Q I am a self-employed dressmaker. There are times when I am really busy but I don't want to employ anyone to help me as I can't afford to contribute to their KiwiSaver scheme or work through all the red tape. What are my obligations as an employer?
A. Inland Revenue has helpful information for employers which sets out your obligations. Look for "KiwiSaver for Employers" on the IRD website.
If you employ someone who meets the criteria for automatic enrolment, you must enrol them in KiwiSaver. You should give them a KiwiSaver Employee Information Pack, available from Inland Revenue, so that they can fill out the KS2 form. You cannot give them financial advice but you can refer them to the Sorted website or encourage them to talk to an authorised financial adviser. If your new employee wants to opt out of KiwiSaver, they will need to fill out the KS10 "Opt Out Request" form.
In some situations, you may not be required to enrol your new employee in KiwiSaver. The main exemptions are those under 18 or over 65, people who are not permanent residents or citizens of New Zealand, or temporary workers.
Those under 18 are able to join KiwiSaver directly through a provider and can then ask that you deduct a proportion of their wages. However, you are not required to make the 2 per cent employer contribution until they have turned 18.
If you decide to employ someone on a temporary basis to help you just at your busiest times, then they may be classed as a "temporary worker". These are people who are employed to work "as and when required" for less than 28 days at a time.
However, if you employ a person on a temporary basis who is already a KiwiSaver member then they are entitled to ask that you make deductions from their pay.
In this situation, you are also required to pay the 2 per cent compulsory employer contribution on their behalf. If you are employing someone for say $18 an hour you will be paying .36c on top of that towards their KiwiSaver.
Currently this 2 per cent employer contribution is not taxed, but from April 1 it will be taxed. Then from April 1, 2013. the employer contribution will increase to 3 per cent (or .54c on $18 an hour) and employees likewise will be required to contribute a minimum of 3 per cent rather than 2 per cent.
By now you will have realised that you need to ask prospective employees various questions about their KiwiSaver status. Since July 1, 2011, every employee must have a written agreement, so you will be able to include KiwiSaver information in the agreement you reach with any new employee. You can build your own employment agreement with the help of the Department of Labour's website at www.dol.govt.nz.
It sounds like your business is doing well so the extra cost of the KiwiSaver contributions should not be a problem for you. The greater cost to you may be the time you spend working through the red tape. Talk to your accountant - they can advise you on setting up as an employer and help your business grow.
Shelley Hanna is an authorised financial adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.