With the bill passing its second reading this week, the employers’ advocate is deeply concerned what the unintended impact will be if the bill progresses into law.
“This bill interferes with the principle of freedom to contract. We believe it will create barriers to businesses’ ability to engage contractors, will add indirect compliance costs and potentially kill off some options for New Zealanders to earn additional income,” says Mark Champion, General Manager Advocacy & Industry Relations, EMA.
“In attempting to resolve concerns around the low pay of a select group, it ends up imposing a new business model on the entire economy.”
If the bill is passed, it will require businesses to work out what contractors will earn on an hourly rate. Which does not take into account the nature and dynamics of contracting. Contract payment options may include an hourly rate, but other common practices also include the use of piece rates for volume based work and fixed price for payment upon completion of work.
For example, the piece rate model uses payment per item to incentivise the contractor to maximise their time. Such work is not about paying the minimum wage, but ensuring productivity.
Or, in the building and construction industry using the fixed price model is common practice. This enables the job to be costed and budgeted for and avoids cost overruns based on variable factors which cause delays, such as weather. Contracted labour is a key component of how the industry delivers the fixed price model. Under the proposed bill, making contracted labour a time-based cost has the high likelihood of increasing the cost to build, at a time when the country is facing a need for more affordable housing.
Also, contractors usually have more than one client. Typically, contactors earn an adequate income from several clients even though the income from any one client many not meet the threshold set by the bill. The proposed time-based approach will impact directly on every client, and likely increase the cost to all of them.
“The bill is broad in its capture of contractor categories and we find it hard to see why it has been expanded to most of those named in the schedule of activities.
“We believe that there would be many couriers, truck drivers and other contractors who would disagree that they were subject to minimum wage payments for their contracted services.
“We strongly believe this bill must be vetoed by the Government, in line with the recommendations from the select committee that it doesn’t proceed,” says Mr Champion.