I reacted much like most small business owners to the Government’s proposed policy announcement to increase Employer’s Kiwisaver contribution to up to 6%, while simultaneously halving their own contribution…again.
Initial thoughts were WTF are they wanting us to pay for now!! Not impressed.
I understand why the Government is wanting us to increase our savings and once my brain had a chance to process all the nitty gritty details, I’ve come up with two thoughts….
Most people currently stick with the default 3%, it’s going to be a massive jump to 6% and some will struggle – Many will only do it if compulsory. The increase is gradual over the next seven years, so we have time. Time to educate our people about personal finances, budgeting and financial independence. In my world baby step changes hurt less. I’m happy to work with my Team or their families to understand what this means for them and what it might look like (message me if you need help here 😊). There’s also a lot of information on Sorted.co.nz to help kiwis with personal finances.
Kiwi business owners need to make a plan… and take action. If you’re service based, then it’s likely that wages are a significant expense. As the KiwiSaver contribution rises by .5% each year, we need to be on to it with our own pricing, or these changes will eat into our own take home pay – grocery and mortgage money. It’s a slow erosion of your profits.
If you are one of our Profit First clients, we can use your %’s to calculate what your revenue needs to increase to in real $$.
My suggestion….
List your current employee roles and annual salaries
Plan out for the next 7 years what any pay increases may look like. Considering likely Govt. increases in minimum wage
Add the .5% annual increase in employer contribution – keep in mind that some employees may opt out for a short time
Total the annual $$ increase and calculate the total annual % increase
Use these figures to reverse engineer your required increase in sales.
