Q) My daughter recently started her first job. The salary is $35,000. If she wants to be in KiwiSaver her salary would be $35,000 less 2%. How can this be an employer contribution if she is effectively the one paying it? Is this legal?
A) In short, no this is not legal.
The KiwiSaver Act specifically condemns this sort of nonsense. If sh
Employer's KiwiSaver contributions are supposed to be on top of regular pay unless your daughter agreed (through "good faith bargaining") to a reduced wage or salary in lieu of KiwiSaver contributions as part of an employment package.
This is a direct quote from Inland Revenue:
"Your take-home pay should not be reduced because your employer is making a compulsory contribution."
That said there are a few situations whereby employers are exempt from making contributions. They are as follows:
- if they're already paying into another eligible registered superannuation scheme.
- if the KiwiSaver is under the age of 18
- if you are over 65 years of age (and you've been a member for more than five years)
- if the employee is not making contributions
You can read the details on Inland Revenue's website
Here's some more information below from the Department of Labour's website on deductions which suggests that you're daughter might also have had to sign off on any paperwork agreeing to a reduced salary in lieu of contributions.
As a fresh hire, you daughter won't likely want to rock the boat but I'm sure she'll miss the $700 a year extra more than her employer will.
Armed with the right paperwork and approach, she should be able to set the record straight.
Employers generally can’t make deductions (take money) from employees’ wages. Employers can only do this where:
- an employee has agreed to or requested the deduction in writing. The employee can vary or withdraw this consent by giving notice in writing at any time. The employer must then vary or stop the deductions within two weeks of receiving the notice or as soon as practicable
- an employment agreement says the money can be taken out (for example, for union fees in a collective agreement)
- an employer wishes to recover overpayments where the employee has been absent from work without the employer's authority, been on strike, locked out or suspended. The employer may only recover an overpayment where it was not reasonably practicable to avoid making the overpayment. The employer must tell the employee of their intention to recover the overpayment before deducting any money and then make that deduction within two months of telling them.
- a Court directs that a deduction be made
- a bargaining fee arrangement applies to the employee
- an employee is required by law (for example, income tax, child support payments or other statutory purposes) to make payments.
If an employee is provided with board and lodging the employer may deduct the costs of board or lodging where the amount is fixed under any Act, determination or agreement. If the amount payable is not fixed, the employer may deduct no more than 15% for board, or no more than 5% for lodging.
If there is a breach of the Act or an employment agreement, call the Department of Labour on 0800 20 90 20.
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