In 2011 legislative amendments were introduced to the Employment Relations Act 2000 and the Holidays Act 2003. These amendments were designed to improve the operation of the labour market by achieving lower compliance costs for employers, faster problem resolution, greater clarity and more choice and flexibility for employers and employees.
This is phase 2 of a two-phase evaluation of the amendments. The first phase evaluated the then-Department of Labour’s role in implementing the legislative changes. The purpose of this phase is to understand the extent to which the changes are working as intended, and to identify factors that have influenced the short-term outcomes observed so far amongst employers, employees and intermediaries such as unions and problem resolution providers. This is a short-term outcomes evaluation; the full effects of the variety of changes introduced, such as changes to problem resolution processes, are likely to take longer to fully emerge.
It focuses on the following key areas of legislative change:
- Allowing all employers the option to use trial periods of up to 90 days.
- Changes to the Holidays Act, in particular:
o the ability to cash in up to one week of annual holidays
o the ability to transfer public holidays to another working day
o providing a different method of calculating payments for some types of leave and holidays, called Average Daily Pay or ADP, and
o making it easier for employers to ask for proof of sickness or injury.
- Changing unions’ access to workplaces conditional on employer consent and clarifying that employers are able to communicate directly with employees during collective bargaining.
- Making changes to problem resolution institutions and processes.
Methodology
The evaluation involved a mixed-methods approach, bringing data together from a number of sources including:
- examining results from four surveys, covering employers, employees and unions
- interviews with key commentators, employers, employees, unions and providers of employment relations services, such as mediators
- analysis of case law and administrative data.
The four surveys used had maximum margins of error for the total sample at the 95 percent confidence level ranging from approximately +/-2.5 per cent (for the Survey of Working Life employee sub-sample) to +/- 5.7% (for the 2011/12 National Survey of Employers). Margins of error for sub samples, for example for larger businesses only or for groups working in particular industries, were larger than for the total sample. The limitations of sample size were mitigated by triangulating results across the four quantitative data sources, as well as against the qualitative findings from the interviews.
Key Results
Overall, the findings indicate that the amendments to the Acts have achieved some of the policy objectives in the short-term.
Trial periods
Trial periods are being used by both small and large firms across a range of industries and positions, at higher and lower skill levels. Survey results indicate that the use of trial periods was spread across most groups that started work during 2012, including the more disadvantaged groups such as Māori and youth. Interviews with employers revealed that the main reason for their use is to help manage risk when trialling new staff.
Employers reported in interviews that trial periods have reduced the potential cost of dismissals (and thereby the risk of new hires), and not added any additional costs. Results from the National Survey of Employers (NSE) show that 72 per cent of employers who had used trial periods had not dismissed an employee on a trial period; 27 percent of employers had dismissed at least one employee during or at the end of the trial period. Interviews with employers who had dismissed staff indicated they followed correct procedures and said they more comfortable that there would be no comebacks.
Generally, neither employers nor employees reported that trial periods had changed the nature of their usual employer/employee relationships.
Holidays Act changes
The Holidays Act changes have increased flexibility and increased choices for some employers and employees, although choices for some were hindered by a lack of awareness of understanding of some of the amendments or of the previous legislative requirements.
Some employers interviewed reported that they are finding that the Holidays Act provisions are difficult to apply in some work arrangements, such as for people with variable work hours or shifts. In particular, translating employee entitlements from a daily to an hourly measure for payroll systems is creating difficulty for some employers.
The impacts of the Holidays Act changes on firms’ direct and compliance costs were minor. For firms that had implemented the changes, most reported that costs remained the same. In general, the compliance costs for calculating entitlements and payments have remained the same.
Union access and communications during collective bargaining
The changes to union access and communications during collective bargaining were reported to have little impact among employers and unions and did not increase the number of problems reported.
Problem resolution institutions and processes
The amendments that related to mediation have made little difference to the flexibility of the service. The provision for formal recommendations by the mediator has increased the choices available to the parties in a dispute. However, it is not clear how often this is taken up, or how often recommendations are accepted as there are no records kept. This provision has increased the use of informal recommendations by mediators.
It is unclear whether the amendments to problem resolution processes have affected the duration of employment problems. Respondents reported little change in the time taken to resolve cases as a consequence of the implementation of the amendments, and administrative data supported this finding. Other factors (like restructuring in some institutions) are likely to have had a stronger effect on their duration.
Key commentators said that fairness in problem resolution processes was relatively well balanced between employers and employees. The balance has not significantly changed as a result of the amendments. The changes to the test of justification have not resulted in any practical changes, although codifying of the tests may have increased the transparency to the disputants.
The amendment relating to preventing mediation settlements being agreed for less than minimum entitlements was sometimes seen as not helping the balance of fairness in situations where the employer did not have enough funds to pay the employee’s full entitlement. As such, agreement could not always be achieved in some cases.