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“Without good people we have nothing” - AIE
Election voting prep He’s stoned at work! Intellectual property a no-brainer Trial periods checklist In this issue: • • • •
Boards as energizers, not handbrakes AdviceLine answers the questions Economic growth needs YOU! Team Leader course graduates
Issue 118 – September 2014 $6.30
Keep your nger on the pulse Your people are one of your biggest assets. To make sure your business is performing at its best you need to get their pay and benefits ‘just right’. That’s where we can help. Using our market intelligence you can keep your finger on the pulse of market trends and act with confidence. The National Employers Wage and Salary Survey covers 216 positions. Our comprehensive reports include splits by industry, location and revenue bands: Salary reports: Reflect Salary ranges by position, location, revenue bandings and industry. Beneets and Conditions reports: Position specific analysis of benefits and conditions. You’ll find sample reports as well as a full list of positions and descriptions on our website.
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CONTENTS Advocacy 04 Manufacturers engage with CEO of Govt’s ‘business ministry’
Private Bag 92066, Victoria Street West, Auckland 1142
05 Robust debate on overseas land ownership required
Ph: 09 367 0909 or 0800 300 362 in NZ Ph: 1800 300 362 from AUS
14 Economic growth – where it comes from, what it needs
Email: ema@ema.co.nz
news
Website: www.ema.co.nz
06 New GM, Advocacy and Government Relations – Mark Champion
Chief Executive: Kim Campbell Manager, Advocacy & Govt Relations:
06 EMA to run Business Central
Manager EMA Learning: David Foley
07 AdviceLine survey
Manager, Strategy & Enterprise:
08 A third of Kiwis don’t switch off
while on holiday Smartphones most important travel item
Mauro Barsi Waikato Denis Quigan 07 823 9311
mob 027 203 0694
Russell Drake 07 838 0018
mob 021 686 621
Bay of Plenty mob 021 662 656
Rotorua / Taupo / South Waikato / Whakatane
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BusinessPlus
COMMENT: Net migration packing less punch…for now
awards. Are they worth the effort?
23 EXPORT: The ExportNZ election manifesto 2014
features
Editor
16
tax tips: Project Do It
Gilbert Peterson Ph: 09 367 0916
21
RAISING CAPITAL: Building an
effective board
gilbert.peterson@ema.co.nz
Mary MacKinven mary.mackinven@ema.co.nz Designer
member noticeboard: 24 First vocational educational group
Colin Gestro (09) 475 9313 colin@affinityads.com
26 12
on stock exchange
25 R&D company ticking over 24/7 25 3D Printing opening new world for fast prototyping, model making
Ripeka Mikaere Advertising Sales
25
22 Letter from Australia: Business
Clive Thomson 07 348 0334 mob 0274 372 808
Writer
24
employment business
Mark Champion
Terry Arnold 07 575 8401
21
26 Manufacturing engineered
excellence in Kawerau – AIE
28
advice 09 Do’s and don’ts with trial employment periods
ISSN No. 1176-4953
BusinessPlus news | advice | learning | networking
10
EMPLOYMENT CHAT: He’s stoned and I want to catch him out!
Publication of the Employers & Manufacturers Association Inc
“Without good people we have nothing” - AIE
12 VOTING DILEMMA? CHECKOUT EMA’S ELECTION GUIDE 2014
18 Business break down, or break up ‘conscious uncoupling’
20 Why IP should be at the top of your to-do list
On the cover... Manufacturing big equipment in Kawarau for all types of industry has Allied Industrial Engineering moving from strength to strength. More on page 26.
Election voting prep He’s stoned at work! Intellectual property a no-brainer Trial periods checklist In this issue: • • • •
Boards as energizers, not handbrakes AdviceLine answers the questions Economic growth needs YOU! Team Leader course graduates
Issue 118 – September 2014 $6.30
ADVOCACY at work
Manufacturers engage with CEO of Govt’s ‘business ministry’ Members of EMA’s Manufacturers Forum heard about the focus of the Ministry of Business, Employment and Innovation (MBIE) from its chief executive David Smol, and discussed their responses. Smol talked about MBIE’s purpose and thinking, where New Zealand might be in 2025, and what will be required to achieve that, as well as Government’s role in facilitating business-led, economic growth. Sentiment rising in building, infrastructure Infrastructure anD BuIlDIngs CONSTRUCTION SURVEY
1H 2014
NEw ZEalaNd
In thIs Issue where is investment expected to increase? what will drive this investment? what have we learnt from the rebuild process so far? How is the industry’s approach to procurement changing?
Sentiment is on the rise in New Zealand’s building and infrastructure industries, said Mike O’Halloran, technical director at Aecom, a global provider of architecture, design, engineering and construction services. He was guest speaker at EMA’s Regional Infrastructure and Local Government Committee meeting, where he presented the findings of Aecom’s most recent New Zealand Infrastructure and “Buildings Construction Sentiment Report” for the first half of 2014. Generally respondents (industry leaders) are more upbeat about future prospects, particularly in the building market where optimism jumped from 53% to 89% expecting increased investment driven by interest in retail, tourism and residential development. In the infrastructure market 72% expect rising workloads, mainly in land development, transport and water projects. O’Halloran said key challenges for the industry in catering to this rising investment interest include skills and material shortages, as well as cost escalation. In Canterbury where sentiment has
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cooled slightly, the industry is also grappling with funding certainty and the need for greater decisiveness to build momentum. However, with more promising developments such as the recently released public sector rebuild programme, the industry will be better equipped to manage the risks that such a huge undertaking presents, and can work together to achieve the best outcomes. The real question is how to get the Christchurch rebuild going at a greater rate, he said. Construction companies must partner with someone in Christchurch or be on the ground in Christchurch. He noted that the considerable amount of increased activity in Wellington was mainly to meet seismic requirements for buildings. Robust discussion on consenting frustrations
EMA was pleased to have as guests at its Policy Forum, Auckland Council’s chief executive Stephen Town and manager of resource consents Heather Harris, to discuss building and resource consenting in the region. Members took the opportunity to provide examples of frustrations with the costs to business and hence investment disincentives in many cases when processing applications. Common concerns were the time it took to gain approval (or communication generally) for developments, with sometimes high costs for processing applications and costs to business from delays and confusion, with overly-prescriptive rules that defied common sense and with the lack of Council’s ability to handle applications digitally. The guest speakers said Council was
working towards enabling consents being managed digitally (in an unknown number of years from now), and advised business to talk to planners earlier rather than later, in the application process, and escalate their complaints about unfair outcomes through the chain of command when they felt it necessary. EMA will continue to work with the Council to make progress in this area. International advocacy: inward and outward trade missions
After a big hold-up at Auckland International Airport [plane grounded due to air conditioning fault] a 28-strong trade delegation departed to Indonesia to visit four cities over 10 days. The mission was organized by EMA/Export NZ and the ASEAN NZ Business Council, with the strong support of NZ Trade and Enterprise in Indonesia. It is led by ExportNZ chair and Glidepath Group executive chairman Sir Ken Stevens, and New Zealand’s Ambassador to Indonesia David Taylor. Indonesia’s Ambassador to New Zealand, Jose Tavares, is also accompanying the delegation. The mission is going to Makassar (population 1.5 million), Surabaya (4.5m), Bandung (3m) and Jakarta (10m). Delegates are from infrastructure, specialised manufacturing, food and beverage and education and are following in the footsteps of a similar successful visit last year. Highlights this year will be attending the third annual Indonesia/ New Zealand Summit in Jakarta, meeting and being hosted by the Mayor of Makassar, meeting the Governors of South Sulawesi, Surabaya and Bandung , and formal dinners in Surabaya and Jakarta. In New Zealand, EMA has recently met with business delegations from Lithuania and Myanmar. We advocate on behalf of our members to bring them export opportunities; and to inform overseas exporters about doing business in New Zealand.
ADVOCACY By Kim Campbell
Robust debate on overseas land ownership required Kiwis wanting to stop the sale of land to overseas owners might reflect on what they’re wishing for. Restrictions on land sales would inevitably reduce the value their own home, unless of course they were to apply only to the sale of other peoples’ property. The confusion, and unease over farmland sales is palpable. I suggest a reason, other than a measure of economic thoughtlessness, is rooted in our pre-European and colonial past. Many immigrants came here, some of them centuries ago, for the prize of claiming a piece of land they could call their own. Those from Europe left countries where they could never hope to own land. An entrenched aristocracy saw to that. Now both Maori and pakeha share a fear we are at risk of losing control of our future. Ironically, to fund development and job creation, New Zealand has always been reliant on overseas investment, assisted by a liberal land ownership regime. In recent years the value of farm land, in fact all food producing land, has been rising internationally underpinned by rising food prices. Some sovereign states too have sought security over their future food supplies by buying up food producing land. This is a global phenomenon driven by increasingly affluent populations seeking higher protein diets. Possibly two million square kilometres of land has changed hands in the last decade to this end though reliable figures are hard to come by. Problems occur also in foodproducing lands where uncertain and unstable weather patterns are emerging, with significant crop failures in some places. The Gulf states, South Korea, and Japan are amongst those most concerned about food security, along with China and other food-importing countries. New Zealand has fortuitous access to a lot of land with potential for adding food production capacity, notably with access to water, and as a consequence of the factors listed its increasingly valuable. But
explanations like this tend to raise the temperature rather than cool people off. After all, if farmland is becoming so much more valuable we should be hanging onto it, right? A report last year (Knight Frank Research) noted New Zealand, Japan and South Korea were the exceptions to countries where foreigners cannot
“We need to agree on a regime to apply to the acquisition of land by non-New Zealand residents that does not conflict with their willingness, or that of others, to invest otherwise in productive assets in New Zealand”
acquire properties if they were not already residents. In Australia temporary residents can buy one ‘established dwelling’ to use as their place of residence with no restriction on the number of new properties or land for development they can buy once approval is obtained. At present in New Zealand nonresidents can purchase a house, section or a commercial building without any restriction. If a property is classified as ‘sensitive land’ consent from the Overseas Investment Office is required. A standard suburban house
would not be classified as sensitive; all non-urban land may well be, and to get OIO approval can begin at $100,000. Also, the OIO assesses applications on their economic upside such as the potential for new investment, technology or export markets, and the background of the buyer. It does not have to factor in anything potentially detrimental. In 2012 the OIO approved the sale of 43,080 hectares of freehold rural land and 8,554 hectares of leases and other interests in land to foreigners. About 10,000 hectares of the freehold land and almost all the leases and other interests in land were from one foreign investor to another. But the statistics on sales of land to overseas interests are poorly recorded and incomplete. One estimate is that in 2011, 8.7 % of New Zealand farmland including forestry, or 1.3 million hectares, was foreign-owned or controlled. Added to that is the land controlled by other overseas owners such as the oil companies, telecoms, retailers, banks, distribution, transport and other types of investor. Statistics NZ figures as of March 2013 list the biggest foreign owners of New Zealand companies in decreasing order as Australia, US, UK, Singapore, Netherlands, Japan, British Virgin Islands, Hong Kong, Cayman Islands, Canada, Switzerland, China and France. These accounted for 96% of foreign direct investment in New Zealand. British Virgin Islands and Cayman Islands are tax shelters, and large proportions of the foreign direct investment from the Netherlands, Singapore, Hong Kong and the tax havens were in fact from other countries, led by the UK, US, Germany and Canada. Continued page 6 BusinessPlus
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NEWS
New General Manager, Advocacy and Government Relations – Mark Champion EMA CEO Kim Campbell is pleased to advise Mark Champion has been appointed to the position of General Manager, Advocacy and Government Relations. Champion has had a distinguished career in corporate communications, industry associations and advocacy. He
has worked for TVNZ as a television producer, Vodafone, Air New Zealand, CAANZ, (the Communications Agencies Association of NZ), and Huawei in New Zealand. Champion has taken over David Lowe who has resigned to undertake a voluntary assignment in Timor Leste for two years. Mark Champion
EMA to run Business Central employment business Business Central, EMA’s counterpart in Wellington, has reached an agreement to outsource its consultancy services to EMA in Auckland. The outsourcing is the result of a review of the Business Central consultancy part of the business which has not been operating economically. After a thorough consultation process with affected staff, and robust negotiations the staff affected were advised of the
decision late August. While employment services will be managed by EMA there will continue to be a team of experts in employment relations and health and safety working in the central region to service members. Business Central will continue to provide learning and development services through training courses, conferences, coaching and mentoring as well as international trade and advocacy, and policy activities.
Continued from pg5 The benefits overseas owners may bring with them have been well rehearsed. Worth repeating though is how they can often deliver access to new markets, along with new investment in technology, expertise and market contacts. Rather than simply retreat into denial about our national anxiety about overseas land ownership the challenge has to be to ensure we always stand to benefit when a property changes hands to an overseas owner. To do this we need to agree on a regime to apply to the acquisition of land by nonNew Zealand residents that does not conflict with their willingness, or that of others, to invest otherwise in productive assets in New Zealand. As a start, I suggest if you want to buy farmland here, and you are a foreigner, you must show how
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“We see nothing wrong in insisting on ‘good citizenship’ and ‘use or lose’ clauses in any sales agreement. ”
you will add real long term and sustainable value including jobs. The measure of how this is to be achieved may warrant further examination and tightening. The OIO should have the power to oblige overseas owners to make good on the undertakings they gave when they purchased a property. The requirements for the adding of value, innovation, technology, and market access also needs increased transparency.
Business Central Chief Executive Raewyn Bleakley says, “We are confident the partnering arrangement with EMA in the consultancy area offers a financially sound model for this area of our business and uses our members’ funds responsibly. “We look forward to our membership throughout central New Zealand continuing to benefit from high quality services delivered locally.” Where assets defined as critical for environmental, aesthetic, cultural and heritage values are involved the need for transparency, and access for other New Zealanders, should be spelled out. We see nothing wrong in insisting on ‘good citizenship’ and ‘use or lose’ clauses in any sales agreement. Maybe probationary periods and audits can be part of it. In any event there is sufficient ambiguity about the current regime to require a robust and complete public discourse so we ultimately we end up with a land ownership scheme which, at the same time, balances our birthright and sovereignty desires while protecting property rights and ensures we have ongoing open access to foreign capital. A big ask but not by any means impossible. kim.campbell@ema.co.nz
NEWS
AdviceLine survey trumps again EMA’s AdviceLine service has received glowing reports from its users – who we thank for participating in our annual survey. AdviceLine is a free service to members, operating 8am-8pm on weekdays to provide employers with advice on employment and other business issues. The survey questions and answers were: 1. How do you rate the promptness with which your call was answered? 91% - either excellent or very good 98% - excellent, very good or good 2. How do you rate the professionalism, friendliness and empathy of the advisor? 87% - either excellent or very good 99% - excellent, very good or good
3. How do you rate the quality of the advice or service you received? 81% - either excellent or very good 95% - excellent, very good or good 4. Overall, how do you rate the AdviceLine service? 83% - either excellent or very good 97% - excellent, very good or good 5. How do you rate the Advice information available on the website www.ema.co.nz 62% - either excellent or very good 97% - excellent, very good or good
The AdviceLine survey was sent out on 15 August via email to members who had recent contact with the AdviceLine team. Members can contact AdviceLine at phone 0800 300 362 or 09-367 0900 (in New Zealand) or 1800 300 362 (from Australia), or email advice@ema.co.nz. See more at www.ema.co.nz
And some comments… • The AdviceLine people are all very knowledgeable, helpful and easy to talk with. It’s a great asset. • The AdviceLine is an absolute credit to the EMA. • We find the help line to be outstanding so easy to get through to and lovely friendly staff. Online info also very good. A great service overall.
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7
NEWS
A third of Kiwis don’t switch off while on holiday
Smartphones second most important travel item, ahead of travel insurance! Almost a third of Kiwis say they are reluctant to turn their phones off while holidaying. According to a global study from Hotels.com on holiday habits across 28 different countries Kiwis rank 19th work-life balance while on holiday, just ahead of Australians.
Thai travellers are least prepared to give up their mobile devices when on holiday: 85% of them won’t, with Koreans second (78%) and Japanese third (69%). The study showed one in 10 Kiwis regret spending too much time on their mobile device after
getting home from travels, though half admit to checking work e-mails while away, even though more than half (60%) said th ey try to use their holiday to forget about work. But having access to social media, wherever they are, is very important to most Kiwis (80%).
Countries least willing to ditch their devices while on holiday: RANK
RANK
COUNTRY
1
COUNTRY THAILAND
% VOTES 85%
=15
GERMANY
36%
2
KOREA
78%
=15
UK
36%
3
JAPAN
69%
17
US
35%
4
CHINA
67%
18
COLOMBIA
33%
5
SINGAPORE
60%
19
NEW ZEALAND
30%
=6
TAIWAN
53%
=20
DENMARK
29%
=6
NORWAY
53%
=20
AUSTRALIA
29%
3rd Annual 3rd Annual
% VOTES
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ADVICE By Brent Torrens, AdviceLine Advisor for EMA
Do’s and don’ts with trial employment periods Grievance free trial periods of up to 90 days have been a feature of New Zealand employment law since 2009. Employers are able to agree with new employees who they have never employed before that a trial period of up to 90 days will apply from the commencement of employment. If the employer dismisses the employee during that time the employee is unable to bring a personal grievance or other legal proceedings in respect of the dismissal. Two-thirds of respondents to the 2013 EMA Employment Roundup survey indicated they had used trial periods, while 35% said they hired someone on trial when they would have otherwise left the position vacant or re-advertised. But despite the wide use of trial periods, recent cases from the Employment Relations Authority show many employers have found it unreliable because they failed to meet the strict requirements as set out by the Employment Court to put a valid trial period in place. In Hutchison v Canon New Zealand Limited the trial period clause in Mr Hutchison’s employment agreement stated Canon could terminate either by giving one week’s written notice or payment instead of notice. Canon terminated under the trial period by paying in lieu of notice. The Authority said that was not valid as the Act states the employee won’t be able to bring a personal grievance for the dismissal if the employer terminates “by giving the employee notice”. Consequently, Mr Hutchison was able to pursue a personal grievance for unjustified dismissal. In another recent case, Fagotti v ACME & Co Limited, ACME & Co had Mr Fagotti perform an eighthour shift on the job as a trial before offering employment. The activities Mr Fagotti carried out during the shift were normal duties, the same as other employees, and therefore of economic benefit to ACME & Co, and Mr Fagotti expected and received remuneration. Therefore the Authority held that he was working. It held that ACME & Co was unable to agree to a trial period with Mr Fagotti because it had already employed him, albeit for one shift.
Other situations where an employer is unable to rely on a trial period include: - having a trial period clause which does not meet the legislative requirements; - an employee not given adequate opportunity to take advice on the proposed employment agreement containing a trial period clause; - the employment agreement not signed before the employee has started work. Strict application of law
Many employers ask about the process they need to follow during a trial period.While the Act makes clear that good faith obligations apply, it does not prescribe any particular process.Whatever process an employer follows, the employee will not be able to bring a personal grievance for unjustified dismissal if there is a valid trial period in place. However they can for other categories of personal grievance such as for an unjustified action causing disadvantage. Employers can mitigate their risk of a disadvantage claim by following a good process during the trial period. As noted, trial periods can be beneficial for both employers and employees but since the Courts see them as a weakening of employee rights, they will apply the law strictly. Including a valid trial period in your employment agreements, and actively managing the employee in good faith can save a lot of hassle, and potential cost later. Contact AdviceLine or seek help from your EMA Employment Relations Consultant or Solicitor for guidance on trial periods. info@emadvice.co.nz Brent.torrens@ema.co.nz
Trial period checklist
• Ensure the trial period clause meets legislative requirements: - that the trial is for a specified period not exceeding 90 days starting at the commencement of employment; - that during the trial, the employee can be dismissed; - that, if dismissed, the employee cannot bring a personal grievance or other legal proceedings in respect of the dismissal. • Use the trial period only for new employees you have never employed before. • Ensure the new employee is aware of the trial period clause and ensure they have adequate opportunity to get independent advice on their employment agreement. • Ensure the employee signs the agreement before they commence work. • Pre-employment assessments are best done in a mock situation rather than within the business operation. Never offer any reward or create an expectation that the person will be rewarded for any work done in an assessment. • Follow a process during the trial period including giving the employee regular feedback on good or bad, and if necessary remind the employee of the trial period. • If you decide to terminate under the trial period, ensure you actually “give notice” as required by the legislation.
BusinessPlus
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EMPLOYMENT CHAT
He’s stoned and I want to catch I’m sure my young apprentice comes to work stoned, or smokes when he’s on the job or something. I can’t smell alcohol or anything. But he’s very clumsy, has red eyes and lumbers around. With the new health and safety regime I can’t risk his risky behaviour. Can I drug test him? – Stu Dear Stu Caution is always needed when contemplating doing drug testing, and you should seek formal advice. Testing an employee for drugs or alcohol should not be a knee-jerk reaction and it pays to think about why you want to test and what you are aiming to prove. If you determine that testing is necessary, how you proceed is going to depend on whether you have a drug and alcohol testing policy in place. If you have an employment policy that spells out to staff they will be drug tested and in what circumstances and how, you can justifiably follow those procedures. If you do not have a policy, your ability to require a member of staff
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“If you do not have a policy, your ability to require a member of staff to submit to drug testing becomes problematic” to submit to drug testing becomes problematic, and unless you obtain informed consent to testing from the employee, you can’t force him to be tested or punish him if he refuses to be tested. However, you could take the guy aside for a chat – in good faith. Say you are concerned about the errors he is making and the H&S risks they pose. Ask if he is tired or getting enough sleep and good meals, for example. You could also make it very clear that employees who are drunk or stoned at work are a hazard, and how you will respond if you receive proof that an employee has consumed drugs or alcohol before or during work time. It is better to have a policy in place before there is a problem, than it is to try and respond to an issue without one. A drug and alcohol testing policy will usually outline the circumstances under which an employee will be tested and what the outcome will be if the person produces a positive test result. The sample-taking activity depends on the method of testing, ie, whether it’s urine, oral fluid, hair follicle or blood for drugs and breath alcohol or blood for alcohol testing. Drug and alcohol testing tends to be performed pre-employment, as well as randomly, or after an accident/ incident, or because the employer has reasonable cause to suspect that the employee has consumed drugs or alcohol. The outcomes provided for in a policy might include suspension, dismissal or rehabilitation. Having a policy in place will enable you to require an employee to be tested, respond if a test result is positive, and consider disciplining an
employee if they refuse to be tested. All EMA members can hook up to the webinar on “Drugs and Alcohol in the Workplace” on Monday, September 15. Learn to identify alcohol and drug usage in your staff and understand how you can implement a drug and alcohol-free policy for your workplace.
I’ve been shocked to see some of my guys working offsite have been doing things dangerously despite all their training. Surely my guys are as responsible as me for their own safety? – Stu Dear Stu Yes employees have a responsibility to keep themselves safe at work and follow health and safety requirements. You of course as the employer have a duty to ensure the safety of employees and, under the current law, to take all practicable steps to ensure their safety while at work. Where employees fail to follow the requirements set down they risk injury as well as potential disciplinary action being taken against them. Under the new law from next April you, as the company owner, will be classed as a PCBU (Person Conducting a Business or Undertaking) with responsibility not only to your workers but all people who step onto your workplace. Your senior managers and directors will also have a level of responsibility under the new classification as ‘officers’. Employees will continue to have health and safety obligations and will be required to comply with PCBU health and safety policies and procedures. Where action is taken for breaches of legislation the Courts tend to favourably consider early guilty pleas, genuine remorse, solid support for injured staff and serious attempts to follow best practice, including training of staff, and immediate steps to prevent a recurrence. Even with all these mitigating factors, the court recently fined a
EMPLOYMENT CHAT
him out! manufacturer $25,000 and imposed reparation of $10,000 to the injured staff member when the latter’s hand was severely damaged in a machine. It is not a defence that you had good intentions to ward off disaster if someone is injured: the fact of the injury alone will incur penalties.
be looking at compensation for humiliation, loss of dignity and injury to his feelings, as well as for lost remuneration for some months since he stopped work, and even for interest on that money! Plus, there might be a further penalty for not having provided him with a full, signed and agreed copy of his employment agreement before he started. You obviously need to consider what you wish to do now. I would start with a consultation with one of our EMALegal solicitors or an EMA consultant.
“There have been a number of cases where employees have signed the agreement on their first day of work and the employer has therefore been unable to then rely on the trial period”
I had a guy on a 90day trial period in his employment agreement, but when I fired him after six weeks we realised he hadn’t signed the agreement, and now he is claiming he was unjustifiably dismissed. How can that be? - Brian Dear Brian Oops – it really is vital that the employment agreement is signed before the employee starts work. For future reference ensure the employee is provided with the employment agreement in plenty of time before the proposed start date, and returns a signed copy to you before starting work. There have been a number of cases where employees have signed the agreement on their first day of work and the employer has therefore been unable to then rely on the trial period. As mentioned it is also very
important to ensure the employee has reasonable time to get advice before being required to sign the agreement. In the absence of a valid trial period any challenge to the dismissal will be subject to the normal fair and reasonable employer test and procedural requirements. It is therefore recommended you actively manage an employee during the trial period and openly communicate with them with the view to the trial being successful. If the trial period is not successful and the employee is dismissed they may not be happy with the outcome, but at least they will understand why the decision was made. In your situation, if he takes a personal grievance claim to the Employment Relations Authority, and you lose you would probably
• By the EMA communications team in consultation with EMA Advice, and loosely based on real calls to EMA’s AdviceLine. All names are fictional. The information in this article is a guide only and not to be used as business advice without further consultation. EMA members can start with our free AdviceLine team at phone 09-367 0909 or 0800 300 362 (within New Zealand), and 1800 300 362 (from Australia), 8am-8pm weekdays. Alternatively, email advice@ema.co.nz or read or print information such as the A-Z of Employing – a manager’s guide on more than 100 specific employment topics, at www.ema.co.nz
Advice and Support when you need it! 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.
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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 AdviceLine, NZ 0800 300 362, AU 1800 300 362 or visit our website, www.ema.co.nz
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ADVICE
VOTING DILEMMA? CHECKOUT EMA’S EMA’s Election Manifesto–our 6-POINT POLICY PLAN EMA has produced a manifesto of six policies it wants the new government to introduce – our wish list. We prepared this as part of our regular advocacy to influencers, but also for members to use for raising questions with their candidates. Our EMA Election Manifesto proposes just some critical government policies to encourage business success. EMA believes when business is strong, so too are families, communities and Government. New Zealand relies on businesses being successful and providing the goods and services we all rely on, and jobs, incomes, and funding (tax) for government. Running a business in New Zealand is demanding, and becoming more so. We think brave business owners and operators should not be taken for granted; they deserve the community’s respect through a supportive policy environment. The six policies and the background to them are:
1. EDUCATION, SKILLS AND MIGRANTS Businesses are reporting a shortage of skills and that some young people are leaving school without adequate work readiness skills. Plus, more needs to be done to encourage careers in the trades. • We seek Employment Readiness Certificates to be issued to all students when leaving secondary school so a meaningful assessment is available to employers of that person’s skills in reading, writing, mathematics, on-time attendance and attitude.
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2. INNOVATION, RESEARCH AND DEVELOPMENT Current incentives to encourage Kiwi ingenuity to drive the high value, high wage economy are well intentioned but complex and narrow and exclude other valuable paths to innovation. • We want broader and simplified application of grants, accelerated depreciation and tax credits to ensure equitable encouragement is available to all types of innovation. • We seek the introduction of soft loans as another way to encourage innovation.
3. LOCAL GOVERNMENT CONSENTING PROCESS
• We seek an increase in the number of students choosing a trades career through: (i) A national public relations campaign: (A) highlighting trades as a valuable career choice, and (B) encouraging influencers of students’ career decisions to not discourage high achieving students from a trades career. (ii) All students having access to quality, independent, expert career advisors who have no bias towards academia or trades. • We seek a temporary work visa to be automatically extended when a migrant continues to work for, and with the support of, the original employer, unless Immigration NZ can show a suitable New Zealander is available to replace that migrant.
Consenting is slow and unduly bureaucratic, sometimes more concerned with protecting local authorities than facilitating the growth and development of their regions. • We seek all local authorities that issue building and resource consents to: (i) Establish and publish a standard for the total elapsed time between a consent application being submitted and being granted, with unreasonable standards being subject to judicial review. (ii Publicise their performance in meeting those standards. • We want legislation to require building and resource consent functions to be delivered by a co-located, single point-ofcontact in each territory. • We expect a full review of local authority fire regulations to ensure common sense and context is applied.
ELECTION GUIDE 2014 Consenting is slow and unduly bureaucratic, sometimes more concerned with protecting local authorities than facilitating the growth and development of their regions. We seek all local authorities that issue building and resource consents to... 4. SMALL BUSINESS GROWTH Small business is a vital part of New Zealand’s success, but some choose to remain small because the factors required to take the next step are seen as too difficult or too risky. Remaining small or growing slowly means the economy, the workers and owners can miss out on the mutual benefits of expansion, innovation and growth. • We want experienced expert company directors to be appointed as directors of small businesses without exposing them to the liabilities that company directors otherwise face, provided they have no direct financial interest in the business. • We want mergers of small businesses encouraged by allowing them a two-year partial tax holiday following a merger or takeover, with the tax holiday only applying to the taxable income additional to that of the combined taxable income of the small businesses prior to merger or takeover.
John Key - National
Note: A small business is a business that employs fewer than 20 employees. Combined taxable income is calculated by taking the average of each businesses taxable income for two years prior and adding them together.
5. SUPERANNUATION AND BUSINESS INVESTMENT Retirement savings is important for ensuring our older people can live in dignity, for addressing the fiscal costs of the increasing aging population, and assisting businesses expand and grow through retirement savings being invested in them. Providing more flexibility in the age to access retirement savings is desirable. • EMA seeks raising the age of entitlement for National Superannuation to 67, phased in by 2023 with the age of withdrawal from KiwiSaver to remain 65. • We want the tax on KiwiSaver and private long-term savings reduced to 15% and to remove the KiwiSaver member tax credit of $541 per annum.
Metiria Turei - Green
David Cunliffe - Labour
• We want Government to create an equitable commercial annuity product as an alternative option to withdrawing KiwiSaver and other retirement savings in a lump sum. Note: Private long-term savings to be accessible at age 50 or 5 years after commencement, whichever is the later.
6. We want the following CURRENT POLICIES to remain as they are: • Retain or reduce income tax and company tax thresholds • Retain a comprehensive GST regime • Continue to progress Free Trade Agreements • Retain 90-day employment trial periods • Retain youth rates • Retain the Emissions Trading Scheme • Retain the Hazardous Substances and New Organisms regulations • Retain or reduce ACC levy rates • Authorised by Kim Campbell, chief executive of the Employers and Manufacturers Association (Northern) Inc
Peter Dunne - United Future BusinessPlus
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IN THE LOBBY
Economic growth – where it comes from, I’m often asked how we get economic growth. The answer is very simple – it comes from business. There’s a common misunderstanding that growth comes from government or from taxes or wealth transfers. But this isn’t so. Those things may help business to create growth, but it’s only business that can actually do it. Your business is part of an overall sector that is doing some amazing things to produce the growth we all need for successful communities and to ensure a good standard of living. Working with many companies that are EMA members, I get to see first-hand how many outstanding local businesses are creating growth, trading in both domestic and international markets. The manufacturing sector in the EMA region is innovative and productive. Hard manufacturing – machinery, components, boats, yachts, equipment, composites, infrastructure items and the like – is particularly strong.
Soft manufacturing – food and beverage processing – is also strong in this region. Many local manufacturing companies, both hard and soft, are supplying export markets, earning the vital foreign exchange that boosts our growth. Service companies of all kinds also provide a great deal of the economic growth of the greater Auckland region. And many digital companies – local companies using digital technology in a huge range of applications – are growing fast and becoming export stars. All these businesses are the reasons for New Zealand’s strong economic performance. It’s important that the non-business community understands just how central is the role of businesses in creating growth. It’s also important to understand what business needs to be able to grow and succeed.
In this period just before and after the election there is a lot of debate about “what business needs for growth.” Business owners will confirm that some things are essential. First, growth needs investment – investment in in staff, skills, plant, equipment, research and development, marketing, advertising and a myriad of other business needs. Companies need investment from investors or shareholders or from loans or other forms of debt financing. Investment requires a fairly stable environment, since investors will be reluctant to invest and banks reluctant to lend if they think their money could be at risk. That means we need a stable policy environment without sudden big changes in regulation or monetary policy, or sudden increases in tax rates. Growth happens when there’s stability. It is to be hoped that the outcome from this year’s election
Schools work together to pay less for their power Schools are paying up to 25% less for their power by going to the market in bulk tenders and attracting contract offers from multiple power suppliers. In the first six months of this year, a group of twenty four schools saved almost $350,000 on their renegotiated contracts - an average saving of over $14,500 or 18% per school. The bulk tender process was managed by procurement specialists, Total Utilities. All the school business managers had to do was supply details of their previous contract and weigh up the offers when they came in. New Plymouth Girls High School was one of the participating schools and business manager Tony Pugh is delighted with the result. “This is our third contract negotiation with Total Utilities and we’ve saved money every time,” Tony explained. “This year we cut our power costs
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by 24% by getting more suppliers interested in quoting for our business and making the most of favourable contract terms.” In the past Tony has had difficulties attracting such a wide range of offers. “It’s important to present the information to suppliers using the right language in order to get the best result – it can be very time-consuming to manage the process. Total Utilities was able to present us with eight offers from different suppliers, lay them out on a single page and recommend the best contract to us – based on dollars and contract terms.” New Plymouth Girls High School first started working with Total Utilities five years ago when the Ministry of Education changed the way the power was funded, effectively capping the spend for each school. “We initially tried to get together
with other schools in the Taranaki area but it proved too difficult - each school had different contract expiry dates,” Tony continued. “Then we found out that Total Utilities offered a service that bulked school power needs together on a national basis. It’s a great antidote to the hefty power increases that we’ve seen in the past.” “We have saved very good money on the past three contracts and have found the analysts at Total Utilities really easy to work with. The bottom line is that now we are not spending more on power than the Ministry is giving us.” Several other schools in the Taranaki area are now working with the company on Tony’s recommendation. If you are interested in finding out if Total Utilities can help your school, please call 09 5762107 or visit www.tumg. co.nz for more information.
Phil O’Reilly
what it needs will be a reasonably stable, businessfriendly environment. Another factor increasingly important for growth is innovation. Successful companies know that new, improved goods and services are required to satisfy customers’ ever-evolving preferences and needs. Consumers don’t just stand still and aren’t satisfied with just the same products year in and year out. But they will open their wallets for new products and services with new, improved and more relevant benefits. Innovation is essentially people-led. A new product only happens because somebody with the right skills and experience makes it. This means skills are vitally important for businesses to innovate and grow. The skills most in demand at present are IT-related skills, other technologies, engineering and trades. Businesses in the greater Auckland and northern region have been very clear about their need for such skills – skill
“It’s important that the nonbusiness community understands just how central is the role of businesses in creating growth.”
shortages have been the top issue in all recent business surveys. This points to the need for a highperforming education system to produce the skills that business needs. More science, technology and IT in schools and tertiary education is the key. It also requires a general awareness of the importance of such skills for economic growth. More needs to be done to educate young people about the qualifications that are most
needed and the pathways through education to achieve them. These are areas that EMA and BusinessNZ have advocated strongly for in our dealings with politicians and other decision makers. Following the policy debate accompanying this year’s election, it’s to be hoped the new government will place a high priority on better outcomes from education. Hopefully we will also see priority given to raising awareness of the need for people to gain relevant skills to enable business growth. First, understanding that economic growth comes from business, and secondly understanding what business needs to create it – these are two key requirements to help us create a more successful future. Phil O’Reilly is Chief Executive BusinessNZ www.businessnz.org.nz
BusinessPlus
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TAX TIPS Jo Doolan
Project Do It, and our woeful R&D 3rd Annual Administration Professionals Conference
Project Do It is the latest initiative by the Australian Tax Office, aimed at getting3rd Australian taxpayers to rock up to the tax confessional and come Annual clean on offshore dealings that have not been fully disclosed to the tax office. This one-off special has a closing date of 19 December 2014. Those who fail to take advantage of it and subsequently get caught can expect to have the book thrown at them. For New Zealand taxpayers, tax mistakes should be disclosed to the Inland Revenue by using a voluntary disclosure. There is no end date but if you are aware of a failure to disclose a tax error, and opt to ignore it, you will also have the book thrown at you. The penalty and interest regime, on top of the tax cost, means only a very foolish person would opt for a headin-the-sand approach. Project Do It is also something New Zealand taxpayers will be hoping our government will urgently apply to our research and development regime. We are bombarded with promises during the pre-election silly season but the promised changes announced in the May 2014 Budget have still not yet been finalised. Depending on the election result, these may be scrapped or shelved until at least November. According to Statistics NZ, in 2012 our R&D spend was $2.6
Learn from some of the best leaders in administration! Join Budget apply the start of like-minded individuals for a would motivating andfrom knowledge-filled the 2016 income year but full details day where you can learn from some of the best leaders in the have not been released. All we “ If you are market and make sure your professional administrationreally skills know is start-up companies will be are the best they can be! aware of a able to cash in tax losses early rather
failure to than being forced to carry them AUCKLAND | 11 September forward to offset future profits. disclose a tax The benefit will be available to emaevents.co.nz/admin error, and opt commonly owned groups engaging to ignore it, you in appropriate R&D activities and making losses. The cash benefit starts will also have at $140,000 in the first year, rising the book thrown to a maximum annual benefit of at you.” $560,000 in year six.
COMING IN ROTORUA
Payroll ThisConference is a timing benefit, not a grant.
means you| 17th are cashing out the tax NOVOTEL, ItROTORUA September benefit of your start- up losses so will billion, including $600m from the pay tax at a later date. But if you government and $800m from the sell out before you have repaid the universities. A record, yet only 1.27% ROTORUA | 18thtaxes, September in future you will be of GDP and below the OECDNOVOTEL, average amount subject to a quasi-capital gains tax on of around 2.4%. So, without being an ever-changing environment, payroll the proceeds of the sale. professionals rocket scientists, we knowWith future This Annual Conference The proposals have Payroll two main innovation and growthcontinually is at risk. face new challenges. willR&D help you deal with the more challenging of your requirements (tested on aparts group basis Under current legislation role, while offeringwhere you innovative methods and training more than one company is expenditure is generally tax deductible to meet existing compliance andowned). operational demands. We commonly if it is expensed for accounting changes in tax • and20% employment, how to make of the company’s wagewith the under IAS 38 (a detailedcover accounting in your payroll, payroll management standard that most smallcomplexity and medium andeffective salary expenditure must be and companies do not apply),the or use under incurred on R&D, including of supporting tools. Accompanying this is a half-day what we colloquially call “old GAAP”. salaries subject to and Managing Leave toolkit.shareholder Get to grips with annual, parental The changes proposed in the 2014 PAYE, contracted labour and 66% sickness leave.
Managing Leave
2nd Annual Asset Management Conference Asset management to support company objectives
This conference takes a holistic view of asset management to help you get the best performance from your assets. Get up to date with the latest thinking, processes and technology around asset management. Ensure compliance with any new legislative changes that might affect your physical assets and the people that care for them.
AUCKLAND | 9-10 September
emaevents.co.nz/asset
Energy Management Summit
COMPLIMENTARY half-day conference - Afternoon of 10 September
Join us for this half day event that looks at the latest trends, developments and technologies in the supply and cost energy and their implications for business efficiency. Find out about where to get the best deals on energy, the energy audit process, plans for a smarter electricity network with Smart Grid, and more.
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conferences@ema.co.nz | (09) 367 0959
TAX TIPS
investment “If you are contemplating R&D activities, avoid look-through entities, qualifying companies, special corporate entities or publicly listing, as these entities will not be eligible, which seriously limits the benefit of the proposals” of contracted R&D. Sweat equity (shares allocated in lieu of the payment of a market salary or wage or unpaid work) is not included. • The company must carry on eligible R&D which is consistent with the definition used in the accounting standard NZIAS 38 on intangible assets. We are awaiting a list of activities and expenses that will be excluded from the rules. In the meantime if you are contemplating R&D activities, avoid look-through entities, qualifying companies, special corporate entities or publicly listing, as these entities will not be eligible, which seriously limits the benefit of the proposals. There is a deduction for capitalised software development expenditure that does not qualify for depreciation under the tax rules. The deduction arises on the write-off of development expenditure for accounting purposes, irrespective of whether the project has been abandoned before completion, or after some utility. Again there is a
claw-back proposal on a subsequent sale. The depreciable intangible property definitions are also to be extended. As we all scream JUST DO IT, these proposals may or may not see the light of day. A Labour government is promising to bring back its R&D credit with effect from 1 April 2016 at 12.5% (the original regime was at 15%). The regime was widely criticised as too complicated, resulting in only larger companies undertaking the work and investment necessary for a claim. As it applied to pre-existing projects, rather than to new undertakings, many considered it was costly to the taxpayer. But since it was in operation for only a year, it’s hard to be definitive about its efficacy. Labour estimate its new credit regime will cost $42 million in 2016, rising to $382 million by 2021, taking into account the cut-back of existing grant-based initiatives. The Greens are considering a mixture of grants and tax credits
to support R&D activity but are light on the details. They have said any proposal would include a requirement for companies to repay if ownership moves offshore and the ability for the company to provide an equity stake to the government in exchange for the funding. The Greens’ expectation is this would cost $500 million a year. NZ First has also put R&D out as a priority policy but no details have been provided as yet. As we pass through this period of proselytizing into the inevitable horse-trading of the MMP system, it’s hoped support for a wide-reaching R&D credit is not lost in the mix and that the recommendation is for the good of New Zealand. Better still would be a cross party agreement, called Project Do It, that creates certainty and removes the important area of R&D from the political football game. Joanna Doolan is a tax partner with EY joanna.doolan@nz.ey.com
Specialist Employment Lawyers Our legal team spend 100% of their time working solely with employers, to help build and shape New Zealand businesses. Come in, sit down and talk to us about what’s next for your business – if you’re ready to take the next step, we’re ready to make it happen.
Jo Douglas
Managing Solicitor - Auckland P +64 9 367 0917 M +64 27 683 7919
Call us toll free on
0800 300 362
Ani Bennett
Senior Associate - Bay of Plenty P +64 7 577 0488 M +64 27 706 4433
Brandon Brown Solicitor - Auckland P +64 9 367 0912 M +64 21 515 116
Matthew Dearing Solicitor - Auckland P +64 9 367 0931 M +64 27 284 4042
Ashleigh Nelson Solicitor - Auckland P +64 9 367 0922 M +64 27 329 3538
Visit our website
www.ema.co.nz BusinessPlus
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ADVICE By Warren Dalzell
Business break down, or break up ‘conscious uncoupling’ Gwyneth Paltrow coined this delightful euphemism for divorce. Sounds painless! Conscious uncoupling rates in New Zealand continue to decline, from 13 per 1000 marriages in 1998 to 9 per 1000 in 2013. Businesses however are nine times less enduring - 85 per 1000 died in 2013. If we assume that start-up businesses are 75% plural ownership, then 32,000 partnership entities are born and die each year. Only 27% of these survive till their 10th year. (Statistics NZ). So, a partnership is really just a joint venture, with a limited life expectancy. We regularly advise on resolving partnership disputes and departnering – about two every year. Here I discuss the avoidable traps going in, and during the life of the partnership, and some guidelines for partners as the partnership breaks down - and up.
“If we assume that start-up businesses are 75% plural ownership, then 32,000 partnership entities are born and die each year. Only 27% of these survive till their 10th year. (Stats NZ)”
partnership agreement, drawn up by an experienced lawyer. 1. Use the limited liability benefit of a company. 2. Clarify the exit strategy and mechanism, and disputes resolution process.
At the beginning, with 20-20 hindsight:
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Be sure you need a partner – more prudent to share expenses, not profit. Know why you are entering a partnership. Don’t partner because you cannot afford to pay the person. This particularly applies to the General Manager – use quasi-equity. If partnering with a friend, don’t expect the friendship to survive the partnership breakup. Debt money is far cheaper than equity in the long run. Agree your business purpose, plan and funding. Agree control and leadership. Don’t have a 50/50. Know partners’ strengths and competencies – yours and theirs. Agree expected contribution and gainshare. Insist on a pre-nup – a written and signed BusinessPlus
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Managing partner disputes:
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When operating and co-operating (again with hindsight):
• •
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Periodically review business purpose, SWOT and strategies. Regularly review roles, responsibilities and contributions for best outcome and work satisfaction. Focus on the business or systems issue, not the person. Try to show EQ in all partner interaction, keeping open and trusting dialogue which aims at solutions. Don’t let a grievance (eg, about unequal contribution) fester – talk it through and resolve it. Equally, when making significant money for the partnership, ensure your partner knows. Consider an advisory board for perspective and for pushing partners above the
operational trap. Partnership danger rises in losses or in big profits.
• •
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Get the right professional help, that brings experience, judgement, calmness and caring, plus courtesy/respect for the Other Party. Check your rights and obligations. Anticipate wealth destruction if the business is neglected through a protracted dispute, especially if it escalates into litigation. Manage your emotions, accepting that most partnerships terminate. Define early your objective – fix or split. Behave honourably throughout. Feels better and plays better if the dispute ever reaches court.
To my several former and present partners, thanks for the dreams, the experience and the fun. Warren Dalzell is manager of Altiora Associates. www.altiora.co.nz
comment By Donna Purdue and Zoe Wallis
Net migration packing less punch…for now The recent sharp pick up in net migration (the number of permanent and long-term arrivals to New Zealand minus departures) has gained a lot of political and media attention of late and for good reason. In annual terms, net migration reached just over 38,000 in June (its highest since October 2003) and is on track to exceed 42,500 in September – the highest since records began in the 1970s. Net migration booms like this normally see a substantial boost to the economy with higher house prices and stronger consumer spending which leads to higher inflation and higher interest rates. Normally. But this time it seems to be different. In this article we will look at reasons why and ask if we can expect this muted impact to last. It’s different this time
As we mentioned, population growth of this magnitude has typically delivered a substantial demand boost to the economy via higher house prices and strong consumer spending growth. However, this relationship appears to have broken down this cycle, particularly in regard to the housing market (see Figure 1). There are a number of explanations for this disconnect. One is that very high Figure 1 Number
Annual Net migration
Source: Statistics NZ
household debt levels, an earlier start to the interest rate hiking cycle, and the introduction of LVR restrictions have acted to constrain households’ appetite to spend and invest. Another explanation – and one we put a lot of store in - is the different composition of migrants this cycle compared to those of the recent past.
addition, the majority of foreign migrants Delving into the data reveals some are coming in on work visas so are able clear trends that make this net migration to enter the workforce as soon as they boom ‘unique’ relative to our two previous net migration booms (one in the come into the country. Both of these mid-1990s and one in the early-2000s). contribute to a readily available pool of The last two migration upturns were labour which helps keep wages lower. largely driven by arrivals (rather than departures) Figure 2 and typically comprised Net migration and house prices Net Ann% of working professionals with families. This time, the net migration has been driven by fewer net New Zealand citizen departures, mostly to Source: Statistics NZ, REINZ Australia. (Figure 2) The net foreign arrivals (nonNew Zealand citizens) are being led by the young Watch this space and skilled, and most are coming in on The turnaround in net migration work or student visas so they’re here for a since the end of 2012 has exceeded fixed period rather than necessarily being most commentators’ expectations, long-term migrants. including our own. But so far we have So what does this mean? When yet to see the full economic impact that foreign arrivals are dominating the historical patterns would suggest. For flows, intuitively there is pressure on housing demand and prices plus increased policymakers like the RBNZ, that consumer spending. They need to find suggests there is probably a little less to accommodation and they need to furnish be worried about on the inflation front. it. But when it’s changes in departures that However, we are wary of becoming is the leading influence, there is much less too complacent. On current trends net inflationary pressure. The people staying migration is on track to reach close to already have homes and hence 50,000 by the end of this year, and a late there is less turnover in the cycle surge in net foreign arrivals looks housing market and inclination to be the driving influence. Based on Number to spend is likely to be lower. the RBNZ’s own research, that could This is supported by recent spur a second-wind in the housing research published by the market and the economy more generally over the coming year. We recommend RBNZ, which showed that watching this space. when net migration is split into arrivals and departures, arrivals Important Disclaimer: appear to have a bigger house All content is for information only and is not advice. price effect than departures, The views expressed are those of the authors and are and importantly that changes in based on information believed but not warranted to New Zealand-citizen migration have had be correct. Any views or information, while given in good faith, are not necessarily the views of Kiwibank smaller house price effects than changes in Limited and are given with an express disclaimer of foreign-citizen migration1. responsibility. No right of action shall arise or can be In terms of the labour market, the taken against any of the authors, Kiwibank Limited or composition helps explain why the its employees either directly or indirectly as a result of increased population has been quickly any views expressed or this information. absorbed into the workforce. With NZ 1 McDonald, C. (2013) “Net migration and the and Australian citizens dominating the housing market.” RBNZ Analytical Note. flows there are fewer barriers to entry. In BusinessPlus
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ADVICE By Paul Adams
Why IP should be at the top of your to-do list Over the last seven years we have worked with thousands of organisations from ambitious start-ups, to medium sized exporters and manufacturers, and offshore Fortune 100 companies turning clever thinking into successful products and built a global business helping them. We’ve seen triumphant successes and dismal failures but what links all their stories, successful or otherwise, is intellectual property. Yet one of the first things we hear when we sit down with many New Zealand businesses is: “we don’t have any intellectual property”. I can tell you your business does have intellectual property (IP). You may not have patents or trademarks, but IP is much more than those. The most important and valuable forms of IP that most businesses have are things like trade secrets, copyright, confidential information and know-how. Your carefully-cultivated distribution channels, the fact that you have to add X before Y in the manufacturing process, the customer details in your database, or the code in your software platform are all pieces of IP which provide you with competitive advantage and enable your business to run. Try this simple experiment: can you run your business for one week without relying on any of these things – without any IP? It can’t be done and that is why intellectual property is so important. IP in its broadest sense is fundamental to business success. However, despite this many New Zealand organisations see it as secondary or worse. For example: most companies have a Fixed Asset register listing computers, chairs and printers but few have any record, let alone active management, of potentially high value their IP such as trade secrets, copyright, trademarks or inventions. There are two parts to addressing this deficit. First, you can get a better understanding of your IP and raise its profile within the business. Making effective decisions about it and leveraging its value becomes very difficult if you don’t understand what it is, how it works
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and its role in your business. Start by asking yourself the following: • What innovation or IP do we have? • How much are we creating on a daily basis? • Are we doing anything with it? If not, what is happening to it? • What is our true spend on IP protection? • Are we generating revenue or value from it? • Do we have a robust IP strategy for our business? • Is the person providing our IP strategy independent and objective? If you conclude that actually your business doesn’t have an IP strategy or does not actively manage it, then it is important to get some help. There are advisors who can help develop a robust, commercially oriented and importantly, independent IP strategy. In practice your IP strategy should not be defined by the person filing your patents or trademarks. Likewise your advisor should be wellversed in all forms of IP, not just patents
or trademarks. Different businesses benefit from different forms of IP and you need someone who values all forms so your strategy presents a sustainable competitive advantage, rather than simply the filing of patents or trademarks you may not need. Having raised the profile of IP in your business you then need to apply that to specific areas of your business. This means when your organisation develops a great idea, invests in new R&D, files a patent or acquires a company you objectively assess the “intellectual property position” of that idea, R&D, potential patent or company in terms of three key insights: 1. What is the strength and scope of my IP? 2. Are we infringing someone else’s IP and 3. Highly valuable market intelligence about the market and competitors. Next month: The choices each of these insights leads to. Paul Adams is CEO of EverEdgeIP, a leading intellectual property strategy, management and technology commercialisation firm. Paul has been named one of the world’s top IP strategists and was the recipient of the Outstanding IP Leader Award 2012.
www.EverEdgeIP.com.
Raising capital By Mary MacKinven
Building an effective board The global financial crisis and the shifting centre of economic gravity from West to East are two phenomena impacting on the practice and composition of boards of directors and management, said Anne Blackburn, a professional director and consultant. Anne was one of three presenters at the latest Business Intelligence Breakfast in Auckland on building effective boards and high performing organisations. The bi-monthly series are run by Lowndes Associates Lawyers in partnership with EMA. Anne has wide governance experience in banking, finance and infrastructure. She said the GFC exposed poor corporate governance as a major contributing factor to the crisis, mentioning her personal experience at the 250-year-old Barings bank in Britain that went bust overnight in 1995. “There was a management committee of extreme congruity and self-interest, and ignorance of how the key elements of the business were connected,” she said. The same kind of behaviour and its consequences became epidemic and combined to become the GFC. Boards must frequently refer to the business’s key objectives, not let management distract the business from them. The board’s responsibility is collective - every director carries ‘the same amount of water’. None can rely on the technical expertise of others and abdicate responsibility to colleagues around the table so deliberations must be in lay terms so all directors can understand. On the shift of economic power from west to east, Anne said with New Zealand’s fortunes significantly tied to the Chinese economy all our businesses need to factor that in. Director of investment and advisory firm Howard and Company, Ant Howard said, “The relationship between the board and executive team is key. High performing organisations have a quality and engaged board that is not isolated from the executive team nor from the employees. “The skills and experience required of board members changes as the
Kerri Dewe, Anne Blackburn, Ant Howard and Sina Wendt-Moore
Anne Blackburn
MC Kerri Dewe, principal at Lowndes Associates lawyers
company’s challenges change. Where is this company going? Do we have the right skills and experience to take it to the next step? “The board’s role is to energise the organisation, not be a hand brake and
not just for risk mitigation. What’s missing in business is coaches, which are critical for good team work, he said. “A coach is independent and impartial, clear on your goals and holds you accountable, a lot like a personal trainer. “Board members have to play the ball, not the man; the moment it’s personalised you have dysfunction with a big D.” Sina Wendt-Moore is chief executive of Leadership New Zealand. She spoke on diversity, human capital and leadership. “Business needs a strategic approach to diversity, not some PC, Noah’s Ark, tick-the-box approach to show they have two of a kind!” she said. Diversity is not just one thing; it’s to bring diversity of thought to the table. “This [diversity] also reflects stakeholder needs; it’s about the breadth and depth of thinking and experience to really be disruptive and meet the challenges of the organization, and the expectations of shareholders and needs of our workforces. “Diverse teams are more productive and creative than homogenous teams.” • The next workshop is on: “Understanding the place of M&A in your corporate strategy” September 17. Visit business-intelligence.co.nz BusinessPlus
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ADVOCACY
Letter from Australia from Marketing Specialist Bella Katz
Business awards. Are they worth the effort? I’m in Auckland this September all thanks to my Australian client Vacupack, a manufacturer of thermoformed plastic packaging for the food industry. We’re coming across for the Fonterra Vendor Awards and Vacupack is a finalist in two categories. These being the first Fonterra awards the family-owned business has entered, and given the power of the almighty dairy giant’s brand, it’s a very big deal for the Vacupack team. If you’ve ever contemplated or entered your own business into awards of any kind, you’ll know the process can be incredibly cumbersome and pretty costly too. And I don’t mean the cost to enter, but rather the cost of your time preparing for and filling out the submission forms. Dotting the i’s and crossing the t’s. So, if your business works with consultants I’d highly recommend you bat this one over to them. I’m not just saying that because I’m a consultant drumming up work for my peers, as I have to be honest with you,
“It’s an unspoken rule in the marketing industry that you need to spend just as much promoting your sponsorship as you do paying for it. That means have a plan to promote the award at every stage”
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those submissions are no one’s idea of a dream gig. Jot down some bullet points and outsource if you can. Meanwhile, go right ahead and write your award acceptance speech. Awards are one of those intangibles that are difficult to put a true value on, but they certainly don’t hurt the reputation. For New Zealand companies trying to break into Australia, any edge you can have over another company is worth pursuing. Lets face it, we’re all a little impressed when we see a badge on a website. It’s shortcut code for these guys must be doing something right. A number of New Zealand companies I speak to believe their brand is enhanced by winning, making the shortlist or even just being nominated for Australian industry awards. In fact, if you have the inclination and the reason to enter awards in other international markets, you should. It adds another layer and makes your business relevant to the local market you’re targeting. However, like sponsorship, awards are only as good as the attention they receive. It’s an unspoken rule in the marketing industry that you need to spend just as much promoting your sponsorship as you do paying for it. That means have a plan to promote the award at every stage, making the most of the co-branding opportunity with organisers, other worthy nominees and so on. In Vacupack’s case, we kicked into action as soon as the announcement was made. Quick and easy wins that included an email to all clients and contacts through Vacupack’s newsletter, the website was updated straight away and a LinkedIn announcement was made. Should Vacupack win on the night,
“In fact, if you have the inclination and the reason to enter awards in other international markets, you should. It adds another layer and makes your business relevant to the local market you’re targeting”
we’ll be marketing that baby and splashing the badge around with great pride. And in practical business terms, Vacupack’s work with packaging Fonterra products in Australia will be validated by a valued client, to the industry and to all their staff. That’s the kind of value that’s priceless.
Bella Katz is an Australia-based brand and marketing consultant, and regularly advises New Zealand companies on how best to position in Australia. She specialises in marketing for the business to business sector. bella@bellakatz.com.au, LinkedIn
GROWING BIGGER COMPANIES INTERNATIONALLY - The ExportNZ election manifesto 2014 ExportNZ supports every effort that will keep the NZ dollar at a competitive level against our main trading partners. ExportNZ recognises the value of the dollar is influenced significantly by commodity prices but policymakers must keep an open mind as to solutions. The Reserve Bank should continue to target inflation and remain independent. The Government of the day can take the pressure off the dollar by keeping spending in check and balancing the budget. Bigger Government debt equals higher country risk and higher costs of borrowing. Government tax and spend policies lead to priming the domestic economy at the expense of the tradeable sector, higher interest rates and a higher currency. Policies that take the inflationary pressures out of the market are positive, such as freeing up land for new houses to rebalance supply and demand and making consenting processes quicker and more affordable. Pursue free trade deals like TPP
ExportNZ encourages bi-partisan support from our leading political parties to continue the pursuit of high quality free trade agreements. Sitting on the side-lines would risk our competitiveness. Given the highest tariff barriers still tend to be on primary sector exports New Zealand has a lot to gain if we get this right and a lot to lose if we do not. As well as reducing tariffs and improving market access, FTAs can reduce the cost of doing business, and increase the speed and optimise the operation of supply and value chains. Continue to invest more in overseas market assistance
Exporters value the assistance of NZTE and MFAT in overseas Markets; they tell us this is the most important assistance from Government they could get. They need more help than hitherto in the more traditional English-speaking markets.
GROWING BIGGER COMPANIES DOMESTICALLY Population policy
A larger domestic population would lead to larger local demand. We are a large country with a small population. Bigger populations lead to economies of scale and increased investment in infrastructure and logistics, etc. The OECD suggests that Australia’s scale more than compensates for the adverse effects of distance from markets.
“The government of the day can take the pressure off the dollar by keeping spending in check and balancing the budget”
Strategic use of Government procurement
Government accounts for around 40% of GDP. Government should help grow bigger companies by ensuring the economic benefits of using local suppliers are factored into their procurement purchasing policy. Government procurement should not be used to protect local companies from international competition, but to give them the opportunity to become bigger and more internationally competitive. To be successful, the cost of tendering etc. should not be a barrier to the many small to mediumsized companies in the New Zealand economy. In addition, Government procurement policy should be careful not to destroy the local business ecosystem with the pursuit of “All
of Government” contracts in a small economy. Suppliers believe this is all about least cost supply, rather than an evaluation of quality and service and innovation. Access to finance
Growing bigger companies requires access to finance and capital when required. ExportNZ supports new ways to access capital from crowd funding, to greater investment in the Venture Investment Fund and the Angel investment part of the market. ExportNZ supports the important role of the Export Credit Office. We support competition policy keeping things fair and competitive
It is hard to grow from a small domestic company into a larger exporting company when dealing with buyers or suppliers with greater market power. The Food and Beverage Information Project undertaken by MBIE showed the big potential of added value food and beverage exports. Collaborate onshore to compete offshore
A way to grow bigger companies of scale is for smaller companies to work together in overseas markets (eg collaborations in wine, avocados, marine, aviation) facilitated by NZTE and permitted under competition policy. ExportNZ supports methods to increase company collaboration and clusters. ExportNZ supports the unlocking of the Maori export potential as an important contributor to Aotearoa NZ Inc. More investment in capability building
ExportNZ advocates extending investment in programmes like innovation, design, efficient practice (LEAN), better procurement practices, and better management capability. BusinessPlus
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Member noticeboard
First vocational educational group on stock exchange A listing on the stock exchanges of both New Zealand and Australia is one of Intueri Education Group’s key achievements so far. The company owns vocational schools such as The Cut Above Academy and the New Zealand School of Commercial Diver Training that provides training across diverse industries. It has just announced its first trading results since listing and they are exceeding expectations. A success has been the awardwinning NSIA -The Professional Hospitality Academy opening of a new commercial training kitchen and restaurant in central Auckland which allows students to sharpen their skills in front of paying real-world customers. The kitchen and restaurant ‘Orange’ is in NSIA Tower in Symonds St and offers business customers a high quality and affordable dining experience – with the added benefit of ensuring students get a real taste of their future careers. Awarded the sought-after Training Excellence Award eight years in a row at the National Culinary Fare competition, NSIA attracts a high proportion of international students and provides both hospitality and culinary arts programmes. Intueri also works closely with industry partners to ensure graduates find employment. Intueri’s recently acquired Quantum Education Group has proudly chalked up 20 years offering students quality
outcomes, says Mr Facer. Intueri is New Zealand’s only publicly listed vocational education group. Mr Facer says the process of issuing an Initial Public Offering (IPO) and listing “might seem sexy but it’s a tough gig”. An essential part of preparation is to be clear what the end goal is. “A big part was to broaden the share base as we were 100% owned by an Australian investment company. Our teaching is 70% to New Zealanders Intueri Education Group includes the NZ School of Commercial Diver Training compared with 20% teaching international students and there were opportunities very focused on ensuring we met to grow, so access to capital markets in our compliance obligations. There’s New Zealand seemed sensible.” a large amount of reading involved The dual listing took an extra amount and detailed work! But we had lots of of time to engage with a broader support from our owners about what portfolio of investors and retail brokers. we were required to do. Mr Facer said “We had lots of “Managing compliance is a huge task.” conversations with potential investors “Most importantly, I must say a humble ‘thank you’ to our broader staff before we pushed the IPO button, to team who are absolutely passionate get their feedback.” about what they do and absolutely He says companies and brokers are committed to delivering practical and investing in people as much as in the relevant outcomes to our students.” business. “We had a very good and diligent due diligence committee Worth it
Intueri’s North Shore International Academy attracts a high proportion of international students.
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On the positive side, Mr Facer says the IPO was an incredible learning experience. Intueri managed to list in the reasonably short timeframe of about five months from wo-to-go, when 12 months is not unheard of. “And in the month since we started trading in May, our shareholders have gained 10% return on paper. The share price in the IPO was $2.35 and that went to $2.70 on the first day. It is now at $2.90-plus. So I’m very happy with that and with demand, though we have to grow our retail investor base, and we will.”
Member noticeboard
R&D company ticking over 24/7: Adept A gun that stuns fish for engineering in house and by 3D printers at the an instant painless death, design, mould tool University of Auckland and overseas. and an armrest for patients design, mould • Murray and Carla are in the US to facilitate forearm tool manufacture, this month [September] to show catheterisation are among injection moulding, their new carbon fibre armrest with inventions designed packing and anti-radiation properties developed and made at Adept, an storage. with a New Zealand cardiologist. Auckland exporting Medical and The armrest system allows for company that prides itself meat industries are catheterisation through the wrist on making products that a focus. Murray instead of the groin, minimising improve people’s lives. says both require risk and side effects during heart Founder Murray Fenton a lot of paperwork surgery. The system also incorporates set up the business in his to meet regulatory a lead shield to reduce the operating garage when he was 21, requirements. In surgeon’s exposure to radiation as Murray Fenton, founder and managafter failing engineering fact regulation such multiple x-rays are taken during the ing director at Adept school and thinking he as the required procedure. could do as well as some companies testing of products in clinical he had worked for. trials can cost millions. Murray is still wedded to the Adept has many patents in business, the sole shareholder with effect, and more pending, one life partner general manager Carla for a method controlling the flow of liquid food through Tewkesbury. Adept employs about 80 valves directly into the stomach staff; and the business runs 24/7 to of people with throat cancer or supply distributors worldwide. other eating restrictions. Murray generously showed fellow Murray said getting it EMA members around his plant last market-ready has already taken month. three years and cost half a The company specialises in product million dollars. design and manufacturing, mostly in He says most ideas aren’t plastics but also carbon fibre. Robots likely to be viable: “10% are are attached to all of Adept’s 24 worth following up and 1% injection moulding machines. might be commercially viable.” Murray said most output was done Some prototypes are made in-house, including product design, The toolmaker’s tools are many and varied.
3D Printing opening new world for fast prototyping, model making With 3D printers it is now possible to create physical models and such as product prototypes and floor plans in far less time and at a substantially reduced cost and effort. For example architects have long relied on CAD and sophisticated 3D modeling to bring designs to life but the growing accessibility of 3D printing is changing that. As Whakatane-based architect
Martin Jackson, says “As printer technology becomes the norm, you could email designs through to clients, send models of building components, furniture and so on, to sub-trades and builders.” Paul Francois, product manager at Comworth, points out “now it is possible to create such things as physical models and floor plans in far less time and at a substantially reduced cost and effort. For
example, the XYZ Da Vinci can produce models or components up to 20 cubic centimetres; with a 600 gram consumable pack costing $45, meaning a model the size of a pack of cards costs around $1- $2.” Internationally, architects are putting 3D printers to work: http://www.metropolismag.com/ Up to the scale of whole houses is now possible with macro 3D printing. BusinessPlus
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MEMBER NOTICEBOARD
Manufacturing engineered Twenty years ago Paul Raethel woke up one morning to find himself the owner of a new engineering company in Kawerau: a “scary step”. At the time Tasman Pulp and Paper had decided to divest itself of noncore businesses; Allied Industrial Engineering (AIE) was spun off and now Paul was in charge. “One day I took off my overalls as workshop foreman and an employee, and the next day I had a business to run with six staff and their families relying on me to get it right and pay them each week,” Paul says. To start with AIE had existing contracts to maintain the pulp and paper mill but it was soon seeking other opportunities and projects to make use of the company’s talent, heavy engineering plant and competitiveness. Now the company employs 60 fulltime. Over the years AIE has developed its knowledge base to offer services to the marine, defence, oil and gas, dairy, pulp and paper as well as other sectors, building a reputation for excellence also in refurbishing and manufacturing power generation equipment in the hydro, thermal, geothermal, wind and wave energy sectors. A recent development has been in providing ‘water to wire’ hydroelectric packages for mini and micro hydro schemes. These packages
Paul Raethal (I) and Kelvin Wright
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include the engineering, manufacture, assembly, delivery and commissioning of all components and systems required to generate electricity: electrical, mechanical, protection and governing systems. “These are ‘run of the river’ schemes,” Paul says. “They don’t depend on the damming of rivers. They’re green. More and more people want their power supply to be green and local.” Green projects
The company has completed projects for New Zealand hydro power producers Westpower (Amethyst, 7MW), Trustpower (Patearoa, 2.1MW, Esk-Toronui 1.7MW and Rimu 2.4MW) and to the Australian hydro power producers Somerset (100KW) and Tasmanian Irrigation (Midlands 7.1MW). He notes that as environmental consciousness becomes a higher priority in South East Asia and the Pacific, the removal and replacement of diesel generators presents an opportunity to partner with larger consultancies to provide mechanical and electrical solutions. To capitalise on their technical IP and experience AIE works with New Zealand Trade and Enterprise and the
New Zealand Export Credit Office to develop a more specialist and ‘in house’ approach for the delivery of renewable energy projects offshore. Additionally, AIE has undertaken work in Fiji, Papua New Guinea and the Philippines, looking to further capitalize on its experience in the South East Asia market and within geothermal, having worked closely with Mighty River Power and Contact Energy on several geothermal projects. Asked how an engineering company can thrive from a regional base in Kawerau, Paul notes that, “Whakatane and Rotorua are close by, giving lifestyle options for staff (our biggest asset), as is the Port of Tauranga, giving world class shipping access right to our front door. “There’s a wealth or resources right here. Some of the world’s best geothermal reservoirs are underfoot, the Kaiangaroa forest is accessible by miles of off-road highways delivering logs for processing to Kawerau, clean water flowing from Lake Tarawera via the world famous Tarawera falls, and industrial land is still relatively cheap. “It’s a resource and industry super hub that is yet to be fully utilized. “However, as I mentioned earlier,
Weld overlay on turbine rotor
excellence in Kawerau Rob working on large Francis Hydro Runner
for a business to thrive, you need good people. “I quickly realized that if the business was to fulfil all it could be then I needed to employ people better than myself to do the jobs they were better at than me,” Paul says. “Without good people, we have nothing”. Some of their people include Paul Sommerville who heads up the Technical Services Dept, Tim Whalley running the workshop teams, and sales and marketing manager Jevon Priestley who has spearheaded the drive into ‘water to wire’ hydro projects, and most recently AIE’s new chief executive, Kelvin Wright. Growth plans
“Most recently we have looked at where the business was at and where it needs to go,” Paul says. “That’s when we made a step change in the day-to-day running of the business by appointing Kelvin as CEO. So, where does AIE see itself going, going forward? Kelvin says: “In terms of growth, AIE has had some challenging years as local manufacturing options have become pressured. Globalisation has allowed previously distant original equipment manufacturers (OEMs) to offer very competitive replacement components from offshore, hence the traditional local manufacture of replacement parts has decreased as OEM capability, often based in Asia, has expanded. “Although we have some exciting development opportunities in the renewable energy sector we see this as more of a change in the mix of work we do. “In the longer term we will look to grow the Allied group through the acquisition of companies that are
Mike loading ship propellor into vertical lathe
Kapiti Coast District Council Sludge Dryer leaving AIE
complementary to our core business.” Chatting with other staff, you get the impression that Paul and Kelvin are not the only ones enthusiastic about the business and the region. They say: • “AIE is a great place to work and The Eastern Bay is an absolute paradise.”; • “With an easy half hour
commute to AIE, there’s the ocean and fishing, the bush and hunting, the beach and surfing, the lakes and trout … it’s a beautiful part of New Zealand.” And Paul’s thoughts looking back on 20 years of business? “It’s not scary anymore,” he laughs. BusinessPlus
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Out & About
Team Leaders Conference, Auckland
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1- Simone Guy [ANZ] and Bridget Morris [EMA] 2 – Craig Player, Devin McMaster, Louis Deverall and Rob Barr [Schindler Lifts NZ] 3 – Sonya McHardy and Andrea Moosa [Auckland Council] 4 – Richard Lamb [WorkSafeNZ] and Erin Boyle [EMA] 5 - Bruce Cowan [Thexton Armstrong], Adam O’Connor [ICONZ – Webvisions] 6 – Vaness MacNeil [Humes Pipeline Systems] and Teresa Mann [Energizer NZ} 7 – Margo Searle [Drake NZ] and Catherine Newton [Catherine Newton International] 8 – Carmel Murphy [Networking Queen] 9 – Emmanuel Balbas and Te Omeka Morehu [ICONZ – Webvisions]
Graduation from Ultimate Team Leader course, Auckland
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1 – Shireen Wells, Mary Chapman, Te Whakatutuki Wade and Denise Puhi [Family Start Manukau] 2 – Wallace Lui [Cotton Soft] 3 – Aaron Newland [Archgola] and Ralph Stock [EMA] 4 – Andrew McKeown [JB Attachments] 5 – Fiona Coyle [Quantum Education Group] 6 – Nicholas Powell [Allpress Expresso] 7 - Tamara Gugich [OneLink]
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