Govt needs to address burden of regulation

Virginia Nicholls
Virginia Nicholls
It is common knowledge that, in the wake of a raft of changes to employment and health and safety legislation, the operating environment for business has shifted significantly in recent years.

But what is less known - in fact unknown - is the negative impact of that raft of changes on business in New Zealand and, by extension, the country.

That is because the Government is not monitoring the cost to business of complying with the new regulatory framework and the effect that new regulations have on productivity.

This is a scary and, frankly, irresponsible situation given the extent of changes to date and the fact that more are coming down the barrel.

At the Otago Southland Employers' Association and at our sister organisations around the country, we are hearing anecdotally that compliance is now proving such a burden in terms of time and money that it is impacting business productivity.

We have a situation where, on one hand, businesses are being urged to improve productivity but, on the other, there is an increasing focus on compliance around various aspects of employment that, individually, might be manageable but, together, exponentially increase compliance workload.

In some cases, up to half of an employer's time at a management level is taken up managing compliance rather than managing business at the expense of leadership. This translates into reduced productivity, lost opportunities and burnout.

These effects undoubtedly hit hardest on SMEs, which are 97% of businesses in New Zealand, and which have the least ability to hire additional resource to cope with the workload.

Let's be clear: that is not just a problem for the individual businesses involved - it is a problem for the whole country. Strong productivity is critical to our national economic wellbeing.

A NZ Institute of Economic Research report released earlier this year by the Employers and Manufacturers Association noted that in 2016 the cost of compliance for business was estimated at $5billion, or 2.9% of gross domestic product (GDP).

But that information was based on 2012 data because unbelievably government has not updated accurate figures since 2012.

Considering all the changes that have been recently introduced - including employment law changes and increased costs associated with employment disputes, health and safety requirements and the increased complexity and time needed for labour immigration and much more - it's clear the cost to the country would be much higher today.

In the past there was comprehensive measurement and assessment of the costs associated with compliance, but this has fallen by the wayside.

The Government needs to review, assess, address and justify the cost of business regulation.

All employers acknowledge that responsible, effective regulation is good for business, but how well a business responds to regulation is of no commercial benefit to it in the market.

New Zealand has long taken pride in being a country where it is easy to start a business.

The Government now needs to focus on how easy it is to manage a business in New Zealand or it puts at risk the businesses that provide jobs to the workers which much of the compliance-heavy legislation is designed to protect. Ultimately, that does not benefit workers either.

The Government needs to address this problem as a matter of urgency. Providing authoritative, reliable and accurate information on the burden of regulation is a fundamental, core responsibility of government and will ensure it has a better handle on the true cost of the regulations it has introduced.

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

 

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