Salary Sacrifice / Total Remuneration for KiwiSaver

The standard approach to KiwiSaver is to pay employer contributions in addition to the employee’s gross salary or wages. This means that if two employees are paid the same amount and only one is a member of KiwiSaver, the KiwiSaver member is essentially paid 3% more, with the extra amount going into their KiwiSaver fund.

A Total Remuneration approach allows an employer to set a fixed remuneration amount for an employee. If the employee is in KiwiSaver, the cost of the employer's contribution comes out of the employee’s pay via salary sacrifice. This results in the two employees described above receiving the same total amounts overall.

How do I set this up in PayHero?

To put an employee on a Salary Sacrifice/Total Remuneration, first go to People > Employees and select the relevant employee's name. From the employee's Default Pay tab, add the Salary Sacrifice Pay Item to the 'Earnings' section, and click save.

The KiwiSaver Employer Contribution line will still be added to the employee's pays, as the employer is still obliged to contribute to KiwiSaver. However, the Salary Sacrifice will also be deducted to balance this out. When processing a pay for the employee, you'll see that the Salary Sacrifice and Employer Contribution pay items have the same total.

What happens with Holiday Pay? 

Holiday Pay will be calculated on the gross salary amount, before the Employer Contribution is deducted.

What if the employee is on a Savings Suspension?

If the employee is on a KiwiSaver Savings Suspension, you'll need to remove the Salary Sacrifice pay item from their Default Pay tab. Add it back in when their contributions resume. 

What if the employee is on (or close to) Minimum Wage?

If the employee is paid at the minimum wage, Salary Sacrifice should not be used. This should only ever be used if the employee will still be paid at least the minimum wage, after the Salary Sacrifice deduction is applied.

Can I use Salary Sacrifice for contribution rates other than 3%?

This pay item always deducts 3% of earnings for the employer KiwiSaver contribution rate, so is not compatible with other employer contribution rates by default.

If only some of your employees receive a different contribution rate, it's best to reduce the salary you enter to exclude their KiwiSaver amount, and don't use the Salary Sacrifice pay item for these employees. 

If all of your employees have a different contribution rate (for example, your company contributes 4% for all employees), you can contact us at support@payhero.co.nz and we can update the pay item to deduct your preferred contribution rate instead.