Opting an employee out of KiwiSaver after their first pay and refunding their contributions

ANSWER ID:30985

If a new employee gives you an opt-out notice any time after their first pay, any KiwiSaver deductions that have been made in the current month may be refunded to the employee. The Inland Revenue Department (IRD) will automatically refund any deductions that have already been reported to them for prior months.

Employees will only be refunded for the employee's portion of the contribution, and the employer will be refunded the employer's portion of the contribution.

Work out what to do

The first decision you have to make is:

Are you going to let the IRD refund the KiwiSaver deductions?

OR
Are you going to refund the KiwiSaver deductions to the employee?

If you choose No. 1

then there is no action required in Payroll, although employees will have to wait until after the current month's PAYE is processed before receiving their refund from the IRD.

The IRD is advised that the employee has opted out by a KiwiSaver Opt-out form (KS10). For example, an employee starts work on the 2nd April and KiwiSaver deductions are made from the employee's wages. They opt out on the 7th of May. The employer will file the KS10 form and the IRD will then refund the employee's KiwiSaver deductions to the employee and any employer contributions to your KiwiSaver account.

If you choose No. 2

You can refund the May KiwiSaver deductions in the employee's next pay in May. The April deductions will be refunded by the IRD after they process the PAYE month. If any KiwiSaver deductions for the current month are being refunded, these need to be re-processed, either by restoring a backup and re-processing the pay without KiwiSaver, or reversing the payrun for the affected employee and redoing the pay.