Reserve Bank Predictions 2023
Knowhow Newsletter
Reserve Bank Predictions 2023
Last week Reserve Bank Governor Orr predicted a very difficult year ahead. Recession in 2023 and minimal growth in the first half of 2024. Despite the inflationary pressure, low unemployment figures have been heralded by the government as an indicator that New Zealand is in reasonable shape. Adrian Orr’s message changed that with unemployment – currently 3.3% - predicted to rise to 5.7% in 2025.
Anecdotally we are seeing a downturn across many sectors, with clients telling us the drop off has been marked. We all know that when mortgages come off fixed rates in 2023 the pain will be significant.
This has echoes of the GFC and what we learnt during that time was the need to be prudent in the early days, to reduce overheads, trim spending, and do what it takes to get through.
There are a number of options to consider - the disestablishment of positions, a reduction in hours and a corresponding reduction in salary, sabbatical, or unpaid leave. All require good procedural management.
Restructuring is something we know well.
It is critical to get good advice. There will be “business advisors” who decide there is market opportunity, that it is straightforward and start “advising”. Be wary – restructuring processes are prescriptive and require a sound understanding of the required process and the case law that governs the process. The last thing any employer needs is a personal grievance for unjustified dismissal because the process has not been well managed, or the substance is questionable.
Restructuring needs to be done in good faith, with sound reasons and within the procedural requirements.
If you are considering restructuring, we recommend you consider;
Whether the proposed changes will provide the necessary cost savings, efficiencies for the business for a reasonable period of time, or will you need to make further changes within months – there is a danger, because it is a very stressful and demanding time, to make cost reductions at the lesser end of the scale and find the need to make further changes within a short time frame.
Holiday pay liabilities – employees are entitled to their holiday pay immediately upon termination. The notice payment can be paid in the normal pay cycle. However we are seeing holiday pay requirements causing considerable financial pressure on some businesses.
If you are considering making changes, let us know and we can assist you to mitigate risk.
Fair Pay Agreements
The innocuous sounding Fair Pay Agreements are here – coming into effect on 1 December. The Unite Union advised yesterday that they have enough signatures to start an FPA in the hospitality industry. So 1000 employees in hospitality have initiated bargaining for terms and conditions that will apply to over 170,000 employees. Be it in Queenstown, Auckland, Hawkes Bay, or Rangiora, the terms will be the same. Most people in the industry – both employees and employers will have no connection with the bargaining process but will be bound by the terms.
How any rational thinker could believe that this will provide an agile, productive environment where people can agree terms and flexibility that works for both employer and employee is beyond me.
There are layers of bureaucracy in the process, one wonders whether the CEO of MBIE will have time to do anything else when you consider the number of times consent is required. The process will be lengthy and if agreement cannot be reached the Employment Relations Authority will determine the terms and conditions.
Business New Zealand has changed its mind again – and lined up to be an employer bargaining agent after saying they would take no part in it.
We will do what is necessary to ensure we can support our clients. However one hopes that with National’s promise to repeal the legislation, FPA’s will not get a foothold in our employment relations landscape.
Christmas Parties
Behaviour at Christmas parties can present challenges – over the years we have seen a few fairly robust issues arise. Ensure your health and safety obligations are well managed. If there are issues – we can advise.
Closedown
If organisations are intending to have a closedown period over Christmas, employers are required to provide 14 days’ notice of the closedown, and advise of the requirement for employees to take annual leave during the closedown.
If you would like assistance with a memo / notification for your employees regarding a closedown period, please let us know.
Public Holidays
The public holidays over the Christmas / New Year period are:
Monday 26 December (Boxing Day)
Tuesday 27 December (observed Christmas Day)
Monday 2 January (Day after New Year’s Day)
Tuesday 3 January (observed New Years’ Day)
If an employee is taking annual leave during a closedown period, the days as outlined above are to be treated as public holidays and not a part of the employees’ annual leave.
Alternative Days
If employees have alternative days owing to them (which they would have become entitled to if they worked on a public holiday during the year, and the public holiday they worked was an otherwise working day), these should be taken when the employee takes annual leave.
Alternative days are paid in the same manner as sick leave, etc., i.e. based on the employee’s relevant daily rate. Let us know if you need assistance with calculating the relevant daily rate.
If you do want an employee to use their alternative days during a period of annual leave, they must be given 14 days’ notice of this requirement, in the same manner as notice of the requirement to take annual leave.
Annual Leave
An employee who is not entitled to annual leave as at the commencement of the closedown period must be paid 8% of their gross earnings from the date of commencement of employment, up to the date of the beginning of the closedown period, less any amount that may have been paid in respect to annual leave taken in advance.
Alternatively, the parties may agree that leave during this period will be treated as annual leave in advance.
If an employee does not have sufficient entitlement to annual leave to cover the whole of the closedown period, you can agree with the employee that they may take the closedown period as annual leave in advance or unpaid leave.
Payment for Annual Leave
Payment for annual leave over a closedown period is no different to payment for annual leave taken by an employee at any other time during the year.
Employees are entitled to receive payment for annual leave before the holiday starts, unless the employer and the employee agree that they will be paid in respect to annual leave they may be taking, in the normal pay cycle during the period of leave.
If both parties agree that the employee will be paid for annual holidays in their normal pay cycle, it should be recorded in writing, usually in the employment agreement.
Please contact us if you require assistance with the management of a closedown period, or if you have any public holiday, alternative holiday, or annual leave queries.
Knowhow's Closedown
Knowhow will close down from 5.00pm, Thursday 22 December, with the offices reopening on Thursday 12 January 2023.
Referrals
We are very grateful to our clients who provide us with referrals. If you know of an employer who needs support in managing employment matters, including those difficult issues that arise with employees, please pass on our contact details or let us know and we will contact them to outline what we do.
Kind regards
Sylvia Wood
Director
Knowhow Limited
Information contained herein does not constitute a definitive or complete statement of law. "What's New" is designed to provide accurate and authoritative information on employment matters. "What's New" is not rendering legal, accounting or other expert advice. Because employment related matters must be dealt with on a case by case basis the information provided herein is not intended to supplant professional legal and other expert advice being sought in regard to a specific problem.
KNOWHOW LIMITED
SUITE 5 LEVEL 1 HEARDS BUILDING
168 PARNELL ROAD PARNELL
PO BOX 37631 PARNELL AUCKLAND 1151
T. 09 377 9891
E. KNOWHOW@KNOWHOW.CO.NZ