If an employee provides an Opt-out Request before their first pay, you have two options. According to the IRD's KiwiSaver Employer Guide, deductions should be made from any pays the employee receives during the first two weeks of employment. These deductions can then be refunded, resulting in a net effect of not having made any deductions in the first place.
- The first option is to follow the guide and make KiwiSaver deductions from any pays that occur in the first two weeks after starting. Then refund them, and then indicate in Maintain Employees that the employee has opted out by selecting the Opted out option.
- Secondly, from a practical, compliance cost point of view, it is simpler to not make any deductions that will subsequently have to be refunded. It will also prevent the need for the IRD to process any refunds, and avoid delays in the employee receiving their full wages. Since the processing of refunds is the most onerous aspect of KiwiSaver, it is ideal to avoid it altogether if at all possible. This can be achieved by encouraging all new employees to make the decision to opt-out or not, at the beginning of their employment, in other words they fill out at the KS10 at the same time as the IR330 and the KS2. They can always opt-in at any time in the future.
If an employee has decided to opt out, select the Opted out option before processing any pays. This will prevent any employee deductions being made, and avoid the need for processing refunds of KiwiSaver deductions and employer contributions.
In considering the options above, you MUST be aware that there may be a risk of incurring penalties for not making KiwiSaver deductions in the first two weeks.