KiwiSaver law change to remove conflict
The Press | Wednesday, 23 July 2008
Labour Minister Trevor Mallard says KiwiSaver legislation will be altered to ensure there is no conflict with employment law when workers and bosses thrash out remuneration packages.
The minister last week moved to make it unlawful for employers to pay different amounts to KiwiSaver members and non-members amid concerns a minority were deducting employees' wages but pocketing tax credits.
To stop this, the Government will change the Employment Relations Act (ERA) to make it unlawful to offer lesser terms to a KiwiSaver employee on the basis of membership. The KiwiSaver Act will also be amended.
Mallard said: "There will be a consequential amendment to the KiwiSaver legislation to ensure section 101B is subject to the changes. There will be no conflict between the KiwiSaver Act and these amendments.
"The costs of KiwiSaver employer contributions should not be borne by the KiwiSaver employee. It is an employer contribution, not an additional employee contribution."
Since April 1, some companies have exploited the loophole and reduced pay rises by 1 per cent to cover the cost of contributions employers are compelled to make to all KiwiSaver accounts.
Staples Rodway tax specialist Matt Baker, however, says the minister's decision is a U-turn on changes to the KiwiSaver Act made only last December.
Baker said the Government changed the law in 2007 to offer a "total remuneration" option, whereby an employee could agree with an employer on a total package, in which case employer contributions would form part of their total gross remuneration.
"As long as the agreement was entered into on or after December 13, and the agreement was negotiated in good faith, this was entirely lawful. In fact, the legislation was passed specifically to allow this option," he said.
The issue of some employers pocketing tax credits could easily have been corrected, he said. Instead, talk of a loophole has been used to mastermind a policy U-turn.
The Retirement Commission's www.sorted.org.nz website has been updated to address fresh concerns about KiwiSaver such as ongoing affordability, scheme suitability and fee structure.
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