The Labour-led coalition government has made it clear that employer-employee relations and workplace conditions will be a key focus for legislative change this year. In the pipeline are a raft of changes, from increasing the minimum wage and pushing for equal pay, to new arrangements for contractors, and a possible return to collective bargaining.
In this month’s cover story, we look at some of the key issues likely to impact employers in Bay of Plenty this year.
How dramatic the workplace shakeup will prove to be in practise remains unclear.
We have already seen the government adopt a milder approach than some expected to the issue of the 90-day probationary period, one of the more controversial of the new government’s legacies from the previous government.
In late January, the government announced that it had effectively allowed small businesses to continue to have the right to fire workers without reason during the first three months of their employment.
The new approach will only ban 90-day trial periods for employers with more than 19 workers. But given more than 95 percent of employers – especially in the Bay- are small and medium-sized enterprises, in practise nothing much will change.
Tom Beswick, a director with accountants Ingham Mora, said he was pleased to see the 90 day trials retained for smaller employers.
“However, I’m not clear on what the problem was that is being ‘fixed’. Personally I haven’t seen complaints that businesses were abusing the current 90 day rule.
“I’m not a fan of any changes that increase risk to businesses in the hiring process as this could reduce opportunities for people who will otherwise struggle to find employment.”
Oliver Moorcroft, a director with lawyers Harris Tate, said the 90 day rule was never the “silver bullet” National intended.
And he pointed out that a number of employers failed to appreciate that they needed to strictly apply the terms of the employment agreement.
“The employee can’t have already started working – if you’ve started work even for 10 minutes without signing the contract, then the 90-day clause is unenforceable. The employer is also expected to advise the employee when they give them their letter that it has a probation period clause in it and advise them they can take advice on it.
“If they don’t provide that advice and sit and make them sign it, then it potentially voids the agreement.”
One of the key concerns regarding the raft of proposed industrial changes – especially for small businesses – is the looming increase in the minimum wage.
“The main concern I hear from clients [about employment]is about the coming ramp in the minimum wages and how they are going to afford the increases,” said Ingham Mora’s Beswick.
The minimum wage is to rise by 75c to $16.50 an hour from April 1, with increases set to continue with a targeted minimum wage of $20 by April 2021.
“The minimum wage is probably going to be a big issue for most employers,” said Moorcroft.
“The living wage has been a hot topic for the last little while. We all know the cost of living is going up and from a social point of view a wage increase is probably a good thing.
“The problem is the SMEs are going to be the most affected. There is a heap of small businesses out there that have pretty slim profit margins. They rely a lot on employees on the minimum wage. The extra few bucks could be the difference between a profitable small business and not.”
Steven Farrant, chairman of the Small Business Tauranga network, said he understood the principle of looking to increase minimum wage.
“But we have to give consideration as to how that is going to affect small businesses. When a big business implements the new minimum wage it may mean a slight drop in profit. But for a small business, it may mean they simply can’t afford to employ anyone.”
Farrant said that, in his experience in the sector, the owners of small businesses were often the ones paying themselves less.
A key issue for employers was the potential knock-on effect of the minimum wage increase, as other more experienced staff on relatively low wages sought increases in order to maintain parity. That was likely to have the effect of pushing up wages overall, said Farrant.
Tauranga Chamber of Commerce chief executive Stan Gregec said it had generally been accepted that New Zealand had a low-wage economy, and making a move to increase the minimum wage was a not unexpected step in the other direction.
“Given that we’ve had several years of strong growth and good profitability for many businesses, I expect that most will take the wage increases in their stride,” he said.
“The extra purchasing power this will put into the economy should compensate for the higher wages being paid. If not, then I imagine employers will simply find other ways to reduce their labour cost.
“However, it’s worth noting that in three years or so when the minimum wage hits $20/hour, that will put New Zealand right at the top of OECD countries in terms of wage protection. That’s a big jump from where we’ve come from.”
Also attracting a lot of attention from Bay employers are mooted changes to contracting arrangements – a special focus of attention in the Bay where contracting is widespread through the building industry.
Labour has signaled that “dependent” contractors, who effectively work under the control of an “employer”, but do not receive the legal protections employees are afforded, are likely to get more statutory protection.
Harris Tate’s Moorcroft said he had no idea how the government would handle the issue.
“There is a lot of established case law around the whole area of contracts. What has happened in the employment space is that employers tried to avoid paying employees all of the cost of employment.
“Over the years case law has evolved and there are earmarks courts look at in deciding whether this person is an employee or a contractor.
“I can see the government trying to codify whether a person is an employee or a contractor. But they are going to have to be pretty careful they don’t undermine a genuine attempt by both parties to enter into a commercial contracting arrangement that benefits both parties. I don’t think it will be a quick fix.”
Farrant said tightening contracting laws could give companies less flexibility.
“Where flexible contracts are in place, you can bring people in as and when required. I would image companies would be now thinking a little bit harder about whether they do bring someone in.”
Kate Ashcroft, principal of Copeland Ashcroft Law, said there was already an ability for contractors to challenge the status of their relationship, and often whether or not they did so was a practical rather than so much a legal consideration.
“The certainty is that employers will need to be taking a much more professional approach to employment matters,” she said.
“The bar is being lifted across the board around what is expected of employers.”
Another issue that has attracted interest locally is a proposal to put back reinstatement to employment as a primary remedy in grievances, which was removed in 2011.
However, several local lawyers commented that such a change was unlikely to result in a significant increase in employee reinstatement, though it might be used as leverage to improve settlement terms.
“I don’t see many people going back into the same workplace,” said Harris Tate’s Moorcroft. “It will just another tool for the employment lawyers to use. There will be some cases, but generally we won’t see a huge uptake in that remedy.”
Added Kate Ashcroft: “When the [working]relationship is over, neither party wants to go back there.”
Other issues on the government’s list included implementing the changes to the Equal Pay Act, a potential strengthening of employees’ collective bargaining rights, and the setting up of Fair Pay Agreements.
The chamber’s Stan Gregec noted there was still a lot of detail to be come out on the full extent of the proposed industrial relations changes.
“And to its credit the government does not appear to be rushing to make these changes,” he said.
“But it’s easy to see that the sum effect will to shift things more in favour of employees – at the expense of employers.”