Definition of "salary and wages" (section 4 of the KiwiSaver Act)

2007 amendment to the definition of 'salary and wages' in the KiwiSaver Act to cover paid parental leave, redundancy and overseas based employees.

The definition of "salary and wages" in section 4 of the KiwiSaver Act has been amended in the following ways:

  • From 1 July 2007, all weekly compensation and paid parental leave payable under Part 7A of the Parental Leave and Employment Protection Act 1987 are treated as salary or wages for the purposes of KiwiSaver.
  • Redundancy payments as defined in the Income Tax Act 2004 are excluded from the definition of "salary and wages".
  • Expenditure on account of an employee and allowances if they are overseas, accommodation and other costs of living are also excluded from the definition of "salary and wages".

The government's intention was that from 1 April 2008, the value of benefits such as board or lodging or the use of a house or quarters, or the payment of allowances instead of such benefits14 would be excluded from the definition of "salary and wages" in section 4 of the KiwiSaver Act. However, this provision was inadvertently omitted from the amending Act. The omission is expected to be corrected in future legislation.

For the purposes of compulsory employer contributions, the following are not considered salary or wages:

  • all weekly compensation and paid parental leave; and
  • weekly compensation paid by an employer, unless the employer chooses to treat such payments as salary or wages.

This means that these payments are not subject to compulsory employer contributions.

For contributions to complying funds, bonuses, commissions and other amounts that are not included in gross base salary or wages are excluded. This enables employers that contribute to complying funds to apply current practice (gross base salary, or a variant of this) as a contributions multiplier. This change means non-regular payments are excluded and contributions, including compulsory employer contributions, are calculated on the same gross base salary basis as an employee's contribution. However, employers will have to use gross salary and wages as a basis for contributions for those employees that choose to opt into KiwiSaver.


14 Para (b)(i) of the definition of "salary or wages" in the Income Tax Act 2004.