KiwiSaver for Contractors NZ: PAYE vs Schedular Payments and Employer Contributions

If you work as a contractor in New Zealand, the word “contractor” doesn’t decide how KiwiSaver applies to you. What decides it is how you’re paid: as an employee receiving salary or wages with PAYE deducted, or as a contractor receiving schedular payments or invoicing for your work. Only the first brings a compulsory employer contribution. This page explains the difference and how it plays out for agency, labour-hire and company contractors.

The Core Distinction: Wages With PAYE vs Contractor Payments

Salary or wages with PAYE (you’re an employee):

Your employer deducts PAYE and, if you’re a KiwiSaver member, your KiwiSaver contributions before paying you
Your payslip shows gross pay, PAYE, KiwiSaver and net pay
The compulsory employer contribution applies: If you're aged 16 or over and under 65, in KiwiSaver and contributing from your pay, your employer must contribute at least 3.5% of your gross pay (unless you're on a temporary rate reduction or in a defined benefit scheme), less employer superannuation contribution tax (ESCT).

Schedular payments or invoiced income (you’re a contractor):

Your payer either deducts withholding tax at a schedular rate (schedular payments) or pays your invoice in full and you pay your own tax
There’s no employer for KiwiSaver purposes: the employer contribution is calculated on “total salary or wages” (IRD: Gross pay for KiwiSaver), and contractor payments aren’t wages
KiwiSaver is voluntary: you join through a provider and contribute directly

Tax withheld from schedular payments is not PAYE, even though it’s deducted before you’re paid. The schedular payments guide explains how withholding works.

Agency and Labour-Hire Contractors

Work arranged through a recruitment agency or labour-hire business can be set up either way:

As the agency’s employee (a “temp”): the agency pays you wages with PAYE and is your employer for KiwiSaver, so it makes the employer contribution and, if you’re an eligible new employee who isn’t already a member, may need to enrol you automatically (temporary and casual employees can instead choose to opt in).
As a contractor to the agency: the agency pays you schedular payments. Inland Revenue’s own example of a contractor getting schedular payments is “an IT project manager contracted by a recruitment agency (labour hire business) to one of the agency’s clients” (IRD: About schedular payments for contractors). No employer contribution applies.

Fixed-term work signed directly with a company is the same test: a fixed-term employment agreement paid as wages with PAYE makes you an employee for KiwiSaver, whatever the role is called.

Independent Contractors and the Self-Employed

If you invoice clients directly or receive schedular payments, KiwiSaver works for you as it does for the self-employed: no automatic enrolment and no employer contribution, but you can join through a provider, contribute what you choose, and receive the government contribution. KiwiSaver for self employed people covers joining, paying contributions directly or through IRD, and the government contribution.

How to Check Your Status

Your pay documents. A payslip showing PAYE and KiwiSaver deductions means you’re paid wages. An invoice you issue, or a payment with schedular withholding tax deducted, means you’re paid as a contractor.

Your tax code. Employees have a PAYE tax code such as M, ME or SB; contractors receiving schedular payments give their payer a schedular rate instead.

myIR. If an employer is listed with KiwiSaver deductions and employer contributions coming through, you’re being paid as an employee.

The employment relationship itself. Whether someone is really an employee or a contractor depends on the working relationship, not only on what the contract says. The contractor vs employee tax guide sets out the differences.

What PAYE Contractors Receive

If you’re paid wages with PAYE, whatever your contract calls you, the KiwiSaver rules are the same as for any employee:

Item	What applies
Employer KiwiSaver contribution	At least 3.5% of gross salary or wages, less ESCT
Automatic enrolment	When you start a new job, if you’re eligible and not already a member (temporary and casual employees may need to opt in instead)
Opt-out window	End of week 2 to week 8 of the job (day 14 to day 56)
Government contribution	Up to $260.72 a year, as for any member

If your employer isn’t contributing: check your payslip, check your KiwiSaver transactions in myIR, raise it with the employer or agency in writing, and if it isn’t resolved, contact Inland Revenue. KiwiSaver employer contributions covers what employers have to pay, in full.

Specific Contractor Scenarios

IT or engineering contractor through a recruitment agency

Status: Either. If the agency pays you wages with PAYE, you’re its employee; if it pays you schedular payments, you’re a contractor. Employer contributions: Only if you’re paid wages. What to check: Your payslip or payment advice, and whether an employer appears in myIR.

Sole trader freelancer

Status: Self-employed. Employer contributions: None. KiwiSaver: Voluntary; contributing $1,042.86 in a year from 1 July earns the maximum government contribution. See KiwiSaver for self employed people.

Director of your own company, paid a PAYE salary

Status: An employee of your own company for KiwiSaver. Employer contributions: Yes, on the PAYE salary, from your company as employer. Note: Dividends and other non-salary income aren’t salary or wages, so no employer contribution applies to them.

Short-term seasonal worker (PAYE)

Status: PAYE employee. Employer contributions: Yes, for the duration of employment. The employer must contribute from your first pay if it enrols you automatically, or from the first pay after it is told you’ve opted in. Note: New employees who aren’t already members are automatically enrolled, and can opt out between week 2 and week 8 of the job.

Healthcare locum (agency-placed)

Status: Depends on the arrangement: an agency that pays you wages through payroll is your employer, while a locum paid schedular payments or invoicing for shifts is a contractor. Employer contributions: Only if you’re paid wages.

Tradesperson on building sites

Status: Depends. Wages through a company’s payroll make you an employee; invoicing as a sole trader, or receiving schedular payments from a labour-hire business, makes you a contractor.

Contracting Through Your Own Company

Some contractors set up a company that signs the client contract and pays them. For KiwiSaver:

If the company pays you a PAYE salary, it’s your employer, and the employer contribution applies to that salary, with ESCT deducted.
IRD says that if your business is run through a company and you’re paid a salary or wage with PAYE deducted, you can join KiwiSaver directly with a provider or through your business’s payroll; if you’re not paid a salary or wage with PAYE, you enrol directly through a provider.
Income you take as dividends rather than salary carries no employer contribution.

How to pay yourself from a company has tax consequences beyond KiwiSaver; it’s a question for an accountant. KiwiSaver employer contributions has the ESCT detail.

Contract Rates and KiwiSaver

Contract rates for genuine independent contractors are often higher than equivalent salaries partly because the contractor gets no annual leave, sick leave or employer KiwiSaver contribution. A contractor who is in fact paid wages with PAYE is entitled to the employer contribution on top of their rate. When a rate is quoted, whether it’s “inclusive” or “plus KiwiSaver” changes what you actually receive.

Frequently Asked Questions

I’m called a contractor but my agency deducts PAYE. Do I get employer contributions? If the agency employs you and pays wages, yes: the employer contribution applies on the same terms as for any employee. If the deduction is schedular withholding tax rather than PAYE, you’re being paid as a contractor and it doesn’t.

What if my employment agreement doesn’t mention KiwiSaver? The employer contribution is a legal obligation for eligible employees, so it applies whether or not the agreement mentions it.

I’m working in New Zealand for a foreign company. Does it have to contribute? It depends on whether you’re its employee paid under a New Zealand PAYE arrangement. Inland Revenue can confirm how your situation is treated.