The great business, employee divide
Business advocates and a government minister claim award systems damage productivity and add costs to employers. Union organisers and left-wing politicians say they would help young employees and people on the minimum wage.
reports.
Christopher Luxon’s first job as a teenager was at McDonald’s Merivale in Christchurch where, thanks to an award system, he had overtime and penalty rates set in his contract.
When the young Luxon had to work more than his contracted hours or on Saturdays, Sundays or public holidays, he would have been paid more than his normal hourly rate.
But in 1991 a new law introduced what was called the “salarisation” of jobs and most of the awards were scrapped from employment agreements.
The Employment Contracts Act, passed under the Jim Bolger-led National government, finalised the labour market deregulation started by the Rogernomics reforms, and in the following years, overtime and penalty rates disappeared from more than 30% of employment agreements.
The rates have now come back into the public sphere after Alex Foulkes published his radical manifesto.
Foulkes unsuccessfully ran for the Green Party co-leadership. On March 10, it was announced that Chlöe Swarbrick had won 169 votes from party members, while he collected zero.
Foulkes said he ran on a platform of restoring mandatory night rates, weekend rates and overtime rates after 40 hours for all workers.
The mandatory rates would mostly be in favour of people on the minimum wage and people working 60 hours a week or antisocial hours, and would encourage young Kiwis to stay at home, stop the brain drain to Australia, and help fix the labour shortage in certain sectors, he said.
According to the Australian Bureau of Statistics, in the financial year 202223 more than 41,000 Kiwis migrated to Australia, although how many of them moved for better employment conditions was unknown.
Unite Union organiser Joe Carolan said he was not surprised that people working in hospitality jobs would fly across the ditch to be better remunerated.
“We don’t need to think that this is from out of space, or something that happens in faraway Sweden,” he said.
“Our closest neighbour, Australia, has weekend rates and night rates.’’
Therefore those incentives were just a three-hour flight to Sydney away, Carolan said.
“The bosses keep telling us that they want a productive economy like Australia, [but] it seems to be that the most productive economies in the world, like Australia or like Germany, pay their workers special rates for working antisocial hours.”
According to the Commonwealth Ombudsman in Australia, most of the workplace agreements there would require an employer “to pay at least 150% (time and a half rate) of the normal base wage for work performed on a Saturday and 200% (double time) for employees who perform work on a Sunday’’.
Aaron Taylor, a restaurant manager in Melbourne, said the award rates on Saturdays and Sundays incentivised people to work at weekends, the busiest days for hospitality businesses.
Hesaidhehadbeenworkingin hospitality for the past 15 years and was now a full-time employee at Hardware
Société, a cafe serving breakfast and brunch.
The award rates paid to employees were partly compensated for by surcharges, Taylor said, as the cafe had a 10% weekend surcharge and a 20% public holiday surcharge.
“We do like to work Monday to Friday and have the weekend off, so I think that is reflected in the way that we pay different award rates in the weekend.”
But business advocates said the downward adjustment or removal of penalty rates and overtime payments in New Zealand in 1991 had helped the economy.
Employers and Manufacturers Association head of advocacy Alan McDonald said productivity was going downwards before the Employment Contracts Act was introduced.
“The only time that New Zealand has been in the top half of the world in productivity was in the five or six years after we introduced the Employment Contracts Act in 1991.
“So simply paying people more to do the same job does not necessarily make them more productive,” he said.
McDonald said the awards were removed to make the workplace more flexible to enterprise bargaining, a sentiment echoed by the coalition Government.
One of the first acts of the Government was to scrap under urgency the Fair Pay Agreements, which would have reintroduced an award system for employment agreements.
In a statement, Minister for Workplace Relations and Safety Brooke van Velden said award systems increased hiring costs for businesses and reduced labour market flexibility.
“Employers and employees benefit from flexible labour markets where they can negotiate terms such as overtime and penalty rates that suit their unique situation.
“I am committed to improving labour market flexibility, where workers and businesses can have a choice about the employment terms that are best for them,’’ she said.
Manawatū Business Chamber chief executive Amanda Linsley said an award system could have a negative effect, especially on small and medium businesses.
“Generally, blanket rules don’t work and can be unfair to both employer and employee alike.”
Overtime and night rates were not likely to stop the brain drain to Australia, and they would hinder productivity, Linsley said. “Performance pay is more likely to drive productivity.”
Through collective agreement, some sectors and workplaces still maintained overtime rates in New Zealand. Nonsworn police staff were paid time and a half for the first three hours of overtime and double time for every hour after that.
Their collective agreement showed that staff were paid double time for all overtime hours worked between 10pm and 6am, during the weekend and on public holidays.
As of June 2022, according to data collected by Victoria University, almost a third of the collective agreements in New Zealand did not contain overtime rates and more than half did not have weekend rates.
Victoria University School of Management senior lecturer Stephen Blumenfeld said he had been collecting information about employment agreements in New Zealand since 1991.
He was the director of the Centre for Labour, Employment and Work until it shut down in 2022.
Blumenfeld said that around the time the Employment Contracts Act replaced the Labour Relations Act, about 50% of the workforce was covered by awards, which meant they received overtime and penalty rates.
In 1996, economist Andrew Morrison published a research paper that documented the economic impact of the Employment Contracts Act.
The paper reported a net reduction in overtime rates from 36% of employment contracts and in penalty rates from 33% of contracts.
At the same time, Morrison’s research showed a steep increase in performance-based remuneration (43%), ordinarytime wage rates (47%) and flexible work practices (57%).
Blumenfeld said the Employment Contracts Act salarisation of jobs meant “moving workers off hourly rates”.
“There has to be hourly rates for overtime and penal rates to apply.”
He admitted to a cynical view that it had happened so employers did not have to pay overtime. “[Employers] didn’t have to provide any type of benefits for working beyond the standard work week.”
Blumenfeld said legislation reinstating overtime, night and weekend rates would likely increase employers’ costs, but at the same time give employees some benefits.
Mostly it would empower workers who had no bargaining process, he said.
However, New Plymouth restaurateur Dicky Chatta said he would be “screwed” if all his employees had overtime rates, night rates and weekend rates.
Chatta, who employs about 60 people across his six hospitality businesses, said although the rates might have a positive impact on employees, they would have a negative impact on revenues.
“Weekend is the key, the majority of the business is on the weekend, for sure.
“And night-time is a prominent part of the business [too],” he said.
Chatta said he would have to consider a 50% surcharge in the weekends if he faced having to pay such costs, as he would not be able to afford it otherwise.
Most of his businesses operated at night, or after 5pm, as they were mostly restaurants, but none of his employees had weekend rates or night rates in their contracts.
“We don’t want to take any extra for our pockets, it’s just to be able to cover that cost,” Chatta said.
Some of his senior staff had bonuses in their contracts, which were paid if they stayed for a year, and performance bonuses, he said. But kitchen hands and front of house staff did not have any bonuses.