An employment case that could effectively raise the minimum wage for workers enrolled in KiwiSaver is being "watched closely" by employers, a lawyer says.

The case, which was heard in the Court of Appeal yesterday and could mean an extra $450 a year for those on the minimum wage, was described as of "considerable public interest" by one of three judges assigned to make a final ruling.

Lower Hutt caregivers Vasivasi Faitala and Dalrene Goff took employer TerraNova Homes & Care to court last year, arguing it was unfair that they had to pay their own and TerraNova's KiwiSaver contributions under their employment agreement.

At the time, the women earned the minimum wage of $13.50 an hour, made up of $13.24 plus 26c for TerraNova's KiwiSaver contributions.

Most employers pay the contributions on top of an employee's salary, but some favour a "total remuneration" approach that includes their contribution, on the grounds that it treats all staff equally.

Although that approach was legal, Ms Faitala and Ms Goff argued it was a breach of the Minimum Wage Act, and the Employment Court agreed, ordering TerraNova to pay any compulsory contributions in addition to the workers' gross salaries.

TerraNova's lawyer, Elizabeth Coats, told the court yesterday that although the KiwiSaver Act said compensation should be paid on top of a salary, there was a provisional clause that allowed it to be included if both parties agreed.

The Employment Court's ruling had focused on the purpose of the Minimum Wage Act, rather than the KiwiSaver Act, which directly clashed, she said.

But Justice Tony Randerson questioned whether her reasoning trumped the rights of a worker receiving the minimum wage.

"The problem is, with your argument, you end up with the employee meeting the employer's obligations. By this process of deduction, for people on the minimum wage, it can hardly be said to encourage savings."

Lawyer Peter Cranney, acting for the two women, argued the Employment Court had reached the only logical conclusion.

Although he did not believe it was a widespread practice to include employer contributions in staff salaries, the case was being watched intently.

"There's a lot of people watching this case, there's a lot of players that only pay the minimum wage or close to it," he said.

"The general gist of what the Employment Court did was protect the integrity of the Minimum Wage Act."

Speaking after the court hearing, Ms Goff said she had taken the case not only for herself but for everyone who was paid a low wage.

"It would be good for everyone if we did win but, if we don't, at least we did try."

TerraNova executive director Terry Bell said no comment would be made until the reserved decision was released.

Contact Shane Cowlishaw

Employment and justice reporter

Email: shane.cowlishaw@dompost.co.nz

Twitter: @scowlishaw