Total Remuneration vs Salary Plus KiwiSaver in New Zealand

New Zealand employers structure KiwiSaver employer contributions in one of two ways. Under total remuneration, the employer’s contribution is deducted from your stated salary figure, so a $100,000 total remuneration role pays less than $100,000 in actual wages. Under salary plus KiwiSaver, your stated salary is untouched and the employer’s contribution is genuinely additional. Both are legal. The difference can be worth thousands of dollars a year, and it is determined entirely by the wording of your employment agreement.

Use the NZ ESCT Calculator To Calculate Employer Superannuation Contribution Tax

This is one of the most consistently misunderstood parts of New Zealand employment, and it affects almost every employee enrolled in KiwiSaver, New Zealand’s voluntary, work based retirement savings scheme established under the KiwiSaver Act 2006. This guide covers what each structure means, whether it is legal, exactly how the numbers work out at different salary levels and contribution rates, how to tell which structure applies to you, and what to do about it.

How KiwiSaver Employer Contributions Work

Under KiwiSaver, an enrolled employee contributes a percentage of their gross salary or wages (3%, 4%, 6%, 8%, or 10%), and their employer is generally required to contribute a minimum of 3% as well, unless the employee has opted out or is on a contributions holiday. As of the current settings, the default employer contribution many employers pay is 3.5%, following a scheduled increase from the previous 3% minimum. This employer contribution is subject to ESCT (Employer Superannuation Contribution Tax) before it reaches the employee’s KiwiSaver account, regardless of which pay structure applies. The Government also contributes a small annual member tax credit for eligible members, administered by Inland Revenue (IRD).

The genuinely important question, and the one this guide answers, is not how much the employer contributes, but whether that contribution comes out of your salary or sits on top of it.

Definition: Total Remuneration

A total remuneration package is also called an inclusive package, total cost to company or total compensation structure. It treats the employer’s KiwiSaver contribution as part of, not in addition to, the headline salary figure.  The employer sets a single fixed total cost for the role. Within that fixed amount, your actual base salary is calculated by removing the employer’s contribution.

Formula: Base salary = Total remuneration ÷ (1 + employer contribution rate)
Example at 3.5%: Base salary = Total remuneration ÷ 1.035

Definition: Salary Plus KiwiSaver

Under a salary plus KiwiSaver structure (also called an exclusive package, or pay plus benefits), your stated salary is a fixed number that is not reduced by KiwiSaver. The employer’s contribution is calculated as a straightforward percentage on top of that salary, as a genuinely additional cost to the employer.

Formula: Employer contribution = Base salary × employer contribution rate (added on top, salary unaffected)

Worked Example Across Salary Levels

The table below shows the actual base salary and employer contribution under each structure, for common salary levels, using a 3.5% employer contribution rate.

Headline offer	Base salary (total remuneration)	Base salary (salary plus KiwiSaver)	Gap
$50,000	$48,309	$50,000	$1,691
$70,000	$67,633	$70,000	$2,367
$80,000	$77,295	$80,000	$2,705
$100,000	$96,618	$100,000	$3,382
$150,000	$144,928	$150,000	$5,072

How the Gap Changes With Your Contribution Rate

Employees can choose to contribute at 3%, 4%, 6%, 8%, or 10% themselves, but the employer contribution rate is what drives the total remuneration gap. Employers are only required to match the statutory minimum, though some employers voluntarily offer a higher matched rate. Here is how the base salary gap on a $100,000 total remuneration role changes at different employer contribution rates.

Employer contribution rate	Base salary under total remuneration	Gap vs $100,000 headline
3%	$97,087	$2,913
3.5%	$96,618	$3,382
6%	$94,340	$5,660
8%	$92,593	$7,407
10%	$90,909	$9,091

This is why scheduled increases to the default KiwiSaver employer contribution rate matter more to employees on total remuneration than to those on salary plus KiwiSaver. On total remuneration, a rising employer contribution rate quietly reduces the base salary component further each time it increases, unless the employer chooses to absorb the cost instead. On salary plus KiwiSaver, an increase in the required rate simply costs the employer more, with the employee’s base salary unaffected.

Is This Legal? The Governing Framework

Yes, a total remuneration structure is lawful in New Zealand. It operates within the framework of the Employment Relations Act 2000 which governs employment agreements generally and the KiwiSaver Act 2006 which governs contribution obligations, provided the arrangement is genuinely agreed between employer and employee and clearly documented. It is not considered a loophole in itself and it is used by a meaningful share of New Zealand employers, though its fairness is genuinely debated. New Zealand’s Commission for Financial Capability – the predecessor to Te Ara Ahunga Ora, the Retirement Commission has previously noted that total remuneration structures can act as a disincentive to KiwiSaver participation, since employees effectively fund their own employer contribution.

There is one firm legal boundary: a total remuneration clause cannot be applied if doing so would drop an employee’s pay below the statutory minimum wage once the employer’s KiwiSaver contribution is deducted. This protection exists under New Zealand’s minimum wage legislation, and it means employees on or near minimum wage cannot lawfully be placed on a total remuneration structure that would breach it.

Can Your Employer Change Your Structure?

Not unilaterally. Moving an employee from salary plus KiwiSaver to total remuneration, or the reverse, is a variation to the employment agreement. Under New Zealand employment law, an employer cannot reduce an employee’s base pay without the employee’s genuine agreement to that specific change, properly negotiated and documented. An employer proposing this kind of change should explain it clearly and give the employee a real opportunity to consider and respond to it, rather than treating it as an automatic administrative update.

Who Typically Uses Each Structure?

Structure	More commonly used by
Total remuneration	Larger corporates and some professional services firms that manage remuneration as a fixed total cost per role, for budgeting and internal pay equity purposes
Salary plus KiwiSaver	Many small and medium businesses, where the employer contribution is treated as a standard additional employment cost rather than built into a fixed total figure

Pros and Cons

	Total remuneration	Salary plus KiwiSaver
For the employee	Predictable total cost, but effectively funds their own retirement contribution out of the headline salary	Full stated salary as cash pay, plus a genuinely additional retirement contribution
For the employer	Simplifies budgeting, since total cost per role is fixed regardless of contribution rate changes	Higher genuine cost per employee, but often viewed as more attractive to candidates and fairer to KiwiSaver participants
Fairness consideration	Employees who opt out of KiwiSaver may end up with a higher effective base salary than KiwiSaver members on the same total package	All employees receive the same stated base salary regardless of KiwiSaver participation

How to Check Which Structure Applies to You

1. Read your employment agreement’s remuneration clause. Look specifically for the words “total remuneration”, “inclusive of KiwiSaver”, “total cost to company”, or “total compensation”.
2. Compare your first payslip against your offer letter. If your gross salary on the payslip is lower than the headline figure you were offered, you are very likely on total remuneration.
3. Ask directly, before signing. Simply ask your employer or recruiter whether the KiwiSaver employer contribution is included in or additional to the stated salary. This is a completely normal, reasonable question to ask during salary negotiation.

Negotiating and Red Flags

If you are comparing two job offers with similar headline salaries, always ask which pay structure applies before comparing them directly. A “$5,000 pay rise” moving from a salary plus KiwiSaver role to a total remuneration role of the same headline figure may represent a much smaller, or even negative, actual increase in base pay once the structures are accounted for. When negotiating a new offer, it is reasonable to ask whether the employer would consider moving a total remuneration offer to salary plus KiwiSaver, particularly for senior or hard to fill roles, though the employer is not obliged to change their standard policy.

Glossary of Key Terms

KiwiSaver	New Zealand’s voluntary, work based retirement savings scheme, established under the KiwiSaver Act 2006
ESCT	Employer Superannuation Contribution Tax, withheld from the employer’s KiwiSaver contribution before it reaches the employee’s account
Total remuneration	A pay structure where the employer’s KiwiSaver contribution is included within, and reduces, the stated salary figure
Salary plus KiwiSaver	A pay structure where the employer’s KiwiSaver contribution is paid in addition to, and does not reduce, the stated salary
Employer contribution rate	The percentage of salary an employer contributes to an employee’s KiwiSaver, with a statutory minimum that has increased over time
Minimum Wage Act	New Zealand legislation setting the statutory minimum hourly wage, which limits how a total remuneration clause can be applied
Employment Relations Act 2000	The primary New Zealand legislation governing employment agreements, including how variations must be agreed
Te Ara Ahunga Ora	New Zealand’s Retirement Commission, which researches and reports on KiwiSaver policy including total remuneration practices

Check Your Own Numbers

If you know your employer contribution rate and want to see exactly how much ESCT is deducted before the money reaches your KiwiSaver account, our ESCT calculator works this out instantly. For your full take home pay including PAYE, ACC and KiwiSaver together, use the PAYE and take home pay calculator.

Frequently Asked Questions