Source: New Zealand Government
Good morning everyone, and thank you for the kind introduction, Alan.
As always, it is a pleasure to be here, and I appreciate the time you’ve all taken to come out during what is undoubtedly the busiest season of the year for some of you.
It has certainly felt like a bumper season for this Government, and for my Workplace Relations and Safety portfolio.
In case you missed it, over the last month the coalition Government has announced:
- An income threshold for personal grievances, where anyone earning over $180,000 will no longer be able to pursue an unjustified dismissal grievance. This will make it easier for companies to ensure they have the right skills and leadership in their top tier or specialist positions.
- Rebalancing personal grievances to remove the ability for workers to be awarded remedies if they engage in serious misconduct and remove reinstatement or hurt and humiliation compensation if the employees’ behaviour contributed to their dismissal. From the feedback I have received so far, I understand this will be of great relief to both employers and workers who have had to witness colleagues being rewarded for poor behaviour.
- Wage deductions for partial strikes have been re-introduced, after they were removed by the previous government. Partial strikes have caused significant disruption in the past to important public services, from our trains to our classrooms, to our hospital scans. Enabling wage deductions will help rebalance the collective bargaining system.
I am proud of the fact that many of the changes announced in my portfolio are ACT-National coalition commitments.
But – you won’t be surprised to hear – we’re not stopping there.
Before Christmas, I aim to make an announcement on the minimum wage rate for 2025 in order to provide businesses with certainty. You can keep an eye out for that over the next couple of weeks.
However, the reason I am here today – and the reason why I suspect we have managed to draw in such a crowd – is because I would love to give you an update on the direction of Holidays Act reform.
As many of you will already know, this Government recently completed targeted consultation on an exposure draft for a new Holidays Act.
When I came into this job, I was well aware of the history of Holidays Act reform. It has been plagued with multiple delays and a growing sense of frustration from the public that the government won’t just get the job done.
This Government agreed to test whether the previous Government’s work was hitting the mark, by going out for targeted consultation on the work they did to date.
Of course, we had to make some changes to the previous Government’s model first. Moving from a weeks-based entitlement system to a weeks-based accrual system, and a pro-rata approach to sick leave were quick wins Cabinet agreed to make to the exposure draft.
The key question on my mind was whether there were improvements we could make to the exposure draft Bill’s framework, rather than having to start again from scratch.
But I have always said that consultation on the exposure draft would be genuine.
I didn’t just want to find out whether the exposure draft was workable, but whether it went far enough and whether further simplification was needed. More radical change was on the table, but only if there was feedback that it was worth investing significant time and effort into such change.
Let me tell you, the feedback we received from consultation has been…enlightening.
I would like to thank all those who participated in the targeted consultation, including the EMA.
Many submitters indicated that the general framework of the Bill is not a significant improvement on the current Act, and that a fundamental change would better address longstanding issues.
70 percent of technical experts and 67 percent of employers expressed a preference for more significant change to the annual leave provisions.
Here is just some of the feedback we received:
- The Law Society described the draft Bill as unnecessarily complex and difficult to follow, with some provisions more complicated than what we have now.
- One small business who wanted more significant changes to the Bill told us that there is no point changing if it isn’t going to be meaningful, and this may be New Zealand’s only opportunity for years to get it right.
- A large retail franchise owner told us that the system needs simplifying and the current recommendations do not achieve that. We were told that if a business of their size has challenges interpreting the proposed changes, then small to medium employers will find it particularly challenging to navigate these changes.
- And the EMA diplomatically suggested it doesn’t believe the exposure draft has gone far enough in seeking to fix the Holidays Act, and that starting afresh may bring the better outcome for business.
I want to give you all assurance today that I’m listening – we could do better, and we should.
Today, I am happy to share that I have asked my officials to go back to the drawing board – we’re going to scrap what isn’t working, and this time we’re going to start from a better foundation.
I believe it is necessary to change the direction of Holidays Act reform so that simplicity is prioritised in order to improve workability and reduce compliance costs.
Prioritising simplicity may sound like a no-brainer for this audience, but I assure you it is a game-changer.
The previous Government’s reform was based on a number of objectives, including the aim to protect overall entitlements for employees and maintain tripartite consensus.
These objectives placed significant constraints on the range of policy options that could be considered, including options that would have optimised the simplicity and clarity of the legislation.
In my view, the current balance of objectives is not consistent with the Government’s ambition. It is not enough to have a ‘workable’ Bill, we should also strive to reduce complexity and compliance costs as much as possible. While the objectives of simplicity, workability, flexibility and proportionality are all important, there needs to be a much greater focus on simplicity.
I also got the message that an hours-based annual leave accrual model is the preferred model across a range of sectors and working arrangements. Some of the reasons that were given include:
- Hours-based accrual is easier for all parties to understand.
- Hours-based systems maximise flexibility for both the employer and employee.
- Many smaller business systems are already accruing in hours.
- It would be simple to implement for very small employers who use spreadsheets for their payroll.
- An hours based approach will not only lower compliance costs, but could lower the financial burden on employers too. One major payroll software provider reported some employers currently overpay their workers just to avoid the risk of underpaying and the potential consequences of doing so.
I think you know where I am going here.
I can confirm I have asked my officials to begin work on an hours-based accrual model as the core system for annual leave, based on the feedback that we got from consultation.
Hours-based accrual has potential to make a significant improvement for simplicity, and I know a lot of businesses use, or would prefer to use, hours-based calculations at the moment. However, at the moment businesses are having to adopt complex workarounds and frequently have to check their payroll systems to ensure they are compliant with minimum requirements or risk the costs of non-compliance.
One lesson we’ve learnt from the design of the exposure draft is that trying to create a one-size fits all model for all working arrangements adds complexity.
The failure of the current Holidays Act is in partly down to the Act trying to accommodate one approach to leave across the entire spectrum of working arrangements, with little prescription or guidance for employers.
The Exposure Draft tried to address this, by adding prescription around calculating days and time of work and payment for leave. The feedback was that this added too much complexity.
I have asked officials for advice on how and whether other models may be best-suited for complex work arrangements, such as extending the use of Pay-As-You-Go, or alternative arrangements for where eligible employers can demonstrate they meet or exceed minimum statutory requirements.
There are, of course, many more details to work through. No Cabinet decisions have been made yet. I will be seeking decisions once we have a prototype to assess.
I know there will be some of you in the crowd who may worry about what this means for the timelines for delivering reform. While I’ve received feedback that the exposure draft did not hit the mark, I’ve also heard concerns that changing direction now will delay reform.
I would like to assure you that it is still my ambition to pass a new Act by the end of my term.
However, we have a long road ahead of us, and I am aware previous Workplace Relations and Safety Ministers have been in my shoes and made similar promises.
Coming from the ACT party, I embrace this challenge.
ACT campaigned on Holidays Act reform – we recognise the importance of this issue for so many New Zealanders, and the importance of getting the changes right.
ACT are also willing to acknowledge that the best ideas often come from outside the Wellington bubble. I want to be working closely with those who understand the variety of needs of people who work closely with the Holidays Act. I would like to thank the EMA for helping to facilitate some connections.
Finally, I would like to take this opportunity to praise my officials for rising to this challenge with me. Bureaucracies can move slowly, and too much policy work can be undertaken without ever testing real-world workability. If we’re going to get this done, we need to be working differently – with workability at the forefront of policy design, rather than an after-thought.
This Government is committed to cutting the red tape and regulations that are stopping both businesses and employees from realising their full potential.
Every day we’re working to empower New Zealanders to peacefully make a difference in their own lives and the lives of those they care about, no matter their background.
I hope you all have a wonderful Christmas and get to enjoy a well-deserved break with your loved ones.
Thank you once again for having me here today and for your hospitality.