KEY POINTS:
Work Super schemes with company contributions look set to be a future battleground for employers seeking to retain and attract staff once KiwiSaver launches on July 1.
Not all companies will elect to make a contribution to the voluntary work-based retirement savings scheme, but this may be unwise
in the competitive labour market, say some in the business sector.
"We are certainly working through the process, and it is more than likely that we'll be making an employer contribution," says Hugh Burrett, ASB managing director and a strong advocate of company contributions. "In time, company contributions to a work superannuation scheme would be a key retention tool."
All "good employers" are going to have to think about doing it. It is a cost that cannot be passed on but must come out of the pocket of the company and its shareholders, Burrett adds, and businesses have to look at it from a social perspective. He predicts up to 30 per cent of employees will take up KiwiSaver.
For New Zealand employees, a company contribution to their retirement scheme will be the best company perk they have ever had. Accumulated over three or four decades, it will add hundreds of thousands of dollars to their final pension fund.
Acumen financial adviser Lisa Dudson says someone on a salary of $40,000 will emerge after 30 years with a pension of $111,745, if they put 4 per cent of their earnings away every month and earned a 5 per cent return.
If their employer matched their contribution, the fund would double to $223,490. "If you are getting a [matched] contribution from your company, you are getting a 100 per cent return before you start," says Simon Hardie, founder of personal finance site www.theshapeofmoney.co.nz
Company contributions to a work superannuation scheme would be well received, particularly by ex-pats, who have been used to having these as part of their package in jobs overseas, says Peter Harbidge, general manager of recruitment consultancy Hudson. "If you are looking to recruit from these markets, you are going to have to be playing a strong hand with KiwiSaver.
"It will be an extra bargaining point, there is no doubt about that. If you are an employer, it is a good option for increasing base salary or increasing compensation. Our suggestion is that employers look upon this as a positive opportunity to add retention."
And in an innovative departure from overseas, the KiwiSaver superannuation fund will be portable, so people won't be tied to companies because of their pension schemes or have to leave them behind when they go to another job.
The country's big unions have already swung into action on KiwiSaver. Andrew Little, national secretary of the Engineering Printing and Manufacturing Union, says employer contributions to KiwiSaver would be a standard claim in collective bargaining. Little says the response from employers "had been pretty muted, so far", but when he talks to them one on one, they agree that KiwiSaver is a good thing. As for making contributions to their staff's funds, a lot of employers expect that in five years this will be compulsory, says Little. Employees who do not have a union should talk to their companies about the situation.
Vance Arkinstall, chief executive of the Investment Savings & Insurance Association(ISA), says employees should have an unthreatening conversation with their companies to see if they intended to contribute to employees' KiwiSaver schemes. "Many employers will respond quite well to that. It is in their interest to make sure their employees are happy. They may be looking for that little bit extra they can offer. Don't rush off and look for a new job. Talk to the employer first," he said.
The New Zealand Institute chief executive David Skilling, a strong advocate of KiwiSaver predicts that company contributions to KiwiSaver schemes will become "one of a range of things that some employers will use as a bargaining chip".
Many small and medium companies with fewer resources for preparing for KiwiSaver are still waiting to get more detailed information about the scheme before they decide what they will do.
What will make small employees get on board are the tax changes, says Michael Littlewood, co-director of the Retirement Policy and Research Centre. "You can contribute better, put money into employees' accounts without paying withholding tax. It's a successful way of giving a pay increase. And it's more tax efficient."
Meanwhile, many smaller companies are still in the dark about KiwiSaver and how they can make it work for them.
"I don't think it [KiwiSaver] has come up on their radar yet," said Sarah Trotman, small business sector specialist. She says that KiwiSaver administrators would be talking at the Small Business Expos this year.
The lack of information and allocation of resources will put small companies at a a disadvantage when hiring and trying to to keep staff, recruitment companies warn.
"Big companies are going to get their heads around this more quickly. If companies don't get their heads around it, their retention strategy could be exposed," says Harbidge.
Business New Zealand chief executive Phil O'Reilly says larger companies already have project teams working on how to make KiwiSaver part of their value-added proposition as an employer.
"Small companies will at best have received a pamphlet. The real danger I see is the potential for employers to be scared and frightened of KiwiSaver. What we advised the Government was that if you turn it into a compliance issue with employers, they will do it grudgingly and will [possibly] badmouth it to employees."
Fletcher Building, one of the most pro-active companies on KiwiSaver, has a dedicated project team working on introducing the idea of KiwiSaver to its 16,000 staff.
It is one of the few companies so far that has pledged to contribute to the scheme on behalf of its employees.
Peter Merry, executive general manager for human resources, said the company will give 2 per cent top-up contributions to its 16,000 workers for those earning $85,700 or less. If they earn more than that, the company will give them $1750 a year, the equivalent of 2 per cent of $87,500.
"This is for every employee who has been with the business for more than a year and who is actively contributing to the scheme," he says.
If workers take a "holiday" from KiwiSaver, Fletcher Building's contributions will go on hold as well, says Merry.
Fletcher Building is also working on putting together a particularly tax efficient package for its workers and the company that should bring some added benefits, says Merry.
Once the Inland Revenue has launched its big KiwiSaver media campaign at the beginning of June, the large construction company will launch its own campaign internally, he said.
"We are throwing our weight behind this because it is socially responsible, and we think our people understand that."
