North & South - - Issues -

At Freight­ways’ busy courier hub in Pen­rose, the small in­dus­trial sub­urb pock­eted be­tween cen­tral and south Auck­land, CEO Mark Troug­hear is scrolling through the names and in­comes of 526 in­de­pen­dent con­trac­tors who work for one of its com­pa­nies, New Zealand Couri­ers.

At the top end, the gross pay is in many cases sur­pris­ingly large and the list of six-fig­ure sums sur­pris­ingly long. The high­est is $285,000 for one driver, who’s been in the busi­ness more than 30 years. That’s fol­lowed by other sim­i­lar amounts: $251,000, $244,000, $208,000, $197,000, $185,000, $184,000, $176,000… Troug­hear says the an­nual gross in­come of a courier con­trac­tor across the busi­ness is $95,000 and the me­dian is about the same. Costs, he says, are around $25,000.

But typ­i­cally, those high earn­ers are not the Sub60 driv­ers like Jac­qui David, who pick up a par­cel from point A and de­liver it to point B. David av­er­ages 17-25 jobs a day; the oth­ers are so-called “hub and spoke” con­trac­tors who run routes that are reg­u­lar and con­cen­trated, of­ten within 20 city blocks, and in­volve po­ten­tially hun­dreds of pick-ups and drop-offs each day in quick suc­ces­sion.

Freight­ways says these driv­ers have built up their busi­nesses over many years, and of­ten have parcels to pick up when they make a de­liv­ery to the same place. “Hub and spoke” op­er­a­tors pick up or drop off from the Freight­ways Pen­rose de­pot sev­eral times a day – of­ten leav­ing and ar­riv­ing with their vans packed to the gun­wales with parcels. David, how­ever, has only a cou­ple of items on board each trip, and is at the mercy of her po­si­tion in the city when a job comes through, and the skills of the dispatcher in dis­tribut­ing jobs fairly.

“We want our couri­ers to earn more money – we want that more than any­one,” says Troug­hear. The com­pany is tack­ling the is­sue in sev­eral dif­fer­ent ways. The first is by lift­ing res­i­den­tial de­liv­ery rates, which have his­tor­i­cally been charged at the same rate as busi­ness de­liv­er­ies, and which he says aren’t sus­tain­able for the com­pany and drive down prof­its and con­trac­tor in­comes. The sec­ond is “route op­ti­mi­sa­tion” to im­prove ef­fi­ciency and pre­vent sev­eral couri­ers cov­er­ing the same ar­eas, and the third is shed­ding jobs charged out at un­re­al­is­tic and heav­ily dis­counted rates. It’s also con­trol­ling how many con­trac­tors are li­censed.

“The more couri­ers you have on the road, the bet­ter your ser­vice will be but the less each con­trac­tor will get. The is­sue is how can I get more items onto the route you’re do­ing and how can I charge more for them?”

Ac­cord­ing to Troug­hear, when New Zealand Post en­tered the courier mar­ket 25 years ago, it drove the race to the bot­tom. NZ Post told North & South that as an SOE, it was re­quired to act com­mer­cially. It set it­self the goal of be­com­ing mar­ket leader, which it did in 2003. “It is nat­u­ral that in­creased com­pe­ti­tion puts pres­sure on prices.”

Troug­hear says both Freight­ways and its con­trac­tors would be against fun­da­men­tal changes to the busi­ness model, say­ing em­ploy­ees would be less mo­ti­vated and less pro­duc­tive. “The minute you go to an hourly rate, pro­duc­tiv­ity drops. Trans­port in Aus­tralia is heav­ily unionised and the pro­duc­tiv­ity rate is ter­ri­ble.”

When the com­pany uses waged driv­ers to cover runs, they’re less pro­duc­tive than con­trac­tors and have more mi­nor prangs on the road, “be­cause it’s not their van”, he says.

Us­ing its busi­ness model, Freight­ways cal­cu­lates David would be earn­ing around $19-$20 an hour,

but that’s based on a van re­pay­ment rate at half of what she’s pay­ing and a lower fuel cost. Troug­hear says many driv­ers can put more eq­uity into their ve­hi­cle, or pay a lower in­ter­est rate by ex­tend­ing their res­i­den­tial mort­gage, if they have one – which David does not. “If you went into a café busi­ness and it cost you $100,000 to set up and you put that on a high-in­ter­est-rate loan, it’ll be hard to make money.”

He urges David and other driv­ers un­happy with their in­comes to talk to their fleet man­agers about how to im­prove their earn­ings. “We’d rather have a fleet of driv­ers earn­ing $100,000 be­cause you get bet­ter pro­duc­tiv­ity, bet­ter cus­tomer ser­vice and more mo­ti­va­tion to find more cus­tomers.” The com­pany has worked closely with the con­trac­tors Pro­drive’s Pete Gal­lagher rep­re­sents and had of­ten found ways to in­crease their re­turns. Some weren’t work­ing full time, or clocked off for pe­ri­ods dur­ing the day, or early to pick up chil­dren. “Avail­abil­ity is a key is­sue and that’s where they made a lot of im­prove­ments. If you make your­self un­avail­able, I can’t give you the work.”

He says if driv­ers aren’t earn­ing even min­i­mum wage, as Pro­drive claims, “how come there are thou­sands of con­trac­tors work­ing as couri­ers? They wouldn’t be do­ing it – they’d be in the of­fice do­ing a job for $18-$20 an hour and hav­ing hol­i­days. It’s their choice.”

The Govern­ment in­tends to im­prove the rights of in­de­pen­dent con­trac­tors and will start in­ves­ti­gat­ing po­ten­tial pol­icy changes early in 2019, says Work­place Re­la­tions and Safety Min­is­ter Iain Lees- Gal­loway.

The last at­tempt to ad­dress con­trac­tors’ rights – David Parker’s Min­i­mum Wage (Con­trac­tor Re­mu­ner­a­tion) Amend­ment Bill, which fol­lowed a sim­i­lar ef­fort by an­other Labour MP, Darien Fen­ton – was scup­pered in 2016, but Lees- Gal­loway told North & South the is­sues re­main.

“There is a group of con­trac­tors who are es­sen­tially in a de­pen­dent con­trac­tor re­la­tion­ship. They op­er­ate in a very sim­i­lar way to em­ploy­ees but don’t have the rights af­forded to em­ploy­ees un­der the Em­ploy­ment Re­la­tions Act, and that in­cludes the right to be paid a min­i­mum wage. There’s def­i­nitely con­cern that con­trac­tors are paid poorly and don’t get the ba­sic work rights we ex­pect every­one work­ing in New Zealand to get.”

Mod­ern em­ploy­ment re­la­tion­ships are much more di­verse than the tra­di­tional em­ployee-em­ployer model, he says, but the leg­is­la­tion doesn’t cap­ture that. He’s asked the Min­istry of Busi­ness In­no­va­tion and Em­ploy­ment to ex­plore what a 21st-cen­tury in­dus­trial re­la­tions frame­work needs to look like to meet the needs of both busi­nesses and work­ers. “This is the cut­ting edge of fu­ture-of-work pro­grammes.”

In Jan­uary, Lees- Gal­loway an­nounced the es­tab­lish­ment of a Film In­dus­try Work­ing Group to find a way of restor­ing work­ers’ rights in the film in­dus­try, and he says the con­trac­tor leg­is­la­tion will draw on its find­ings. He’s par­tic­u­larly in­ter­ested in whether con­trac­tors can have the right to col­lec­tive bar­gain­ing to im­prove their pay rates and con­di­tions, but won’t be drawn as to whether he wants some form of min­i­mum wage clause in any new leg­is­la­tion.

The only in­for­ma­tion he has so far on con­trac­tor pay is anec­do­tal, both from courier com­pa­nies and con­trac­tors. “A driver came into my elec­torate of­fice to drop off a pack­age and made the com­ment that he was mak­ing good money be­cause he’d been do­ing it for a long time and had good runs, but a lot of the peo­ple he worked along­side would be strug­gling to earn a liv­ing wage on the work they got, so it’s vari­able. We need to hear the ev­i­dence and base fu­ture pol­icy on good ev­i­dence.”

Above: CEO Mark Troug­hear. “The minute you go to an hourly rate, pro­duc­tiv­ity drops. Trans­port in Aus­tralia is heav­ily unionised and the pro­duc­tiv­ity rate is ter­ri­ble.” Right: David un­loads boxes from the van she is still pay­ing off.

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