What impact could compulsory KiwiSaver contributions have for business owners?

On top of its November 2025 KiwiSaver announcement to lift default contribution rates from 1 April 2029 until employer and employee contributions reach 6% each by 2032, the National Party has outlined a further proposal to make KiwiSaver contributions compulsory for all workers if re-elected at the upcoming General Election.

While these changes remain proposals and would depend on the outcome of the election, they signal a continued focus on lifting retirement savings and broadening KiwiSaver participation. For employers and self-employed people, it’s important to understand the likely impact early, so decisions about cash flow, remuneration, payroll and communication can be made with confidence.

National’s recent policy announcement follows a series of related KiwiSaver amendments in recent years, including the minimum contribution rate increasing to 4% by 1 April 2028 and the Government’s annual contribution being halved to $260.72. You can read more about these changes here.

Tax Partner Alan Scott breaks down what the latest proposal could mean for your business.

“The proposed shift to compulsory KiwiSaver would be a significant policy change for employees and employers. While the long-term goal is to strengthen retirement savings, the immediate question for businesses is how to plan for higher employment costs, tighter cash flow and the administration that comes with wider participation.” – Alan Scott, BDO Tax Partner

 

What are the proposed KiwiSaver changes?

If progressed, the proposal would include:

• Making contributions to KiwiSaver (or an equivalent scheme) compulsory for all workers, including self-employed people, from 1 July 2028.
• A $1,500 “Baby Boost” payment for children born in New Zealand, with automatic KiwiSaver enrolment at birth from 1 July 2027.
• Government contributions to a parent’s KiwiSaver account while they are on paid parental leave, based on the default contribution rate and the amount of paid parental leave received.
• Extending compulsory employer KiwiSaver contributions to employees aged over 65 from 1 July 2027.
• Limiting contribution suspensions to people who meet the existing KiwiSaver hardship test.

Workers already contributing to an approved equivalent scheme may not be required to join KiwiSaver.

What could this mean for businesses?

For many businesses, the practical first step is to model the expected cost increase across different employee groups, then assess whether current pricing, margins and remuneration settings can absorb the change.

For employers, the proposed changes would extend beyond payroll administration. Compulsory contributions and higher default rates would need to be factored into total remuneration settings, salary reviews, hiring decisions and future workforce planning. Labour-intensive businesses may feel the impact most directly, particularly where margins are already tight or wage costs represent a significant share of operating expenses.

Employers should also consider how compulsory employer contributions for employees aged over 65 could affect employment costs, payroll settings and employment agreements from 1 July 2027, if the policy progresses.

Self-employed people who currently contribute voluntarily to KiwiSaver do not receive employer contributions. Under the proposal, they would need to make compulsory contributions equivalent to employee contributions, starting at 4% of income from 1 July 2028 and increasing to 6% by 2032.
 

“For self-employed people, this is not simply a payroll adjustment. It is a cash flow issue. Many sole traders and owner-operators already manage variable income, provisional tax and business reinvestment, so a compulsory contribution would need to be built into their budgeting well before the rules take effect. The businesses that start modelling the impact early will be better placed to make informed decisions about pricing, profit distribution and future growth.”

More than 420,000 people are self-employed in New Zealand, whether as sole traders or working through a company structure. With often fluctuating cash flow and irregular income, a mandatory 4%, increasing to 6%, contribution may require many self-employed people to rethink how they manage drawings, tax payments and working capital.
 

“The detail of how compulsory contributions would be collected from self-employed people will be critical. Options such as provisional tax or GST returns may be considered, but many self-employed people will not know their actual profit until year end. Any in-year payment method will need to be practical and fair to avoid overpayment, underpayment or added cash flow pressure. With no employer contribution and a reduced Government contribution, the incentive for self-employed people to participate may also be more limited.”

 

What should business owners do now?

• Model the future cost impact early.  Estimate the effect of compulsory KiwiSaver and higher contribution rates on total employment costs, including current employees and planned future hires.
• Review remuneration settings and employment agreement settings. Consider how KiwiSaver costs are treated in employment agreements, salary reviews and future offers, particularly where roles are priced on a total remuneration basis or where future increases may influence wage negotiations.
• Plan for workforce, payroll and employment agreement changes. Check whether payroll systems, processes, employee records and employment agreements can support wider compulsory participation and phased contribution rate increases.
• Build KiwiSaver into budgeting and forecasting. Include the expected cost increases into future budgets, cash flow forecasts and pricing decisions, especially for labour-intensive businesses where employment costs represent a significant share of operating expenses.
• Plan clear communication with employees.  Be ready to explain what the proposed changes could mean for take-home pay, contribution rates and employer obligations, using plain language and allowing time for questions.

What should self-employed people consider?

For self-employed people, the proposed changes could affect both personal retirement savings and business cash flow. The earlier you understand the likely impact, the easier it may be to plan contributions alongside tax payments, drawings and reinvestment in the business.

• Assess the cash flow impact. Estimate what compulsory contributions of 4%, increasing to 6%, could mean based on expected income, drawings and seasonal fluctuations.
• Review how income is structured. Consider whether current drawings, shareholder salaries or contractor income settings remain appropriate once compulsory contributions are introduced.
• Factor KiwiSaver into tax planning. Build future contributions into provisional tax planning, working capital forecasts and year-end profit distribution decisions.
• Seek advice before making structural changes.  Before changing business structures, remuneration settings or drawings policies, speak with your adviser to understand the potential tax, cash flow and compliance implications.

 

If you would like to understand what the proposed KiwiSaver changes could mean for your business or personal position, reach out to a member of our tax team or your local BDO adviser can help you model the impact and plan your next steps.