The impact on business now that Labour govern
19 October 2020
Over the weekend, it was announced that The Labour Party won the 2020 election. With the Labour Party continuing to govern for the next three years, it’s important to consider how their policy changes may impact your business. Here, we list their policies and how they may affect your workplace.
Business hiring package
Labour intends to support job creation in numerous ways through a job creation support programme that will aim to create 40,000 new jobs in New Zealand. If your business is getting back on its feet after lockdown, this policy could help you take on new staff, with a focus on getting Kiwis who lost work because of COVID-19 back into employment.
Minimum pay rate
The minimum pay rate is scheduled to be revised on 1 April 2021, to $20.00 per hour. This represents an increase of 5.82% on the current minimum rate. This increase doesn’t translate into a linear 5.82% across the board because many employees will be earning more than that. Still, it will have a roll-on impact from the minimum rate to ensure that employers compensate everyone else’s experience and skills fairly in relation to the new rate for the lowest-paid employee.
This policy strives to assist the reduction and eventual closing of the gender pay gap. The Government will make greater information available to ensure that employers are equipped and empowered to make good pay decisions for all employees. When addressing this, employers should be aware of potential privacy issues if employees demand specific pay information relating to colleagues.
Living wage rate
The living wage rate is currently $22.10. The Labour Party wants to implement a system where all employers providing services to the Government are expected to meet minimum living wage requirements. This policy suggests that if you wish to provide services to the Government, your minimum wage and lower-wage employees will need to be paid at least $22.10 (or its increased amount in 2021.)
This represents a wage cost increase of 10.5% on the coming $20.00 minimum wage rate and 17% on the current minimum wage. With this rate change cascading upwards to ensure comparative pay fairness for more skilled and experienced employees, this cost increase will need to be factored into financial planning for 2021 and beyond. Examples of job categories that will likely be affected by this are cleaners, security guards, and caterers. It’s easy to think that the contract fees charged to the Government might absorb this pay rate. However, for your business to be eligible to provide Government services, this policy entitles all your permanent employees to a living wage rate — even the ones who are not working on a government contract.
If you employ people in these roles and you have submitted a Government tender or you would like to renew an existing Government contract, you’ll need to be proactive in achieving this benchmark.
Fair pay agreements
Labour is seeking to introduce fair pay agreements in competitive industries that have demonstrated a tendency to engage in a “race to the bottom” regarding wages to manage their costs. Removing this differentiator from those industries will, of course, require creativity around other ways to increase value or manage costs, such as revised supply chain strategies or value-added contributions to the client or customer.
Holidays Act simplification
The details around this proposal are unclear, but we anticipate that this will result in more straightforward pay rate calculations for annual and incidental leave, as well as simpler eligibility requirements. These changes hopefully, will reduce risk and administrative demands on employers. Unfortunately, at this stage, these proposals don’t appear to be aimed at simplifying the Parental Leave and Protection of Employment Act.
The Government has promised to increase sick leave from five to 10 paid sick days per year to ensure that employees can take their sick leave when they need it. While this policy will undoubtedly assist in preventing the spread of illnesses through a workplace by allowing sick employees to stay home without fear of losing income, it almost certainly brings a higher cost of absenteeism to employers.
When this change happens, necessary leave owing to illness may increase. In preparation for these changes, employers should consider ways to manage employee absences better to ensure that absenteeism costs are not unnecessarily escalated.
Training and development
Labour intends to use the current “fees-free” tertiary education programme to target areas that are critical for the COVID-19 recovery. These will include free apprenticeships and vocational training as the anticipated needs is for retraining of employees and employers affected by COVID-19 as well as new talent needs.
Hazardous work restrictions (age)
Under this policy, Labour will raise the minimum age for employees who can undertake hazardous work. The intention here is that dangerous work should only be performed by more experienced employees, which will no doubt be good for health and safety. Wages costs, however, could increase as employers may need to use more expensive employees to do this work. It may also affect the availability of employees, as even if some younger workers are very qualified and safe, their age will still prevent them from doing the work.
There are a number of proposed workplace relations policy changes ahead, and as a business leader, it’s important that you keep up to date with them. Should there be any future amendments, you can rely on the team at enableHR to keep you informed, and to ensure your standard HR workflows and templates are 100% compliant.
If you have any questions about this information or how enableHR can help you and your business, please get in touch.
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