A very good morning to you all. I’m told we have a full house this morning, which is fantastic. I would love to believe it’s because I agreed to speak but I know a Backbencher breakfast is likely just as big a drawcard at this hour.
This morning I will canvass a few of the changes this Government is doing on the employment law front, with particular emphasis on holidays’ legislation and trial periods. Just this month a lawyer asked me at the annual Industrial Relations Conference whether trial periods were voluntary, so I am very much aware of how much misinformation has been spread surrounding our aims in this regard. If you do have questions please feel free to raise them after.
When it comes to employment law, this Government believes flexibility is crucial. Good employment law should dovetail neatly with a growth-friendly business environment, while ensuring fairness in the employment relationship. With the economy in unknown territory, we must focus on means to not only preserve jobs, but help workers into employment. The introduction of a 90 day trial period will provide a boost in this regard. In developing this legislation we wanted to make sure that it would assist those on the margins of the workforce who might struggle to get a shot at a job they are entirely capable of performing.
It is disappointing, though not unexpected, that a scaremongering campaign targeting small businesses has been attempted. It is incredibly irresponsible to discourage workers from seeking work with small employers purely because they have the option of utilising a trial period.
Even One News could not get the facts right on this one. They put forward the case of an autistic man on an invalid’s benefit who believed this legislation would make it near impossible for him to get a job, and if he did get one it would allow employers to discriminate against him. In reality, he is the very type of person the 90 day trial period will provide assistance to. People like him want to make a contribution and know there may be some barrier to getting a foot on the employment ladder. All they are looking for is an employer to give them a chance so they can back themselves and prove their worth.
Trial periods are not a new phenomenon; they are used successfully throughout developed nations and are commonly six or 12 months long. They are also often mandatory. We have looked at the legislation around the world and moved to implement the 90 day voluntary trial period for small businesses because it is the best option for New Zealand. The 90 day trial period is designed to provide small businesses with the confidence to take on employees in uncertain economic times and promote labour productivity over the long-term.
As most of you know, it means that businesses that employ 19 or fewer employees may agree with new employees to a trial period of up to 90 days. The trial period will allow parties to evaluate the employment relationship and to terminate that relationship if it is not working out, without risking a costly, time consuming personal grievance action. The legislation is clear that a trial period is voluntary, and it was always envisaged that some workers would not agree to it and in many sectors will not even be asked to.
A wrong employment decision can cripple a small business, so employers can be very reluctant to hire, particularly at a time when economic confidence is low. Through this legislation the Government is giving small businesses the confidence to take a chance on expanding their workforce or hiring someone they might not otherwise be willing to look at.
A key aspect of the legislation relates to people on the benefit. We want to give them the confidence to go off the benefit and get into employment. We are well aware that they may be reluctant to accept a trial period if it meant they faced a stand-down period to go back on the benefit in the event a job didn’t work out. So we removed that stand-down period for beneficiaries, and while we’re confident most workers will back themselves to step up to the requirements of a new job, they have that added assurance that they won’t be in a worse-off position financially should it not work out.
There are significant safety mechanisms in place to protect workers from exploitation by unscrupulous employers. These include the right of employees to seek a personal grievance on discrimination grounds and the requirement of employers and employees to act in good faith. I should probably emphasise that we do expect employers to act in good faith in all aspects of an employment relationship and I know by far the majority of employers already do. I am confident we have got the balance right in this legislation and employers who do attempt to abuse employee rights will find no comfort in this law.
In that regard I welcome the CTU campaign to name and shame unscrupulous employers who try and flout the law, as long as the campaign doesn’t expand to law abiding businesses that are trying to survive and giving new employees an opportunity to get on the employment ladder. There is a clear distinction between businesses wanting to provide opportunities for workers and others that do not share those intentions. So long as those distinctions are clearly identified I’m comfortable with their position.
I will be monitoring this legislation to see how it is used and what workers and industries benefit from it. Any feedback from employment lawyers or human resources specialists is also welcome.
Holidays Act 2003 Review
The next stage of our programme addresses concerns experienced by employers in complying with Holidays legislation. This Government is aware that businesses have experienced increased compliance costs in applying some parts of the Act, especially the calculation of relevant daily pay.
Over time, many issues have arisen that required resolution in the Courts. This, in my view, is an unsatisfactory situation. Lack of clarity in holiday provisions has a negative impact on employment relationships and the labour market, because employees and employers have to waste time and resources trying to establish what their rights and obligations are.
The legislation must also be more easily able to accommodate increased diversity in working patterns. Some 35% of people work outside of the standard Monday to Friday working week. Holidays legislation must be better able to cope with these changes in working patterns.
This is why I am establishing a working group to review the Holidays Act and identify areas for improvement. Both Business New Zealand and the New Zealand Council of Trade Unions will be on the working group.
Reviewing relevant daily pay to make it easier for businesses to calculate and administer will be one focus of the review. Current practice in calculating relevant daily pay is horrendous. As some have described it, the sums required to work out what relevant daily pay is often end up looking like the blackboard equations from A Beautiful Mind. Clearly, this is not a satisfactory system by any means and it needs to be fixed.
Allowing employees the flexibility to trade in their fourth week of annual leave for cash will be another area of the review. A 2007 survey pointed out that since the introduction of four weeks’ annual leave in 2006, the average number of days of untaken leave per employee had increased from about seven days to about 14.
We intend on giving employees the choice to trade in their fourth week for cash – and we emphasise that it is the employee’s choice. Only the employee can seek to make the trade upon agreement with their employer, and it cannot form part of the original employment agreement. A business that cannot afford to pay the extra cash can simply say no. An employee who does not want to trade simply does not have to ask.
The legislation is aimed to help out workers in busy industries who simply don’t feel they need a fourth week’s holiday, or would prefer to have a bit of extra cash in the hand. If the statistics are accurate, this will likely be widely welcomed. Employers often struggle in particular seasons with low staff levels and the opportunity to maintain productivity through workers who are happy to trade in a week’s holiday is certainly beneficial to them too.
The terms of reference for the Holidays legislation are in the process of being finalised now.
Dispute Resolution
Dispute resolution is another common concern for both employees and employers. As a Government, we are committed to promoting mediation as the primary problem-solving mechanism. This can be through mediation services provided by the Department of Labour, which completes around 9,000 mediations a year, three quarters of which reach a settlement. A private mediator is also an option and has proved successful in many cases. We have committed to ensuring adequate resources for the Mediation Service, with properly qualified mediators, as per our election policy. There are also concerns about the perceived and actual independence of the Mediation Service and I am considering ways to enhance their independence.
Changes I plan to make are around the Employment Relations Authority so that it acts in a more judicial way. What I want to see is an authority that retains relatively simple access to justice that is not bogged down by too many rules and procedures, yet ensures proper justice is delivered. If we can make the decisions made by the Authority more consistent and more reliable, employers and employees will both enjoy more certainty in the employment relationship.
I will also propose changes to allow complicated cases involving complex legal issues such as injunctions to bypass the Authority and go straight to the Employment Court. Those issues are best resolved in a court of law to avoid unnecessary duplication and costs and to ensure that proper judicial decisions are made.
Everything this Government is doing is aimed at putting the employment relationship on a sound footing so we can focus on building more productive businesses and higher wages. I am also mindful of the need to offer flexibility at a time when the recession is putting significant pressure on businesses and everyday New Zealanders.
I am confident that, from a Government perspective, we are on the right path to being in the best position possible to capitalise when the global economy recovers. But if you have any further ideas, we are always willing to listen.
Thank you.
