Sometimes an employer doesn't enrol an employee in KiwiSaver - it happens...
Then, some weeks, months or years later, the employer attempts to correct the situation by enrolling the employee - then IR insists that the employer somehow magically correct all their previous records.
Unfortunately, that magic is fraught with difficulties.
Sure, it's possible to recalculate every pay period that should have had KiwiSaver - and then you need to re-report every payday report (sometimes impossible if too long ago, really, really difficult if you filed some manually, some via the IR gateway, or even way back in the IR348 days...), so that's not really a feasible option (even though it is possible).
You would also need to have the correct ESCT rates in effect (and you may be crossing fiscal year boundaries that may have had different rates in effect), and the employee would need to repay you their share - because it all becomes due to IRD...
Then how do we resolve this situation?
IR do not have a specific process for rectifying KiwiSaver in arrears (despite what their front-line helpdesk staff might suggest - and if they do, please ask for a detailed procedure in writing).
Here's what we received from IR (Oct 2020):
There is no formal process for backdating kiwisaver contributions in these cases, its up to the employee and employer to come to an agreement.
“In previous situations the employer has the used the ability to pay more than the 3% gross employer contribution to make up for any perceived loss. The employee can also make voluntary contributions”
The best solution then would appear to be:
- where the issue is very short term (only a few weeks)
- you could ask that we assist you to reprocess his pays and resubmit your payday reports and you deduct the amount the employee should have contributed as a sundry deduction from their next pay, or
- just start KiwiSaver and carry on (the amounts involved may not be material)
- where the issue extends over months or years
- agree to pay a higher employer contribution percentage to redress the lack of previous contributions, then revert to standard rates at the end of the agreed period, and
- advise the employee to make a voluntary contribution to their fund (e.g. for the amount they would have contributed, but it's really down to them to do this).