Section 101FB – grace period for employers

Clause 538

Submission

(67 – New Zealand Institute of Chartered Accountants)

Section 101FB should be deleted. The employee should not be disadvantaged if other parties such as the employer and Inland Revenue make errors concerning automatic enrolment and compulsory employer contributions.

Comment

Section 101FB limits an employer’s liability to back-pay any unpaid compulsory employer contributions in the event of their non-compliance with the automatic enrolment provisions of KiwiSaver. Requiring employers to back-pay all unpaid compulsory employer contributions is not considered by officials to be a fair option, particularly because employees who are not subject to automatic enrolment can opt in at any time. The proposed grace period strikes a balance between the employer’s obligation to automatically enrol (and make employer contributions) and the employee’s obligation to make contributions from salary or wages. Furthermore, an employer’s open-ended liability under the status quo is administratively complex. A grace period would be simpler to administer while maintaining an incentive for employers to comply with their KiwiSaver obligations.

Recommendation

That the submission be declined.