In this article we’ll show you how you can manage the KiwiSaver deductions and contributions for your employees as well as how employees can update this themselves.
An overview of KiwiSaver
We recommend you check out IRD’s guide on KiwiSaver for employers, available here.
KiwiSaver deductions are what the employee has taken out of their own pay, and KiwiSaver employer contributions are what you as the employer pays on top of the employee’s gross taxable income.
The minimum contribution rate for employers in New Zealand is 3%, and employees can choose to contribute at a specific rate. The available rates (set by IRD) are 3, 4, 6, 8 or 10%. Your employee must choose one of the available rates.
Employees tell you their chosen rate by completing a KiwiSaver deduction form, called a KS2. You can find the form here: KS2 KiwiSaver deduction form.
As an employer you can change your employee’s KiwiSaver deduction rate when they ask you to, or change the employer contribution rate if you have agreed a higher rate than 3%.
Employees can also update their own KiwiSaver rate in the PaySauce app, and we have included those instructions here.
Changing the Kiwisaver rate (for employers)
Before you start, ensure the employee’s current pay is in ‘data entry’. If the pay is already calculated, the change will not take effect until the next pay.
Changing KiwiSaver rate on your computer
Go to the ‘Employees’ section on the left hand side menu.
Select the ‘Settings’ tab, then choose the ‘KiwiSaver’ option from the menu in the middle of the screen.
Choose the correct rate in the appropriate field. Use the ‘Employee deduction’ option to change the rate that the employee pays.
Click ‘save’ in the right hand corner.
Changing KiwiSaver rate on your mobile
Tap on the ‘Employees’ icon.
Tap on the employee’s name on the list.
Scroll down until you see the KiwiSaver option and tap on it.
Tap on either the employee or employer deduction as needed to select a new rate.
Choose the new rate, then tap ‘select’.
Changing the KiwiSaver rate (for employees)
Employees are able to update their KiwiSaver deduction rate using the PaySauce app.
Tap on the ‘Account’ icon.
Tap on ‘Income & Payments’.
Tap on the KiwiSaver rate, then tap the rate again on the next screen to show the available rates.
Tap on the rate you want to apply, then tap ‘select’.
Salary Sacrifice
If you want KiwiSaver to be included within an hourly rate or salary, this is called a salary sacrifice. This means employee is paying for their employee deduction and the employer contribution out of their earnings: the base pay is adjusted accordingly to account for the employer KiwiSaver contribution.
To set this up, the employer contribution needs to be reduced from the salary or hourly rate as the KiwiSaver employer contribution is paid as a separate component on top of wages.
⚠️ Note that we do not deduct 3% of the value from the total rate - we need to find what the starting value would be that would result at your total rate when 3% is added to it.
Formula to calculate the salary or hourly rate
This formula can be used for calculating any sort of percentage including 8% holiday pay.
Please note that holiday pay needs to be calculated separately and shown as a separate component so must be removed from the rate or salary before you calculate the salary sacrifice.
The rebated hourly rate must be at least minimum wage.
Hourly rate example
Start with your total pay rate (including KiwiSaver) and divide the rate by 1.03.
For example, if $29 per hour is inclusive of the employer contribution:
$29 divided by 1.03 = $28.16 (Note that this figure is rounded up from $28.155)
Work it back to make sure you end up with the same result – $28.16 x 3% + = $29.00
Salaried example
$75,000 divided by 1.03 = $72,815.53 (round it up to .54)
$72,815.54 x 3% + = $75,000
What needs to be included in KiwiSaver calculations?
We're often asked if payments needs to be included in KiwiSaver calculations or not. The answer is usually yes, as only some specific payments are excluded from KiwiSaver.
We recommend you review the IRD guidance on this topic here: Gross Pay for KiwiSaver.
Payments included in KiwiSaver
For KiwiSaver schemes, gross pay is total salary or wages including:
bonuses
commission
extra salary
gratuities
overtime
any other remuneration of any kind before tax, for example taxable benefit allowances
Payments not included in KiwiSaver calculations
redundancy payments.
the value of providing board, lodging, use of a house or part of a house, or an allowance instead of accommodation.
expenditure or allowances for accommodation and living costs overseas.
free or discounted shares received under an employee share scheme.