Employers, managers, and HR professionals are navigating a complex environment in 2024, with a slowing economy, continuing cost and wage pressures, legislative changes, and striking the right balance between employees working remotely and in the office.
To help SME business owners, we’re taking a look at the key trends that are shaping how organisations operate and how employees experience work.
Macro trends: rising unemployment and easing wage growth
Unemployment in New Zealand is running at 4.3% (up from 4.0% in December 2023). This means 134,000 people are now unemployed, but the numbers don’t include many of the public service workers made redundant in the past few months.
Unemployment has also risen more quickly for youth, women, Mãori, and Pasifika people
Wage growth is edging down, with the labour cost index (all salary and wage rates) rising 4.1% in the year to the March 2024 quarter - the lowest rate of increase since December 2022.
Inflation and cost of living pressures are also slowly easing. The annual consumer price index (CPI) was 4% in the year to the March 2024 quarter, and the household living-costs price index is 6.2%.
Business confidence levels are down, on the back of weaker demand and activity, and ongoing cost pressures. An increase in companies being removed from the companies register or being placed into liquidation also points to the tough time businesses are currently facing.
Businesses experiencing high employee churn
MyHR’s data shows that most New Zealand industries are seeing an elevated employee turnover rate (i.e. employees whose employment has ended), with rates between 28 and 46% over the past year. Selected sectors are reporting much higher rates, with turnover in hospitality and food services at just over 88%, and administrative and support services at 70%.
The Ministry of Business, Innovation, and Enterprise (MBIE) recently reported New Zealand’s annual average employee turnover rate was 30.4%. This puts employee churn in this country slightly below that of the UK (at 35%) and lower than USA's 41% (which is down from 47% the previous 2 years).
It’s difficult to define what an ideal employee turnover rate is for individual businesses, as some industries (like hospitality) traditionally have much higher churn. But for most enterprises, ideal turnover rates are between 10-15%.
All organisations with high turnover face ongoing pressures around recruitment, staff retention, and productivity.
Survey reveals high worker burnout rates
More than half of New Zealand employees are reporting severe burnout, according to an April 2024 survey by Massey Business School’s wellbeing@work project.
The survey of over 1,000 Kiwi workers found 57% fell into the "high risk" category for burnout, more than double the rate in December (25%) and worse than at the height of the COVID pandemic.
The biggest reason for the rise in burnout was increased job insecurity, especially among public service workers. Employees had a higher rate of burnout than managers - the first time this has happened since the project started doing the surveys.
Employees in the burnout risk category are far more likely to experience mental health issues, engage in unproductive work behaviours, and seriously consider quitting their jobs.
Restructures and redundancies rising
For the first time since the early days of the COVID pandemic in 2020, requests from MyHR clients for assistance with restructures are outnumbering disciplinary processes. This rise reflects the effects of the current economic slowdown and difficult operating conditions for businesses.
The Employers and Manufacturers Association (EMA) has also reported increased rates of employer requests for support with restructuring and redundancy, and economists are predicting more company restructures and resulting redundancies over the winter months, with low levels of business and consumer confidence.
Balancing return to office vs. hybrid work
Flexible work is now the norm for many New Zealand workers. Recent Stats NZ figures report 4 out of 5 businesses across New Zealand offered employees flexible working hours in 2023. More than 2 out of 5 businesses (43%) offered their employees the option of working from home, and 14% of their staff took up this option on a working day.
Other research from Massey University in December 2023 found the number of people doing hybrid work had increased to 41.7%, up from 28.4% in June 2023 and 32.3% in December 2022. It also found the majority of people who work in hybrid environments are more innovative and productive.
Kiwi employers appear to be more flexible than those in US and Australia, where some big name companies have mandated office attendance - typically 3-5 days a week - with some tying remuneration and benefits to office attendance. However, some have faced pushback from employees.
In New Zealand, employers can legally request employees return to the place that is named as the location of work in the employment agreement. Employees also have the right to request flexible working arrangements under the Employment Relations Act, so organisations who want their workers back in the office will have to find a balance.
Read our article on businesses bringing employees back to the workplace.
Recent legislative changes
Under changes to the Employment Relations Act, all employers (regardless of size) can now utilise 90-day trial periods to assess new employees. The trial period must be included in the written employment agreement and can only be used for employees that haven’t been employed by the organisation before.
Some immigration and employment laws have been reformed under the Worker Protection (Migrant and other Employees) Act 2023 that came into force on 6 January 2024. The changes aim to better protect employees from exploitation, with new infringements for employers who cannot supply records to a Labour Inspector within 10 working days, and potential disqualification from managing or directing a company for people convicted of migrant exploitation or people trafficking.
The Employment Relations (Employee Remuneration Disclosure) Amendment Bill has been drawn from the parliamentary ballot, and is awaiting its first reading. The Bill will ensure that employees can discuss and disclose their pay rate or remuneration to third parties without repercussions. Currently, an employment agreement can contain terms that prohibit workers from sharing their pay details, and breaching the terms can be considered a breach of good faith or a disciplinary matter.
Things to keep an eye on…
The coalition government has signalled a number of law changes aimed at “cutting the red tape" holding businesses and employees back:
- Simplifying the Holidays Act - we’ve been waiting a while for changes to make calculating and paying leave easier, and the government says it is a top priority. An exposure draft of a reform Bill will be released for targeted consultation in September 2024. Parties interested in being part of the consultation have until 8 July to register. Find out more at mbie.govt.nz.
- Making health and safety laws clearer and more effective - work will start with public consultation; timeframes still to be confirmed.
- Rules around contractors - details are still unclear about exactly what reforms are proposed, but indications are that they will prohibit contractors who have signed up for a contracting arrangement from challenging their employment status in the Employment Court.
- Simplifying personal grievances - the government has indicated changes to set a high-income threshold that would prohibit employees earning over a certain amount from making a claim, and to remove the eligibility for remedies if the employee is at fault.
In the news: Employees retaliate by “rage applying”
A recent survey by recruitment company Robert Walters has found that 60% of New Zealand professionals had "rage applied” for new roles since the beginning of the year.
Rage applying is the term coined for employees applying for a new role in heated response to a bad day at work.
Robert Walters did the same survey in other countries, with Australia, South Africa, USA, and Canada all reporting rates of 60% or above.
Among the 2,000 Kiwi professionals surveyed, 65% said being in a toxic workplace culture was their primary motivating factor, with poor work-life balance and an unmanageable workload other common drivers.
Nearly half of respondents (47%) said they had “rage applied” for multiple new roles within a short space of time.
Robert Walters ANZ CEO, Shay Peters, noted the motivating factors “stem from the work environment and policies, which lie entirely within the employer’s control”.
Our advice
It’s a demanding time for both businesses and employees. Many employers are feeling the squeeze, and looking to make changes to lower overheads.
Workers are concerned about job stability, particularly in the public sector (19% of NZ's workforce) and high workloads that can lead to burnout. Many employees expect flexibility and want to work for companies that prioritise wellbeing.
We’ve seen organisations that can accommodate individual preferences and foster an open culture reap productivity and loyalty benefits that come from having a talented, motivated team. They can also navigate change and challenges more effectively.
