RSM New Zealand

Upcoming Changes to Employment Legislation

At the start of 2018 the new Government announced the rolling introduction of changes to employment law here in New Zealand. The announcement drew mixed responses from employers and employees. 

In this article we highlight the key proposed changes included within the first round of employment law reforms and discuss the implications for your business. (Please note that at the time of writing this article some of these changes have already been enacted into law). 

What has or is proposed to change? 

1. Increase in Minimum Wage - On 1 April 2018 the minimum wage increased to $16.50 an hour, rising to $20 by April 2021. 

2. Increase to Paid Parental Leave - Currently, eligible employees receive 18 weeks paid parental leave. Paid parental leave will increase to 22 weeks on 1 July 2018, and 26 weeks on 1 July 2020. 

3. Remedies for Personal Grievances - Reinstatement will once again be the primary remedy for personal grievances.

4. 90 Day Trial Period - Restricting 90-day trial periods to only employers of less than 20 employees.

5. Rest and Meal Breaks - Since 2015 there has been no prescription around timing and duration for employee rest and meal breaks. It has been confirmed that a regulated rest and meal break schedule will be restored.  

6. Foreign Workers -It is proposed that New Zealand employment law will apply to all foreign workers undertaking work in New Zealand for foreign employers. From the information available so far, it appears as though foreign workers will require New Zealand employment agreements and must receive New Zealand minimum entitlements.

7. Changes for Unions – There will be a reasonable amount of change to collective bargaining processes including:

  • Restoring a unions ability to initiate collective bargaining in advance of employers
  • Re-introduction of the duty to conclude a collective agreement
  • Allowing contractors to bargain collectively and join unions
  • Restoring the requirement for new workers to be employed on the same terms and conditions as provided by any existing collective agreement for the first 30 days
  • Removing the ability for employers to deduct pay from workers taking partial strike action

What does this mean for business? 

Many of the changes that have been announced at the basic level represent an increase in labour cost for businesses which will need to be factored into business plans and forecasts. For example, the planned roll-out of the minimum wage increases represents a 27% increase over the next 4 years and by 2020, a full-time employee on minimum wage, will receive an annual salary of $41,600. 

For a large number of our client base, this has been a common point of discussion as the increase in minimum wage does not just have an impact on minimum wage earners. Many of our clients believe there is a flow on effect to employees who are just above the minimum wage or supervisors/middle level management that want to maintain the wage gap between them and their direct reports. 

We have currently seen two different responses from our clients. For some small businesses it has created significant concern for the future existence of their business. Businesses who have accepted and have ‘gotten on with it’ are looking at their payroll budgets in the context of wider business processes to ensure their business can cope with the wage changes. Looking at such changes as an opportunity can be the silver lining for businesses. By looking past this business challenge, companies are able to look at internal business processes to identify more efficient ways of working. 
By doing this, businesses may be able to operate on a leaner staff numbers or introduce more technology into their processes which may in the long term reduce the need for similar or greater staff numbers. Furthermore, businesses are also looking at how much of these costs can be passed on to customers by way of increased charge out rates for service-based companies or sale prices of goods. 

Another positive impact is that this change will also have the benefit of challenging businesses to look beyond the ‘now’ and address potential longer-term issues around skill shortages. As companies are spending more on employees this may result in additional investment in ‘growing from within’. This is an issue that many industries have struggled within of late. 

What can your business/ organisation do to manage this change? 

Given the significance of the changes, it is very important for business owners to understand the implications prior to changes being enacted and then performing a full assessment of the potential impacts to their business. This will be more important for SMEs as most will not have the benefit of having in-house resource that fully understand the employment law changes. The impact will vary dependant on the make up of your work force and the overall % of employees that will be impacted. For example, those in the food and beverage industry may be more impacted due to numbers of staff currently on the minimum wage. 

There are transitional arrangements within the proposed reforms.  By understanding these, businesses can properly put into place a plan to manage this period of change. It will also allow business to stagger internal changes and align with proposed dates that changes will become part of employment law. 

Conclusion 

 The proposed employment law changes represent a potentially significant change to many businesses.  With transitional periods likely to be implemented it is important that businesses understand the changes and use this as an opportunity to perform a full review of the impact on their organisation. 

RSM is hosting a complimentary event on employment matters which focuses on the above changes on the 4th of July 2018. Click here for more information or to register. 
 

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Authors

Lloyd Kirby
Partner - Auckland North
Don Aue
Associate Director - Audit - Auckland Central