KiwiSaver is one of those obligations that runs quietly through payroll until something changes. Something has changed: the default contribution rate moved on 1 April 2026, and it moves again in 2028. Employers who set their remuneration budgets before that first date have been absorbing a cost increase since.
What changed on 1 April 2026
The default employee and employer contribution rates increased from 3% to 3.5%, effective 1 April 2026. A further increase to 4% is legislated for 1 April 2028.
The change applies automatically to employees on the default rate. No action is required from them, and none from you beyond ensuring payroll is calculating correctly.
Employees who want to stay at 3% can apply to Inland Revenue for a temporary rate reduction, which runs for between three and twelve months and must then be renewed. Where an employee has an approved reduction, the employer contribution matches at the reduced rate.
The employer obligations that have not changed
The underlying framework is the same, and it is worth restating because the failures tend to be in the basics rather than the rate:
- Automatic enrolment. New employees aged 18 to 64 starting permanent employment must generally be automatically enrolled, with an opt-out window between weeks two and eight.
- Compulsory employer contribution at the default rate on gross salary or wages, on top of the employee’s own contribution.
- Employer superannuation contribution tax (ESCT) is deducted from the employer contribution at a rate based on the employee’s total remuneration. Getting the ESCT rate wrong is one of the most common payroll errors.
- Employee contribution rates may be set by the employee at 3%, 3.5%, 4%, 6%, 8% or 10%. The employer contribution obligation remains at the compulsory rate regardless of what the employee chooses above it.
- Savings suspensions. Employees can apply to suspend contributions; the employer obligation stops for the suspension period.
- Information obligations — providing the KS3 information pack to new employees and passing opt-out and rate change forms to Inland Revenue.
Total remuneration arrangements
Some employers contract on a total remuneration basis, where the employer contribution is included within a stated total package rather than paid on top. This is lawful, but it is heavily conditioned: the arrangement must be agreed in good faith, and there is case law on employers who effectively imposed it.
Where you operate total remuneration, the rate increases reduce take-home pay unless the package moves. That is a conversation to have proactively rather than one to have after an employee notices.
Budgeting for the change
The direct cost is straightforward arithmetic — an extra 0.5% of gross salary and wages for employees on the default rate, rising to a further 0.5% in 2028. For a business with a $1 million wage bill, that is roughly $5,000 a year now and $10,000 from 2028, before ESCT effects.
Two second-order effects are worth planning for. The increase compounds with any wage growth, since it is a percentage of a growing base. And it interacts with remuneration reviews — employers who fold the KiwiSaver increase into an annual review as though it were a pay rise tend to be found out, because employees see the deduction increase on their own side too.
Where employers get caught
- Not enrolling eligible new starters. Automatic enrolment is the employer’s obligation, not the employee’s.
- Wrong ESCT rate, particularly after a pay increase or for employees who joined part-way through a year.
- Missing contributions for employees over 65, where the rules differ and the compulsory contribution does not apply, but many employers pay anyway without realising the position.
- Payroll software not updated for the rate change. Cloud payroll generally handled it automatically; desktop and manual systems did not always.
Where to check
Inland Revenue publishes current KiwiSaver rates, employer obligations, ESCT tables and the forms free at ird.govt.nz, including a dedicated page on the recent changes. If you run payroll manually or on older software, verify the 3.5% rate is actually being applied — a quiet under-contribution accumulating since April is an arrears problem plus interest.
General information only, not financial or tax advice. Confirm your obligations with Inland Revenue.
