Quick answer
Inland Revenue says the default KiwiSaver contribution rate rose from 3% to 3.5% for both employees and employers on 1 April 2026, and will rise again to 4% on 1 April 2028. For New Zealand employers, that means higher employer contributions on the gross pay of staff at the default rate, paid alongside PAYE. The change is modest per employee but adds up across a payroll, so it belongs in your cash flow forecast and pricing.
Key points
- Default rate 3% to 3.5% for employee and employer from 1 April 2026.
- A further rise to 4% is scheduled from 1 April 2028.
- Employer contributions are paid to Inland Revenue with PAYE.
- Employees can apply for a temporary rate reduction for 3 to 12 months.
- Build the higher cost into forecasts, quotes and wage budgets now.
What changed on 1 April 2026?
Inland Revenue’s summary is short: if an employee was contributing at the default rate of 3%, that rate automatically rose to 3.5% from 1 April 2026 — for both the employee’s contribution and the employer’s. A further step is scheduled: the default rate rises to 4% for both employee and employer on 1 April 2028.
For employees, the change shows up as a slightly larger deduction from their pay. For employers, it shows up as a slightly larger contribution on top of gross pay — paid to Inland Revenue alongside PAYE.
Half a percent doesn’t sound like much. Across a full payroll, every pay run, for a whole year, it’s a real number — and for businesses already managing tight margins and uneven cash flow, it’s worth planning for rather than discovering.
How do you estimate the extra cost?
A simple method:
- Identify staff at the default rate. Employees who’ve chosen a higher rate weren’t automatically moved, and some may have applied for a temporary reduction.
- Total their gross pay for a typical pay period.
- Multiply by 0.5%. That’s the extra employer contribution per pay period, compared with the old default.
- Multiply by pay periods in the year for an annual figure.
- Repeat with 1% instead of 0.5% to see the cost from April 2028, when the rate rises to 4%.
Illustrative example. A Napier hospitality business has 18 staff, all at the default rate, with combined gross wages of $36,000 a fortnight. The extra 0.5% employer contribution is $180 a fortnight — about $4,680 a year. From April 2028, compared with the original 3%, the extra would be about $9,360 a year. None of this is dramatic on its own, but it arrives every fortnight, alongside PAYE, and it needs to be priced in.
These figures are illustrative only. Your payroll software will calculate the exact amounts, and your accountant can advise on treatment.
When does the money actually leave your account?
Inland Revenue says employer KiwiSaver contributions are included in your employment information return along with ESCT (the tax on employer contributions), and paid with your total employer deductions for that period. Inland Revenue requires:
- Small employers to pay deductions monthly, by the 20th of the following month.
- Large employers to pay twice monthly — by the 20th for wages paid in the first half of the month, and by the 5th of the following month for the second half (with 15 January replacing 5 January for late-December pay).
So the higher contribution doesn’t come out on payday itself; it lands a few weeks later with PAYE. That lag is helpful for timing, but it also means a busy month of wages creates a bigger tax bill a few weeks later — potentially in a quieter month.
What about employees who reduce their contributions?
Inland Revenue says KiwiSaver members can apply for a temporary rate reduction for between 3 and 12 months; contributions return to the default rate after that, and the option can be reapplied. Inland Revenue’s employer guidance says the minimum employer contribution is 3.5% of an employee’s gross salary or wages unless the employee is on a temporary rate reduction — in which case the employer can choose to lower its contribution to 3% as well. If some of your staff take this up, make sure your payroll software reflects it from the right date.
How should you adjust your cash flow forecast?
business.govt.nz recommends cash flow forecasting as a way to avoid financial trouble and plan for growth. For the KiwiSaver change:
- Update your payroll cost line with the higher employer contribution from April 2026.
- Add the PAYE timing — the 20th (or twice monthly for large employers).
- Mark April 2028 as the next step change.
- Check your peak months. Seasonal businesses with big peak-season payrolls will see the largest increases in those months — and the PAYE bill a few weeks later.
How should you adjust pricing and quotes?
For labour-heavy businesses — trades, hospitality, cleaning, labour hire, care — the KiwiSaver increase is a direct cost increase on every hour worked. If you quote fixed prices for long contracts, check whether quotes prepared before April 2026 allowed for it, and make sure new quotes do, including any work running past April 2028. Contracts with cost escalation clauses may allow some recovery; your lawyer or accountant can advise.
When does fast funding help — and when doesn’t it?
Be clear about what borrowing can and can’t do here.
It can help with timing. If you pay wages weekly but customers pay monthly, the higher payroll cost widens a gap that already exists. A line of credit or invoice finance can smooth that timing. Our page on covering payroll compares the fast options.
It can’t fix a permanent margin squeeze. A higher ongoing cost needs to be covered by pricing, productivity or cost savings elsewhere. Borrowing to absorb a permanent increase just postpones the problem and adds finance costs on top.
Illustrative example. A Christchurch labour-hire company bills clients monthly on 30-day terms and pays workers weekly. The KiwiSaver increase adds a modest amount to every weekly payroll, but because the gap between paying and being paid is already six weeks, the extra cost widens the gap noticeably at peak times. The company updates its charge-out rates for new contracts and uses invoice finance against client invoices to smooth timing — two different tools for two different problems.
Does the change affect employees on contracts or casual staff?
KiwiSaver obligations follow employment status and enrolment, not just whether someone is permanent. Casual and part-time employees who are KiwiSaver members and contributing at the default rate are affected in the same way. Contractors who aren’t employees are outside your payroll. If you’re unsure about a particular worker’s status, check with your accountant or an employment adviser before assuming either way.
What else is changing for employers?
KiwiSaver isn’t the only moving part. Employers also manage minimum wage reviews, holiday pay obligations and ACC levies. We don’t cover those here, but the principle is the same: build known changes into forecasts before they arrive, price them into quotes, and keep standby funding for timing gaps rather than permanent costs.
How do you talk to staff about the change?
Most employees will notice a slightly larger KiwiSaver deduction and a slightly smaller take-home figure. A short note explaining the change, the scheduled step to 4% in April 2028 and the option to apply for a temporary rate reduction (for between 3 and 12 months) avoids confusion and payroll queries. Point staff to Inland Revenue’s KiwiSaver information rather than giving personal financial advice — and make sure your payroll team knows how to process a reduction if one is approved.
A quick employer checklist
- Confirm your payroll software applied 3.5% from 1 April 2026 for default-rate staff.
- Estimate the annual extra cost and the April 2028 step.
- Update your cash flow forecast with PAYE timing.
- Review quotes and long contracts for labour cost assumptions.
- Check how temporary rate reductions are handled in your payroll.
- If wage timing is already tight, arrange a standby facility while things are calm.
For a closer look at choosing between a revolving facility and a one-off loan for payroll gaps, read line of credit vs short-term loan. For the bigger picture of cash tied up in wages, stock and debtors, see working capital loans.
Payroll timing already tight? Talk to a specialist about standby funding.
Keep payroll smooth as costs rise
Higher employer contributions are manageable when they’re planned for. If the timing between paying staff and getting paid is already stretched, we can help you find a facility that fits. Asking involves no credit check, and your details stay with one specialist — we don’t hand them out to a string of lenders. Tell us accurately what your payroll costs, how often you pay and when customers usually pay you, and we’ll suggest the simplest way to keep wages and PAYE on time. See if you qualify.
Frequently asked questions
When did the KiwiSaver default rate change?
Inland Revenue says the default contribution rate rose from 3% to 3.5% on 1 April 2026 for both the employee and the employer, and is scheduled to rise to 4% on 1 April 2028.
How much extra does the change cost an employer?
For staff at the default rate, an extra half a percent of their gross pay in employer contributions. Across a payroll, multiply total gross wages for those staff by 0.5% to estimate the increase.
Can employees reduce their contributions?
Inland Revenue says members can apply for a temporary rate reduction for between 3 and 12 months, after which contributions return to the default rate.
When are employer KiwiSaver contributions paid?
They're paid to Inland Revenue along with PAYE. Small employers pay deductions by the 20th of the following month; large employers pay twice monthly.
Should I borrow to cover higher payroll costs?
Borrowing isn't a fix for a permanent cost increase. It can help with timing — for example, bridging a gap between paying wages and getting paid — but the higher cost itself needs to be covered by pricing or efficiency.