From 1 April 2026, the KiwiSaver minimum contribution rate will increase for the first time in many years
For both employees and employers, this requires clear understanding, timely communication, and accurate payroll implementation.
This article outlines what is changing, how temporary rate reductions work, and what actions need to be taken before the new rate applies.
“Even a small percentage change requires disciplined implementation.”
What’s Changing on 1 April 2026?
From 1 April 2026, the minimum KiwiSaver contribution rate will increase:
- From 3% to 3.5% for employees
For employees, this means a slightly higher deduction from each pay. For employers, this means updating payroll systems and ensuring compliance from the effective date.
If no action is taken, the new 3.5% minimum will automatically apply.
Temporary Rate Reductions: What Employees Should Know
Employees who feel the increase may place pressure on their finances can apply for a temporary rate reduction.
This allows contributions to remain at 3% for a period between three months and 12 months.
Key points:
- The reduction must be approved by Inland Revenue.
- It does not occur automatically.
- Once the approved period ends, employees must reapply if they wish the reduction to continue
If no reapplication is made, the 3.5% minimum contribution will apply once the temporary period concludes
How to Apply for a Temporary Rate Reduction
There are no paper forms for this process.
Applications must be submitted online via MyIR (Inland Revenue’s digital platform). Once approved, Inland Revenue issues an acceptance letter confirming the temporary rate reduction
That acceptance letter is essential.
Employees should:
- Apply via MyIR.
- Wait for confirmation from Inland Revenue.
- Provide the acceptance letter to their employer.
- Retain a copy if changing jobs.
IMPORTANT: Employees cannot simply inform their payroll team directly. Payroll cannot apply the reduced rate without receiving the official acceptance letter from Inland Revenue Without this documentation, the 3.5% minimum contribution must apply.
“When contribution changes are implemented early and communicated clearly, the transition is straightforward for both employers and employees.”
What Employers Need to Prepare
For employers, the rate increase will automatically apply from 1 April 2026 unless an employee provides an approved temporary rate reduction notice.
Practical actions include:
- Reviewing payroll system settings ahead of April 2026
- Informing employees early about the change
- Ensuring employer contribution rates align correctly with temporary reductions
- Establishing a clear process for receiving and storing Inland Revenue acceptance letters
Employers may choose to match the employee’s temporary 3% rate or continue contributing at 3.5%. However, a copy of the acceptance letter must be retained to justify the applied contribution rate.
At the end of the temporary reduction period, Inland Revenue will notify the employer that the reduction has ceased. Employer contributions must then revert to the 3.5% minimum.
Disciplined documentation and process clarity reduce confusion and ensure ongoing compliance.
Act Early to Avoid Disruption
Employees can already apply for temporary rate reductions.
Applying early helps avoid automatic increases from 1 April 2026 and gives payroll teams time to process changes correctly.
For employers, early communication supports smoother transitions and reduces administrative pressure close to the effective date.
Best practice for accruals
- Treat accrual and entitlement as separate balances.
- Where possible, configure your payroll system to record gross earnings since the last anniversary, so the 8% calculation can be applied correctly. Few systems handle this well, but it is the most accurate approach.
“Holiday pay isn’t just about calculation, timing matters too.”
Final Thoughts
The percentage increase is modest. The implementation requirements are not.
Accurate payroll configuration, clear documentation processes, and proactive communication will ensure the change is applied correctly from day one.
Preparation creates clarity. Clarity protects confidence.
Bring Clarity to the KiwiSaver Update
Clear preparation reduces last-minute pressure.
If you would like structured support ahead of 1 April 2026, our Managed Payroll team can work alongside you to:
- Confirm payroll contribution settings align with the 3.5% minimum
- Establish a clear process for managing temporary rate reduction documentation
- Support structured employee communication
- Ensure a smooth transition when the new rate takes effect
Small percentage changes still require disciplined implementation. The right preparation keeps payroll accurate and controlled.
Key Takeaways:
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The KiwiSaver minimum contribution increases from 3% to 3.5% for both employees and employers from 1 April 2026
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If no action is taken, the 3.5% rate will automatically apply.
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Employees may apply through MyIR to temporarily remain at 3% for three to 12 months
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Payroll teams cannot apply a reduced rate without an official Inland Revenue acceptance letter.
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Employers should update payroll settings early and establish a clear process for managing documentation.
