Endless KiwiSaver changes cause red tape headaches

Media statement Tuesday, March 10th, 2008

Endless changes to KiwiSaver causing red tape headaches

Bungles in the law governing KiwiSaver are making anomalies in the scheme worse causing red tape headaches for employers.

"A fourth round of changes to the KiwiSaver law is needed as more errors keep coming to light," said Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern).

"Employers will have to change their payroll systems yet again, and the re-work involved is causing a huge loss to the nation's productivity.

"Ever since Budget 2007, KiwiSaver has been steadily degenerating into a compliance nightmare with IRD struggling to fix the scheme's errors and anomalies.

"Here are five examples:

1) IRD is about to intimidate employers not automatically enrolling new staff.

They are about to send out letters asking employers to rework their automatic enrolments but admit those letters may sometimes be wrong and the rework will not be necessary.

2) Recently we advised Dr Cullen of a further anomaly. Twice a year employers who pay their staff fortnightly and therefore have 26 pay periods must make two payments in two separate months, but this takes their pay for the month over the limit for which they are entitled to an income tax credit for their KiwiSaver contributions.

The lost tax credit to these employers averages about $87 per employee each year.

The government recognizes this is an unintended consequence of IRD trying to retrieve employer tax credits for new staff who withdrew from the scheme.

A fix will be very slow coming and when it does, it will require yet another costly change to payroll systems.

3) The latest KiwiSaver Amendment says there are new increased penalties for employers who don't comply, starting on two different dates: April 1st, 2008 and April 1st 2009. Which is it?

4) Worse is the discrimination faced by employees who don't join KiwiSaver, most of whom can't afford to.

Employees joining the scheme get an employer contribution from April 1st and other staff, don't. This issue can only be fixed if employer contributions to KiwiSaver are treated as a part of an employee's total remuneration, as for other employer super schemes.

Unfortunately, if they do this, employers have to repeat the change to total remuneration if it was done before 13 Dec 2007. We have no idea why. We wrote a 'please explain' letter to Revenue Minister Peter Dunne last year and haven't had an acknowledgement.

5) Because of the way big changes to the scheme were announced last year, IRD has failed to allocate KiwiSaver money to Kiwisaver accounts in reasonable time. In some cases they have not sent money to the right fund manager.

Workplace morale is being affected as staff ask: 'what's happened to my money?'

Five to 10 per cent of employers are reporting their employees are blaming them for IRD's implementation bungles, according to a poll of some 2000 employers at our current rounds of briefings.

"We don't wholly blame IRD who are trying to make a fist of implementing bad legislation.

"The law they are required to work from is the problem combined with the unexpected changes of the Budget.

"We told Parliament's Select Committee about these anomalies but it took no notice and compounded them.

"Michael Cullen is the only person Kiwisavers and employers can hold accountable. He's paying the price for rushing KiwiSaver to make it his star turn in the politics of surprise and awe in an election year without giving IRD sufficient time to make the necessary law changes.

"The loss of productivity from all the changes that employers have had to see to, is huge."

ENDS

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