Setting Up a Workplace KiwiSaver Scheme: An NZ Employer's Guide (2025)

Auto-enrolment, the opt-out window, the 3% match (rising to 3.5%), and how ESCT is deducted — the full NZ employer KiwiSaver setup guide, plus the common mistakes to avoid.

If you take on staff in New Zealand, KiwiSaver is not optional admin you can leave for later. From an employee's first pay, you have legal duties: enrol most new starters, deduct their contributions, pay your own compulsory contribution on top, and deduct a tax on that contribution before it leaves your hands. Get the steps in the right order and it runs quietly through payroll. Miss one and you can end up owing back-contributions.

This guide walks through what employers must do, how automatic enrolment and the opt-out window work, how much you contribute and how ESCT is deducted, and the 2025/2026 changes that affect your payroll.

TL;DR: Employers must auto-enrol most new staff aged 18 to 64, deduct their KiwiSaver from the first pay, and pay a compulsory employer contribution — 3% of gross pay, rising to 3.5% on 1 April 2026 ¹³⁴. New employees can opt out between day 14 and day 56. ESCT is deducted from your contribution before it reaches the employee's account ⁶.

What are an employer's KiwiSaver obligations in NZ?

KiwiSaver runs through your payroll, and Inland Revenue holds you responsible for several things at once. In plain terms, an employer must:

• Automatically enrol most new employees aged 18 to 64 when they start, unless an exemption applies ¹.
• Give new employees the KiwiSaver information pack (KS3) so they understand their options.
• Deduct employee contributions from gross pay at the employee's chosen rate, from the first payday ⁵.
• Pay the compulsory employer contribution on top of wages — 3% of gross pay as at late 2025 ³.
• Deduct ESCT (Employer Superannuation Contribution Tax) from that employer contribution and pay it to IRD ⁶.
• Pass everything to Inland Revenue through your usual payday filing, and handle opt-outs if a new starter files one.

None of this depends on the size of your business. A single first hire triggers the same obligations as a payroll of fifty. The mechanics are the part people find fiddly, so the rest of this guide takes them one at a time.

How does automatic enrolment work for new employees?

When most people start a new job, they are automatically enrolled into KiwiSaver — you do not wait for them to ask. The rule covers new employees aged 18 to 64 who are eligible (broadly, New Zealand citizens or residents entitled to live here permanently), unless a specific exemption applies ¹.

A few points worth being clear on:

• Enrolment is per new job. Automatic enrolment is triggered when someone starts with you, even if they have been in KiwiSaver for years elsewhere. (Existing members are handled differently for fund choice — more on that below.)
• Under 18 and 65+ are not auto-enrolled. They can choose to join by telling you, in which case you deduct contributions, but you do not enrol them automatically.
• Deductions start immediately. You begin deducting KiwiSaver from the first pay, even though the employee still has a window to opt out. If they later opt out, contributions are refunded.
• The KS3 information pack must be given to the new starter so they understand opting out, contribution rates and choosing a scheme.

If the employee does nothing, they stay enrolled, their contributions continue, and after the opt-out window closes they are a KiwiSaver member for that job.

Employer KiwiSaver timeline: enrol, opt-out window, first contributions

This is the sequence Inland Revenue expects you to follow for a new auto-enrolled employee.

Source: IRD employer guidance ¹²⁶. This is a general illustration of the process, not a substitute for the detailed rules on ird.govt.nz.

What is the opt-out window and how do you handle it?

Automatic enrolment is not the final word. A new employee who has been auto-enrolled can choose to opt out by filing an opt-out request (form KS10). The window is specific: it runs from the end of week 2 to week 8 of starting — that is day 14 to day 56 ².

A few things to keep straight:

• Too early doesn't count. An employee cannot opt out in the first two weeks. The window opens at day 14.
• Too late means staying in. After day 56, the normal opt-out window has closed. Late opt-outs are only allowed in limited circumstances (for example, where the employer did not provide the right information), and these go through Inland Revenue.
• You keep deducting until they opt out. Because deductions start from day one, an employee who opts out in, say, week 4 will have had contributions taken. Those are refunded once the opt-out is processed.
• Opt-out is a one-job decision. Opting out of one job does not remove someone from KiwiSaver permanently, and it does not carry across to a future employer.

For employers, the practical task is simply to act on a valid KS10 promptly: stop the deductions and make sure refunds flow back correctly. Payroll software usually handles the mechanics once you flag the opt-out.

How much must you contribute, and how is ESCT deducted?

There are two separate flows of money, and it helps to keep them apart.

The employee's contribution comes out of their pay at a rate they choose. As at late 2025 the options were 3%, 4%, 6%, 8% or 10% of gross pay, and if an employee did not choose, the default was 3% ⁵.

Your compulsory employer contribution is paid on top of wages. As at late 2025 the minimum was 3% of the employee's gross (before-tax) pay ³. You can choose to pay more than the minimum, but you cannot pay less for an eligible employee.

Then there is ESCT — Employer Superannuation Contribution Tax — the tax deducted from your contribution before it reaches the employee's account. ESCT is charged at a single rate set by each employee's total annual remuneration (their salary or wages plus the gross employer contributions they received in the prior year) ⁶. The rate is a flat one per employee, not a tiered calculation, and these are the thresholds in force from 1 April 2025 ⁶:

So if you contribute 3% for an employee earning $60,000, the gross contribution is $1,800 a year; ESCT at 17.5% removes $315, and the rest is credited to their KiwiSaver. You deduct the ESCT and pay it to IRD — the employee never sees a separate bill for it. We cover the mechanics in detail in our guide to ESCT and the employer contribution tax.

How do contribution rate changes in 2025/2026 affect your payroll?

Two sets of changes from Budget 2025 matter for your payroll. The first changes what you pay; the second changes nothing you do, but staff may ask about it.

The contribution rate is rising. The minimum employee and compulsory employer rate rises from 3% to 3.5% on 1 April 2026, and again to 4% on 1 April 2028 ⁴. Your payroll needs to apply the higher rate from the first pay on or after each date, for both the employee deduction and your employer contribution. Because the employer side rises too, your wage-on-cost goes up, and the ESCT deducted from the larger contribution scales up with it.

There is also a temporary rate reduction. From 1 February 2026, employees can apply to Inland Revenue to drop their rate back to 3% for between 3 and 12 months once the new 3.5% minimum begins on 1 April 2026 — and when an employee is approved, the employer matches the reduced 3%, not 3.5% ¹⁰. So if a staff member uses this, your contribution for them drops too. Watch for IRD notifications and apply the reduced rate when instructed.

The government contribution change does not touch your payroll, but it is the question staff most often raise. From 1 July 2025, the annual government contribution halved to 25 cents per $1 of member contributions, with the maximum dropping from $521.43 to $260.72 a year; an employee must contribute at least $1,042.86 of their own money between 1 July and 30 June to receive the full amount ⁷. From the same date, members earning over $180,000 no longer qualify ⁸. This is paid by the government to the employee, not by you — but it is worth knowing the figures when staff ask why their statement looks different.

For a fuller breakdown of the rate steps and the take-home-pay impact, see our guide to the KiwiSaver contribution rate increase from 3.5% to 4%.

What about employees who are already in KiwiSaver?

Plenty of new starters are already KiwiSaver members from a previous job. They do not need to be automatically enrolled again ⁹. But that is not the same as having nothing to do.

For an existing member, you must still:

• Deduct their contributions from the first pay at their chosen rate (or the default if they have not specified one) ⁹.
• Pay the compulsory employer contribution and deduct ESCT, exactly as for any other member ⁹.

The one exception is an employee on a valid savings suspension (formerly a contributions holiday). If they have an active suspension granted by Inland Revenue, you do not deduct their contributions for the period it covers, and the matching employer contribution pauses too ⁹. Once the suspension ends, deductions resume.

A practical note: a savings suspension is something the employee arranges with IRD, not something you grant. Ask new starters whether they are an existing member and whether they have a current suspension, and let your payday filing reconcile the details with Inland Revenue.

What are the most common employer KiwiSaver mistakes?

The errors that come up tend to be process slips rather than anything exotic. The ones worth guarding against:

• Not enrolling a new starter because they "already have KiwiSaver." Existing members still need deductions and employer contributions — you simply skip the auto-enrolment step, not the contributions ⁹.
• Stopping deductions on the wrong opt-out date. Opt-outs are only valid from day 14 to day 56. Acting on a request made in week 1, or treating a late request as automatic, are both errors ².
• Forgetting to refund contributions when a valid opt-out is processed within the window ².
• Setting the wrong ESCT rate. The rate is based on prior-year remuneration including employer contributions, and it should be reviewed annually and after a pay rise that crosses a band ⁶.
• Missing the 1 April rate steps. Payroll must move both halves to 3.5% from 1 April 2026 (and 4% from 1 April 2028) on the first pay on or after each date ⁴.
• Not pausing for a valid savings suspension — or, conversely, pausing without a current suspension on file ⁹.
• Treating a contractor as exempt without checking. Whether someone is an employee or a genuine contractor affects KiwiSaver and ACC, and the line is not always obvious — see our note on contractor versus employee for KiwiSaver and ACC.

Most of these are caught by a once-a-year review of your KiwiSaver setup alongside payroll, and by checking the IRD rate notifications your software receives.

A setup-and-compliance checklist for employers

A short list to run through when you take on staff or review your payroll.

1. Auto-enrol every eligible new employee aged 18 to 64 and give them the KS3 information pack ¹.

2. Start deductions from the first pay at the employee's chosen rate, or the default (3% as at late 2025) ⁵.

3. Diarise the opt-out window — day 14 to day 56 — and act promptly on any valid KS10, including refunds ².

4. Pay the compulsory employer contribution (3%, rising to 3.5% from 1 April 2026) on top of wages ³⁴.

5. Set and review each employee's ESCT rate against the current thresholds, and re-check after pay rises ⁶.

6. Check existing members are getting deductions and employer contributions, and confirm whether any savings suspension applies ⁹.

7. Update payroll for the 1 April 2026 and 1 April 2028 rate steps, and apply any approved temporary reductions ⁴¹⁰.

8. File everything through payday filing so Inland Revenue receives contributions and ESCT correctly.

Frequently asked questions

Do I have to enrol an employee who is already in KiwiSaver?

No — you do not automatically enrol existing members again ⁹. But you still deduct their contributions and pay the compulsory employer contribution (and ESCT) from their first pay, unless they have a valid savings suspension in place ⁹.

When can a new employee opt out of KiwiSaver?

Between the end of week 2 and week 8 of starting — day 14 to day 56 — by filing an opt-out request (KS10) ². You keep deducting contributions until the opt-out is processed, then refund what was deducted. Requests made in the first two weeks are too early, and after day 56 the standard window has closed.

How much does an employer have to contribute?

The compulsory minimum was 3% of the employee's gross pay as at late 2025, rising to 3.5% from 1 April 2026 and 4% from 1 April 2028 ³⁴. You can pay more than the minimum, but not less for an eligible employee.

What is ESCT and who pays it?

ESCT (Employer Superannuation Contribution Tax) is the tax on your employer contribution. You deduct it from the contribution before it reaches the employee's account and pay it to IRD, at a rate set by the employee's total annual remuneration — 10.5%, 17.5%, 30%, 33% or 39% ⁶. Our ESCT guide works through the bands.

Do I deduct KiwiSaver for an employee under 18 or over 65?

They are not automatically enrolled, but they can choose to join by telling you, in which case you deduct their contributions. Rules on employer contributions for younger and older members have specific conditions, so check the current IRD guidance for the employee's situation.

What happens to KiwiSaver if someone is on a savings suspension?

If an employee has a valid savings suspension granted by Inland Revenue, you pause their contributions and the matching employer contribution for the period it covers ⁹. Deductions resume automatically when the suspension ends. The employee arranges the suspension with IRD, not with you.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). KiwiSaver is a long-term savings scheme; contribution rates, government contributions, ESCT thresholds and other settings are set by the Government and can change — figures are correct as at 23 October 2025, so check current rules at ird.govt.nz. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 23 October 2025.