RUNNING THE FIGURES
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.