Labour's policies include upping the minimum wage, pay equity and doubling sick leave. Photo / Getty Images
Industries relying on low-skilled labour will be the hardest hit by Labour's proposal to up the minimum wage and double sick leave, Bay business leaders and lawyers say.
They say some businesses could incur additional costs of half a million dollars and costs would be passed onto customers.
While increasing the minimum wage and sick leave were not "outrageous", fair pay agreements could be a "radical" shift to collective bargaining.
Tauranga Chamber of Commerce chief executive Matt Cowley said industries relying on low-skilled labour are the most impacted by Covid-19 and will be hardest hit by these policies.
That included construction, manufacturing, retail, hospitality and tourism.
Cowley said Covid-19 had accelerated business owners' investment in technology, as well as consumers buying online.
"The automation in the manufacturing and distribution sectors will likely accelerate as employing low-skilled staff becomes more costly and risky.
"Small businesses will also seek ways to outsource administration tasks to the cheapest and best option.
"The option of working with overseas virtual assistants or digital marketing coordinators may become more favourable for many small business owners."
Cowley said businesses will have no choice but to increase their prices to pay for the extra overheads.
Rotorua Chamber of Commerce chief executive Bryce Heard said general feedback from larger employers post-election was Labour's clear majority in the house was "a good thing".
"Most seem to agree that the minimum wage is necessary, but the small gap between that and the unemployment benefit is reportedly leading to some employees choosing the unemployment option and leaving employment by choice."
Heard estimated the combined cost per year of changes to the minimum wage, sick leave, and Matariki amounted to well over half a million dollars for medium-to-large Rotorua employers.
He said many leading employers pay well beyond the statutory requirements for genuine cases of sickness – even up to several months in some cases.
"Conversely, the minimum sick days regulations are used by some employees as additional paid annual leave entitlements.
"Doctors' certificates will likely be more strictly applied in the new environment."
Employees were generally well looked after simply because "a happy employee is a productive employee", he said.
"In today's world, the old-style employment system of time-based payment is really becoming obsolete.
"Innovative systems of output-based remuneration can be far more beneficial to both employers and employees and allow everyone to live more flexible lifestyles, often working from home."
Director of boutique recruitment and consultancy service provider in the Bay of Plenty, Human Resource Group, Brett Looker said it was ultimately throwing more costs back on the employer.
However, he did not believe the policies were anything outrageous.
Looker said upping the minimum wage was "not a bad thing" but pay equity across the workforce had to be reasonable and fair.
"At the end of the day, they [employers] still have to turn a profit. It's a fine line."
Mackenzie Elvin Law solicitor Stephen Shaw said some employers were concerned upping the minimum wage and doubling sick leave was "too much, too fast", especially with existing financial pressure arising from lockdown.
Shaw said minimum wage increases will place a "disproportionately" greater cost burden on small and medium-sized businesses.
Smaller businesses had less revenue to go around and therefore less ability to absorb quick increases in the minimum wage, which may significantly increase their labour costs in some cases, he said.
"That's going to be tricky, especially when their financial position may have already been hit quite hard by the lockdown."
There was also a concern, he said, that proposed increases may push businesses to the point of restructuring, redundancies or possibly even collapsing.
However, he said Labour has promised to try and strike a balance between increasing the minimum wage, and ensuring businesses can continue to grow and provide stable employment.
Shaw said doubling sick leave was "timely" and encouraged employees to take sick leave to help prevent the spread of Covid-19.
"Although businesses, particularly small and medium-sized businesses, are under financial pressure as a result of lockdown and this is obviously is another financial liability in terms of employment entitlements they will need to factor into their business decisions and into their budgets.
"But because employers are currently not required to pay out sick leave when employment ends, it is a contingent liability not like annual leave where you know you will have to pay at some point ... that may help to lessen the financial blow."
A more general concern from employers was that some employees might "pull sickies" more which could exacerbate the cost impact and cause loss of productivity.
"From a legal perspective it's not impossible for an employer to require proof that an employee is actually sick, but it does put a strain on the employment relationship."
While he said upping the minimum wage and sick leave were not "drastic changes", the fair pay proposal would be a "radical" and fundamental change to collective bargaining.
Shaw said the fair pay proposal meant introducing industry-wide bargaining that, along with the proposed introduction of the "dependent contractor" legal concept, was a "major shift" in the approach to how both employees and contractors could collectively negotiate under New Zealand's employment law.
He expected the Bay's horticulture industry to be a likely target for a fair pay agreement.
More generally, he said fair pay in an industry where wages increase could attract workers from other sectors and will force innovation to reduce labour cost resulting in some employees retraining into higher-skilled and better-paid jobs.
Christie McGregor of Holland Beckett Law said doubling sick leave would ensure particularly lower-paid employees were not left unpaid and feeling financial pressure to return to work if they or their children were unwell.
But in a Covid-19 environment, already-struggling employers consider this will increase costs and decrease productivity as employees take their maximum entitlements of 10 days' sick leave.
Employers allowing employees to work from home if sick could consider themselves disadvantaged, she said.
McGregor said employers with a greater proportion of lower-skilled employees will be most impacted by the minimum wage increase.
"There will also be the flow-on impact of managing those employees who are paid just over the existing minimum wage, and have their less skilled colleagues now potentially being paid the same.
"For those employers struggling after Covid-19 this will be an increased cost, however, given the timeframes for the introduction [it] should not come as a surprise."
Implementing Fair Pay Agreements would mean employers will need to comply with minimum standards industry-wide, which may see a "substantial shift" in terms and conditions provided by them.
"There also will be potentially less flexibility to think 'outside the box' in terms of terms and conditions, and to undercut competitors.
"There is provision for regional variations and exemptions for up to 12 months for employers facing severe financial hardship. The government has said that this will stop the 'race to the bottom' in terms and conditions of employment."
She said smaller employers will have fewer resources available to deal with an employee initiating bargaining, as compared to larger employers who may have dedicated HR to deal with claims. "For a small business, the process could be quite distracting."
New Zealand Kiwifruit Growers Incorporated chief executive Nikki Johnson said NZKGI will continue to monitor the potential changes to employment law closely.
While he said it was too early to comment on the details of these changes, 60 per cent of New Zealand's kiwifruit orchards were relatively small - five or fewer hectares - and such legislative changes were likely to impact on their willingness to employ staff directly.
"These small, mostly family businesses make up some of the $2 billion which was contributed to New Zealand's kiwifruit growing regions annually.
"In general, growers are concerned about the increasing costs of compliance and their ability to respond to these as small businesses."
Talent ID Rotorua director Kelly Hamlett said there were benefits to both employers and employees in doubling sick leave.
"A lot of people have been saying five days is not enough particularly now with both parents working, 10 days is likely to ease some of that burden for employees."
On the flipside, Hamlett said doubling sick leave and upping the minimum wage was an extra compliance cost for employers to have to cover time off for their workers.
1. We will implement a major support package to assist businesses in hiring at least 40,000 New Zealanders whose employment is impacted by Covid-19.
2. We will progressively extend Living Wage guarantees to contractors to the public sector – such as our cleaners, caterers, and security guards.
3. We will increase minimum sick leave entitlements from five days to ten days a year.
4. We will increase the minimum wage to $20 an hour in 2021.
5. We will make it easier for women to gain pay equity in their organisation or across their industry, by ensuring there are better records of pay equity across New Zealand, including by ethnicity and age as well as gender.
6. We will make it easier for workers to receive fair wages and conditions, and avoid the 'race to the bottom' that occurs within competitive industries by implementing Fair Pay Agreements.
7. We will strengthen and simplify the Holidays Act, and allow sick leave to be taken when needed.
8. We will protect vulnerable workers by legislating protections for dependent contractors and by recognising security guards as vulnerable workers to ensure their terms and conditions are protected.
9. We will raise the age for workers to be allowed to perform hazardous work, ensure all workers have the right to elect health and safety representatives, and ensure Seafarer Welfare Centres provide better services.
Source: https://www.labour.org.nz/workplacerelations
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