Business New Zealand

The business community is very concerned about the Employment Relations (Flexible Working Hours) Amendment Bill that is working its way through Parliament.  The bill purports to give employees with young or disabled children or dependent relatives the right to ask for changed working hours.

On the face of it, that seems compassionate and sensible. But this legislation is not exactly about getting flexible hours.  That's because employees already have the right to ask for changed working hours (and the majority of employers do their best to accommodate those requests).

Second, the process proposed by the bill wouldn't achieve more flexible hours anyway.  So what is it about?

Some background: It is a bill based on similarly named British legislation, but which would be far more draconian toward employers than the British law is. It has been put forward by the Green Party and appears at this time to have Labour's support. This means it is close to having the numbers to pass into law.  Unfortunately it combines the worst of woolly Greens thinking with Labour's tendency to punish the business sector.

In essence, what the bill would really do is bring in a grievance process that could be used to punish an enterprise that was not able to agree to a particular employee's request.  It would be a gold-plated grievance process. An aggrieved employee could go to a labour inspector in the first instance, and if that failed, to mediation, the Employment Relations Authority, then the Employment Court, the Court of Appeal and all the way to the Supreme Court.

It's a bizarre thought that a simple request for a change in working hours – something that is worked out in a commonsense way every day in workplaces all over the country – should go all the way to the Supreme Court.  The threat of expense and time wasted in all of this would result in many employers feeling forced to say yes to a request even if that would cause problems among other employees.

The effect of the legislation would be to increase the already large grievance industry operating in New Zealand.  It would also expand the reach of the union movement. Part of the legislation would require union officials to be involved in the decision if there was a collective agreement in the workplace. This would be so even if the employee making the request wasn't a union member.  This strange requirement would bog down the process, particularly in companies in which the workforce belonged to several unions, or in the state sector where there is a high degree of union membership.

The legislation could be used by a minority element as an industrial weapon. A disgruntled troublemaker could find it a ready tool for "getting back" at an employer for a perceived slight, or a rogue union element could use it to spark discontent among employees.  Employers could be forgiven for feeling a bit threatened by this proposed legislation, especially as there appears to be no real need for it.

In the many workplaces that I come into contact with, I see a culture of flexibility and give and take among employers and employees. Employees are happy to work round each other's needs. Employers are certainly keen to do the same. Not only is that important for the wellbeing of individuals and the overall company culture, but it is essential in today's tight labour market – companies that don't look after their employees risk losing them.

Just last week a survey came out showing that New Zealand employers are among the most flexible in the world.  Since employees already have the right to request flexible hours and since New Zealand employers are already very responsive to staff needs, this legislation is misplaced.  Coming on top of the employer- unfriendly Employment Relations Act, the disastrous Holidays Act and the ambush involved in compulsory employer contributions to KiwiSaver, this legislation is definitely not wanted by the productive sector.

# Phil O'Reilly is chief executive of Business NZ.

Work stress is making people from doctors to plumbers mentally ill, new research has found. The Dunedin-based study found that 14 per cent of women and 10 per cent of men who were stressed at work suffered depression or anxiety when aged 32. They had not had these conditions before.

They were among nearly 900 people Otago University has been following since they were born in 1972-73. For the latest paper, they were asked at the age of 32 about psychological and physical job demands, the level of control they had in decision-making and social support structures at work.

The paper, published in the British journal Psychological Medicine, found that women who reported high levels of psychological job demands - such as long hours, pressure or lack of clear direction - were 75 per cent more likely to suffer from clinical depression or general anxiety disorder than women who reported the lowest levels.  Men with high levels of these work stress factors were 80 per cent more likely to be depressed or anxious than those with the lowest levels.

Separate research has found that 16 per cent of New Zealanders suffer major depression and 6 per cent have general anxiety disorder at some point in their lives.

The director of the long-term Dunedin study, Professor Richie Poulton, said previous research had suggested a connection between work stress and depression and anxiety. However, this study was the first to establish the association independently of other factors in mental disorders, such as personality type and socioeconomic status.

But the study did not find any differences between jobs. "The most toxic factor here is high psychological demands," he said. "That can be present in multiple professions: the media are always working under time pressure; doctors, firemen, nurses, builders, plumbers ... it applies across the board."

He said the latest study, a collaboration with King's College, London, was done because rates of depression, anxiety disorders and people's stress levels had increased.

Because of the costs of mental disorders he urged employers to minimise stress for their workers. Business NZ chief executive Phil O'Reilly said smart employers were already doing that. "A key to minimising workplace stress," he said, "is excellent communication between employers and employees, to minimise confusion, to make sure people are clear about what they are doing."

Job stress costs

• 45 per cent of newly diagnosed cases of depression or generalised anxiety disorder were directly related to workplace stress.
• 12 per cent of people who experienced stress at work and had no history
  of mental health problems had a first episode of depression or anxiety
  at the age of 32.
• People with high levels of psychological
  demands at work were 75-80 per cent more likely to suffer from
  depression or anxiety than those with the lowest levels.

Source: Otago University study of 891 people aged 32.

Unions, lawyers and employers all predict difficulties with employment contracts under the KiwiSaver scheme, starting on July 1.  Council of Trade Unions economist Peter Conway said one of the main issues of concern was the 4 per cent entry level contribution, which could be a tough ask for low wage earners.

He said a 2 per cent entry level for low wage employees with a matching payment from employers was a preferred option.  It was an issue the union would raise before a final bill on the scheme was passed, he said.

Simpson Grierson law partner and superannuation specialist Neil Cameron said the traditional "total remuneration" concept was a sticking point with KiwiSaver.  He said some employers traditionally approached employees from a total remuneration package point of view, where a salary was made up of pay, and allowances for extras such as vehicles.  The KiwiSaver concept of gross salary wages was one that didn't sit well with that concept, he said.

Contract arrangements were also likely to be complicated by the fact some employees would join the KiwiSaver scheme and others would not.  The situation was in some cases likely to present difficulties when it came to wage rounds.  "In that case you've taken it into account in the wage round but you aren't actually paying it because half your employees haven't joined up," he said.  Mr Cameron said there would be some initial confusion as people tried to word employment contracts to "do all sorts of gymnastics" but believed the issues would eventually sort themselves out.

Business NZ chief executive Phil O'Reilly said after the budget the scheme's voluntary nature would cause difficulties.  He said people could opt into KiwiSaver after initially negotiating a salary without it.  If a person who did choose to opt in later agreed to have their wages reduced by the amount of employer contribution unions could argue this was "contracting out" under the law and take the employer to court.  Mr O'Reilly said wage bargaining would become very complex with some opting into the scheme and others not.  But Mr Conway said he was not convinced the scheme would lead to bargaining complications.  "It's hard to see that because really for anyone on $52,000 or below, the first couple of years of contributions are completely covered by the government."

While employers would not be fully subsidised a few years down the track or when it came to contributing to high wage earners, the subsidies for employers were still significant.  "So I don't really see that there has to be a negative impact on bargaining, there could be a positive one, but I can't see a negative one."  He said it appeared most employees were getting more and more positive about KiwiSaver but that it was important they knew all the facts and individual options before joining.  "At this stage the focus is to get as much information as possible in front of workers for them to make their own minds up."

Treasury has predicted there will only be an initial take-up of 20 per cent of workers signing to KiwiSaver, rising to 50 per cent over 10 years.

Reinvigorating ties with Japan will be the first priority of a new business group aimed at expanding New Zealand's international trade and investment. The New Zealand International Business Forum, to be launched today, brings together leading exporters from the dairy, meat, fish, horticulture and software sectors and business organisations such as Business New Zealand, the Chambers of Commerce and Export New Zealand.

Chairman Graeme Harrison said the new group would seek to emulate the meeting of business and political leader in Washington last year which created some momentum for a free trade agreement there. Stephen Jacobi, who is executive director of the NZ-United States Council, would fill a similar role for the new group.

Japan is New Zealand's third largest export destination and second largest source of imports - "but we are only Japan's 43rd largest trading partner". Japan has made it clear it is not interested in a free trade agreement with New Zealand at this stage. But as such deals proliferate the risk is of being disadvantaged by preferential bilateral pacts between other countries.

A free trade agreement which gave US or Australian beef producers preferential access to the Japanese market would be bad news. Japan is New Zealand's second largest beef market despite a 38.5 per cent tariff. "But it's about investment too, and the wider relationship," Harrison said. "We want to build a stronger high-level business constituency in Japan for a closer economic relationship. It is also about working alongside government and saying we want more effort going into Japan."

Official efforts have been concentrated on negotiations with China with the aim of concluding a comprehensive trade agreement by April next year. "Over time we will develop further projects related to Korea and the European Union," Harrison said, "as well as supporting existing efforts with regard to Australia, the United States and China."

In addition to Harrison, the forum's board includes Don Elder of Solid Energy, Rod Carr of Jade, Charles Finny of the Wellington Chamber of Commerce, Robin Hapi of Sealord, John Maasland of Auckland International Airport, Jon Mayson of Export NZ, Tony Nowell of Zespri, Mike Petersen of Meat and Wool NZ, Phil O'Reilly of Business NZ and Henry van der Heyden of Fonterra.

Sweetners to encourage half the workforce to sign up to the state's KiwiSaver retirement savings scheme will ensure its success, fund managers say.

Workers will receive up to $20 a week in tax credits if they contribute the minimum 4 per cent of their gross income.  In the other significant change, employers will be forced to match the employee contribution, phased in over the next four years, starting with 1 per cent next year.

PricewaterhouseCoopers chairman John Shewan said the changes effectively made KiwiSaver a compulsory scheme because "you would be a bit silly" not to opt in. "There seems to be an increasing appetite for compulsion and in practicable terms that is what we have got now."

The controversial compulsory employer contribution would take some of the shine off the corporate tax cut, despite being partly offset by a $20 a week subsidy from the Government, Mr Shewan said.

Investment Savings and Insurance Association chief executive Vance Arkinstall said the changes to KiwiSaver would ensure its success.

"There is now no doubt that the proposition offered by KiwiSaver is so attractive that virtually all New Zealanders must consider joining. Even employees not changing jobs should consider opting in."

Mercer, which is one of six Government-appointed default providers for the scheme, expected the added benefits would result in the number of people opting into KiwiSaver to at least double from its previous estimate of 20 per cent over the next seven years.

"If you can afford savings at all you are strongly encouraged now to do them," Mercer head of New Zealand Tim Jenkins said.

Mr Jenkins said employers should view compulsory matching contributions positively because they would have a year to adjust and receive a tax credit to soften the initial cost.

AMP's general manager of savings and investment, Roger Perry, expected the KiwiSaver take-up rate to hit 80 per cent in the next few years, similar to the United States, which also has automatic enrolment schemes.

Some existing workplace superannuation schemes that were previously available only to management would now have to be opened up to all employees.

Some schemes would expand rather than contract as a result of KiwiSaver, Mr Perry said.

Business NZ chief executive Phil O'Reilly said KiwiSaver would impose more costs on employers. "The proposals to make compulsory matching employer contributions for KiwiSaver, even with the tax credit for reimbursements, will load costs on employers that are not needed at this difficult time.

"Compulsory costs imposed on employers without their agreement or buy-in is not helpful given the significant negative elements in the current business environment."

But New Zealand Exchange chief executive Mark Weldon said the matching tax credits for employer contributions would give businesses an edge in attracting and retaining high-value staff.

While many moaned about what it lacks, some business owners think after eight consecutive budgets Michael Cullen is finally starting to learn.

Lower Hutt fire alarm manufacturer Pertronic managing director David Percy said a 3c cut in the business tax rate showed New Zealand was starting to "play catch up" with the rest of the world.

"The number one thing in terms of growing a business is retained earnings. It's a move in the right direction," he said.

New Zealand's per capita income was just more than half of the US, and the only way to increase it was to build successful businesses, he said. "Most countries recognise this and it has taken New Zealand a while to focus on having successful businesses."

More tax cuts would further increase New Zealand's global competiveness, Mr Percy said, a point Business New Zealand chief executive Phil O'Reilly agreed with. "We can't compete with Australia if you are just doing the same stuff, it's important that we move that downwards rapidly over the next two years," Mr O'Reilly said.

An extra $630 million in research and development funding was going to be positive for a lot of businesses too, Mr Percy said. However the positive gloss was immediately tarnished by the flip side of the Budget - compulsory KiwiSaver contributions and an obvious lack of commitment to tightening Government purse strings, Mr O'Reilly said.

"The positive things they are doing are likely to be less than they might have been otherwise, because you're still seeing government spending squeezing out private sector spending. It's a pretty negative point."

The compulsory contribution to KiwiSaver was an "unwelcome surprise" for employers, Mr O'Reilly said. Even with tax credits to dull the pain, the forced contribution was going to increase payroll costs already hit by extra holidays and higher minimum wages, he said.

Even worse, it seemed the Government was forcing employers to start doling out money for nothing. "Employers will be most unhappy that something that is nothing to do with them employee savings they have been roped into," Mr O'Reilly said.

But even with 50 staff in his Wingate factory, Mr Percy said he was relaxed about the KiwiSaver changes. "Ultimately it is part of the salary package, so it just forms part of the backdrop in terms of wage negotiations," he said.

The positive windfall from a tax cut would still miss about 60 per cent of small businesses, Massey University's Centre for Small and Medium Enterprise Research Claire Massey said.

And the rest of Dr Cullen's package held little for the sector to get excited about, she said. "It's not a day for celebrating for New Zealand small business."

Comparing Dr Cullen's announcements to 50 paragraphs of small business highlights in last week's Australian budget, Dr Massey said New Zealand small business owners would be indifferent. "I don't think they will be pissed off because they didn't have high expectations."

But the lack of a positive message to the owner-operators and small enterprises from Government was very "underwhelming", Dr Massey said. "I'm not talking about the neighbourhbood dairy but the small firm who do have growth prospects, whose owners are ambitious, what do they get out of this?"

Only a fraction of businesses are prepared for the Government's KiwiSaver retirement savings scheme which kicks off in four months, leaving business groups warning of a compliance "train smash" ahead.

A survey of Canterbury Employers' Chamber of Commerce (CECC) members found that only 5 per cent were prepared for the workplace savings scheme which will be compulsory for them to administer.

While Canterbury employers look woefully underprepared, Business New Zealand said the situation was the same around the country where most businesses had heard of KiwiSaver, but few understood what the implications were likely to be.

KiwiSaver, aimed at boosting New Zealand's low retirement savings rate, will be compulsory for all new employees from July 2007, and the burden of compliance falls on employers.

Employers can gain an exemption if they already have a registered superannuation scheme that meets several requirements, but the reality is KiwiSaver will be a big compliance requirement for most businesses.

CECC chief executive Peter Townsend said the survey found "almost no-one" was prepared.

"It's just not on people's dials and it is not far away."

A spokesman for Finance Minister Michael Cullen said there was no reason for concern.

"There's plenty of time before July. There's an information campaign coming up, including nationwide advertising. I don't think it's a story."

But Business New Zealand chief executive Phil O'Reilly said the level of awareness nationwide was likely to be around the 5 per cent reported in Canterbury, and possibly less.

"Typically, larger businesses will be prepared or getting prepared. But the vast majority of small and medium-sized enterprises will have done no or little work on it.

O'Reilly said the success of KiwiSaver would depend on business.

"To make this successful they need to retain the faith and support of employers. If they don't invest significant time and effort in getting people prepared they risk facing a compliance nightmare."

He said it was good to hear that a publicity campaign was on its way.

"If businesses don't get good and timely information out you are going to have a train smash."

Among the decisions employers have to make are whether they will contribute to KiwiSaver as a way of attracting and retaining staff, which has both financial and industrial relations ramifications.

If they decide to simply administer the scheme there are still a lot of compliance requirements.

There are few things more frustrating for an employer or employee than being forced to obey outdated regulations that are no longer relevant to today's workplace.  Red tape of this nature is like molasses. I know from my experience as the managing director of Foodstuffs (Auckland) that it is easy for a business of any size to get bogged down.

One piece of legislation that has clearly passed its use-by date is the 22-year-old Holidays Act. Since this law was introduced, New Zealanders have changed. We've changed the nature of the work we do, and the hours we spend doing it. Once employees were mainly wage-earning 9-to-5ers, but today far more are casuals, or self-employed, or salary-earners.

Almost every other Government intervention into our working lives has been overhauled: shop opening hours have been liberalised; the Employment Contracts Act freed us from many prescriptive regulations. Yet despite all these changes, we continue to rely on the same old holidays legislation, which as well as being out of date is complex and difficult to enforce.

That's why many people in the business sector, including the Business Roundtable, have been hoping that some government would consider putting the tired old Holidays Act out of its misery.

Sadly, though, the Government is planning to replace one bad law with another. Although it cuts down on some complexities, the new Holidays Bill is hardly any more relevant to today's labour market than the act. Crucially, it still mandates holiday arrangements upon employers and employees, instead of allowing people to reach their own agreements.

As Business New Zealand and other organisations have warned, the Holidays Bill cuts down complexities in some areas, yet sprouts whole new areas of regulatory intricacies in others. It is like a pharmacist supplying you with a pill for your migraine and then giving you a whopping head-butt before you leave the store.

One cause of the headache for business owners is the news that administration and compliance costs are likely to increase rather that decrease. In fact, some tourist and retail operators could choose to remain closed on public holidays because the new legislation means it could cost the equivalent of 20 hours of ordinary pay to employ a person for one eight-hour day.

The effects of the Holidays Bill won't be confined to private business. Many public sector operations that work seven days a week - such as prisons, police, hospitals and fire services - could be affected. The Auckland District Health Board estimates its increased new costs at $1.25 million. The Government and taxpayers will need to decide between reduced services and increased taxes.

The new legislation is being examined by the parliamentary transport and industrial relations select committee, which is hearing submissions from the public.  The Business Roundtable is challenging the committee to dump both the archaic Holidays Act and the new, flawed bill. Full deregulation is both feasible and reasonable. These days there is little sense in having the Government involved in the holiday arrangements between employers and employees.

Despite dire warnings from unions in the 1990s, a decade of life under the Employment Contracts Act showed that employers and employees are sophisticated labour market participants.  As with the Employment Contracts Act, we will find that moving to a deregulated environment does not lead to either group employers or employees having a chokehold on the other.

Repealing this legislation would not put us out in the wilderness internationally; the world's richest and most productive economy, the United States, has no statutory provisions at all governing annual leave or the terms of employment concerning public holiday arrangements.

Left on their own, employers and employees have the scope and the ability to structure work, pay and holiday arrangements in a way that is satisfactory to both sides. Regulation makes it difficult or impossible for this to happen.

If the committee cannot bring itself to recommend a fundamental review of the act with a view to its repeal, it should at least recommend that only minimum holiday entitlements are set by law, and that employers and employees should be free to negotiate mutually acceptable holiday terms, including trading pay for time, and vice versa.

The old Holidays Act is a molasses of legislation. The new Holidays Bill may have a slightly different flavour, but the outcome will be just as annoyingly sticky for workplaces.