Workplace law changes: are SMBs being left in the lurch?

Proposed new changes New Zealand workplace laws, which look set to come into play in 2022, will cause the biggest disruption to small and medium businesses in recent history, pandemic aside, writes Ben Thompson.

Following in the footsteps of Australia’s modern awards, New Zealand’s Fair Pay Agreements (FPAs) will set minimum standards across different industries or occupation types, allowing employers and unions to negotiate set pay and conditions for employees. Base pay rates, working hours and penalty rates (for work completed overtime, overnight or on weekends and public holidays) are all areas covered under these negotiations.

While the government’s intention and objective is to set the bar high around rates and conditions for employees, the problem is that these new measures are being sold as a one-size-fits all solution, something that will not quite work for the 97 percent of SMEs (530,000 firms) in New Zealand.

FPAs are inherently complex and not black and white when it comes to classifying industries; rather, they are grouped by job type. What this means is that an SME may find themselves in a situation where they are not just covered by one seemingly obvious FPA, but they are bound by a number of FPAs, creating a long and arduous compliance process for business owners.

This system is also more expensive, resource and administrative-heavy for SMEs: it will not only increase the cost of products and services to compensate for the increased cost of labour that would occur under FPAs, but could prevent employers from further employing people, leading to a reduced workforce and – worst case but certainly realistic scenario – businesses shutting up shop.

In Australia, the complex modern awards system (which sees 65 percent of employees covered by one of more than 120 awards) has only increased the complexity of employment law by orders of magnitude. 

I don’t think I’m alone in not wishing to see the same confusion that characterises the industrial relations system in Australia for employers also define the workplace landscape in New Zealand.

I am by no means against paying and treating employees in every industry fairly. We know that good and kind employers have a more productive, happy and involved workforce, which translates to lower voluntary turnover, higher profits and better quality work. 

But as well-meaning as the FPAs are, it’s not as simple as just paying all of your employees a minimum wage, especially when they all become classified under different industry/occupation types. Without a dedicated and extensive HR department, SMEs are more likely to struggle to always be compliant even when their intentions are good. 

If we want to help both businesses and employees strive, the government should consider whether a compulsory system that sets binding minimum terms and conditions across industry or occupation types is better than a single, national minimum wage that is not industry specific.  

Let us stop overcomplicating matters for SMEs. We need to ensure every employer is filled with confidence that they are operating compliantly, and every employee is filled with confidence that they are being paid correctly and fairly, but are the incoming FPAs the right answer?

Ben Thompson is the co-founder and CEO of people-management platform Employment Hero.