"There is no way that it is fair for one employee to be paid less each week in their take-home pay than an employee doing the same tasks, simply because they choose to be in KiwiSaver and the other employee doesn't," Mr Mallard told the Weekend Herald.

In principle, up to the government contribution of $1043 I agree 100%.  After that however, I strongly disagree. I say:

There is no way that it is fair for one employee to be paid less each week in their gross pay than an employee doing the same tasks, simply because they choose NOT to be in KiwiSaver and the other employee does.

Let's take the average income of a software developer with 8 years experience.

They can expect to be paid $65,000 per annum, depending on their specific skill-set.

Once the 4% employer contribution kicks in, the employer will be "topping-up" $1557 per annum for a salary of $65,000.

If the employer has two employees with equal experience, and they are both as good as each other, but only one is in Kiwisaver, the employer will have to pay the non-Kiwisaver person an extra $2373 for them to be on the same remuneration as the person on Kiwisaver.

The net value of $1557 is gross $2373 after 33% tax and 1.4% ACC.

However, it seems the change to legislation actually makes out that the employer is penalizing the person in Kiwisaver, which is simply not logical.  They are getting a net benefit from the employer of $1557.  Just because someone has not joined Kiwisaver does not mean they should be entitled to anything less.  In fact it could probably be argued the employer is prejudicing them by not giving them the same "package".  This would be even more likely if the person not in Kiwisaver happened to be female, but thats a completely different problem that needs to be dealt with.

Assuming the market rate is $65,000 per annum.  Kiwisaver in fact makes the market rate $67,3773 - if the employee was given fringe benefits to the value of $1557 (in simplistic terms sticking to their 33% tax bracket) there would be a gross liability for the employer of $2373.

So, is the employer offering a $65,000 gross package based on market rates really in breach of the legislation if one person decides to join Kiwisaver and one person does not?  $65k total package should be exactly that.  Obviously the Kiwisaver would still get the $1043 subsidised amount - but that's the government paying it, not the employer.

Does the legistaltion only cover that $1043 or is it the whole 4%? 

These are questions that small employers need answers to, $2373 in gross terms means each developer in this scenario would have to bill out an extra 3 hours a month to cover it.  That may not sound a lot - but for professional services, it can be hard enough to keep consistent billing.  Since services companies trade time for money, it is very much a problem.

The person in Kiwisaver is making a choice as to whether or not to join.  If they do join, their package is still the same as the person that didn't join, so they take home less pay.  That is not the boss ripping them off, it is simple mathmatics.

It shows yet again that Kiwisaver was not properly though through, and that most MPs have no clue about the real business world.

Don't get me wrong, I am not against Kiwisaver in principle - but the details are a huge can of worms that will be hurting people for many years to come.