KEY POINTS:
The onset of compulsory employer contributions to KiwiSaver could 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, tax principal Jo Doolan of accounting firm Ernst & Young said.
For employees who are members of KiwiSaver, any redundancy payments would be subject to KiwiSaver contributions both by the employee and, from next April, 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 April 1, 2008, to avoid this additional cost," Doolan said.
"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 per cent disappear out of their redundancy payment by way of a KiwiSaver employee contribution could be an unwelcome surprise at an already stressful time."
Doolan said it appeared to be an issue that hadn't been fully considered in the rush to get the revised KiwiSaver package in place.
- NZPA
