Payroll & Finance

What is ESCT? | Ask PayHero

October 17, 2019
Ruby | PayHero Resource Author




What is ESCT?

ESCT is the tax deducted from employer contributions to your employees’ KiwiSaver or superannuation accounts.

You pay ESCT to Inland Revenue along with PAYE and other employee deductions.

Employers are required to work out the ESCT rate for each employee. The rate will differ for each person depending on their salary or wages, and how long they’ve worked for you.

If the employee worked for you for the entire previous tax year (1 April to 31 March), the ESCT rate will be based on:

  • the total salary or wage they received, plus 

  • the total Kiwisaver or other employer superannuation contribution you made last financial year

If the employee wasn’t employed by your company for all of the previous tax year, the ESCT Threshold can be estimated based on:

  • the total amount they should earn through salary or wages, plus 

  • estimated KiwiSaver or other employer superannuation contributions, within this financial year

The ESCT rate changes depending on the Employee’s annual income – as incomes increase, ESCT rates follow. These rates occasionally change, and the best place to find the current rates is the IRD website. 

If an employee’s salary or wage changes during the tax year, don’t change the ESCT rate just yet. Wait until the start of the next tax year to change it.

Don’t worry if your employee has a secondary job – each employer needs to work out the ESCT rate for each employee and so you don’t need to know how much they earn in their other jobs. 

Employers don’t need to pay ESCT if the employer and employee agree to treat some or all of the employer contributions in their total salary or wages which can be stated in their employee contract.

PayHero automatically works out the ESCT rate for employees. Create an account today and get 14 days free.

Ruby | PayHero Resource Author



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