After nine years under a National Government, the employment landscape is about to be reshaped. While Labour, New Zealand First and the Greens all had different policies and priorities coming into the 2017 election, they shared the commonality of being policies for the people.
One of the places where we are likely to see some significant changes from our new Government will be in the area of employment legislation. While many policies are going to take some time to take shape, in this first term we need to prepare for the potential strengthening of employee rights, an uplifting of minimum entitlements (a significant increase in the Minimum Wage for 2018 is guaranteed) and further promotion of unionisation and collective bargaining.
The first steps – increasing the Minimum Wage
The first steps have already been taken with the announcement of the coalition agreement between Labour and New Zealand First on the 24th of October. As outlined in this agreement, the Minimum Wage is set to be raised from $15.75 to $16.50 an hour in April 2018. This is the first step in progressively increasing the Minimum Wage to $20 per hour by 2020, with the final increase to take effect in April 2021.
While it’s important to understand where things are heading and give business owners some certainty so they can start planning for wage increases in the years to come, there are concerns that knowledge of the end goal could cause an artificial inflationary response.
The issue of wage relatively is going to be prominent. For workers who are currently been paid slightly above the Minimum Wage or around the Living Wage, as the Minimum Wage is increased they will likely expect similar increases – to keep their wage rates relative. Otherwise, employers who are paying above the Minimum Wage for low skilled jobs in order to attract, reward and retain good quality staff, may find their employees disincentivised. It may become exponentially more difficult for many businesses to keep wages above the Minimum Wage in the years to come.
As commented by Robert Reid (First Union, General Secretary) “the era of 2% per year wage offers is over. Employers, especially those who employ minimum wage workers, will need to be looking at increases of around 8% per year to stay at or ahead of minimum wage rises.”
If other unions share this view we are likely to see claims for large increases being bargained for, with unions seeking progressive steps that will keep their member’s wages in line with the increases in the Minimum Wage. The first Minimum Wage step for April 2018 is a 4.75% increase (compared to a 3.25% increase in 2017), significantly higher than most negotiated wage rates that we have been seeing in collective agreements of late.
We estimate that to reach $20 by 2021, the Minimum Wage may rise around the following amounts each year:
|Date||Minimum Wage||$ Increase||% Increase|
|1 Aril 2018||$16.50||$0.75||4.75%|
|1 April 2019||$17.50||$1.00||6.05%|
|1 April 2020||$18.75||$1.25||7.15%|
|1 April 2021||$20.00||$1.25||6.65%|
For many employers, these increases will result in additional costs that can’t be absorbed without the need to put up their prices – and thus has the potential to inflate prices and increase costs to consumers as a result. There will be some interesting and challenging wage negotiations and economic conditions ahead!
The gender pay gap
In addition to this coalition agreement, is the Labour and Greens confidence and supply agreement in which the Green Party agrees to provide confidence and supply support to the Labour-led Government. The Green Party supports a transformative Government which implements the United Nations’ 17 Sustainable Development Goals. In this parliamentary term, the Green Party has a number of priorities which the Labour-led Government shares and will support.
One of these priorities is to eliminate the gender pay gap within the core public sector with substantial progress within this Parliamentary term, and work to ensure the wider public sector and private sector is on a similar pathway. We should therefore expect to see some progress or changes being made in this area.
What is yet to come?
To set the scene of how the employment landscape made further evolve in the years to come, let’s take a brief look at what some of the other policies were, going into the election, from our now governing parties.
- Re-assessing the current 90-day trial period laws, potentially introducing a free referee service for employees unjustifiably dismissed under the trial period.
- Extending the paid parental leave to 22 weeks paid leave by 2018 and 26 weeks from 2020.
- Throwing out the pay equity legislation and introducing “Fair Pay Agreements” that set basic employment conditions across an industry.
- Creating a new employment-relations framework which focuses on enabling effective unionsation.
New Zealand First
- Setting Minimum Redundancy provisions based on twice the normal contractual notice period up to a maximum of 13 weeks.
- Supporting increasing paid maternity leave to 26-weeks.
- Reviewing and amending legislation to ensure that casual employment practices are fair and just, to achieve better job security for casual employees.
- Amending the Health and Safety at Work Act 2015 to remove its bureaucratic excesses.
- Supporting a complete review of the Employment Relations Act 2000.
- Increasing sick leave to a minimum of 10 days per annum.
- Improving rights and protection of casual, seasonal, fixed term and temporary workers.
- Improving union representation and participation in the workplace.
- Opposing the Pay Equity and Equal Pay Bill and promises to introduce new, effective legislation.
We can help
We will be watching closely to see what changes our new Government seeks to implement, and will keep you updated as and when these start to take shape. In the meantime, talk to us about your bargaining strategy before going into your next round of collective negotiations. We can help you determine a sustainable plan for your business as the Minimum Wage increases.