Analysis by LiveRem CEO, Kathleen Webber
National's proposal to make KiwiSaver compulsory for employees in New Zealand from 2028 has sparked plenty of discussion about retirement savings, contribution rates and the cost to employers.
I think many organisations are focused on the wrong question.
The real issue isn't whether employer KiwiSaver contributions rise to 6% for employers and employees.
It's what that change exposes about the way organisations currently manage pay.
If implemented, the proposal would see employee and employer contributions gradually increase to 6% each by 2032, creating a combined contribution rate of 12%. Employer contributions would also extend to employees over 65.
Whether the policy ultimately becomes law will depend on the outcome of the next election. If it proceeds, the impact on remuneration strategy will be significant.
The End of Hiding Behind Total Remuneration
For many employers, the first challenge will be total remuneration packages.
Today, it's common for KiwiSaver contributions to be included within an employee's total remuneration package rather than paid on top. As contribution rates increase, that model becomes increasingly difficult to sustain.
At some point, organisations will need to decide whether they:
Absorb the increased KiwiSaver cost on top of salaries
Reduce base pay to keep total employment costs unchanged
Take a hybrid approach
None of those options are painless.
What makes this particularly interesting is that many employers will discover their salaries are not as competitive as they thought.
When KiwiSaver is bundled into total remuneration, the headline number can look strong. Once base salary is separated out and compared directly against the market, some organisations may find they are sitting well below where they believed they were.
The employers that understand this early will have options.
The employers that discover it during a recruitment process probably won't.
The New Battleground Is Base Pay
For years, employer KiwiSaver contributions have helped some organisations differentiate themselves.
If every employer is required to contribute 6% on top of base pay, that advantage largely disappears.
When everyone offers the same retirement contribution, employees naturally focus on the things that remain different:
Base salary
Career progression
Flexibility
Learning and development
Equity and ownership opportunities
Workplace culture
This doesn't mean culture suddenly becomes unimportant.
It means compensation becomes more transparent.
Organisations that have relied on benefits to offset weaker market positioning may find employees paying much closer attention to what they're actually earning.
Not Every Role Can Absorb The Same Change
One mistake I expect to see is employers applying a single rule across their entire workforce.
On paper, reducing base pay by the same percentage everywhere may appear logical.
In reality, labour markets don't work that way.
The impact on a customer service role with a large talent pool is very different from the impact on a senior software engineer, finance leader or specialist data professional.
Some roles have significant market leverage. Others don't.
Some employees have multiple options available to them at any given time. Others have fewer alternatives.
Treating every role the same may control costs in the short term. It can also create retention issues in precisely the parts of the business that are hardest and most expensive to replace.
The organisations that navigate this successfully will segment their workforce and make deliberate decisions about where they protect base pay and where they don't.
The Four-Year Transition Is Longer Than It Looks
A phased increase sounds manageable.
In some ways, that's exactly what makes it dangerous.
When change happens gradually, organisations tend to delay decisions.
There will be a temptation to wait and deal with each increase as it arrives.
The risk is that by the time employers realise their market positioning has shifted, the gap has already opened.
Remuneration changes rarely happen in isolation. They interact with inflation, labour market conditions, internal pay equity, promotion frameworks and employee expectations.
Waiting until 2028 to start thinking about these issues means competing against organisations that started preparing years earlier.
The Employers Best Positioned For This Already Know Their Numbers
The organisations that will handle this transition best won't necessarily be the ones with the biggest budgets.
They'll be the ones with the best visibility.
They'll know:
Which roles are paid above market
Which roles are paid below market
Which talent segments are hardest to replace
Where compression risks already exist
How changes will affect different employee groups
Most organisations still struggle to answer these questions with confidence.
Many are relying on annual salary reviews, static surveys and spreadsheets that were never designed for modelling change at this scale.
That's where I think the real lesson sits.
Compulsory KiwiSaver on top of base isn't simply a retirement savings policy.
It's another reminder that remuneration is becoming more complex, more transparent and more strategic.
Organisations that treat pay as an annual administrative exercise will find themselves reacting to change.
Organisations that understand their workforce data and actively manage their market position will have far more control over the outcome.
The contribution rate may be the headline.
The real story is visibility.
