BusinessPlus September 2015 by EMA

Issue 129 – September 2015

News and commentary for EMA members

Plenty of heads, not enough skilled stylists – p27

• Weapons of mass administrative delay – p7 • On the way: GST on online purchases – p13 • Targeting bad employers – p23 • Changing face of corruption – p25 • Governance in vogue for SMEs – p30 …and much more!

On the cover... Finding skilled staff in the hair styling industry is a big block to expansion, says the founder/owner of French Revolver Studio, Brad Lepper (pictured). Full story, p27

CONTENTS Commentary

Your feedback feeds into policy

Rates sting for small business

EMA’s CEO Kim Campbell: Weapons of mass administrative delay

BusinessNZ CEO Phil O’Reilly on RMA, housing and councils

The changing face of electricity supply worldwide: can NZ compete?

MP Michael Woodhouse: Ensuring our families get home every night

Readership survey results

Tax agenda: online purchases, car parks and late payments

International trade

ExportNZ division: Collaborating with the brilliant

Bribery and corruption reaches new levels

Employment

Member profiles

Five recruitment trends to embrace

The Mindlab: A new way to learn

Nine steps to a more agile organisation

French Revolver: Where are the skilled hair stylists?

Employment Chat – Q and A

Papakura Timber: Processor looking to grow

Employer Survey round-up

Patton: India part of expansion plans

Remuneration: Broader salary bands bring flexibility

Case law: spending up on boss’s credit card

New law: Employment Standards Legislation Bill

is published by :

The Employers and Manufacturers Association (Northern) Inc 159 Khyber Pass Rd, Grafton, Auckland Private Bag 92066, Victoria Street West, Auckland 1142 Ph: 09 367 0909 or 0800 800 362 Email: ema@ema.co.nz Website: www.ema.co.nz

Editor Mary MacKinven 021 636 089 mary.mackinven@ema.co.nz

In business

29 Residential property developers: “no bubble” 30 Good old fashioned governance in vogue for small business

Contributor

Waikato

Gilbert Peterson

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Clive Thomson 07 348 0334

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Manager of Advocacy and Industry Relations: Mark Champion

Manager EMA Learning: David Foley Manager of Enterprises and Strategy: Mauro Barsi BusinessPlus September 2015

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COMMENTARY

Your feedback feeds into policy on the likes of employment, OH&S and port development Winter Member Briefings were the main focus for EMA’s Advocacy team over the past month, with almost 2,000 EMA members registering to attend venues from Whakatane to Kaitaia. The briefings are a great opportunity for us to update you on what’s happening on the policy front for improving the business environment, and provide relevant information and case studies in the employment sector. But most importantly we get to hear from members, and at this Winter Briefing much of your interest focused on what’s happening with occupational health and safety (OH&S) legislation, “zero hour” contracts, finding skilled employees and regional development – on the latter issue, especially developing and paying for new infrastructure to support business. Another topic that came up particularly in Hamilton and Tauranga was the impact of Auckland’s housing shortage on local housing markets, with more Aucklanders looking for investment and lifestyle opportunities outside our largest and rapidly growing city. It’s great that so many of our members take the time to come to these briefings and we value your comments on how we can improve the briefings and the content of the accompanying book. You can send feedback to the Advocacy team at myvoice@ema.co.nz

Legislation: OH&S, parental leave, zero hour contracts The new OH&S legislation has passed its second reading in the house and Minister of Workplace Relations and Safety Michael Woodhouse told us when we met him recently at the Michael Woodhouse Beehive in Wellington, that he expects it to be introduced towards the end of the first quarter of 2016. He is also not expecting major change to the current form of the Health and Safety Reform Bill.

Also under Mr Woodhouse’s watch is the Employment Standards Bill, which includes extending parental leave, payments to non-standard workers and those who have recently changed jobs. And an interesting new clause called “keeping in touch” allows workers to work up to 40 hours during paid parental leave, to keep up with training, etc.

“We’re exploring opportunities to also get you, our members, directly involved in Labour’s policy development programme.”

There are also further enforcement measures for employment standards, featuring tougher penalties. You can read more about this Bill on page 23. Opposition MP David Parker’s Private Members Bill – the Minimum Wage/ Contractors Remuneration Bill – also surprisingly passed its first reading, with the unexpected support of United Future’s Peter Dunne. This will affect anyone from cleaners, couriers, musicians and deliverers of fast-food or pamphlets who would be paid a rate equal to or higher than the minimum wage. This applies to payments under a contract which are at less than the minimum wage, with the Bill introducing a minimum rate for such contractors. It could have an effect on low skilled people who may not be able to get a job and work experience, which is part of Work Readiness Passport in pilot phase, and there is the assumption in the Bill that employers can’t be trusted. We will continue to monitor its progress.

Policy development: Future of work, port, roads EMA met with a number of senior politicians and officials over the past month. Labour is in listening mode as it develops its business-oriented policies and EMA staff will be hosting several senior Labour caucus members over the next few weeks.

In her role as Small Business Spokesperson for Labour, MP Jacinda Ardern, and Labour’s Finance Spokesman Grant Robertson both want feedback from the EMA. We’re exploring opportunities to also get you, our members, directly involved in Labour’s policy development programme. A key step in unlocking some of the issues blocking progress on Auckland’s transport problems may also be getting closer. EMA met with Transport Minister Simon Bridges who says the Auckland Transport Alignment Project (ATAP) is making progress. Auckland Council and the Minister’s team are working on agreeing a joint strategy and approach to addressing the raft of major transport projects on the books for Auckland. EMA continues to push for the actual turning of earth on these projects. EMA is also included in the Ports Future Study Group looking at the future of the Ports of Auckland, for which the first two meetings were held in August. The first meeting was basically about process and getting to know fellow group members, with the second expected to start delving into the key issues facing the Port. • For more information on the policy issues mentioned above, please contact EMA policy director Alan McDonald at alan. mcdonald@ema.co.nz BusinessPlus September 2015

COMMENTARY By Mary MacKinven

Rates sting for small business A council rates hike of 42.8 per cent for Shane Jones’ four-person automobile business has him up in arms. As a member of EMA he approached us for support, after receiving a frustrating reason for the increase from the council, and after a long wait for a council response. The reason of course: property price increases. Rates are based on capital value – the total value of the land and buildings, plus extra charges this year for transport and waste management. Shane’s business, Vodis Automobiles, services and repairs cars in a big shed he leases on approximately a quarter-acre section (1,015 sq m) in Milford, Auckland. His landlord doesn’t pay the rates, as is common in commercial leases. The company’s Auckland Council rates invoice for 2015-16 is $11,717, but nothing has changed on site in that time, Shane says. The workshop is a hollow building made of steel beams, an iron roof and concrete floor, and housing a small kitchen and toilet - is valued at $360,000 on the rates notice - even though insurance valued it 18 months ago at $160,000 for a rebuild. A neighbouring business of luxury ‘offices’ on a site almost exactly the same size pays $2000 a year less; Shane’s land use is described as ‘engineering/metalworking’. EMA emailed the Council on his behalf, also asking why the property incurs a rates bill that is 2.7 times the residential rates bill, just for being a business premises, that is, what is the justification for the business differential? The Vodis Automobiles’ building is empty

after hours and does not have a council rubbish collection (Shane pays separately for that), therefore using fewer services than a house. Council’s principal advisor for financial policy, Aaron Matich replied the primary driver for the rates increase is that the capital value increased at revaluation from $990,000 to $1,625,000. “This is an increase of $635,000 or 64 per cent, which is significantly higher than the regionwide increase for businesses of 15.8 per cent,” he said. Auckland Council says in its newsletter to ratepayers that the overall average rates increase is 2.5 per cent for 2015-16, which incorporates an average increase for business of 1.4 per cent and 4.2 per cent for residential. These are based on 2014 property valuations.

“Shane’s first thought in response was, “what a load of BS” regarding the justification for taxing businesses harder.” Business pays more And on the business differential, Mr Matich said: “The council considers that business ratepayers benefit more from council services like transport (heavy vehicles associated with business activity increases construction costs of roads) and stormwater (business properties have greater impervious services which contributes to increased stormwater run-off) than residential ratepayers.

“Businesses are also considered to have a better ability to afford rates as they can claim back GST and rates can be claimed as an expense against income which is a tax advantage.” Shane’s first thought in response was, “what a load of BS” regarding the justification for taxing businesses harder. He said to BusinessPlus, “Businesses have a better ability to pay rates? Small businesses like mine do not. Last year my income was $55,000. That is less than the national average wage. If Council taxed [rated] every Aucklander that was on the average income and owned a property, at $11,700 a year – Council offices would be torched. “Claiming GST back is no consolation, as that is just tax upon a tax. “So I benefit from Council services like transport? That isn’t an argument. I drive to work as do my staff, and we stay put until the working day is over. Based on Council logic, [couriers] should be taxed hard – but naturally they can’t under the current system. “As for storm water runoff – from my recollection I get charged separately for that by Watercare. “Council is a dictatorship with the power to set rates how they like. “We shouldn’t pay more than a sensible level of rates; at least no more than residential rates.”

EMA’s policy Our long-standing policy on the points raised above are: • Business differentials need to be reduced to zero. If a differential is imposed, there needs to be a supporting case study of costs and benefits to justify it – and preferably an independent study. • Rates should be kept to the rate of inflation or less. Anything greater needs to be justified. Please send responses to this article to EMA’s policy director Alan McDonald at email alan.mcdonald@ema.co.nz

BusinessPlus September 2015

CEO COMMENTARY By Kim Campbell

Weapons of mass administrative delay I’ve coined a new phrase – Weapons of Mass Administrative Delay. This refers to the numerous delays I see around the country. There are a number of policy and infrastructure issues that significantly inhibit business growth. We want to unlock these to help our members. Whether our members are trying to get a housing development underway, an airport extension or even office renovations, they often face unacceptable delays. The cost to businesses and employers is frustrating and staggering. The question has to be asked: to what end do the administrative delays deliver a better outcome? We need checks and balances, but we also need to have faith that the system is working. We have several examples of where this is not the case, for instance, in Auckland city around 70 per cent of all applications relating to the Resource Management Act (RMA) are placed on hold and it takes an average of 40 days for 80 per cent of applications to be processed. Even the Auditor General has commented on needing a reduction in the time it takes to process these applications. We’re 25 years down the track with the RMA and it’s been amended more than 20 times. It seems to have become more complex, and endlessly tangled in case law, rather than delivering to its original intent. We know it is a source of frustration for our members, with 36 per cent of businesses saying the Act is fundamentally broken.

Along with the RMA, is the conflicting legislation of the Local Government Act and the Land Transport Management Act. There are a number of instances where the three Acts overlap or even contradict each other. Our efforts are being channelled into keeping the pressure on for a non-politicised review to deliver certainty for all involved.

“The cost to businesses and employers is frustrating and staggering. The question has to be asked: to what end do the administrative delays deliver a better outcome?” New Zealand’s adversarial system means we resolve disputes through the courts and there is no limit to this cost. We know the RMA is a legendary place for competitors to fight turf wars – but this is not the purpose of the legislation.

Disabling those weapons Furthermore, the jury is still out on whether the environment has been protected to the extent most New Zealanders consider it deserves. Which is why we firmly believe the time has come for a review of how the acts relate to each other. This is a huge issue that cannot be resolved overnight – but it must be addressed for the long term good of our country. In the meantime, there is still much that can be done, that would cripple the weapons of mass administrative delay. The Government could issue national policy statements which set the bottom

line for environmental impact. While difficult, this would at least provide clarity on whether a project was worth embarking on or not. We could insist on a planning system which local councils are obliged to follow. This could provide certainty for businesses which operate around the country, that they will be treated in a consistent manner no matter which local authority they are dealing with. We currently have a patchwork quilt, and there are some local authorities which are better than others, but what we need is surety of what our local bodies will do. There’s tremendous potential for national standards. These do not necessarily have to be environmental. For example, they could provide clarity around how hazardous substances required for infrastructure will be used and managed. Superimposed on all of this are multiple layers of competent consenting authorities often operating under separate legislation such as for building (the Building Act), fire (Fire Regulations), water (WaterCare), transport (local and national), earthquake and so forth. We know that change will only happen with a broad range of support, and I see the need to get momentum on meaningful reform. One possible option is an independent commission of inquiry. Or, is this the domain of the Productivity Commission? Today’s society will only accept policy that is sound from an environmental, cultural and economic perspective. • Kim Campbell is CEO of EMA. BusinessPlus September 2015

BusinessNZ COMMENTARY By Phil O’Reilly

Boardroom mood on RMA, housing and councils New Zealand businesses have given the Resource Management Act (RMA) a big thumbs down. The latest Mood of the Boardroom survey organised by The New Zealand Herald showed leaders from a cross-section of New Zealand businesses calling for change to the RMA. EMA members were among other business leaders taking part in the survey, and offered views on the RMA that were consistent with businesses from other parts of the country. Reform of the RMA is currently difficult to achieve in Parliament, with attempts to improve the Act being held back by a single vote. This situation is frustrating for businesses that are experiencing delays, expense and barriers to development caused by the RMA.

Local councils in firing line The role of local government in managing resource and building consents came in for a great deal of criticism in the Mood of the Boardroom survey. Most of the businesspeople surveyed thought central government should take more control of local government decisionmaking and activities in this area. A strong majority (nearly 80 per cent) thought central government should have more oversight of how local government implements the RMA. Only 9 per cent did not want central government involved. Business unhappiness with local government also extended to its actions over housing. Survey respondents were critical of local government’s actions in constraining land supply and saw this as the main reason for inflated Auckland house prices.

“Only a few respondents voted for keeping the RMA as it is - a very low vote of confidence in an Act that occupies such a key role for business and development in New Zealand.” Nearly 30 per cent of businesses responding to the survey said they would like to see the RMA ditched and replaced by a completely new resource management law. Around 70 per cent took a more gradual view, saying they hoped the politicians would continue seeking changes to the RMA as best they could under the current process. Only a few respondents voted for keeping the RMA as it is - a very low vote of confidence in an Act that occupies such a key role for business and development in New Zealand. The survey will hopefully send a message to politicians that business is very keen to see improvement to this Act. The survey also highlighted dissatisfaction with how the RMA is being administered.

Sixty-one per cent said the council should be required to free up land supply consistent with projected population growth. And 21 per cent had a strong view on urban limits - the boundaries around Auckland, beyond which new sections may not be created – wanting urban limits abolished altogether.

Just build the houses There was a clear view expressed that house price inflation in Auckland was simply a matter of demand outstripping supply, and respondents just wanted action towards increasing the supply of houses. Overall, housing was seen as an area where both local government and the Resource Management Act were failing

business. This view was held by Auckland businesspeople in particular.

Councils competing with business Another area of concern relating to local government that was evidenced strongly in the survey was the tendency for councils to set up enterprises in competition with local businesses. In a recent case, a number of Auckland events companies complained that the councilowned Regional Facilities Auckland was using ratepayers’ money to buy equipment to undercut them and monopolise events. The practice of a council imposing a high rating burden on local businesses - then using that funding to set up enterprises to compete against those local businesses - was seen as unfair. There are also example of councils in other areas setting up enterprises - cafes, gyms, cinemas, golf courses and other ventures - in competition with local businesses. Businesses say the ability of councils to use rates money to compete against local firms makes life difficult for those businesses. Asked whether councils should be allowed to establish enterprises in competition with private sector businesses, nearly two thirds of the respondents said no. Overall, the Mood of the Boardroom survey revealed the business view that the RMA needs significant reform and that local government needs significant improvement. This is a message that EMA and BusinessNZ will deliver. • Phil O’Reilly is Chief Executive of BusinessNZ. www.businessnz.org.nz BusinessPlus September 2015

COMMENTARY By Richard Gardiner and Hans Buwalda

The changing face of electricity supply worldwide: can NZ compete? New Zealand is advanced on a global scale in generating most of its electricity from renewable sources rather than the less clean, non-renewables such as coal and other fossil fuels. But in committing to do better, there is an economic price to pay. New Zealand is a small, advanced but geographically remote First World economy. Renewable electricity generation based on the use of hydro-electricity, geothermal energy and wind power, etc, typically accounts for about 85 per cent of New Zealand’s total electricity generation.

“The question is not if the world will transition to cleaner energy, but how long it will take.” The proportion of renewable sources has been growing steadily in recent years, with the commissioning of new geothermal and wind power stations and the progressive retirement of aging coal and gas-based generation. This trend now includes the planned closure of Contact Energy’s gasfuelled Otahuhu B Power Station. With such a high existing renewables component, it is much harder for us to achieve significant reductions in our electricity-related CO2 emissions/kWh than it is for larger, less remote trading partners overseas.

World catching up Governments are committed to creating a new international climate agreement at the United Nations in Paris this coming December. In preparation, governments have agreed to publicly outline what climate actions they intend to take post2020. These are their Intended Nationally Determined Contributions (INDCs), which will largely determine whether the world achieves an ambitious 2015 agreement and is put on a path towards a low-carbon, climate-resilient future.

BusinessPlus September 2015

In its INDC, New Zealand has committed to reduce GHG emissions to 30 per cent below 2005 levels, in the next 15 years by 2030. The likely cost to the New Zealand economy of meeting the 2030 target in terms of GDP is greater than that implied by other governments’ targets. This is due to a number of factors, such as already achieving a high (+/- 85 per cent) level of renewable electricity generation, plus the fact that almost half of New Zealand’s emissions originate from agriculture. The emission reduction pathways on which other countries’ targets are based differ from the pathways possible for New Zealand. A significant part of both the US and the EU commitments is based on opportunities for reducing the carbon-intensity of electricity generation. The current proportion of electricity generated from renewable sources in the US is 13 per cent, and in the EU is 25 per cent. Clearly there is significant scope for CO2 emission reductions in both those major economies through further increases in renewable electricity generation, particularly as much of that will substitute for electricity currently generated from coal. Already, the mix of renewables and nonrenewables used in electricity generation is changing globally. Back in May, BloombergBusiness in the US reported that, “The race for renewable generation has just passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas and oil combined”. It also advised that, “solar power makes up less than 1 per cent of the electricity market today but could be the world’s biggest energy source by 2050 according to the

International Energy Agency. The question is not if the world will transition to cleaner energy, but how long it will take.” The New Zealand emissions trading scheme (ETS) is due to be reviewed this year. Achievement of our INDC highlights the need to address our domestic policies. It is clear the current ETS will not, on its own, ensure New Zealand’s progression to a sustainable, low-carbon economy. Supporting sector-specific policies and measures are also required. It may be that some sectors should be included in a different way in the ETS.

Tips for NZ businesses New Zealand business customers of electricity and gas need to focus on: • Price minimisation – by checking the market systematically via a professional procurement process and bulk purchasing power. • Usage optimisation – by monitoring usage in detail, highlighting potential kWh reductions and then taking effective action utilising energy specialists. • Wider environmental considerations (for large organisations at least). Large organisations, whether public or privately-owned, need to consider their environmental impact on the wider community, and especially their contribution to lowering greenhouse gas emissions (GHG), particularly CO2. • Richard Gardiner is managing director of Total Utilities Management Group Ltd, email Richard@tumg.co.nz Hans Buwalda is managing director of Environment Health & Safety Consult, email hans.buwalda@ehsconsult.co.nz

COMMENTARY By Hon Minister Michael Woodhouse

Ensuring our families get home every night The new health and safety law is expected to come into force in the first half of 2016, representing the biggest change to New Zealand’s health and safety system in 20 years.

Officers of the PCBU such as directors, board members and partners will hold a duty to exercise due diligence to ensure that their PCBU meets its health and safety responsibilities.

Workplace Relations and Safety Minister Michael Woodhouse explains what these changes mean for businesses and employers.

In addition to directors who are covered by this, so too are staff in a senior governance role, such as the chief executive. They will not be liable for breaches of a PCBU’s duty by the PCBU. Their duty is to take reasonable steps to keep up-to-date knowledge on the operation and risks of the business, and ensure that the PCBU has appropriate resources and processes to meet its duties.

The Health and Safety Reform Bill, currently before Parliament, is part of the Government’s “Working Safer” reform package. It aims to reduce the unacceptable number of New Zealanders killed or hurt at work. The key emphasis of this law change is that everyone including businesses, workers and government needs to contribute to health and safety. It will ensure safer workplaces without creating a lot of additional red tape and compliance costs.

“It isn’t mandatory for businesses, but when requested by at least one worker, a PCBU must initiate the election of one or more health and safety representatives.” Good workplace health and safety isn’t just the right thing to do, but an investment in good business productivity and staff engagement. Now is an ideal time to start thinking about it. Under the new law, the Person Conducting a Business or Undertaking (PCBU) will hold the primary duty to ensure the health and safety of its workers and others, so far as is reasonably practicable. PCBU refers to the business entity rather than individuals.

The Government will also make a change to the Bill to make it clear that the extent of the officer’s duty takes into account the nature of the business, the position of the officer and the nature of their responsibilities. Workers also have specific health and safety duties when they are at work. The officer and worker duties reinforce that health and safety is everyone’s responsibility.

Worker engagement requirements PCBUs – small or large, low-risk or high-risk – will have two overarching worker engagement and participation duties. They will need to engage with their workers on matters of health and safety that affect them; and give them reasonable opportunities to participate effectively in improving work health and safety. Health and safety representatives are one way of achieving this. It isn’t mandatory for businesses, but when requested by at least one worker, a PCBU must initiate the election of one or more health and safety representatives. When a PCBU is requested by workers to establish a health and safety committee they can decline, but must explain why, and advise workers that they may raise the matter under the issue resolution process in the new law.

“Workers also have specific health and safety duties when they are at work. The officer and worker duties reinforce that health and safety is everyone’s responsibility.” Small businesses with fewer than 20 workers in low-risk industries will not have to have representatives or a committee if a worker requests it. But they still can do this if they want to – and if they do, they’ll still need to meet their worker participation requirements. WorkSafe NZ will be working with business and industry associations to support good health and safety practice by providing clear, accurate and easy-to-use material for all businesses, large and small, with a particular focus on high risk sectors. These resources will become available once the Bill is passed and regulations are confirmed. The material will include the Approved Codes of Practice (ACOPs), guidance and tools. If your business already has sound health and safety policies and practices in place, there won’t be a lot you need to change. If not, there will be a few months to fix this before the law comes into effect. While a strong legal framework is important in improving health and safety performance, what’s most important is changing behaviours and attitudes in the workplace. All businesses can show leadership to make this happen to keep our workmates safe. • The Hon Michael Woodhouse is Minister for Workplace Relations and Safety, email m.woodhouse@ministers.govt.nz BusinessPlus September 2015

COMMENTARY

Survey shows members’ magazine valued It is pleasing to know that as many as 80 per cent of you who receive this free, monthly, member magazine BusinessPlus are satisfied with it overall, including 20 per cent being ‘very satisfied’. I extend a big thank you to EMA members who answered our online survey last month, telling us your impressions of BusinessPlus.

Issue 128 – August 2015

News and commentary for EMA

members

Just popped up: the rapid succes s of NZ Kettle Korn - p 26

• That ‘recession’ word – p7 • Trends in sustainable practice – p10 • Drug testing: employer wins dispute – p21 • Chinese business in NZ thriving – p 24 and 28 …and much more!

As a result we will add content that you have requested and hasn’t been a focus before. We are also going to improve its layout and make some stories a bit shorter and punchier, at your request. We aim to please a diverse readership: readers work in industries spanning the gamut of sectors, with the bulk in manufacturing (36 per cent) followed by health care/social assistance (13 per cent), then professional/scientific/technical services (9 per cent).

Your favourite content is the Employment Chat column - brief questions and answers about employment scenarios, according to 80 per cent. The next most popular content is case law articles (75 per cent) followed by “how-to” articles on doing business (64 per cent).

Also popular with more than half of you are commentary from EMA’s chief executive Kim Campbell and general business news. Most of you find the articles easy to read (76 per cent) and relevant (75 per cent). Of course, most appreciate the fact it is free business information - as a member-only service. You also told us you like receiving the magazine in the post (69 per cent), but perhaps as a sign of changing times, this preference is weaker than three years when 80 per cent said so. Our Australian members receive BusinessPlus as an electronic newsletter.

Respondents to our readership survey are mostly aged 40-65 years (83 per cent), unsurprising considering the magazine is sent to decision-makers and the bulk are managers and directors (71 per cent). Slightly more are women (56 per cent). Most respondents’ businesses employ more than 20 staff, and up to 1000 people; while 42 per cent employ up to 20 staff. Everyone who completed the survey automatically entered the draw to win one mixed case of fine wine. Congratulations! The winner is: Michael Bell, managing director of Fiber Fresh Feeds in Reporoa, NZ. • For those of you who said you would be keen to supply articles, please contact me: Mary MacKinven, editor, at mary. mackinven@ema.co.nz or +64-9-367 0939 or 0800 300 362 (within New Zealand) or 1800 300 362 (from Australia). We can discuss topics and timeframes, and word counts.

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Tax COMMENTARY By Joanne Doolan

Tax agenda: online purchases, car parks and late payments What do financial woes from subcontracting, GST for cross border services and car parks have in common? On the surface very little, except they are all on the tax agenda at present and deserve attention. The IRD has issued an information factsheet that is useful for both employees and contractors if you are in the unfortunate position of having lost your job or you are suffering because of the failure of one of the businesses you deal with. Often dealing with the shock of what has happened means you can miss out on opportunities and the IRD is reminding us there is help available, which may be in the form of increases in Working for Families Tax Credits or reductions in child support payments. And these can be worked out online via the IRD website ird.govt.nz or by ringing them. IRD’s other valuable advice is if you find you may not be able to make a tax payment on time, talk to the IRD before the payment is overdue and come to an arrangement. Failing to do this will simply make the problem worse and believe it or not, the IRD is prepared to help you with an arrangement to pay something off via instalments. The big challenge is you have to stick to what you have promised, so you need to be realistic about what you actually can afford to pay, and you need to be seen to be actively taking measures to curb unnecessary expenses. Other options are to re-estimate your provisional tax payments based on your lower income and also to look at contacting the IRD to see if you can get access to your GST refund urgently. The myIR website is available 24 hours a day, seven days a week and if you have not already done so this can be done via ird.govt.nz

“Failing to do this will simply make the problem worse and believe it or not, the IRD is prepared to help you with an arrangement to pay something off via instalments” document on this topic has been released by Government. These changes are firstly targeting overseas suppliers of services, intangibles and goods. The proposed requirement is that overseas suppliers will need to register and return GST when they are selling to New Zealand consumers, and this will include online products like e-books, music and videos. New Zealand retailers are largely happy with these proposals. The bad news is that since South Africa introduced a similar system, it has not deterred online purchases. The press release on consultation around the GST change comes with the usual PR spin about the Government needing to fund essential services and the concerns it has about the GST not collected being around $180 million a year and growing at around 10 per cent a year. Despite this, there is an obvious question of fairness and the fact that many countries are now moving to tax online purchases, so it would seem dumb for us not to. The caution is watch this space and if you have been benefiting from purchasing goods or services offshore and saving the GST, then this is unlikely to continue for much longer.

GST for cross-border shopping

There is also the warning that change is coming to GST not being charged on low value imported goods that is below the Customs de minimis rule (below NZ$400). A Customs report is due next month.

GST for online purchases is moving a step closer, now the latest discussion

Given the bizarre situation where currently

Customs collects GST on imported goods and the IRD often refunds this, one would hope that this gets sorted, with measures to put all the revenue collection activities on GST under one roof.

Car park taxes Lastly, the IRD has also issued a draft public ruling on fringe benefit tax (FBT) exclusions for car parks provided on an employer’s premises. You will recall that there was a very public battle proudly and loudly lead by the EMA and others, when the IRD tried to start taxing all car parks. The back-down on this was a credit to the power of people and organisations being prepared to say “enough is enough”. Despite this we still have a very illogical outcome, where any employee car parks that are supplied under a car park lease can qualify for the on premises exemption from FBT; but any that are under a licence to use a car park, cannot. This is a weird and irrational outcome and one can hope that the next move is to also exempt from FBT employee car parks that are provided under a licence. However, lots more noise is needed to bring about this change. • Joanna Doolan is a Partner with EY. The views expressed are her own and do not necessarily represent those of EY. joanna.doolan@nz.ey.com BusinessPlus September 2015

EMPLOYMENT By Nicola Pohlen

Five recruitment trends to embrace Themes emerging in the employment market have a high impact on companies successfully attracting and securing the people they want in their businesses. The following five trends are described to help employers accommodate new thinking and requirements when finding staff.

1. Clarity of purpose and talent brand Staff wish to be proud of their employer. In a professional or social situation it is important for them to be able to communicate an engaging story of the influence their daily efforts have, of the purpose and the difference they and their teams make - to their community, country and the world. So all employers need to create the right impression by: • expressing their employer proposition; • articulating a narrative of purpose; and • managing their market reputation.

2. Planned interactive evaluation process Executing a succinct recruitment process is respected by all stakeholders: candidates invest time from busy work schedules; and hiring managers take time out from their business-as-usual demands. All interactions require behaviour that recognises it is an interchange, a two way process. Both the individual candidate and the company have a role to play in promoting their offerings. When employers acknowledge this and the importance of personal chemistry within teams, processes often begin with an informal ‘coffee’ meeting which is followed by a formal, robust assessment

BusinessPlus September 2015

designed to reflect the organisation’s style. A positive outcome is enhanced by engaging the human resources, hiring managers and recruitment partners as ambassadors. Through promoting the opportunity and work environment at every touch point, prospective employees are more likely to be highly invested and accept offers employers present.

3. Diverse candidate profiles The requirements of contemporary workplaces have impacted on the evolution of careers. This flows to decision-maker expectations on prospective employees’ backgrounds. Employers need to evaluate candidates in the following terms: Sector agility: There is recognition of value in a candidate’s transferable skills when it is appropriate to hire from outside the employer’s industry. This can be an advantageous choice in bringing new ideas and a fresh perspective which, at the extreme, may disrupt the sector, giving a distinct advantage. In New Zealand acrossindustry hiring is more likely because of the relatively small market for selection compared to others; however, it can also be a source of frustration to those from bigger employment markets such as Australia, the USA and UK for whom guidance may be needed. Position mobility: Candidates’ CVs represent increased movement in roles, requiring employers to gain further insight to look for considered rationale in these decisions, resulting in skills and career advancement.

Clearly, robust evaluation is required, which may involve assessing internal and external applicants alongside each other in a defined process. The employee has the opportunity to gain new skills and develop their career. More commonly these moves include an employee joining a new functional area, which provides the opportunity to add value across a business in a partnering style; and results in stimulating careers and enhanced commercial understanding.

5. Flexible work practices Interesting options are available for flexible work and are often tailored to meet individual employees’ specific requests. Employees’ accountability and outcomes are unchanged; the flexibility is in how these are achieved.

Future capability: Employing people who fill a specific position as well as an identified organisational competence gap provides benefit and is commonly viewed as a long term strategy for sustainability and growth.

Examples include global roles moving to New Zealand because of the employee’s desire to work here; working from home one day per week; setting aside a day per year for employees to dedicate to their charity of choice; and job sharing, for which we recently saw the appointment of a joint CEO in an Australian business.

4. Internal sourcing

Summary

Organisations that appoint internally to new positions gain significant advantage from many angles. Internal sourcing: · adds value to the talent brand; · keeps knowledge within the business; · encourages retention; and · sends a positive message to employees about investing in their workforce.

Implementation of contemporary talent initiatives compatible with the character of your organisation will have immediate and lasting benefits on your success in attracting the right people to your teams. • Nicola Pohlen is a principal at Pohlen Partners human resource and recruitment specialists. www.pohlenpartners.co.nz

Nine steps to building a more agile organisation Flexibility and openness to change are key attributes for success, in today’s rapidly changing world. As individuals, we need to be able to reinvent ourselves on the fly, updating skills and being in a mode of constant learning to meet the challenges we face. Similarly, organisations are advised to develop a culture of resilience as that will enable them to view crisis as opportunity and be ’better positioned to prosper when others falter’. While that is undoubtedly a good objective, we also need to be more proactive in terms of moving forward and thinking ahead. We need to become agile. What does this mean, and how can we achieve it? If you ask someone the meaning of agile, you will get answers like spry, dexterous, supple and lithe. In essence, becoming agile involves thinking on your feet, having clarity of purpose and the ability to alter your course in response to fresh data so that you achieve the outcomes you want. In a world that expects fast reactions, instant responses and where technology advances often mean things are becoming dated even as they develop, being agile is of the essence. In an organisation, agile thinking promotes a culture of collaboration that has everyone focused on one thing: what our clients need.

2. Encourage a collaborative and agile culture. Get rid of silos and get employee buy-in to collaboration. Effective use of social technology can help speed up business, enable employees to gain insights to make quicker and better decisions, and convey information to customers and partners faster. Access via mobile devices and new ways of working together in the Cloud and on open platforms, means business can be done when and where it delivers the greatest value, allowing the organisation to be flexible in terms of the changing marketplace. 3. Revisit and streamline processes that might have made sense once but are now unwieldy and slow things down. 4. Have clarity of purpose: understand the outcome you are hoping to achieve. Then, instead of moving inflexibly toward your desired outcome, encourage employees to take stock of progress from time to time and have the ability to change direction as and when required, always keeping the final outcome in mind. 5. Understand that, in this networked world, expertise cannot be concentrated in the hands of a few individuals. Make it easy for information to be shared across the organisation, which drives a culture of willingness to share knowledge and ability to tap into the combined expertise of the workforce.

Following are some ways to achieve this. 1. Embrace change, don’t just react to it. According to one study on managing organisational change1, the ability to anticipate, manage and capitalise on pervasive change is often the difference between market leadership and extinction. The organisation as a whole must have a clear understanding of the benefits of change management, with top managers ensuring they establish the right organisational context by creating the vision, reinforcing the benefits and injecting change management into the corporate culture.

By Debbie Landers

6. Simplify decision-making and empower more people to take the decisions they might be most qualified to take. Let accountability also rest with them.

8. Communicate, communicate, communicate! Set realistic expectations at the start of any project through discussion between the project team and the stakeholders. Good communication will drive collaboration, frequent checkpoints will show what is working and what is not, and iterations allow the product to be continuously improved. 9. Work smart. Look at developing a new mindset, a new way of working by understanding why you are working toward a certain outcome, applying tools and processes for maximum benefit. Participating in the annual IBM Kenexa Best Workplaces Survey is a great way to assess the agility of your organisation, and start the journey toward greater employee engagement and productivity. This will result in greater customer satisfaction and better business outcomes, as well as the ability to make the most of opportunities. In short, it will be a win-win situation for all. The IBM Kenexa Best Workplaces Survey is open between March and August. For more details, visit www.bestworkplaces.co.nz.

7. Map the skills of your employee base so that you can flexibly pull together teams for projects based on the skills required to execute on them optimally.

1 IBM Institute for Business Value: “Making change work…while the work keeps changing”

Talent analytics tools can help companies gain an accurate view of their organisation while identifying their most critical talent. Also, give employees the resources they need and trust them to get the job done.

• Debbie Landers is IBM General Manager of Kenexa and Smarter Workforce, based in Canada. She will be a keynote speaker at the Best Workplaces Awards celebration in Auckland on November 5. BusinessPlus September 2015

Employment CHAT

Training costs, secret recordings Q. One of our employees resigned two days before doing her two-day, first aid training course – can I take the cost of that course off her final pay, now she will only be here a month from resigning? Usually we require people to commit to being here for six months after that training. – Ngaire

Dear Ngaire Whoa, no! An employee’s earnings for work she has completed are inviolable: you can’t touch them and must pay her in a timely manner. If an employee owes you money, you must invoice them or ask for it - on repayment terms that are ideally agreed, but must meet your business’ needs. Owing you money is a separate issue from pay for work. In answer to your particular question, it seems to me the employee owes you nothing. If you did not inform her of your exact policy about staying for six months and get her to sign to that, you cannot ask her to pay for the training.

An employee can resign at any time and give their contractual notice period (which can be altered by agreement when they resign, such as bringing forward the leaving date). All sorts of life circumstances can require people to change jobs, so bonding them for a several-hundred-dollar course seems harsh.

to the employer’s interests … it will not generally consist of mere inadvertence, oversight, or negligence”. What was needed was conduct that “deeply impairs or is destructive of that basic confidence or trust that is an essential of the employment relationship”. The Authority confirmed that it is not unlawful for a participant to tape record a conversation without the knowledge of the other party; but whether this is unfair or not will depend on the circumstances. Always make sure you sufficiently investigate issues leading to a dismissal so the employee feels fairly treated and more likely to be open and constructive during meetings.

Q. We have discovered that an employee secretly recorded disciplinary meetings. Can we dismiss her for that? - Angela

Dear Angela Discovering an employee has covertly recorded meetings can lead to ‘a loss of trust and confidence’ in them, which are key terms in employment law. However, it is not illegal.

By the way, if an employer secretly recorded meetings that could be considered ‘bad faith’ and possibly grounds for a personal grievance claim against them.

You could have stopped her from attending the training, as you knew two days in advance that she had resigned.

In a recent case on this matter, the Employment Relations Authority said it had not determined a view on the issue of whether the covert or secret recording of a meeting by an employee with her manager constituted serious misconduct.

Q. A staff member is always sick on Mondays and Fridays. I feel it’s not genuine, or fair on other employees. How do I address the issue? – Simon

It also seems that you will have one month’s worth of ‘value’ or benefit from her being a

It held that serious misconduct will generally involve “deliberate action inimical

EMA regularly holds a half-day conference on Managing Medical Incapacity to deal

ADVICE AND SUPPORT WHEN YOU NEED IT. Free call NZ 0800 300 362 AU 1800 300 362 Visit www.ema.co.nz

trained first aider –an essential skill in staff that deal with customers in risky situations. Perhaps the training was essential rather than a benefit for her.

BusinessPlus September 2015

Dear Simon

We’ve got a team of advisors, lawyers and consultants who’ll do more than take the case - they’ll help you build a workplace for the future. AdviceLine

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Don’t just get information – get advice you can rely on from industry specialists.

A library of knowledge, tested in the courts and all in one place.

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Our member only resources allow you to download templates for all the difficult jobs that face employers - like Employment Agreements and OH&S.

Employment CHAT

and extreme Mondayitis with issues just like this - next in Auckland on September 11 and then in Hamilton on September 18. Absence for illness is a difficult issue indeed. The first rule of thumb for an employer is to act in ‘good faith’, and this includes never making assumptions – especially about people’s motives and reactions. So, check it out. There are indirect but quite legal ways to find out what your employee is actually doing on those days, such as posts on social media mentioning them, office gossip and the like. But this still leaves you in the area of assumption, so there is no substitute for putting your concern directly to the employee. Invite her to meet with you or the human resources manager. You need to show her the evidence that all/most of her sick leave, or more than most people’s sick leave, is taken on Mondays and Fridays. Understand her total leave entitlements and see the sick leave in this context, and in the terms of the employment agreement with her. Explain to your employee how this causes problem(s) in the company. Also discuss the manner in which she gives notice of turning up to work, if that is an issue.

Admit you might be wrong but the pattern of sick leave seems more than coincidental and you wonder if longer weekends were the reason for her absences – and was there an issue with leave and time for being with family, for example. Perhaps she wasn’t coping at work and needed more guidance or training, or she was being bullied and avoiding a certain worker on those days… If the outcome is not satisfactory, explain that you will be requiring a medical certificate in future for more than one day’s sick leave. Then discuss options for covering her workload in her absence. Down the track, continual absences that exceed agreed leave terms can be grounds for performance reviews and even disciplinary meetings. • By the EMA communications team in consultation with EMA Advice, and loosely based on real calls to EMA’s AdviceLine. All names are fictional. The information in this article is a guide only and not to be used as business advice without further consultation. EMA members can start with our free AdviceLine team at phone 09-367 0909 or

0800 300 362 (within New Zealand), and 1800 300 362 (from Australia), 8am-8pm weekdays. Alternatively, email advice@ema.co.nz or read or print information such as the A-Z of Employing – a manager’s guide on more than 100 specific employment topics, at www.ema.co.nz

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BusinessPlus September 2015

EMPLOYMENT

Business outlook stable: EMA Business conditions are expected to stay the same over the next six months, according to EMA members in our latest, Half-Yearly Survey of Employers (July 2015). Most businesses (61 per cent) expected business conditions to stay the same in the next six months, at the time of the survey, and 22 per cent even expected improvement. Still, 16 per cent expected things to worsen. When respondents consider their own businesses, 48 per cent expected business activity to stay the same but 45 per cent expected their business to grow. This left 8 per cent expecting a decrease in business. In other key findings, 52 per cent of employers had increased their staff numbers in the first six months of this year, which generated 848 jobs. In the other hand, 28 per cent had made positions redundant, resulting in the loss of 243 jobs. EMA’s chief executive Kim Campbell says, “This is in line with much of the commentary we’ve heard recently. We know that growth has slowed compared with what was predicted at the beginning of 2015, and we know that it’s tough in some sectors, such as dairy. However, the economic fundamentals we have in place are serving many of our members well and they remain relatively positive for their own sectors. “Sourcing skilled staff still remains a key issue amongst our members. We’ve seen this previously and it is a growing trend.” You can read more Survey findings about skills, training and immigration in the next issue of BusinessPlus (October 2015). In this issue we focus on responses to questions about employment conditions in the workplace and occupational health and safety.

• Trial employment periods When asked about their use of 90-day trial employment periods, 74 per cent of respondents said the trial allowed them to take a chance and fill a vacancy with a person who seemed to have potential. In addition, 43 per cent said the trial period meant they could appoint someone to a vacant position sooner than they might have otherwise. And 18 per cent said the trial period allowed them to create a new position or recreate a disestablished position with more confidence than otherwise.

• Use of flexible working arrangements Employers were asked what flexible working arrangements their staff required, to change conditions such as the hours they work, the times and days they work or where they work. In order of their commonality of use, flexible working arrangements practised in respondents’ businesses were (as shown in graph1): · Part-time work (in 57 per cent of businesses) · Flexi-time (19 per cent) · Telecommuting (6 per cent) · Job sharing (5 per cent) · Compressed work week (3 per cent) Employees in most workplaces (54 per cent) do not request more flexible working arrangements.

• Zero hour contracts The term ‘zero hour contract’ has no legal definition but refers to a type of employment agreement providing for an employer to engage an employee without guaranteeing (regular) payment.

1. Main flexibility arrangements in the workplace

BusinessPlus September 2015

The Minister of Business, Innovation and Employment has signalled changes to this concept through employment law-read more on pg23. Of those surveyed, 9 per cent implemented zero hour contracts. • Collective bargaining Since March there have been changes to collective bargaining law, aimed to increase choice and flexibility for employers such as reduce ineffective bargaining (by limiting the time it can take) and improve fairness and balance in bargaining requirements. Most respondents were not affected by collective bargaining: 67 per cent were not affected at all and only 2 per cent were affected a lot.

• Flexible rest and meal breaks Changes to the rest and meal break provisions in the Employment Relations Amendment Act 2014 that took effect this March sought to balance the importance of rest and meal breaks with the need for breaks to be practical for each workplace. The new provision encouraged employers to negotiate with employees. This did not affect the majority of employers who participated in the survey, as seen in graph 2.

• Infant feeding provisions Just less than half of respondents (45 per cent) were aware of the 2008 Infant Feeding Amendment to the Employment Relations Act requiring employers, as far as was reasonable and practicable, to provide appropriate breaks and facilities for employees who wish to breastfeed their infants during work hours. Another 17 per cent were unsure.

2. Effects of flexible rest and meal breaks

EMPLOYMENT

Employers Survey Occupational health and safety knowledge and views Directors in a large number of businesses surveyed were already involved in occupational health and safety (OH&S): 65 per cent of respondents said they were, with most of those (39 per cent) saying the directors were ‘very involved’ (graph 3). Even higher, 70 per cent of respondents’ companies have the topic of OH&S on the board papers regularly: including always in 48 per cent of companies. But for 5 per cent it is never an agenda item. These figures are very encouraging. By far the most respondents (85 per cent) have a reasonable grasp of the changing nature of the law for occupational health and safety: 33 per cent are very familiar and a further 52 per cent are familiar (see graph 4). The high level of awareness is encouraging partly because the biggest single group of respondents is in the manufacturing sector, which has the second-highest level of risk for workplace deaths - after the construction industry. These figures show that employers and business see OH&S as an important part of their business and business risk. EMA is doing its best to improve understanding and implementation of the rules as they unfold, through seminars and training courses aimed at all levels of business. A hefty 55 per cent are prepared for the pending law changes, and a further 31 per cent are somewhat ready. Only 3 per cent say they are quite unready. Most are also familiar with the new health and safety regulations accompanying the Health and Safety Reform Bill in the business

3. How involved are Directors in workplace Health & Safety?

area of ‘general risk and workplace’, with 61 per cent comfortable in their knowledge. Fewer were familiar with the regulations for major hazards facilities (38 per cent were very familiar or familiar), for asbestos (22 per cent) and adventure activities (12 per cent) – perhaps reflecting the respondents’ business types. Based on open-ended comments about health and safety, most respondents seem supportive of the idea of employees being involved as OH&S representatives in their companies. Positive comments show they believe responsibility and ownership of OH&S should be shared, or that people at the coalface know best what is needed or that employee buy-in and morale is greater with the more involvement they have, for example. But of course there are reservations too. Concerns include the amount of time it will take to increase worker participation, employees’ ability to judge what is hazardous and the potential for staff to abuse their involvement in the committee and take time off their core role. The disparity between employee decisionmaking and employer responsibility irks some too. And 30 per cent of respondents find it hard to get employee representatives for health and safety committees and another 30 per cent indicate it’s somewhat difficult. Conversely, 40 per cent find it very easy or easy. These findings were in contrast to some media reports that imply employees generally were lining up for the role and that business was not supportive of the concept.

Comments on attracting employee participation included: • In theory it is important; our issue is to achieve genuine participation. • No issue with it as long as staff want to be involved. Even when we remunerate staff who sit on the H&S committee that doesn’t attract any enthusiasm from staff when there is vacancy to be filled. • Employees basically don’t care! It is difficult to engage them in the new law. • Good and we are encouraging more. • Not an issue as it is part of our monthly warehouse, office and management meetings. • We are WSMP tertiary qualified. All our employees are fully involved in health and safety and will continue to be.

Background The purpose of the Half-Yearly Employers Survey is to monitor members’ employment practices and perspectives on topics including business outlook, employment conditions, training, immigration, flexible working arrangements and health and safety. The findings contribute to our work advocating for employers’ needs to government, and to developing the most suitable training programmes and other services for members. The survey was conducted online between July 2 and 14, 2015 and received responses from 253 businesses/employers. The most common type of business was manufacturing (28 per cent of the sample) and most commonly respondents employed fewer than 20 people (in 47 per cent of cases). Most responses were from businesses in Auckland (48 per cent of the total), followed by Waikato (16 per cent), Bay of Plenty (15 per cent) and Northland (5 per cent).

4. How familiar are employers with workplace health & safety law?

BusinessPlus September 2015

EMPLOYMENT By David Shannon

Broader salary bands bring flexibility to remuneration Grouping salary levels into broad bands for paying employees is popular among organisations that find traditional job evaluations and narrow salary bands are a hindrance to effective management. In the traditional remuneration structure as depicted in graph 1, job evaluation is used to determine the pay band (or grade) of each employee.

Pay in $ 120,000 110,000 100,000 90,000 80,000 70,000 60,000 50,000 40,000

• There is pressure on the job evaluation system to “get it right” with little margin for error. • This can lead to temptations for employers and employees to “fiddle” with the job evaluation system to get jobs placed in the band they want. • Sometimes jobs of very similar sizes are split into different bands by just a “fluke” of scoring. • The shallow dollar ranges of the bands provide little opportunity to distinguish between high and low performing employees in similar jobs.

The pros of the broad banding approach In graph 2 the eight salary bands of graph 1 are replaced by four “broader” bands. This approach provides for the following advantages: • Easier salary administration in terms of the number of pay bands used, • Less pressure on the job evaluation processes to “get it exactly right” and correspondingly less opportunity to “fiddle” with the job grading system, • More assurance that job positions of similar size scores will be in the same pay band, • More flexibility in managing individual pay, BusinessPlus September 2015

H F E C A 30-40

40-50

50-60

D C

80,000 70,000 60,000 50,000 40,000

20-30

Salary Band

120,000 110,000 100,000 90,000

Graph 1

With such a structure, negative effects include:

Pay in $

10-20

This typically provides for many relatively narrow bands where all the jobs in each band are very similar in size, that is, they have been scored similarly for their attributes. At the same time, the salary range of each band is small, offering limited room for salary movement.

Salary Band

60-70

70-80

B A

80-90

Job Evaluation Score

10-30

Graph 2

and • More opportunity for high performers to be rewarded and distinguished from low performers. Broadbanding removes a lot of the pressure from the job evaluation process. As long as the job is “sized” into the band that seems most appropriate, the actual point score for a job position is not critical. In the end, jobs with scores several points apart may be assigned to the same band, so it is not necessary to worry over small point differences among them. The use of broadbanding also provides considerable overlap in the remuneration ranges of each band. This means it is not always necessary to move an employee to a higher pay band in order to receive a higher salary. While “borderline” jobs will require a little additional rigour in job sizing, overall the wider bands take the pressure off “getting it exactly right.” In this way the job evaluation process becomes easier to conduct and less of a game of points manipulation that it occasionally becomes.

The ‘cons’ of broadbanding However, broadbanding has its own difficulties. These include: • More complex salary movements are possible because of the larger range of dollars available. • The linkage between specific jobs and market rates becomes less direct. • There is greater pressure on the performance management process or whatever is used to determine individual

30-50

50-70

70-90

Job Evaluation Score

remuneration levels inside the bands. • There is potential for employees to feel they are not banded with their peers. One sign that the bands may be too broad is finding a position in the same band as the position it reports to. Unless the two roles are actually very similar, such a structure is bound to create tensions. It is all very well to place a position in Band C through the job sizing process, but if Band C extends from $60,000 to $100,000, there is a considerable range of potential remuneration for the individual jobholder. This will call for a more rigorous process for controlling movement through that range. Traditional structures typically consisted of a series of fixed steps through the salary band range which, assuming movement of one step per year, almost predefined the exact salary level of the job for the foreseeable future. With the broadband approach, the greater range of salary opens other possibilities including discarding steps altogether in favour of an “open” range where literally any dollar level is possible. After an employee moves a few steps due to time in service, movement tends to be based on performance, competency or other measures and may or may not conform to established steps within the range. • David Shannon is EMA’s remuneration consultant. Contact him via AdviceLine at email advice@ema.co.nz or 0800 300 362 (within New Zealand) or 1800 300 362 (from Australia)

Find the middle ground. Keep your precious staff.

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EMPLOYMENT

Spending up in Las Vegas on company card

- no reason for dismissal The case of the employer having to compensate an employee after dismissing him for spending up large on the company credit card, is a lesson to employers on the need for clear policies on staff’s use of company assets. At first glance, the case of the employee Mr Shoshany being cleared for spending $11,500 on personal items during a trip to Las Vegas seems to show he was merely lucky to have succeeded. However, the Employment Relations Authority placed a lot of weight on the fact that the employer seemingly condoned Mr Shoshany’s previous similar conduct, and never provided formal guidelines around the use of credit cards. As this case shows, employers are not always able to rely on what many would regard as common sense or expected standards of conduct.

“Employers are not always able to rely on what many would regard as common sense or expected standards of conduct.” Mr Shoshany worked as a manager for the Wellington-based technology company 4RF Ltd, in its Israel office, from December 2013. He had a company credit card to use for expenses while travelling on business. Mr Shoshany’s agreement stated that expenses should be “within reason”, and he was required to reduce expenses where possible and practical. There were no other written rules or policy in relation to the use of company credit cards. Five months into the posting Mr Shoshany travelled to the US on company business and used the company credit card to make cash withdrawals and buy personal items amounting to almost $4,500. The next month, on June 30, he sent his credit card statement to 4RF highlighting

BusinessPlus September 2015

the transactions and asked to have the sum deducted from his salary. The company replied, thanking Mr Shoshany and notifying that a deduction would be made from his next salary payment. Nothing more was said about the credit card use. Six months later Mr Shoshany again travelled to the US to attend meetings over two weeks. During the intervening weekend he visited Las Vegas and during three days made cash withdrawals and bought personal items with the company credit card totalling around $11,500. When the company chief financial officer (CFO) was notified that the credit card had been declined for a hotel booking, he sent Mr Shoshany a list of credit card transactions and asked him to confirm if they were his. Mr Shoshany confirmed that they were. The CFO was not impressed and emailed Mr Shoshany, advising that the level of expenditure was unacceptable, that the credit card “was not a private banking arrangement that can be used to fund personal expenses”, and that he had instructed the bank to cancel the card immediately. Mr Shoshany apologised and confirmed that 4RF could deduct the amount from his next salary payment. However, 4RF did not accept Mr Shoshany’s contrition and following a disciplinary process, dismissed him summarily, saying that his actions were serious misconduct, which damaged trust and confidence.

making deductions from his next salary. The evidence showed that 4RF’s expected practices around credit card use was acquired either by past practice, word of mouth, or experience in alternative employment. The Authority considered that such an “ad-hoc methodology”, together with 4RF’s failure to have any written policy “created a setting for misunderstandings to arise”. The Authority found that the employee’s use of the credit card, particularly in Las Vegas, “clouded 4RF’s willingness to consider Mr Shoshany’s explanations”. 4RF ignored its own email, which Mr Shoshany cited in his explanation. The Authority found that was a procedural defect, which was more than minor, and resulted in unfairness. The Authority considered that even without this procedural defect, Mr Shoshany’s conduct could not warrant dismissal. The Authority noted that, “A fair and reasonable employer cannot justifiably dismiss an employee for conduct it has previously condoned without some intervening notice that it would no longer tolerate the behaviour”. The Authority concluded that Mr Shoshany’s dismissal was procedurally and substantively unjustifiable.

Remedies favour employee In assessing remedies, the Authority noted that Mr Shoshany’s position would have been disestablished shortly after his dismissal and so awarded only a few weeks’ lost wages.

Exchange of evidence

However, the Authority ordered the company to also pay the contractual notice period of three months.

Mr Shoshany argued, both in the disciplinary meeting and before the Authority that, given his previous personal use of the credit card and the lack of anything having been said to him about it, he had no reason to consider that his use of the card was wrong. The company had not objected to his earlier $4,500 spending and

In assessing compensation for distress, the Authority took into account that there was a perception that Mr Shoshany’s conduct was dishonest and there were reports that 4RF directors regarded him as a thief. Although Mr Shoshany sought $5,000 compensation, the Authority awarded him $10,000.

EMPLOYMENT By Matthew Dearing

Targeting bad employers

– the Employment Standards Legislation Bill The Government has outlined its concern that, while employers are the backbone of our economy and most do a great job in meeting their employment obligations, there are a number of serious breaches occurring and new legislative amendments are required to strengthen the current system. In March, Workplace Relations and Safety Minister Michael Woodhouse announced a package of measures to strengthen enforcement of minimum employment standards – read what these are, below. And now he has put forward the Employment Standards Legislation Bill to Parliament. Its aim is to promote fairer and more productive workplaces, by providing enhanced protections and benefits for both employers and employees, through a number of improvements to the employment relations/ employment standards legislative framework. In particular, the Government has noted that those who breach minimum employment standards have an unfair advantage over law-abiding employers, and it is unfair on employees who work hard to support their families. As a result, stronger sanctions for serious breaches will send the message that this type of conduct is unacceptable. The Bill aims to target the worst transgressions of employers without imposing unnecessary compliance costs on employers in general. Key changes include tougher sanctions, increased tools for labour inspectors and clearer record-keeping requirements for employers. It will also promote the effective enforcement of employment standards by giving additional enforcement powers to Labour Inspectors, the Employment Relations Authority and the Employment Court. While this article cannot outline all the proposals in the Bill, I point to some major changes, below.

Minimum employment standards enforced Observance of employment standards will require employer records to show compliance with minimum entitlement

provisions, in addition to existing recordkeeping requirements. The employer already/will need to retain a copy of the individual employment agreement and comply with obligations for breastfeeding mothers, for rest and meal breaks, wages and time record, the Equal Pay Act, holidays and leave payments, holiday and leave records and employee requests to access these, plus observe minimum wage law and the Wages and Protection Act. Employees as well as labour inspectors will be able to bring an action against an employer who fails to keep a copy of the employee’s Individual Employment Agreement.

Proposed changes to ‘zero hour contracts’ The Bill proposes the Agreement for an intended employee must include agreed hours of work as well as individual terms and conditions of employment - additional to those of a Collective Employment Agreement. This information will need to be in the copy retained by the employer and in the employee’s copy. To deal with the concerns around ‘zero-hour contracts’, an availability provision in an employment agreement will be permissible, but is not enforceable unless the Individual Employment Agreement provides for the employer to pay compensation. Under an availability provision: • the employee would work only when the employer made work available; • the employer would not be obliged to make work available; but • the employee would have to accept work that was made available. Where an employee is paid a salary, the employer and employee could agree that the employee’s remuneration includes compensation for the employee being available for the additional work.

For shift work, the employment agreement must state how much notice period must be given if the shift is to be cancelled, together with the compensation payable if the required notice is not given. The notice period must be reasonable. If no provision is made for notice and compensation, or the employee is not told of the cancellation before the shift is to begin or, if it has begun, that the remainder is cancelled, the employee will be entitled to be paid the amount payable for working the shift. A provision prohibiting or restricting the employee from having secondary employment would be unenforceable, unless: • there is a genuine reason for the prohibition; and • the reason is based on reasonable grounds; and • it is stated (and agreed) in the employment agreement. Possible reasons for prohibiting secondary employment include protecting commercially sensitive information, intellectual property rights, the employer’s commercial reputation, or preventing conflict of interest. The Government hopes that the changes will mean a more robust employment standards system where all businesses are operating on a level playing field. It considers this is essential for business growth and means any anti-competitive behaviour that occurs when employers breach minimum employment standards is detected and sanctioned. The Government is particularly concerned about the exploitation of our most vulnerable workers such as migrant workers. It hopes these changes deliver on our commitment to strengthen the enforcement of minimum employment standards and help ensure vulnerable workers receive their minimum employment entitlements. • Matthew Dearing is a senior solicitor at EMA Legal and a sitting member of the Auckland District Law Society’s Employment Law Committee. BusinessPlus September 2015

International TRADE By Catherine Lye

Nothing short of brilliant - NZ export success stories Another incredible story of surviving the ups and downs of export markets was told to members in Auckland last month. At the After Five networking function we had the privilege of hearing from a Kiwi visionary and self-described ‘extreme engineer’ – Bill Buckley, founder of Buckley Systems that creates and exports precision electromagnets, charged particle beamlines and high vacuum equipment. These futuristic-sounding technologies are integral to big machines with a range of industrial purposes, and for little devices like iPads. Buckley Systems is the single biggest user of steel plating over four inches thick. Bill told us his story of innovation and adaptation that was inspirational for all in the room. Sales over the past 12 months have been rocketing for Buckley Systems. The silicon chip industry is running pretty steady but with all the ups and downs Bill was always looking for diversification, he said.

magnets for Monash University in Australia. One year at a conference Bill was attending he was approached by some Canadians who were going to build a light source and because Bill was in magnets, they asked him to bid on the job. Bill looked at all their paraphernalia and refused, saying he didn’t want to build it their way. But some Australians present asked if Bill would build the machine for them.

He has said, “Over the years, I have taken many risks in business, however, my belief in my ability to manufacture exactly what the Americans were looking for paid off. The more I got knocked back, the more determined I became and today, my business is a global leader in precision electromagnets.”

Planning for export

Subsequently, the Taiwanese approached Buckley Systems wanting a 500m diameter, 2000 tonne machine. This came at a time when things were pretty grim at work due to fluctuations in the silicon chip industry that led to Bill laying off three quarters of his staff. Then Buckleys landed this $26m contract two weeks before Christmas.

Our presenters on that occasion were the very knowledgeable and open SnapComms chief executive Sarah Perry, and Imake international sales manager Barry Cowen. Both companies have won awards for growth in their export markets, in our annual export awards programme.

When the bank refused to put up a bond, a local New Zealand company put up the guarantee (using the same bank!).

They are big machines at 6m long x 3.5m high x 3m wide. Buckley Systems have been asked to build one every 10 days over three years, in a contract worth approximately $26-30 million a year. Customers are Apple, Samsung, Sharp and LG.

Bill envisages building a machine that can treat a patient using one treatment with no side effects, based on injecting boron into cancer cells then zapping them with a neutron: after weeks the body will have destroyed the cancer.

He never expected success on that scale. So all the time Bill was casting around for other opportunities.

These developments are expected to be up and running in a couple of years.

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By 1986, intent on entering the computer chip industry, he sold that business and created Buckley Systems to pursue the US market.

Given it was a government job, he needed to tender for it. However, Bill said the Australians went out of their way to help. Buckley Systems was awarded the $8m contract over the opposition.

When iPads came along the company developed a machine to improve iPad screens, which are now also being used for telephone and super high-definition television screens. Buckley Systems has captured the world market for those machines, which make one iPad screen every second, and run 24/7.

Buckley Systems has built a machine 112m in diameter containing 600–1000 tonnes of

ExportNZ Auckland members gather around Bill Buckley (centre) for an evening of storytelling and business inspiration – at the premises of sponsor DB Breweries.

From industrial goods to cancer treatment Bill’s new focus for an innovative machine is to treat cancer using boron neutron therapy.

Bill started out in business 37 years ago forming Buckley Engineering, doing simple engineering jobs.

At another seminar for members in recent weeks we heard invaluable advice couched in real life examples of planning for the risks and challenges in overseas markets.

We have workshops this month on the EU - its economic status and doing business in those markets - as well as on managing distributor relationships in China. The presenters have expert knowledge and personal experience of their subject matter. What these people share is gold! We are truly grateful for their collaboration with us to help boost New Zealand’s exports. And our branch offices in Hamilton and Tauranga offer similar events locally. Anyone can come along to gain from others’ wisdom and experience, and share their own. Be warned: a heavy focus is chatting over breakfast, or later in the day over drinks and canapes! • Catherine Lye is executive officer of ExportNZ Auckland and manager of the ExportNZ Division of EMA. Visit www.exportnz.org.nz

International TRADE By Daniel King

NZ has work to do on anticorruption in foreign markets Positive developments

Corruption is becoming much more sophisticated where it is practised. That requires OECD countries to lead the way and ensure that their national laws are stringent and prohibit their companies from engaging in corrupt practices when operating in overseas markets.

It should be noted there are some very positive developments taking place in New Zealand.

This is a key finding in the annual Exporting Corruption report, recently released by Transparency International (TI). The report benchmarks 41 countries’ performance in combating foreign bribery and corruption. In the good old days bribery/corruption was more straightforward. For example, money or gifts were offered (or demanded) between individuals. Nowadays bribery can take various shapes and forms such as gifts, jobs, political contributions, kick-backs, overseas trips and so forth. When a government official in a foreign country asks your business for a contribution to a local charity, it’s important to make sure the charity is legitimate and the funds are not going directly or indirectly into the pocket of the official. Corrupt officials are getting better at concealing their illicit gains and in many cases these funds are sent offshore to avoid detection. In China the term “naked officials” refers to corrupt government officials who send their families overseas, using them as a means to shift assets outside the country, which are then invested in the local country. There have been a number of such cases in Australia, the US and Canada. In other cases shell companies are set up overseas, with no-identifiable owners, to conceal gains from corrupt activities.

of measures to combat corruption: active enforcement, moderate enforcement, limited enforcement, and little or no enforcement.

The Organised Crime and Anti-corruption Legislation Bill is now proceeding through Parliament. Its stated intent is to ensure New Zealand’s full compliance with the United Nations Convention against Corruption (UNCAC), which New Zealand signed in 2003. The Bill will address a number of the inadequacies in New Zealand’s legal framework including removal of the dual criminality requirement, clarifying company liability for acts of employees and increasing the level of sanctions.

Countries such as the US, Germany, the UK and Switzerland are in the active enforcement category.

In addition the Bill will, in its present form, make fines and imprisonment available for the offence of foreign bribery by New Zealand corporations. All of the above should motivate New Zealand companies to take foreign bribery seriously and most importantly, provide an incentive to develop adequate procedures to mitigate these risks.

“Moderate Enforcement” and “Limited Enforcement” indicate stages of progress, but are considered insufficient deterrence. Last year, New Zealand moved up into the Limited Enforcement category with countries such as France, Sweden and Holland.

Historically New Zealand’s export markets have been countries where corruption and bribery risks were relatively low. Nowadays many of the overseas markets where New Zealand companies operate have high levels of corruption and bribery.

Where there is “Little or No Enforcement”, there is no deterrence.

“Nowadays many of the overseas markets where New Zealand companies operate have high levels of corruption and bribery.”

Although measures to combat foreign bribery by the OECD countries could be much better, non-OECD countries are considerably further behind.

In 2013 the New Zealand Serious Fraud Office commenced two investigations - one of which was closed - and in 2014 began investigating one more company.

The report uses a point system based on the number of investigations, concluded cases, and sanctions in proportion to a country’s share of world exports. It then divides countries into four categories of use

The report also notes that New Zealand’s sanctions against our businesses committing bribery in foreign markets are inadequate, and that although whistleblowing protection laws are present, they are rarely used.

The New Zealand authorities have expressed a willingness to investigate and prosecute all cases of bribery, whether they take place here or overseas. But efforts must be intensified to raise awareness as well as establish effective resources for the preparation of evidence and reporting mechanisms, to bring potential cases to light. New Zealand’s reputation and brand are at stake. • Daniel King is a director of TINZ, the New Zealand Chapter of Transparency International and is responsible for providing information for the TI Exporting Corruption 2015 report. You can read the report at www.transparency.org.nz or email daniel.king@thenatureofbusiness.co.nz BusinessPlus September 2015

Member PROFILE

A new way to learn Frances Valentine opened The Mindlab by Unitec two years ago, a unique collaboration between public education provider Unitec and the specialist education lab, and it took off. At first The Mindlab by Unitec offered holidays and term time programmes for primary and intermediate kids. Their teachers came along to supervise their classes but before the end of the first year more teachers were attending out of interest, and for their own benefit as much as for the children’s. Frances was chief executive of the Media Design School, a private tertiary institute, then she set out to establish a better, 21st century way for children to learn. Since the beginning, in Auckland some 20,000 school children and 700 teachers have taken the Mindlab courses. Three new locations have been opened: in Gisborne, Wellington and Christchurch. Staff numbers are up over 30.

be better applied to the processes of learning; The Mindlab’s feedback suggests it is unique in offering an environment and an approach to do just that.

The Gisborne operation alone has put through 3000 students since March this year. It’s a full house there every day, thanks to financial assistance with course fees supplemented by the local Eastern Community Trust and Activate Tairawhiti. So under the guidance of a public/private partnership established between Unitec and The Mindlab, the Postgraduate Certificate in Applied Practice (Digital and Collaborative Learning) was developed to offer professional development for teachers. It allows practicing teachers to study for a recognized qualification part time while in full time employment postgraduate training for the digital age. The Mindlab adopts and relates technologies such as robotics, 3D design and printing, and augmented reality, to the study of any number of school subjects, from measurement to computer coding, from science to feelings like joyfulness. Children may create the software needed to print out a chair, or for a key ring to 3D-print and take home with them. But it’s not just about the technology, says

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Melissa Fincham, engagement manager for The Mindlab. A lot of schools are shifting away from the teacher-at-thefront-of-the-classroom model towards a collaborative approach where the teacher acts as a facilitator and coach, with all the skills and knowledge in a classroom brought to bear, she says. “Everything we do is hands on and collaborative,” she says, where teachers acknowledge they also are learners, not a one-way dispenser of knowledge to passive students. The Mindlab programme aims to assist children and teachers to collaborate in small groups to solve problems and think critically. But the rapid changes in technology cry out for more research on how they can

After all, as the Mexican archbishop Ignacio Estrada famously said: “If a child (or anyone for that matter) can’t learn the way we teach, maybe we should teach the way they learn.”

Just Water on the move Just Water International, the New Zealand water cooler and supplies business, is on the move after buying a new site for its bottling plant and head office in Auckland for $3.3 million. The listed company will make the shift to 103 Hugo Drive in Penrose over the next nine months. Just Water recently obtained agreement to sell its Australian business, Waterlogic Australia for A$11m, which will leave it debt-free, according to the company’s press release.

Member PROFILE

Where are the skilled hair stylists? Owner of French Revolver Studio Brad Lepper in the zone

Brad Lepper is one of just 11 hair stylists internationally entrusted by Wella to advise and train others on the art of hair styling, and the owner of French Revolver Studio in downtown Auckland. He has just been appointed the new creative director for Sebastian Professional Australia and New Zealand, a creative brand of Wella. In the new role Brad expects to extend his already busy travel schedule: he has been to Delhi, Bangalore, Madrid, Sydney, Melbourne and Brisbane teaching the art of hair design. Says Brad, “I am very privileged to be taking our knowledge and experience also to Berlin this year with Sebastian International. We have a lot here in New Zealand that the rest of the world hasn’t seen yet, and on these trips I have been lucky enough to meet many other artists.

of top awards including Wella Trend Vision Finalist 2015, Industry New Zealand Hairdresser of the Year Finalist in the past three years, Industry New Zealand Men’s Stylist winner last year and finalist this year, along with top recognition for teaching and colourist work.

“We’re always getting ideas off other people – this is a very collaborative industry.

The biggest obstacle to further expansion, Brad says, is a lack of staff.

“Culture is a big thing. We draw inspiration from places as diverse as Africa and Thailand to interpret and merge ideas.”

“We have a lot of room to expand but have difficulties in finding people with the right skills. It’s a big business issue for us.”

With his wife Amelia as manager and marketer, Brad established French Revolver Studio with himself the sole stylist four years ago. It had been a natural progression after managing another salon. Senior creative Chris King soon joined, adding huge value and experience. There’s also a senior colourist and salon assistant.

Asked where he wants the business to be in five years, Brad says he wants the salon to be well established and staffed by people who love what they do.

The name French Revolver? It honours the origin of Brad’s great grandfather while ‘revolver’ references the always changing nature of fashion. The business has quickly run up a string

As he says on the studio’s website: “We’re a Kiwi creative mecca… where hair meets music meets fashion meets art…the first of its kind in New Zealand, inspired by similar concepts in Paris and New York, where salons double as galleries and where stylists are constantly creatively inspired. “You come to French Revolver Studio for an experience, not just a haircut….”

Examples of hairstyles

BusinessPlus September 2015

Member PROFILE

Papakura timber processor looking to grow

Two of the crew bind a batch of planed timber ready for dispatch

As many EMA members are, Papakura Timber Processing is struggling with a skills shortage. However, that’s not deterring it from its quest for growth. The company has recently taken on a new, highly skilled machinist and is currently looking for a plant operator to join its stable and valued workforce of 30. General manager Matt Murphy says they like to hire the right people and hang onto them, but people with the right computer skills are hard to come by. Right now, he says, they’re doing a standard 47-hour week so business for them is on the quiet side. The company is not a saw miller; that’s what their clients often are. Papakura Timber doesn’t own any of the timber it processes on its spread at the southern end of Auckland. Rather, the company has two big kiln driers, three timber treatment plants, three big machine planers, an optimiser to make best use of

the timber, and a painting line for weatherboards, plus 22 acres of concreted floor surface outdoors, for the clean air drying of timber. “We recycle every drop of water that hits the yard,” Matt says. “We’re also looking to convert an existing product line to a new, eco-friendly timber treatment. “In our industry wood shavings are a big issue and they always have been,” he says. “We make 90 tonnes of them a month, so we have got this bio waste raw material and the land to process it on, so we’re interested in finding a partner to make use of it as a biofuel or something like that.”

India part of expansion plans Patton’s chief executive Sameer Handa is very pleased with the way the company’s new owners are backing the refrigeration wholesale and manufacturing company. For 14 years Patton was owned by NZPM, a co-operative of former New Zealand Plumbing Merchants whose primary business is Plumbing World. Patton had ambitious plans for international expansion, and a shortage of working capital.

local business would nearly double. He points out the company is a net importer of components and products; so the recent exchange rate fall has not been kind. Similarly he says there Sameer Handa, CEO of Patton may be some slight downside from the fall in the dairy price – 10 per cent of their revenue isfrom milk cooling equipment.

Patton’s acquisition by Swedish company Beijer Ref AB was announced in April. “The new owner understands our business and is really backing us,” Sameer says.

However, looking ahead he says, “New regulations may be coming up which will require milk to be chilled very fast, and farmers will have to get their refrigeration up to speed.”

Patton’s head office in Auckland, and other operations in New Zealand, employ 65 people; and operations in Australia and Thailand employ 60 each, with another 20 in India.

Likely to offset any market lull is the work on kiwifruit cool stores. Another 10 per cent of the business comes from those, with a further 10 per cent from supplying components for commercial refrigeration in supermarkets. Commercial kitchens, hospitality, bars and the like make up the balance.

In acquiring Patton, Beijer Ref added three countries to the 28 where it already operated. Beijer Ref is also seeking to acquire a second refrigeration business here, a competitor of Patton requiring Commerce Commission approval. If it comes off, Sameer says their

BusinessPlus September 2015

Patton employs five people full time on research and development, designing and testing the products they make.

But it’s the new export frontier of India which clearly has Sameer enthused. He was born in New Delhi and completed his degree in mechanical engineering there before going to the Middle East, Sydney and Fiji then coming here, 20 years ago. He says 40 per cent of the vegetables and fruit in India go to waste because of the lack of cool storage. “I know the market and culture, and have contacts which make it a bit easier, and our business in India could grow even faster. “Our new owners are very excited about the scale of the opportunity.”

IN BUSINESS

Auckland’s housing market no bubble Third in line to Richie McCaw and the All Blacks, the Auckland property market must be the most popular topic in the news. So at what stage is the property cycle, and what are the issues preventing us getting on top of our housing crisis? It was in terms like these that Lowndes law firm partner Jeff Walters introduced the latest in the Business Intelligence Workshop series in Auckland. The breakfast workshops with top presenters are hosted by Lowndes in association with EMA. This one was on the theme of “Inside the Bubble: Issues for Auckland’s residential property developers”, a progress update for all. First up at the podium were two developers who are jointly re-developing 400 homes in the Glen Innes suburb of Auckland: Matt Currie, director of Arcus Property, the investment arm of Arrow International; and Murdoch Dryden, director of Dryden Property. The project began in 2000 but nothing much happened till 2010. Since then the name of the development has changed and work is now accelerating. Matt and Murdoch set out the challenges they faced. The houses were built for the expectations of a different era and are at the end of their design life. But the location is great: near parks, beaches, good transport routes, schools and just 10km from Auckland’s central business district.

Seminar presenters from left: Matt Currie of Arrow International, Murdoch Dryden of Dryden Property, Wayne Silver of Willis Bond Co, John Dalzell of Waterfront Auckland and Lowndes host Jeff Walters.

Arrow became involved in 2011, acquiring 156 properties from Housing NZ in 59 parcels that were peppered among other tracts of land. Matt reported a mixed experience of Housing NZ. He has had to deal with two changes of chief executive at Housing NZ and six different account managers all in the space of four years. “It’s been very difficult,” he said. The development agreement for the build of 39 affordable homes took Housing NZ 12 months to sign off. The agreement would prove to be their only protection against a partner subject to political interference. The Housing NZ culture of mistrust spilled over into tenant protests when houses were to be removed and residents displaced. “The whole process could have been handled better,” Murdoch said. Once the tenants began to be settled in new, warm, dry and healthy homes, the protests disappeared.

Auckland Council required the paperwork to be printed out once the plans for 156 homes with variations on nearly all were ready for consenting. It took 7.5km of paper and a small truck to deliver the plans to the Council. Then they had to wait while Council officials scanned it back into their system. “But we’ve come an enormous way since then,” Murdoch said. “The council is very much a partner now, as much as the Government is. “We initiated a lot of change and there’s been a lot of learnings from working with Housing NZ.” Willis Bond specialises in developing high density and terraced homes, including in the Wynyard Quarter at 32 Halsey Street, Hobsonville and Takapuna in Auckland, among others. Since the global financial crisis they’ve raised $228 million. Willis Bond director Wayne Silver pointed out the Auckland property market is in no housing price bubble. “With 2,500 new migrants arriving each month and 550 new home building consents issued each month, every dwelling would have to accommodate 4.5 people. We’re not even standing still at the moment,” he said. The graph shows the trends in housing consents. He said other factors contributing to the housing growth are migration to Auckland from other places in New Zealand, more people being born and interest rates going down.

Continued pg30 BusinessPlus September 2015

IN BUSINESS By Dave Jaques

Good old fashioned governance in vogue for small business stopping effective decisions being made at management level. A ‘Positional Flow Chart was tabled and discussed, resulting in one member being appointed as general manager. Virtually straight away, systems were improved when the single loud voice gave a clear direction to staff.

Running a small business can be a constant struggle of putting out fires, juggling cash and looking out for new customers. Most owners of small to medium enterprises (SMEs) are expert at the ‘doing’ in their business, that is, making, moving and selling, but many have little experience in what I might call Business 101 - the craft of actually being in business. Enter centre stage: governance as a crucial tool. ‘Governance’ is a term that comes from a time when those with money invested in the businesses of others. Governance came about from the need to hold the management to account for the investment of the owners. Today it is more common to own your own business, but too often if things don’t work out those owners feel that since it’s only causing themselves a loss, then it is alright. Good governance involves holding regular, short and punchy board meetings, say, every one to two months. The meetings are for taking a fresh look at where your business is at and where it is heading. A weekly management meeting is no substitute, as these usually only focus on the daily issues such as staff and cash flow.

Example of a small family business A suburban family business had been trading for seven years and grown revenue to $2 million. They were pleased with that; thought everything was going generally OK; but did not really have any spare money. When they held their first board meeting their independent director asked why their GP (gross profit) had slipped 10 per cent. The family were expert at doing what they did, but they really did not know what GP was exactly, or what effect a 10 per cent change would mean.

“A weekly management meeting is no substitute, as these usually only focus on the daily issues such as staff and cash flow”

Before you throw your hands up, I want to say from the outset I am not in favour of spending any money or time on the irrelevant. I am a great believer in implementing the principles of good governance without the bureaucracy. Don’t do it too often, and don’t drag it out, but get on and do it.

The 10 per cent slip was due to not pricing jobs correctly and this wiped $150,000 from their bottom line. A pricing scheme was put in place to ensure this did not happen again.

Continued from pg29

Transport are not equipped for the volumes needed.

In their second board meeting it was identified there were too many bosses,

An issue the development industry struggles with, Wayne said, is volume. “We are playing around with 100 unit projects but we should be aiming at three, four and five hundred unit projects.”

As well, capacity constraints are looming in the building industry with construction costs running at more than double the current CPI (inflation), he said.

In addition, infrastructure providers such as Chorus, Watercare and Auckland

More problems arose from the banks being nervous about projects of scale

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Today the business is entering into long-term contracts with customers (as opposed to keeping deals to a hand shake), collecting all the money it is owed, and paying the owner a proper salary for the first time since the company opened. The family openly says that the clarity from having short but regular board meetings with an outside perspective, from someone familiar with business best practice, has made all the difference in the world and they would not be without it. So I say don’t spend all your time putting out fires and chasing money. Stop for one moment and take a deep breath. Don’t get over-complicated but make sure you start to run your business as part of an overall plan (and not by going from job to job). Next month I will give you some insight on how to build the right team around you to maximise this process but for now, start getting your head around the benefit of making this an important part in the way you run your business. • Dave Jaques LLB NZIM is managing director of Good Governance NZ Ltd focusing on educating SMEs on good governance, and providing independent company directors to SMEs. www. GoodGovernance.co.nz

and a bit suspicious about the quality of presales agreements. And developers are cutting corners, taking the easy way out on quality, he said. Furthermore, development margins are in subdividing the land, with no incentive to build on it. Casual parking, for example on land in the CBD, can cover its holding costs.

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New training programme focuses on building habits for safe lifting The manufacturing industry had approximately 9500 active lifting, carrying, and strain claims with ACC in 2013/14. And that’s just manufacturing - the transport and storage industry adds another few thousand claims. Injury numbers can be reduced through developing a culture for safe lifting in our workplaces. Repetitive lifting and performance targets are demanding on the body, even if staff are young and fit. There is huge opportunity for employers to equip workers with the knowledge and skills to lift safely, every time. Agoge Training has recently developed and launched a new engaging Manual

Handling training programme that seeks to provide safe lifting techniques and tools to trainees. Agoge have placed significant focus on their target in warehousing and manufacturing, and how this audience learns to ensure the course programme is effective. Agoge’s Manual Handling training programme is structured around four simple techniques: ‘start warm,’ ‘get ready,’ ‘power lift,’ and ‘move and place.’ It has an essentials course, a leadership course for H&S reps and team leaders, and toolbox resources available. Behaviour change doesn’t happen instantly, so to get the real rewards of having good training Agoge believes you need to engage everyone. The point of

difference for Agoge’s programme is that it doesn’t only facilitate training for those lifting all the time, but also trains leaders and management teams. The leadership course provides the tools to encourage and engage leaders’ work teams, so they can enforce positive behaviour change in their organisations. Agoge is confident if organisations invest in creating safe lifting habits in their people, they will finally see the reductions in strains and sprains that have proved so elusive until now. For further information and Agoge’s special offer to EMA members, visit www.agoge.nz/EMA or call 0508 428 574.

BusinessPlus September 2015

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