Q: When we became a public company an employee share scheme was introduced. In brief this was an interest free loan to employees to purchase shares.

The share value has now dropped considerably. When an employee leaves they sell back their shares to the company but end up owing money on the interest free loan. The company wishes to cover the difference between the value of the shares sold back to the company and the remaining balance on the loan.

The intention is to pay the difference to the employee as a bonus, pay PAYE on it, and recover the net amount as a deduction paid back to the company.

As a discretionary bonus it will be exempt from the gross for AL calculations, included in the gross for Student loan calculations and, I think, excluded from kiwisaver.
I note that the Practice Guide states that “free or discounted shares received under an employee share scheme” are excluded from the gross pay for kiwisaver contributions. Would this payment be considered as being for discounted shares?

A: As this payment is an additional payment outside the “free or discounted shares received under an employee share scheme” if does become part of gross that Kiwisaver is based on and cannot be excluded.