Personal finance and KiwiSaver columnist at the NZ Herald

Kiwisaver: Good news and bad if boss doesn't pay

IRD will chase up missing paperwork and contributions but an employer's payments are not guaranteed

Workers can be left out of pocket if an employer does not honour its KiwiSaver obligations. Photo / Getty Images
Workers can be left out of pocket if an employer does not honour its KiwiSaver obligations. Photo / Getty Images

Q: I have just found out that my employer has not been paying my KiwiSaver contributions or employer contributions.

This amounts to about $2,000, yet the money (a 4 per cent contribution in my case) has been deducted from my weekly wages, and employer contribution amounts have been shown in my payslips.

I found out my employer owes money to the IRD so I presume this is why they haven't been paid.

I contacted the IRD which has opened an investigation, but to complicate matters I have resigned and finish within a week.

The IRD says it will take 15 working days to formulate a response.

Legally what can I do and what options do I have to get this money paid?

I would really appreciate your help because I can't speak to the person conducting the investigation as you can only speak to the call centre staff at the IRD who can't provide detailed information.

As you can imagine I feel completely cheated by my employers and I am concerned I'll never see my money.

A: What a rotten situation to be in.

Under normal circumstances your KiwiSaver contributions are taken out each payday and forwarded to the Inland Revenue, usually by the 20th of the month.

Your employer will also be sending through a report to the Inland Revenue summing up its payroll for the month.

Once this has been checked by the Inland Revenue, the money will hit your KiwiSaver provider account.

The whole process may take a month or two but while it is with the Inland Revenue it will earn 1.57 per cent interest.

The Inland Revenue has an online option - My KiwiSaver - that allows you to keep track of contributions, update your contact details, apply for contributions holidays and email through queries about KiwiSaver.

Check out the website for more information.

My KiwiSaver will not give your overall account balance or investment earnings, which are the responsibility of your selected KiwiSaver provider, the firm you have chosen to manage and invest your retirement savings.

So what do you do when you discover your employer isn't playing its part?

Get in touch with the IRD as soon as possible and it will begin an investigation on your behalf.

The IRD will chase up any missing paperwork and endeavour to recover any unpaid contributions.

This will occur regardless of whether you are still employed with the business or not.

The good news is that the employee contributions are government guaranteed so any money deducted from your pay will be paid to your KiwiSaver provider.

Chapman Tripp senior associate Emma Harding explains further:

"The KiwiSaver Act contemplates a situation where money has been deducted from an employee's weekly wages but not remitted to Inland Revenue.

"The amount of the deduction is treated, for the purposes of the KiwiSaver Act, as having been received by Inland Revenue on the 15th day of the month in which the deduction is made.

"In other words, the employee is not penalised.

"As long as Inland Revenue is satisfied that a deduction has been made by the employer, Inland Revenue will forward the amount on to the employee's KiwiSaver scheme provider and then will seek to be reimbursed by the employer (as they would seek payment of unpaid PAYE)."

Now the bad news.

These investigations can take time, particularly if it involves a wider issue of unpaid taxes. This could also be complicated by a business going into some form of administration, such as liquidation or receivership.

Unlike your KiwiSaver contribution, the 3 per cent contribution an employer must make to your KiwiSaver fund is not government guaranteed so if the Inland Revenue is not able to recover those unpaid funds you will not be compensated for your loss.

"Under the KiwiSaver Act, Inland Revenue can forward on to scheme providers only the amount of the employer contributions Inland Revenue actually receives from an employer," says Harding.

"So, if an employer does not pay its KiwiSaver employer contributions to Inland Revenue, it can expect to receive a notice from Inland Revenue that a payment has not been received and then Inland Revenue will seek to recover the amount (as it would for short payment of PAYE).

"However, until Inland Revenue receives the amount for employer contributions it cannot transfer that money to a member's scheme provider.

"There are also special rules in the KiwiSaver Act where some (as opposed to no) payment has been received from an employer and how to determine whether it relates to KiwiSaver employer contributions or is in respect of PAYE or student loan/child support payments or another amount that is payable by an employer to Inland Revenue."

Hopefully, with the help of the IRD, you will see the recovery of the contributions you have made to KiwiSaver and potentially the contributions your employer was meant to chip in.

Best wishes for your new job.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision. To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose,

- NZ Herald

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Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose is a freelance business journalist who writes regularly about KiwiSaver and entrepreneurial companies. She has written for the Business Herald since 2006, covering the telecommunications sector, but has more recently focused on personal finance and profiling successful businesses.

Read more by Helen Twose

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