The Post

Pay freeze takes public service into the twilight zone

Opinion: The Government says a pay freeze will rein in the pay of ‘Wellington bureaucrat­s’, but it’ll probably just encourage more of them into the grey area of contractin­g, writes Dileepa Fonseka.

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On the same day Labour were in Wellington announcing a pay freeze for government employees, a group of businesspe­ople at the other end of the North Island were discussing the exact opposite.

Some of the country’s top company directors were packed together in a hotel conference hall for an Institute of Directors event where former Delaware Supreme Court Judge Leo E. Strine Jr told the audience they should add an extra ‘‘E’’ to the term ESG.

ESG is the term for the environmen­tal, social and corporate governance responsibi­lities companies are increasing­ly taking on. Strine was arguing companies should really be adding an extra ‘‘E’’, for employees, to this acronym and possibly even forming workforce committees to ensure their staff were better looked after.

Company directors are increasing­ly turning away from the ‘‘Uber-isation’’ model of employment. Most think it doesn’t do them many favours in the long run. One, it’s bad for their brand, and two, it’s bad for their bottom line because they end up paying through the nose for staff as their workforce turnover increases.

That is why it’s difficult to understand what the Government will achieve through this recent move to effectivel­y freeze the pay of the majority of our public servants.

The stated aim of keeping debt low is hardly worth worrying about, especially if it’s to try to keep a lid on inflation. Other developed countries are running much higher levels of debt during this crisis while demographi­c factors are pushing inflation down in the long term.

After the world opens up we might see a brief burst of inflation, but afterwards we’ll find ourselves in the same low-inflation pickle we were in before. Even if we’re printing more money, demographi­c changes mean this cash will circulate around the economy more slowly, because an ageing population is generally associated with lower levels of spending.

In any case, I doubt shaving a few dollars off public-servant pay will save much money at all. I seem to be joined in this assessment by the Public Service Commission­er, who told media he doesn’t know how much money this will save, and even seemed to admit it could fall at the first collective bargaining hurdle.

The money the Government does save won’t be at the expense of those much-vilified ‘‘Wellington bureaucrat­s’’. Your typical bureaucrat has a very easy way out of this pay freeze and that’s to negotiate with their boss to become a contractor.

The Public Service Associatio­n (PSA) told the Government this in a letter at the end of April, just as they began to get wind of these changes.

‘‘Experience shows that when the pay rates of employees in hardto-staff roles like IT are kept down then employers are incentivis­ed to engage people as contractor­s (so avoiding pay restraint expectatio­ns for employees) so that they can recruit or retain them by paying them more,’’ they wrote.

The PSA says the Government currently spends nearly $1b on contractor­s. You only have to attend one or two house parties of older millennial folk (millennial­s are nearly 40 now) in Wellington to realise this billion-dollar figure might actually be an underestim­ate.

Business case ‘‘bros’’ of disputable talent are a dime a dozen in the capital and bounce from one Government contract to another effortless­ly. No need to feel too sorry for their lack of employment rights, some of the contracts they’re on have astonishin­g rates of pay attached.

There’s a limited amount of transparen­cy around these roles within government. They’re not included in statistics around its own workforce, while informatio­n on them can often be hard to obtain even via the Official Informatio­n Act. That means government­s can effectivel­y avoid a lot of scrutiny by employing people as contractor­s rather than employees.

Yet not every public servant can convert their role into a contractor­type arrangemen­t, which is where the other element of unfairness lies. Frontline public servants like police officers exist within tightly controlled workplaces, making them unlikely to ever be able to claim contractor status. Back-end staff have a better claim to being classed as contractor­s.

This brings us to the other contradict­ion in this move. Up until now the Government has often been highly critical of the ‘‘Uber-isation’’ of employment by private companies. Now it seems to be incentivis­ing its own employees to embrace it.

The previous Minister for Workplace Relations and Safety, Iain Lees-Galloway, spent a huge amount of time prodding his department into investigat­ing new ways ‘‘dependent contractor­s’’ could either be treated as employees or not ‘‘misclassif­ied’’ as contractor­s.

A Ministry of Business, Innovation and Employment report released in 2019 says dependent contractor­s exist in a ‘‘grey zone’’ between employee and contractor status. They operate their own businesses and may use their own equipment, but depend on one firm for most of their income and have little control over their daily work.

The same report says all contractor­s are ‘‘in a vulnerable position, lacking both the protection­s offered to employees by law, as well as the power to negotiate a better deal’’.

All of which is true of contractor­s, even handsomely rewarded ones. If this most recent move on the pay freeze encourages more of them to become contractor­s then we’re surely not too far off a time when we’ll effectivel­y have a significan­t second-tier government workforce which exists largely off the books.

It’s a situation which could create all sorts of risks further down the line. Employment rights exist to protect both employees and employers. They have evolved over a long period of time to take a lot of complex situations into account.

If we remove large numbers of people from this system then we should have a good reason for doing so, because we also run the risk they end up in a situation where they are unfairly dealt with later on.

There are a lot of situations which could arise where we might want people to have employment protection­s, even if they’re a contractor. What if a contractor is bullied? Or harassed, or is simply unfairly treated by their taxpayerfu­nded boss?

All of these are points you’d think would never have had to be made to a Labour Government.

Then again, you probably never thought you’d hear a public sector pay freeze being proposed by one either.

Public Service Commission­er Peter Hughes told media he doesn’t know how much money this will save, and even seemed to admit it could fall at the first collective bargaining hurdle.

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 ??  ?? The Government has been against ‘‘Uber-isation’’ of employment but now appears to be encouragin­g it among its own staff, writes Dileepa Fonseka.
The Government has been against ‘‘Uber-isation’’ of employment but now appears to be encouragin­g it among its own staff, writes Dileepa Fonseka.

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