KiwiSaver Inclusive Agreements – What You Need To Know For 1 April

From 1 April 2026, the compulsory employer KiwiSaver contribution increases from 3% to 3.5%.

If your employment agreements state that pay is KiwiSaver inclusive (often called “total remuneration”), you may need to consult with your employees before the changes kick in on 1 April.

This is one of those small legislative changes that can lead to an employment relations issue if it is not managed well.

Check the Wording in your Employment Agreements

If your agreement specifies 3%
The most important thing to know is that the employee’s base pay is effectively protected. You cannot simply reduce the base pay to accommodate KiwiSaver at 3.5%. If you want to adjust the split between wages and KiwiSaver, you must consult with your employee and get agreement.

If your agreement is genuinely “KiwiSaver inclusive”
You may be able to adjust the internal calculation so long as the total agreed remuneration does not reduce.

However, you need to check the wording in your agreements carefully. Many agreements that reference “total remuneration” are actually drafted in a way that locks in 3%.

The $30.00 Example – Checking the Maths
Let’s assume an employee is paid $30.00 per hour inclusive of KiwiSaver at 3% and you want to keep the wage bill the same.

In this scenario it means the employee’s gross wages reduce by approximately 14 cents per hour.

You cannot automatically impose that reduction unless you consult with your employee or your agreement has genuine, inbuilt provisions to automatically adjust the split between wages/salary and KiwiSaver contributions.

When Consultation is Required

KiwiSaver changes do not override the good faith obligations you have in the employment relationship. You need to consult with your employees if:

  • You need to reduce base wages to maintain total remuneration
  • Your agreement specifies 3% rather than being open-ended
  • The wording is ambiguous
  • You are proposing any variation to agreed remuneration

What if you simply increase pay by 0.5%?

Some employers are considering increasing pay by 0.5% and leaving base rates untouched.
Using our $30.00 example:
On $29.13 (the original base rate):

  • 0.5% increase = $0.15
  • New base = $29.28
  • Employer KiwiSaver at 3.5% = $1.02
  • New total cost = $30.30 per hour

That’s a 1% total cost increase, not 0.5%.
Yes, you can choose to absorb the increase but be clear on the financial impact.

The Key Point

  • If you are increasing pay, no consultation is required.
  • If you are reducing base pay — consultation and agreement is required.

Practical Options to Consider

In managing the increase to KiwiSaver, there are three choices:

Option 1: Absorb the increase

  • Keep base wages unchanged
  • Your employment costs increase by 1%
  • No consultation required.

Option 2: Stick with the Total Remuneration Approach

  • Recalculate the base pay so total cost stays the same
  • Consultation and written agreement required – unless the agreement provides for automatic adjustment.

Option 3: Move away from a KiwiSaver Inclusive Approach

This may be a good opportunity to use this change as a reset point to simplify your agreements and separate base pay from KiwiSaver permanently.

Plan Ahead for 4% in 2028

The employer rate increases again to 4% from 1 April 2028 and you will need to repeat this process. Now might be a good time to consider:

  • Do we want ongoing recalculations?
  • Do we want repeated consultation cycles?
  • Do we want payroll complexity every time legislation changes?

Key Takeaways

Check your agreement wording — don’t assume it allows for an automatic adjustment.

  • Reducing base pay requires agreement
  • Increasing pay does not require consultation
  • The financial impact is small per employee however it could be significant across your workforce

And remember, you need to make sure that the employee’s wages do not drop below the minimum wage if you take the KiwiSaver inclusive approach.

If you’re unsure whether your agreements are truly KiwiSaver inclusive or locked in at 3%, it’s worth reviewing them before making payroll changes.

Take a Proactive Approach

Handled well, this change can be straightforward. Getting ahead of it now, with the right process and clear communication, will help you avoid potential issues later on. If you have any questions, please contact us, on 07 823 3250, or your preferred advisor in this space.

Please note:
This information is offered as a guide only and for any situation you may be facing we recommend that you obtain independent professional advice. Of course People in Mind can provide that advice – just call us or email us and we will be in touch.