Recently, MP Dr Tracey McLellan’s Employment Relations (Protection for KiwiSaver Members) Amendment Bill (Bill) was introduced to Parliament. The Bill intends to significantly alter KiwiSaver contribution compliance requirements by introducing a new ground for raising a personal grievance to the Employment Relations Act 2000 (Act).
The new personal grievance
If passed, the Bill would introduce grounds for raising a personal grievance where an employee’s employment has been adversely affected as a result of their membership with a KiwiSaver or complying superannuation fund.
The test for whether employment is adversely affected would be satisfied if:
- the employee is a member of a KiwiSaver scheme or a complying superannuation fund; and
- the employee’s employer refuses or omits to offer or afford to that employee the same terms of employment, conditions of work, fringe benefits, or opportunities for training, promotion, and transfer as are made available for other employees of the same or substantially similar qualifications, experience, or skills (comparable employees) employed in the same or substantially similar circumstances; and
- the reason (wholly or in part) for the employer doing any of those things is that the employee is a member of a KiwiSaver scheme or a complying superannuation fund.
An employee’s employment will also be adversely affected if:
- the employee’s salary or wages are less than the salary or wages of other comparable employees employed by the employee’s employer; and
- the reason (wholly or in part) for the situation described in paragraph (a) is that the employer has taken into account the compulsory contributions the employer is required to make in relation to the employee.
The Bill also proposes repealing section 101B of the KiwiSaver Act 2006, which entitles employers and employees to agree that an employer’s compulsory contributions do not need to be in addition to ordinary pay.
So, what does mean in practice?
In practice, this means would mean that employers would be unable to adopt a “salary sacrifice” or “total remuneration model” (TRM) for their compulsory employer contributions.
Under TRMs, parties can agree that if an employee is a KiwiSaver member, then an employer’s compulsory contributions to an employee’s KiwiSaver are accounted for in the total remuneration that employee receives. Effectively, an employee pays for an employer’s compulsory KiwiSaver contributions out of their remuneration.
TRMs are fairly popular, with a recent study by the Retirement Commission finding that almost half of employers use a TRM for at least some employees. However, TRMs have been criticised for disincentivising employee contributions, undermining the intentions behind KiwiSaver and lacking transparency where employees have not meaningfully agreed to their use.
By removing the legal basis for TRMs, employers would be required to make KiwiSaver contributions in addition to ordinary pay. Failing this, where a non-KiwiSaver member receiving the same gross remuneration is not affected this way and receives more money in hand, the Bill proposes that the KiwiSaver member could argue that they have been adversely affected and could raise a personal grievance.
These changes are not novel. Rather, the Bill seeks to restore earlier protections that were repealed in December 2008.
The Bill is still awaiting its first reading; if it is passed, it will progress to a Select Committee for consideration and public submissions. We expect it will be hotly debated.
For employees, it will be favoured as it would require employer contributions to be in addition to an employee’s remuneration. However, for the significant number of employers offsetting compulsory contributions to employee KiwiSaver funds through total remuneration packages, the Bill would result in increased costs.
We also note the Bill’s passing is highly contingent on the upcoming election as the two major parties have held historically conflicting positions on TRMs, with Labour prohibiting them and National amending legislation in 2008 to allow their use. Because of this, we consider it likely the Bill will be on the chopping block should a National led government be voted in.
We will keep you updated as the Bill progresses.