and am on more than the minimum hourly wage.  I don't want to bring this issue up and risk retaliation, or miss the next pay rise. Opting into KiwiSaver will give me Gov't tax credits, and could help my wife and I get a housing subsidy. Can Inland Revenue intervene in this situation?
A.         Your situation is not uncommon. In the current labour market where jobs can be hard to find, employers often hold the upper hand in negotiations. Unless workers are on the minimum wage, employers can negotiate to deduct both employer and employee KiwiSaver contributions from the worker’s wage under a ‘total remuneration’ agreement.   The outcome of this is that all employees doing the same job are treated equally, whether they are in KiwiSaver or not. 
I asked lawyer Emma Harding from Chapman Tripp in Auckland for her comments. She said that “Section 101B(4) of the KiwiSaver Act allows employer contributions to be bundled into employees’ pay under ‘total remuneration’ agreements, if the parties have entered into the agreement after 13 December 2007 and where the agreement accounts for the employer contributions in the employee’s pay.  The rationale behind it is that employees can choose how their remuneration is spent.  In order to meet the requirements set out in the KiwiSaver Act, a “total remuneration” agreement must account for employer contributions in the employee’s pay.  This means that your reader’s pay should have been at least 3% higher than it would otherwise have been when he joined the company.  If this was not the case, then it might be possible for the employee to challenge the arrangement. However, it depends how much he wants to raise his head above the parapet, so to speak.  There could be a risk with doing this.”
As you quite rightly point out, if you challenge your employer you may find yourself penalised with fewer pay rises in the future. 
Can you turn to Inland Revenue for help? Emma Harding has this to say: “Unfortunately, given that this is a negotiation between the employer and employee (and an employment arrangement), Inland Revenue will not be able to help.” 
As long as your employer is meeting his obligations under the Act, you cannot get any Government department to intervene on your behalf. KiwiSaver or not, it sounds like you believe you are worth more to your employer than you are currently being paid. If you enjoy your work and plan to be there for some time, it would be worth building up a good relationship with your employer. He may have had cashflow problems in the past which have led him to be on the stingy side when paying his staff. If he believes that you are there for the long run perhaps he will become more generous. 
As you point out, there are advantages in joining KiwiSaver including the Government tax credits and the opportunity to apply for a housing subsidy in the future. Your best course of action may be to opt in to KiwiSaver, adjust your budget to allow for the 6% drop in take home pay, and negotiate harder at the time of your next wage review.   From a practical point of view all you need to do is fill in a KS2 form and give it to the person in charge of payroll. Then check your next payslip to make sure deductions have started.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not intended to provide personalised advice. Send your KiwiSaver questions to