Publications
FYI
Employment Law
19 Dec 2008
Employment law changes passed under urgency
Changes to KiwiSaver and the Employment Relations Act 2000 were passed under urgency last week as part of the Government's first 100 days package.
KiwiSaver
The changes to KiwiSaver, which were foreshadowed during the election campaign, were introduced to Parliament under the Taxation (Urgent Measures and Annual Rates) Act 2008. Some of the main changes, which will come into effect from 1 April 2009, are:
- The minimum member contribution rate to a KiwiSaver scheme will be reduced from 4% to 2% of a member's gross salary or wages and 2% will be the default contribution rate for new members (although new members can choose to contribute at a higher rate). Existing members will retain their current contribution rate unless they elect to reduce their contribution to the lower rate of 2%.
- Compulsory employer contributions will be capped at 2% (previously programmed to reach a minimum of 4% from 1 April 2011).
- Section 101B of the KiwiSaver Act 2006, which provides that compulsory employer contributions must be paid on top of gross salary or wages except to the extent that parties agree otherwise, has been amended to clarify that compulsory contributions are paid "in addition to" an employee's gross salary or wages.
- The employer tax credit paid to employers to offset some of the cost associated with compulsory employer contributions will be discontinued.
- The exemption from the employer superannuation contribution tax will be capped at the employer's minimum compulsory contribution rate of 2%.
The Government will continue to match the member contribution rate dollar for dollar up to $1,040 a year. The member fee subsidy of $40 a year will be discontinued.
Employers will need to give some consideration to the impact of these changes on their current KiwiSaver arrangements. Matters to consider include:
- Whether your payroll system needs to be adjusted to allow for a 2% contribution rate and the default rate being 2% from 1 April 2009.
- If you currently contribute more then 2%, whether you will continue to do so.
- Whether any previous arrangement you have entered into provides sufficient flexibility to undo an agreement to contribute more than 2%.
- The impact discontinuation of the employer tax credit will have on your remuneration costs.
A further change to KiwiSaver is the repeal of sections 103(1)(h) and 110A of the Employment Relations Act 2000 (as amended by the Employment Relations Amendment Act 2008). These provisions allowed an employee to raise a personal grievance if their employment was "adversely affected" because that employee was a member of KiwiSaver (or a complying superannuation fund). As a result of changes to the KiwiSaver Act requiring compulsory employer contributions to be "in addition" to an employee's gross salary or wages, these provisions have been deemed unnecessary and have been repealed.
90 day trial period
As of 1 March 2009 (as a result of an amendment to the Employment Relations Act 2000), employers in small and medium size businesses will be able to take on new employees for "trial periods". The Government intends these periods to enable employers "to determine the employees' suitability for permanent employment, without the risk of legal proceedings for unjustified dismissal in the event the employment is terminated".
To take advantage of these trial periods, the employer must have fewer than 20 staff at the time the relevant employee was employed (even if the employment of the relevant employee increases the total number of staff over the threshold of 20 employees). If the employer meets this requirement, a trial period may be implemented as follows:
- the trial period is agreed to in good faith as part of a written employment agreement signed by both the employee and employer at the beginning of the employment relationship;
- the trial period is up to 90 days (an employer and employee can agree to a shorter trial period);
- the employer must still comply with any agreed notice period, or give a period of notice of termination of employment (ie where the employment agreement is silent as to notice); and
- a trial period can only be entered into once with the same employee.
If a trial period is agreed to, an employer may terminate the employee’s employment on notice within the trial period and, as long as the notice is given within the trial period, an employee may not challenge the dismissal in the Employment Relations Authority or the Employment Court.
However, an employee dismissed within the trial period may still:
- apply for mediation using the Department of Labour's Mediation Service; or
- raise a personal grievance on grounds other than unjustified dismissal, such as under the discrimination or sexual or racial harassment provisions of the Employment Relations Act.
- In addition to the new "trial periods", the general probationary period arrangements that exist under section 67 of the Employment Relations Act will still be available. This provision is available to businesses of any size and allows employees to raise a personal grievance in the usual way even if their dismissal occurs within the trial period.
Redundancy assistance
The Government has also unveiled details of a redundancy package designed to ease the burden on those affected by redundancy and help ease the effects of the global economic downturn.
The "ReStart" package, which will be provided through Work and Income, will be backdated to the date of the election, 8 November 2008, and will provide short term assistance - up to 16 weeks - for low and middle income families with children, and for people with high housing costs who lose their jobs through redundancy.
There are three components to the ReStart package:
- a payment for families with a dependent child or children who are no longer eligible for the in-work tax credit (up to $60 a week for families with up to three children and $15 for each additional child);
- up to $100 a week extra for single people, sole parents and couples (with or without children) who qualify for the maximum accommodation supplement after redundancy; and
- employment and job services, including support to develop a CV and prepare for interviews, help with career planning, support for training to get new skills or information about job vacancies.
To get some or all of ReStart you must:
- have been made redundant from full time work or have been self employed and entitled to an unemployment benefit;
- have been working for at least six months immediately before you were made redundant (although you could have worked for more than one employer);
- be looking for a full time job;
- be a New Zealand citizen or permanent resident;
- normally live in New Zealand and intend to stay.
Those who get redundancy compensation of more than $25,000 or have other sources of income, such as a partner who works full time or savings of $16,200 for couples and $8,000 for singles, will not be eligible for ReStart assistance.
Authors
Katherine Burson
Senior Associate - Employment
DDI: +64 9 977 5112
Mobile: +64 21 498 624
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Lucy Jenkins
Senior Associate - Employment
DDI: +64 4 924 3401
Mobile: +64 21 221 4534
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The changes to KiwiSaver, which were foreshadowed during the election campaign, were introduced to Parliament under the Taxation (Urgent Measures and Annual Rates) Act 2008.
