Small business owners are terrified of making mistakes when handling employment issues. They don’t have the time, money or inclination to get up to speed on employment law — it’s all too hard. This fear is the bottle neck that is strangling NZ’s economy and preventing growth and increased prosperity for all New Zealanders.
If NZ’s 450,000 small businesses grew and employed more people, our economy would lift and all New Zealanders would start to experience a significant improvement in living standards. But this prosperity is being held back by complex and un-necessary employment laws.
Terry McLaughlin, CEO of the NZ Institute of Chartered Accountants, was recently quoted as saying that we have too many small businesses in New Zealand and this is restricting our economic growth. He went on to say that we need more big businesses in order to sustain them.
He’s probably right, but the question must be asked: Why do 90% of all NZ businesses fail to grow beyond five employees? These small business owners will tell you that employment law is stacked against them. It is too complicated and makes it too expensive to defend themselves against employee attacks.
Let me demonstrate the complexities of NZ’s employment law. Due to all the fuss relating to dismissals, you would expect the employment statutes to be clear so that an employer knows what is right and wrong. Well it doesn’t! Out of the 300-plus pages of the Employment Relations Act only one paragraph is provided to guide an employer as to when they can or cannot dismiss and it comes down to this one sentence.
| “The test is whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred”.
What does that mean? If you ask a lawyer, be prepared to pay an extra 10 to 15 minutes of consultation fees and to receive a very wordy explanation, after which you will not be any wiser.
A few years ago, the National Government decided to improve the dismissal laws. We were very excited; at last something will be done; however, all they did was change one word in that sentence. They changed “would” to “could”.
For over a year no one knew what this meant, including the lawyers or the Employment Relations Authority. Finally the Employment Court handed down a decision from a case that gave only lawyers an idea what this change meant.
So how is a small business person supposed to know when they are allowed to dismiss an employee?
Many employers say, “I built and own this business. What right does the Government have in telling me why when an employee is to be dismissed”?
Often those few brave small employers, who do dismiss, find themselves in front of the Court or Employment Authority and claim that they were unaware the law prevented them from dismissing in the circumstances. They are told by the judiciary that not knowing the law is no excuse.
This law is ridiculous, impracticable and only serves the purpose of feathering the law fraternity’s pockets. How are our 450,000 small employers supposed to get guidance from that one sentence? They don’t; they simply avoid employing people by keeping their business small. Who suffers? All of us: the Kiwis who have stayed in this country as our potential prosperity and well being is held back by these overzealous employment laws.
Why are small businesses ignored?
When creating employment laws our politicians and the government officials seem to focus only on large businesses and their relationship with unions. Why? Because most of our politicians’ employment backgrounds stem from big businesses, unions, government departments, legal or teaching professions.
Big business and the unions involved with them also employ professional lobbyists to engage with our politicians and convince them that big business and unions are all that matters.
This gives the politicians the perception that our economy revolves around only big enterprises. Whereas 97% of all employers employ less than 10 people and generate just under half the Nation’s GPD. These figures come from their own Department of Statistics.
What’s the Solution?
Some say remove employment laws all together, but unfortunately our society is full of people who will cause pain and suffering to others, either accidental or, in some cases, deliberately.
We let these same people drive lethal weapons like motor vehicles; to mange that we have police to enforce our traffic laws using infringement notices and the power to prosecute.
In the employment environment we have labour inspectors who could do this, but unfortunately they are hopeless and are generally reluctant to police employment issues or enforce employment law.
If New Zealand had a road code for employment and our labour inspectors enforced this code and responsibly imposed infringement tickets on employees and employers when necessary, then hopefully our small employers would then have clarity and confidence to grow and prosper.
Just imagine if this became New Zealand’s next problem: Too many jobs, not enough people and escalating wages; living standards soaring and our young returning from overseas. Certainly that would be better than what we have today, with our living standards deteriorating, wages stagnating and our cost of living escalating, primarily, in my view, caused by our overzealous employment laws.