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Employees need to check wage slips


Q.        My son left school at 17 and has been working for his current employer for the past 4 months. When he started he ticked the box that he was in KiwiSaver, but they did not make any deductions from his wages. Oh well, we thought they would start when he turned 18. He turned 18 a few weeks ago, but when he showed me his payslips there were still no deductions. What should we do? Doesn’t IRD notify them that they should be making deductions?


A.         Although KiwiSaver has been up and running for nearly 8 years, there are still some employers who do not understand their obligations. For employers that are in any doubt, the rules are set out very clearly on the IRD website under KiwiSaver.

New employees under the age of 18 as well as those employed on a temporary basis (28 days or less) are not automatically enrolled in KiwiSaver by their employer. However, new and existing employees aged under 18 can join KiwiSaver by contracting with a KiwiSaver scheme provider directly (as long as they are New Zealand citizens or eligible to live in New Zealand indefinitely). Once an employee under 18 is accepted by the scheme provider, Inland Revenue should will write to the employer and ask them to start deducting their contributions, if they nominated the employer in their application to join. IRD will provide the employer with the contribution rate for that employee, their name and IRD number.
If your son joined KiwiSaver before he started working in his current job, Inland Revenue will not make this connection so it will be up to your son to let his employer know that he is in KiwiSaver (and you say that he did this). The correct way to do this is to fill out a KS2 form and give it to his employer. At that point his employer should start making the deductions (3%, 4% or 8%) chosen by your son.

Starting a new job often involves a long process of interviews and form filling, and it won’t be until the employee gets their first payslip that they will know if any information they have provided about their KiwiSaver status has been actioned.

Most young people will only be interested in how much lands in their bank account each week, but it is worth checking each detail to make sure they are on the correct pay rate, tax rate and KiwiSaver rate. 

Employers are not obliged to make employer contributions of 3% to workers under 18, although some good employers choose to do so. Now that your son is 18, his employer should be contributing 3% to his KiwiSaver as well as passing on the 3% employee contributions.

Even someone employed on a temporary basis (28 days or less) who is already a KiwiSaver member can ask that their employer make KiwiSaver deductions for them. In these cases the employer is not only required to do so but must also pay compulsory employer contributions.

Hawkes Bay Today 10 March 2015
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz