Q Some of us at work have just realised that our employer contribution is being deducted from our gross pay. Checking our employment contract, it talks of "total remuneration". Unfortunately I did not realise what this meant when I signed it. Taking this into account, it appears that our hourly rate is $19.40 — 3 per cent less than we thought. Can you please advise if this is legal for an employer to do or should the employer contribution be paid for by the employer rather than the employee?


As it is in your contract, your employer can take their contribution out of your wages. This is called "total remuneration". The exception is if someone is on the minimum hourly wage of $18.90. Employers cannot lawfully include a "total remuneration" clause in an employment agreement if the worker is on the minimum wage, since this would effectively mean they are being paid less than the minimum wage — a breach of the Minimum Wage Act. At $19.40 you are 50c over the minimum wage so yes it is legal.

But is it fair? Some employers argue that this approach is fairer on those who are not in KiwiSaver, otherwise those in KiwiSaver get an extra 3 per cent employer contribution. Others say it goes against the spirit of KiwiSaver, which rewards people for saving. In 2016 the Commission for Financial Capability said in its KiwiSaver recommendations that total remuneration is a disincentive to be in KiwiSaver. "The intent of KiwiSaver legislation is that compulsory employer contributions are paid on top of gross salary or wages," it said.


In 2015 a survey by the Employers and Manufacturers Association found 28 per cent of senior managers and 20 per cent of other staff were affected by total remuneration.

I asked Emma Dale, senior associate with law firm Chapman Tripp, for her opinion. She said: "Section 101B(4) of the KiwiSaver Act allows an employer to agree with a staff member that the staff member will make both the employee and employer contributions from the staff member's salary. Such arrangements are known as total remuneration arrangements. Any such arrangements must be undertaken in good faith and the agreement must account for the employer contributions in the employee's pay. Total remuneration arrangements can be used to treat employees doing the same job equally — ie. such arrangements mean that employees joining KiwiSaver do not get remunerated in total at a higher level than those who choose not to join KiwiSaver. The rationale behind it is that employees can choose how their remuneration is spent."

You may feel that your employment agreement was not negotiated in good faith, as it wasn't until you checked your wage slip that you realised what was happening. Employment contracts are not always easy to understand, and it is worth getting a second opinion before you sign. However, the balance of power often sits with the employer and it may be difficult for a new employee to negotiate.

One small upside is that if you were to go on a "KiwiSaver suspension" then you would get that 3 per cent in your hand, and this could be helpful if money were tight. You could then contribute just enough yourself to KiwiSaver to get the Government top up. But this option is not going to help you reach your long-term financial goals.

Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling (06) 870 3838 or go to peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz