The Government's tinkering with KiwiSaver could reduce workers' pay rises, as employers say they will bear the changes in mind when conducting salary reviews.

The executive director of Hitech Solutions in Takapuna, Mark Christensen, said the company would have to keep higher employer contributions in mind when reviewing salaries.

The changes would affect the company's ability to give wage increases, he said.

About a third of Hitech Solutions' 30 staff belonged to KiwiSaver, and the additional 1 per cent would put some pressure on the firm.

John Hayson, sales director at Tomahawk, a North Shore software development firm, said the Kiwi-
Saver changes would have to be factored in when salary reviews were conducted.

"It's just another cost and obviously as people's gross incomes grow then that 3 per cent becomes a bigger and bigger number," he said.

Mangere Budgeting Services chief executive Darryl Evans said the charitable trust would have to pay an additional $3750 a year to its employees' KiwiSaver funds.

But he said he would be disappointed to see companies using the increase in contributions to reduce salary increases, or not give pay rises at all.

"If you're looking after your workers, then hopefully the result is better productivity," Mr Evans said.

Employers and Manufacturers Association chief executive Alasdair Thompson said increasing the KiwiSaver contributions was a much better option for reducing New Zealand's budget deficit than raising taxes.

"It's not as if those paying more into their KiwiSaver accounts will lose anything - they're simply being asked to put more aside for later on," he said.

Deloitte tax partner Greg Haddon said the tax on employer contributions over 2 per cent would increase compliance costs for businesses as firms would have to alter payroll systems to deal with the change.

Mr Christensen, of Hitech Solutions, said the removal of the tax exemption was "disappointing".