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1 BusinessPlus news advice learning networking Issue 108 October 2013 $6.30 Publication of the Employers & Manufacturers Association Inc New moves on business internet risk Export earners turned into tax refugees Heat rises over stiffer claw back rules In this issue: Your immigration guide to recruiting off shore New law facilitates crowd funding What the Australian change of government means for tax Are you wasting your money owning a smart phone?



4 Membership Rewards Exclusive, Substantial & Relevant Membership rewards can help your business with every day savings on things you actually use, like power, petrol and paper. It s like a normal rewards scheme - only this one has actual cost saving benefits! Kiwibank * Kiwibank Business Banking we are passionate about New Zealand business and supporting our own. Together with KiwiBank, members receive a 20% discount on transactional banking and 3% on business MasterCard interest rates, this is on top of KiwiBanks exciting range of business products and servcies. Genesis Energy Genesis Energy wants to help members get the best deal on their energy usage. With a great understanding of energy needs, they are committed to giving better, simpler and smarter ways to manage your energy needs. Members can receive a 12% prompt payment discount on a fixed term Power Freeze electricity account. Telecom NZ As members, Telecom can work with your individual business in one-to-one meetings and recommend the right communications solutions for you. Telecom provide a full range of Internet, data, voice, mobile and fixed line calling services for customers in Australia and New Zealand Caltex - StarCard Last year members saved over $600,000 in fuel costs. Take advantage of your EMA membership and minimize your fuel expenses with a StarCard account from Caltex. Save 5.2 cents per litre on regular and premium petrol at Caltex service stations Save 10.5 cents per litre on diesel at unmanned Caltex diesel stops. Buy NZ Made Get an exclusive 20% discount on membership to the Buy NZ Made programme. Buy NZ Made is a great marketing tool for businesses, providing a unique selling point and value add for your brand. If your product carries the iconic Kiwi symbol, your customers can be certain they re buying local. OfficeMax We have partnered with OfficeMax to bring the best available pricing on everyday office supplies and packaging, if your new to OfficeMax, simply show your current pricing for stationery, furniture and cleaning supplies and they guarantee to match or better the price. Horizon Recruitment As an EMA member you can receive upto $300 as a reward when referring a temporary contract or permanent staff vacancy. Also ask about Horizon Recruitment s new super low Temp to Perm rates. Vero Receive upto 30% off your Quotable Value (QV) valuations with Vero. Vero, are not above showing preferential treatment particularly to our members. Because Vero is our preferred supplier of general insurance, members enjoy preferential valuation rates year after year. Total Utilities Collaborate with fellow members in bulk buying tenders for electricity, natural gas/lpg and waste services. Receive an additional 20% discount on all service fees by just being a member. Members have saved over $3 million dollars from their power, gas and waste bills since Southern Cross Investing in the health and wellbeing of your employees can have a positive effect on productivity and profitability. With over 50 years of experience looking after the health insurance needs of New Zealanders, Southern Cross Health Society can help tailor the right solution for your business. Custom Fleet Together we have negotiated exclusive discounts for members across a vast array of models. No matter the size, Custom Fleet have a solution for your business. For more information on these great offers and to ensure you don t miss out on the latest exclusive member only discounts, simply search rewards on our website: All information is correct at time of printing and subject to change. Individual partner terms and conditions and/or service fees may apply.

5 BusinessPlus is published by : The Employers and Manufacturers Association (Northern) Inc 159 Khyber Pass Rd, Grafton, Private Bag 92066, Victoria Street West, Auckland 1142 Ph: or Website: Chief Executive: Kim Campbell Advocacy Manager: Bruce Goldsworthy Manager, Employment: David Lowe Manager EMA Learning: David Foley Manager EMA Membership & Marketing: Mauro Barsi Waikato Denis Quigan mob Russell Drake mob Bay of Plenty Terry Arnold mob Rotorua / Taupo / South Waikato / Whakatane Clive Thomson mob BusinessPlus Editor Gilbert Peterson Ph: Writer Mary MacKinven Published by Mediaweb Designer Bex Mikaere Advertising Sales Colin Gestro (09) ISSN No Advocacy 04 EMA Advocacy at work 05 UFB roll out defies communications skills By Kim Campbell, EMA CEO 14 Compensation and the RMA BusinessNZ news 06 Crowd funding facilitated 06 MBIE learns from EMA members 07 Claw back rules tighten 08 Gimme, gimme, gimme - selling on line 08 Tonga call centre service offered 23 Export earners forced to become tax refugees 26 PROFILE Five companies combine to make pizza trays and beat China advice 10 What a fair and reasonable employer could do when making an employee redundant 12 employment chat 16 TAX TIPS - What Australia s change of government will mean technology 20 Are you wasting your money owning a smartphone? 21 Back up for Internet security learning 19 Need skilled workers? Immigration New Zealand offers suite of services proud moments 24 Aerosol contract filler boosts certifications 24 Piloting vehicle and driver safety initiative 25 Bold approach pays off for Mi Business 27 Spring briefings schedule: Free to EMA members On the cover CONTENTS BusinessPlus news advice learning networking Issue 108 October 2013 $6.30 Publication of the Employers & Manufacturers Association Inc New moves on business internet risk Export earners turned into tax refugees Heat rises over stiffer claw back rules Businesses with sensitive intellectual property need to have a strategy to protect themselves. Netsafe offers some simple guidelines to help you back up for your internet security. The story is on page 21. In this issue: Your immigration guide to recruiting off shore New law facilitates crowd funding What the Australian change of government means for tax Are you wasting your money owning a smart phone? BusinessPlus 3

6 ADVOCACY Advocacy at Work Winston Peters, on the economy Leader of New Zealand First, Winston Peters, discussed his party s economic policy and in particular the future of manufacturing, with members of EMA s Policy Forum last month. He said New Zealand First is a centrist, common sense party; not blinded by ideology, and motivated by what works in practice. He suggested a tax break for exporters, aid for failing businesses and a change to currency management. The party has a Member s Bill ready to give the Reserve Bank the wider legislative framework it needs to tackle the exchange rate. Other policy settings designed to support manufacturing include: An accelerated depreciation regime for plant and equipment; Giving preference to New Zealand firms when Government agencies and local bodies buy goods and services; A regional development policy; A royalties scheme that required 25% of the wealth generated from oil, gas and minerals extraction in a region remain in the source region. Support for Foreign Direct Investment (FDI) when it adds new capacity and technology to the manufacturing sector. Reducing car parking s wasted spaces The NZ Green party is considering a policy to limit parking in the CBD to encourage people to use public transport rather than cars. The party s transport spokesperson Julie Anne Genter explained the policy with EMA. She said freeing up land used by parking could make it available for more productive uses. A vigorous discussion ensued with agreement that the RMA should be amended to remove parking requirements for developers. Govt procurement concerns EMA has had complaints regarding the current vogue of whole of Government contracts, which result in bulk purchasing by government on behalf of several of its departments. The concerns are over the way these are run and administered by officials. This matter has been referred to Business NZ for taking up with government. Puzzling restrictions on port growth EMA is alarmed that Auckland Council intends to place severe restrictions on Ports of Auckland s ability to undertake reclamation activity anywhere within the port precinct. The Council intends to make all reclamation in the port basin non-complying. It seems incongruous that the Ports owner, Auckland Council, expects the port to operate in an extremely competitive environment up against the Port of Tauranga then introduce a measure like this which effectively restricts the port s ability to compete. EMA is asking Auckland Council to act urgently to reverse this decision. Media commentary EMA recently dispatched media statements supporting proposed employment law changes, the expansion of study-to-work schemes, Government funding to build a cable across the Pacific to improve Internet speeds, and more. We said the present employment law changes before Parliament are part of the catch up process needed to reflect common practices already in place in today s workplaces. It s sensible that anyone can ask for flexible work hours for any reason, as proposed by one of the amendments, said David Lowe, Employment Services Manager. Another proposed change seeks to repeal precisely when coffee breaks can be taken. This is unworkable and openly flouted by employees and employers alike. The law should simply require that reasonable breaks are provided then let those involved work out the details how it should apply to them. This is what happens now - the amendment is just catching up with the modern workplace. Employers acknowledge and accept union bargaining is central to our employment law. But a change is needed for when, despite everyone s best efforts, the bargaining becomes destructive. It is absolute nonsense to suggest any of these changes will decrease wages, Mr Lowe said. EMAs submission can be found at Youth for work EMA also said the Youth Guarantee and other skills training schemes are getting traction so it s great they re being expanded and added to. We re much encouraged by the government focus on getting younger people either into skills training or work, said EMA chief executive Kim Campbell said in commenting on a new Government training package. Their success is registered in the fall in the youth unemployment rate amongst 15 to 19 year olds it was 27.6% two years ago at the end of the June quarter and is down to 24.1% this year. Expanding these schemes is the right response, and will also help ensure their success by encouraging employers to take on younger workers at every opportunity. Government heard from us on your behalf on: Boosting Productivity in the Services Sector the First Interim Report of the Productivity Commission; and R&D Tax Losses, An Inland Revenue Officials Issues Paper. We also have other submissions underway including on the review of the Telecommunications Act 2001 and the Productivity Commission s Enquiry into the Design and Operation of Government Regulatory Regimes in New Zealand. 4 BusinessPlus

7 By Kim Campbell, Chief Executive, EMA ADVOCACY UFB roll out defies communications skills (First published in the NBR 27/9/2013) In the eight year rush to replace our legacy copper network with the transformative power of fibre, while keeping the economic and technical viability of copper, there were bound to be big risks. Over the past week or so we have witnessed one of the biggest. Ironically the risk, of a loss of confidence in the project, turned out to be much more about communication in the non-technical sense, less about technology. The stakeholders footing the bill, especially those representing the users and consumers of ultrafast broadband (UFB) have not been kept well informed of the challenges inherent in managing the transition from copper to fibre, or on how it could and should proceed in our unique geographic and regulatory environment. The loud cries of foul that the cut price for copper proposed by the Commerce Commission would result in a tax or subsidy to bolster Chorus share price - were based largely on a totally understandable misunderstanding on what our Commerce Commission is charged to do. In fact we think the pricing proposed, if undertaken by a commercial enterprise, would normally be held to be price fixing under the Commerce Act. However the once in a generation UFB rollout is far from normal. The Commerce Commission has jurisdiction over the pricing of the copper network which it exercises from time to time, whereas the pricing of the fibre network roll out has been fixed by Crown Fibre Holdings on behalf of the government until It seems no one in government or Chorus appears to have had the foresight to consider how this tension might be overcome, or if our regulatory system, when confronted with the UFB rollout, could be excused for the duration. When Telecom was separated from the wholesale network provider Chorus, the Commission was called on to regulate a new cost based wholesale price for broadband products running over the copper network. In its draft determination the Commission was required to take into account the cost of investing in new technologies and infrastructure such as UFB; the Commission advised it was unable to do this. As part of the review the Commission compared New Zealand with Sweden and Denmark, two countries whose telecoms providers are vertically integrated and therefore unlike ours. Why drop the price for copper? Inexplicably the Commerce Commission decided the price for copper should be well below that for fibre, which the Government s August 7 th discussion paper proposes to overturn with a price for copper approximating that for fibre. Hence the claims about the $600 million subsidy for Chorus. The Commerce Commission price, if introduced, would have had a major impact on Chorus revenues directly after it had signed with CFH to build the new UFB network; it is clear Chorus will need those revenues to help fund the roll out. There is no question that reliable, attractively priced telecommunication and internet connectivity systems are fundamental for the long term success of our businesses, and they must be delivered in a competitive environment with minimal government regulatory intervention. But no comparable country has undertaken what New Zealand must be successful at doing, which is to expeditiously roll out UFB while maintaining the viability of the existing copper network. Ultimately we can be confident the price set for the services delivered on fibre will be market driven, not prescribed by regulatory intervention, but ultimately in this context is likely to be post 2020, once the fibre roll out is up and running. We still fail to understand why the copper network is not being written down faster under a cost minus model. The potential loss of value from copper, all the latest technical refinements notwithstanding, against the benefits in the long term of the fibre business should be recognised. Review paper fails A criticism is that the paper doesn t address these issues. For example, vastly higher speeds over copper are becoming possible, speeds which are close to matching the initial offerings to be made available under UFB. Then there s the price competition coming up from wireless. Already a growing percentage of households choose not to have a hard wired connection or phone number, and the possibilities of wireless broadband are still in their infancy. Another point is though many CBD businesses already utilise high speed fibre, smaller businesses connectivity outside of CBD areas are not yet in the queue for it though they stand to benefit strongly provided the speed is competitively priced to copper. Perhaps the villainy of this unenlightened episode should be sheeted back to the government s review paper, a highly technical document by nature, and a challenge for any knowledgeable party to comprehend, let alone a lay person. Nevertheless a determined effort should have been made to decipher its complexity. BusinessPlus 5

8 NEWS Law facilitates crowd funding The Financial Markets Conduct Bill which comes into effect next year will introduces six new types of licences including for intermediary service providers of crowd funding and peer-to-peer lending platforms. Crowd funding offers firms a way to raise relatively small amounts of equity by accessing large numbers of investors willing to invest small amounts. Peerto-peer (P2P) lending facilitates lending and borrowing small amounts between people. Online platforms in common use act as intermediaries for both, and in the case of P2P lending often offer to undertake credit checks and collect repayments. The new law provides licensing of these intermediary platforms as a straightforward way to protect investors seeking to fund businesses but unable to raise the capital they need at an appropriate cost. The NZX is reported as seeing the new sources of capital as stepping stones toward listing on NZX s main board. Online crowd funding platforms include PledgeMe, Boosted and GiveALittle. Crowd sourcing is well known and works successfully in several countries. The crowd funding platform Kickstarter in the United States for example claims to have assisted 4.8 million people with pledges of US$796 million, to fund 48,000 creative projects since launch in The new law limits the size of P2P and crowd-funding loans to $50,000 and the amount a person can lend to $10,000 a year. MBIE people learn from grass roots EMA members recently hosted staff from the employment standards policy team at the Ministry of Business, Innovation and Employment(MBIE). The visits were to show how they apply the minimum employment standards (including Holidays Act and parental leave) and discuss other employment relations issues. ASB Bank and JA Russell Ltd hosted Kate Lynch and Laine Fisher. Thermosash, OCS and Cannon Hygiene hosted Tina Jamieson and Robert Haig. Manager of Employment Standards Policy, Gerard Clark said: It s great to see first-hand some of the issues that different businesses deal with to ensure they comply and of course to hear about ideas for improvements. It can only improve the policy advice produced in our team. MBIE needs to maintain good relationships with businesses and others, and to understand the realworld impacts its policies have, and these visits have been great on both counts. We re grateful to the EMA members who met with us. (l-r): Daneka Nuttall, HR Manager, JA Russell with MBIE s Kate Lynch and Laine Fisher Ace Payroll for New Zealand employers. Try it for free Take control on pay day with easy low cost software and great help desk support. 6 BusinessPlus

9 NEWS Claw back rules tighten: Seller beware! An appeal is being mounted to challenge a Court of Appeal ruling that would see contractors forced to pay back money for goods they supplied to companies that subsequently went insolvent. The ruling threatens to require contractors and suppliers who received late payments for work or supplies in the two years leading up to an insolvency to return the money to a liquidator. Under the ruling the claw back can apply: Even where there is no argument that fair market value was supplied. The contractor/supplier had no knowledge or reason to know about the financial difficulties They used the money to pay operating costs such as for their sub-contractors. The only payments that contractors and suppliers may not be required to repay are monies that an insolvent company made in advance of a job being done or that provided real value. The inference is that if a contractor accepted late payments (payment in arrears) they may have known the company was insolvent and the payment was therefore invalid. In addition, proving the matter could now be more difficult. This is all bad news for construction contractors in particular, who frequently issue invoices in arrears for work done. Construction contractors with progress payment contracts could still be protected, and there are some other technical exceptions. Where payment was routinely late it could be hard for a contractor to show their work had only continued because of the previous payment they received, ie, that they genuinely worked on a progress payment basis. The case (Farrell v Fences and Kerbs Ltd) relates to voidable transactions (transactions that can be annulled under certain circumstances) centres on when liquidators can reverse payments that a developer/contractor made in arrears (late payments after the job was done) in the two years leading up to the developer s insolvency. The precautionary cost of doing business is likely to increase for all parties to a contract. New Zealand law in this area is now very different from Australia s where payments from the insolvent company made in the ordinary course of business can only be reversed or clawed back for up to six months. An appeal to the Supreme Court is likely. EMA will be taking a close interest in the proceedings. We set out to revolutionise business banking. And the judges believe we have. We didn t set out to win awards. We set out to change business banking. Our aim is to help our customers do less banking and do more business. So we created products and services for our business customers that help them to streamline their systems, to speed up their cash flow and to easily manage all their banking. We ve just won the Supreme Award at the AUT Business School s 2013 Excellence in Business Support Awards. So thank you to all our business customers. We couldn t have won without you. And if you re not a customer yet, but you d like to revolutionise your business, come to an award-winning bank. Visit or call SUPREME WINNER Every revolution needs a leader. KBBANZH366 R Kiwibank Limited s Disclosure Statement is available from your local Kiwibank or at KWB0039 Business Banking AUT Awards 177x130 EMA OP2 FA.indd 1 13/09/13 5:28 PM BusinessPlus 7

10 NEWS Gimme, gimme, gimme Customers want a rapid response to their queries and complaints like never before - because it s possible in this digital age, said Simon Bennett of Madison Recruitment at the latest Business Intelligence Breakfast Workshop in Auckland. The subject: Engaging your customers and clients rejuvenating and maximising the service experience. It s all very well having great design, branding and logistics but the real work begins when the customer walks into the store, said Jason Neely, Managing Director of Amazon Surf clothing stores employing 600 staff. You have to give the customer what they want every day at the right price He listed four criteria for exceptional customer service: having the right people with the right attitude, who are correctly trained in policies and procedures, with an understanding of (Amazon s) 90-plus brands across 20 categories; and with specific sales service standards eg to greet a new customer in 45 seconds and give them two brand facts about the product they are looking at. He said it takes two years to train someone and most have gone by then because retail is viewed as a short term stopover. To combat that he developed manuals and procedures but gave up. Then I had an epiphany: a staff member that believes in our brand and culture will outsell someone who is well trained but does not have that affiliation. So just get the right kids at the start. Amazon Surf worked to create something people wanted to be part of. Now their key performance indices are all heading in the right direction and staff retention is up, Mr Neely said. But we still have a long way to go. Next we are turning retail into a real career option, not a stopover on the way to a career. Online and mobile change everything Simon Bennett, chief executive of Madison Recruitment, has 80 staff across Tonga call centre open for business ProComm Services has established Tonga s first call centre operation with the backing of Japanese investor Suite Pole. The venture became possible once Tonga connected to the Southern Cross cable; Tonga is now a viable alternative venue for locating New Zealand call centre operations. Two directors from the company, Tevita Kilisimasi Ha apai and Takeshi Tamura pointed out wage costs in Tonga are about a third of those in New Zealand and their Tongan staff are all English speaking with many educated here. The first customer for ProComm was TCC, Tonga s own phone company. The 24 hour/7 day operation has 35 staff currently for the local market with ambitions to seat up to 1000 agents. ProComm offers full connectivity for inbound, outbound, back office and full data support. You can Skype to Nuku alofa. Their promotion says on your behalf they can undertake: Customer services, sales support and incident management Takeshi Tamura and Tevita Kilisimasi Ha apai, directors of ProComm Database cleansing, help desk and data entry Market surveys and lead generation ProComm is at pains to say they have learnt that to be an effective service provider we ourselves must develop the knowledge and skills that can never be found in your common and standard training manuals. We must contribute to our clients success. 8 BusinessPlus

11 NEWS (l-r): Presenters Bruce Cotterill, Simon Bennett, Jason Neely (Amazon Surf) The definition of customer service is very simple: consistently exceed the expectations of your customer by meeting the highest possible standards on time. Bruce Cotterill five locations in New Zealand. Madison declines more candidates (145,000) than they place (5000) per year. The company uses many ways to engage with people than just placing job advertisements: Facebook, Twitter, YouTube, etc But technology can be used negatively as well as positively and We can t do everything by and we can t replace real human interaction. He reported on a survey that showed 53% of respondents overall said they believe companies are more responsive to customers when they complain via social media, a figure rising to 57% among Millennials (aged 18-34). Recent survey results indicate consumers expect faster response times via social than . It s simple People over complicate the notion of customer service, said Bruce Cotterill, who led one of New Zealand s biggest debt restructure programmes as CEO of Yellow Pages Group. He said the definition of customer service was simple: consistently exceed the expectations of your customer by meeting the highest possible standards on time. Customers want eight things: 1. Rapid response: to a complaint, for example; 2. Proactivity: you need to actively help customers; 3. Accuracy: you need to describe your product or service; 4. Communication: keep the customer in the loop on how the service or complaint is proceeding or why it s delayed; 5. Assistance with the decision: help people buy stuff because their lives are so complex; 6. Make it enjoyable: because customers have enough struggles in life; 7. Trust: customers want to trust you. 8. Needs met: customers want their needs met in buying your product. Mr Cotterill joked: It s real rocket science. We made a big effort to understand what was going wrong and told our people what we were doing about it and the execution was led by example from the top including me as CEO. Mr Cotterill said getting staff buy-in for change requires communication, communication, communication. Staff can t provide good customer service if they don t know what is going on in the organization. When people know what is expected they get it right. He recommended giving people permission to be themselves. The fourth workshop is the big debate, on November 6: That Kiwi businesses don t have what it takes to succeed globally. BusinessPlus 9

12 advice By Carla Pallant-Drake LLB, EMA AdviceLine Employer Advisor Redundancy and section 103A: What a when making an employee redundant The Employment Court has released a number of cases this year which have clarified its interpretation of the requirements of section 103A of the Employment Relations Act 2000 in a redundancy situation. When defending the decision to dismiss an employee by reason of redundancy an employer must establish that the decision is both procedurally and substantively justified for it to be upheld as what a fair and reasonable employer could do under section 103A. If a dismissal for redundancy is found to be substantively unjustifiable, either because it is not genuine or the process applied to selecting the employee for redundancy was so flawed that it cannot justify the redundancy of that particular employee, the employee could raise a personal grievance for unjustifiable dismissal. Genuine business reason The Court s 2006 determination of Simpsons Farms Ltd v Aberhart, was interpreted in a way that limited the scope of the Authority or Court to inquire into the substantive justification for an employee s redundancy. As such, all an employer was required to prove was that the redundancy was not a charade and, by doing so, the Court and Authority could not inquire any further into the genuineness of the redundancy. However, Chief Judge Colgan sought to clarify what was meant in the Simpson Farms case in the recent Michael Rittison-Thomas t/a Totara Hills Farm v Davidson case. The Chief Judge made it clear that the Authority and the Court could not substitute its decision for that of an employer, when determining, based on the facts, whether redundancy was a conclusion it would have come to. However, the Chief Judge stated the Authority and Court could inquire into the merits of the genuine business reason an employer sought to rely on to justify its decision. Consequently, there have been a few cases, including the Totara Hills case, where the Court has inquired into an employer s substantive reasoning behind making an employee redundant. In the Totara Hills case, Mr Rittison- Thomas had stated that the reason for disestablishing Mr Davidson s role was to reduce expenditure by 10%. However, Mr Rittison-Thomas hired a junior shepherd following Mr Davidson s termination, with an actual annual saving of $6,000 which fell below the 10% that Mr Davidson s redundancy was intended to save. The Court considered this, among other things, cast doubt on the genuineness and justification of Mr Davidson s redundancy. In the Brake v Grace Team Accounting Ltd case, the Court considered whether the redundancy could be justified when based on misinformation. Grace Team Accounting Ltd ( GTA ) disestablished Ms Brake s role for economic reasons following a report that GTA had a $100,000 decrease in turnover. However, after Ms Brake s termination, GTA discovered that it had relied on incorrect figures during the redundancy process and the firm actually recorded a profit of $59,568. Despite the decision to make Ms Brake redundant being based on a genuinely held belief that the firm had suffered a decrease in turnover, the Court determined that evidence could not be produced to prove that GTA had a genuine business reason for making Ms Brake redundant. As a result, the redundancy could not be justified. A third case in this area is the Tan v Morningstar Institute of Education Ltd t/a Morningstar Preschool case. Ms Tan was made redundant on the grounds that Morningstar Institute of Education Ltd ( Morningstar ) was suffering serious financial problems. However, following her termination, the directors of Morningstar purchased the property it operated in for $1.52 million. Also, Morningstar recorded a profit of over $63,000 and hired one of the director s wives to perform Ms Tan s duties. The Court determined Ms Tan s termination resulted in only a modest saving for Morningstar which did not address the forecasted financial loss on which Ms Tan s redundancy was based. The Court considered that the redundancy was based on misleading information which was known to be incorrect by Morningstar and therefore said the redundancy was unjustifiable on substantive grounds. These Employment Court cases outline that a fair and reasonable employer should be able to prove it has a genuine business reason based on accurate information, to substantively justify disestablishing an employee s role. Appropriate selection criteria In the Gilbert v Transfield Services (New Zealand) Limited case, ( Transfield ) it was not the decision to disestablish roles that the Court took issue with, it was the decision to select Mr Gilbert s role that was substantively unjustified. Mr Gilbert was selected for redundancy following a three-stage process which included psychometric testing and interviews. The Court considered the use of psychometric testing as a selection method to be fraught with difficulty because Transfield was not privy to the questions asked or answers given. Consequently, the testing results could not be fully explained and justified. Mr Gilbert s role was as an indoor plant technician but Transfield had considered his role a part of a wider group of field staff when determining which employee s roles would be considered for disestablishment. The Court considered the incorrect categorisation of roles to be a fundamental flaw. Transfield also misinterpreted its obligations under the collective employment agreement to apply a selection criteria of skills and attributes which lead Transfield to disregard Mr Gilbert s performance record. The Court considered the approach of Transfield to the selection process and its implementation to be so flawed 10 BusinessPlus

13 ADVICE fair and reasonable employer could do that it could not be considered to be fair and reasonable. The Transfield case establishes that a fair and reasonable employer ability to justify the decision to make an employee redundant, from a substantive perspective, is dependent on correctly interpreting and applying redundancy terms that are outlined in an employment agreement. Redeployment The question of whether an employer must offer redeployment options before terminating an employee s employment by reason of redundancy was also considered in the Totara Hills case. After Mr Davidson s role was disestablished, he was invited to apply for a newly created junior shepherd role. The role had a remuneration package 18% less than Mr Davidson was on however he would have had adequate skills and experience for the role. The Court determined that it was not enough for Totara Hills to simply invite Mr Davidson to apply for the role. The Court concluded that a fair and reasonable employer would have at the least offered the junior role to Mr Davidson. Consequently, it is arguable that, based on the Totara Hill case, if an employee has been selected for redundancy but the employee has the skills and experience needed to perform another role with the company, a fair and reasonable employer should offer the role to the employee. What this means for employers Justifying the decision to disestablish an employee s role requires more than just complying with procedural requirements. These recent Employment Court cases illustrate the level of substantive justification needed for it to be fair and reasonable. The cases also indicate how far the Court s and Authority will probe into the substantive reasoning for a company s redundancy decisions. In our view, it is key for employers to ensure that; They can justify the reasons behind the decision to disestablish a role The outcome of the redundancy process satisfies the genuine business reason They comply with your good faith obligations Redeployment options are considered before terminating. For more information, please contact the AdviceLine on A His work profoundly influenced Apple co-founder STEVE JOBS, business magnate MICHAEL BLOOMBERG and Intel CEO ANDY GROVE - some of the greatest business leaders of our time Harvard Business Professor Clayton Christensen is the world s foremost authority on innovation strategy and growth. His development of Disruptive Innovation Theory has defined 21st century business This is a rare and exciting opportunity to hear from an influencer who has changed the world s thinking on innovation strategy and growth! He is a game changer. He revolutionised conventional management thinking when he wrote one of the most provocative business books ever, The Innovator s Dilemma based on a radical idea that great companies fail because they do everything right. Now, for the first time, Professor Christensen will deliver a seminar for business leaders in Australia and New Zealand 4 November am pm Sky City Convention Centre, Auckland Early bird price (to Sept 30) $795 + gst Corporate Table of 8 $ gst To register or phone BusinessPlus 11

14 EMPLOYMENT CHAT Should I employ someone on a trial? What And can I oblige staff to take leave? Q. A woman dropped by and offered to work for us on a two day trial hopeful that we would give her a permanent job. Should we do this? Beth Dear Beth In short, probably not. The option of trying out potential employees could be a thing of the past following a recent landmark employment case about a brief trial at a small lunch shop in Nelson. After a woman worked there for two days she texted to ask if there was more work and the manager texted back saying (to paraphrase) no because you have stolen from the till. She won her case in the Employment Court. Employment law specialists say the case also has implications and questions around unpaid internships or training as part of a qualification. But you could still ask prospective employees to undertake tasks as part of the recruitment process. However, they should not be permitted to get any economic gain from those tasks. For example, a barista could make a coffee for their employer and a chef could make her interviewer s lunch to show they were capable at their jobs. If you want to try out potential employees it might be best to engage them under the up to 90-day trial period provided by the Employment Relations Act, and not by informal work trials. However, the coffee or lunch could not be sold. If the prospective employee did tasks that potentially benefited your business there is a risk that an (unintended) employment relationship is in effect. If you want to try out potential employees it might be best to engage them under the up to 90-day trial period provided by the Employment Relations Act, and not by informal work trials. Although this approach imposes greater compliance costs, it would offer some protections to employees and you by allowing you to terminate the arrangement without the risk of a personal grievance claim for an unjustified dismissal. Q. One of my staff is really rough with gear and has caused a lot of damage and need for replacements and repairs. I ve really had enough is this a discipline issue? Gerry Dear Gerry Damn nuisance that, and I sympathise. Has he been properly trained to handle the equipment he s required to? Does he actually know what he is meant to do, and when and where the crossover might be with other people? If this has been pointed out and you have all your ducks in a row and he is still clumsy or careless, you can take him aside and raise it as a serious concern on the basis of the actual costs and/or downtime caused by his actions. You need to have some evidence to overcome any possible prejudice that may be claimed. 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. AdviceLine Don t just get information get advice you can rely on from industry specialists. A free, confidential telephone service providing employers with up to date, direct and practical advice. Member Only Resources A library of knowledge, tested in the courts and all in one place. 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 , AU or visit our website, 12 Untitled-3 1 BusinessPlus 10/06/13 12:42 PM

15 EMPLOYMENT CHAT does it take to discipline someone? See what he says are the reasons - they might be fixable. On his side, it might be that he is left-handed using right-handed tools or has eyesight or literacy problems. If he has an attitude problem and unreasonable grievances, or is plain vexatious, you will need to take disciplinary action. If he is well intentioned but really costing more than your business can bear, you could try and give him other duties or instigate formal procedures. Q. With the year-end in sight, I m thinking about closing down for two weeks. What do I need to do? Ben Dear Ben You can close down, that is insist your employees in all or some areas of your business do not work for particular dates but you can do this no more than for once a year. During a closedown people have to take their annual leave if they have some, or otherwise take it unpaid unless you agree to their taking leave in advance. Those who have been with you for less than a year use any accumulated leave and get their next four-week holiday entitlement at the December closedown next year or 12 months from the start of the last (2013) closedown. You must give at least 14 working days notice of your mandatory closing down period. Even if you don t close down, summer can be a good time to ask people to reduce outstanding leave (unless it s your peak season of course!). And yes, you can insist they take a break. It is of course better to get their agreement, but if you re getting fobbed off you can set their holiday dates by giving 14 days notice and making sure the holiday is a minimum of two weeks long. By the EMA Advocacy 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 AdviceLine team at phone or (within New Zealand), and (from Australia), 8am-8pm weekdays. Alternatively, or read or print information such as the A-Z of Employing a manager s guide on more than 100 specific employment topics, at To inquire about becoming a member to gain access to this free AdviceLine service for employers, please contact EMA Membership at the numbers above or through ARE YOU GETTING EXTRAORDINARY TEMPORARY BUSINESS SUPPORT? Horizon, Auckland s temp and contract specialist, has a reputation for providing: Exemplary Temps Exceptional Service Excellent Value Be it for a short or longer term, get a really useful person who fits in and gets the job done! Call now Visit: 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 Phone: Mobile: Auckland Brandon Brown Solicitor Phone: Mobile: Auckland Matthew Dearing Solicitor Phone: Mobile: Auckland Ani Bennett Senior Associate Phone: Mobile: Bay of Plenty Call us toll free on Visit our website Training Directory.indd 1 23/09/13 1:21 PM BusinessPlus 13

16 By John Carnegie Compensation for taking property would better support the environment for all The Government s recently released changes to the Resource Management Act (RMA) are a step in the right direction, especially if they result in higher quality decision-making and a greater reliance on property owners to use their resources in an environmentally responsible way. Acknowledgement of the right to compensation is a fundamental part of respecting property rights in the face of regulation. This is why BusinessNZ believes the RMA needs to strengthen its compensation provisions where property is taken, or its use or value is restricted. So, it would be good to see a willingness to change section 85 of the Act, which currently rules that if you lose control of how your land can be used, you are not likely to be compensated for this loss. Under the Act as it stands, the only ability to challenge this absence of compensation is if you, the landowner, can prove that the rule would render your land incapable of reasonable use. Only then, if you are successful in proving this high burden of proof, can the rule be set aside. If you fail to prove the rule would make your land incapable of reasonable use, you lose the use of your property and get nothing in return. It s black or white there s no grey area. The fact that the new changes to the Act fail to include a compensation scheme is a major flaw in an otherwise good package. It makes sense to include a more robust compensation regime now, and avoid the need for yet another set of amendments in the future. Opponents to this change say it would be unworkable. We are told that arguably any rule at all is a limit on what you can do...any rule at all would trigger a requirement for compensation. We agree with this statement in that the impact on property would need to be non-trivial, but it still upholds the black or white situation. Compensation for regulatory takings is already used successfully The very popular Employer Guide series is now even better. A valuable employment resource kit for payroll, HR/ER practitioners, and those new to staff management. We have reviewed and updated our 12 EMA Employer Guides. The changes include the addition of: A guide to employees and technology, including chapters on the use of computers and cell phones, GPS, CCTV and more A guide to Diversity, including information on Human Rights, EEO, Older Employees and Retirement Make sure you and your set of guides are up to date! Information such as the meal breaks law, changes to KiwiSaver, transferring public holidays as well as many other issues are covered. Also available is our Engaging Contractors CD with template contracts for engaging contractor individuals or companies. This disk contains: Sample 1: Contract for engaging an individuals as a contractor. Sample 2: Contract for engaging a company or other legal entity as a contractor. ORDER NOW: to Or go to and search for employer guides and/or contractors CD 14 BusinessPlus

17 in other Acts without being economically disruptive or chaotic. Our Public Works Act is a great example of this. Compensation provisions do not need to be openended they can be tightly focused on the introduction of new rules that constrain the use of property. Compensation is a vital economic check-and-balance. If regulation costs nothing, the demand for regulation will remain high while the willing supply of property rights will be very low. It encourages examples such as those recently proposed from the Kapiti District Council where property owners of land with outstanding or amenity landscapes might be required to get consents to do such mundane everyday work as fencing and farm tracks. Such landowners face the unfortunate prospect of paying for their land twice, once to buy it and again for the privilege of being told by the local council what they can then do with it. This prevents improved environmental outcomes from being reached. Opponents to this change say it would be unworkable. We are told that arguably any rule at all is a limit on what you can do...any rule at all would trigger a requirement for compensation. The act of compulsion without compensation stifles the opportunity for willing mutually beneficial exchange that would see the environment protected. Without compensation, communities are not required to put their money where their values are, so the need to focus on what is the most important environmental priority is swamped amongst trivial concerns, such as on the location of lounges, garden landscaping and storage sheds. Environmental regulation without compensation has failed to deliver what environmentalists most want protection of what is important. Changes to the RMA would be more beneficial for all if they were supported by economic analysis that weighs up all the relevant costs and benefits environmental, cultural, recreational and economic. These would include the cost of any compensation required for regulatory takings under the Act, and are vital for delivering better overall environmental decisions that all parties local communities, land owners and businesses most value. John Carnegie is BusinessNZ s Manager, Energy, Environment & Infrastructure. RegisteR now Survey Available 1 May to 30 August (09) Brought to you by: Proudly supported by: In association with: 2013 Kenexa Corporation BusinessPlus 15

18 TAX TIPS By Joanna Doolan What the change of government in As the tension, elation and the disappointments of the America s cup recede, today we are back into that exciting three letter word ending in x, tax of course. The political uncertainty in Australia has moved to a new phase with a change of Government and the new Prime Minister, Tony Abbott, has proudly declared Australia open for business. Yes, there are potential hurdles like not having a majority in the Senate so how will the 19 pieces of new tax legislation ever be passed let alone 100 pieces of the tax legislation back log. What appeared to be a stalemate between business and the previous Australian Government had the potential of doing serious damage to our nearest trading partner, and the flow on effect of this was never going to be good for New Zealand. On the tax front Australia had started down a slippery path of retrospective tax changes, tax changes by press release and a lack of open dialogue and cooperation between business and taxpayers. None of this makes for happy campers. While New Zealand continues to have business challenges around the over use of the anti-avoidance rules we largely have a very cooperative relationship between the tax office and taxpayers, and a good track record on consultation. As for headline tax rates when these are lower there is less incentive to save tax. New Zealand has been through a sweet phase of having lower company tax rates than Australia, but from 1 July 2015 this advantage will virtually disappear as Australia reduces its company rate to 28.5%. The likely outcome of the reduced company tax rate in Australia is New Zealand businesses will need to start preparing for a turf war, and have robust pricing and cost policies that can prove the economic case for Australian businesses moving neither profits nor operations back to Australia. Whether we like it or not we have a lower cost structure than Australia so we need to start a reverse trend of encouraging Australian businesses to 16 BusinessPlus

19 TAX NEWS TIPS Australia will mean base their operations in New Zealand, not the other way around. The other hairy chestnut is finding a potential resolution to the 20 year old challenge of trans-tasman investors being penalised by a lack of mutual recognition of imputation credits. Despite reports that suggest implementing this would boost economic growth, the odds on bet is it would continue to be a no go zone as the tax revenue cost to Australia of up to $1 billion dollars a year is too high for them. Added to this is the economic benefit to New Zealand is much higher than the benefit to Australia, meaning the incentive for Australia to agree to these changes is virtually zero. The combination of the two factors adds to the pressure for Australian companies to have their profits taxed in Australia, and for New Zealand companies to have their profits taxed in New Zealand. Other expected changes adding to the Australian tax burden include: the 1.5% Paid Parental Leave Scheme levy to be imposed on companies with taxable incomes in excess of $5 million (levied on the excess income amount) from 1 July 2015 the scrapping of the company tax loss carry-back rules (worth $940 million) the scrapping of the business concessions that were previously funded from the mining tax package, including the small business asset write offs (worth $2.9 billion over four years) and the accelerated depreciation for motor vehicles. Research and Development incentives and other innovation incentives are also to be reviewed. The increase in compulsory super contributions to 12% is to be deferred for two years. In addition to promoting the economic cost benefit of basing Australian and other businesses in New Zealand we need to start focussing on the impact of a potential change of Government here. In particular what would the increase in the top tax personal tax rates to 39%, and the introduction of a capital gains tax mean? More about that next time. Joanna Doolan is a Partner with EY the views expressed are her own and do not necessarily represent those of EY Tax pooling tames the beast. Provisional tax doesn t have to be a beast. With tax pooling from Tax Management NZ you can get it under control by: - reducing exposure to IRD interest - increasing flexibility on when and how you make provisional tax payments Talk to us about how you can tame your tax. EMA/PB/D/HP 2013 Talk to your accountant, call the tax masters on or visit EMA-PB-D-H-P 2013.indd 1 24/07/13 4:59 PM BusinessPlus 17


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