Andrew Little: Cost-cutting exercise dressed up as business opportunity

Workers saw cuts in wages and conditions but customers did not see any reduction in their phone bills. Photo / Kenny Rodger

Telecom's networks division Chorus is proposing a massive change to the way its technicians are employed. Far from helping to improve network maintenance and reliability, it is a fundamental attack on their status and rights as employees.

There are huge risks in the plan but they are risks for the technicians and Telecom customers, not Telecom.

The proposal is a radical one. It involves turning 900 telecommunications technicians across Auckland and Northland from employees of two large, well-resourced utility service companies into stand-alone contractors.

Telecom wants them to go from having certainty in terms and conditions of employment, with rights to paid leave, to negotiate wages and conditions and have a say on work issues, and against unfair treatment, to a contract with no certainty of income, no minimum rights and with all control handed over to a new Telecom sub-contractor, Visionstream.

No reason has been given for the change. But that's hardly surprising since Telecom has not faced up to the people who actually carry out its phone installations and network maintenance for more than 15 years.

In the mid-1990s, after it was privatised, Telecom followed an aggressive plan to contract out as much of its frontline work as possible, work such as field technicians and call centre staff, and to focus only on marketing and asset development.

The technical workforce first saw its ranks dramatically culled then contracted out. Telecom aimed to create a competitive market for technical maintenance. They did this by securing six different contracting companies throughout New Zealand responsible for six geographical areas of the network. The contracts were won through competitive tendering to be renewed after five years.

This contracting model meant that when technical staff sought pay increases, the contractor employer could simply say it doesn't get enough from Telecom to pay any more. In this way, Telecom got to hide behind its contractors and avoid responsibility for wages and conditions.

Competitive tendering was great for Telecom, at least for a short while. Some contractors bid low for the work, so Telecom got it done more cheaply. Workers saw cuts in wages and conditions but customers did not see any reduction in their phone bills for line charges and wiring maintenance.

The reality was not all the contracting companies survived the five-year period. At least one collapsed, owing workers unpaid wages, and others gave up the contracts because they weren't economic. It wasn't long before there were only two left.

The model involving six maintenance contractors across New Zealand was unviable. Now Telecom wants 900 so-called independent contractors across one third of the country.

They call it a business opportunity. But the reality is different. The contract being offered by Visionstream at Telecom's behest includes obligations such as:

Being available for work from 7am to 7pm seven days a week.

Telecom or its agent Visionstream controlling the price the contractor receives for each job.

Using relief contractors approved by Telecom and having insurance approved by Telecom.

These are known as dependent contracts. The contractor is controlled by and dependent on the one source of work and income.

Telecom and Visionstream say contractors will be able to do work for other phone companies, but this is hardly likely under a requirement to be available to Telecom 12 hours a day, seven days a week.

The reality is there is no business opportunity for the individual worker. There is no ability to grow the "business" through skilled management of work or to specialise in high value work - you only get the work that is eked out to you.

It's not possible to set a competitive price that covers overheads and other costs. It's not possible to build goodwill, the real value in a small business, so that you have something to sell when you decide to get out.

The economics of the proposed new arrangement are all bad for the technicians. Telecom has said its network maintenance costs will not increase under the agreement with Visionstream. But under the dependent contractor model the technicians need to arrange for their own accounting support, insurance and tax services for income tax, provisional tax and GST. Visionstream is even recommending each technician seeks the support of a business mentor.

So, where does the cost of all this extra accounting and tax services, not to mention mentoring, fall? Not on Telecom, which is paying the same price for network maintenance as it did before. And Visionstream is just the ticket clipper. The cost will fall on to the technicians.

Earning enough to cover overheads and ensure a reasonable personal income is dependent on pushing through the available work as quickly as possible. Forget quality. It's quantity that counts.

At a time when we are all concerned about productivity and generating better value, this proposal goes dead against the trend. We would all be worse off as a result.

* Andrew Little is national secretary of the Engineering, Printing and Manufacturing Union (EPMU).