Govt ignored SME worker warnings

DANYA LEVY
Last updated 11:15 30/11/2012

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The Government ignored warnings from both the Department of Labour and a consultancy company that its decision to exclude smaller companies from a vulnerable worker protection would create ‘‘perverse outcomes’’, new documents show.

After a two-year review, the Government last month announced Part 6A of the Employment Relations Act would be limited to workplaces with more than 20 staff.

The provision prevents groups of low-paid workers such as cleaners, caterers, orderlies and laundry staff having their pay and conditions reduced for the same job, or being replaced by cheaper contractors, when the work is re-tendered or a company is sold.

The change will remove the rights of more than 6000 workers.

Documents obtained by Labour under the Official Information Act show former labour minister Kate Wilkinson considered scrapping Part 6A altogether.

The Department of Labour looked at exempting smaller businesses based on analysis by consultancy company Sapere and concluded it would be ‘‘counter-productive and lead to even more perverse outcomes than the current arrangements’’.

That included larger companies being undercut by smaller ones, which would lead to companies restructuring or hiring contractors to avoid being subject to the provision.

There was also concern the protection would break down when one party had to comply but the other taking on the employees did not.

Labour’s industrial relations spokeswoman Darien Fenton said the Government had been ‘‘fiercely lobbied’’ by some influential smaller companies.

Sapere had been commissioned for $50,000 when the Government didn’t like the advice it got from the Department of Labour, she said.

‘‘The Government went looking for justification for excluding small employers. There was no advantage.’’

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A spokesman for Acting Labour Minister Chris Finlayson said the Government made the changes because the cost of Part 6A fell disproportionately on small employers.

The Government intended to create an ‘‘associated persons’’ test so large employers could not structure their businesses to avoid their obligations, he said.

However, Fenton said the test would unworkable.

‘‘It will be complex and clumsy. It’s going to create a whole lot of compliance costs for a cash-strapped department and result in court action.’’

- BusinessDay.co.nz

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