KiwiSaver Employer Contributions Went Up on 1 April 2026. Here Is What to Check.

On 1 April 2026, three things changed for employers on the same day. The default employer KiwiSaver contribution went from 3 per cent to 3.5 per cent. Employees aged 16 and 17 became entitled to employer contributions for the first time. And the minimum wage went up.

For most employers this was a payroll update. The employer contribution is paid on top of wages, so the cost went up and nothing else changed.

We are writing this for the employers where it was not that simple. If you pay staff on a total remuneration basis, with one agreed figure that includes KiwiSaver, the extra half a per cent had to come out of something. The easiest way to keep the total the same is to reduce base pay, and some payrolls will have done exactly that. Depending on what the employment agreement says, that may be perfectly lawful. Or it may mean staff have been paid less than they are owed on every pay day since April.

Six months on is a sensible time to check. Any shortfall is still small, it is easier to put right now than later, and the rate goes up again on 1 April 2028.

What changed on 1 April 2026

The compulsory employer contribution is set by s 101D of the KiwiSaver Act 2006. Since 1 April 2026 the rate in s 101D(4) has been 3.5 per cent. The one exception is an employee who has been granted a temporary rate reduction to 3 per cent. For that employee, the employer may choose to match it at 3 per cent, but does not have to.

The next increase is already law. The Taxation (Budget Measures) Act 2025 lifts the rate to 4 per cent from 1 April 2028.

The same Act lowered the age at which employees qualify for compulsory employer contributions from 18 to 16 (s 101C(b)). Employees aged 16 and 17 who are KiwiSaver members, and who have contributions deducted from their pay, are now owed the employer contribution as well.

The adult minimum wage rose to $23.95 an hour on the same day. The starting-out and training minimum rose to $19.16 an hour.

Who needs to check

If you pay KiwiSaver on top of wages, have updated payroll to 3.5 per cent, pay comfortably above the minimum wage, and have no KiwiSaver members aged 16 or 17, there is probably nothing more to do.

The rest of this article is for employers who fall into one or more of these groups:

• staff are paid on a total remuneration basis, with KiwiSaver included in one figure;
• staff are paid at or close to the minimum wage; or
• you employ 16- or 17-year-olds who are KiwiSaver members.

Total remuneration: what the law allows

The starting point is s 101B. Its stated purpose is that compulsory employer contributions are paid in addition to an employee’s gross salary or wages. A term in an employment agreement that defeats that purpose has no effect (s 101B(1)–(3)).

There is an exception. Since 13 December 2007, employers and employees have been free to agree terms that set that purpose aside (s 101B(4)). That is what a total remuneration arrangement is: one agreed figure, with the employer contribution paid out of it rather than on top.

For most employees today, the exception comes with a condition. Where the employee’s KiwiSaver deductions first began on or after 15 December 2008, the agreement must account for the amount of compulsory contributions the employer is required to pay. If it does not, the contributions go back on top of gross pay (s 101B(4)(a)–(b) and (4A)). Whatever the parties agree, the duty of good faith in s 4 of the Employment Relations Act 2000 applies when they bargain over compulsory contributions (s 101B(5)(a)).

So the question is not whether total remuneration is allowed. It is whether your agreement accounts for the amount you must now pay, and how it does so.

What your agreement says matters

The full Employment Court looked at what “account for” means in Faitala v Terranova Homes & Care Ltd. The agreement in that case said only that the employee’s pay was inclusive of any KiwiSaver compulsory employer contributions. The Court held that was enough. A dollar figure is not required. A statement of how the figure is worked out will do, and a reference to the statutory rate meets that test (at [47]–[48]). The Court of Appeal later found it unnecessary to decide that point, so it rests on the Employment Court’s reading rather than an appeal court’s.

On that reading, most total remuneration clauses fall into one of three types, and the April increase affects each one differently.

The first type says the employer contribution comes out of the total at whatever rate the law requires. When the rate went up, the clause went up with it. Base pay fell by the difference because that is what the parties agreed. No variation is needed. Payroll still has to get the arithmetic right, and staff should still be told what has happened and why.

The second type sets base salary or an hourly rate as a stated number, with KiwiSaver added on top, and sometimes a total as well. Here the base pay is a term of the agreement in its own right. Reducing it to hold the total steady is a pay cut, and a pay cut needs the employee’s agreement. Without that agreement, the employee has been paid less than the agreement requires since the first pay day in April.

The third type states a total “inclusive of the employer’s 3 per cent contribution”. In our view that wording accounted for 3 per cent, and it is at least arguable that it does not account for the amount the employer is now required to pay. If s 101B(4)(a) applies to the employee, s 101B(4A) would put the extra half a per cent back on top of pay. We have found no decision on the point. It is worth taking advice on before 2028, when the gap becomes a full percentage point.

What a shortfall could cost

An employee who has been paid at a lower rate than the one legally payable can recover the difference under s 131 of the Employment Relations Act. Accepting the lower payment does not waive the claim (s 131(2)), and the claim can go back six years (s 142).

The amounts are small, which is why they are easy to miss. Take an employee whose agreement sets base salary at $60,000, with 3 per cent KiwiSaver on top: a total cost of $61,800. If payroll kept the $61,800 and recalculated at 3.5 per cent, base salary became about $59,710. That is a shortfall of roughly $290 a year for one employee. Across a whole payroll, and through to the next increase in 2028, it adds up.

The minimum wage still applies

Whatever type of clause you have, the minimum wage sets a floor. In Terranova Homes and Care Ltd v Faitala the Court of Appeal upheld the Employment Court and held that s 101B is subject to the Minimum Wage Act 1983. The employer contribution is not payment for the employee’s work (at [20]). Employers and employees can still agree total remuneration, but not an arrangement that leaves wages below the minimum (at [33]). Inland Revenue’s employer guidance says the same: the minimum wage is measured without the contribution.

Because the minimum wage and the contribution rate both rose on 1 April, this needs checking. A total rate set at the new adult minimum plus 3 per cent is $24.67 an hour. Take the contribution out at 3.5 per cent and the base is $23.84, which is 11 cents an hour below the minimum. To stay at or above the minimum on total remuneration, the total rate now needs to be at least $24.79 an hour.

Employees aged 16 and 17

This is the group most likely to have been missed. Before April they were outside the compulsory contribution rules, so their employment agreements had no reason to mention employer contributions. Some will be on the starting-out rate of $19.16 an hour. Under the Minimum Wage Order 2026, a 16- or 17-year-old can be paid that rate only until they have completed six months’ continuous employment with their current employer, and only while they are not supervising or training other workers. After that, the adult minimum of $23.95 applies, unless their employment agreement requires them to complete at least 40 credits a year of industry training or an apprenticeship.

If a 16- or 17-year-old’s agreement says nothing about employer contributions, it does not account for them, and the contributions sit on top of pay (s 101B(4A)). If the employee is on the starting-out minimum, Terranova puts the contribution on top whatever the agreement says. Either way, if payroll has been taking a young employee’s employer contribution out of a rate that was already at the minimum, that employee has been underpaid since April.

What to do now

1. Find the pay clause in each employment agreement for staff on total remuneration, and work out which of the three types it is. Then compare it with what payroll has done since 1 April. A clause of the first type and a reduced base are consistent. A clause of the second type and a reduced base are not.
2. For anyone on total remuneration close to the minimum wage, or on the starting-out rate, run the numbers at 3.5 per cent, not 3 per cent.
3. Check that every employee aged 16 or 17 who is a KiwiSaver member is receiving an employer contribution, and that none of it is coming out of a minimum rate. While you are there, check whether anyone on the starting-out rate has passed six months with you and should now be on the adult minimum.

If something has gone wrong, the simplest course is to correct it and pay any arrears before anyone has to ask. If an agreement needs to change, that is a conversation to have with the employee, in good faith, and to record in writing. Doing it now also means the wording is ready for the increase to 4 per cent in 2028.

We are putting together a short review pack for total remuneration clauses ahead of the 2028 increase. If you would like to know when it is ready, get in touch.

Lex Praxis advises New Zealand employers on employment law and AI governance. This article is general commentary and does not constitute legal advice. For advice specific to your circumstances, contact us directly.