In an earlier blog we discussed the
increase in minimum contributions from 2% to 3%.
The Court of Appeal has now had to consider the interplay
between the Minimum Wage Act and the KiwiSaver Act. The Court of
Appeal has decided that compulsory employer KiwiSaver contributions
cannot be deducted from wages paid to employees when those
employees are only paid minimum wage.
The case involved two caregivers employed by Terranova Homes and
Care Limited. Each employee was paid a gross wage of $13.50 an
hour. The employment agreements stated that the employees'pay was
inclusive of the employer KiwiSaver contribution. Accordingly, the
employees were only paid $12.98 an hour after the employer and
employee KiwiSaver contributions were deducted.
The employees issued proceedings against Terranova,and the
Employment Court upheld the employees'claim.
The Employment Court held that the purpose of the Minimum Wage
Act 1983 was to ensure that workers received the base minimum wage
to enable them to meet living expenses. The Court held that
deducting the compulsory KiwiSaver contributions from this was
contrary to the Act.
Terranova appealed the decision. The Court of Appeal held the
statutory entitlement to be paid a minimum hourly rate is not
affected by the KiwiSaver Act. Therefore, the employees were
entitled to be paid minimum wage for each and every hour worked and
the employer's KiwiSaver contribution had to be paid on top of
So, what does this all mean?
Put simply, if you pay your employees minimum wage, the
Employer's KiwiSaver contribution must be paid on top.
The bigger picture
Recently, several cases have been brought- and won- which
reaffirm employees' minimum employment entitlements such as being
paid the minimum wage. While most employers do comply with minimum
statutory requirements, some are not, and are facing large bills
for pay arrears as a result. Employers ignore minimum wage
entitlements at their own peril.
- Shima Grice, Rebecca Catley