Big employers rail against proposed $3.5 billion Income Insurance Scheme

Some of the country’s largest employers have come out against a government plan to set up a compulsory Income Insurance Scheme that would provide a new safety net for the newly unemployed.

The scheme, first proposed in last year’s Budget, would see people who lost their jobs paid out up to 80% of their salary for six months, with the expected $3.5 billion annual cost funded through an ACC-like levy on workers and their employers.

Hundreds of submissions on the proposal were released by the Ministry of Business, Innovation and Employment on Tuesday.

Countdown-owner Woolworths NZ, which employs more than 20,000 people in New Zealand, said it understood the drivers behind the proposed insurance scheme but did not support it as currently designed.

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The company said it rarely made staff redundant, so the scheme would “take much-needed earnings from our team members’ take-home pay, to fund a scheme that they will most likely never need, or ever see the benefit of”.

“Our team members would, in effect, be subsidizing other businesses or industries where redundancies are much more common,” he said.

Auckland University also objected to the scheme saying the proposed employer contributions would translate into an extra cost that it had not budgeted for.

“This would be estimated to take 75% of the funds that we have currently budgeted for future salary increases at the University of Auckland, which are substantive at the moment due to the current employment market,” he said.

Some employers, including transport giant Freightways, fear people might game the proposed Income Insurance Scheme by delaying job hunting if they lose their jobs.

Peter Meecham/Stuff

Some employers, including transport giant Freightways, fear people might game the proposed Income Insurance Scheme by delaying job hunting if they lose their jobs.

The university was also concerned there was no guarantee the levies might not need to rise if the scheme costs more to run than had been anticipated.

Transport giant Freightways, which employs about 4000 staff in New Zealand, expressed concerns similar to those of Woolworths that the scheme could see the company and its staff subsidize businesses with higher staff turnover.

“The majority of staff have long tenures within Freightways, often moving between businesses as they progress their careers.

“In comparison Freightways is aware of many other large New Zealand industries and corporates who almost routinely reduce their workforce through ‘cyclical’ redundancy processes,” it said.

“As such, Freightways is keen to see any income insurance scheme include appropriate protections and incentives for businesses to avoid cross-subsidisation by businesses such as Freightways of organizations who pursue far more aggressive displacement programs.”

Freightways also indicated it was concerned that people could “game” the insurance scheme by not returning to the job market as early as they otherwise might after they were made unemployed.

Countdown owner Woolworths fears its 20,000 staff would see little benefit from their levies.

Robyn Edie

Countdown owner Woolworths fears its 20,000 staff would see little benefit from their levies.

“Limits should be placed on the number of claims people can make for displacement situations, rather than health-related claims, to mitigate against the possibility of repeated exploitative claims,” ​​it said.

Meat company ANZCO, which employs 3000 staff, also submitted against the proposed insurance scheme, saying it could have “perverse outcomes on the labor market, in particular for seasonal workers”.

“We are concerned that seasonal employees could game the system with the opportunity to receive 80% of their pay for six months making workers less inclined to seek permanent roles and encouraging workers to seek a seasonal ‘layoff’,” it said.

But the proposed Income Insurance Scheme received strong support from unions, including E Tū.

At the moment when its members lost their jobs, they were also at risk of “losing the ability to sustain the necessities in life – such as their weekly grocery shop, bills and rent or mortgage”, it said.

Business body Business Central said it could not support the scheme in its current form, saying the concept that the scheme would support workers who lost their job due to illness or disability as well as redundancy amounted to “scope creep”.

“The inclusion of health and disability coverage doubles the cost and makes the forward planning of the scheme’s liability deeply uncertain,” it said.

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