KiwiSaver: employers to consider redundancies?

31 May 2007

Will KiwiSaver force employers to consider redundancies before the turbo version kicks in?

“Employers who struggle to pay KiwiSaver contributions may face a double whammy paying out extra on redundancy payments if they try to downsize,” say Ernst & Young KiwiSaver spokespeople Jo Doolan and Aaron Quintal.

“For employees who are members of KiwiSaver, any redundancy payments will be subject to KiwiSaver contributions both by the employee and, from 1 April 2008, the employer”

“For employers who are already thinking they may have to lay people off, but are still hoping to trade through their difficulties, this aspect of KiwiSaver may encourage them to rush through any redundancies prior to 1 April 2008 to avoid this additional cost”

“The outcome is equally unfair on employees. The purpose of a redundancy payment is to tie the worker over until they find a new job. Having 4% disappear out of their redundancy payment by way of a KiwiSaver employee contribution could be an unwelcome surprise at an already stressful time”

“This appears to be an issue that hasn’t been fully considered in the rush to get the revised KiwiSaver package in place. We would hope the Government and their officials could turn their attention to this problem sooner rather than later.

“As with anything new the complexities and wrinkles emerge over time but this is certainly not a case where employers should be sitting back and doing nothing.

ENDS

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