Preparing for the coming payroll changes

Payroll changes from 1 April 2026 will affect wages, KiwiSaver contributions, and ACC levies. Shannon Goodwin and Brendan Clough of Baker Tilly Staples Rodway explain what SME owners need to check now to stay compliant and avoid surprises.

Big payroll changes are landing next month and they’ll be felt in employees’ pay packets straight away. Employers need to be well prepared. With Holidays Act backpay and penalty risks still front of mind, getting it right is non-negotiable and staff will expect nothing less.

KiwiSaver minimum contributions are increasing, in addition to the regular minimum wage and ACC levy increases. Workers aged 16 and 17 will also qualify for KiwiSaver employer contributions for the first time. These changes, in particular, have the potential to catch employers out, if they haven’t made the required adjustments before the start of April.

These are the key things employers need to act on now, before the deadline arrives. 

Minimum wage increase 

The adult minimum wage is set to rise to $23.50 per hour or $940 for a 40-hour week from 1 April. While employers are now accustomed to regular increases, those using automated payroll systems will need to check individual employees’ pay has been updated correctly if they are on minimum wage.  

The changes will also have implications for how pay is being allocated across the board. Employers will need to consider whether an increase in pay for entry-level roles should flow on to higher levels, to ensure skills and experience are appropriately remunerated. It may be an employers’ market at the moment, but that won’t be the case forever – and retaining good workers usually costs less in the long run than having to recruit. 

Rising ACC levies 

ACC levies have been steadily increasing each year, and from 1 April, workers will see this increase to $1.75 per $100 deducted from their pay (to a maximum of $2,741.22 annually). This could come as a surprise to workers who are unaware of the changes, potentially leading to disputes if employers aren’t careful to communicate these in advance. 

Most payroll system providers will have developed communications that employers can share with their teams, but it will be essential to do so before the first pay round in April to avoid confusion. 

KiwiSaver contribution changes 

In line with the Government’s intention to increase New Zealanders’ retirement savings, both employers and employees will see their KiwiSaver minimum contributions rising from 3 percent to 3.5 percent. However, employees who wish to can apply for a reduced contribution (the current rate) for 3-12 months. There are no special requirements for this, but the employee will need to apply to Inland Revenue directly, as the employer cannot do this on their behalf. As best practice, it’s worth informing employees of their ability to apply for the temporary reduced contribution in case their personal circumstances make the increase particularly challenging. 

Different payroll systems have different ways of managing these changes, so it would pay to check everything is working as it should before 1 April. Systems won’t automatically update for workers aged 16-17, so employers who are unused to paying KiwiSaver contributions to younger workers could face significant backpay and disputes if this isn’t correct upfront. It’s important to check whether these workers are enrolled in KiwiSaver (or would like to be) well in advance. 

Another change that may catch employers unawares is when KiwiSaver contributions are included as part of an employee’s total remuneration package. A decision will be needed on whether to deduct the increased contribution from the total pay package or add it on top.  

Note, however, that employer contributions cannot be included as part of a total remuneration package if employees are on the minimum wage, or inclusion would decrease their pay rate below the current minimum wage.  

To add an extra dimension, with the increased ACC levy, employees’ total take-home salaries will decrease, so balancing this with the KiwiSaver changes will be important.