NZ firms broadly satisfied with labour flexibility under new employment law

Thursday 13th November 2014

New Zealand firms have given the thumbs up to new employment law aimed at creating a more flexible work force by letting employers negotiate the terms of meal breaks and overhauling collective bargaining rules.

The Parliament last month passed legislation which aims to increase labour market flexibility and cut the regulatory burden and compliance costs for small and medium sized businesses. Chief among the changes are new working arrangements where employees can request work hours that suit them, the ability to negotiate rest breaks to meet work flows, provisions to protect vulnerable workers, a faster turnaround for Employment Relations Authority decisions, and a series of changes to collective bargaining to reduce ineffective negotiations.

The moves have been widely welcomed by public companies, with 35 of 42 local firms on the NZX surveyed by BusinessDesk saying the legislative overhaul leaves New Zealand's labour market flexible enough to meet their needs.

Just six companies who responded to the survey said the changes weren't enough for their business, with one firm saying it didn't apply. Another company executive was in the 'yes' camp, though couldn't speak on behalf of the company.

Workplace Relations Minister Michael Woodhouse described the changes as "creating a fair and more flexible system for both employers and employees", and has said he may consider looking at the Holidays Act, citing the difficulties some employers face in calculating relevant daily pay.

Telecommunications firm Spark New Zealand, the old Telecom Corp, said it works within the current framework to achieve good outcomes, but envisaged legislation will need to keep evolving as with the working landscape changes.

"As work practices and work forces continue to diversify and change, and as technology change continues to drive new customer needs, greater flexibility in the area of hiring and simplification of the holidays act would be desirable," a spokesman said.

New Zealand's labour market is recovering from the 2008 recession which coincided with the global financial crisis, forcing firms to slash jobs as they clamped down on costs in a shrinking environment. Since then, the local employment environment has improved, with the unemployment rate falling to a five and a half year low of 5.4 percent in the September quarter, with jobs growth outpacing the expansion of the population, which has been beefed up by new migrants and returning kiwis.

Still, those strong inbound migration flows have limited gains in wages, with the labour cost index, a measure of wage inflation, rising at a 1.6 percent annual pace in the September quarter.

One company, which asked not to be named, said the potential in the South Auckland labour market was considerable, and new ways are needed to "unlock the skills and potential of these New Zealanders" to help drive growth and prosperity.

The government's changes to the employment legislation were stalled in the previous Parliament after former Act Party leader John Banks resigned after he was found guilty of filing false donations declarations in his failed bid for the Auckland mayoralty in 2010, and was quickly passed after this year's general election returned the National led administration to the Treasury benches.

The legislation was staunchly opposed by opposition political parties, which leaped on the amendment to make rest and meal break provisions negotiable, which the government defended as trying to find a balance for sole charge positions, and accused it of watering down collective bargaining provisions.

Among those firms that found the labour market was still too inflexible for their needs, they cited unions' intractability in linking wage growth to productivity, which made local companies less competitive to their international rivals.

The government's amendments remove the requirement that all non-union members are employed under a collective agreement in their first 30 days, let firms opt out of multi-employer agreements, remove the duty for good faith to require a concluded agreement, and allow partial pay reductions for partial strike action.

The Department of Labour estimated about 13 percent of the labour forced was covered by a collective agreement in its 2012 regulatory impact statement, with about 9 percent of the private sector covered and 58 percent of the public sector.

In terms of the collective bargaining changes, its advice was that removing the requirement to conclude an agreement and introducing partial pay cuts for partial strikes was "likely to have the biggest impact on the bargaining environment" and would reduce bargaining where there were strained relationships between employers and unions or low unionisation, stoking litigation in the short-term to test the legal boundaries. Workplaces with productive bargaining relationships would like see little impact.

A 2012 Cabinet paper by former Labour Minister Kate Wilkinson expected more efficient bargaining in the state sector would reduce costs for the government, and would reduce compliance costs for employers who "no longer feel compelled to bargain until a collective agreement is concluded or have to be a party to multi-party bargaining if they opt out."

Of the 120 companies listed on the NZX All Index, which is made up of domestic equity securities on the local stock market, 42 responded to BusinessDesk's survey question: 'Given the recent changes in employment law, do you think New Zealand’s labour market is flexible enough to meet your company’s needs?'

BusinessDesk.co.nz

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