Are Fair Pay Agreements really fair on small businesses?

Small businesses have really done it tough over the last 18 months, with numerous lockdowns and long periods of being unable to operate. When all the outgoings have been paid, only then can the business owner take what’s left for themselves.

We are a nation of small businesses. They can be found in every sector of commerce and in every industry. They are often referred to as the ‘engine room’ of the economy, providing jobs for thousands of Kiwis.

As of February 2021, there were 562,520 businesses in New Zealand, of which 97 per cent had fewer than 20 employees. Only 5,840 businesses had 50 or more employees, making up 1 per cent of all businesses.

Most small businesses are privately owned and operated – husband and wife teams or sole traders, or run by a family, which is common amongst ethnic communities. They provide the goods and services that keep our communities moving and provide a solid standard of living for many families.

During lockdowns, the Government provided financial support for businesses large and small. But what they offered with one hand, they took away with the other. Before and during Covid, the Government actually increased the costs of operating a business: by raising the minimum wage, doubling the amount of sick days, and introducing a new public holiday.

These policies come at a significant additional cost to business owners, and the Government hasn’t done anything to offset these costs. Lifting the minimum wage isn’t something National opposes on principle, but to do it during the middle of an economic crisis and pandemic simply served to put further stress on small businesses who were already struggling to get by.

And the Government-imposed costs have continued. Under the vaccination mandates, it is the business that has to pay four weeks’ notice to an unvaccinated employee. Hospitality businesses are required to have someone at the door to check potential customers’ vaccination status – yet another cost that the Government has transferred to the business owner.

The Labour Government doesn’t seem to understand that while their policies are good in principle, they are a direct cost to our ‘engine room’ of small businesses.

Now their next gift to small businesses is on the horizon, with the introduction of so-called Fair Pay Agreements (FPAs). This will allow unions to negotiate with the largest employers in a particular sector to set minimum wage rates, overtime and penalty rates, plus hours and conditions of work, which will then be applied to all businesses in that sector, regardless of size. Legislation is currently being drafted and is expected to be introduced to Parliament this year.

National strongly opposes this planned scheme. It is compulsory wage control and a return to the days when unions controlled the workplace. Small business owners would lose the flexibility and autonomy to negotiate directly with their employees and put in place arrangements that suit their own business and their employees.

BusinessNZ has refused to be one of the principal bargaining parties that would help businesses navigate the negotiation process. The peak business organisation says it is not prepared to be part of a scheme that is unfair and out of touch with modern ways of working, adding that compulsory FPAs are unlawful under both current domestic and international employment legislation.

FPAs impose the same rate of pay on all workers regardless of their skills, experience, strengths, and productivity. Individual workers will no longer be able to negotiate with their employer for a rate of pay that rewards them for their efforts, and employers won’t be able to negotiate with their employees to arrange working hours and conditions that meet the needs of their business. All agreements will be made between unions and business representatives.

An example of what this FPA will do is a dairy owner in Pukekawa will have to pay the same rates as the owner of a large supermarket in central Auckland.

Once FPAs are mandated for a sector, individual businesses won’t be able to opt out. A small business facing these extra costs may have no option but to lay off staff or, worse, shut up shop.

The role of the Government is not to change the shape and direction of New Zealand on its own, but to provide the framework and allow individuals and businesses to lead the way.