A&A Blog – Rational Commentary on Employment Issues
2018 – 2021 THE NEW MINIMUM WAGE ENVIRONMENT IN NEW ZEALAND
02 November 2018
We ran a half-day update session earlier this week and put the questions below to the various presenters from the different organisations. Below is our summary of the answers, as well as our opinions also.
How do you maintain wage scale relativity?
You need a structured and well formulated wage grade and wage band spread. Each organisation will need to decide on a starting point. Should this be the statuary minimum or something higher? This is for each company to look at and factors which will impact this are – what the business can afford and how do wage rates compare to others doing the same job at other companies. When this has been decided upon, each job grade then needs to have a higher starting rate. The degree of this will depend on a % based formula. Wage grades normally increase as job complexity demands higher skills.
What do you budget for increases in 2019, 2020 and 2021?
This is a bit of an unknown as the government has started by setting the minimum wage for 2018 at $16.50 and an end point in 2021 of $20.00. There is also a provision for the government to vary the 2019, 2020 & 2021 increase depending on the economic viability. Some organisations have simply incrementally estimated a $1.17 increase for each of the three years. Some have frontloaded it by $1.50 with two further $1.00 increases thereafter. Look to the worse-case scenario as a starting point.
How will supervisor and middle management pay be affected if you lift the pay rates for lower level wage workers?
If a wage percentage increase of around 5% - 6% is applied to lower level jobs, because of the hike in the minimum wage and then a lesser increase amount of 2% - 3% is applied to supervisors and middle management you are in effect flattening your organisation’s wage curve. This means the pay differential between wage grades is reduced. This can cause dissatisfaction and discontent as supervisors/front line managers may feel undervalued. This can lead to more interest in wanting to join unions and or employees looking elsewhere for better paying jobs. Companies who can’t afford to pass on the full % wage adjustment to middle managers and supervisors may want to explore other benefits for these employees e.g. one-off bonuses; gym membership payment; extra day off once a month; a monthly fuel voucher etc
Are we likely to see increased staff turnover as employees chase top dollar?
Very possible! However, this is not specifically linked to an increasing minimum wage – employees at the bottom end of the wage scale will typically chase a few extra cents per hour anyway. With a predicted increase in the cost of living due to additional expenses on fuel, food, rent, clothing, health services and entertainment, it is probable that employees on the lower end of the pay curve may be tempted to look for a job at a better hourly rate. Employers are already struggling to find and retain staff of reasonable quality. This could get a lot worse if pay and remuneration is not managed pro-actively. Doing this however will be expensive. Hence the forecast hike by various economists of overall labour cost increases for companies of anything between 20% - 30%.
After lifting wages to the new minimum other companies may go even higher. Rather than following this should you consider one-off payments, bonuses or rewards?
Yes, if you don’t wish to institutionalise a higher wage regime that then flows into all other pay related aspects e.g. leave pay, overtime calcs, sick leave etc. However, if you go this route it requires careful analysis, costing and planning. Plus, it needs to be managed well.
If your company has a stated policy of not being a minimum wage employer and you now can’t afford to pay more than the new minimums announced, can you renege on your policy?
Yes, you can. However, if you have included this policy into any negotiated agreement you can only renege by agreement. If it was simply a stated intent as part of your overall employment brand you can withdraw this, but it will require very careful communication as employees may lose trust & respect in management.
With labour costs set to rocket upwards by around 25% what can you do to recover some of this cost?
Companies are evaluating their whole employee value proposition and also looking within the HR portfolio at how to off-set some of the costs, for example by reducing turnover and absenteeism or upskilling.
One way is to increase price points. However, the consumer may resist price hikes and sales may drop. Automation – working smarter and cleverer by using technology. There is often an additional cost of setting this up, but once installed it can add hugely to productivity. Spend more time on recruitment and focus on bringing better quality staff on board. Better quality staff are good candidates for upskilling through training. Well trained staff deliver better outputs and up goes productivity. Performance bonuses and awards can further entice employees to be more engaged and productive.
How do you go about evaluating job skills and deciding on correct pay rates?
There are many different Job Evaluation methods in use currently. Choosing what works best for an organisation is essential as some can be complex to implement and work with. The best system to consider is one that is simple and can be easily explained to the average employee. There are 4 main methods -
1: Factor Comparison (Jobs are graded to market rate data)
2: Ranking (Detailed job analysis are completed and then ranked in order of importance)
3: Job Classification (Jobs are slotted into pre-defined job grades)
4: Point Ranking (Separate job factors are scored to produce an overall point score. The total score is then linked to pay grades)
The Point Ranking system tends to be the most objective, consistent and limits bias.
Managing a Job Evaluation and Job Grading system is best done by experts. This can be delivered internally by HR or Rem managers, or by using external experts. When using external resources make sure you do a due diligence on providers as they can be costly.
Why is it essential that employers have absolute clarity as to the difference between pay parity and pay affordability when debating wages, in the current volatile management/union negotiating climate?
Pay parity is based on comparing pay rates either internally or externally for jobs of a similar nature and pay affordability is based on what an organisation an afford to pay. In negotiations, unions often use both or the one argument that strengthens their position. Comparing wage rates for similar jobs either internally or externally (including off-shore) requires a well thought through response. Similarly, if organisations have had a record year, unions are likely to run the discussion on the basis of “you can afford to pay more”. It’s all about exerting pressure on management to pay more be it an overall % or simply lifting the starting rate. This becomes especially difficult when claims are made for employers to pay the Living Wage rather than the national Minimum Wage.
Fred Adelhelm & Anna Holmes
OFF THE RECORD
08 March 2018
Having had a frank and often hilarious chat with one of the leading movers and shakers at First Union toward the end of 2017, made me realise why they are currently viewed as the most active and fastest growing union in NZ. They are focused, passionate and with loads of energy to uplift the working class! Especially in sectors where an employer is perceived as being greedy, unethical and exploitive of workers.
Hence, they are focusing on, the so called precarious workers. These types of workers are often new arrivals to NZ, or are Kiwis desperate in search for work so they can pay the rent and feed their families. It is not uncommon for some employers to wilfully and strategically tap into this desperate situation by hiring casuals, contractors & temp employees to keep their labour cost at the lowest base possible.
For those exploitive employers, First Union has a message – treat all your workers with respect, dignity and fairness! If not, we will be on your case!!
First, is focusing on the previously not well organised employment sectors in NZ such as forestry and agriculture. Companies using 3rd party ‘on hire’ workforces who pay incorrectly, manipulate hours & rest breaks and treat regular long-serving persons as aliens, by not observing the correct and lawful employment contract status, watch out – First will be on your case in 2018!!
First have hired younger, energised and culturally aligned organisers with the ability to take on the hard issues! They also dedicate a lot of time to education and coaching of delegates. A key ingredient for building credibility and membership growth.
First is well organise and networked, know how to use social and mainstream media and are willing to use the strike tool when negotiations don’t deliver results.
First, unashamedly, promotes socialistic values and will challenge worker exploitation and corporate greed no matter the size and reputation of a company.
Their 2018 wage goal is to achieve a minimum increases beyond 3%; however they advise they will be pushing hard for higher wages in companies who can afford this.
First, has allegedly grown membership by around 3% each year over the last couple of years and is now closing in on 30,000. Their goal is to become the best and most active union in the private sector in NZ. They seem well on their way to achieving this.
First Union also assists and supplies informal support to other unions covering sectors that they are not directly involved in, such as hospitality and fast-food.
First advises that employers can expect a flurry of negotiations and industrial activity early in 2018. It is also rumoured that they have a growing strike fund nudging the $1 Mil mark.
First will be keen to utilise the new Fair Pay Agreements, by grouping companies in similar industries together, for bargaining purposes. This is to ensure that individual company profitability is not driven predominantly by labour cost.
Their model for success seems simple – get the right organisers and delegates, have a clear vision, communicate with and educate members, challenge employers with poor work practices & wages and negotiate hard.
I have no doubt that in 2018, the First will boldly continue to market their brand of unionism and effectiveness by exposing those companies and/or individual managers who believe in the old doctrine of “profits before people”!
RATHER SAFE THAN SORRY!
11 November 2015
Last week on Wednesday & Thursday we presented a couple of update sessions in NZ on the new Health & Safety at Work Act 2015 (the new NZ Act), which commences on 4 April 2016. Attendance was reasonable however we were somewhat surprised by the lack interest from some of the more established organisations, given that the new NZ Act will substantially change how H&S must be managed in New Zealand.
Some leading companies we spoke with were of the view “not much is going to change” or “we are ok in this space as we have H&S in-house expertise” or “we are onto it and have run our own workshops”.
We sourced two Australian experts to present. Why Australians? Well the New NZ Act is almost the same as Australia’s Work Health and Safety Act 2012 (Australian Act) and the Australians have been working with the Australian Act for nearly three years. There is nothing like learning from others’ mistakes and there have been many made across the ditch. The New NZ Act has been drafted to correct ambiguities in the Australian Act and to omit provisions that are unnecessarily complex. However, whilst ambiguities in the Australian Act were problematic, the key challenge for the Australians was to get senior business leaders to accept that they are accountable for safety under the Australian Act. We suspect the same will apply in NZ. The message from Australia is that H&S in NZ needs a complete reboot in regard to systems, culture and accountability.
If you believe this is going to be easy think again. The Kiwi mind-set of “no worries she’ll be right” is not going to cut it. Having listened to Siobhan and Stephen, we learned that organisations in Australia are still struggling to adjust to certain aspects of the Australian Act, 3 years after it commenced.
The key messages I took away from the sessions were:
- the complexities associated with the new primary duty holder – the PCBU, and the challenges of managing those duties when they are shared by multiple duty holders
- the wide range of persons to whom the PCBU’s duty is owed
- current NZ H&S experts generally have limited and superficial understanding of how the NZ Act affects CEO’s, Board members and other senior corporate executives – as do those people themselves!
- H&S is no longer a function that can be limited to an in-house H&S expert; this person will now be considered an expert adviser – it’s the most senior company execs who will be held accountable. Breaches of the key duties under the New NZ Act are criminal offences and they attract significant penalties for breach – for example, a corporate PCBU faces a maximum penalty of $3 million dollars, whilst an officer (director or very senior executive) faces a maximum penalty of $600,000 and/or go to jail for up to 5yrs.
- Lost Time Injuries (LTIs) alone are not an accurate measure of the success of an H&S system. A more detailed analysis of the organisation’s safety culture and performance will provide a better measure. .
- NZ companies and their Boards CEO’s and Senior Execs as well as current NZ H&S managers appear to have underestimated the scope of change that will be imposed by the New NZ Act and in particular, the vastly increased compliance risks and challenges introduced by it.
- Safety culture and therefore safety performance is driven from the top and needs to be given equal or greater priority to other business priorities.
The Australian experience has made me realize that NZ has a long way to go. Current NZ H&S experts are way off the mark.
03 November 2015
‘Health and safety awareness’ has become a bit of a catchphrase among business owners, HR managers and employees alike, so much so that it has almost lost its meaning along the way.
The new Health & Safety at Work Act, due to come into effect on 4 April 2016, is set to remind businesses that the safety of their staff is something to be taken seriously. Under the current Health & Safety Act, the wider company is liable for any injuries received by a person while they’re at work. Under the new legislation, an individual from the company, probably the CEO, would be liable and would face a hefty fine (far more than the current $52,500 penalty) along with possible jail time.
Recently the pyrotechnics company in charge of a high-profile fireworks display gone wrong was fined more than $100,000 in penalties and damages after they were found liable for injuries received by two members of the public at Eden Park last year. Hired to conduct a series of fireworks displays at a Bledisloe Cup match in August 2014, Waikato-based business Van Tiel Pyrotechnics pleaded guilty to seven charges laid by WorkSafe, most seriously failing to take all possible steps to ensure no action or inaction of any employee harmed any person.
What would that penalty have looked like under the new Health & Safety at Work Act? Put simply, an individual from the company, probably owner, would have been to blame. As a result, they would have been sentenced to footing the $100,000 bill himself, potentially facing jail time as well.
So what do business owners need to know before the new legislation kicks into gear in April? Firstly, what you see is what you get. The Act has already been passed and is fixed, which means it can only be amended by Parliament. Secondly, regardless of whether you’re a large, small, high- or low-risk business, the Act requires all New Zealand businesses to implement stricter worker engagement and participation processes. Thirdly, failure to comply with the new Act can now result in business owners, directors, executives and managers landing criminal prosecution, hefty fines and jail time, rather than lumping it all onto the business. Finally, companies will no longer be able to insure for claims or damages as a result of health and safety-related prosecution and fines.
While company owners and managers initially might be frightened of the new legislation, there’s no need to be. The updated New Zealand Act is similar to the Australian counterpart which has been in effect since 2012 and has seen great success in health and safety relations. The similarities reflect our government’s desires to replicate the same success on this side of the ditch, and regulators will seek guidance from Australia while the new Act is still in its infancy.
Company owners, directors and managers who aren’t sure what the new health and safety legislation means for their business should do their research well before the Act kicks in early next year. Enrolling in a workshop that outlines all the changes in layman’s terms is also a great idea; Adelhelm & Associates is hosting a Health & Safety at Work Act workshopin Wellington on 4 November and Auckland on 5 November 2015.
But more than anything else, businesses should take a close look at their current health and safety practices and make sure they’re up to scratch – because not only could a future health and safety issue affect the reputation of their business, it could also take a much more personal toll.
Adelhelm & Associates
14 October 2015
Flexible working conditions is an increasingly common catchphrase we’re hearing among unionised Kiwi companies.
But what do flexible working conditions look like, and how could they impact your business – and your staff?
A desire for greater flexibility in work contracts isn’t bad, particularly when your bottom line could be improved. But it’s important to remember that you’re dealing with people who have a life outside of work. At a recent Bunnings protest that objected to flexible contracts, most protesters were up in arms because of a lack of security around their rosters. “Some of us have kids and things going on,” said one worried employee. “We don’t want the uncertainty.”
Recently, SkyCity has followed in the footsteps of the fast food companies and reached an agreement with Unite and SFWU that abolished a ‘zero hours’ policy, their new agreements officially coming into effect in January next year. Back in May, Unite Union National Director Mike Treen emphasised security of hours and consequently wages was a major influence on employees’ reactions to contracts with greater flexibility.
What increased flexibility looks like for your company is completely different to another’s. That’s why it’s essential you do your homework and ensure your business case is sound before heading to the bargaining table, because as soon as employees even sniff the prospect of uncertainty, the media will hear about it.
Balance the pros and cons for all parties, not just your bottom line. Sure, flexibility in rosters might improve your overall productivity on paper, but if you propose that staff work 12 days straight productivity may slack off initially due to anything from ill-ease and bad attitudes to fatigue.
Flexible working conditions are becoming more of an employment relations concern than ever before, so it’s essential unionised businesses are aware of potential pitfalls. Contact the Adelhelm & Associates team for guidance.
Adelhelm & Associates
29 June 2015
A couple of weeks ago the media revealed that 1284 Talley’s workers were injured on the job in 2014 alone. Over the last three years ACC has paid out a whopping $8 million to nearly 5000 Talley’s workers, including one man who was impaled from behind with a 10cm meat hook. Despite obvious issues in the health and safety arena, Talley’s is vigorously campaigning for laxer health and safety laws.
Now there are reports that their seasonal workers are being told that if they don’t sign individual contracts, they shouldn’t bother coming back to work. Talley’s is currently in talks with the Meat Workers Union, but an email to 3News from their management dismissed these claims as “union propaganda” that doesn’t need to be taken seriously.
To make matters worse, last week’s proposed first world health and safety legislation was narrowly voted down in Parliament – 60 to 61. Come on, Talley’s – and the New Zealand government, stop playing politics. There are Kiwis’ lives at risk here.
Think back a moment to the 20’s & 30’s when unionism expanded rapidly in workplaces. It was the beginning of the modern Industrial Age, the rise of commercialism – and the subsequent rise of work-related injuries and deaths. The establishment of unions increased workplace health and safety awareness, and reduced the number of workplace deaths.
Unions were life-saving. Employees and their families revelled in their new-found job security and safety, while employers enjoyed profit – and the ability to sleep easy at night.
From where we stand it seems that Talley’s wants to take Kiwi workers back to the dark ages, where they will be exploited for commercial gain and valued far less than the meat they are processing.
New Zealand urgently needs stricter health and safety legislation passed to protect the lives of our people – but Parliament has denied them this basic human right. This is despite our friends across the ditch enforcing the same legislation two years ago – and two years down the track they’re seeing great success – and undoubtedly far fewer injuries and deaths.
Companies tend to get the unions they deserve. Talley’s might think that the Meat Workers Union is just stirring, but the numbers aren’t wrong. Whether their management likes it or not, they will always have to deal with the unions – that’s the kind of industry they work in. This is a classic example of all unions, not just the Meat Workers Union, banding together to force the hand of a company that is, quite frankly, taking advantage of Kiwi workers.
It doesn’t matter how much you try to break them, the unions will only become stronger and more aggressive – because it seems like they’re the only ones who actually care about your staff.
And the more you fight them, the more you actually prove the point of unions existing in the first place.
Workplace injuries cost money. A safe workplace spends less on workers’ compensation and enjoys better productivity and better quality. Workplace safety is not a zero sum game– everybody wins when safety is improved. But it is the employer who has to take the first step – and that first step is simply the recognition that all injuries are preventable.
Unless specified, all articles are summaries of articles gathered from various news publications. For full citations please click on the article heading.