Courts empower employees

Employers
in Australia and New Zealand are facing an uphill struggle to recruit and
retain good staff against a background of mounting employment legislation.
Richard Rudman reports

These
are good times for recruitment consultants in Australia and New Zealand. Demand
for skilled and experienced staff remains high in relatively buoyant and
confident economies. And perhaps most significant for consultants, employers
are making much greater use of external providers for the recruit and selection
processes.

At
the same time globalisation has arrived with a bang. Mergers, takeovers and
alliances are no longer hot news, and most of the world’s big players are now
participating or represented in the Australasian market place.

International
link-ups can bring new services, better technologies and access to worldwide
networks. Yet, according to a New Zealand consultant who is resisting offshore
suitors, many agencies are still "body shops" staffed by
inexperienced recruiters driven by commission-based earnings. By keeping in
touch with the individuals they place in jobs, recruiters can add to the
employer’s problem of employee "churn" in a tight labour market.

These
are also good times for Internet recruitment sites. Australians and New
Zealanders have always taken enthusiastically to new technologies – and the
popularity of e-recruitment is clear from the ANZ Bank’s job advertisements
surveys. Internet advertising in Australia has grown from a monthly average of
20,000 adverts two years ago to 90,000 today, while newspaper advert numbers
have fallen from 26,000 to 22,000. In New Zealand, Internet job advert numbers
have risen by one-third in the past year to a monthly average of 14,000, while
newspaper advert numbers have remained steady at around 29,000.

These
are good times too for job applicants. Demand for skilled labour remains high.
Which means employers have to bid up salaries and benefits for those whose
skills and experience are in demand. Plus the law offers ever-increasing
protection for employees.

So
these may not be such good times for employers. Fuelled by a job boom in IT and
e-commerce, and international shortages in other occupations, the
"churn-and-burn" rate for many staff is rising. Some employers are
responding by shifting their focus from recruitment to retention, reckoning
that it will cost less – and prove easier – to keep hold of their current good
performers than to find, hire and train replacements.

However,
these efforts by employers can be thwarted. Earlier this year, for example, the
New Zealand government became concerned that the non-taxable status (as capital
sums) of so-called restrictive covenant and inducement payments was threatening
the tax base. These payments are now taxable as income, and are thus less
effective as incentives for staff.

Employees
in both countries seem to be enjoying greater legal protection of their
contracted rights and privileges. New Zealand, for example, has had a statutory
remedy for unfair dismissal for 30 years. Originally, it applied only to staff
covered by collective instruments or to union members. Now, it applies to every
employee – regardless of level or position in the organisation. Laws to protect
employees from arbitrary dismissal were introduced in Australia during the
1990s.  

In
both countries these laws may have gone further than intended, often giving
more weight to procedure than substance, and thus giving inefficient and
under-performing workers a means to contest their dismissal. Employers often
found it easier to pay up than to fight these cases through the employment
tribunals.

Facing
this risk, many companies adopted defensive strategies which still influence
their recruitment and employment practices. Letters of appointment, for
example, which set out employment terms and job requirements in minute and
legalistic detail are common.

Some
prefer not to employ any permanent staff, relying instead on contractors and
staff from temp agencies. Research reported in Australia’s Business Review
Weekly indicates that 11% of Australian companies now hire more temporary and
contract staff, and 5% have cancelled or suspended plans to recruit more
permanent staff – all because of the unfair dismissal rules.

One
thing is clear in both countries – bad recruitment decisions can be very
costly. This is especially true if an employer attempts dismissal without
giving the staff member a series of oral and written warnings and a reasonable
opportunity to improve performance.

One
way around this problem is to hire a temporary employee or contractor from a
recruitment company and later offer that person full-time employment if there
is a good match. But care is needed. In New Zealand, new employment relations
legislation empowers the courts to determine whether a so-called contractor is,
in reality, an employee and thus entitled to the benefits of being an employee
regardless of the label the parties might give their relationship.

Moreover,
hiring people on a trial or probationary basis is no longer a defence if the
employer tries to dismiss a short-term employee who proves unsuitable. In
addition, all prospective employees must be given written details of a proposed
employment agreement – and time to take advice on it. As a result, both
countries have seen an upsurge in detailed employment contracts and, at senior
executive levels, so-called "pre-nuptial" agreements providing hefty
payouts for individual employees who don’t make it.

These
are good times indeed for employment lawyers and consultants.

Changing
the face of employment legislation


New Zealand government taxes inducement payments to retain staff.

 


Every New Zealand employee is afforded protection from unfair dismissal.


Australia has introduced laws to protect employees from arbitrary dismissal.


Loophole closed over employing contractors and temps. In New Zealand, courts
can extend legal rights to them.


Protracted dismissal process includes a series of oral and written warnings and
reasonable time to improve performance.


Hiring staff on a trial or probationary basis is no longer a defence if that
employee is dismissed.

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