Employers are aghast a Bill could soon pass in Parliament ensuring specified contractors receive no less than the equivalent of the minimum wage. Unions say the legislation is needed. Business editor Dene Mackenzie reports the fate of the Bill lies in the hands of United Future leader Peter Dunne.
Labour MP David Parker last year introduced a private member’s Bill that aims to pay contractors a minimum wage.
The Minimum Wage (Contractor Remuneration) Amendment Bill requires a principal party who engages a contractor in one of the specified service industries to keep a record of time taken to provide particular services if the contract does not specify a time for completion.
The Bill will proceed to the committee stage on Wednesday and may be passed into law soon after.
The success or failure of the Bill lies in the hands of United Future leader Peter Dunne, who his staff say will not indicate how he is voting until next week.
Otago-Southland Employers Association chief executive Virginia Nicholls says the Bill is based on confusion and will end up harming contractors instead of helping them.
The proposed restriction on contracts would make many contracts unworkable and would cause confusion and uncertainty in industries using contracts for services, including building, construction, manufacturing, forestry, cleaning services, transport and delivery.
First Union communications and media officer Morgan Godfery said many of those sectors had, until recently, been predominantly filled by "employees", workers with a full set of rights and entitlements under the law.
The restructuring of many of those sectors and the introduction of the self-employed "independent" contracting model had stripped workers in those industries of basic rights.
Those workers had lost the ability to bargain collectively and to take personal grievance cases against employers.
"This relationship has often been accompanied with dramatic drops in wages, long hours worked, issues surrounding health and safety, particularly fatigue."
BusinessNZ chief executive Kirk Hope said the Contractor Bill could be passed into law next week as a result of a vote switch by United Future leader Peter Dunne.
Mrs Nicholls said despite the select committee recommending it did not proceed, the Bill passed its second reading with the support of Mr Dunne, who she said had opposed a similar Bill in 2008.
When the Otago Daily Times put the question to Mr Dunne’s office, his executive assistant said the United Future leader had supported the Bill to the second reading but he had some concerns.
Some of the concerns surrounded uncertainty as to whether the independent contractors would have to pay ACC and holiday pay and whether their pay would be reduced below the minimum wage.
The effects could spread from truck driving through to people delivering pamphlets, the executive assistant said.
Asked why Mr Dunne supported the second reading, the executive assistant reminded the ODT about the MMP environment and said Mr Dunne was talking to both Mr Parker and Revenue Minister Michael Woodhouse about changes.
"The Bill is not a done deal. Peter’s vote will not be known until next week."
Apparently, Mr Dunne had been burnt before by agreeing to support or not support previous legislation and had decided to follow the "correct process" in Parliament through the House debate before he made his position clear.
The New Zealand Law Society said the Bill might inhibit contracting flexibility and not achieve its purpose.
In its submission to the select committee, the society also noted the Bill allowed multiple pathways to bring a claim for recovery and submitted claimants should have to elect which recovery path they chose.
Mrs Nicholls said many contractors in Otago and Southland had specialist skills, including in building, forestry, cleaning, courier services, truck driving, security, fast food delivery, public entertainment, telemarketing and market research.
In the building and construction industry, it was common for work to be quoted and paid for on a finished job basis.
That enabled jobs to be costed and budgeted for and avoided cost overruns based on variable factors, including the weather.
That was especially important for cash-strapped homeowners who required financial certainty.
The Bill’s provisions made time-based labour costs a significant factor in a fixed price, with a high probability the quoted final price would be negatively affected.
"The result could easily be a chilling of enthusiasm for new building or renovation at the very time the Central Otago region is facing a need for more affordable housing.
"There was an established way of contracting in the marketplace which is working very well and we appear to be trying to fix something that is not broken."
The Bill did not take into account most contractors were providing a service across the contractors’ time, plant and materials depending on the business model and not just labour, Mrs Nicholls said.
Mr Godfery said in the experience of the union, "contracting" was usually a synonym for shifting cost and risk.
"Look at courier drivers, most of whom are responsible for things like licensing, branding, upkeep, their financial situation and more. The company gets to take advantage of their labour without much reciprocity."
The difference between an employment agreement and a contract for service was that the latter identified an output or outcome, such as a certain number of courier deliveries each day, Mr Godfery said.
The driver could put in eight, 10, 12 or more hours and, no matter how long they worked, the payment did not change.
"That means if you calculate your fee by the hours worked you could be earning less than the minimum wage.
"What’s the point of a minimum wage if you can just contract out of it?"
In short, Mr Parker’s Bill stopped companies from ripping people off.
It set a minimum standard, ensuring working people could earn enough to live on, he said.
If employers were paying fairly, they had nothing to fear from the Bill, Mr Godfery said.
The Bill put protections in place for working people but it also prevented the race to the bottom.
Contracting instead of employing allowed companies, such as trucking firms, to undercut their competitors and drive down wages for all working people, he said.
"The Bill is a lawyer’s breakfast."
Small business
Small business owners are likely be hit hard by the Minimum Wage (Contractor Remuneration) Bill becoming law, Otago-Southland Employers Association chief executive Virginia Nicholls believes.
She outlines the association’s concerns: This Bill may end up hurting small business owners, as they do not have the scale and the resilience of large organisations.
Small business contractors want to maintain the right to be self-employed and maintain the principle of freedom to contract which underpins commerce and the economy in general.
The Bill ignores the fact that contracting is a legitimate business model under which many contractors have a significant personal interest in their business.
These businesses view themselves as business owners by choice and do not consider that they are in need of this protection.
The Bill assumes a contractor always has only one contract with one client, and that the single client should be paying an equivalent of the minimum wage or more. Most contractors provide their services to many businesses, not just one.
For example, an electrician, over a working week, might engage with many different businesses or clients, to earn a combined total income well above the minimum wage.
The Bill removes the choice for contractors to price a job in a way suitable for their business and may lead to small-scale contracts not being undertaken at all.
This will also impose more administrative burdens on these contractors.
The Bill also assumes that many contractors are actually employees and so should get minimum wage protections.
But there is already legislation to protect people who are illegally engaged as contractors so the Bill is not needed for this.
— Otago-Southland Employers Association
First Union
The courier industry most effectively illustrated the problem with the owner-driver model. Heavily indebted contractors soon find themselves signing on to an economically impossible "per parcel" rate.
When contracts are not fulfilled, they are either abandoned with a substantial financial penalty, or they accept the company’s minimum payment.
Based on discussions and legal proceedings, a commercial driver-trainer ascertained that gross daily rates typically paid to courier owner-drivers fell within the range of $250-$280 a day.
This equates to $1250-$1400 a week for a least 50 hours to 60 hours of labour.
Once contract costs — fuel, debt servicing and upkeep — are offset, the equation is looking "very slim".
The driver-trainer believes that based on their experience in the courier industry, the average wage is about $7 to $8 an hour, about half the present minimum wage.
— Morgan Godfery
