Welcome to our blog page! Grab a cuppa and get up to speed with developments in employment relations. We are publishing new posts periodically which cover various ER and people management topics.

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The government has confirmed their intention to implement Fair Pay Agreements following the recommendations of a working party they convened in 2019/20. While it is not known exactly how these will operate, the government has advised they will confirm this during the later part of 2021 with changes likely to take effect during 2022. The advice below is based on the recommendations made by the government's working party, which the government is likely to follow.

Fair Pay Agreements would be a framework for industry wide collective bargaining between unions and employer representatives. The proposed framework would set compulsory minimum conditions for:

• Rates of pay for all occupations within an industry
• A mechanism for increases to rates of pay
• Overtime/penal rates
• Redundancy provisions
• Leave entitlements
• Skills development and training requirements
• Ordinary hours and days of work.

A Fair Pay Agreement framework would be fundamentally different to the current employment framework. Currently, employers have to comply with statutory minimum requirements which mostly relate to minimum wage, various leave types, rest and meal breaks, some hours of work restrictions and Kiwisaver provisions. All other terms and conditions are negotiated either individually with employees or collectively with a union who has coverage of employees within that employer's specific workplace. This current framework gives considerable flexibility to employers and employees in negotiating and agreeing terms and conditions of employment that work for them and their business.

The proposed Fair Pay Agreement framework is loosely modelled on the Australian Awards system but there are several key differences. One is that the proposed framework for New Zealand is bargained by unions. The Australian Awards system involves consultation with unions but the rates of pay are determined by the Fair Work Commission. The Australian Awards system also sets a much narrower scope of compulsory conditions than what is being proposed for New Zealand.

Some of the issues that Fair Pay Agreements may introduce are:

• It requires all employers to provide the same minimum pay and conditions which is likely to have an adverse effect on smaller business and business outside of main centres. Many of these businesses can’t afford to provide the same pay and conditions as large employers including corporate and public sector organisations, for workers in the same occupations. This fails to recognise that many employees of small and medium size businesses report such substantially higher job satisfaction and work/life balance that they are willing to forgo the higher wages available in corporate and public sector entities.
• There is no clear plan to ensure all businesses are fairly represented in negotiating a Fair Pay Agreement, meaning it is likely that the interests of larger business or those that have affiliated with an industry organisation will be met to the detriment of other businesses.
• It assumes unions will represent the best interests of all workers across an industry, even though very small numbers of workers are members of a union (less than 10%) in many of these industries.
• It will likely make employing workers a less attractive option for small and medium size businesses who are making decisions about how to grow their business. With ever increasing developments in technology, automation and off-shore service provision, employing staff is only one option for business growth. This is a particular risk for lower skilled workers including those new to the workforce who need entry level or lower skilled jobs in order to participate in the workforce – these jobs are typically the easiest for businesses to do without.
• It runs on an assumption that paying more in wages will increase worker productivity, which is not typically an outcome employers experience in reality.
• A higher minimum wages 'floor' may reduce employer's ability to pay more to higher performing/higher value workers.
• They may serve to increase minimum staffing levels in some industries, particularly retail, due to increased requirements for various forms of paid time off work, and training. This will come at a significant cost to employers and will make it more difficult to compete on cost with online retailers.
• Widespread wage increases will almost certainly increase prices driving inflation and a higher cost of living, which could offset any benefit of wage increases in real terms.

However, there may be some potential benefits:

• Having standard pay and conditions across industries mean everyone knows ‘the rate for the job’ and means employees are less likely to change jobs purely to achieve a pay increase.
• Increases to wages for occupations paying more than the minimum wage have fallen relative to occupations paying at or close to the minimum wage over the last 15 years. Fair Pay Agreements are likely to result in all occupations receiving similar percentage pay increases to what has been provided through minimum wage increases. Some occupations are likely to receive substantial pay increases upon the introduction of a Fair Pay Agreement.
• It forces employers to consider appropriate rates of pay for the occupations they employ, which is something some employers are reluctant to do. This may contribute to addressing identified skills shortage areas in industries like construction, making these occupations more attractive.
• It may force some struggling businesses to make difficult but necessary decisions about their future direction, where they are only surviving as a result of paying minimal wages.
• It may address the growing gap between pay increases in the public and private sectors.
• Paying more in wages may motivate some employers to invest more in effectively managing their workforce and increasing productivity that way, which is something not all employers currently do well.

Whether your focus is more on the potential costs or benefits that Fair Pay Agreements will bring to your workplace, now that it has been confirm that they will be introduced it is sensible to begin considering how you might adjust to these changes.

While we are all hoping for an easier year in 2021, there are likely to be some ongoing challenges for all business owners for prepare for. Here are some of the key HR risks and issues that all small business owners need to plan for during 2021.

Increased employment costs and liabilities

• The minimum wage will increase to $20 per hour (from 1 April 2021).
• It is likely (but not yet confirmed) that paid sick leave will increase for all employees from 5 days to 10 days, every year. This change is expected to take effect by the end of 2021. It is important to note that the current proposal is all employees receive 10 days sick leave every year, regardless of how many days they normally work in a week. So for example, a part time staff member working 2 days per week will benefit from 5 weeks of sick leave every year.
• It is expected that the government will introduce a new public holiday, Matariki, from July 2022, meaning New Zealand employees will benefit from 12 paid public holidays every year.
• The government is re-considering ‘Fair Pay Agreements’ which are industry based collective agreements negotiated between employers and unions on behalf of entire industries. These would prescribe minimum pay and other terms and conditions (like training, pay progression, and hours of work arrangements) modelled on the Australian Award system. There is no certainty here yet, but if they are implemented this may take effect from sometime in 2022 at the earliest. These have a significant risk of disadvantaging small businesses who cannot afford to compete with larger employers on pay and other terms and conditions, who are most likely to lead industry negotiations on behalf of all employers. If the Fair Pay Agreement system is implemented, many industries could expect the Living Wage (currently $22.10) to replace the minimum wage as their new minimum pay rate, and to expect proportionate increases for more senior and/or skilled employees. Businesses could also be required to pay overtime and additional leave entitlements, as well as training costs and redundancy compensation, depending on exactly how the Fair Pay Agreement system is designed. Further consultation is likely before anything is implemented and it is important that small business owners provide their submissions when that time comes, so that the impacts on them can be properly considered.

Further Covid disruptions

Future lockdowns remain a possibility as long as the current situation remains, with the potential for breaches at the border reaching the community continuing. It would be wise for business owners to review how they responded to the 2020 lockdowns and put together a lockdown contingency plan based on what went well last time, and anything they would do differently next time around.

The biggest issue that arose from the 2020 lockdowns from an employment perspective was a lack of clarity that normal employment rights and responsibilities continue to apply – employees cannot be required by the employer to take leave of any type without their agreement, unless their employment agreement specifically allows for this to happen. Consultation with employees will always be required when making changes to their working arrangements including during a lockdown situation. Consulting on a future lockdown contingency plan would be a good way to get ahead of this requirement.

Some businesses are also experiencing supply chain difficulties which are impacting their ability to trade, and these difficulties are not expected to resolve in the near future. Additionally, it is anticipated that consumer spending is likely to gradually reduce during 2021 from current levels. Any significant opening of the border remains, at best, uncertain.

The general move towards online trading for consumers, and increased expectations of flexible working from employees, are likely permanent impacts of Covid for many businesses.

Health and safety obligations for employers have come into sharp focus in respect of communicable diseases in the workplace. While pre-Covid it was not uncommon for people (employees, business owners and customers) to attend a workplace with a minor illness, now if that illness is potentially infectious this is regarded as a health and safety hazard that must be identified and eliminated.

How to respond

It is clear that the costs and potential liabilities involved with employing staff are set to significantly increase during 2021 and again in 2022. These impacts are most significant for employers with lower paid employees (due to the minimum wage increase and possible expectations around the living wage), and part time employees (due to the expected 10 day sick leave requirement). They also disproportionately affect employers of employees who cannot productively work from home during a lockdown or while suffering a minor illness.

It is possible to address some of these liabilities with improved policies, employment agreements and communication systems within workplaces. Now could be a good time to review these items to make sure you have the flexibility you need to respond effectively to Covid related impacts without incurring significant losses by paying wages while people are unable to work productively.

When planning for future workforce requirements, it is going to be important to recognise that the cost of employing people has risen significantly over the past 5 years, and these costs are set to continue to increase over at least the next 2 years. If your current business model involves high staffing levels, relatively low wages and tight margins, now may be a time to consider alternative operating models that may include fewer, and potentially more highly skilled, employees. Automation of tasks with new technology, and online trading options present significant opportunities for small businesses to reduce staffing costs while continuing to trade profitably.

Other options might include partnering with other small businesses to share resourcing / employment costs and risks, or outsourcing / subcontracting some tasks or functions to other businesses. Deciding to no longer employ staff and downsizing accordingly may also be a legitimate option for some small family businesses, particularly if the Fair Pay Agreement system comes into force for their industry and makes pay rates unaffordable for them.

Here is a summary of the key employment law changes that took effect in 2019. These are the most recent significant changes that have taken effect. The next round of changes are expected to be confirmed at the end of 2021 and to come into effect sometime in 2022.

Changes to trial periods

Employers with 20 or more employees at the time they hire a new employee are not be able to use trial periods any more, from 6 May 2019. Any trial period that started before that date will be unaffected. This is a straight count of employees including the person being hired, including casual and part time staff.

Changes for unions and employers with a collective agreement in place

There are a significant number of changes affecting union – employer relationships, including in summary:

• A requirement for the employer to employ new staff on the terms and conditions of the collective employment agreement, where one exists, for the first 30 days of their employment (as per the pre-March 2016 position).
• Requirements for employers to provide union access to workplaces and ‘reasonable’ paid time off for union activities to union delegates.
• A requirement for employers to provide information about the benefits of joining a union, provided by the union, to new employees at the union’s request, and a requirement to notify the union when new employees are employed, unless the employee opts out.
• A requirement for employers to conclude bargaining for a collective agreement, and to participate in Multi-Employer Collective Bargaining, unless genuine and reasonable grounds exist not to do so.
• Union membership and participation in union activity within the past 18 months will be grounds for claiming discrimination, if the employee believes they have suffered less favourable treatment than they otherwise would have done for these reasons.
• Rates of pay (or minimum rates of pay) and any mechanism by which they will increase during the term of a collective agreement will have to be written into that collective agreement.

Changes for ‘vulnerable’ workers in restructuring situations

There are increased requirements for employers of ‘vulnerable workers’, which includes cleaning and catering staff amongst others, to transfer staff to a new employer, where that employer is taking on the work those employees are doing, as a result of a sub-contracting or tendering process. These changes remove many of the previous scenarios which prevented the automatic transfer of staff. They include scenarios where a contractor could be required to take on employees as a result of winning a tender, where they are not currently an employer at all.

These changes are complex. Advice should be sought before tending for new catering work where that work is currently being completed by employees of another entity (either another service provider or in-house staff) so the implications can be fully considered.

Changes to rest and meal breaks

Mandatory rest and meal breaks are to be re-introduced for almost all employers. This means, in summary, employees will be entitled to a 10 minute paid rest break after every 2-4 hours of work, and a 30 minute unpaid meal break after every 4-6 hours of work. Employers and employees need to agree when these breaks will be taken or they will default to the middle of the time period in which they are due. They also need to record that they are being taken.

Other changes

The government had already committed to raising the minimum wage to $20 by 2021 last year, in a series of steps. This year the minimum wage increased to $17.70 on 1 April.

Also from 1 April, employees can now receive up to 10 days paid leave annually for dealing with the effects of domestic violence.

For employees claiming they have been unfairly dismissed, the primary remedy is re-instatement, where reasonably practicable. This was previously the case up until March 2016, although in practice it was not common for employees to be re-instated by the courts. For employers, re-instating a dismissed employee could be extremely disruptive. The risk of a possible re-instatement is likely to become a significant bargaining chip for employees negotiating settlement of a personal grievance relating to their dismissal.

The government is currently consulting on changes that would mean temporary staff employed by an agency could raise a personal grievance against the company they complete work for, as well as, or instead of, against the agency that employs them. These are not yet confirmed changes. However, if implemented they will have significant ramifications for any employer using temporary agency staff, and the agencies themselves.

What do I need to do?

These changes add significant costs and risks for employers, particularly for small businesses paying low skilled workers at or near the minimum wage, and those with collective agreements. It is essential that employers are fully informed and compliant with the changes now they are in effect. Smaller businesses will need to factor these costs and risks into their operational planning, particularly when making decisions about whether to engage new staff members or tender for contracts where new staff will be inherited or required to complete the work.

Technology based solutions for many routine tasks are developing fast. Now is a great time to consider whether these can support business growth as an alternative to increasing staffing levels. Investing in key staff and moving to an operating model of fewer staff with greater skills and responsibilities, supported by efficient systems and technology, is one way to adapt to increases in the direct and indirect costs of employing staff.

The large retailer Smiths City recently lost a case in the Employment Court, which has been widely reported in the media.

The issue was whether or not employees had to be paid at least the minimum wage for 15 minute ‘optional’ meetings before the start of their shift.

The Court said that these meetings were ‘work’ because there was an expectation communicated by managers that employees who cared about their jobs attended them. It didn’t matter that employees were not contractually required to attend, that some employees didn’t attend from time to time or that the meetings were informal.

It followed then that all employees need to be paid at least the minimum wage for the time spent attending these meetings.

The Court also said employees must receive at least the minimum wage for time spent attending these meetings regardless of what else they got paid during the pay period.

Previously it had been a fairly standard practice for many employers to make sure they paid at least the minimum wage on average for all hours worked within a pay period (e.g. a fortnight). Interestingly the Labour Inspector who brought the Smith City case to the Courts originally seemed to think this was an OK practice. They only brought the case for those employees being paid ‘at or near’ the minimum wage – presumably because they thought employees whose hourly rate worked out higher than the minimum wage on average for all the hours worked including the 15 minute meetings, were being paid acceptably. The Court disagreed.

In practice this approach almost certainly also means the employees should have been paid at their contractual hourly pay rate for these units of time, where their hourly pay rate was higher than minimum wage. That point wasn’t part of the case the Court was considering.

Smith City has 3 months to comply with the decision and will have to pay backpay to all affected staff who haven’t been paid to attend these meetings for the past 6 years.

This case has significant implications for employers who operate any of the following practices, which until now have been quite common particularly within retail, hospitality and construction:

·        An expectation, contractual or otherwise, that employees attend work earlier than their paid shift start time to ‘prepare’.

·        An expectation that employees cash up, clean up, or continue serving a customer after their paid shift ends.

·        Any form of meeting that employees are expected (or encouraged) to attend outside of their paid working hours.

·        Any form of requirement for employees to rectify work errors in their own time.

·        A requirement to attend unpaid work-based training or potentially any requirement to undertake other activities to meet accreditation requirements for their job.

·        A flexible approach where employees may work more than their paid hours one day and be allowed to leave early or take a longer lunch break on another day without this being specifically recorded in their wage and time records.

As always there are a range of options available to employers to respond to this issue. Whether or not the example situations above are definitely a problem will depend on a range of factors including what is contained in the employment agreement. Contact us for further information or advice.

As a customer I have always believed in giving feedback be it negative (but constructive) or positive where and when appropriate. I don't know the exact ratio of negative to positive but I'm pretty sure that the positives come out higher.

Something happened recently however that got me thinking about how employers handle this feedback. I was in a large store looking for a specialist product for a very specific purpose. This had to work first time, or I would be faced with a lot of rework and a bigger job the second time around. I explained the situation to one of the staff who gave his initial opinion, but then said that to make sure he was right did I mind if he checked with another staff member? Far from minding I was both impressed and appreciative. The second staff member agreed but then said do you mind if I check with the supplier to make sure that the product will dry properly in the situation that you have described. I have two staff who have been prepared to admit that they aren't 100% sure and asking whether I mind if they check! The supplier said yes it will be OK so I bought what had been recommended.

When I got home I rang the store and talked to the manager. His initial reaction was to say that it made his day for someone to ring with some positive feedback. He said that a note would go on their file, he would tell them personally, and they had a policy of giving staff a coffee voucher as a small reward. This sort of approach will encourage staff to carry on with that type of positive behaviour, and this would hopefully be reflected in the culture of the organisation. Looking at it from a business perspective I would hazard a guess that it won’t do any harm to customer retention / return business either.

I compared this to when I mentioned to a garage owner that I appreciated the fact that his workshop manager had kept me up to date time wise one day when they were struggling to get some parts. This was face to face and he simply grunted and walked away. I doubt very much if the feedback was passed on - I suspect however that negative feedback would have been passed on in a flash.

Saying thank you doesn't cost anything, passing on positive feedback to your staff doesn't cost anything, but the negative impacts of not doing so are likely to cost you both in terms of staff effort and the subsequent impact on customers.                                         

Food for thought ........... and no I don't go to that particular garage any longer.

Tony Stone

A question came up recently about the pros and cons of using recruitment agencies to recruit for vacancies.  There appears to have been a major increase in the use of recruitment agencies, and there are some excellent ones out there.  An example of this would be in the construction industry where there is a significant shortage of tradespeople, and a recruitment agency can help both in terms of advertising in a wide number of places, and in saving the employer time in checking things such as qualifications. Because good recruitment agencies maintain relationships with good candidates and potential candidates, they can also pro-actively headhunt suitable people for a role, rather than just relying on people responding to an advert. This can be invaluable where a unique skill set is required, or the calibre of people responding to an advert is just not at the level required.

I am also aware of a Human Resources Manager who used a recruitment agency because he was aware that the organisation was in a sector which would put people off applying.  The recruitment agency was able to advertise “blind” and talk to people about the role, explaining the benefits of working for that organisation and then thinking about the sector in that context.

Having said that, using a recruitment agency comes at a cost, and it’s not always necessary. ER Resolutions can assist employers who wish to conduct their own recruitment internally – reviewing your job requirements, writing a good advert and clear job description, acting as a sounding board, providing a second opinion at interview stage, completing background checks and putting induction plans together are all services employers choose to use us for, to ensure they get the right people and identify any potential problems. With the likely ending of the 90 day trial period next year, it’s never been more important to get this right, to avoid the cost and disruption of making bad hiring decisions.

Tony Stone

Diversity has been a growing focus for larger employers and the public sector over the past few years. Whilst some of the legal framework promoting equal opportunities and banning discriminatory work practices has been in place for over 40 years, many aspects such as equal pay for work of equal value are really only getting tested in the courts now.

Significant developments are on the horizon. 25% of New Zealand workers are over 55, we are experiencing record levels of migration, particularly from Asia, and litigation on equal pay for work of equal value is likely to result in legal changes assisting pay comparisons to be made between female dominated and male dominated jobs.

But is this something employers in the SME market need to start thinking about?

The short answer, in my opinion at least, is yes. Aside from the litigation risk of not keeping up to speed with legal developments in this area, there are actually some really positive reasons for all employers, including SMEs, to make sure they are thinking about this significant trend. Here are my top three:

1. Skills shortages are the most common complaint I hear from working with employers. Good people are hard to find, and when you do find them, you need to be able to attract and retain them in your business. With ever growing diversity in New Zealand, employers who are able to attract and retain skilled and motivated workers across a wide range of demographic profiles hold a competitive advantage as they are able to access and utilise a much larger pool of talent.

2. Connecting with your customers is easiest when they readily identify with your business and the people associated with it, and your people understand and connect with them. Businesses experience significant growth in customer attraction and retention when they can match the profile of the customers they are targeting with the people they employ.

3. Diversity of thought leads to more innovation, creativity, and more robust decision making within business. Having a diverse workforce, so long as you manage it in such a way that everyone is encouraged to have a voice, helps you to explore new ideas, challenge them in a robust way, and use a broad range of experience to implement them effectively.

Being able to attract and retain a diverse and talented workforce does require good management practices and a culture of valuing different perspectives and experiences. It may require some awareness of cultures and work practices that may be different to what you are used to. It may also require some consideration of how to lead your existing people, particularly your managers and longer serving employees, into working effectively in a new, more diverse environment. A growing number of businesses in New Zealand however are recognising that the benefits of embracing the changing face of the New Zealand workforce more than justify any initial upskilling required in order for this to work for them.

Get in touch for more information about managing a diverse workforce, effective management practices, or legal obligations around diversity and equal opportunities.