Regulatory Impact Statement – Temporary Work Policy: Recognised Seasonal Employer Policy
Statement of the Nature and Magnitude of the Problem and the Need for Government Action
Relatively low wages and work that is periodic and weather-dependent have made increasingly difficult for employers in the horticulture and viticulture industries to attract New Zealand workers. Relatively few employers (certainly less than half of the 7,000+ employers in these industries), however, have sought to enhance labour productivity through retention, higher wages, and training. A more common approach has been to adopt a business model based on low-cost staff, some of whom are illegally in New Zealand, and other practices such as non-payment of tax. Industry leaders agree that they need to pursue more productive labour practices, because of growing competition from lower cost producers internationally.
The main issues facing the industry are:
- accessing sufficient numbers of both New Zealand and other legal workers
- removing the large numbers of unlawful workers
- lack of compliance with New Zealand workplace law
- low productivity and innovation levels
The current seasonal work policies are the Seasonal Work Permit pilot (SWP), Approvals in Principle (AIPs). However, the SWP has encouraged people to enter New Zealand as visitors with the intention of working, this undermining visitor policy. AIPs can be approved or have conditions placed on them in an inconsistent manner, given rise to uncertainty for industry. Also, neither of these policies sufficiently encourages improvements to business practices, or more effective planning for labour requirements.
Statement of the Public Policy Objective(s)
The public policy objective is to support the aims of the Medium/Long Term Seasonal Labour Strategy (the Strategy), by encouraging industry to focus on developing skills and productivity (rather than rely on cheap labour), while encouraging a preference for New Zealand labour where available and ensuring the effective management of immigration risk in the long term.
Statement of Feasible Options (Regulatory and/or Non-Regulatory) That May Constitute Viable Means For Achieving the Desired Objective(s)
Another part of the status quo is the Strategy a partnership between industry, unions and government that aims to encourage more effective labour utilisation, and higher labour productivity.
The Seasonal Work Permit Pilot grants entry to people for the purposes of work in the horticulture and viticulture industries. Since the pilot began in December 2005, 3,440 permits have been issued (as at 03 October 2006). The AIP process allows employers to recruit temporary workers from offshore. It is a two stage process whereby employers apply for approval to recruit and then workers apply for visas. The Variation of Conditions (VoC) arrangement allows migrants to apply to the Department to alter the conditions of their permit (e.g. allowing visitors to work). VoCs are also used to vary other permit conditions, such as the nominated employer. Working Holiday Schemes (WHSs) are bilateral agreements which allow 18-30 year olds from partner countries to spend 12 months (or 23 in the case of nationals from the United Kingdom) in New Zealand and undertake work of a temporary nature.
These policies are administered by the Department of Labour (the Department). In the cases of AIPs and SWP, permits are issued in consultation with the Ministry of Social Development (MSD).
Key features of the status quo (AIPs aside) are that:
- employers do not have to seek permission to recruit workers and recruit them from offshore,
- employers are not responsible for immigration conditions such as paying at the market rate and paying for the airfares if workers abscond and are are removed from NZ.
AIPs are the reverse of this in both respects.
The status quo does not meet the public policy objectives.
Preferred Option: Recognised Seasonal Employer policy
The preferred option is to replace the current AIP and SWP policies with a new seasonal work policy for those employers in the horticulture and viticulture industries who wish to recruit labour from outside of New Zealand. The proposed policy is entitled Recognised Seasonal Employer (RSE) policy. It would be a three stage process:
- employers apply for RSE status - similar to an application for accreditation under Accredited Employer (Talent Visa) policy. This essentially involves demonstrating “good employer” credentials, and an ability to pay workers their entitlements.
- employers apply for Agreement to Recruit (ATR) – similar to the current AIP process with further conditions added as per below
- worker apply offshore for work visas
Recognition: The ‘good employer’ requirement would be based on evidence of having Health and Safety and HR practices, including paying tax and (where appropriate) being accredited with ACC and the NZ Contractors Federation. Employers would be expected to demonstrate a commitment to recruiting and training New Zealanders.
Pastoral care relates to looking after the migrant workers’ interests outside of the workplace: providing translation, transport into town, ensuring meals are available, and opportunities for recreation and religious observance. The RSE application would generally be paper based with site visits only when necessary to verify particular aspects.
RSE policy would place more obligations on employers than current policies. Employers would pay one half of their migrant workers’ travel costs, provide a repatriation guarantee (for if their workers become illegal and are apprehended), and would need to pay at least 240 hours work. Market rate terms and conditions would also be required.
ATR application: MSD would have effective veto over ATR applications when there are NZ workers available, and MSD and Department statisticians would work together on predicting labour market shortages. It is intended that ATRs can be applied for well out from the season and that they will be processed as quickly as possible. A new ATR would need to be applied for every season.
A cap on the number of ATR places approved every year would be set at 5,000. This could be varied, however, by the Minister of Immigraton.
Visa applications and following seasons: There would be a presumption of return for individual workers in following seasons if all laws and immigration requirements are met, and labour market shortages continue. Return of workers would be contingent on the employer still wanting them.
The Department of Labour will be responsible for processing all applications and for subsequent monitoring and compliance activity. Some of the monitoring will be done by Workplace (Health and Safety) staff, and some by Workforce (Immigration) staff.
It is not practical to continue with AIPs and the proposed new Recognised Seasonal Employer policy as (due to AIP’s lower requirements) employers would all opt to use AIPs and the new policy would not be successful.
Judicious use of VoCs will continue, however, where a person’s bona fides are genuine. Temporary migrants will be permitted to work for up to six weeks on a VoC in the hortculture and viticulture industries.
Statement of the Net Benefit of the Proposal, Including the Total Regulatory Costs (Administrative, Compliance and Economic Costs) and Benefits (Including Non-Quantifiable Benefits) Of the Proposal, and Other Feasible Options
Costs: The Department is budgeting for two Full Time Employees (FTEs) to implement the policy at an annual cost of $0.2 million. These FTEs will be fully fee funded. RSE policy will be fully fee funded, and no extra costs will accrue to government. There will be no savings from discontinued schemes as these are also fully fee funded.
Benefits: The policy will support the aims of the Horticulture and Viticulture Seasonal Labour Strategy by encouraging industry to focus on developing skills and productivity (rather than rely on cheap labour), while encouraging a preference for New Zealand labour where available and ensuring the effective management of immigration risk in the long term.
Costs: The firms affected are employers in the horticulture and viticulture industries who want to recruit foreign workers from offshore to meet their labour requirements. Smaller employers that currently benefit from the SWP because it ‘delivers workers to their doorstep’, with no obligations on the employer, will be among those most affected by this policy.
There are an estimated 7,000 employers in these sectors. However, due to the requirements for recognition and the cap on the number of ATR allocations, the Department of Labour estimates that (once the policy is established) only some 200 employers are likely to have RSE status at any one time (given the cap of 5,000 places per year).
Initially, at least, there will be a significant financial impact upon those employers in the horticulture and viticulture industries who wish to source foreign labour. At a minimum it will cost an employer $1,400 for the RSE fee (payable once every two years because RSE status would last two years) plus $120 per ATR application. Costs will vary, however, by the employer and the terms and conditions they offer. For example, companies’ obligations would be significant if:
- they recruit migrant workers from relatively distant nations
- climate factors cause them to lose projected work time and require them to pay the migrant workers even though there is not work available, and
- the migrant workers abscond and become illegal in New Zealand, and are subsequently removed at the employer’s expense.
Firms will also need to make arrangements for pastoral care. This extends to things like arranging for the migrant workers to get to their accommodation from the airport (and back again), sourcing accommodation, organising for meals if in remote locations, and interpretation if necessary.
As all crops have fundamentally similar (eg. semi-skilled) labour requirements, there is not expected to be a differential impact between the various crops. In cases where migrant workers are employed by contractors, seasonal workers might work at a large number of different worksites. This would give rise to extra considerations relating to the protection and payment of workers. There would be no differential impact on contractors as opposed to growers however. All employers would be treated equally.
Businesses seeking labour input have other options available to them, including hiring contractors to carry out activities like picking and pruning. Therefore it is unlikely that the impact on any business would be enough to cause it to fold, although it may well become more difficult to recruit foreign staff.
Benefits: The Department also expects that, in time, smaller businesses would cooperate to seek more effective ways of recruiting and utilising labour. In the longer term industry will benefit through a move towards a higher-skilled, more productive workforce with greater retention and easier planning for labour requirements. The prospect of circular migration will be a significant benefit to employers as they will be able to retain trained staff and select the best performers.
Migrant workers will have to pay for TB tests (they not currently are tested for TB). These cost around $NZ 70-100 depending on location. Migrant workers will benefit significantly from having half their airfare paid, and from having pastoral care arrangements made. Workers from the Pacific might benefit because their flights are cheaper so they would be more attractive to employers. Highly trained migrant workers with many years of experience in New Zealand will also benefit as they will be prime candidates for return employment.
A more efficient and productive Hort/Vit sector will assist economic development, benefiting all New Zealanders. More secure full-time jobs would make participation more attractive to New Zealanders. While a significant proportion of smaller labour contractors would currently find it difficult to meet recognition requirements, larger contractors would be better placed to achieve RSE status. This would have positive spin offs for New Zealander workers, as this would provide for longer-term employment opportunities and hence more retention in the industry.
STATEMENT OF CONSULTATION UNDERTAKEN
Consultation has been undertaken with the Council of Trade Unions and representatives from the Horticulture and Viticulture industries. This was wide-ranging, beginning with an extensive research project, then with a series of meetings. Industry feedback has been incorporated into the proposed policy.
Industry representatives have indicated general support for the policy proposal, although they would like more flexibility around the time workers can spend in New Zealand and more flexibility around employers’ obligations.
The Department has attempted to accommodate these concerns by introducing more flexibility around the 240 total and 30 per week working hours requirements, increasing the proposed VoC term from one month to six weeks, removing a proposed requirement for workers to have $250 to hand on arrival in New Zealand, and making health insurance contributions a permissible deduction from workers’ pay.
Industry would also like the SWP to continue past the expiry date of 30 September 2006. The Department does not currently propose to recommend this to the Minister of Immigration, but will monitor the takeup of the RSE policy and keep the Minister informed of developments.
The Ministries of Economic Development, Foreign Affairs and Trade, Health, Pacific Island Affairs and Social Development, the Department of Internal Affairs (Office of Ethnic Affairs), the New Zealand Customs Service, the New Zealand Police, Te Puni Kokiri and the Treasury were consulted in the development of this paper. The Department of Prime Minister and Cabinet was informed. No significant concerns have been raised.
BUSINESS COMPLIANCE COST STATEMENT
The Department estimates that, with a cap of 5,000 workers, a total of around 200 businesses will be affected at any one time.
One source of compliance costs for employers will be taking the steps necessary to meet recognition requirements. Those employers (often small businesses and contractors) that currently do not meet recognition requirements would be most affected by this policy, should they choose to use it.
Compliance costs will depend on how organised firms already are. Those with adequate record keeping practices will face minimum compliance costs, as they will simply need to make copies of relevant material available to immigration staff with their RSE application forms. Those firms who need to hire accountants and get their records in order will face greater costs. Of note, however, such costs (i.e. maintaining correct records) are standard for most businesses and should not be considered an unreasonable cost imposition.
The Department intends to operate an outreach programme and issue extensive publicity material with clear guidelines for employers. Industry representatives have agreed to ‘road test’ the guidelines and application process to make sure they work.