NZ Chambers Submission on the Proposed Fair Pay Agreement (FPA) Legislation

18 May 2022

INTRODUCTION
1. The New Zealand Chambers of Commerce appreciates the opportunity to make a submission on the proposed Fair Pay Agreement Bill and confirms it wishes to be heard by the Select Committee in support of this submission.

Address for service:
• To New Zealand Chamber Network Director and Auckland Business Chamber Chief Executive, Michael Barnett; Email: mbarnett@chamber.co.nz; Phone 0275 631150.

2. The New Zealand Chambers of Commerce bring together 30 regional Chambers across the country, representing over 22,000 small and medium businesses who are active in contributing to the health, wealth and wellbeing of their regions, the national economy and growing GDP through international exports.

3. The Chambers’ members are diverse, ranging from professional service providers, manufacturers, freight companies, family-owned enterprises, retailers, and digital entrepreneurs pushing new levels of high-tech innovation and service offerings.

4. The Chamber is dedicated to supporting the sustainability and growth of private enterprise encouraging upskilling, entrepreneurship, and innovation to contribute to the development of New Zealand’s commercial success, international trade, visitor economy, and investment in infrastructure, technology, education, and cultural hubs.

5. Key to growth will be to reframe New Zealand’s reputation as a desirable place to live, work and play to attract the essential skills, capabilities, and competencies fit for the digital age.

6. Our members expect their views as business owners and employers to be forcefully represented in this Submission.

7. The Chamber approach is to establish constructive partnerships and relationships with policymakers and decision makers in government as well as other business organisations.

8. Our overarching aim is to champion equitable and fair outcomes to promote economic growth and social wellbeing, and a system that recognises and rewards talent addresses skill shortages and training needs and lifts the bar to build sustainable globally competitive excellence.

MAKE A MODEL THAT FITS THE FUTURE

9. The impact of Covid’s disruptions around the world and in New Zealand has been a circuit breaker, forcing a rapid shift to agile, technology-enabled operational, manufacturing, construction, finance, supply chain and service delivery models.

10. We live in a connected, digitally-enabled world where survival, competitive advantage and sustainable success for employers and employees is predicated on adaptability and adoption of the technology solutions, skills, aptitudes, behaviours and commitment to continual learning and improvement to enable peak performance in the new workplace wherever it is – in a factory, an office, a home or remotely with the world a borderless marketplace.

11. This Bill belongs in another era, one that has long been buried by private enterprise who seeks to recruit, reward and grow employee careers. It does, however, fit with the rigid hierarchies and pay scales that are so well defined in the public sector and contributes funds to unions to negotiate for members.

12. It’s hard to criticise good intentions to continue to raise the pay and conditions of the 5 per cent or so of our lowest wage earners and have mechanisms in place for all employees to be fairly rewarded. It is the way of the world and of this Government which is committed to securing economic recovery and investing in the wellbeing of New Zealanders with a balanced approach – as well as seeing through its election promises.

13. But there are costs for doing the right thing if the approach is wrong. Levelling the playing field and “stopping the race to the bottom” through fair pay agreements and compulsory negotiations that can be initiated by the minority to get sector wide agreements is not future thinking. That is days of futures past.

14. New Zealand already has comprehensive employment laws and can target interventions for sectors with bad employment outcomes.

15. A fair pay regime by compulsion will achieve nothing. Bad employers will still be bad.

16. Instead, government and business together, should strengthen existing standards.

17. Rather than imposing collective pay and conditions across whole sectors whether they are fit for purpose or not, the focus should be changed up to achieve a continually improving and progressive workplace culture that rewards lifelong learning and increased productivity.

18. It’s time to create a new model that captures today’s values and aspirations, builds on the best of now but looks out to the future rather than inwards back in time, a model that sets the bar high and recognises the new normal is values driven and people led.

RAISE THE BAR AND REWARD ASPIRATION

19. New Zealand needs a national transformation plan to attract, reward and retain the skills and capabilities to support an innovative, diversified, high tech and highly productive 21st century economy where we grow world class expertise and investment in priority niches be it agritech, food production, service and supply chain solutions or manufacturing computer chips.

20. Covid has exposed skills shortages and atrophied mindsets. Retaining and fostering talent is critical. We must change the narrative to create hunger and aspiration for excellence and sow the seeds for a revolution to take place across our education system. We need to grow curiosity, core numerical, language, comprehension, digital and analytical skills and keener social intelligence, to have a future proof workforce.

21. That revolution is already happening here, not just offshore, but across the private sector as employers realise winning customer preference means proving that who you are and what you stand for must be demonstrated across the value chain.

22. Increasingly, contemporary enterprises are realigning their vision, values, cultures, and behaviours to meet customer demands to demonstrate integrity, ethics, authenticity, accountability, and transparency to do right by the environment, the community, and their people – and publish independently audited reports on their impact, progress and challenges.

23. Businesses, including the 80 per cent of small and medium enterprises in New Zealand who employ 20 people or less, know success depends on being part of this movement and ensuring that their people, their employees, have the dignity, equity, and opportunity to have financial security, their health, safety, and wellness cared for, career development plans, timely communications and engagement and their performance reviewed so their contribution is recognised and fairly rewarded.

ALL IN IT TOGETHER DOES NOT MEAN FAIR

24. Wellbeing, equal opportunities for a step up and fairness is part of the Kiwi ethos. It is not enough of a foundation to create a prosperous future when workers are valued only by their hourly rate of pay not for the individual relevance of their skills, adaptability, mobility, and ability to learn.

25. The system being proposed will mean everyone’s pay being set across a whole industry for that role or class of employee. All assistant salespeople at the same pay, all hospital cooks paid the same. All managers paid the same. All IT programmers paid the same. All retail assistants with that title paid the same. How will the system cope with someone who is both a salesperson and a data analyst and won’t fit the box for that job class?

26. The differentiations in the Bill may permit differences based on district, class of employee or occupation but it still amounts to the same out of step thinking and refusal to recognise the need, particularly for private sector businesses, to compete to attract talent for hard to fill roles or plug skills shortages.

27. Business owners, the people who take the risks, put up their homes as the collateral to stay in business, generate employment and around 30 per cent GDP to the national economy, will lose their right to tailor a competitive package to attract and continually develop the right mix of skills and aptitudes to grow their enterprise and workforce.

28. In a free market, employers and employees must retain the right to negotiate an individual package that aligns compensation and reward with contribution and supports career advancement and ambitions with training and development.

29. If this Bill is shunted through in this form, New Zealand will perpetuate its default position of celebrating mediocrity and never motivating a tall poppy to bloom to realise their full potential.

 

OUT OF STEP

30. Government’s own advisors have counselled against the reforms, citing possible infringements of international labour and human rights obligations with workers having little choice but to join a union as the designated negotiator, the iniquitous no opt in or opt out provisions for employers, and the damage foreshadowed on targets to improve productivity, innovation, investment and competition for the good of the nation.

31. The proposal does not support voluntary bargaining but rather enforces it. That is an infringement of workers’ and employers’ right to freedom of association. It is out of step with best practice.

32. Other countries have moved to enterprise-level bargaining, after finding that sector-level bargaining was not conducive to good-quality economic outcomes or superior quality labour market outcomes.

33. This model for FPAs is not and will not achieve the worthy objectives cited in the Bill.

34. Being treated the same is not the same as being treated fairly.

35. Business cannot support this agenda and will not shut up or put up with compulsory collective bargaining rules.

FAIR BY CERTIFICATION MODEL A NEW WAY

36. The Chambers recognise that the FPA model is embedded in Labour’s union roots and doctrine, and pledge to electors and the Labour Party faithful.

37. We believe there is another way to ensure that employers behave ethically to achieve the desired outcomes.

38. As stated above the Chambers seek a new model that is fit for purpose and incentivises individual employee learning and development to compete in a digital age.

39. The private sector is resistant to reverting to a throwback, combative, unwieldy, and expensive labour relations regime that under any guise looks like compulsory unionism to match compulsory collective bargaining.

40. The Chambers propose that consideration be given to a new, independently audited and published rating or certification standard for firms that pay at least the minimum wage and put their reputations on the line to show the ethical values, behaviours, practices, and compensation, reward and skills development systems that make them a good – and appealing – employer.

41. The transparent and verified standard would be a guarantee to employees that their pay, leave entitlements, conditions of work, health, safety, wellbeing, and opportunity for career progression, skills development and continuous learning are fair and equitable.

 

42. As the system evolves the annual impact reports on social, financial, environmental, and ethical sourcing now used as part of authentic and transparent enterprises’ toolkits, could extend to measuring labour relations and employee care. This in turn would form part of the Company’s overall market compliance, performance measures and brand story to build integrity and preference via verified proof points.

43. The standards could have a star rating with different levels, audited each year by a peak business organisation like a chamber of commerce, or an audit could be initiated by an employee or group of employees who believe they are not being paid fairly for their contri bution.

44. Many private sector employers already publish a code of ethics and practice as part of how they attract good candidates for roles. The certification model would not be unwelcomed, but a key performance indicator, embraced in the same way as the B Corporation certification is taking off or the quality and ethical sourcing certifications that are now keenly sought as essential to winning customers.

45. The certification panel could have three members, including a representative from or selected by the Employment Relations Authority.

46. The checklist to determine a star rating would examine the provisions specified in the Bill including defining pay and penalty rates, normal hours, flexibility on work locations, sick, bereavement and holiday leave provisions, training and development arrangements and redundancy provisions.

47. The number of stars awarded would be progressive based on pay and conditions with one star for paying at least the minimum rate for a role and five star recognising a firm that offered a premium remuneration, reward and upskilling package.

48. The model would enable progressive employers to continue to lift the bar to nurture lifetime on the job learning and reward performance and productivity contributions instead of ringfencing a person and their prospects by their hourly rate which is what the Bill perpetuates.

49. The certification model would strongly motivate an employer who needs to lift their pay rates and provisions to do so or risk public exposure that would damage their reputation – their social licence to do business and most valuable asset.

50. That loss of reputation, embodied in a star rating, would be a powerful catalyst to identify failures and motivate behaviour change – and that will achieve, without the sledgehammer, the remit of the Bill.

51. The certification model could be voluntary as should any FPAs.

52. If there are disputes, either the certifier or as a next step, the ERA, can be brought in to arbitrate, mediate and make a final determination.

53. The Chambers would welcome any opportunity to progress a productive and constructive conversation to develop this certification framework for the private sector and the tens of thousands of enterprises and hundreds of thousands of employees who would benefit from a fair and streamlined pay and conditions system.

FPAS BY DICTATE WILL NOT WORK

54. While the Chambers want to progress an alternative model that will meet the private sector needs for flexibility, competitive appeal and differentiation, we recognise that the Government is moving down the path like a steamroller in a straight line, with heavy expectations to please the unions, as the employees’ negotiator.

55. We can expect the FPA in its current form, to be resisted and challenged by the private sector.

56. While the latest iteration of the Bill recognises the capacity and capability of respected organisations like the business chambers to be approved employer negotiators, we simply do not believe that compulsion is acceptable in 2022 or that all enterprises, public and private, good and bad, should be swept up in its grip.

57. Pursue the bad with targeted interventions, but one size does not fit all.

58. The promotion of FPA law should not serve as a membership and revenue drive for any group.

59. It is archaic to believe that workers should belong to a union. Just a trickle over 16 per cent of the workforce currently belong to one and there is no guarantee that the FPA will bolster union membership.

60. Under the FPA regardless of what employees might want, a union can trigger a fair pay agreement negotiation even if 90 per cent of the workers in an industry do not want one nor want to be represented or belong to a union, but minority rules. In fact, the union rules.

61. Many employers who currently have no involvement at all with unions will be forced to participate in this new bargaining framework and engage with unions for fair pay agreements.

62. Not all employers in an industry group will have a seat at the bargaining table, but all employers will be covered by the resulting agreement, even if they disagree with the outcome.

63. The agreements will be for individual organisational or job categories, which means a single business could be covered by multiple agreements, requiring different compliance standards for different workers in their business. In many businesses, especially in the SME sector, an employee may be required to carry out several tasks during the day, and each task could easily be covered by a separate FPA. For example, in many small businesses an employee could make the sale (a salesperson), pick pack and dispatch the goods (a store person), make the delivery (a driver), write up the invoice and input it into Xero (office person/accountant) then collect and bank the revenue (accountant). Who is going to arbitrate on which FPA applies? Lawyers will have a field day.

64. Current New Zealand employment law establishes a single set of minimum standards for all industries, with a small number of exceptions, such as the starting out wage versus the minimum wage.

65. For the most part, every employee, regardless of industry, must have a minimum rate of pay, leave entitlements and employment protections.

66. This means employers understand what to do when they offer someone a job and the penalties for failing in those clear obligations.

67. The Chambers’ suggestion of a rating system makes many of these issues redundant and eliminates complexity and costs.

COSTS AND COMPLEXITY

68. Government must recognise the damage Covid wreaked on the private and productive sector and the enormous challenge of rebuilding and staying solvent to employ workers and live up to their ambitions as responsible and accountable enterprises to feed families and the community.

69. For many employers, the main problem will be having to pay imposed salary and wage rates that they cannot afford given the introduction of minimum wages, additional sick leave, and rising operating costs from rents to interest rates, as well as restructuring and refining their offers.

70. The result will be increased risk of job losses, redundancies for out-moded skills, disincentivising training and apprenticeships and accelerating further automation and disintermediation of once manual and labour-intensive procedures and processes.

71. Business will be stung by compliance and administration costs as well as having to engage experts from lawyers to HR consultants to guide them through the new regime. Government will also have a heyday recruiting an army of bureaucrats to implement FPAs.

MEDIATION AND DISPUTE RESOLUTION

72. Fair Pay Agreements are going to be long and complex and are an open invitation to inevitable stalemates and mediation. They aim to establish rules for base rates of pay, pay scales, allowances, and overtime, which will all be different depending on the agreement itself.

73. Under the current proposal the Employment Relations Authority is the exclusive default mediator, using precedence to inform ruling, but they are also the final adjudicator.

74. Private enterprise cannot accept that position of a government sponsored body in this critical role. They are not state owned or run trading enterprises as found in other countries which apply this type of arbitration.

75. There are thousands of skilled, independent, and experienced mediators to use and ensure transparency and determination of issues.

VETTING AND RATIFICATION OF AGREEMENTS

76. The proposed law, having already given unions and now approved representative business organisation high office, also elevates the ERA as the body with the obligation to vet and approve each FPA if it ticks all the boxes.

77. Employees and employers covered by an FPA will be able to vote to ratify the binding agreement with a simple majority, overseen by the union and approved negotiators.

78. Once again, the ERA is the bulwark if the vote fails to support the FPA with power to fix the terms. Provisions also promulgated for MBIE oversight as well as supporting secondary legislation to nail down loose process in getting an FPA implemented.

79. No enterprise should be subjected to government dictating representation and ratification agencies.

80. Private sector business owners and employers cannot be disenfranchised to this degree. They must have the right to appoint their own experts.

CONCLUSION

81. The Chambers supports ethical, fair pay and opportunities.

82. This Bill will not achieve its purpose.

83. It will be costly, hard to action let alone implement and erodes the basic rights of employees and employers.

84. Defining which FPA applies to an individual employee, given the need for multi-disciplinary skills in SMEs, will be confusing and complex.

85. This Bill, couched in the language, job definitions and relationships of the past will not create the transformation New Zealand needs so urgently to compete globally and diversify its economy, lift productivity, and motivate, recruit, develop and retain skills that are relevant in the digital era to build prosperity.

86. The New Zealand Chambers of Commerce cannot support the Bill and its compulsory bargaining provisions and decisions.

87. The Chambers seek a new voluntary certification model that motivates and incentivises change for the better to lift the bar on pay rates and conditions to create a skilled, progressive, and productive workforce, rewarded for contribution and lifelong learning as part of an enterprise and its brand appeal.

88. We welcome the opportunity to participate constructively in finding a fair way forward with government and other organisations that can be implemented, gives workers – and employers – dignity, fairness and protects their right to choose and enables adaptation, flexibility and learning to meet our changing world.

 

Good Business: Growing a Business starts with Strong Foundations

Starting a new business venture with other people can be a very exciting time, filled with good intentions, optimism and possibilities. It is also the perfect time to get your foundation or constitutional documents in order. Whether this is a shareholder’s agreement, a partnership agreement, a joint venture agreement or otherwise, the best time to get these foundation or constitutional type of documents prepared is right at the beginning of your business venture and the next best time is right now!

These foundation documents generally set out how the parties are going to work together, how decisions will be made and how the rewards are to be shared. These documents can also cover what happens when the parties cannot agree or if one party wants to exit the arrangement. By their very nature, these documents are best prepared when everyone is happy and things are going well – as it can be difficult to sort out these issues when things are not going well.

At Horsley Christie, we have one of the largest and most experienced commercial and property teams in Whanganui. We can help you to construct and shape these foundation documents to suit your individual needs. A lot of potential problems can be avoided with good planning and good systems. Well-crafted foundation or constitutional documents help set the respective parties expectations and will go a long way to manage those expectations going forward to ensure the parties remain on the same page.

Turning to the contents of the documents, there are a range of matters to consider, including but not limited to the following:

–              How will the business operate?

–              How will decisions be made? And how will they be recorded?

–              How will funding be arranged?

–              How will distributions be calculated? And when will they be paid?

–              What are the parties obligations to the business?

–              What are the parties obligations to each other?

–              When can one party bind the business or the other party?

–              What happens if the parties cannot reach an agreement?

–              What happens if one party wants to exit?  Or you want to introduce another party?

–              Will both parties do the same amount work or contribute the same amount of capital? And if not, how will you value the reward for effort and the reward for investment?

While some of these issues can be difficult to raise and perhaps uncomfortable to talk about at the beginning of your business venture, it is absolutely in your interest to still have that discussion. In our experience, those conversations are best had at the outset and do not get any easier if the parties are starting to disagree.

If you already have these documents in place, that is a good start but it is not the end of the matter. It is still really important that you regularly read and review these documents to ensure they are still appropriate, that they still reflect how you are actually carrying on your business and that they are compliant with any relevant legislation.

Your foundation and constitutional documents need to be living documents that are capable of growth, adapting to changes in law and to changes in the way you operate your business. Regular reviews with quality legal advice will ensure your business has solid foundations to help support future success!

If you have any questions regarding any of the above or if you would like an appointment to discuss setting up your own foundation documents or to review your existing documents, please telephone the Horsley Christie Lawyers for an appointment 06 349 0090 or email miken@horlseychristie.co.nz.

Mike Neil LLB

PARTNER

Member Offer: UCOL Business Scholarships 2022

Develop your leaders, grow your talent, and supercharge your business.

100% subsidised learning with recognised qualifications available now to Whanganui Chamber of Commerce members thanks to our partners UCOL and their 2022 Business Scholarships offer.

Teaming up with Chambers of Commerce and business network partners across the UCOL rohe of Whanganui, Manawatu, Wairarapa, Horowhenua and Kapiti, UCOL are offering 100 scholarships to businesspeople like you who believe in investing time and effort into the growth and future sustainability of their businesses, and who want to create a bright future for themselves and their community.

This year’s Scholarship offer covers 100% of course fees across seven qualifications, and also includes the Student Services Levy.

For you and your people, your investment is time and a commitment to learning. The UCOL programmes on offer use flexible-learning and blended-learning (check course offerings) resulting in more effective, more efficient learning that you can make work with other commitments.

Programmes on offer:

Note: all programmes can be taken 1 year full-time or 2 years part-time
• New Zealand Diploma in Business (Level 5)
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Whanganui Chamber Community – don’t delay!

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Scroll down to find links to more information and/or contact UCOL direct.

In brief:

The Numbers:
• 100 Scholarships available across 5 rohe
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UCOL Business Scholarships promotion information and links

UCOL Business Scholarships FAQ sheet

Fair Pay Agreements …. or are they?

The New Zealand Chambers of Commerce are uniting in vocal opposition to the Government’s plan to introduce  “Fair Pay Agreements”.

Our initial feedback to Minister Wood include the following:

FPAs are a misnomer. They are inherently unfair to both employers and workers and signal an unnecessary and unwanted return to the past.

Our members cannot support this Bill which will empower a small percentage of a sector group to dictate the pay and conditions of the majority to the detriment of employers and workers.

We all accept the aspirations to do better for workers and to implement overdue reform in some sectors, but there are better ways, more acutely tuned to market realities, to reward and grow a skilled workforce that will take New Zealand into the future.

One size does not fit all and fails to recognise and reward productivity, skills and fit for the individual enterprise’s size, structure, location and resources.

Good employers are innovative in creating workplaces where wellbeing and fairness underpin their way of operating and are creating prosperous futures that value skills, adaptability, love of learning and productivity, beyond an hourly wage rate.

We have moved a long way from compulsory and combative them-and-us unions versus employers.

We, as business owners and leaders, will not be silent. We will fight for a better way to lift productivity, pay for excellence and innovation and grow skills to sustain our economy.

Compulsory Fair Pay Agreements are not the way to achieve the changes we need.

We would welcome working as partners with Government in finding the way forward to achieve a resilient business environment with a diverse, skilled, and productive workforce that is valued for the individual contribution they make.

Speak to us if you have questions or feedback: ce@whanganuichamber.net.nz

Good Business: Co-ownership arrangements as investor or getting on the property ladder

Getting on the first rung of the property ladder is becoming harder than ever to achieve. The reasons why are well known — sky-rocketing house prices, higher rents and costs of living, tight lending restrictions and a shortage of housing stock. This perfect storm presents a living nightmare for first home buyers. Is it time for prospective homeowners to give up on the Kiwi dream of home ownership? If not, there are other options.

 

The Kiwi dream
There are significant social and economic benefits to communities from the security that comes with having an established place to live. It brings freedom from the uncertainty and stresses of renting coupled with anxiety as house prices continue to rise. These benefits make the housing dream worth chasing and have driven private companies, the government and charities to provide innovative solutions to help Kiwis (with a variety of incomes and house price brackets) into home ownership. Necessity is, after all, the mother of invention.

 

Co-ownership
Co-ownership or shared ownership is a practical tool to get on the property ladder: by ‘shared’ we don’t mean pooling funds and cramming into one house with several other families (or your closest friends) bunk-bed style.

Co-ownership means buying the percentage of a property that you can afford now, with a silent investor partner providing the balance. Together you ‘co-own’ the property in those shares. The home is the one owner’s to enjoy (occupying owner) while the other owner has funds invested in property (investor owner).

The occupying owner pays a fee or interest to the investor owner for the portion of funds invested and in time the occupying owner can buy out the investor owner.

 

Filling the deposit gap
For many prospective buyers, their inability to save a large enough deposit is the main barrier to getting a loan from a bank. Most are quite capable of servicing a mortgage but cannot save for the required (and ever-increasing) deposit amount because life gets in the way.

The gap between the deposit saved and the deposit required is just too wide for many. This is where co-ownership initiatives help people who don’t fit mainstream mortgage criteria.

Buying a first home provides Kiwis (who have been in KiwiSaver for at least three years) a ‘single use’ key to unlock those contributions which can assist towards 5% of a house deposit. If the occupying owner has 5% of a deposit, they can use the investor owner’s contribution to top up the deposit required for regular retail lending — without having to resort to a second-tier lender.

 

If the worst happens – what next?
As well as the upsides of owning property, what happens if the property market dips, personal financial situations change or relationship break ups occur?

If things really go belly-up, the house can be sold, the mortgage repaid and the co-owners share in the loss (or the gain) in the percentage ratio that they contributed at the outset. Or there may be other alternatives by negotiation.

 

Conclusion
In high-price areas such as Auckland (actually, almost anywhere in New Zealand now) and without access to a ‘bank of Mum and Dad’ to solve the deposit gap, a co-ownership arrangement may be the best opportunity for prospective buyers wanting to escape private rentals and have a place to call their own. It is also an alternative investment opportunity to those with available funds.

Consider this property ownership and investment option and keep the dream alive. It may be you, or someone you know, who could use a helping hand onto the property ladder right now.
For more information contact Joamari van der Walt joamariv@horsleychristie.co.nz

 

Joamari Van der Walt │ LLB │ BComm(Economics)-Law (Stellenbosch) │
LEGAL ADVISOR

 

Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.