Minimum pay rates and KiwiSaver contributions - Landmark Court Case ruling

Result: If you employ people who are in KiwiSaver, on the minimum wage, the KiwiSaver contribution must be on top of the minimum wage of the time.


A landmark ruling effectively raising the minimum wage has scaled its latest hurdle.

The Court of Appeal chose yesterday to uphold last year's decision by the Employment Court that employers paying the minimum wage had to pay their KiwiSaver contributions on top. This would give some minimum-wage workers an extra $540 a year.
Lower Hutt caregivers Vasivasi Faitala and Dalrene Goff took their employer, TerraNova Homes & Care, to court last year, claiming it was unfair they had to pay their own and TerraNova's KiwiSaver contributions.

The women earned the minimum wage of $13.50 an hour, which was broken down into wages and tax of $12.98, 26c as their contribution to KiwiSaver, and 26c for TerraNova's contribution.

Most employers pay their contributions on top of an employee's salary, but some choose to subtract their contribution from the salary. Employers claim this approach means all staff are treated equally, and it is legal under KiwiSaver law.

However, Faitala and Goff claimed this approach breached the Minimum Wage Act. In December last year, the Employment Court agreed and ordered TerraNova to pay any compulsory contributions on top of their minimum wage workers' salaries.

TerraNova appealed against this decision, but the Court of Appeal agreed with the original finding.

Employment lawyer Susan Hornsby-Geluk said the case was potentially significant in terms of additional costs.

John Ryall, the national secretary of the Service and Food Workers Union representing Faitala and Goff, said the decision was a win for the most vulnerable workers.

TerraNova executive director Terry Bell said he would now adjust pay rates to reflect the ruling and would also back-date any wage correction.

- © Fairfax NZ News

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