Contracting not a mess that needs fixing

The Ministry for Business, Innovation and Employment’s discussion document ‘‘Better Protections for Contractors’’ raises the prospect of yet another raft of sweeping changes for New Zealand employers and workers to wade through.

MBIE says the changes are needed to protect workers who are misclassified as contractors when they really should be treated as employees.

It also wants to reduce what it calls the ‘‘imbalance in bargaining power between organisations and vulnerable contractors.’’

But the options they put forward to right these and other perceived problems are the equivalent of a wrecking ball being used to dismantle a shoebox.

If introduced, they would disrupt the vast majority of contractors and employers for whom contracting works effectively and that’s an issue for everyone, regardless of how they’re employed.

So what are the heavy-handed strategies MBIE is suggesting? They include designating certain occupational groups as being occupations in which people can only be employed as employees so if you’re someone who contracts your services to several organisations and chooses when you do your work, and your occupation is classed as being employee-only, you’ll lose that flexibility.

They also include introducing (mandatory) collective bargaining for contractors across occupational groups regardless of location or any of the other variables that affect contractual terms and conditions.

MBIE is also keen to redefine the legal definition of employees, a term robustly tested by the courts.

If there were a significant problem with vulnerable worker exploitation then some of these clunky options might almost be warranted. The ministry offers no evidence of wide-scale exploitation or inequity.

It appears the discussion paper is driven more by perceptions than evidence of problems.

Most of the changes, if introduced, would impact on business flexibility and productivity that drive our economy and keep contractors and employees in jobs.

Globally, contractors are used in all sectors and industries, including government departments. The rapidly evolving nature of modern business means organisations need to be flexible and adaptive, while workers are increasingly keen to balance work with domestic responsibilities or other activities. A diversity of working arrangements is an appropriate response to these circumstances for workers and employers.

Contracting plays an important role in driving economic growth because it enables businesses to meet their variable human resource needs while giving workers greater flexibility and self-determination.

Much of the Otago and Southland region faces particular challenges in its labour market because of the seasonal nature of some of its business, issues with accommodation affordability and transport and the many transient workers.

Contracting is a significant and valid response to those challenges and enables skilled workers to move within the labour market to meet demand.

There are unscrupulous employers who exploit workers by wrongly treating them as contractors when they should be treated as employees.

But these abuses are relatively few and there are processes albeit under-resourced for dealing effectively with them.

The ministry would do better to resource their labour inspectors properly rather than entirely dismantling the practice of contracting.

Some readers might think ‘‘this doesn’t affect me’’ but it will. If the Government were to introduce the changes mooted, the negative impact would extend beyond individuals and organisations who use contracting, because what’s at stake is business growth.

Since 2016, businesses have been impacted by a deluge of legislative change. The pace and extent of that change is beginning to overwhelm them, while the amount of non-productive time spent dealing with compliance is skyrocketing.

Further confounding factors in the employment environment include changes to immigration, scarcity of local labour, increasing litigation risk from unsubstantiated personal grievance claims and most recently the economic impact of coronavirus.

The net result of the compliance burden, uncertainty and sudden downturn is that businesses are reluctant to take on staff, particularly permanent employees. They are therefore less able to grow.

Ironically — given MBIE’s aims in relation to vulnerable workers — the people most likely to be affected first are vulnerable workers. The downstream effect will be a slowing in economic growth and that will affect everyone.

Independent contracts for services are used for the mutual benefit of contractor and business.

They facilitate business flexibility and help drive economic growth. Any proposal to regulate them ought not restrict what is otherwise a legitimate and agreed method of engagement that works well in the vast majority of cases.

The status quo is working, so let’s not change it. Let the current law do its job and let people do theirs, the way they choose. Let’s get better at detecting and dealing with the few unscrupulous employers rather than changing the rules for everyone else.

■Virginia Nicholls is chief executive of the Otago Southland Employers Association.