KiwiSaver Employer Contributions at 3.5%: What a Tradie Employer Now Pays

Since 1 April 2026, KiwiSaver employer contributions have been 3.5% of an employee’s gross pay, up from 3%, and they now apply to members as young as 16. If you run a building, plumbing or electrical business with staff, your payroll software has probably made the change already. What it cannot decide for you is what to do about the 17-year-old apprentice who joins KiwiSaver, the worker who asks to stay at 3%, and the labour rate you quote for next summer.

KiwiSaver is the work-based retirement savings scheme set up by the KiwiSaver Act 2006. Inland Revenue collects the money through payroll and private scheme providers invest it. Joining is voluntary for the worker, but once an eligible employee is a member, your contribution is a legal requirement rather than a perk. The new rates come from the Taxation (Budget Measures) Act 2025, which also sets a second step to 4% on 1 April 2028.

Who your KiwiSaver employer contributions have to cover

Inland Revenue’s employer contributions page sets out the group: employees aged 16 and over and under 65, who are KiwiSaver members and have KiwiSaver deducted from their pay. You can stop once someone is eligible for NZ Super, and nothing is required for a member under 16.

The contribution is calculated on gross salary or wages, including overtime, bonuses, commission and allowances, and it is paid on top of that pay, not taken out of it. That second point comes from section 101B of the Act. You can only fold the contribution into a “total remuneration” package if the employment agreement says so, and changing an existing worker over to that basis means negotiating it in good faith, not announcing it.

Labour-only contractors you pay on schedular payments are not your employees for KiwiSaver, so there are no deductions and no employer contribution for them. A casual or temporary worker can be different. They are not enrolled automatically, but if they are already a member and you make deductions, you contribute for them like anyone else.

What 3.5% costs on two example pay packets

The figures below are illustrations, not quotes from anyone’s payroll. They use a qualified tradesperson on $38 an hour and a 17-year-old apprentice on the starting-out minimum wage of $19.16 an hour, which applies from 1 April 2026 to a 16 to 19-year-old whose agreement requires at least 40 industry training credits a year. Both work 40 hours.

For the tradesperson, the rise costs you $7.60 a week, or about $395 a year. The apprentice is the bigger change. Before April you paid nothing for a member under 18. Now that apprentice costs you about $1,395 a year if they are a member. The 17-year-old row is the one to check on your payslips.

The apprentice who joins at 16 or 17

Here is where the change catches up with you. A 16 or 17-year-old is not automatically enrolled when you hire them, because automatic enrolment only applies to new employees aged 18 to 64. They can still join by signing up directly with a KiwiSaver provider. Inland Revenue says a 16 or 17-year-old needs at least one legal guardian to co-sign the application. You do not enrol them yourself.

Once they are a member, Inland Revenue tells you to start deductions, and from that pay your 3.5% applies too. If deductions should have started earlier, Inland Revenue’s KiwiSaver employer guide (KS4) says your contributions can be backdated as far as the date the employee turned 16. Late or short contributions attract the same kind of penalties as late PAYE.

So when a school leaver starts with you over the summer, ask on day one whether they are in KiwiSaver. Put the answer in your new-starter notes. It is a two-minute conversation, and it decides whether your first pay run for them is right.

When a worker asks to stay at 3%

A temporary rate reduction lets an employee keep contributing at 3% instead of 3.5% for between 92 days and a year. The employee applies to Inland Revenue, not to you, and can apply again when it ends. The rules are in subpart 3B of the KiwiSaver Act, added by the 2025 Act, and the employee’s side is optional.

Your side has a fixed part and a choice. Once you have the notice from Inland Revenue, or the employee shows you it, you must deduct their contribution at 3% from the next pay. Your own contribution is different. Section 101D(4) of the Act lets you drop it to 3% while the reduction runs, but only if you choose to. If you do nothing, you keep paying 3.5%.

The Government’s Budget announcement of May 2025 described the lower rate as one the employer would match. The Act’s wording is narrower, so treat matching as your decision, and say in writing which way you went. Inland Revenue tells you again when the reduction ends, and the employee goes back to 3.5% from the next pay. Before 92 days are up, they can only cancel it early if you agree.

ESCT comes out of your contribution

Employer superannuation contribution tax, or ESCT, is the tax Inland Revenue takes from what you contribute. You deduct it from your contribution and pay it with your PAYE, so it reduces what reaches the fund rather than adding to your bill. It is a legal requirement unless you and the employee agree to treat the contribution as salary and run it through PAYE instead.

The rate depends on the employee’s pay plus your contributions in the previous tax year. Inland Revenue’s Employer’s guide (IR335) sets the bands at 10.5% up to $18,720, then 17.5% up to $64,200, 30% up to $93,720, 33% up to $216,000 and 39% above that. For a new employee you estimate the year ahead. That is how the apprentice in the table lands on 17.5% and the tradesperson on 30%.

Everything goes into the employment information return you file each payday. Payday filing is the Inland Revenue system every employer must use to report pay as it happens. The return shows gross pay, PAYE, KiwiSaver deductions, your net contribution and ESCT. Electronic returns are due within two working days of payday. If your PAYE and ESCT come to less than $500,000 a year, you pay the deductions monthly, by the 20th of the following month.

Putting the half per cent into your quotes

Back to the tradesperson on $38 an hour. Your KiwiSaver contribution now adds $1.33 to every hour they work, up from $1.14. The apprentice adds about 67 cents an hour where they used to add nothing. On a crew of four, that is small on any one job but noticeable across a year of quoting. Check that your charge-out rates already allow for it.

The bigger step is still coming. On 1 April 2028 the default rate goes to 4%, which takes the same tradesperson to about $1.52 an hour. Signing maintenance or fixed-price work that runs past that date? Build the 2028 rate in now, rather than finding it in a margin later.

KiwiSaver is one of the costs that sit on top of wages when you employ someone. Public holidays are another, and our guide to Labour Day pay for a crew covers who gets paid for 26 October. You can find more in our New Zealand business admin guides.