Holidays Bill is seriously flawed
The NZ Retailers Association told the Commerce Select Committee today that there were serious flaws with the Holidays Bill and that additional costs will flow from it resulting in a negative impact on the economy.
In presenting the submission, the Association's chief executive, John Albertson, told the Committee that the Bill as proposed would do real damage to the economy and have a serious impact on retailers. Specifically:
The estimated cost of the proposed additional week of annual leave for the wider retail industry is $68 million per year.
Imposing mandatory penal rates for all work on public holidays will cost retailers up to $34 million per year.
The additional cost of the sick and bereavement leave changes are likely to add up to a further $34 million.
Potentially, there could be the imposition of an additional 3.4% of payroll on the industry.
This translates to a reduction in net margin for retailers of some 9%.
The additional costs will only be recoverable by either increasing prices or decreasing staff. Either will have a negative impact on the economy.
A copy of the paper detailing these costs is attached to this release.
The Association also expressed its disappointment that the Bill was unduly complex and difficult and described it as a lost opportunity to make sound law.
"The Minister's Advisory Committee identified all the issues and set the framework for a Bill that would be accessible and easily understood by all. What we ended up with is a Bill that is difficult to read and comprehend and a nightmare scenario for employers. It has been written by lawyers, for lawyers, and the arguments over what it will mean in practice have already started", says Albertson.
" We urged the Select Committee to pull together a small group of experienced practitioners to rewrite the Bill in plain language format. It is worth the extra time to get it right."
The Association has submitted a detailed analysis of the Bill to the Select Committee. Copies of the submission will be posted on the Association website www.retail.org.nz as soon as it is released by the Committee.
-end-
Further Information:
John Albertson 027 445 9400
Chief Executive Officer
Cliff Daly 025 371 391
Industrial Consultant
John Albertson is Chief Executive of the New Zealand Retailers Association and has held this position for seven years. Before taking on this role, Albertson was national group marketing manager of R Hannah & Co - New Zealand's largest specialist footwear chain.
Cliff Daly was a member of the Ministerial Review Committee on the Holidays Act. He has been with NZ Retailers for three years following a lengthy career in employment relations for employer organisations.
Background Paper
27 May 2003
Cost Impact of New Holidays Bills for the Retail Sector
Overview
As part of our submission on the Holidays Bill and the associated Four Weeks Annual Leave Bill, we calculated the likely cost to the industry of the two major cost elements, work on public holidays and an additional week on the base entitlement of three weeks paid holiday.
The indicative costs of the sick leave changes were also estimated.
The changes in this Bill will have a wider impact on the industry over time. They add to the increasing list of changes made in recent years that complicate the employment obligations for retailers, add new compliance requirements and increase the perception retailers have of risk to their business. Although the impact of each item separately is relatively small, the cumulative effect of the change agenda is significant.
This paper demonstrates how the changes affect the tight profit margins in the industry.
From discussions with members, we are aware that many retailers are considering options that allow them to reduce staff to minimise the cost and impact on their business.
Analysis
The estimated annual wage bill for the Retail Sector from Statistics New Zealand's Annual Enterprise Survey for 2001 is $3.54 billion. (This includes the cafÈ/restaurant and accommodation store types)
From that base, we estimate the costs of the major changes proposed for holiday entitlements as follows:
Penal rates for work on public holidays - There are 11 public holidays each year. Retailers are entitled to open on 8.5 of those days (Christmas day, Good Friday and Anzac day before 1 pm are days when most shops are required to close.) Allowing for the fact that not all retailers open on every public holiday, we estimate that retailers will employ staff on at least 5 days each per annum.
The proposal is that everyone who works on those days will be paid not less than time and a half for working. While some major retailers do pay an additional rate for work on holidays, the vast majority of retailers do not. Penal rates and similar add-ons were built into the base rates in the early 1990's. Generally, a composite rate is paid for the work required.
We estimate that the time and a half proposal represents a direct addition of 2-2.5 days labour cost per year for the industry. On a base of 260 working days per year, this represents an additional cost of $27 - $34 million per annum across the industry.
An additional week of annual holiday - An increase in the base entitlement of 3 weeks leave will in time flow on to virtually all employment situations. Additional annual leave almost always requires replacement staff in retail. This is a direct cost increase of 5 days per annum. This is 1.92% of payroll or $68 million per annum.
Changes to sick and bereavement leave - There is no reliable measure of special leave use in the industry. Our enquiries suggest that the combined effect of allowing a separate entitlement to bereavement leave and removing the ability for employers to manage inappropriate use of sick days will add a further 2-2.5 days to wage costs. As noted above, this is likely to add some $27 - $34 million per annum to industry costs.
What does this mean to the retail industry?
The calculations above are indicative only, but they do show graphically the impact of the proposed changes. The cumulative effect of the additional penal rates, increased sick leave and extra week of annual leave is $27M + $27M + $68M or $122 million in total. This represents an additional cost of some 3.4% of the industry payroll.
The retail sector works on minimal margins. Data from the Annual Enterprise survey shows that the average net sales ratio in retail is 4.4%. For the key supermarket sector, the margin is 2.3%.
An increase in payroll costs of the magnitude proposed will significantly affect those margins. If the full impact of the changes flows through as proposed, the average margin will reduce to some 4.0%, a reduction of over 9%.
Additional costs such as these can only be recovered by either increasing prices or decreasing staff. Either option will have a negative effect on the economy.
Cliff Daly
For Chief Executive
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