12 April 2008 Media Statement

Good faith bargaining and KiwiSaver

Labour Minister Trevor Mallard said today that he was very unhappy with reports that some employers are attempting to pay those in KiwiSaver less than the people working alongside them who are not in the scheme. This is supposedly based on the costs of their employer KiwiSaver contributions despite government tax credits designed to compensate for this.

"The vast majority of good employers have embraced the KiwiSaver scheme and, in some cases, provided enhanced entitlements to their employees," Trevor Mallard said.

"A company like Progressive Enterprises has looked at the scheme, and thought about how they can best ensure that their employees can access it, adopting a ‘2 + 2’ transitional arrangement to enable employees to start making a 2 per cent contribution in the first year, with Progressives topping it up to 4 per cent. I encourage all employers to have a look at what they can do also. This is an excellent example of how to do the right thing by your workers.

"But in a few cases it appears employers are in essence offering their employees, who have joined KiwiSaver, pay increases 1 per cent less than those employees who decide not to join KiwiSaver, allegedly in order to cover the employer contribution.

"This blatantly ignores the fact that the government provides tax breaks to employers that for the vast majority of employees would already cover the cost of the 1 per cent employer contribution.

"Employers are getting a tax credit of $20 a week which will full compensate for the 1 percent employer contribution for employees who are on a salary of up to $104,000 per annum. Therefore any suggestion that employees also have to cover this employer contribution through their remuneration is unethical.

"The government considered this issue very carefully at the time KiwiSaver was being developed and we decided that the fairest approach would be to leave the issue to normal good faith bargaining between employers, unions and employees under the Employment Relations Act.

"However, if employers continue the immoral practice of pocketing government money at their employees’ expense we will have to reconsider whether special rules will need to be put in place to ensure that an employee is not disadvantaged.

"I have also asked the Department of Labour to look into whether these sorts of actions could amount to a breach of good faith under the Employment Relations Act, which carry fines of up to $10,000," Trevor Mallard said.

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