Business NZ says businesses more keen on slimmed-down income insurance scheme, cutting health and disability coverage

Finance Minister Grant Robertson with Business NZ chief executive Kirk Hope (left) unveiling the social unemployment insurance scheme. Photo / Mark Mitchell.

Business NZ chief executive Kirk Hope has said members of his organisation would be more likely to support the Government's $3.5 billion unemployment insurance scheme if its ambitions were pared by dropping cover for sickness and disability

In February, the Government announced its plan for social unemployment insurance, which would pay people 80 per cent of their salaries (up to a cap) for seven months after losing their job. The plan would be funded by a levy of 1.39 per cent on employees and businesses.

It's designed to ensure people re-enter the labour market at an appropriate pay level after being made redundant.

The scheme was jointly designed by the Government, Business NZ, and the Council of Trade Unions. The three parties have supported the scheme to consultation, but are not obliged to support whatever emerges from the consultation process which ends later this month.

Hope said the scheme had expanded in scope while the three groups were negotiating over what it would look like.

"You're not always going to get everything you want. When we started the conversation with the CTU it was about a redundancy scheme - it's expanded. The Government wanted to expand that to include health and disability," Hope said.

Hope said Businesses would probably find the original scheme, without health and disability cover, "more palatable".

"It certainly halves the cost - Insofar as it makes it more palatable I think the answer is likely 'yes'," Hope said.

Officials estimate the total annual cost of the scheme to be $3.54b, made up of $1.81b for displacement and $1.73b for health condition and disability claims.
He said Business NZ was engaging "with as many businesses as we can over it," and that it was "too early" to say that Business NZ might not support the scheme after the consultation period ended.

Business NZ pulled out as a backstop negotiator for Fair Pay Agreements, the Government's signature industrial relations reform. Unemployment insurance is slightly different to that issue, in that Business NZ never backed Fair Pay Agreements, while it helped design the unemployment insurance scheme.

Hope said the Government had "other policy options" if it did not want to follow through with the unemployment insurance scheme in its current form, and suggested looking at an old working group report.

"There's a 2008 report that was done by a working group with CTU, Business NZ and Govt officials which outlines a range of options with relation to restructuring redundancy. So there are other policy options," he said.

Hope said Business NZ supports New Zealand having a "conversation" about the need for such a scheme.

"Our view is it's really important to have a national conversation about it," Hope said.

"You've got the OECD and now you've got the IMF supporting the idea New Zealand has a missing link in terms of … income smoothing," Hope said.

"There may be good reasons for that - maybe we have a stronger and more effective welfare system but until we have a proper discussion about how an income insurance might work and what the pitfalls are we are not going to know," Hope said.

He said Business NZ had been meeting with businesses to talk through the "pros and cons" of any such scheme.

Hope said that unveiling levy-funded social unemployment insurance in the midst of Covid outbreaks and mounting cost pressures was "difficult".

"It's an important message for the Government to heed - businesses are really struggling,"

"There are a range of other significant factors that make the timing of this a difficult thing - that's going to be a challenge," he said.

For now, the Government appears keen on following through on the insurance scheme as proposed. Finance Minister Grant Robertson said he had "no intention" of paring it back.

"It was a proposal where the tripartite forum agreed to propose health conditions and disability and from our perspective that sits alongside redundancy as an important way of supporting jobs through no fault of their own, so I've got no intention of changing that - of course we'll listen to submissions," Robertson said.

He said the Government was committed to the introduction of some kind of social unemployment insurance scheme, which was in Labour's 2020 manifesto. Robertson suggested he would be keen to keep the three partners in the group together, but left the door open to introducing the scheme unilaterally, if the group fell apart.

"We'll listen to what people have got to say. The government is committed to an introduction of a social unemployment insurance scheme," Robertson said.