Employers divided over KiwiSaver in the pay packet

Michael Littlewood. Photo / David White

Divisions are emerging over who should pay for the KiwiSaver employer's contribution, with some temporary workers reporting pressure to take it out of their salary or wages.

Employers cannot force either permanent or temporary staff to include the employer contribution in a total remuneration package but can do so by agreement with the employee.

Michael Littlewood, co-director of Auckland University's Retirement Policy and Research Centre, believes it's an approach all employers should take.

Littlewood said it did not make sense to have two people undertaking the exact same job getting different amounts from their employer because one was in KiwiSaver getting the 3 per cent employer contribution on top of their salary.

"You can't justify paying someone in exactly the same position more just because they want to save for their retirement," he said. "Two otherwise equal employees should get the same money regardless of whether they are saving for retirement."

Littlewood said it should be up to workers to decide if they got the money in the hand now or put it away later for their golden years.

"Employees seem best placed to make that decision."

He said if the KiwiSaver employer contribution was paid on top it would probably reduce salary and wage increases.

But David Kneebone, executive director of the Commission for Financial Literacy and Retirement Income, said it was not within the spirit of KiwiSaver for employers to include the employer contribution as part of a worker's package.

"Offering an incentive for employees to save for their retirement is something we would support wholeheartedly."

Kneebone said the commission had been concerned about the issue and undertook research on it in January which found it was not a problem in collective bargaining talks.

But he said anecdotal evidence appeared to point to it occurring more in the professional sector in individual contracts.

Several people have written to the Herald's KiwiSaver Q&A questioning whether it is legal to take the employer contribution out of their salary package.

A survey by the Employers and Manufacturers Association found 25 to 30 per cent of its members used a total remuneration approach.

EMA spokesman David Lowe said there had not been any great increase in employers using the total remuneration approach since KiwiSaver was launched.

"It has increased very slightly as a couple of employers realised it was possible."

Lowe said the increased cost of KiwiSaver from April would have an impact on wages but it was too hard to predict how much.

He doubted whether many firms would move existing staff on to total remuneration as it would potentially involve giving them a 3 per cent pay rise.

"A hike like that just isn't on the radar."