Worker opted out of KiwiSaver without her permission

The woman first learned she had been opted out of KiwiSaver by her employer was when she received a letter from Inland Revenue. Photo / 123RF

The family of a young worker claims her employer tried to opt her out of KiwiSaver without asking for her permission.

The father-in-law of the young woman, who did not wish to be named for fear of identifying her to her employer, said the first she knew about it was a letter from the Inland Revenue Department declining her application to opt out of KiwiSaver but granting her a 12-month savings suspension.

"She didn't understand it so she showed it to me and I said you need to contact the IRD which she eventually did. But how can this happen if you have not given them your permission and you have not asked them or said you want to stop your KiwiSaver or not make contributions?"

Workers can opt out of KiwiSaver if they are automatically enrolled when starting a new job and it is between two and eight weeks after they begin working for that employer by filling out a form and giving it to their employer or directly to IRD.

According to the Inland Revenue Department, employers must send the opt-out form, which requires a signature from the worker, to the IRD.

An IRD spokeswoman said on receiving an opt-out request, it sent a letter to the person opting out to make sure they were aware of the move.

"KiwiSaver members who get the letter can call IR in the first instance and talk to us."

The young woman, who works part-time as a cleaner, was not able to be opted out because she was already a KiwiSaver member before joining the company through another part-time job.

But if she hadn't called the IRD to stop the savings suspension from going ahead it would have stopped her contributions from going into KiwiSaver and allowed her new employer to forgo contributing as well.

An employer must contribute 3 per cent of an employee's wages or salary for workers who are a member of KiwiSaver unless they have a total remuneration agreement where both the employee and employer contribution comes out of the workers' salary package.

The father-in-law said the woman had spoken to another worker at the same company who told her "this is what they do".

He declined to disclose the name of the business but said it was a restaurant chain.

He said he did not know if it was a widespread problem or an isolated incident.

"We just don't know other than the comment from the other staff member."

Craig Renney, policy director at the New Zealand Council of Trade Unions, said if an employer had submitted a form on behalf of a worker without their permission they would be misrepresenting the worker.

"For us that misrepresentation takes it beyond the simple purview of just being an employment issue. It becomes a real legal and possibly criminal issue."

He said the opt-out form was a statutory form. "You are making a declaration to IRD and so if someone is being misrepresented in that declaration then you have committed fraud."

If it was done through malice in an attempt to try to save money, then someone had made a "pecuniary benefit" from that misrepresentation which was the definition of fraud.

He said if it was true it would be either terrible incompetence or an unprecedented attack on basic KiwiSaver rights.

"No worker should have their choice about their KiwiSaver taken away from them or be subject to pressure from their employer."

Renney said the woman could request all the information that the IRD held on her, which should capture the opt-out form.

"She should be able to call IRD and say can you tell me when allegedly I requested a KiwiSaver opt-out. That is personal information."

He said she should also go to her employer and request the form that allegedly had her signature on it.

Renney said an employee had the choice about whether or not to opt out or opt in to Kiwisaver and the default position was auto-enrolment.

"So it has to be an active choice to leave. And if they have been misrepresented on that space that is a really troubling issue."

The woman's father-in-law said he could not find anywhere on the IRD website where a person could go online and stop the opt-out or suspension, which meant the only way to stop it was to call IRD, which often meant long wait times on the phone.

"To me there is something completely wrong - something wrong with IRD's system
that allows that to happen - I just can't believe it that an employer can do that.

"I would have thought the employee would have to log in and do it themselves."

He questioned how many other workers had been in a similar situation and were too afraid to confront their employer over it.

"First time into the job market - they are not going to rock the boat are they?"

Tom Hartmann, personal finance lead at Sorted. Photo / Supplied

Tom Hartmann, personal finance lead at Sorted, said he had not heard of any similar cases but anecdotally, the Retirement Commission had come across employers who have discouraged new employees from signing up.

"Given inflation and especially in a Covid environment where we have a shortage of staff, it is not surprising that employers would attempt to cut costs in any way possible in order to stay afloat."

He said it tended to be smaller businesses like builders that put pressure on workers not to join KiwiSaver.

Hartmann said its advice was for people to stick up for their rights and entitlements.

Figures from IRD show the number of individuals opting out of KiwiSaver has been steadily on the rise over the last year.

Between May 2021 and May 2022, the number of members who opted out of KiwiSaver increased from 228,600 to 242,100 - a 6 per cent increase.

Hartmann said it would be keeping an eye on the opt-out rate.

"KiwiSaver is an automatic system and we want that to keep working for people but it is their right to opt out when it is not working for them."