KEY POINTS:
Employers will no longer be allowed to pay less to KiwiSaver employees than to those not in the scheme, under a move to be announced today by Labour Minister Trevor Mallard.
"There is no way that it is fair for one employee to be paid less each week in their take-home pay than an employee doing the same tasks, simply because they choose to be in KiwiSaver and the other employee doesn't," Mr Mallard told the Weekend Herald.
Since April 1, when employers started contributing 1 per cent of pay to employees' KiwiSaver accounts, some employers have given smaller pay rises to KiwiSaver members.
They say this is to cover the costs of employer contributions - even though the Government in most cases fully reimburses those contributions.
To stop this, the Government plans to amend the Employment Relations Act "to make it unlawful to offer lesser terms and conditions to a KiwiSaver employee on the basis of their KiwiSaver membership. Such action would give rise to a personal grievance," said Mr Mallard.
The law change will take effect from the date the amendments are introduced into Parliament, probably in late July or early August.
The change won't affect employment agreements entered into before that date. KiwiSaver employees already working under contracts that give them lower pay than their non-KiwiSaver workmates will have to wait until their contracts expire to benefit from the change.
This is because "total remuneration" packages - under which employees can be given a pay rise as either cash or a KiwiSaver contribution - are currently legal. The KiwiSaver Act permits such arrangements if the employer and employee agreed to them after December 13, 2007. But Mr Mallard's proposed amendments will no longer allow that.
Some experts have said that total remuneration is fair. However, Mr Mallard said the Government didn't expect to see differences in take-home pay.
"We originally left this issue to employer and employees to agree to in their employment agreement negotiations, on the understanding that employers would take the extra costs into account across the entirety of their workforce."
Those extra costs have been little more than administrative expenses for most employers so far.
The Government reimburses employer KiwiSaver contributions up to $20 a week per employee. Until April 2009, that means employers get back all their contributions to employees earning less than $104,300 a year, as well as partial reimbursement for employees earning more.
That will change as compulsory employer contributions gradually rise to 4 per cent from April 2011. By then, the reimbursement will fully cover contributions only to employees making $26,075 or less.
In the meantime, some employers are ignoring the reimbursement when paying employees. In some "particularly bad cases", said Mr Mallard, "the employee gets a 1 per cent pay cut, which the employer uses to pay their compulsory contribution, while pocketing the $20 per week tax credit the Government provides them".
