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Labour Using "Sledgehammer To Crack Nut"

18 July 2008

Labour Using "Sledgehammer To Crack Nut"
Press release

The Labour Minister Trevor Mallard has announced that the government intends to amend the Employment Relations Act to change what they view, is discriminatory treatment by a few employers against their employees who opt into KiwiSaver.

Specifically, the minister condemns cases reported to him of employers allegedly reducing the pay or pay increases of employees who elect to join KiwiSaver when compared to their fellow employees who do not join KiwiSaver.

Aventine Group, the provider of the SuperLife KiwiSaver scheme and also a leading superannuation advisor to employers, agrees with the Minister that these incidents are contrary to the spirit of KiwiSaver. Michael Chamberlain, a director of Aventine says, “We note that the practices the Minister alludes to which are behind his proposals are rear and not common or normal practice – they are a small minority and I have real concerns that the proposals announced by the Minister may lead to major complications and unintended consequences with managing employment relations and remuneration strategies. I believe the changes will penalise the good employers by the imposition of additional compliance and system costs.”

He says “The Minister can solve the problem he has identified very easily without creating turmoil with NZ business employment relations and remuneration strategies”.

To meet the Minister’s requirements, where there is no existing KiwiSaver allowance and/or a superannuation subsidy, then he should continue to allow employers to add a KiwiSaver allowance to current gross taxable pay for all employees either immediately or incrementally to match the employer KiwiSaver obligations. This means all employees receive a KiwiSaver and/or a superannuation subsidy allowance plus a possible pay increase which would be non KiwiSaver discriminatory per the remuneration strategies of the business.

The Minister must then just focus solely on the situations where an employer is reducing the current taxable salary/wage component of total fixed remuneration of a KiwiSaver member. He should focus his attention on just that component and not take home pay. His remedy is to simply require all employers to meet the test that no employee has their previous gross taxable salary/wage reduced as a consequence of an employer having to meet its obligation to pay KiwiSaver contributions.

The worst case scenario that Aventine considers possible from interpreting the wording of the Minister’s announcement and background material, is as follows:

• Employers become liable to pay the employees’ contributions to KiwiSaver. Significant extra costs
• Employees who join KiwiSaver get paid 4% more than their non KiwiSaver workmate. Discrimination in the workplace.
• Employers with existing superannuation arrangements may have to pay KiwiSaver on top of those existing subsidies. Extra costs
• Employers will have to spread the extra KiwiSaver costs across non KiwiSaver employees and so inherently penalise even further, those employees who chose not to or cannot afford to join KiwiSaver. Discrimination in the workplace.

Michael Chamberlain says “I am concerned that the Minister is using the proverbial sledgehammer to crack a nut, but in this case the collateral damage to the golden Kiwi that Dr Cullen has spawned may stop the bird in its tracks. Unless that is, 100% employer funded compulsion is the real objective”.


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