KiwiSaver Contribution Changes: What the Rise to 3.5% (Then 4% in 2028) Means for Your Wage Bill

If your payroll costs crept up slightly from your April pay run this year and you weren't quite sure why, there's a good chance KiwiSaver is the answer. On 1 April 2026, the default employer KiwiSaver contribution rate rose from 3% to 3.5% — the first of two scheduled increases from Budget 2025 that will take the default rate to 4% by 1 April 2028. It's a quiet change, but it's a permanent one, and it applies to every employer with staff on the default contribution rate.

What actually changed

Budget 2025 (22 May 2025) set out a staged increase to the default KiwiSaver contribution rate for both employees and employers, moving from 3% to 4% over two steps:

• 1 April 2026: default rate rises from 3% to 3.5%, for both employee and matching employer contributions.
• 1 April 2028: default rate rises again, from 3.5% to 4%.

If your employees are contributing at the standard default rate, both sides of the contribution — theirs and yours — moved to 3.5% automatically on 1 April. No paperwork was required to make that happen; it should already be reflected in your payroll settings.

Who's actually affected (and who isn't)

This is the detail that trips employers up: not every employee's contribution changed.

• Employees on the default 3% rate: both their contribution and your matching contribution rose to 3.5% automatically.
• Employees already contributing more than 3% (4%, 6%, 8%, or 10%, for example): their own contribution rate didn't change. But if you were only matching at the 3% default, your employer contribution still rose to 3.5% regardless of what they're personally putting in.
• 16- and 17-year-old employees: this is the one most likely to catch retail, hospitality, and other youth-employing businesses off guard. From 1 April 2026, employers are now required to make KiwiSaver contributions for 16- and 17-year-old employees who are existing KiwiSaver members, at the same 3.5% default rate — an obligation that simply didn't exist before this change.
• Employees on a temporary rate reduction: staff can apply to stay at the old 3% rate for a stretch of 3 to 12 months at a time, as often as they like. You can choose (it's optional) to match their reduced rate rather than paying 3.5%, but only once they've given you the correct temporary rate reduction letter from Inland Revenue.

What it actually costs you

The percentage sounds small, but it compounds across a workforce. As a rough illustration: on a $60,000 salary, a 0.5-percentage-point rise in your matching contribution is an extra $300 a year, per employee, from April 2026. Across a 10-person team largely on the default rate, that's roughly an extra $3,000 a year in KiwiSaver costs alone — before you even get to the second step. By 1 April 2028, once the rate reaches 4%, that same team would be costing you closer to an extra $6,000 a year in KiwiSaver contributions compared to the old 3% baseline.

Real numbers will vary depending on your actual salary mix and how many staff sit above the default rate, but it's worth running your own team through that same rough math — this is a recurring cost increase, not a one-off.

Worth knowing: the other half of this change

Budget 2025 didn't only raise contribution rates — it also changed the government's own contribution to member accounts, effective 1 July 2025. The government contribution was halved from 50 cents to 25 cents for every dollar a member contributes, and the maximum annual government contribution dropped from $521.43 to $260.72. Anyone earning more than $180,000 a year no longer qualifies for a government contribution at all. None of this costs employers anything directly, but it's useful context if staff start asking why their KiwiSaver balance isn't growing the way they expected — the answer usually traces back to this change, not anything you've done.

What employers need to do

If 1 April 2026 has already come and gone for your business, this is worth treating as a compliance check rather than a future to-do list:

1. Confirm your payroll settings actually applied the 3.5% default correctly, for both employee and employer contributions, from the first pay run in April onward.
2. Check whether you employ any 16- or 17-year-olds who are KiwiSaver members — this is the change most likely to have been missed, since it's a genuinely new obligation rather than a rate adjustment to an existing one.
3. Process any temporary rate reduction letters properly, and decide (and document) your policy on whether you'll match reduced rates or hold at 3.5% regardless.
4. Put a reminder in for 1 April 2028, when the rate steps up again to 4% — far enough away to feel irrelevant now, close enough that it's worth budgeting for in any multi-year wage cost planning.

The bottom line

This change is easy to miss precisely because it's automatic and mostly invisible — payroll software handles the mechanics, so there's no dramatic moment that forces you to notice it. But "automatic" isn't the same as "definitely correct," and the 16-17-year-old contribution requirement in particular is new enough that plenty of employers simply won't have it set up yet. Worth a five-minute payroll check now, rather than finding out at year-end that a handful of pay runs went out under the old rate.

---

Not sure if your payroll setup is actually compliant with the current KiwiSaver rules — or the Holidays Act, minimum wage, and everything else that's shifted this year?

Book a free HR & H&S audit and we'll help you find out. No cost, no obligation — just a clear picture of where you stand.