Consumer NZ calls for end to KiwiSaver loophole in contracts

By RNZ's Checkpoint

A KiwiSaver loophole means thousands of dollars are being shaved off some people's take-home pay.

Consumer NZ says it is simply not fair. Employers can include what's called a "total remuneration" clause in an employment agreement, which means they can legally deduct their KiwiSaver contributions from a worker's pay instead of those payments being an added extra.

Consumer NZ boss Jon Duffy said it was hard to tell how many of the contracts were in existence. 

The most up to date figures go back to 2015 when the Employers and Manufacturers Association found that 28 percent of senior managers and 20 percent of other staff were affected by a "total remuneration" clause.

For those using them it meant they were being paid less than the headline figure of their salary because an employer was "syphoning out" the contribution they should be making to the employee's KiwiSaver account out of the total salary. 

The practice is not illegal - in 2008 the then-National government changed a clause in the KiwiSaver Act that meant employers and employees could agree to the practice. 

However, Duffy believes many employees will not realise what is happening until they receive their first pay packet.

Asked if senior managers should be aware when negotiating their pay deals, he said: "I would hope that it is part of a negotiation and the employers are acting in good faith and being upfront about these clauses.

"For some cases that might be what's happened. In some cases we're a bit concerned ... people won't understand exactly what's meant." 

Duffy understands that the Ministry of Business Innovation and Employment is looking into the issue but he would like to see a return to the pre-2008 situation. 

"The loophole was closed and employers need to pay you your base salary that you agree and then add the 3 percent [employer's contribution to KiwiSaver] on top of that."

He advised workers to check their contracts and if they saw the "total remuneration" clause they should discuss it with their boss. A clear answer must be provided or an employer could be in breach of the Employment Relations Act, he said.