Under the proposal, all employees would have to pay premiums worth 1.39 per cent of their wages/salaries into the ACC-run scheme. Their contributions would be matched by their employers.
If someone lost their job, the scheme would pay 80 per cent of their previous income for up to six months.
Levies would be capped for employees (and their employers) who earn more than $130,911 a year. Payouts would be limited accordingly. Terms and conditions would apply.
The proposed scheme was a pet project of Finance Minister Grant Robertson, which National slammed for creating a “jobs tax” and the Greens opposed on the basis of it creating a “two-tier welfare system”.
While many of those who made submissions to a Ministry of Business, Innovation and Employment run consultation process last year highlighted problems in our welfare system, they raised a wide range of issues with the proposed solution.
Indeed, Hipkins acknowledged these inequities, noting someone might be eligible to receive more support if they have an accident than if they’re diagnosed with a terminal illness.
He said his decision to put the scheme on ice was an acknowledgement that governments only have the bandwidth to take on so many projects.
“If you take on too many, you lose focus,” he said.
Business NZ chief executive Kirk Hope, who spent years working with the Government and the Council of Trade Unions to try to create a suitable scheme, agreed the timeframe in which policy was being developed was too short.
The lobby group had wanted the scheme to be confined to only covering redundancy, not illness. It also wanted businesses to be offered tax credits.
E tū union assistant national secretary Annie Newman said the income insurance scheme should’ve been a priority in the face of a possible recession.
“The Prime Minister has told Aotearoa that he’s squarely focused on the cost of living for Kiwis. Income insurance should be a key part of that plan, as job losses are often devastating for family budgets,” she said.
“Many other countries have highly successful unemployment insurance schemes as part of their welfare systems. New Zealand is behind the eight-ball here.”
Chartered Accountants Australia New Zealand country head Peter Vial said, “From the outset, the scheme has lacked detail, robust modelling and has been too rushed, and comes at a time when Kiwis are facing severe economic headwinds.”
Vial said the organisation was worried the scheme would suppress wages and had the potential to be gamed.
“There are benefits in having a scheme that enables workers to find the most suitable and productive employment after becoming unemployed, rather than being under pressure to take the first, less suitable job they can get. But those benefits would need to come at a manageable cost that is fair to both employers and employees,” he said.
The Financial Services Council, which represents life and health insurers, supported Hipkins’ decision to push pause on the scheme’s development.
It’s chief executive Richard Klipin said this would “allow more time to get the details right and protect workers and employers from additional costs”.
