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Submission on Fair Pay Agreements Bill 2022

posted on

May 2022

Executive Summary

The Restaurant Association does not support the Fair Pay Agreements Bill. While we agree it is important to provide a fair day’s pay for a fair day’s work, we do not believe this will be achieved through this legislation.

As the Association representing the majority of restaurants and cafés in Aotearoa New Zealand, we are leading work in our sector to provide support to our members in achieving this, without the ‘one size fits all’ approach taken with the introduction of Fair Pay Agreements.

We are committed to a long term work programme to transform the perception of hospitality from a sector that is sometimes seen as a stop-gap job for tertiary students, to one that provides a meaningful and fulfilling, life-long career.

Not only is the legislation poorly timed for a sector such as ours which has experienced a significant drop-off in business[1] following the COVID-19 pandemic, the Fair Pay Agreements Bill will increase the costs and resources required of small business owners in the hospitality sector. This will only make it more difficult to achieve the goals we have set for ourselves in raising the status of hospitality through our recovery from the pandemic.

As such, the Restaurant Association makes the following recommendations:

  • Recommendation 1: the representative criteria be raised to a simple majority of respondents to any proposal to initiate bargaining on their behalf.
  • Recommendation 2: all parties to the bargaining process should undertake training to ensure those involved are adequately prepared. This training should be developed centrally and provided by the Department at no cost to the parties involved.
  • Recommendation 3: all Fair Pay Agreements should include delayed commencement as standard, to come into effect on 1 July the year after the agreement is ratified.
  • Recommendation 4: the labour inspectorate should be adequately funded to both execute its role and undertake stakeholder engagement to better understand the different requirements for the industries with which they engage.
  • Recommendation 5: that the hospitality sector is given adequate time to properly recover from the impacts of COVID-19 by ensuring Fair Pay Agreement bargaining is not initiated for at least four years after the Bill is passed.

Introduction

  1. The Restaurant Association of New Zealand (the Restaurant Association) welcomes the opportunity to make a submission on the Fair Pay Agreements Bill, and we wish to appear before the Select Committee to speak to this submission.
  2. We do not support the Fair Pay Agreements Bill. While we agree it is important to provide a fair day’s pay for a fair day’s work, we do not believe this will be achieved through this legislation.
  3. The inflexibility that Fair Pay Agreements introduce is of particular concern. Given what we as a country have been through over the past two years, such rigid agreements remove the adaptability that working relationships need to be able to respond to our ever-changing working conditions.
  4. The prospect of Fair Pay Agreements has been in discussion since before the pandemic, yet workplaces and working relationships have changed significantly since then. If the idea of Fair Pay Agreements was an outdated concept a mere four years ago, now it is more so than ever. This Bill was designed for a different time and a different economy, one that we know we are not returning to.
  5. We want to make it clear, however, that we support fair pay and working conditions. As the Association representing the majority of restaurants and cafés in Aotearoa New Zealand, we are leading work in our sector to provide support to our members in achieving this, without the introduction of Fair Pay Agreements.
  6. Our aim is to transform the perception of hospitality from a sector that is viewed as a stepping-stone job for secondary students and a stop-gap job for tertiary students, to one that provides meaningful and fulfilling, life-long careers.
  7. To achieve this, we need to be able to address working conditions, professional development and workforce supply, as well as pay. That is exactly what we have been doing for some time now, however this Bill will draw our ever scarce resources away from facets other than pay that speak directly to elevating hospitality as a career.
  8. The average profit margin in the hospitality industry is between 4-7%. As we have reiterated in numerous submissions in recent months, our sector is being pushed to the brink as a result of the compounding compliance costs our sector is facing due to the ongoing changes to Government policy.
  9. The Bill proposes to implement a one size fits all approach, which fails to recognise the importance of employers and employees working together to develop individualised employment relationships tailored to meet the needs of both parties.
  10. This approach also fails to acknowledge the differing requirements of the diverse range and size of businesses that make up the sector.
  11. Fair Pay Agreements will only increase the costs and resources required of small business owners in the hospitality sector, making it harder to achieve the goals we have set for ourselves in raising the status of hospitality through our recovery from the pandemic.

Substantive Issues

Initiation

  1. As an industry with more than 130,000 employees, the representative criteria of either 1,000 or 10% to initiate bargaining fails to take into account the sheer scale of people that Fair Pay Agreements will impact.
  2. We recommend that, to ensure the bargaining process is truly representative of the will of a majority of affected employees, the representative criteria be raised to a simple majority.
  3. Recognising the difficulty that comes with contacting all employees in a given industry, the criteria could be set at 50%, plus 1, of those who respond to a proposal to initiate bargaining on their behalf.
Recommendation 1: the representative criteria be raised to a simple majority of respondents to any proposal to initiate bargaining on their behalf.

Representation

  1. Both the employer and employee bargaining sides for Fair Pay Agreements will be traversing new territory during the bargaining process for Fair Pay Agreements.
  2. As at 1 March 2020, approximately 16.42% of New Zealand’s workforce was unionised[2]. Given the low level of unionisation, there is likely to be a general lack of collective bargaining experience, capability and capacity across many New Zealand businesses to effectively engage in the Fair Pay Agreement process.
  3. This is particularly true for our sector, where the majority of businesses – almost 76% – employ fewer than 20 staff as shown at Appendix A1.
  4. Further, the new role of unions to act as sector-wide representatives for both their paid-up members and the even larger number of unaffiliated, non-union employees throws up new challenges for the employee bargaining side.
  5. Section 6.9 of the Fair Pay Agreement Working Group Report[3] outlines what support is needed to make the bargaining process work well, in particular the support to build capability and capacity of the parties and to facilitate the process.
  6. We recommend that, following the granting of approval to initiate bargaining, all parties to the bargaining process should undertake formal bargaining training, specifically designed for the Fair Pay Agreement bargaining process.
  7. This training should be developed and provided by the Ministry of Business, Innovation and Employment (MBIE) at no cost to the parties involved before substantive bargaining begins, to ensure a fair and equal process for all parties involved.
Recommendation 2: all parties to the bargaining process should undertake training to ensure those involved are adequately prepared. This training should be developed centrally and provided by a Department (MBIE) at no cost to the parties involved.

Ratification

  • To go through a process that is initiated without employer buy-in and proceeds without adequate support for those inexperienced in bargaining, to end up at the current proposed ratification process is nonsensical.
  • In essence, following the current ratification process Fair Pay Agreements can be mandated without employer agreement. This makes a farce of the voting process and raises questions about why the policy bothers to propose a bargaining process when, once initiated, an agreement will be imposed regardless of the outcome of any vote.
  • The delayed commencement provisions at clauses 127-129 of the Bill create an unnecessarily confusing caveat that could be standardised for ease of understanding.
  • Given the delayed commencement provision as currently proposed must be for less than 12 months, we recommend that all Fair Pay Agreements should include delayed commencement as standard, to come into effect on 1 July the year after the agreement is ratified. This will allow employers affected by the agreement sufficient time to prepare and allow for the changes within their respective Fair Pay Agreements.
Recommendation 3: all Fair Pay Agreements should include delayed commencement as standard, to come into effect on 1 July the year after the agreement is ratified.

Wage Growth and Working Conditions

  • Despite the pandemic, the hospitality industry performed well when it came to wage growth – wages increased by an average of 6.5% in the year to June 2021, well surpassing the 2.1% average increase recorded across other industries over the same period[4].
  • For a sector with such narrow profit margins, Fair Pay Agreements will absolutely impact business bottom lines, and hamper the ability of the sector to maintain wage growth at their current rates.
  • As shown at Appendix A2, more than half of employers (almost 54%) indicated in our 2022 Hospitality Workplace Insights Report that they have no, or less than 10% of their employees earning minimum wage.
  • Skill shortages across the industry continue to drive fierce competition for workers and this is rising the market rate for hospitality roles. This, along with minimum wage increases, the low unemployment rate and a rise in immigration remuneration salary thresholds, are key factors pushing wages upwards.
  • It is important to recognise the impact that Fair Pay Agreements could feasibly have on the wider work being undertaken in the hospitality sector to further improve work conditions and benefits which round out a fulfilling career.
  • Creating a more resilient industry is about more than just pay, and the pandemic has highlighted this fact in new ways.
  • Our 2022 Hospitality Workplace Insights Report also highlights that industry-led workplace practices are in place or being implemented, which aim to attract the workforce we need as we look to the future of hospitality.
  • Given the lengths our businesses are going to to disprove the misconception that hospitality is a low paid, stop-gap sector made for students, we want the Government to support sectors such as ours meeting the high standards we are setting for ourselves, instead of imposing these inflexible agreements and sanctions to force industries into line.
  • While we recognise that all sectors have unscrupulous operators that we must disavow and from whom we must protect employees, our robust employment laws are in place to address those operating unlawfully. However, the inspectorate needs to be adequately resourced to execute its role.
  • Anyone who has dealt with the current labour inspectorate knows it is well under-resourced to do its role any justice.
  • Further, the inspectorate should understand the nuances of the industries it is investigating. Therefore adequate funding should include the incorporation of stakeholder engagement to better understand the different operational requirements for the industries with which they engage.
Recommendation 4: the labour inspectorate should be adequately funded to both execute its role and undertake stakeholder engagement to better understand the different requirements for the industries with which they engage.

Implementation and Timing

  • As a sector, hospitality has weathered more than two years of subdued trading amid increasing operational and compliance costs. It will take time to pay down increased debt and for each business to begin to rebuild its reserves. Our members have only recently been able to take the first steps towards the beginning of any real recovery following the move to orange on 13 April 2022.
  • Acknowledging the Government has gone to some lengths of late to recognise our sector as one of those still experiencing the impacts of the pandemic, particularly in light of potential additional outbreaks, we are asking that those sectors most impacted by the pandemic be given a reprieve to enable us to properly recover before turning our minds to the many changes that will impact our sector.
  • We made a similar request in our submission on the proposal for Income Insurance Scheme, so in order to avoid what could become a simply postponed bombardment of change, we recommend that Fair Pay Agreement bargaining not be initiated for our sector for at least four years after the Bill is passed, in order to stagger the number of changes we are facing and make for a more just transition to the future of work. Over this time our Future of Hospitality Roadmap will continue to guide change in the sector.
Recommendation 5: that the hospitality sector is given adequate time to properly recover from the impacts of COVID-19 by ensuring Fair Pay Agreement bargaining is not initiated for at least four years after the Bill is passed.
  • Change is both inevitable and necessary, but we are asking that the Government be mindful of the significant changes that have taken place over the past two years, which have created untold challenges for our industry.
  • We acknowledge that this piece of legislation has been a long time coming, with the Fair Pay Agreement Working Group being established in June 2018. As we have pointed out this is itself an issue as our working environments have changed dramatically over the past four years. We also acknowledge that the pandemic has thrown the Government’s legislative agenda off course, and we are currently catching up on the policy work that was delayed as a result.
  • We appreciate the consultation and would always rather be asked than ignored, however the constant disruptions of late have increased the stress experienced by our sector. The recent influx of consultations has only compounded the pressures being felt by our sector. This is the second of three submissions we will have made in less than four weeks, with the next due only days after this and another due in only three weeks.
  • For a sector that is currently walking a tightrope between recovery from the pandemic and ensuring the long-term sustainability of the industry, it is important for legislators to know the sheer number and scale of changes occurring across business in New Zealand at present is enough to tip many of our small business owners over the edge.

[1] PR: New financial support for businesses affected by Omicron

[2] Union membership return report 2020 | New Zealand Companies Office

[3] Support to make the bargaining process work well | FPA Working Group Report 2018

[4] Statistics New Zealand 2021 Labour Market Statistics

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