From 1 April 2026, compulsory KiwiSaver contribution rates for both employees and employers will increase from 3% to 3.5%. This change comes from the Government’s 2025 Budget and is part of a broader series of KiwiSaver reforms designed to strengthen retirement savings in New Zealand.
This blog breaks down the practical impacts for businesses — from payroll and compliance to cashflow and budgeting — so you can prepare well before April 2026.
From 1 April 2026, the default KiwiSaver contribution rate rises from 3% to 3.5% for both employees and employers.
There’s a further scheduled increase to 4% from 1 April 2028, so this is the first step in a phased change.
Employees can apply to Inland Revenue before 1 April 2026 to temporarily stay at 3% if they want (applications open 1 February 2026). Employers can choose whether to match that lower rate.
From April 2026, employers must also make KiwiSaver contributions for 16 and 17-year-old employees who are enrolled and contributing.
From 1 July 2025 the Government contribution halved — meaning members receive a maximum of 25¢ per dollar contributed (up to $260.72 per year) compared with the previous $521.43 cap.
The most direct impact for employers is higher payroll costs. When you multiply even a small increase like 0.5% across all staff on the default rate, it adds up.
Here’s a simple example:
If you have 10 employees on the default rate, that’s an extra $3,500 annually you need to budget for.
Because employer KiwiSaver contributions remain a tax-deductible business expense, this doesn’t change your taxable profit directly — but it does affect your cashflow, budgeting and labour cost planning.
Your payroll software will need to be set up correctly to apply the new rate from the first pay period on or after 1 April 2026 — whether that’s Xero, MYOB, Smartly, iPayroll or another system.
You’ll also need to:
Failing to correctly apply the rates could lead to compliance issues with Inland Revenue.
From a staff perspective, this change slightly increases deductions from their pay:
Clear communication with your team before the change will help reduce confusion and questions at payday.
For SMEs with tight margins (like retail, hospitality or services), higher employer contributions do add to fixed labour costs. A report on KiwiSaver employer contributions found that smaller businesses are more likely to feel the financial impact of policy rate increases than larger firms.
That’s why planning ahead — including reviewing budgets, pricing, remuneration packages, and staff communication — is key. Early preparation reduces risk and gives you options rather than scrambling come April 2026.
Here’s a simple checklist to help you prepare:
✅ Review payroll system settings — ensure the new 3.5% rate is applied correctly from April 2026.
✅ Identify who’s on the default 3% rate — and who may already be on a higher rate.
✅ Check age/eligibility status of employees — especially 16 and 17-year-olds who might now require employer contributions.
✅ Update employment agreements if needed — especially those with total remuneration clauses.
✅ Communicate early to staff — set expectations and provide clarity on what will change at payday.
✅ Budget for increased employer costs — even a small percentage increase adds up across a workforce.
This KiwiSaver rate change might seem like a small half-percent move on the surface, but the flow-on effects — from payroll systems to cashflow and compliance — are worth planning for now, not later.
Approaching it early helps you:
If you’d like help reviewing your payroll settings, budgeting for these changes, or drafting employee communications like this blog for your own team, we’re here to support you.
