Changes to KiwiSaver and student loan repayments come into effect on 1 April. Employers and employees alike should already have considered the likely impact of these changes and made the necessary arrangements.

Employers, if you haven't already, it's time to update payroll systems and review existing policies and employment agreements, as these may need to be updated in light of the changes. You should also be prepared to answer any questions that arise from employees regarding changes to their pay.

Employees should consider the impact of the increased rates on the pay they receive "in the hand." It may be necessary for employees to update their personal budgets or to consider taking a contributions holiday from KiwiSaver.

We summarise the key changes below.

Employer contributions

On 1 April 2013 the minimum rate for employer contributions to KiwiSaver will automatically increase from 2% to 3% of an employee's gross salary or wages.

For employers who pay employer contributions to KiwiSaver in addition to an employee's salary or wages (the default approach to KiwiSaver), this change will have the effect of increasing the cost to the employer for each employee who participates in KiwiSaver.

Employers who pay employer contributions to KiwiSaver as part of a "total remuneration" package will need to carefully consider the impact of this change. In particular, employers need to consider whether this change has the effect of increasing an employee's total remuneration package.

The effect of the upcoming change in employer contribution rate is to be assessed on an individual basis, as it depends on the terms and conditions of an employee's individual employment agreement in relation to an employee's total remuneration package. For example, if an employment agreement provides an employer flexibility to amend the rate of the employer contribution in accordance with changes to the KiwiSaver Act, the change to the contribution rate should not increase the employee's total remuneration. Rather, the employee's "in the hand" pay would be reduced as a result of the increase in the employer contribution.

Employers who are uncertain about whether this change impacts on their existing remuneration arrangements should seek specific advice regarding this issue.

Employee contributions

Simultaneously, the minimum rate for employee contributions to KiwiSaver will also automatically increase from 2% to 3% of an employee's gross salary or wages. Employees can still choose to contribute at the higher rate of 4% or 8%.

The consequence of this change is that employees who make contributions at the minimum rate will receive less "in the hand" with each pay as a result of the increase to their employee contribution. However, this change will not impact on the cost of the employee to the employer.

Student loans

The student loan repayment rate will also increase from 1 April. This rate will rise from 10% to 12% for each dollar earned over the IRD's student loan repayment threshold ($367 per week or $19,084 per year). This change will reduce the "in the hand" pay for those employees with student loans who are paid more than the repayment threshold. However, it will not increase the cost of each employee for employers.

More information about the changes effective from 1 April is available from the IRD website ( For completeness, we note that there will also be changes to arrangements relating to PAYE and employee contributions to KiwiSaver for employees who are under 18.

Employees with concerns about these changes should seek specific financial advice.