Employer KiwiSaver Cost And ESCT
Employer KiwiSaver cost starts at 3.5% of the employee’s gross KiwiSaver pay. Employer superannuation contribution tax (ESCT) is then taken off that employer contribution, so the scheme often receives less than 3.5%.
The 3.5% is still what payroll funds. ESCT is the slice that goes to Inland Revenue instead of the fund. The employee deduction is a separate line. It is not ESCT.
What ESCT rate applies from 1 April 2025?
Inland Revenue sets one ESCT rate for the employee from the prior tax year salary or wages plus gross employer contributions. The thresholds below took effect from 1 April 2025. PAYE deduction tables IR340 and IR341 for April 2026 still use the same bands.
| Employee’s annual income plus gross employer contribution | ESCT rate |
|---|---|
| $0 to $18,720 | 10.5% |
| $18,721 to $64,200 | 17.5% |
| $64,201 to $93,720 | 30% |
| $93,721 to $216,000 | 33% |
| $216,001 upwards | 39% |
Sources: Inland Revenue Get ready for new ESCT and FBT changes, PAYE tables IR341 (April 2026), and Employer’s guide IR335. You can choose a flat 39% if you are paying into a defined benefit fund.
That rate applies to the whole employer contribution. It is not sliced like income tax. Teachers Retire used an $85,000 example: the entire contribution sits in one band. Inland Revenue’s IR335 examples do the same. Josh’s annual salary plus employer superannuation contributions is $80,000, so ESCT is 30%. Bree’s figure is $53,000, so ESCT is 17.5%.
| IR335 named example | Salary plus employer contributions | ESCT rate |
|---|---|---|
| Bree | $53,000 | 17.5% |
| Josh | $80,000 | 30% |
You do not need to know how much the employee earns in any other job. Inland Revenue’s ESCT page is blunt on that. Work the rate from this employment only.
How do I work out employer KiwiSaver cost?
Inland Revenue’s calculate KiwiSaver deductions and contributions page is the payroll order: gross pay, employee deduction, employer contribution, then ESCT, then the net amount in employment information.
Gross pay. Use Inland Revenue gross pay for KiwiSaver schemes and complying funds. KiwiSaver gross includes bonuses, commission, extra salary, gratuities, overtime, and other before tax remuneration.
Employee deduction. Use the KS2 rate. If no rate is chosen, Inland Revenue says use the 3.5% base rate. A temporary 3% reduction is a separate Inland Revenue notice, not a KS2 tick.
Employer contribution. The lowest compulsory rate is 3.5% of that gross, unless the employee is on a temporary 3% KiwiSaver reduction and you choose to match 3%. If you contribute at a higher rate, use that rate.
ESCT, then net. Deduct ESCT from all employer contributions, including voluntary extras. Enter the net employer contribution. Include ESCT in payday filing for small employers.
From 1 April 2026 that 3.5% is the default employer match as well as the default employee deduction. The next default lift is 4% from 1 April 2028. The rate change itself sits on KiwiSaver 3.5% change from 1 April 2026. This page stays on what the employer line costs after tax.
Compulsory employer contributions apply for employees aged 16 and over, aged under 65, in KiwiSaver or a complying fund with deductions from salary or wages, and not a member of a defined benefit scheme. Inland Revenue: start CECs for new employees you enrol from their first pay, and from the first pay after you are notified if they opt in. You can stop CECs on an approved savings suspension, a KS51 notice because they are eligible to withdraw, or if Inland Revenue asks you to stop. You can also stop CECs when they become eligible for NZ Super, unless you have an agreement or you volunteer to keep paying. ESCT still applies on those voluntary extras.
Is ESCT extra on top of 3.5%?
No, not on Inland Revenue’s default method. ESCT is deducted from the employer contribution. Your cash outlay for a standard 3.5% CEC is 3.5% of gross KiwiSaver pay. Part of that 3.5% is ESCT to Inland Revenue. The rest is the net employer contribution to the scheme.
Gross employer
3.5%
Compulsory minimum of gross KiwiSaver pay, unless you choose 3% during a temporary reduction.
ESCT to IRD
Taken off
Calculated on each whole dollar of the employer contribution, at that employee’s ESCT rate.
Net to the scheme
3.5% minus ESCT
Inland Revenue: you may get less than 3.5% paid into the account after ESCT.
Labelled example: $1,000 gross pay
Employer compulsory 3.5% before ESCT: $1,000 × 3.5% = $35.00. Inland Revenue: you may get less than 3.5% paid into the account after ESCT. This $1,000 figure applies Inland Revenue’s published percentage. It is not an Inland Revenue worked ESCT example.
Do not treat ESCT as a second bill on top of 3.5% unless the employment agreement promises a set net percentage into the fund. Inland Revenue only grosses up when you must contribute a set percentage so the employee still receives that full net entitlement. Some software guides add ESCT as extra employer cost on a $60,000 wage. That is the gross up method, not the usual deduct from each contribution method.
Inland Revenue’s easiest check is its PAYE/KiwiSaver deductions calculator: salary or wage, tax code, employee KiwiSaver rate, employer rate, and ESCT rate. To see the employee PAYE, ACC, and KiwiSaver deduction on the same wage, run it through the PAYE calculator.
Do not change the ESCT rate mid year. Employer’s guide IR335: work out the ESCT rate for each employee at the start of the tax year (1 April). Do not change it if salary or wages change during the tax year. Change it at the start of the next tax year. New employees who did not work for you in the previous tax year use an estimate of this year’s salary or wages plus gross employer contributions.
What counts as gross pay for employer KiwiSaver?
Inland Revenue treats KiwiSaver gross pay as total salary or wages including bonuses, commission, extra salary, gratuities, overtime, and any other remuneration of any kind before tax, for example taxable benefit allowances. That is the base for the employee deduction and for your 3.5% unless an exclusion applies.
| In KiwiSaver gross pay | Usually out of KiwiSaver gross pay |
|---|---|
| Bonuses, commission, extra salary, gratuities, overtime, other before tax remuneration | Redundancy payments |
| Taxable benefit allowances | Board, lodging, use of a house, or an allowance instead of accommodation |
| Backdated salary or wages, if you take KiwiSaver deductions from them | Accommodation and living cost allowances overseas |
| Free or discounted employee share scheme shares | |
| Voluntary Bonding scheme payments funded by the Ministry for Primary Industries, Te Whatu Ora Health New Zealand, or the Ministry of Education | |
| Honoraria paid by Fire and Emergency New Zealand to a volunteer |
Source: Inland Revenue gross pay for KiwiSaver schemes and complying funds. Keep records of income exempt from KiwiSaver. Inland Revenue confirms that information with you annually. Complying funds use gross base salary or wages, so you exclude bonuses, commissions, and other amounts the trust deed leaves out.
A bonus still sits in KiwiSaver gross. A redundancy payment does not. Inland Revenue also excludes some periodic payments to retired staff, such as a pension, retiring allowance, superannuation, or other allowance or annuity relating to past employment. Special cases such as accident compensation and paid parental leave have their own Inland Revenue page. Joining, KS2 rates, and withdrawals sit on the KiwiSaver hub.
What are the two ESCT methods?
Inland Revenue gives two ways to tax employer contributions. Most payrolls deduct ESCT from each employer contribution. The other path is to include the employer contribution in gross salary or wages and tax it under PAYE. Then there is no ESCT deduction on that amount.
| Option 1: deduct ESCT | Option 2: treat as salary | |
|---|---|---|
| What happens | ESCT comes off the employer contribution. Net goes to the scheme. ESCT goes to Inland Revenue with other deductions. | You and the employee agree. The contribution is added to gross pay and taxed under PAYE. The money still goes to the fund, not into the hand. |
| ESCT line | Yes. Show each employee’s ESCT in payday filing. | No ESCT deduction on the amount treated as salary. |
| When you gross up | Only if the agreement requires a set net percentage into the fund. IR335 Albert example: 5% net on $70,000 is $3,500 to the fund, $1,500 ESCT, $5,000 gross for the year. | IR335 Lani and Harriet examples add $80 to $800 weekly pay. PAYE is calculated on $880. There is no ESCT line. |
| Watch | ESCT on whole dollars. Do not change the rate mid year. | IR335: classifying the amount as salary or wages may affect Working for Families, independent earner tax credit, child support, and student loan repayments. ACC earners levy is deducted on that amount. |
Sources: Inland Revenue ESCT page, deduct ESCT from each employer contribution, and Employer’s guide IR335. Employees can change back from option 2 at any time.
If the employee is in a complying fund, do not pay employee deductions or employer contributions to Inland Revenue. Pay them direct to the complying fund. Still include ESCT in employment information. If they are in both a KiwiSaver scheme and a complying fund, Inland Revenue lets you send the compulsory employer contribution to one fund or share it, for example 2.5% to KiwiSaver and 1% to the complying fund, as long as the total is at least 3.5%.
KiwiSaver scheme contributions are paid with your total employer deductions payment for that period. Business.govt.nz: if PAYE and ESCT is $50,000 or more a year you must file electronically. Under $50,000 you can file electronically or by paper. File ESCT on the payday return. There is no separate ESCT form.
Use case: Ray’s Transport Ltd (IR335)
Situation: Inland Revenue’s own example. Matthew started on 1 August 2025 on a $70,000 salary plus 3.5% employer superannuation contributions. He is paid monthly. He did not work for Ray’s Transport Ltd in the previous tax year, so payroll estimates this year.
KiwiSaver and ESCT: $70,000 plus 3.5% is $72,450 for a full year. From 1 August to 31 March that is $48,300, so ESCT is 17.5%. Monthly employer contribution $204.17, less ESCT $35.73, net $168.44 to the fund. From 1 April 2026 Inland Revenue says estimate again on a full year $72,450, which sits in the $64,201 to $93,720 band, so ESCT becomes 30%.
Action: set the rate at 1 April from last year’s figures, or from this year’s estimate if they are new. Do not wait for a pay rise in August to move the rate.
Pull highlight: Inland Revenue’s KiwiSaver benefits page is blunt. The employer must pay tax on their 3.5% contribution, so you may get less than 3.5% paid into your account.
What should total remuneration packages do with CEC?
Inland Revenue: if you agree a total remuneration package, you must still pay employer contributions on top of the package if they are not already included. Take home pay should not be less because of compulsory employer contributions. You can negotiate a salary package that includes a CEC component, but employees must be paid at least the minimum wage excluding any CEC component.
KS4, the KiwiSaver employer guide, repeats that the 3.5% is in addition to gross salary or wages. Existing superannuation scheme contributions may reduce the compulsory KiwiSaver amount if they meet Inland Revenue’s conditions. Check those conditions on Inland Revenue’s employer contributions page rather than assuming a private scheme already covers the 3.5%.
What people get stuck on
Geekzone payslip threads still ask why the employer KiwiSaver line in the scheme is smaller than the employee line. Inland Revenue’s KiwiSaver benefits page is the official reason: tax on the employer 3.5%. That tax is ESCT. It does not come off the employee deduction.
A second mix up is “ESCT on top”. Some payroll blogs add ESCT as extra employer cost on a $60,000 wage. Inland Revenue’s default is deduct ESCT from the 3.5%. Gross up only if the contract promises a net percentage to the fund.
A third mix up is changing the ESCT rate when pay changes. That is not IR335. Set it on 1 April. New starters use an estimate, then a full year estimate from the next 1 April, as in the Matthew example.
Business.govt.nz’s ESCT page (last reviewed 22 July 2025) still says you pay ESCT on a compulsory 3% employer contribution. Follow Inland Revenue for the contribution rate: 3.5% from 1 April 2026, unless you choose to match 3% during a temporary reduction. Use the Business.govt.nz table for the 1 April 2025 ESCT bands, which match Inland Revenue.
Frequently asked questions
Why is the employer KiwiSaver amount in the scheme less than 3.5%?
Because Inland Revenue deducts employer superannuation contribution tax (ESCT) from the employer contribution. The compulsory employer contribution is 3.5% of gross (unless a temporary rate reduction and the employer chooses to match 3%). ESCT comes off that employer amount, so the scheme can receive less than 3.5%. Employee deductions are not ESCT.
Is ESCT taken from employee wages?
No. Inland Revenue: ESCT is deducted from employer contributions to KiwiSaver or complying funds. You do not pay ESCT if the employee asks you to deduct money from their pay to put into a superannuation scheme. Those are not employer contributions.
Do I change the ESCT rate when an employee's pay rises during the year?
No. Inland Revenue's Employer's guide IR335: work out the ESCT rate for each employee at the start of the tax year (1 April). Do not change the ESCT rate if an employee's salary or wage changes during the tax year. Change it at the start of the next tax year.