The nine-day working fortnight

Rob Towner, Partner and Deborah Doak, Senior Legal Professional | Friday 27 March 2009

The nine-day working fortnight scheme begins today. Developed by the Government from last month's job summit, the object of the scheme is to abate the impact of the current global economic turmoil on New Zealand businesses and their employees.

The job support scheme is currently aimed only at private sector businesses with 100 or more employees, although it may be extended to smaller workplaces at some time in the future.

The nuts and bolts of the scheme

There is no implementing legislation. Employers, workers and unions are expected to negotiate voluntary arrangements to reduce working hours to a nine-day fortnight for up to a six month period, during which workers cannot be made redundant. The scheme will be available for up to 10 employees for each averted redundancy, although it is not clear how employers must demonstrate the need for redundancies in order to receive the subsidy. To qualify, employees will need to have been employed by the employer full-time for at least the two months before entering the scheme. The scheme will run from 27 March 2009 to the end of 2010, but can only be used for a six month period within that timeframe.

Initial plans to link the job support scheme to subsidised compulsory training have not come to fruition. However, five tertiary education institutions have announced plans to offer free or low-cost training to employees who agree to a reduced working fortnight in an effort to sweeten the deal. It is anticipated that more will follow. Training will not be mandatory, but it is hoped that employees will use their time off to take up further education. Training could cover anything from literacy, numeracy and computer skills, to up-skilling in particular trades.

Participating workers will also be paid the $12.50 minimum hourly wage for up to five hours on the tenth day. This $62.50 government subsidy for each employee per fortnight will be paid to employers to pass on to employees. Employers may be asked to top up the subsidy, but will not be required to. This will be a matter of negotiation although there must be reduced costs for the employer in order to make the scheme workable.

The pros and cons

Clearly there are potential benefits for both employers and employees in opting in to the scheme. For employees, there is the incentive to retain their jobs albeit at the cost of reduced pay. For employers, it means retaining valuable skills and knowledge, and saving on retraining costs when the time comes to recruit.

With unemployment forecast to reach 8% over the next year, the initiative has met with mixed reaction. Some embrace the scheme, while others lament the limit on subsidy. It is anticipated that between 20,000 and 25,000 employees may take up the scheme with a potential saving of up to 2,500 jobs.

Fisher & Paykel is the first organisation to sign up to the scheme, having reached agreement with employees for a 35 hour working week in order to prevent 60 redundancies. The six-month arrangement includes a top-up contribution from the company and funded in-house training. Several other large workplaces are in advanced negotiations.

Holidays for cash

Government plans to introduce changes to allow employees to "cash up" their fourth week of annual leave will be included in the review of the Holidays Act 2003 this year. The plans were first mooted as part of National's election campaign employment policy last July, and could be in force by April next year.

Under the proposed legislation, it would not be open to employers to offer a cash payment in lieu of holiday. The employee must make the request, which would be subject to agreement with the employer. However, it may be acceptable for an employer to advise its employees of their right to make such a request without this amounting to an "offer".

Arguments for and against this "cash up" initiative debate the risk to employees' health in selling holidays to make ends meet and the cost to employers of an additional week's wages per annum on the one hand, and the flexibility to trade a week's holiday for cash in tight economic times on the other.

The Holidays Act review will also consider the issue of simplifying the definition of relevant daily pay, on which pay for public holidays and days of sick leave is calculated.

A working group including Business New Zealand and the Council of Trade Unions will be established to conduct the review. It is anticipated that the review will be completed and legislation introduced to Parliament later this year.

For further information, please contact your usual Bell Gully adviser or:

Auckland

Rob Towner
Partner

Liz Coats
Solicitor

Wellington

Michelle Banfield
Senior Associate

Susannah Leslie
Solicitor