Proposed employment law changes: the good, the not-so, and the ugly

Jason Ennor, Co-founder and CEO at MyHR
By Jason Ennor, Co-founder and CEO at MyHR

Last week, I wrote a piece outlining some of the changes to employment law proposed by the new Labour government and how the changes could increase costs and compliance obligations for NZ businesses.

Afterwards, I had a number of colleagues and reporters ask me what my personal views on the changes are.

Fair enough. I’m not one to lob the (figurative) grenade, then hide behind my keyboard.

So, here’s a follow-up that covers my views on the good, the not-so good, and the potentially ugly outcomes of these proposed changes for small and medium-sized enterprises (SMEs) and my reasons why.

In principle, many of the changes are a good thing for Kiwi workers and businesses. However, the way the government proposes to address the issues is not so good.

NZ employment law is structurally pretty sound, because it establishes a simple baseline of minimum standards that apply to all workers, no matter the industry or region of the country they're in. Compliance is relatively simple.

The proposed changes will add complexity and cost, which could put small and medium-sized businesses off hiring.

The good

Increasing the Minimum Wage

I hear the cries and I know this adds cost at a time of recession. But I can’t see anybody with a heart truly believing that $18.90 an hour for an adult worker is enough to house and feed a family.

Wages need to rise to keep up with increases in living costs, things like rent, food, and power, especially as children grow up.

There is real data behind the Living Wage and we should be thinking seriously about getting NZ to that level.

Reviewing the Holidays Act

Hallelujah!

We’ve had 16 years under a law that is so bad even the ministry responsible for it - the Ministry of Business, Innovation, and Employment (MBIE) - can’t pay employee leave correctly.

My sincere hope is we will see a massive simplification of the many and unwieldy leave calculation types, interpretations, and accrual methods.

The mixed bag

Matariki as a Public Holiday

Yes! Let’s fill our calendar with uniquely New Zealand/Aotearoa events to celebrate. Plus it spreads the public holidays out, giving another long weekend.

But we already have 11 public holidays a year in NZ, which is better than most countries we compare ourselves with. Moving to 12 is an unnecessary cost.

Let’s have Matariki, but sub it for one of the others.

Maybe Queen’s Birthday? Considering the day is not our sovereigns’ actual day of birth and there is no associated celebration.

Or 2nd January, “the day after new years day”? It is a pretty random day to pick as a public holiday. It doesn’t really make sense to me. This is a very expensive time of year for many businesses, with 4 public holidays and a significant drop in trade and income.

Dependent contractor protections

What makes an employee vs a truly independent contractor often comes under scrutiny.

I've looked over some case law history and the recent ruling by the Employment Court that a courier driver was an employee and not an independent contractor. This guy was clearly an employee and the ruling addressed an inherent problem in this industry.

I understand that this change is clearly intended to address an inequality in certain sectors, but a blanket change could be dangerous, especially to sectors where being a dependent contractor is a matter of preference.

Think of a "tradie" builder who subcontracts to a main building company. They don’t have to hustle for work or project manage the build. If their relationship with the primary contract holder is good, they know they’ll always have work and can take time off when they don’t want to. Much of the stress of being a sole trader is removed.

IT contractors are similar, as are some private health sector workers.

The granting of extensive employment rights to these genuine contractors, who will fit the definition of dependent contractor will not address an existing problem and could create one.

Pay equity

The data doesn’t lie: NZ has a gender pay equity issue and there is a re-balancing needed.

It is often an uncomfortable discussion point, but we cannot pretend it’s not an issue any more.

My problem with the proposed changes is that I don’t believe lumping SMEs with additional reporting and compliance requirements is the answer to the problem.

Sometimes such forced measures can build resentment and frustration, which in-turn leads to an exacerbation of the problem or avoidance of the issue.

And... the not-so good

Doubling sick leave

This just isn’t necessary and will come with significant cost.

I appreciate the COVID situation and that some people affected by the Coronavirus need extended time off work, but this could be managed with a crisis package, targeting those specifically affected.

The current law already allows for 20 days to accrue. This is 1 month off work.

I haven’t seen any hard evidence (non-anecdotal) that 5 days sick per year isn’t enough.

Sick leave is also not pro-rata for part-timers, which could add significant cost and disruption to smaller businesses who have a lot of part-time staff and limited resources.

A compromise could be to consider extending the maximum accrual allowance from 20 days to 25, which would build up from sick leave not taken each year.

Fair pay agreements

Fair pay agreements (or “modern awards” as they’re called in Australia) are a bureaucratic nightmare.

Every industry has a different set of pay and allowance standards. These standards are articulated across multiple documents of many pages.

Some employers could be covered by multiple agreements, requiring different compliance standards across a small workforce.

These agreements often cover more than just pay and allowances. They can include rules governing the employment relationship that employers must be aware of.

 

To sum up

My appeal to the new Labour government is simply that they hear the voice of small and medium-sized business, which is a significant employer group in NZ. These businesses don’t have large HR teams, lawyers on tap and government relations departments. But they do have valid points and genuine concerns.

In my experience, the vast majority of these employers want to do the right thing by their people. There is no sense in treating employees badly; it becomes a major impediment to success. There is no sense in churning staff because recruitment takes valuable time that these business owners don’t have.

Hiring and retaining good people is the aim.

I’m all for raising the floor and improving some of the minimum standards. But too much bureaucracy and additional cost will inhibit business growth.