Businessplus October 2015 by EMA

Issue 130 – October 2015

News and commentary for EMA members

Let there be light

– using LED technology – p28

• Business collaborates with community on sustainability – p8 • Raising equity just got easier for small business – p11 • Stay out of court: trial periods explained – p13 • Digital tools big motivators for skills training – p21 • Trade missions: the way to go – p23 …and much more!

On the cover...

is published by The Employers and Manufacturers Association (Northern) Inc (EMA) EMA is the major shareholder of national lobby group, BusinessNZ. EMA head office: 159 Khyber Pass Rd, Grafton, Auckland, New Zealand Private Bag 92066, Victoria Street West, Auckland 1142, NZ Ph: +64-9-367 0900 Email: ema@ema.co.nz In Hamilton: EMA 103 Tristram Street, Hamilton. PO Box 490 Waikato Mail Centre, Hamilton 3240. Ph: +64-7-839 2713

Operations director Ralph Coppins of Oceania LED that sells and rents screens for projecting action and replay, in both outdoor and indoor settings - from school prize givings and sports fixtures to back screens at the X Factor on TV, export awards and trade shows. Full story, p28. Photo credit: Garry Brandon of Garry Brandon Photography

CONTENTS Commentary

In Tauranga: ExportNZ Bay of Plenty Smart Business Centre, 65 Chapel Street, Bay Central, Tauranga, 3110. PO Box 13202, Tauranga Central, Tauranga 3141. Ph: +64-7-571 0600 AdviceLine: 0800 300 362 (in NZ) or 1800 300 362 (from AUS) or advice@ema.co.nz Phone 8am-8pm weekdays for information about employment and more, plus referrals to EMA Legal lawyers and your local EMA consultant in employment relations and/or occupational health and safety. Visit www.ema.co.nz for owner and staff training programmes, conferences and other events, employer guides and templates, manufacturer services, media statements and submissions, export development and more

EMA’s CEO Kim Campbell: Change or be changed. Remaining competitive in today’s climate

Test Labour’s thinking on small business - invitation

Busy advocacy agenda: TPP, port, employment law

Sustainability: Business collaborating with society

BusinessNZ CEO Phil O’Reilly on the changing business environment

ICT trends – selecting the best option for your business

Finance: Raising equity just got a lot easier for small business

Tax: trade agreements don’t help

Employment 13

Trial periods 101: getting them right

AdviceLine service wows

Youth Employability Passport gives confidence to employers and job-seekers

Finalists in NZ’s Best Workplaces Awards 2015 care for employees

Employment Chat – Q and A: Phone check misery, closedown confusion and temp as solution

Leave and payroll planning for public holidays

Employer Survey: Immigration and literacy improvements needed

Bay of Plenty/Tauranga

Employment relations (ER): Terry Arnold +64-7-575 8401, mob +21 662 656 Occupational health and safety (OH&S): Toni Welch mob +64 27 326 5251

Training: Trend to digital learning tools

Wellness Survey: Home life causes most absenteeism from work

EMA contacts Chief executive: Kim Campbell Membership manager: Roger Carson External Relations manager: Val Hayes Advocacy and Industry Relations manager: Mark Champion EMA Learning manager: David Foley Enterprises and Strategy manager: Mauro Barsi Senior Solicitor, EMA Legal: Charlotte Hatlauf Industrial Relations and Safety manager: Paul Jarvie Administration and Technology manager: Paul Yeo Corporate and Building Services manager: Sheree Alcock ExportNZ manager: Catherine Lye

Waikato ER: Denis Quigan mob +27 203 0694 | Russell Drake +64-7-838 0018, mob +21 686 621 OH&S: Geoff Brokenshire mob +64 21 595 090

Rotorua/Taupo/Whakatane ER: Clive Thomson +64-7-348 0334, mob +274 372 808 OH&S: Toni Welch mob +64 27 326 5251 Editor: Mary MacKinven, +64-9-367 0939, mob +21 636 089, email mary.mackinven@ema.co.nz Contributor: Gilbert Peterson Designer: Ripeka Mikaere | Printer: MHP | Distributor: Rocket Mail Advertising sales: Colin Gestro, Affinity Ads, mob + 27 256 8014, colin@affinityads.com ISSN No. 1176-4953

International trade 23 24 25 26

Seventh trade mission records strong results TPP risks over-stated The global challenges for supply chain and logistics Attractive export pricing for Asia

Member profiles 27

28 29

Grayson Engineering: investing in more CNC plant Makepiece: Keeping alive the timber joinery trade Oceania LED: LED lights up new business Zealong Tea Estate: taste of award success

In business 31

Governance: Building the right team to steer your ship BusinessPlus October 2015

Here are just a few reasons our members stay members, and just a small part of the commitment we make to them:

Member Briefings

Online Resources

Keeping you one step ahead of the competition.

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

Attended by over 2,000 other committed business people, our targeted 90 minute briefings and webinar are held every 4 months, in over 30 different locations.

Download from our member only templates covering a wide range of Business related documents including Workplace Health & Safety, Employment Relations and other value added savings. Information that you need, as you need it.

Keeping you well informed & well ahead of important legislative updates & changes.

Training & Development

AdviceLine A free member only, confidential telephone service designed to provide Employers with up to date, clear, direct and practical advice on Human Resources, Workplace Health & Safety, Mentor Guidance and business related issues. Available Monday to Friday, 8am - 8pm. Free call 0800 300 362.

We’re backing your business to succeed & investing in your people to make it happen. Our business school offers over 100 courses, all targeted at making your business more successful. We work with you either at our training centre or onsite at your business to make sure your people get the best learning, and the best results.

Advocacy & Industry

Legal Services & Consulting Well trained, well supported, and only for employers – it’s your ‘go-to’ team. Our team provide excellent service and real results – without substantial fees. 64% of our employers win their personal grievances, when nationally only 36% of employers win.*

Our Advocacy team is the ‘voice of business’ on tax, trade, interest rates, compliance costs, infrastructure, energy, education, policy and planning. Dedicated to creating a better environment for you and your business.

*2012 analysis of personal grievances determinations from the Employment Relations Authority.

Find out how we can help, visit our website www.ema.co.nz or simply give us a call 0800 300 362

CEO By Kim Campbell

Change or be changed, remaining competitive in today’s climate One of the biggest challenges businesses face is remaining competitive in today’s ever changing world. Until relatively recently, competiveness centred on your business’ product offering and how this compared within its market segment. This doesn’t hold true anymore. Technology has changed consumer behaviour in a raft of ways. It allows products or service offerings to morph into realms we have not necessarily thought of. Think back a few years when the valuebased airlines shook up the offering of the aviation industry, yet today it’s part of the suite of options for consumers. Or, for example, how TripAdvisor has become a virtual travel agent these days, or how UBER has become an alternative taxi service provider. Who buys a small torch, handheld calculator or a small video camera these days, when we have smartphones? Keep expecting the unexpected. This allows us to be prepared for what may come our way. This can either be seen as an insurmountable challenge or a golden opportunity. What does this mean for you? 1.

Customers cannot be taken for granted, it’s important to keep ahead of the game.

“Technology has changed consumer behaviour in a raft of ways. It allows products or service offerings to morph into realms we have not necessarily thought of.”

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The need to upgrade technology and innovation capacity;

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The lack of adequate finance and human capital for this process;

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The inability to meet standards and certification requirements;

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The necessity to better manage intellectual assets, including the protection of intellectual property (IP) rights when appropriate;

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The difficult bargaining position smallmedium enterprises face with large contractors; and

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The need for diversification to reduce dependence on one or a few customers.

cheaper or better than you can do. Furthermore, almost everything we consume crosses many borders before we purchase it. For New Zealand to remain competitive, we need to remove unnecessary friction around transportation and border inspection for quality; along with free trade access with our trading partners.

Quest for reinvention has to be relentless, as the only certainty is that the industry you’re in today will not look the same in future.

Smart ideas are key

Your only goal should be satisfied customers – this will define where solutions in your business can be found.

If the recent past has taught us anything, it’s that the real wealth of the future is in ideas. There is value in this rather than the asset.

In this regard, the global supply chain is a great leveller. There is a growing supply of poorly paid, highly skilled workers and an over-capacity of production in the global market. Therefore, before investing in a new production facility for example, it’s crucial to make sure it cannot be made

The challenges we face are:

Change has no respect for size. It’s not the big who eat the small, it’s the fast who eat the slow, in this instance.

While the global supply chain gives us access to the hard assets, success lies with the ideas on how to use these. It is no surprise the main new work stream to emerge from this year’s B-20 meeting in Turkey was “Small Business Access to Global Supply Chains”.

The challenge and the opportunity for businesses is to identify where value is created and to insert themselves at the right place and time. We need to recognise that everything we consume has moved between borders, and all countries have similar challenges. The technique for remaining competitive is to be clever in dealing with these challenges and turn them into our advantage to keep our customers satisfied. • Kim Campbell is chief executive of EMA, email Kim.campbell@ema.co.nz BusinessPlus October 2015

COMMENTARY

Test Labour’s Protecting NZ business from thinking on unfair overseas competitors small business policy The Labour opposition is deeply involved in policy development this Jacinda Adern year as it looks to establish a policy platform to take it through to the 2017 general election. One area the opposition has identified as a crucial leg to its policy platform is working to improve the environment for small-tomedium enterprises. MP Jacinda Ardern is leading this area for Labour and is keen to test ideas with a crosssection of our members, at a special policy forum to be held at the EMA in Khyber Pass Rd, Grafton, Auckland on October 27. She has an interest in the area having worked with the Better Regulation Executive in the UK, an agency that worked on the interface between business and local government. She was also recently voted, in the Business NZ Mood of the Boardroom survey, the MP that businesses in New Zealand would like to see lead the Labour Party. As many EMA members are smaller business owners or managers we are opening up our regular monthly policy forum to members who own or run businesses with fewer than 50 employees. We want you to test Labour’s thinking on its small business policies. The forum provides an opportunity for feedback and to present to Labour some of the issues that continue to face members. We have 50 places available to members on a first-in, first served basis to attend the forum. You can register by replying to our electronic invitation (first in e-report, September 30). If you have any questions about the forums or feedback on small business issues contact our policy director Alan McDonald at alan.mcdonald@ema.co.nz

BusinessPlus October 2015

Government proposals that would have allowed significant quantities of various products to be dumped into the New Zealand market have been dropped following submissions from the EMA and others opposing the move.

Current anti-dumping laws protect New Zealand businesses from overseas suppliers dumping their goods on the market here at lower prices than in their home markets. But the Government’s original proposal for new legislation allowed an “unbounded test”, meaning that the impact of dumping products in our market on businesses and jobs within New Zealand would not be considered. Fortunately our lobbying on behalf of members, with strong support from many other organisations and businesses, has resulted in what is known as a “bounded test”- a fairer test that should protect our members when Government considers allowing large quantities of foreign made goods into the New Zealand market. Government wanted this ability to open the market at short notice as it had originally been concerned about possible shortages of some critical building materials in the aftermath of the Christchurch earthquake. The original ‘unbounded’ proposal was

strongly opposed by the EMA and clearly the Government listened and amended its original position to: • A ‘bounded public interest’ test will be introduced into New Zealand’s anti-dumping and countervailing duties regime, which means that a wider consideration of the impacts of the dumping must be considered consistent with WTO rules, and balance the lower cost of goods to market to the consumer against the real and potential impacts to industry and jobs within New Zealand.

The public interest test will consider the cost of imposing anti-dumping duties on consumers and therefore strike a balance between encouraging competition and protecting domestic producers from unfairly priced imported products. • The Government has rejected adopting an automatic termination period (ATP), which would prevent anti-dumping duties from being imposed beyond a specified number of years. Such a change could prove too damaging for some New Zealand industries and required considerable effort to have duties re-imposed by effectively putting up a new case for them each time. The Dumping and Countervailing Duties Act 1988 is likely to be amended later this year.

Busy agenda promoting business interests Issues dominating the agenda for the advocacy and policy team in recent weeks have been regional and local government, and employment related matters. And they will continue to be an emphasis for the EMA, as infrastructure underpins growth in our regions. For example, we’ve opposed proposed changes to electricity transmission pricing based on its impacts in Northland and Auckland in particular. We simply cannot support a proposal that increases transmission prices by 172 per cent in Northland at a time when the region is crying out for new

development to provide critical employment opportunities. Auckland EMA members would bear the brunt of a near $100 million cost. We’re supporting a proposed merger of Bay of Plenty and Waiarakei polytechs. We believe that will help better align the courses each offers with the needs of business in the regions, while maintaining their geographic reach and better utilising their combined resources. We’re aware of some of the more parochial opposition to the move but from a neutral viewpoint believe it best serves the needs of students and employers. We’re also supportive of the goals of

COMMENTARY the Waikato District Council’s business development strategy but would encourage the various business development programmes in the region to pool their ideas, strategies and resources. That’s a theme that emerged in our discussions with the Local Government Association around its proposed 10-point funding plan. We have difficulty with some proposals around more, or targeted, taxation programmes but we supprt ideas like special business zones or levies on extraction industries where there is a demonstrable benefit for the business involved. For example, if the local council provided a fasttrack consent or some type of exemption then there should be a payback to that council and its ratepayers.

Pool local government resources

Similarly we would encourage more councils to pool resources or procurement for major projects. For example, smaller territorial authorities could bundle their roading contracts together to take advantage of scale, and multiple economic development and tourism organisations within tight geographical areas could pool resources for an obvious saving. We are also looking closely at the possible impacts of Auckland’s rampant housing market on the ability to attract employees,

and continue our push to unlock Auckland’s transport planning and construction muddle. The recently signed Auckland Transport Alignment Project should finally see Government and Auckland Council agree on the priorities and strategy for Auckland’s transport network although we are concerned that this process will take up to a year. Even at the signing the Mayor Len Brown was talking about accelerating that process, while the Transport Minister Simon Bridges’ comments talked about at least a year. We pushed hard for this alignment, now we want to see results. Local-based opposition to the design of Auckland’s East/West corridor remains vocal - although the issues are around design and impacts on the local community rather than the total concept - with no obvious progress on this critical project.

Port future complex

The Consensus Working Group (CWG) continues to refine the scoping document and the RFP for the Ports Future Study that will make recommendations for the future of Auckland’s port. EMA is a member of the CWG. The process is complicated by a need to look 30-50 years into the future, with another layer of complexity added by those advocating possible alternative uses for the land on which the port currently sits. Technology is also playing an increasingly

influential role in port capacity growth. For example, Ports of Auckland CEO Tony Gibson recently announced new technology changes such as automated, laser guided cranes that stack higher than the current models and allow the container port to significantly increase its capacity without requiring extra land. Unlike many other port and waterfront regeneration projects around the world, Auckland is a working port that has a critical role in local and national economic wellbeing.

Employment legislation

We are busy evaluating employment legislation including the Employment Standards Legislation Bill, focused on a range of issues including zero hours and extended parental leave, and the Minimum Wage (Contractor Remuneration) Amendment Bill. We support retaining the casual contracts in the former bill, while strengthening the requirements on employers around provision of hours and possible compensation. Casual contracts are often a useful gateway into full employment for employees while also providing the flexibility required by many employers. The Minimum Wage private members bill surprisingly made it to the select committee thanks to Peter Dunne’s supporting vote. It’s a bill we strongly oppose because it will force some employers to pay a minimum wage to piecemeal or casual workers. Expectations are it won’t go further than the select committee.

TPP negotiations slow down While the Trans Pacific Partnership Agreement (TPP) negotiations appeared to have slowed down there is still an expectation that a significant announcement will be made before the end of year, perhaps as early as next month’s APEC meeting. While the outlook for the agreement was later rather than sooner following the last round of meetings, the rhetoric has again shifted as President Barack Obama continues to push for what he sees as a signature agreement for his administration. With rules around tabling such agreements in the US requiring a threemonth tabling period this means that a late 2015, early 2016 timeline is essential to avoid the agreement being stalled in the midst of the next US presidential election campaign. New Zealand Trade Minister Tim Groser has also sounded more confident in recent discussions on the TPP and with up to $4 billion in trade benefits on the table for New Zealand, there is much to gain – despite Government admitting there may be higher costs for pharmaceuticals

for New Zealanders.

agreement when the text is released.”

Increased costs to Pharmac and the issue of Investor State Dispute Settlements (ISDS) and their supposed threat to sovereignty have dominated much of the anti TPP discussions and protests. ISDS agreements allow for financial compensation if an investors rights are breached by law changes and damages are caused.

He said, “What we’re hearing is that that there will be minimal adjustment required for New Zealand with good or comfortable outcomes in most areas. Dairy is still an issue for a deal on products and there will be exceptions in the investment sector. Environment, labour and SOE positions look good and while there are still some outstanding issues around intellectual property, our negotiated position also looks comfortable in that sector.”

An NZIER study commissioned by Business NZ (of which EMA is the major shareholder) found that New Zealand already has 12 ISDS provisions within existing trade agreements, and will add another when the recently completed Korea-NZ Free Trade Agreement (FTA) comes into force. New Zealand has never been sued under these provisions. You can read more about this on p24.

Outside of the TPP, New Zealand is also looking to upgrade its China FTA where our first-nation status means we can renegotiate to ensure our terms in the FTA at least match those negotiated in subsequent FTAs between China and other countries.

The other key issue is transparency of the text of the agreement and as New Zealand International Business Forum spokesman Stephen Jacobi recently told the EMA’s policy forum, “you need to evaluate the whole

There is also increased confidence around an FTA with the European Union. Europe remains New Zealand’s third largest export trading partner and is the leading source of imports into New Zealand. BusinessPlus October 2015

COMMENTARY

Business building partnerships and collaborating with society Working closely with communities helps build a stronger business environment and improves society more generally, according to leading New Zealand chief executives. Four chief executives joined a panel discussion at the Sustainable Business Council recently to discuss the sustainability challenges facing businesses.

the climate change problem, as a polluter, to being in the heart of the solution. The company drew heavily on the views of a wide range of New Zealanders, including its biggest critics, as it worked out how it needs to approach that change. It then developed and committed to achieving 16 goals which are publicly available.

The megatrends impacting business include unprecedented global challenges from climate change and population growth, scarce water and rising unemployment - especially among young people.

“Kaitiakitanga or custodianship has driven the company’s approach to sustainability with many of its partnerships looking ahead by up to 80 years.”

A number of business leaders believe business has an important role to play in addressing these issues. Many also see collaboration as key – both between businesses working together to come up with solutions, and working closely alongside communities to strengthen civil society. After all, business thrives in strong communities.

The chief executive of Mighty River Power, Fraser Whineray, also believes strong relationships with community can help support long-term, sustainable growth.

Air New Zealand chief executive, Christopher Luxon, said there were two standard responses from business to the sustainability challenges we face: either to panic about what’s going wrong; or ignore the problems by focusing only on the dollars and cents. He said, “As a new generation of business, political and community leaders, we need to step up and say we will address this confidently and optimistically and we will find a way through this. “Business has been critical in lifting people out of poverty around the world and here in New Zealand we need business to be strong to ensure society remains strong. “Governments have a role to play. But business can also play a really big role because we have global scale and we don’t have the bureaucracy and we can do many things that government can’t.

“Air New Zealand celebrated 75 years of being in business this year. As we go forward we need to find a way to stay there for the next 75 years. We know that our fortunes in the future are inextricably linked to New Zealand. New Zealand becomes a small place without a thriving Air New Zealand and likewise we can’t be successful if New Zealand is not strong and

BusinessPlus October 2015

prosperous.”

Mighty River Power has developed close relationships with manawhenua (local Maori). Kaitiakitanga or custodianship has driven the company’s approach to sustainability with many of its partnerships looking ahead by up to 80 years. Mr Whineray said, “We have deep relationships with Maoridom which help us to do that because manawhenua need a strategy to stay, not go. “We work alongside Maori because you need to be there for the long game. If you don’t you’re out of business. “You have to set up for the ultra-long-term. The way that we see Maoridom feel the burden of their decisions with 50 years of hindsight - they are looking at their mokopuna (grandchildren) and how they will be judged by them – it’s a brutal test.” Z Energy chief executive, Mike Bennetts, says providing the answers to the challenges the company faces can be addressed by engaging all of the people with an interest in those challenges. Z Energy has a goal to shift from being in the middle of

Mr Bennetts said, “My advice is to listen to the people who are prepared to throw rocks at you, and build genuine partnerships with them. “Then, you go out there and listen really carefully. When you put out big goals that you don’t know how to do, it’s amazing, in the village of New Zealand, how many people are willing to help you solve that.” • From the Sustainability Council of New Zealand - a division of BusinessNZ, of which EMA is the major owner. The Council has 80 members representing about a third of private sector GDP. www.sbc.org.nz

BusinessNZ COMMENTARY

Snapshot of changing business environment The environment for enterprise has been undergoing change recently. Two significant changes have been the fall in international dairy and oil prices. Dairy and oil earn valuable foreign exchange and both affect many related industries in New Zealand. Being commodities, they are both subject to international price changes, and while their prices will doubtless rise in future, current levels are challenging.

By Phil O’Reilly

“…I can see that times are tougher. At the same time, there is still an underlying confidence among businesses of many kinds, and good prospects in many sectors.”

The dairy sector has been hit hard and the effects can be seen in many areas. I have spent time in towns and cities in provincial New Zealand over the last few weeks and can see that times are tougher.

manufacturing is expanding; below 50 means it is contracting. The New Zealand PMI has now been in expansion for 35 straight months.

We are also advocating on a number of domestic issues that are important for the business environment, including tax, skills and development issues.

At the same time, there is still an underlying confidence among businesses of many kinds, and good prospects in many sectors.

The same solid story is coming through the PSI (the BNZ-BusinessNZ Performance of Services Index). This survey of service businesses shows the service sector experiencing an even longer period of expansion - over 55 months.

Business would like to see a lower rate of corporate tax. Our actual corporate tax rate (28 per cent) is the highest in the OECD: after taking account of exemptions, all other OECD countries have a lower rate than New Zealand.

Exports are critical

Business would like to see improvements in our education and training system, to be able to employ more suitably skilled staff. Surveys of EMA members show many are having difficulty gaining employees with the right skills. Many are seeking to hire from overseas, but are finding the immigration process is difficult.

The latest stats show that export values have increased greatly for some exports, including kiwifruit, apples, meat, fish and forestry. Increasing exports of more value-added products is also a positive trend. Other parts of the economy including tourism, services, manufacturing and the ICT sector are performing well. Last year’s tourism expenditure grew 5 per cent. The value of ICT exports grew 23 per cent last year. One positive for exporters has been the depreciation of the NZ dollar against the US and Australian dollars over recent months. Interest rates are also lower, making this a good time to consider business development funding. A clear indication of the solidity of the New Zealand economy is the PMI (the BNZBusinessNZ Performance of Manufacturing Index). The PMI is built on information from a monthly survey of hundreds of New Zealand manufacturers, including many EMA members, and generates a score that indicates the health of the manufacturing sector. Any score above 50 means the

For the New Zealand economy to prosper, it is important for us to keep increasing exports. Our domestic market is not big enough to generate overall growth from selling goods and services to ourselves. So we need the environment for exporting to be the best it can be. For New Zealand exporters, free trade agreements (FTAs) are important. Recent agreements with China and the 10 ASEAN countries have significantly lowered tariffs against our exports and increased our export returns. The Trans Pacific Partnership brings the potential of even greater returns, as does an FTA with the EU, and also the Regional Comprehensive Economic Partnership, a proposed agreement with a wide group of Asia-Pacific countries. EMA and BusinessNZ are advocating for the successful completion of these trade agreements, as they would bring greatly increased profits for New Zealand export businesses.

And a key issue for business is the barriers to development and growth that are posed by the Resource Management Act and the way it is implemented by local government. Difficulties and expense associated with consenting, and high costs for housing caused by local government policies, are among the issues raised in EMA surveys. These are areas where EMA and BusinessNZ are representing business concerns to Government. A snapshot of business today shows change, growth and development and the potential for more. • Phil O’Reilly is chief executive BusinessNZ of which EMA is the major shareholder. BusinessPlus October 2015

COMMENTARY By David Spratt and Mike Ette

Select the best telecommunications for your business A big challenge for many businesses today is how to take advantage of the changes to the telecommunication’s market. Some customers have decided that they only want to pay the cheapest price for the services they have. They feel they have saved money with no risk of change. Other customers have asked, “How do we do this better?” And by acting on this, they have reduced risk, improved business process and saved more money as well. We recommend that if your contracts are up for renewal and you are ready to go to market, go wider than just the traditional telcos and legacy services. We have a number of customers that we have helped in this process.

advantage is a very short term thing.

“The biggest challenge is to decipher the increasingly complex pricing plans with different calling volumes, free text messages, included data allowances and handset subsidies.”

There have been a number of game changers: the rollout of UFB services, both copper and fibre; separation of Chorus from Telecom; and entry of regional providers such as City Link, Unison Networks and Trustpower to name a few.

Down the hill in Auckland is Vodafone’s New Zealand head office. The company has been trying to digest the Telstra Clear fixed line business it took over.

New products are transforming the market There is a whole new range of TLAs (Three Letter Acronyms) such as SIP (Session Initiation Protocol, a communications protocol for controlling multimedia communication sessions) and UFB (Ultra Fast Broadband, high speed copper and

BusinessPlus September 2015

Price is the differentiator and when price becomes a difference the customer generally wins. The biggest challenge is to decipher the increasingly complex pricing plans with different calling volumes, free text messages, included data allowances and handset subsidies.

Fixed line services customers have a mindbending array of options, both in the different services available and providers that can deliver.

Telecom is now Spark and is a much smaller and more focussed business than it was in 2006 after a series of seemingly endless staff cuts, restructuring and redundancy.

What does this mean to me as a customer? There is a lot of good news for the users of telecommunications services in New Zealand.

The other differentiators are service and price. Service is something that Spark and Vodafone are struggling with as they downsize their businesses to meet the financial targets they have.

Complexity remains an inhibitor to change

So what has changed in the market?

There have been a lot of other changes and consolidation within the telecommunications industry. Newest player in the mobile space, 2Degrees, has bought fixed line provider Snap. Australian company Vocus has bought Maxnet and FX networks.

The biggest differentiator is coverage, and this is becoming much less of a difference.

fibre services) entering the industry jargon. In practical terms we are seeing services that are cheaper, more effective and easier to use than in the past. For example SIP access circuits are replacing ISDN access at approximately one third the monthly cost, coupled with lower calling costs.

The mobile market in NZ is saturated The entry of 2Degrees has only made mobile more competitive, with the three providers fighting over the same customers. Realistically there is minimal difference between the providers: the underlying technology is the same, the handsets work across all three networks and any competitive

There is a host of providers that can deliver services that range from the cheap and cheerful to top level, fully redundant managed services. As specialist consultants we can make the process of going to market as painless as possible. We are able to advise on which providers may be suitable, which technologies you should look at and then structure a go-to market process. The outcome for our customers is having the right technology to support the business requirements, delivered by the best provider at the optimum cost. • David Spratt and Mike Ette are from Total Utilities Management Group of analysts that offers unbiased advice on the service and pricing of all relevant utilities suppliers. www.tumg.co.nz

COMMENTARY

Raising equity just got a lot easier for small business Business owners might have heard of equity crowdfunding, but this is just one of the reforms enabled by relatively new legislation to raise equity, or shareholders’ capital. Whilst the Financial Markets Conduct Act 2013 (FMCA) is not easy bedtime reading at over 600 pages long, it has made it a lot easier for small to medium enterprises (SMEs) to raise equity!

Streamlined employee share offers The reforms under the FMCA exclude employee share offers from needing to produce expensive disclosure documents (formerly called prospectuses, now called product disclosure statements) where the offers do not exceed 10 per cent of a company’s total shareholding in any year and are made as part of an employee’s remuneration arrangements. The raising of funds must not be the primary purpose of the offer, so this needs to be linked to employee attraction and retention. Tax advice should be sought on structuring such schemes.

Small Company Offers

“The raising of funds must not be the primary purpose of the [employee share] offer, so this needs to be linked to employee attraction and retention.”

However, smaller and medium-sized businesses can find listing on the main board of the NZX too expensive, so the NZX has recently established the NXT Market – another initiative facilitated by the FMCA.

NXT Market by SMEs - but which is probably the least well known. So please do ask your advisers and directors: “Is a small company offer right for my business?” (With apologies to a well-known TV ad!)

Equity crowdfunding Capital raising from retail investors on licenced crowdfunding platforms is limited to $2m in any one year, but there is the ability to raise amounts from wholesale investors outside this cap. Over the past year $12.4m has been raised on the seven licensed platforms that have now been approved by the Financial Markets Authority.

This is a great option for attracting, incentivising and retaining senior management and to facilitate a staged exit strategy for those founders seeking succession over time.

Whilst crowdfunding can raise a company’s profile and may not materially change the shareholding control held by existing major shareholders, this process will often result in introducing a large number of small shareholders, with on-going communication requirements. Where a company ends up with more than 50 shareholders, additional compliance costs could arise as they may become subject to the Takeovers Code and the obligations under the Financial Reporting Act. So it is important to seek professional advice in these areas.

This is the reform facilitated by the FMCA which could make the most profound difference to capital raising

And companies with large shareholding registers should ensure facilities are available to enable small

Small company offers are also excluded from preparing onerous disclosure documents where they are seeking less than $2 million within any 12-month period, and which are limited to 20 investors who are connected to the issuer, either professionally or personally.

investors to readily trade their shares. That is because illiquid shares, ie, those that trade infrequently, can carry discounts of up to 40 per cent relative to the value that might prevail where those shares are actively traded in public markets.

Lower compliance costs from listing on the NXT arise in part from not having to prepare and report against financial forecasts, which can be challenging for an emerging business with lumpy cashflows. Instead, reporting against key operating milestones is required. The NZX will provide independent analyst reports and has contracted a broker as a market maker to promote liquidity. Companies eligible for listing on the NXT must have a market capitalisation of between $10m and $100m once listed and if they are raising capital (which is not mandatory), they must raise at least $5m.

Conclusion New legislation has reduced the costs and increased the options for SMEs to raise equity capital. However, considerations need to go beyond the quantum of capital to be raised. Choosing the optimal capital raising process should include an assessment of the extent to which it facilitates the company’s strategic and operational goals – it should be about “smart” money. • Jim McElwain is the executive director of the Institute of Finance Professionals in NZ Inc (INFINZ) for professionals operating in NZ’s financial and capital markets, and has over 1,000 members. www.infinz.com BusinessPlus October 2015

Tax COMMENTARY By Joanne Doolan

Tax advantages missing from trade agreements The ASEAN Economic Community agreement among its 10 member nations creates new and exciting opportunities for New Zealand businesses that are seeking to grow their export sales. Exporters’ ”must-have tantalizing new opportunity” includes easier access and reduced tariffs along with a growing middle class and a huge demand. The caution is these agreements do not provide any personal tax or income tax advantages so you still need to work out the best way to operate and ensure unexpected direct and indirect tax costs do not destroy the value you are creating by expanding offshore. This can be challenging for New Zealand business operators as compared to other countries. New Zealand is an easy place to do business so unexpected compliance hurdles are not something we deal with that well. Also our excitement and drive to make the most of new opportunities can mean we rush in and do the deal then sort out the compliance and administration later. Exporters know the basics about determining how they are best to operate in a particular market, such as by having a representative office, a joint venture or a wholly owned company or appointing a distributor or an agent to act for them.

The application of these choices will depend on the local rules for the country concerned. For example, in Indonesia if you set up a registered office you cannot generate income in Indonesia or agree to purchase or sells goods or services with an Indonesian company or national. Indonesia also has minimum capital requirements and numerous other quirks that it pays to be aware of up front.

“Ensuring your employees are tax compliant when they are working offshore is highly recommended and consideration should also be given to including a tax equalization package for them.”

In Thailand foreign entities cannot wholly own a limited liability company so you will need to form a joint venture with a local organisation or individual.

Factor in different tax agreements with NZ What this all means will depend on the individual country you are operating in and the wording of the Double Tax Agreement that New Zealand has negotiated with the individual country. To get technical, if you have a “permanent establishment” in a particular country then you will be taxed in that country unless what you are doing is merely preparatory or auxiliary to your business or you are only storing goods or collecting market research, etc. Even if this is all you are doing, more often than not you still need to go through a long and convoluted registration and approval process. Also if you are claiming

relief under a double tax agreement, a number of ASEAN countries require you to get a certificate before any payments are made from your local tax office, and other countries charge withholding taxes at the time the payment is incurred rather than when the payment is paid, which is what we are used to. New Zealand’s controlled foreign company rules often mean you are best to set up a limited liability company in a relevant country as this company may not be subject to tax in New Zealand. Then there are your employees who may be transferred from New Zealand. New Zealand residents are subject to tax on their worldwide income and breaking this link with New Zealand does not happen the day they leave the country, so unless you apply for a special tax code from Inland Revenue you still have an obligation to deduct PAYE on payments to your employees. Ensuring your employees are tax compliant when they are working offshore is highly recommended and consideration should also be given to including a tax equalization package for them. Overall, ASEAN holds huge opportunities providing consideration is given upfront to all issues, and this includes ensuring you are tax compliant and are using a structure that is tailored to the individual country requirements. • Joanna Doolan is a Partner with EY. Email joanna.doolan@nz.ey.com

BusinessPlus October 2015

EMPLOYMENT

Trial periods 101: Getting them right Cases filtering through the Employment Relations Authority continue to demonstrate that some employers are still not getting it right when it comes to using trial periods in their employment agreements. Recent cases highlight issues such as the clause about the trial period not being expressly incorporated in an employment agreement; or employers not providing employees with a reasonable opportunity to get advice on the agreement; or the employer not ensuring that the employee signs and returns the agreement before she/ he commences work, all of which have meant the trial period was invalid.

•

A trial period must be expressed in writing and can only be agreed with a “new employee” meaning someone you have not previously employed.

•

The clause must also state that the employer can terminate the employee’s employment under the trial period and if the employer does so the employee is prevented from challenging the dismissal.

•

The employee must be given a “reasonable opportunity” to get advice on the employment agreement. It is recommended you allow between three and five working days as an opportunity for the employee to get advice.

In short, these type of situations and others can risk the employer not being able to rely on the protection of a trial period when dismissing an employee. This is because a failure to meet the statutory requirements will mean the trial period is invalid in the event an employee challenges you.

Employing on a trial period Essentially, a trial period allows an employer to test the suitability of a new employee for up to 90 days. As mentioned above, it prevents the employee from being able to raise a personal grievance for unjustified dismissal if terminated within their trial period. However, it is critical that certain requirements are satisfied before the employer can confidently rely on the protection a trial period affords. These requirements are:

If a trial period is not going well you should communicate your concerns to the employee at the earliest opportunity, remind them that the trial period is in place and monitor the situation closely.

Dismissal If you dismiss an employee who is on a 90-day trial period, ensure that the employee receives written notice of termination before the expiry of 90 days. An employee can still work beyond the

“If a trial period is not going well you should communicate your concerns to the employee at the earliest opportunity, remind them that the trial period is in place and monitor the situation closely.”

The simple fact is that not getting it right when it comes to using a 90-day trial period can cost your business valuable time, money and resources in an unjustified dismissal claim. Indeed the whole point in having a trial period in the first place is to protect you as the employer from this type of personal grievance. So what do you as the employer need to do to ensure that you are afforded the protections under a valid 90-day trial period? Before answering this question it’s important to understand what a trial period is and how it works.

After all, the aim is for these employees to become permanent members of staff. This means you should be active, constructive, responsive and communicative to any issues that arise during the operation of the trial period.

Finally, the employer must ensure that the employee signs and returns the employment agreement before she/ he commences work.

90-day period in order to work out their notice period, provided they have been given notice of termination before the end of the trial period.

If an employer fails to satisfy any of these requirements there is a risk that the employee may successfully raise a personal grievance for unjustified dismissal. As such you should make sure that your preemployment process allows sufficient room for you to be able to demonstrate that you have complied with the minimum requirements outlined above.

Remember trial periods are narrowly interpreted and strictly enforced by the Employment Relations Authority and the Employment Court. Therefore it pays to ensure that your processes around setting up and managing employees on trial periods are robust, so if you make the decision to terminate an employee under a trial period they cannot challenge the dismissal.

•

Beyond recruitment As the employer you are still required to act in a manner that complies with the principle of good faith in dealing with employees employed under a trial period.

• By EMA’s AdviceLine employment advisers. Phone 0800 300 360 (in NZ) or 1800 300 360 (from Australia), or email advice@ema.co.nz BusinessPlus October 2015

EMPLOYMENT

AdviceLine service wows EMA members are very pleased with the service they receive from AdviceLine. • Overall, 92 per cent rated the service as excellent or very good, in the annual EMA AdviceLine Survey in August of members who had recently contacted the freephone advice service. In addition: • 90 per cent were very satisfied with the promptness with which their call was answered. • 92 per cent rated the professionalism, friendliness and empathy of the advisor as excellent or very good. • 90 per cent rated the quality of the

advice or service they received as excellent or very good. 71 per cent rated the Advice information available on the website www.ema.co.nz as excellent or very good.

Comments from the AdviceLine survey participants include: • Thank you for your help, I enjoy our discussions and your input. • It’s great to be able to confirm my answers with the EMA. • Everyone I speak to is incredibly knowledgeable and gives good practical advice that is clear and structured in a way I can easily interpret it.

Employability Passport gives confidence to employers and young job-seekers Auckland student Sirila Alao wants to be a chef in the Navy one day, so he was thrown straight in the deep end on work experience at a SKYCITY Hotel kitchen.

The programme is designed to teach the soft skills that are often simple but employers say are often lacking in young people, such as showing up on time, following basic instructions, working as a team and demonstrating a positive attitude. At the end, participating students receive a Youth Employability Passport - a small booklet with ticks for the work skills achieved. The combination of soft skills and work experience may be all it takes to help these kids get a foot in the door.

BusinessPlus October 2015

•

Excellent service and have recommended it to a number of other employers. Great team - really appreciate the assistance which is just a phone call away - knowledgeable, friendly, great service. Always very helpful and supportive. A great service. Thank you.

AdviceLine is our front line employment relations service. It also offers advice and referrals on most business issues.

Call (NZ) 0800 300 362 or (AU) 1800 300 362 or email advice@ema.co.nz

He says, “As far as the kitchen is concerned, young people who can physically understand how the kitchen operates have a definite advantage. They need to be able to come from school and be thrown straight into the deep end. “There is no bell here like there is at school. Instead, the kids are finishing one job, and then moving straight on to the next one.

As a result of his performance, Sirila is one of approximately 100 young people gaining a Youth Employability Passport this month. The Passport programme is in pilot phase led by COMET (Community Education Trust) Auckland with partners including the EMA, Careers NZ, Auckland Council and its economic development agency ATEED, the Ministry of Education, the Ministry of Social Development and Workchoice.

•

“Young people sometimes get a bad name, and it can take a while for them to realise their full potential. It’s like learning to drive a car: it takes time, and some people learn at different paces and in different ways, but the Passport is a valuable tool to bridge the gap and equip our youngsters.” Sirila Alao (left) and Martin Harrap

In Sirila’s case, the Papatoetoe High School student is still adamant he wants to be a chef after getting a good taste of what it’s like to work in a kitchen for several weeks. He says, “With a bit more training, I feel like I could even get a job as an apprentice chef. Through the Youth Employment Passport, now I know how to write a CV and how to act properly at a job interview.” This real life experience is precisely what SKYCITY’s Apprentice trainer and coordinator Martin Harrap believes helps ease the transition between school and work.

SKYCITY is also hosting two other young people from the Passport programme, in the role of front-of-house waiter. The Passport and associated training and work experience are being trialled in three schools and a youth training organisation this year. It is receiving positive feedback from both schools and employers. If all goes well, COMET Auckland plans to increase the number of students and sites involved in a wider trial next year. · For inquiries or to take part in the pilot, please contact Mike Burgess at EMA: email Michael.burgess@ema.co.nz

EMPLOYMENT

Finalists in NZ’s Best Workplaces Awards 2015 care for employees IBM Kenexa has announced the 40 finalists of its annual Best Workplaces Survey and Awards, New Zealand’s largest and longest running study of workplace climate and employee engagement.

workplace great places to work, as well as areas to improve in order to increase engagement levels. Organisations also gain a more accurate view of what is needed to retain critical talent.

This year over 30,000 employees from 193 New Zealand organisations in the private and public sectors participated, with 40 workplaces reaching finalist status across five categories: Small, Small-Medium, Medium-Large, Large and Enterprise.

The winners will be announced at the Awards Dinner on November 5 in Auckland. Follow the conversation at #BestWorkNZ.

Sixty-five per cent of this year’s finalists also achieved finalist status in 2014, demonstrating the continued importance New Zealand employers are placing on engaging their employees. In 2015, the largest improvements were made by organisations in the Bottom 25% Benchmark group – demonstrating that all organisations that participate in the programme can see great benefit. This group recorded particular improvements in the areas of clarity of organisational vision, feedback and performance measurement, and employee recognition for great work. Overall, ‘caring about employee wellbeing’ made the biggest gains across Best Workplaces survey participants. This reflects a current trend, with many businesses understanding that genuine concern for the physical and emotional health of employees is part of being a great employer. “It’s clear from the survey results that the organisations taking on board the feedback from their people and translating it into action, are seeing positive results,” says Leighton Abbot, senior consultant for IBM Smarter Workforce for New Zealand. “We are really encouraged to see that more New Zealanders are feeling motivated and enthused about their work. This in turn is lifting staff perceptions of customer service delivery and organisational success.” Analysing the data received via the survey provides business leaders with key insights about their organisations from their most valuable assets: their people. The insights identify the characteristics that make their

And the finalists are…. Small Workplace (20-49 employees) category: • Au Pair Link • Colliers International - Queenstown • Hyundai Motors New Zealand • Hyundai Wairarapa – Eastwood Motor Group • ICM Asia Pacific • Ingham Hyundai • McVerry Crawford Motors • Office of the Electricity and Gas Complaints Commissioner • The Research Agency • Training For You Small-Medium Workplace (50-149 employees) category: • ADInstruments • Boffa Miskell • Brother International NZ • FUJIFILM NZ • Hilti • Masterpet Corporation • Miles Toyota • MRC Transmark • New Zealand Rugby Union Incorporated • NZCU Baywide • Online Republic • Russell Gordon Contracting • Soltius New Zealand • Sport Northland Medium-Large Workplace (150-399 employees) category: • Auckland Motorway Alliance • Bay Audiology • Colliers International New Zealand • Comvita NZ • Leading Edge Communications NZ • Mars New Zealand • Overland Footwear • Recreational Services

• •

Leighton Abbot

Rothbury Group South Taranaki District Council

Large Workplace (400-749 employees) category: • AA Insurance • FMG • Trade Me Enterprise Workplace (750 or more employees) category: • Flight Centre (NZ) • VTNZ • Warehouse Stationery About The IBM Kenexa Best Workplaces Survey and Awards The IBM Kenexa Best Workplaces Survey is New Zealand’s largest annual workplace climate-employee engagement survey and the definitive measure for ‘best employer’ and ‘employer of choice’ claims in the country. The programme identifies the best places to work in New Zealand as rated by their employees. Employees grade their workplace and employers across key categories including leadership, culture, recognition and engagement. For 2015, the IBM Kenexa Best Workplaces Survey and Awards are proudly supported by Kiwibank, the Employers and Manufacturers Association (EMA) and AUT Business School. For 16 years Best Workplaces has been valued by business and CEOs throughout New Zealand, providing the information to assist them in building great workplaces and enhancing their customer service delivery. The IBM Kenexa Best Workplaces Survey and Awards are delivered as part of IBM’s Smarter Workforce initiative, which helps organisations apply proven behavioural science, statistical analysis and psychological principles to improve employee engagement and organisational performance. Learn more about IBM Kenexa Best Workplaces at www.bestworkplaces.co.nz BusinessPlus October 2015

Employment CHAT

Phone check misery, closedown Q. When someone goes on holiday and I have to employ a temp, how much does the temping agency do and what do I have to do regarding the employment agreement and pay? – Seb

Dear Seb A temp (temporary) worker has a contract with an agency who also has a contract with you. The worker works temporarily for you as an employee. You the employer tells the worker how she/he should do their work, as spelled out in an Employment Agreement co-signed with you.

“The agency and the worker together manage tax, KiwiSaver and other deductions from the pay.” period of time or to complete a particular task. We refer you to Horizon Recruiting that specialises in temp placements. Their ad is on the next page.

You pay gross salary or wages including the holiday pay entitlement of a normal employee, ie, full time or part time or casual, to the agency.

Q. As Christmas approaches, I’m not sure about a closedown. When and how do I have to sort that out? – Nigel

The agency and the worker together manage tax, KiwiSaver and other deductions from the pay.

You have to give staff at least 14 days’ notice of closing down before you actually shut the doors.

But in all other respects, your obligations to the temp worker and theirs to you are covered by the Employment Relations Act 2000.

It’s possible to only close down some areas of the business and not all, or different departments for different time periods depending on your needs.

In comparison there are arrangements for employing a fixed term employee or contracting a contractor for a defined

However, you can’t use this to stop paying workers or save money per se. A closedown can only occur once in every 12 months

Dear Nigel

and for good business reasons, eg, you have inadequate amounts of work to do during that period. During the closedown you must pay staff holiday pay entitlements but if they have none, you are not obliged to pay them – though you could consider paying leave in advance, for example. Q. A number of my managers check their cellphones frequently during meetings and even when they are with just me. I find this revolting. How do I stop it without sounding old-fashioned or overbearing? Can I write this into staff policy? – Tim

Dear Tim From the points of view of doing good business and customer service ethics, you are correct that giving one’s undivided attention to the person before you is critical. All-aged people value that, I’m sure. It’s tricky to change people’s habits in a hurry though. But that is where policy helps – by requiring and rewarding certain behaviours valued in your business culture. Ensure that there is a clause in the employment agreement, or a company-

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BusinessPlus October 2015

Employment CHAT

confusion and temp as solution wide mobile phone policy, about no phones in the workplace if that is what you are trying to achieve. It’s always good to have a mobile phone policy if it directly impacts productivity. You could have a protocols or culture policy that included things such as: do not bring digital devices to meetings or put them on silent and leave the meeting room to respond to any known urgent messages; respond to emails within 24 hours; always use language that is respectful and use no swear words in written communication, and with discretion at other times; and observe the dress code (a policy in fairly general terms such as business casual or semi-formal, uniform or ‘dress appropriate to conditions’ for outdoor workers, for example). Perhaps point this out at interview stage when recruiting, and certainly during induction, and occasionally as a reminder on a regular basis so as not to look like you are picking on anyone or any activity, if things are going well. But reminders can be useful, especially for newer staff. At the same time, consider your managers’ workloads. Are they so busy

ADVICE AND SUPPORT WHEN YOU NEED IT.

“It’s tricky to change people’s habits in a hurry though. But that is where policy helps – by requiring and rewarding certain behaviours valued in your business culture.” they can’t switch off? Do they need support services to answer calls, take messages or complete admin tasks? Are there too many 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), 8am8pm 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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Visit: horizonrecruitment.co.nz

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

Member-Only Resources

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.

A free, confidential telephone service providing employers with up to date, direct and practical advice.

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

Free call NZ 0800 300 362 AU 1800 300 362 Visit www.ema.co.nz

BusinessPlus October 2015

Christmas & New Year Christmas & New Year Public Holidays LeaveHolidays and payroll planning for Public EMPLOYMENT

Christmas and New Year holidays Key Dates » Christmas day - Friday 25 December 2015

Key Dates

»» Christmas - Friday 25 Boxing Dayday - Saturday 26 December December 2015 or Monday 28 December 2015 »» Boxing DayDay - Saturday December or Monday 28 December 2015 New Year’s - Friday26 1 January 2016 »» New Year’sHoliday Day - Friday 1 January 2016 2016 or Monday 4 January 2016 2 January - Saturday 2 January » 2 January Holiday - Saturday 2 January 2016 or Monday 4 January 2016

Transfer of public holidays over Christmas 2015 & New Year 2016 Transfer of public holidays over Christmas 2015 Boxing 2015 and the New Year 2 January Holiday 2016 fall & NewDay Year 2016

on a Saturday and are therefore subject to the Christmas and Boxing Day 2015holiday and thetransfer New Year 2 January 2016 Act. fall New Year public provisions of Holiday the Holidays on a Saturday and are therefore subject to the Christmas and • Year If a public on aprovisions Saturday and theHolidays day would New publicholiday holidayfalls transfer of the Act. otherwise be a working day for the employee, the public • Ifholiday a public holiday falls onasa falling Saturday must be treated on and that the dayday would otherwise be a working day for the employee, the public • Ifholiday a public holiday falls onasa falling Saturday must be treated on and that the dayday would not otherwise be a working day for the employee, the • Ifpublic a public holiday falls a Saturday andon thethe dayfollowing would holiday must beon treated as falling not otherwise be a working day for the employee, the Monday public holiday must be treated as falling on the following It is recommended employers consider the impact of the Monday transfer on your business and how the day will be managed It is recommended employers consider the impact of the and discuss your requirements with employees in advance. transfer on your business and how the day will be managed Where Saturday the public holiday for an employee then and discuss yourisrequirements with employees in advance. Monday will just be an ordinary day. If you do not require the Where Saturday is the public holiday for an employee then employee to work on Monday then annual leave or changes Monday will just be an ordinary day. If you do not require in rostered days may be considered as options as long as the employee workthe onHolidays Monday Act thenand annual leave or terms changes you complytowith any relevant of in rostered days may be considered as options as long as employment. you comply with the Holidays Act and any relevant terms of employment.

Public holiday Saturday or Monday?

If Saturday is normally a working day for the employee Public holiday Saturday or Monday? Public holidays: Boxing Day = Saturday December 2015 If Saturday is normally a working day for26 the employee Public holidays:

2Boxing January = Saturday 2 January 2016 DayHoliday = Saturday 26 December 2015

If Saturday is not normally working day for the employee 2 January aHoliday = Saturday 2 January 2016 Public holidays: Boxing Day = Monday 28for December 2015 If Saturday is not normally a working day the employee Public holidays:

2Boxing January = Monday 4 January 2016 DayHoliday = Monday 28 December 2015 2 January Holiday = Monday 4 January 2016

BusinessPlus October 2015

NOTE: Employees are entitled to a maximum of 4 public holidays over the Christmas and New Year period. An employee NOTE: Employees aretoentitled to aoff maximum of 4 public will only be entitled a paid day on the public holiday if the holidays over the Christmas and New Year period. day would otherwise be a working day for them. An employee will only be entitled to a paid day off on the public holiday if the day would otherwise be a working day for them. Otherwise working day In most situations it will be very clear that the day on which the Otherwise working day public holiday falls would otherwise be a working day for an In most situations it will be very clear that the day on which the employee. public holiday falls would otherwise be a working day for an Ifemployee. it is not clear whether a day would otherwise be a working day for your employee, you should consider these factors with a Ifview it is to notreaching clear whether a daywith would otherwise be a working agreement your employee: day for your employee, you should consider these factors with a • to The employee’s employment agreement view reaching agreement with your employee: •• The patternsagreement The employee’s employee’s work employment •• Any other relevant factors, including The employee’s work patterns the employee for the employer only • -Anywhether other relevant factors, works including when work is available - whether the employee works for the employer only - the employer’s rosters or other similar systems when work is available -- the expectations of similar the employer the reasonable employer’s rosters or other systemsand the employee that the employee would work on the day - the reasonable expectations of the employer and the concerned employee that the employee would work on the day • Whether, but for the day being a public holiday, the concerned employee would have worked on the day concerned • Whether, but for the day being a public holiday, the employee would have on the day concerned Christmas closedowns andworked public holidays If a public holiday falls during a closedown period the factors Christmas closedowns and public holidays listed above in relation to what would otherwise be a working Ifday a public holiday falls during a closedown the in factors must be considered as if the closedownperiod were not effect. listed above in relation to what would otherwise be a working This means employees may be entitled to paid public holidays day must be considered as if the closedown were not in effect. during closedown periods. This means employees may be entitled to paid public holidays during closedown periods.

entitlement an employee has, and not any accrued annual leave from an incomplete year of employment. Annual holidays and public holidays A public holiday that occurs during an employee’s annual

Annual holidays holidaysholidays is treatedand as a public public holiday and not an annual leave A day. public holiday that occurs during an employee’s annual holidays is treated a public holiday to and not an annualatleave An employee whoas has an entitlement annual holidays day. the time that their employment ends will be entitled to be for a public holiday the holiday would have:holidays at Anpaid employee who has anif entitlement to annual the time that their employment ends entitledand to be • otherwise been a working day forwill thebe employee; paid for a public holiday if the holiday would have: • occurred during the employee’s annual holidays had they taken remaining • otherwise beentheir a working day holiday for the entitlement employee; and immediately after the date on which their employment • occurred during came to an end the employee’s annual holidays

had they taken their remaining holiday entitlement You only have to consider period of annual holiday immediately after thethe date on which their employment entitlement an employee has, and not any accrued annual came to an end leave from an incomplete year of employment.

You only have to consider the period of annual holiday Employees become entitled to 4 weeks holidays after the end entitlement an employee has, and not any accrued annual of each completed 12 months of continuous employment. leave from an incomplete year of employment. Public holiday transfer Employees become entitled to 4 weeks holidays after the end The Holidays Act allows an employer and employee to agree of each completed 12 months of continuous employment. in writing to transfer a public holiday to any 24 hour period.

Public holiday This means withtransfer agreement a public holiday may be transferred: The Holidays Act allows an employer and employee to agree in writing transfer to any 24 hour period. • By atofew hours atopublic matchholiday shift arrangements

This •means with agreement a public To a completely different day holiday may be transferred:

In the absence of a written agreement, a public holiday is observed midnight • By a few hourstotomidnight. match shift arrangements The section of the EMA website • Advice To a completely different day www.ema.co.nz contains detailed guides on leave entitlements.

In the absence of a written agreement, a public holiday is This is only a guide. to It should not be used as a substitute for observed midnight midnight.

EMPLOYMENT Employees become entitled to 4 weeks holidays after the end of each completed 12 months of continuous employment. Public holiday transfer The Holidays Act allows an employer and employee to agree in writing to transfer a public holiday to any 24 hour period. This means with agreement a public holiday may be transferred: • By a few hours to match shift arrangements • To a completely different day In the absence of a written agreement, a public holiday is observed midnight to midnight. The Advice section of the EMA website www.ema.co.nz contains detailed guides on leave entitlements. This is only a guide. It should not be used as a substitute for professional advice. Please call our AdviceLine Team if you wish to discuss further.

call AdviceLine, Visit Free our website www.ema.co.nz NZ 0800 300 362 AU 1800 300 362 Follow us on twitter.com/ema_nrthn E-mail advice@ema.co.nz

Visit our website www.ema.co.nz Follow us on twitter.com/ema_nrthn

professional advice. Please call our AdviceLine Team if you

The Advice section of the EMA website www.ema.co.nz wish to discuss further. contains detailed guides on leave entitlements. This is only a guide. It should not be used as a substitute for professional advice. Please call our AdviceLine Team if you wish to discuss further.

BusinessPlus October 2015

EMPLOYMENT

Immigration and literacy improvements needed to help with skills shortages Immigration is an important option for New Zealand employers to obtain a skilled employee, evidenced by the fact that one in four workers in the country are immigrants.

However, most employers (53 per cent) rate the immigration process as being hard. A number find it hard to get qualified people, and immigration barriers are immense.

In Auckland, 43 per cent of migrant worker growth has occurred in the past 10 years.

Sourcing skilled staff still remained a key issue amongst our members. We’ve seen this previously and it is a growing trend. While 52 per cent of respondents said they had increased their staff numbers over the past six months, 68 per cent said it was still difficult to attract suitably skilled candidates. The skills shortage sits across trade/ technical roles as well as professional roles. In the survey, 35 per cent of respondents were struggling to fill trade and technician vacancies, and 17 per cent were struggling to fill professional vacancies. Businesses handled the shortages in various ways, depending on their circumstances. The majority of survey respondents said they planned to meet their needs for skilled staff by (obviously) employing staff with the required experience (52 per cent), or employing people with the basic skills and then up-skilling them (52 per cent will). A further 45 per cent will retain existing staff, 29 per cent will employ casuals or contractors, 23 per cent will take on apprentices and 20 per cent will redesign job roles.

A number feel the process “should be more flexible and allow the employer to say if the applicant has the skills for the job”. Others mentioned “we have a staff member for whom we have extended their work permit six times”. There needs to be “better transition from short time visa (working holiday and student visa) to being able to hold a permanent job”. Some members felt it was advisable to become an Accredited Employer and have a good working relationship with an Immigration NZ Relationship Manager. Generally members were requiring the process to be faster and more streamlined. The Minister of Immigration Michael Woodhouse recently signalled changes coming next year to streamline the labour market test to provide employers with more certainty, earlier in the visa application process. In addition, those who have reapplied to extend their work visa every year may be offered residency but only in the South Island.

Literacy and numeracy

And 19 per cent will seek skilled migrants from offshore.

Employers were asked how satisfied they were with school leavers and tertiary graduates who have applied for jobs, in terms of the applicants’ skills.

Among respondents, 24 per cent were already recruiting overseas. Of those employers, 55 per cent were in Auckland, 11 per cent in the Bay of Plenty, 11 per cent in the Waikato, 2 per cent were in Northland and 21 per cent operated nationwide.

The business sector regularly expresses frustration at the lack of practical literacy skills (reading and writing) among school leavers and as a consequence the need for employers to provide remedial literacy training. This situation has not improved

BusinessPlus October 2015

The effects of low literacy (reading and writing) and numeracy (arithmetic) in the workforce are poor completion of workplace documents and wasted time. Employers rated secondary school students very highly in their attainment of technology skills and capacity to learn, while rating their self-management as low.

And only those filling jobs where Kiwis can’t be found are able to be employed in New Zealand. Immigration as a tool for finding staff was one of many issues canvassed in EMA’s Half Yearly Employers Survey of July 2015.

despite the continued increase generally in attainment in schools.

Only 9 per cent of respondents felt school leavers’ levels of literacy were satisfactory or very satisfactory, though 56 per cent thought they were somewhat satisfactory. And levels of numeracy rated slightly lower: 7 per cent and 52 per cent respectively. Employers were more satisfied with tertiary students than secondary students in their levels of literacy and numeracy. And employers were more satisfied with actual university graduates than secondary students, in all disciplines. The full Survey report is available on the website ema.co.nz in the ‘Resources’ section.

Top Five Tips for Employing Migrants 1. Most migrants need a job offer before applying for a Work or Residence Visa. 2.

Employers can offer a job, but migrants must have an appropriate visa before starting work.

3. Migrants can change from one type of visa to another. 4.

Migrants must meet health and character requirements.

5. Candidates may visit New Zealand for job interviews but, if offered a job, should obtain a work/residence visa before moving to New Zealand. Source: Immigration NZ

employment By Nirupam Sakar

Digital learning 2.0 – It is good for business Digital learning is any training and knowledge that is delivered using electronic and digital technology. In this article we will explore in brief how the disruptive power of new digital learning technologies can transform your business for the better. In the modern context digital learning covers the standard flash or HTML5-based courses that are the industry staple, plus an innovative range of products including mobile apps, gamified content and usergenerated content.

It’s all in the game

modules has been very encouraging. Now EMA is working on a game designed to train businesses and their employees in the more critical aspects of health and safety in the workplace, for launch next year. Gamification or the use of gaming principles is another innovation that can drive learning engagement. Giving a user points or rewards for learning behaviours, like in a game, extrinsically motivates learners to engage with the content. The ability to socially share their learning achievements with peers or colleagues further elevates that motivation factor.

Digital training is no longer restricted to simply delivering information on a oneway interface. It is now possible to create simulated environments and interactive activities that intrinsically motivate learners to explore and engage with the content.

Businesses stand much to gain by gamifying their training content. Take the example of Deloitte, which used gamification in its online Deloitte Leadership Academy programme to increase its usage by around 35 per cent.

The use of games and gaming principles within digital learning have also gained significant traction. Game-based learning takes the simulated learning experience to a more complex level, where the learner can explore the self-contained virtual environment of a game and have the desired behaviours reinforced through practice and interaction, in a risk-free setting.

Social media has opened up opportunities for digital learning as well.

While game-based simulated learning has provided compelling benefits in industries such as military, aviation and medical science, more businesses are waking up to its potential.

Businesses can engage and supplement the training of their staff in the social media space by encouraging and generating conversations around key issues that face them in the workplace and as a business.

The feedback from our clients on the simulated exercises and games we developed as part of their customised digital learning

The mobile factor

Post, share, like

For example, YouTube can be used to deliver subject specific training videos, and LinkedIn Groups and blogs provide a platform for topic-based discussions. Facebook and Twitter are viable alternatives for creating focused learning communities.

It is now a given that any digital content needs to be mobile friendly. Frost and

Sullivan’s research report predicts 90 per cent smartphone and 78 per cent tablet ownership in New Zealand by 2018. Businesses can not only enable access to training content with a simple swipe of a smartphone screen, but also facilitate further user participation through social channels. Mobile access to learning will be enhanced by using other new technologies and features such as learning games and apps, gamified content and user generated content using social media. For example, at EMA events we use a live audience polling platform to crowd-source ideas and get feedback in real-time.

What’s exciting for business • Reaching the digital majority: Digital natives and digital immigrants carve out a sizeable share of today’s workforce. Training will need to transform to cater to this demographic. • An affordable must have: Digital learning removes the usual costs and constraints of time and location, especially for businesses with ongoing needs for training, or where staff are spread across multiple locations. • It’s measurable: Probably one of the biggest advantages of digital learning is that everything can be recorded and measured, from learning behaviour to assessments to interactions with content. This helps businesses make strategic changes to their training programmes. • By Nirupam Sarkar, EMA’s portfolio manager – digital learning, email Nirupam. sarkar@ema.co.nz

ANYTIME. ANYWHERE. www.ema.co.nz BusinessPlus October 2015

EMPLOYMENT

“The two most common causes of absence across both nonmanual and manual workers were illness/injury unrelated to the workplace, followed by caring for a family member or dependant.”

Home life causes most absenteeism from work Stress levels in big businesses are on the rise, bucking a nationwide trend where 60 per cent of businesses have seen stress levels stay roughly the same, according to the Wellness in the Workplace Survey 2015 conducted by Southern Cross Health Society and Business NZ. Thank you EMA members, who are among the 113 participants nationwide, which represent 116,000 employees. But the two most common causes of absence across both non-manual and manual workers were illness/injury unrelated to the workplace, followed by caring for a family member or dependant. And despite a culture change where businesses encourage unwell workers to stay home, more than a third of Kiwis continue to turn up sick to work, says Southern Cross Health Society chief executive Peter Tynan. The Survey report covers a range of topics from levels of absenteeism and stress to employers’ policies for older workers and the impact of the proposed removal of fringe benefit tax (FBT) on businesses deciding to provide health insurance for employees. Nearly 60 per cent of businesses say they would look at providing healthcare plans for staff if the FBT was dropped from the provision of health insurance. Mr Tynan says the survey is an important benchmark for business owners and policy makers alike. “Employers need to identify what lies behind these trends and consider what they can offer or change to make their workplace a healthier place for their staff. Introducing or expanding wellness policies, free flu jabs, health checks, using staff information effectively, having more

BusinessPlus October 2015

flexible hours or the option to work from home are ways in which to keep staff healthy and engaged.”

proportion indicating general stress levels increased stood at 35.6 per cent, compared with 23.3 per cent for those with fewer than 50 staff.

Other findings are outlined below.

Absenteeism facts • New Zealand lost 6.7 million working days to absence in 2014 - up from 6.1m in 2012 - according to the second Wellness in the Workplace Survey.

• The top five reasons given for stress and anxiety increasing were general workload, relationship issues, long hours, pressure to meet targets and financial concerns. • Nine out of 10 businesses believe wellness has an impact on productivity.

• The average number of annual absentee days per employee was 4.7, amounting to a national cost of $1.4 billion in 2014.

Older workers

• Average absenteeism has risen from 4.5 days since 2013, at an additional cost of $200 million.

Almost 80 per cent of businesses have no policies or arrangements in place for older workers – and don’t think it’s required. Furthermore:

• Public sector workers’ absentee rates were 45.7 per cent higher (6.7 days) than those of the private sector (4.6 days).

• More than 40 per cent of businesses expect to see an increase in the proportion of workers in their enterprise aged above 65 in the near future.

• Manual employees took more sick leave with 5.1 days compared to nonmanual employees at 3.9.

• 79.6 per cent of businesses do not have any current policies or arrangements in place for older workers and don’t think it’s required.

• Larger organisations are more likely to have high rates of absenteeism, compared to small to medium enterprises where the absence of a staff member is more acute. • For non–manual employees, the third most common cause of absence was attending a medical appointment or waiting for one.

Stress Among respondents, 28.6 per cent of businesses reported an increase in stress levels in staff, while 14.3 per cent reported a decrease, and 57.1 per cent saw stress levels stay the same compared to a year ago. • For those with 50+ staff, the

• For those that have plans in place, changes to the hours of work was the most common plan, followed by reduced hours of work, lighter duties and discussions around retirement options.

Health insurance Only one third of businesses provide health insurance for their staff. If FBT on employer subsidised health insurance were removed, 56 per cent of New Zealand businesses not currently providing health insurance would look to do so. The full survey can be found at www. business.org.nz by searching for “Wellness in the Workplace Survey Report 2015.”

International TRADE minutes from Singapore. Catherine reports companies such as Intel, Dell and Motorola are relocating there across the border to benefit from the well-developed infrastructure, lower operating costs and incentives, while losing nothing in terms of logistics and proximity to port facilities. Business matching session for Lance Sheppard of Power Technology ASEAN NZ Ltd (left).

Trade mission host and leader from ExportNZ, Catherine Lye and Sir Ken Stevens, on the ground between meetings.

Seventh trade mission records strong results Export New Zealand’s seven-strong run of highly successful trade missions ramped up a further notch with the recent return of a seven-day intensive to Malaysia and Singapore. Twenty delegates from an eclectic range of businesses were on board. ExportNZ manager at EMA, Catherine Lye, managed the venture for Export NZ in cooperation with the ASEAN NZ Business Council. She reports she always hopes the travelling group members will gel and find they can learn from each other as much as they will from the places and people they meet. They did; it proved to be true again this time.

mission delegates found this venture to be no exception. For instance, one food and beverage company delegate got to spend a whole afternoon with a New Zealand Trade and Enterprise (NZTE) Beachheads advisor based in Singapore. Catherine said he rated it ‘real gold’ as a learning experience.

Why take a trade mission to Malaysia/Singapore? For businesses going beyond New Zealand and Australia for the first time, Malaysia and Singapore offer relatively Sir Ken Stevens benign stepping-off places. It’s relatively easy to do business there, English is the language of business, and the countries share She says, “The mission delegates loved recognisable banking and legal systems. travelling as a group. In fact they were still enjoying learning from each other days Besides, this year marks the 40th later, texting and still buzzing.” anniversary of the formation of ASEAN (Association of East Asian Nations) and it’s Trade mission participant Jason Ashford chaired at this time by Malaysia. of Aotearoa Fisheries was enthusiastic for this and other reasons, Catherine says. On Malaysia is also well located as a hub for business trips he usually travelled just with expansion elsewhere in Asia. Fonterra fishos but this time he said it was great has picked up this very opportunity; because of the range of businesses and mission delegates heard directly from the with all sorts of cross pollination of ideas. giant dairy cooperative about how it was Exporters should cancel other plans just to working out. As well as operating as an get on a trip like this, he said. administrative and logistics hub, many Fonterra staff located throughout SouthSir Ken Stevens who led our mission for a East Asia are brought to its Kuala Lumpur seventh straight time has often stressed HQ for induction and skills training. that traveling in a group means you get to places you simply would not get to On the ground otherwise, and you get to meet people you The mission visited an industrial zone in couldn’t normally hope to meet. Again Johor in the south of Malaysia, about 30

One of the mission’s participant businesses is now considering whether to establish there for similar reasons. Catherine says the Malaysia Investment Development Authority (MIDA) and the ISKANDAR Development Region were very supportive of the mission’s visit and assisted a lot with business matching. Having an NZTE business development manager on hand to act as guide for some delegates also proved invaluable, she says. Delegates were pleased to find there was no risk of them getting lost and wasting precious time. Sir Ken echoed the praise for the high standards NZTE brought to bear again for this seventh mission. The mission was also well briefed on the political and economic landscape. The chief economist of Ambank Group in Kuala Lumpur, Anthony Dass, advised the mission that the economic outlook for the region was subject to the same global transitions as in New Zealand, with some very significant differences. The Chinese yuan has become a reference currency in Asia since 2005, and it is now more logical for Chinese companies to use yuandenominated credit than US dollar credit. Dass said too that the further internationalisation of the yuan will help unlock the region’s potential. While we should expect the yuan to be gradually depreciated over the medium term, a cheaper yuan may not boost China’s exports as it can also cause capital flight, he said. So how did the delegates find their mission experience? Well, they thought the organisers did a fantastic job, and they were really grateful, and the mana of Sir Ken as leader was great. One said he had “nothing but the highest praise” and another “couldn’t do in a year what he achieved in a week on this mission.” BusinessPlus October 2015

International TRADE By Catherine Beard • No company has ever sued the New Zealand government under an international treaty. • ISDS clauses are in trade agreements to protect investors from having their investment stolen or illegally misappropriated. • ISDS relates to the investment chapter of agreements only, and does not extend to intellectual property, copyright or tariffs, etc. • ISDS protects New Zealanders making investments in overseas countries, and lets overseas investors know they can invest safely in New Zealand.

TPP risks over-stated A new report on the Trans Pacific Partnership (TPP) concludes that it would not allow foreign control over New Zealand’s law-making ability. ExportNZ commissioned the report, ISDS and sovereignty, about investor-state dispute settlement provisions in the TPP and other free trade agreements. The report, by NZIER, concludes risks from investor disputes have been overstated in the media. The 12 Asia-Pacific countries negotiating the TPP are New Zealand, Australia, Brunei Darussalam, Chile, Japan, Malaysia, Peru, Singapore, Viet Nam, the US, Mexico and Canada. Investor-state dispute settlement (ISDS) provisions allow arbitration if investors are unfairly discriminated against by a government and suffer damage as a consequence. It’s common for investors to request the ability for arbitration in the countries where they invest, and common for countries to provide that assurance, as ISDS provisions ensure investors are treated fairly and they also uphold the ability of countries to make laws in their own interests. Arbitration is usually only needed in the case of rogue decisions by unpredictable governments.

BusinessPlus October 2015

ISDS arbitration is primarily designed to stop extreme actions such as illegally confiscating or nationalising business assets. New Zealand is not an extreme government. We have good rule of law, strong institutions, a global reputation for fairness and lack of corruption, and a strong interest in encouraging foreign investment. These factors combined mean New Zealand is unlikely to be targeted in investor-state disputes. It’s important to remember the significance of the TPP opportunity. TPP represents around 40 per cent of the world’s gross domestic product – and our businesses need equal access to those huge markets. New Zealand has more to gain from the TPP than most countries, because the highest tariffs apply to primary products, which are around two-thirds of our goods exports.

Key points Our recent trade agreements have been great for New Zealand business – the agreement with Taiwan delivered a 20 per cent increase in exports after one year, and the China trade agreement quadrupled our exports in seven years. That is the sort of relationship we want with all our trading partners. Key points in investor-state dispute settlement and sovereignty include: • ISDS clauses are not new – New Zealand has included them in trade and investment deals with 13 economies over the last 27 years.

• Most ISDS claims overseas have been taken against countries that would be described as ranking lowly on “ease of doing business” indexes, eg, regulatory flip-flops, tendency to expropriate investors’ property, low rankings in bribery and corruption indexes, protectionist policies, etc. • Investors have won only about one in four of these claims, and won compensation of around 3 cents in the dollar relative to what they claimed. • Modern ISDS arbitration hearings are transparent and publicly accessible. • Modern trade is as much about global investment and trade in services as it is about trade in goods. • New Zealand’s biggest export earners benefit from ISDS because they are increasingly investing in partnerships in other countries, allowing them to service overseas customers more efficiently, be more competitive and earn more export dollars for New Zealand. • ISDS is about countries treating each other’s investors fairly - New Zealand benefits from overseas investment and from fair treatment for our companies when they invest overseas. The report ISDS and sovereignty, can be found at www.exportnz.org.nz and searching for ‘NZIER’. · Catherine Beard is executive director of Export New Zealand, a division of BusinessNZ that is majority owned by EMA. Visit www,exportnz.org.nz

International TRADE

The global challenges for supply chain and logistics New documentation for international freight was due to come into force from July 1st next year requiring shippers to weigh every individual item in a container before it would be accepted into a freight terminal.

“There’s an International Transport Forum report on mega ships (at www. internationaltransportforum.org) and they will impact on you indirectly through transhipping, for example, via Hong Kong and Singapore.

But this logistics and expense nightmare has been pulled back to where it might now be practicable.

“On top of that there are the four alliances keeping the 19 (international) shipping lines alive. There’s a big debate in Europe on the merits of these alliances, and that’s flipped a bit recently. The knock-on effects are in doubt. Just In Time reliability, etc, has been lost, and the strains are showing. The jury is out on the big alliances.”

Lobbying by the Global Shippers Forum, of which the NZ Shippers Council is a member, has resulted in the requirement next year for shippers to provide the tare weight of goods packed in containers before they can be offloaded in a terminal. And for this shippers should be able to use a calculated weight then verify it later. Forum members will have best practice guidelines on these new rules to assist with their implementation, thanks to the Forum whose secretary general Chris Welsh was in New Zealand last month. He was here to bring local shippers up to speed with the latest developments. BusinessPlus took the opportunity to interview him on the major global supply chain and logistics trends. Welsh said since the GFC they have been heavily involved in ensuring new regulations were designed in a way that was not overly bureaucratic. “Our goal overall is to make the shipping business more focused on its customers,” Welsh said. “They need to reach out more to their customers.”

On bigger ships He said, “Leaders in the shipping industry believe their route to salvation is bigger ships, mega container carriers delivering economies of scale; and to some extent this has happened. The problem is they need to fill these huge ships – when they are not filled they don’t make money. So while the model works for Maersk [shipping line] can it work for the others? “My observation is Maersk is very good at its business, but whether others can match them is an open question.

On security Changes in security for goods are moving at a snail’s pace, Welsh said. “Trade blocs such as the EU like the ability of e-commerce to take costs out of documentation, standards, and harmonisation; and world Customs and the IMO [International Maritime Organisation] are aligning their security arrangements. But like UN organisations they move very slowly.” The same applies to global aircraft arrangements with the International Air Transport Association (IATA) and the International Freight Association (IFA) specifically addressing supply chain progress, but it’s not happening quickly enough, he said. “The standard time for moving something by airfreight is 10 days on average. This is too slow for today’s superfast economies. We need to get it to six days from warehouse to warehouse. “For example, the electronics and pharmaceutical industries expect this, and the industry has an awareness of the need to lift its performance. By collaborating and making serious efforts to integrate operations the new imperatives of the international supply chain can be met. “Information dissemination is an important part of this, and to ensure the shipper’s voice is heard and best practice implemented.”

By Gilbert Peterson

On the environment Shippers want to accurately report and record their emissions and some have signed up to greenhouse gas emission protocols, Welsh said. Both shipping and aviation need to voluntarily record their emissions, and the IMO and the EU have been delegated by the UN to reduce maritime emissions. “But it’s proving difficult due to disagreement between shippers over how they should be measured,” Welsh said. The UN’s Climate Change Panel is due to meet in Paris in November to sign an accord replacing the Kyoto Protocol, and the UN Convention on Climate Change has agreed on a green fund to be paid for by the shipping and aviation industries. “But the big fear I have is that when it comes to report at Paris the industry may be embarrassed to explain why it hasn’t made more progress and this could leave open the possibility of a climate change levy being imposed on shipping, with the user ending up paying for it. “The IMO is also currently looking at data collection of emissions, and we’re involved. In parallel with that there is a report due in July 2017 on emissions monitoring, verification and reporting, which will apply to all vessels entering EU waters. The aim, as it is for IATA and IFA, is to agree on a target for reductions of CO2 and the market system to reduce them. “We need to think pragmatically and use existing voluntary measures, and the outlook for this is looking more positive.” See shipperscouncil.co.nz.

On SMEs The Global Shippers Forum website (www. globalshippersforum.com) has a best practice template for small to medium enterprises (SMEs) for drawing up a contract for shipping. Cargo owners have to register but otherwise the GSF BIMCO Standard Service Contract for Shippers boiler plate which includes legal guidance for when things go wrong, is provided at no charge so SMEs can be better informed. BusinessPlus October 2015

International TRADE By Nada Young

Attractive export pricing for Asia A realistic look at profit margins in the food and beverage sector across the Four Asian Tigers The plummeting New Zealand dollar has been a dark cloud over New Zealand in recent times, but it’s not all bad news. The silver lining is that our food and beverage (F&B) sector has rapidly become much more competitive in the global market place. This is especially so in the markets of South Korea, Singapore, Hong Kong and Taiwan, where price is king. Commonly referred to as the Four Asian Tigers, these markets have shown impressive economic growth with few barriers to entry when compared to their neighbours. In this part of the world New Zealand goods are often criticised for their lofty prices. I speak to F&B distributors across Asia on a daily basis and I’ve lost count of the number of times I’ve heard them praise the quality of New Zealand produce, only to bemoan the pricing and ultimately turn down an opportunity. With a significantly more favourable foreign exchange rate, New Zealand’s value proposition is a lot more attractive. Profit margin expectations in South Korea, Hong Kong, Taiwan and Singapore are high. Most distributors demand at least 25 – 35 per cent gross profit (GP) and the leading players will often treat marketing and logistical costs such as warehousing and handling as separate margins, not to be extracted from GP. When the price build is challenged the

“I’ve lost count of the number of times I’ve heard them [F&B distributors] praise the quality of New Zealand produce, only to bemoan the pricing and ultimately turn down an opportunity.” response is predictable: rising operational costs for such things as cold storage and manpower must be accounted for. In truth, distributors are accustomed to enjoying carte blanche when it comes to the price build and it’s appalling how often this results in pricing that is simply not competitive. Understanding the price build from FOB (shipping under ‘free on board’ terms) for example, to wholesale or retail pricing in your chosen market is the best way to counter this attitude. To do this, you must be armed with a realistic cost model that calculates actual landed costs and uses margins based on industry norms to determine final pricing and its viability against competitors. This approach garners a paradigm shift in negotiations with your target distributor. Not only does it present the opportunity in a way that is clear and logical, it also demonstrates your market knowledge and instils confidence. Here are some tips for creating your cost model: 1. Get a DDP (delivery duty paid) quote from your freight forwarder. Note - be certain you have optimised carton configurations and applied relevant free trade agreement tariff savings.

2. Know how the local GST or sales tax equivalent is applied. 3. Speak to a range of distributors or get expert advice to benchmark distributor and retailer margins. 4. Survey the competitors in market and compile price data to demonstrate that your price is viable. This exercise can absorb a great deal of time and resources, but as the foundation of any successful export plan, it’s well worth the effort. • Nada Young is Asia Market Director at Incite, visit www.exportincite.com

New inland container terminal opened in Whanganui A new inland container terminal has opened in Whanganui to boost regional growth by improving transport connections for importers and exporters. The Direct Connect Container Services terminal is the result of a partnership between public and private companies,

BusinessPlus October 2015

and with the collaboration of Government-owned KiwiRail. Transport Minister Simon Bridges says, “It’s a real regional success story, showcasing the importance of national and local businesses working together to support regional economies.”

The terminal will handle imported goods such as raw materials, packaging and machinery, with exports to include meat, dairy, wood products and other finished goods. The terminal employs a 40-tonne container lifter provided by Wellington port CentrePort.

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Grayson’s invests in more CNC plant Grayson Engineering, which is the contractor responsible for the steel fabrication work on Sky City in Auckland and Dunedin’s Forsyth Barr Stadium, has just invested another $3 million in CNC machinery this year.

Another one coming up is the King Edward Barracks job, a Ngāi Tahu Property development with about 1000 tonnes of steel.

The specialised equipment sourced from the Peddinghaus Corporation in the US is to further automate the cutting, profiling and drilling of the structural beams that the company prepares and erects in some of New Zealand’s largest projects.

Moore talks us through how Grayson David Moore Engineering quotes and wins a typical job such as a warehouse or airport building. He explains that the construction company that wins the head contract will break Britomart transport centre in Auckland under development. the project into packages and ask three of four companies to put in a price for the steel work. Grayson Engineering’s team of two estimators will price the steel fabrication and erection.

A big job starting to tail off now is the Justice and Emergency Services complex in Christchurch. Using 4,500 tonnes of steel, this was “a good decent job for us” valued in excess of $20m, says general manager David Moore.

“Before doing that we will review the tender and may raise questions over, for example, the projected time for a job to compare it with our work programme. Some jobs will be too small or fiddly for us. From there, we take over to procure the materials, fasteners, shop detailing,

fabrication, painting, delivery and erection of the steel.” Much of the steel the company works with is sourced locally from NZ Steel with some structural sections coming from Australia, or Thailand and Taiwan; Grayson Engineering may order some to be custom made for a big project. Moore says a lot of their machinery is purchased from Peddinghaus that sends over technicians to help install and train their staff. Asked about deploying their expertise offshore Moore says, “New Zealand has a good reputation for engineering and we are looked to for providing expertise for work in the Pacific as well as locally.” Periodically Auckland-based Grayson has completed big projects overseas such as a rugby stadium in Papua New Guinea, and Fiji and New Caledonia. “Our industry is mature and very cyclical based on demand,” he says. “New Zealand is a fickle beast. We’re hiring a few more staff at present (to add to the present contingent of 120) but we’re very conscious of the size of the market,” he says. He finds when there is an upturn, a lack of skilled labour will become evident and then “we will have the pleasure of dealing with our immigration service.”

Keeping alive the timber joinery trade Growing up in the UK, Richard Knott had a Kiwi teacher who made the class do a project on New Zealand, and it stuck with him as a place he should visit. Forty years later after completing an apprenticeship in fine furniture making and a stint working for an antiques business in Leicestershire - a company that did a lot of work for the English Heritage and the National Trust - Richard came to New Zealand with only a suitcase, literally, and an ambition to pursue his calling. At first he found work in Rotorua then landed a job at Whakatane where he still lives, now with his own business, Makepiece Furniture. continued on pg28

Richard Knott

Makepiece crafted all the stairs and interior joinery of the Tuhoe headquarters at Whakatane.

BusinessPlus October 2015

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LED lights up new business New high resolution LED lighting technology is responsible for all the action on the big screen at just about every event you go to these days, and we have Oceania LED to thank for it.

more exposure for their money, Bob says. Sponsors can engage directly with the crowd, and when people are excited and happy the social media analytics are very positive.

The Auckland company, soon to change its name to Monstavision, is the largest LED sales and rental agency in the country for action, and action replay screens. And they are finding ever more uses, from secondary school prize givings and sports fixtures to back screens at the X Factor, export awards and brand presentations at trade shows, for both interior and outdoors.

Oceania LED imports most of its equipment from Daktronics in the US, the world leader in LED. But interestingly, New Zealand was in the vanguard of developments in LED, Bob says

Oceania LED is growing as fast as demand allows, re-investing all of its returns in new equipment. Revenue has doubled in the past two years, says managing director Bob Wilson, one of the company’s three owners.

Along with raised expectations from an event these days is the affordability of the new equipment. Rentals ranges from $2,500 on up to $15,000 for a 50 sq m display. Mobile screens of 8-9 sq m can be trailered just about anywhere. Oceania LED supplies the trucks, electronics and installation, and requires its staff to cover all skill sets: IT, electronics, driving, rigging...

“The Rugby World Cup helped us get going four years ago with a growth spurt and the Cricket World Cup added another lift,” he says. “By the end of this year we will invest a further $2.5 million in new equipment.” Over the next two years Bob says their aim is to grow the sports market. “We have some exciting (crowd interactive) developments coming up this summer,” he says. The new technology is allowing a lot more engagement and interaction via mobile phones and the big screens. For example, audiences will be able to be polled for their opinions: Was he out, or not out? Developments like this give sponsors a lot

“In the early 2000s a local company, which we later bought, led the charge, and some of our oldest and most reliable equipment is New Zealand made.”

“It can be a challenge finding good technicians with the unique and broad skills we need and who are prepared to work odd hours,” Bob says. He says they mostly get their work by wordof-mouth from people seeing on site what they can deliver, and from repeat business. Netball New Zealand is one of its big clients. Other big events he is proud to own include a 160 sq m screen erected in Aotea Square in Auckland, and the high tech launch of the Samsung S4 for which they won an award. “But what gives us a kick,” he says,” is when the crowd at a live event sees some action and goes wow!”

Oceania LED technician Sonny Gallardo

BusinessPlus October 2015

Makepiece fitted-out the NZ Alpine Club lodge on Mt Cook.

Continued from pg27 Makepiece Furniture is named partly for a renowned furniture designer and maker he trained with, John Makepeace OBE, and partly because in the process of setting up his business he had to make do from a lot of different piece work. The business was formed in 2006 when Richard says he was building a motor home including the interior fit out. Then came the recession of 2008 and he found he needed to be as diverse as possible in the work he took on. “I needed to keep my doors wide open,” he said, and to take on cabinet making, kitchens and commercial joinery. “I love my furniture, but it’s been a very hard industry lately because of the competition from Chinese imports. It’s the same for all New Zealand industry, but New Zealand is very good at making bespoke, one-off items in general. “I prefer to specialise in one-off joinery and furniture but we do our everyday work as well, although I like the challenging stuff.” Two big projects are a particular testament to Richard’s skills: a fit-out for the bunkrooms in the NZ Alpine Club at Mt Cook; and all the stairs and interior joinery of the Tuhoe headquarters at Whakatane. Richard is active in JMF Ltd (the Master Joiners Association) due to his interest in assisting with the setting of compliance standards (NZS 4211) for joiners and cabinet makers, and which seeks to ensure architects and other specifiers are more aware of what can be achieved with timber joinery. In his down time, Richard is a mountaineer and rock climber and more lately a kite surfer. He says there’s a lot of opportunity in New Zealand for those who want to work, and “I would never have had the chance to do what I can do here if I had stayed in England.”

Member PROFILE

Zealong Tea tastes award success Waikato organic tea grower Zealong Tea Estate has won the category of ‘Best New Natural/Organic Beverage’ at Asia’s foremost business event for the natural and organic industry, says general manger Gigi Crawford. This has helped strengthen Zealong’s reputation as an organic tea recognised internationally for its purity, she says. “To be named best new natural and organic beverage on the first visit to the Natural and Organic Product Asia (NOPA) expo is a tremendous honour. “The Zealong team is proud to be involved in an exhibition that celebrates the most up-to-date products and services that cater for the growing demand in natural and organic products around the world,” she says. Held over three days in Hong Kong, the expo is Asia’s foremost business event for the natural and organic products industry and is an important platform to engage and promote sustainable and healthy lifestyles. New Zealand’s only commercial tea estate prides itself in its achievements in this field at a time when questions continue to be asked about the potential effects commodity teas may have on those who consume them. Zealong Tea Estate uses no chemical sprays or fertilisers, with organic

Pictured (centre) Stuart Bailey (CEO of Diversified Communications, organiser of the NOPA expo), and from Zealong (l-r): Dyson Xiao (marketing executive), Sen Kong (marketing manager), Gigi Crawford (general manager) and Nicole Wang (quality control manager).

certification being a hallmark of its home-grown products. The company also has ISO 22000 accreditation, which makes it one of the only fully traceable teas - from leaf to first sip - in the world. NOPA organiser Stuart Bailey commended Zealong on its efforts and provided high praise for the brand’s range of five teas. “The combination of the highest quality tea and stylish and fresh packaging really struck a chord with the buyers at the expo.”

Gigi says, “As a company we are proud of the innovation we have brought to the tea industry and what we have achieved in not only creating great tasting teas, but products that have very distinctive health benefits due to the regime we have adopted in terms of standards and quality. “People are concerned about their health and well-being these days. They seek out products that are not only organic but can be proven to be organic. “Zealong’s tea fits that bill perfectly.”

AUTOMATE & FUTURE PROOF YOUR BUSINESS Do you have manufacturing or assembly processes in your operation that could be automated? Do you contract out processes that you would rather do in house? Did you know you can have machinery designed and built to automate your processes here in New Zealand?

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Talk to: Rick Walter; 021950494; rick@fairfit.co.nz Fairfit; 09 2762765; Auckland NZ www.fairfit.co.nz BusinessPlus October 2015

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IN BUSINESS By Dave Jacques

Building the right team to steer your ship Governance is the art of steering the ship, not any of the “doing”, as I discussed in BusinessPlus (September 2015). The management in your organisation do all the doing, and an owner is involved in making the decisions that steer the ship in the best direction. In this article I’m talking to owners/ shareholders about building a team that can do that. While it is important that you hold regular short and punchy board meetings to be effective, that alone will not take you to the next level. You also need to have the right blend of inputs in that meeting. I am a fan of psychometric profiling. I do not necessarily advocate actually testing everyone, but I am very much in favour of putting the options on the table as a talking point as to where everyone’s thinking is and what perspective they are coming from.

“If your board consists of all similar profiles, they will all laugh at each other’s jokes but no-one will be playing advocate for the opposing interests of the business” The perspective tool I like the most is the ‘WD Profile’. The reason why I like this particular model is its ease of understanding from a simple glance. Most psychometric tools group people into four boxes in a square. While we can all operate in any space, there will only be one that we naturally operate in, and tend to fall back to, especially under pressure. In simple terms the four boxes are: ‘top’ is ‘head in the clouds, creative’; ‘bottom’ is ‘ear to the ground, timing’; ‘left’ is ‘introvert, system and processes’; and ‘right’ is ‘extrovert, brand and people’.

Don’t take this the wrong way but ‘lefties’ often want to focus on numbers and systems. ‘Righties’ usually do not have any interest in numbers but want to really grow your enterprise through dynamic marketing and people plans. The same goes for the creative and those waiting patiently for the right time to make a move. At your board the idea is to aim for a blend of three inputs. If your board consists of all similar profiles, they will all laugh at each other’s jokes but no-one will be playing advocate for the opposing interests of the business.

“By contrast if the company had an extrovert profile as part of their board that person by nature would have been a lot more interested in the brand and people than the figures and pushed for action in that department”

Is your board full of “lefties”? I undertook an assessment of an electronic engineering firm as part of their review of the effectiveness of their governance structure. The company was owned by two engineers who also worked in the business. They sat at monthly board meetings along with a semi-silent investor. Their meetings were chaired by an internal person who had skills in project management. It would be fair to say at least three of the four sat on the ‘left’ side of the profile square. The investor was more in the middle, but his input was generally focused on revenue and risk. My assessment found there was a complete lack of ‘right’ input. This manifested itself in the company having no sales staff or marketing plan. There was no-one specifically tasked with sales growth accountability. The staff were all happy and worked well as a team but this was achieved from a very ‘quietly, quietly’ approach – there was no-one with the additional skills in staff welfare and team building.

By contrast if the company had an extrovert profile as part of their board that person by nature would have been a lot more interested in the brand and people than the figures and pushed for action in that department. A ‘right’ side profile creates wealth and growth through ‘magnification’ – that is, shining a light on the brand and building up the people. A ‘left’ builds through ‘multiplication’. Neither is right/wrong or better, but the blend of both is always more powerful. In next month’s BusinessPlus I will be asking if your enterprise is in summer or winter? Businesses go through cycles like the seasons and your board needs to recognise what season you’re in so decisions are optimised taking this into account. • Dave Jacques LLB NZIM is managing director of Good Governance NZ Ltd focusing on educating SMEs on good governance and providing independent company directors for SMEs. www.goodgovernance.co.nz BusinessPlus October 2015

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