Employers 'ambushed' over KiwiSaver

Last updated 00:00 15/08/2007

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A business lobby group say employers were "ambushed" by changes to the KiwiSaver scheme which will create industrial unrest for years to come.

Business New Zealand Chief Executive Phil O'Reilly told a select committee considering legislation on the workplace saving scheme that the budget day announcement on compulsory employer contributions was completely unexpected.

"It was the worst political ambush seen in 20 years," Mr O'Reilly said.

Employers had been willing to support a work-placed saving scheme if it had been "compliance light" and based on "no-surprise" consultation.

This had changed on budget day when employers were lumbered with the compulsory contributions and the risk of administering the scheme.

"Clearly, ambush trumps consensus."

Finance Minister Michael Cullen had called for consensus around retirement issues, but this clearly did not include employers.

In the budget, Dr Cullen announced employers would have to pay into employees' KiwiSaver accounts a contribution of 1 per cent of their gross salary, rising to 4 per cent over 4 years.

Mr O'Reilly argued that this would create industrial unrest in the workplace.

Employers would have to negotiate different wage rises for different employees based on whether they were in the scheme or not.

Mr O'Reilly said this would cause tension in the workplace, especially if some one negotiated a pay rise on the basis they were not in KiwiSaver and then afterwards joined up.

This would mean that person had gained a larger wage rise than their colleague.

The bill should be amended so that any required employer contribution should be recognised as part a total employment package whether or not the employee joined KiwiSaver

Mr O'Reilly acknowledged the Government would be partly subsidising the employer contribution, but said this would have to be inflation indexed to maintain its usefulness.

The committee also heard today from other employer groups and unions.

Alasdair Thompson, chief executive of the Employers and Manufacturers Association (EMA), said the idea of KiwiSaver was a good one, but it had been poorly executed and implemented.

He said the EMA was not opposed to compulsory contributions provided that was part of an employee's total remuneration.

A good way of getting KiwiSaver introduced would have been to "reduce taxation and made that the contribution for the employer into KiwiSaver."

However, he said that despite the EMA's concerns over the way KiwiSaver was being implemented, the EMA had been running seminars to help make KiwiSaver a success.

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Among changes the EMA wanted were:

For the legislation to be amended to make it clear compulsory employer contributions would not have to be paid until any collective agreements had expired;

For employees over 65 years to be able to join KiwiSaver while those aged 16-17 should be able to get the tax credits.

The EMA also raised concerns of possible court cases if an employer discussed with an employee whether they should join KiwiSaver and the KiwiSaver provider the employee joined later went under.

It said the legislation needed to be amended so such discussions were in "good faith".

The EMA represents 7500 member organisations in the upper half of the North Island which employed 300,000 people.

In its submission, the Council of Trade Union – which represents 39 affiliated unions with a membership of more than 350,000 workers – argued to lower the entry point for KiwiSaver contributions to 2 per cent of a worker's gross salary rather than the minimum 4 per cent at present.

"Union officials are reporting that there is quite a lot of resistance among low income workers to join at a minimum of 4 per cent of gross salary," the CTU said.

In other points, it said:

Employer contributions should not be less than $20 a week given that an employer tax credit was available;

Contributions to KiwiSaver should be over and above wages and salary. Some employers were trying to persuade workers to accept a "salary sacrifice," it said;

It was discriminatory to exclude those aged 16-17 from automatic enrolment and from getting a tax credit;

Employer contributions should continue when a worker took a contributions holiday.

- NZPA