Anti-Money Laundering (AML) & Countering Financial Terrorism (CFT) – Update
From April 2013, both employees and employers will be paying more into KiwiSaver with the minimum employee contribution increasing from 2% to 3%. Likewise, from 1 April 2013 compulsory employer contributions also rise from 2% to 3%.
This change will bring New Zealand’s flagship superannuation scheme closer into line with typical international retirement saving schemes which rely primarily on contributions from employers and employees, rather than on government support. However, even at a 6% total contribution rate, it is still well below the likes of Australia where the current rate of 9% is set to progressively increase to 12% over the next few years.
For employers, the increase in the minimum compulsory contribution is likely to place further pressure on what for many are already stretched wage budgets given that the standard approach is to pay employer contributions in addition to the employee’s gross salary or wages. What we might see is employers factoring in this cost when negotiating any wage or salary increases.
One option for employers to potentially reduce or limit their wage costs is a total remuneration approach. This is where an employer sets a fixed amount to be paid to the employee as remuneration and then takes the cost of paying any employer KiwiSaver contributions out of the employee’s pay, giving certainty around wage costs and also removing any perceived bias between KiwiSaver versus non-KiwiSaver employees.
However, any move to total remuneration would first require overcoming one major hurdle in that existing employees would have to agree to amend their employment agreement to allow for a total remuneration approach to KiwiSaver. And for those employees already in KiwiSaver, it is unlikely they would want to in the absence of another incentive to do so.
As an employer, if you are unsure how the latest changes or KiwiSaver in general impacts your business, any proactive advisor or chartered accountant will be able to discuss this with you.