Our Leader in Indian Newslink Digital Edition (December 15, 2023)
Venkat Raman
Auckland, December 16, 2023
Workplace Relations and Safety Minister Booke van Velden has done well to introduce two important pieces of legislation to Parliament this week: Repealing the Fair Pay Agreements System and restoring the 90-Day Trial Period applicable to all companies and employers, revoking the existing law which excluded those employing fewer than 19 persons.
As Ms Velden and her (ACT) Party Leader David Seymour had argued during their election campaign, Fair Pay Agreements (introduced by the previous Labour government) have undermined the flexibility of the labour market and the 90-day Trial period discriminated against small companies, which indeed constitute a majority of the business sector.
Employment Market Equity
While these two bills will some sanity into the employer-employee equation, there is an urgent need to bring equity into the employment market. The new Coalition government should consider amendments to the Employment Law that will ensure minimum rights (not just maximum responsibilities) to employers; more importantly, there is a need to empower them to exercise their right to expect and receive better employee performance and optimise productivity. While the Employment Relations Authority functions well to protect the interests of the workforce, there is no such Authority to protect the rights of employers.
Trade Unions, Collective Bargaining and Worker Representation are essential components of a good democratic system. They are also essential to ensure that employers, especially large entities do not exploit workers and have in practice systems and schemes that promote their welfare.
But on the other side of the coin, there is now a growing need to protect employers from exploitation as well. We often hear from entrepreneurs and HR managers that they are constrained from exercising their minimum rights to optimise productivity and profitability. Many of them are frustrated and are on the verge of calling it a day.
The German Example
In the 1990s, Germany was cited as an excellent example of an ‘industrial democracy.’
In contrast to Britain and the United States, where employment contracts are negotiated company-wide or individually, Germany established an extensive system of centralised, industry-wide collective bargaining, with almost 60,000 agreements. Unions were also given a say in how firms are run. If a company has more than 2000 employees, half of the seats on its supervisory board must go to employee representatives.
They called this system co-determination. Arguably, these principles served Germany well and helped explain why the country lost a mere nine working days per 1000 workers annually between 1992 and 2001, against 22 days in Britain and 48 in the United States. Industry-wide bargains spared companies from having to negotiate their own pay deals, and the practice of co-determination has smoothed the way for corporate restructuring.
According to the Economist, the drawbacks of the system have now become apparent. Pay rises were too high, adding to Germany’s unemployment.
“Centralised bargaining is a blunt instrument: it cannot allow for variations within a sector, nor the specific needs of a firm. As for co-determination, that system has started to look rather out of step with the imperatives of an accelerating global economy. The bedrock is crumbling. Employers’ associations, in particular in the engineering sector, are losing members even faster than unions and not just in the East where a mere 22% are now bound by a union pay deal (against 45% in the West). Worse, firms are moving jobs abroad,” the publication said.
Promoting better Employee Relations
Notwithstanding the above, good employer-employee relations cannot be over-emphasised. Employers must do their best to have in place a good work environment, ensure the health and safety of all employees and have systems and procedures that reward employees for their work.
Some time ago, an Economist Survey wrote about the changing business world and the need for greater cooperation and opportunity on this issue.
It quoted Management Guru Peter Drucker on the changing nature of corporations.
First, the power dynamic between employer and employee has become more complex; employees, aware of the value of their knowledge, hold a more privileged, less deferential position in
negotiations. Second, the changing nature of manufacturing has led to a necessary emphasis on supply-chain management and on coordinating production among several plants with varying degrees of independence. Finally, the physical costs of communication technology have dropped to the point where, as Mr Drucker puts it, “the most profitable and most productive way to organise is to disintegrate.
As Mr Drucker rightly points out, such loose confederations will need top management to set the organisation’s principles, direction, and priorities. But both at the very top and among the confederate partners, greater communication will be necessary to preserve working relationships. Managers need to be better negotiators, both with their employees and with outsiders. Some businesses have already learned to cooperate with competitors, for instance in alliances. These proliferate among airlines, which combine frequent-flyer programmes and ticketing.
In a commentary on Labour Markets on November 28, 2023, the Economist said, “How things change. In the rich world, workers now face a golden age. As societies age, labour is becoming scarcer and better rewarded, especially manual work that is hard to replace with technology. Governments are spending big and running economies hot, supporting demands for higher wages, and are likely to continue to do so. Artificial intelligence (AI) is giving workers, particularly less skilled ones, a productivity boost, which could lead to higher wages, too. Some of these trends will reinforce the others: where labour is scarce, for instance, the use of tech is more likely to increase pay. The result will be a transformation in how labour markets work.”
Good times are coming!
