New (tax) levy proposal redundancy scheme.

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Forums › Politics › New (tax) levy proposal redundancy scheme.

rugrat

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#293611 2-Feb-2022 11:18

https://www.nzherald.co.nz/nz/politics/unemployment-insurance-government-unveils-plan-to-offer-billions-in-coverage-for-workers-who-lose-job/4MS426Y4YJB7V2PYHKQHBDHRHY/

1.39% comes out of people’s wages. Some people are already living day to day and the government is going to reduce their wages by more?

If get redundant or can’t do job because of illness then 4 weeks notice, and 80% of wage for six months.

Great, what happens to current redundancy clauses where people get 100% of wage and it is a disincentive for big business to make people redundant, that have many years of work.

I saw it with kiwi saver, where some retirement schemes were better, and then when kiwi saver came along new workers got offered the inferior scheme. Realise for most a benefit, but when they bring these things out
it can be a disadvantage when there is an existing clause in contracts with better conditions.

An example in article, if someone earned $880 a week they would lose $12.23 a week. Then there is normal tax to come off and any other things person is paying into.

Edit: Probably also encourages a couple months of a holiday, if can live at 80%, as payment would stop once start new job. Also levies frozen for two years, so looks like the 1.39% will go up over time?

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#2860586 2-Feb-2022 11:47

What utter garbage, still, hardly surprising that they introduce something that has billions of dollars of costs loaded on the bulk of the economy to "protect" a very small portion of it and unfortunately I see it as been ripe for abuse as people learn that the 80% is more than they would have gotten on the unemployment benefit, they just have to endure a short term of employment.....

wellygary

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#2860590 2-Feb-2022 11:48

From what I read there is also a 1.39% levy in business (A payroll tax) that will also help fund it...

Only prob at the moment is that inflation in 5.9%, but average wages only went up 3.8% in the last year .. People are working longer hours to stand still, not a great time to be be looking at imposing a new tax

Technofreak

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#2860791 2-Feb-2022 17:17

Yep, a new tax in disguise. No more taxes, Yeah Right!

It wouldn't be quite so bad if the government were to reduce the general tax rate by the same amount. All they're effectively doing is swapping the unemployment benefit for this and reducing their liability for unemployment payments.

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GV27

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#2860933 3-Feb-2022 07:55

Smacks of a book balancing exercise. The government received a hugely comprehensive Welfare Working Group report with something like 40 recommendations and implemented about five of them.

There is also no discussion around the preservation, expansion or yeeting of redundancy clauses in contracts - already these were moving away from the 'time served' model (X weeks + one week for every six months, etc) to a flat two week provison. Hell, I think my most recent contract has a restraint of trade clause but only a one week redundancy provision.

Instead of doing these things that aren't easy, Grant Robertson has reached into everyone's wallets again - not satisfied with taxing the inflation component of wage increases sparked by huge living increases under his watch, he wants to further increase taxes in real terms, and presumably this will mean another wave of civil servants to help ACC stuff this up like they mess up ACC claims.

sen8or

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#2860951 3-Feb-2022 08:46

That something like this got a passing mention on One news last night was a disgrace, should have lead with it, far more news worthy that the daily covid numbers lottery. Still, guess they can't be seen to be beating up their employers too much.

I think labour needs to start releasing their policies in Cyrillic with the old sickle emblem at the top, really advertise where they want to head......

Jas777

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#2861158 3-Feb-2022 10:57

2.8% of your gross salary will go on 2 levies that quite a lot of people will never get any benefit from.

I think when we compare NZ tax rates to other countries we need to add these on to the base tax rates to give a fair comparison.

Got to think if you got offered redundancy and knew you were retiring in 5 months (80% of 6 months) it be a no brainer to take redundancy.

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ezbee

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#2861256 3-Feb-2022 14:05

Someone with an accounting background can perhaps comment on what it costs companies to manage
redundancy provisions they may have in employment contracts ?

I expect its uneven as large or share market listed companies have more accounting oversight than the small owner/operator outfits.

The cost of the scheme may not be such a cost to the company if they can dump all the redundancy clauses ?

rugrat

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#2861257 3-Feb-2022 14:16

Ezbee you are probably right. I noticed on the One News that they mentioned business were happy with it.

Any one with a good redundancy clause in their contracts, and been many years with same company is going to be hurt by this as I can see it at moment. But the company will be thrilled by it.

It also gives someone that has worked long term at a company less protection over someone starting new, in terms that there is no difference in cost to company over who they lay off.

I’d expect businesses with less well off redundancy clauses, this will cost them more.

Jas777

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#2861291 3-Feb-2022 15:51

ezbee:

Someone with an accounting background can perhaps comment on what it costs companies to manage
redundancy provisions they may have in employment contracts ?

I expect its uneven as large or share market listed companies have more accounting oversight than the small owner/operator outfits.

The cost of the scheme may not be such a cost to the company if they can dump all the redundancy clauses ?

It will depend on if an IEA or Union agreement. Most Union agreements are more generous.

I think you will find that there will be something in this that allows people to keep their union agreement if it is better.

sen8or

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#2861294 3-Feb-2022 15:58

I would expect that the terms of any existing contract would trump any legislation if the contract was more favorable, but if not, it would be more be like a minimum (much like minimum wage, you can pay more, just not less). You can't just arbitrarily alter someone's existing employment agreement and remove their rights under the contract. I would also expect that any Govt support wouldn't kick in until after the redundancy settlement period expires (e.g. if you are paid 8 weeks redundancy, then any Govt entitlement wouldn't kick in until then.). Where someone is paid out in lieu of notice, if their notice period is 4 weeks, then does the company have to pay effectively 8 weeks of pay (4 weeks notice period and 4 weeks redundancy under this new legislation).

The devil will be in the details, something that Governments (of all political leanings) tend to get horribly wrong, especially when its as complex as employment law.

As for what they cost employers to have in them? Are they still a thing in modern day contracts? No contract I have seen (as an employer or an employee) has had a provision for redundancy in it and nor would I expect it, but I suspect if "business NZ" is broadly supportive then there will be some big businesses that have crunched the numbers (as above, not for existing contracts, but certainly new ones).

rugrat

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#2861304 3-Feb-2022 16:24

If someone can keep their current redundancy contract, would they still have to pay the levy?

I asked Union about what happens to existing redundancy clauses with proposal but got no answer. I can see at negotiations once this is in, a company trying to argue that the redundancy clauses are redundant.

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Varkk

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#2861577 4-Feb-2022 10:01

I would hope existing redundancy clauses would remain in addition to this. E.G you would get paid out the redundancy period, then this new scheme would start paying. However I can see this being used to erode existing arrangements in the next round of contract renewals.

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#2862694 6-Feb-2022 17:20

Please can we change the title of this thread to something that includes the words "Income Insurance Scheme"? Searching GZ did not bring up this thread.

That seems to be the official title of this "tax" and more details info is available at https://www.mbie.govt.nz/have-your-say/income-insurance/ with a summary of the proposals available as well.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

rugrat

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#2862760 6-Feb-2022 18:30

I can no longer edit, a moderator can change title if will make better.

Thank you for link. It looks like compulsory at present form and explains reasons why they think it is needed.

I will probably put feedback that I think it should be optional like other insurance. My nephews have found new jobs within two to three weeks of losing current jobs so people that are confident in this area are paying for nothing as well.

Illness cover is extra cover, that is not there now so that is one plus.

When I was unemployed many years ago, WINZ did send me on training courses for work, so unless something as changed training courses available now, without money coming out of someone’s wages. Income was a lot lower then 80% though.

rugrat

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#2862792 6-Feb-2022 19:46

Feedback done, I did the survey.

Put my objections under weakness’s and in other feedback that voluntary would be better.

Also asked if it replaces unemployment benefit, then for the payment up to that amount people are paying for something that didn’t cost any insurance payment before. It did ask if unemployment should be paid as well as this.

It also asked if should be tested on Assets or something like that, huh expect someone to pay and then get no benefit because to many assets?

Guess it just wait and see now.

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