Select committee against bill to limit use of KiwiSaver as part of pay package

The majority of the Finance and Expenditure Committee doesn’t think a bill to make it harder for employers to include KiwiSaver contributions in employees' pay should be passed.

The Employment Relations (Protection of KiwiSaver Members) Amendment Bill introduced by Labour bank bencher Dr Tracey McLellan last year, aims to restore some financial protections originally given to KiwiSaver members by the Employment Relations Act 2000 and removed by the National government’s Employment Relations Amendment Act 2008.

Currently employers aren’t legally required to offer the same terms, salary or wages, conditions and or benefits to KiwiSaver members as non-members. Employers can also offset pay increases against workers’ KiwiSaver contributions and include KiwiSaver contributions as part of an employee’s total remuneration.

The Protection of KiwiSaver Member bill doesn’t seek to prohibit parties from agreeing to a total remuneration approach, but it would limit the situations in which it would be possible to use that approach.

At its first reading in parliament, the bill enjoyed wide support on both sides of the house with 109 “ayes” and 10 “noes” from the Act party.

However after select committee hearings,  the Finance and Expenditure Committee has reported back saying most of its members don’t think the bill should be passed.

"The Finance and Expenditure Committee has examined the Employment Relations (Protection for Kiwisaver Members) Amendment Bill. We have recommended changes to the bill to improve its workability. We recommend these amendments unanimously. However, the majority of the committee ultimately do not agree that the bill should be passed."

The report also notes that the National, Act and New Zealand First parties disagree with the bill.

“The National Party does not support the passage of the Employment Relations (Protection of Kiwisaver Members) Amendment Bill. While we support saving for retirement and the KiwiSaver scheme, the bill introduces uncertainty for employers by adding new grounds for personal grievances, potentially complicating existing employment relationships. We do not believe that imposing additional hurdles for businesses under the Employ‐ ment Relations Act benefits either employees or employers.”

Likewise NZ First and Act cited imposing additional hurdles for employers as the main reason.

Retirement Commissioner Jane Wrightson describes the report as Orwellian, in a LinkedIn post.

The Retirement Commission was one of 14 parties to make submissions on the bill.

It supported the bill saying that the total remuneration approach goes against the spirit of KiwiSaver, which incentivises employees to save small amounts over a longer term with employer support, and ultimately see them into a better retirement.

Removing total remuneration approaches was also one of the key recommendations in the Retirement Commission’s recent Opportunities to Improve KiwiSaver report. It was also a recommendation in 2019.

It’s not the first time the Commission has expressed concerns about the approach. Last year it surveyed more than 300 small, medium, and large organisations about the use of a total remuneration approach to KiwiSaver and found that 45% use the model for at least some employees. 

The findings showed that 25% of employers include employer KiwiSaver contributions as part of total remuneration. A further 20% adopt both approaches, paying some employees earnings plus KiwiSaver, and paying others earnings inclusive of KiwiSaver.

At the time Wrightston said it was not how KiwiSaver was designed to operate as the KiwiSaver Act clearly states that compulsory contributions must be paid on top of gross salary or wages except to the extent that parties otherwise agreed.

“However, it is not legislatively prohibited so long as the outcome is the result of good faith bargaining,” she said.

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