How to use Kiwisaver to get ahead of your competition

Are you failing to attract the right people into your business, or are you losing valued employees to your competition? One of the fundamental principles of creating a great business, according to Jim Collins - author of Good to Great, is to get the right people on the bus (in other words, having the best employees). If you have the wrong employees, then you will never have a great business.

Why good employees need to be retained

In today's labour market employees are not hard to come by. Good employees, on the other hand, are (and always have been). Generally, good employees know that they are good. If they don't, they soon will and will put a value on their services. If you want these employees in your business, then you have to offer a remuneration package that will attract them and a work environment that will retain them. The old saying, 'if you pay peanuts you get monkeys', has never been more true. Surprisingly however, for a lot of employees, it's not just about salary.

Why salary is not everything

Increasingly, the amount of an employee's take-home pay is not the only, or necessarily the most important, factor to be considered when making job choices. That's the case particularly for those in higher salary brackets. Job satisfaction combined with those added benefits tacked onto the salary play just as important, if not more important, part in the decision making process. The reason is psychological.

How psychology affects job choice

Marketers the world over have known for some time that if a salesman gives away a bonus with his or her product or service, the chances of making the sale greatly increase. It sounds obvious, but the same applies even if the customer is not quite sure whether they need the actual product or service. Why? Because the customer's brain becomes focused on the bonus, not the product, and because the bonus is free (so to speak) the whole package suddenly becomes a good deal for the customer.

The principle of bonuses applies if you want to get the right employees.

Kiwisaver is a benefit if you use it right.

On 1 July, every employer will have to offer new employees the opportunity to be part of the Kiwisaver scheme. The employee can contribute either 4% or 8% to its scheme. As an employer you can also contribute, and your contributions go in tax free. So even if your contribution forms part of what otherwise would be part of the employee's salary, they are still better off: e.g. for an employee to get the same benefit as a 4% contribution to KiwiSaver from a payrise, you would need to pay an extra 6% salary to offset the tax payable. So does that mean every employer should contribute? No. Employees in a lower salary bracket may prefer the money in their hand (Kiwisaver contributions are locked in until age 65). But for higher paid employees (the employees you are more likely to want to retain), contributing should be seriously considered. But you should never contribute to a default Kiwisaver scheme.

Why contributing to the default scheme is nonsense

If you don't have your own Kiwisaver compliant superannuation scheme, then your employees will be automatically enrolled in a default Kiwisaver scheme. Which fund will depend on which one is allocated on any particular day by the IRD. So it is feasible that all of your employees could be on different schemes. Any contribution you make to a default scheme vests in the employee from day one. That means that when they leave, they take all of your contributions with them to their new employer.

However, if you set up a Kiwisaver compliant scheme, you can specify that your contributions vest over a five year period. That means that if an employee leaves in year one, they only take 1/5th of your contributions and you get the rest back, year two, two fifths etc. Now you have an incentive which will retain your employees. All you have to do now is to provide some job satisfaction and you are on your way to creating a great business.

But I've never contributed before

You can be excused for never contributing to a superannuation scheme in the past. Let's face it, it's extra administration for you. The difference now is that you have got that extra administration anyway. So why not use Kiwisaver to attract and retain the best employees. If you use a financial adviser to set up a compliant scheme for you they will do a large chunk of the admin for you to make it easy. So, if you have never looked at superannuation schemes before, now is the time to do so.

A superannuation scheme could transform your business from a good business to a great business

Building a good team is all about attraction and retention of employees. A KiwiSaver compliant scheme can help you do both. Get the right people on the bus, and then you can drive it anywhere you like.
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