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Dyson: Address Federation of Vocational & Support

Ruth Dyson: Address Federation of Vocational and Support Services

Good afternoon, and thank you for this opportunity to give you an update on the government's vocational services policy. In particular, I've been asked to speak about the repeal of the DPEP Act and the employment barriers created by benefit abatement rates.

Repeal of the DPEP Act You will all know that the reason the government has decided to repeal the DPEP Act is because it treats people with disabilities unfairly.

The repeal of the act is priority 3 on the government's legislative agenda. This means it is to be repealed if possible in 2003. In the meantime, government agencies are working with providers such as yourselves to help you make the transition to the new environment in which people with disabilities have the same employment rights and opportunities as other New Zealanders.

Invalids Benefit and abatement regimes One employment barrier we need to look at is financial disincentives to entering paid work. Many people with disabilities made this point during consultation on the New Zealand Disability Strategy and Vocational Services Review, and singled out the current system of benefit abatement as a particular barrier. Generally, people receiving the Invalids Benefit can have income of up to $4,160 a year before tax (including their partner's income) before their Invalids Benefit is affected. Thirty cents is taken from the benefit for each dollar of income between $4,160.00 and $9360.00 a year, and 70 cents for every dollar of income that is more than $9360.00. When assessing the income of a person receiving the Invalids Benefit, Work and Income can disregard: · all personal earnings of a totally blind person; and · up to $20.00 gross a week of personal earnings for other recipients.

Any income earned can also affect supplementary payments being received by the person, such as the Accommodation Supplement.

The combined effects of benefit abatement, tax and work-related costs mean that some beneficiaries are little or no better off moving into work at available wage rates. They face additional barriers if: · they have high work-related costs because of disability, such as high transport costs; · their wage rate is very low, e.g. below the minimum wage; and/or · they have children and have childcare costs.

Another disincentive is "the 15 hour rule". To qualify for an Invalids Benefit, a person must not be assessed as capable of working regularly for 15 hours or more a week in open employment. They may still qualify for an alternative benefit, such as an Unemployment or Sickness Benefit, if they are working fewer than 30 hours per week. However, the rate of payment will be lower and the abatement rate higher than for the Invalids Benefit. People working in sheltered workshops covered by the DPEP Act are effectively exempt from the "15 hour rule". In other words, their eligibility for the Invalids Benefit is not affected if they work 15 hours or more per week. The government recently decided to continue this exemption for people working in existing workshops when the act is repealed - pending decisions under the Future Directions work programme - to help ensure their financial security during the transition period.

Proposals for reforms of social assistance for working-age individuals and families are also being developed. Future Directions for Social Assistance is considering family income assistance, benefit simplification, and housing and hardship assistance.

It would make sense for this review to include disability social assistance including Invalids Benefit, Sickness Benefit and Disability Allowance, and to address policy issues associated with Pathways to Inclusion - such as the best long-term approach for people who receive part of their income from Invalids Benefit and part from wages, the $50 tax exemption for people in workshops, and the use of Disability Allowance to pay for access to vocational services.

An important part of any review of disability social assistance would be consultation with people with disabilities and people working in the disability sector. We already have a lot of information at our fingertips, such as the consultation report for the New Zealand Disability Strategy, and this will be fed into the process.

Minimum Wage exemption When the DPEP Act is repealed, where people are deemed to be in an employment relationship, all the normal terms and conditions of employment, including payment of a minimum wage, will have to be met.

In some cases, it will still be possible for employees to be paid less than the minimum wage through a minimum wage exemption, which is an existing provision of the Minimum Wage Act 1983. This would be issued for a certain period of time and reviewed regularly.

A minimum wage exemption will only be issued in appropriate cases where no other arrangements can be made. Labour inspectors will ensure that these exemptions do not become a 'soft' alternative that allows businesses to pay their employees less than the minimum wage and gain an unwarranted competitive advantage by doing so.

Inspectors will also ensure that the terms of the permits are fair and reasonable, the rights and interests of employees are protected, and there are sound arrangements for issuing and reviewing permits.

In addition, in cases where funding support for a limited time would help create new ongoing jobs which will pay at least the minimum wage, existing employment subsidy schemes should be available - in 'segregated' or 'sheltered' employment as well as open employment.

Transition strategy A transition strategy has been developed to: · help providers develop a clear delineation between quality community participation services and paid employment; and · where people are deemed to be in paid employment, to ensure that employees receive at least the minimum wage, or have a minimum wage exemption, and that all other employment requirements are met.

The Department of Labour and Ministry of Social Development are working together to implement this strategy.

Approach to change Department of Labour inspectors have three roles in this process: · advising sheltered workshop providers on whether employment relationships exist in a particular sheltered workshop - this will enable the provider and Ministry of Social Development staff to consider whether the organisation should be funded for employment or community participation services;

· facilitating negotiations between the employer and employee in relation to minimum wage exemptions under the Minimum Wage Act 1983; and

· being available to talk to groups such as sheltered workshop providers, employees with disabilities and their families or representatives about employment rights and obligations and how they affect them.

In most cases, existing sheltered workshops are not approaching inspectors directly for advice. However, when their exemption under the DPEP Act becomes invalid because they move to a new site, providers have been encouraged to apply for minimum wage exemptions rather than a new DPEP exemption.

This helps to start moving towards the new environment. It means that: · the inspector discusses the exemption with each employee individually, together with the employee's representative and employer; · the exemption sets a minimum rate for that employee; and · the exemption will be reviewed regularly - currently, every six months.

Inspectors are aware that employees and their families or caregivers are anxious about the changes and have some concerns about the impact on wages and benefits. They are working to phase in the changes gradually to alleviate these concerns. At this stage, pending further work on financial security, independent representation for employees will be encouraged, but will not be insisted on, and initial individual exemptions will be issued at the employee's current wage rate.

Inspectors have guidelines for issuing minimum wage exemptions, which are intended to ensure that the employee's interests are properly represented, and the outcome is a wage that fairly represents the employee's ability to do the work.

Pilot studies of providers who are making the transition will be conducted by the Ministry of Social Development and the Labour Inspectorate. This will enable a model to be developed of the financial effects of introducing minimum wage exemptions.

Barriers caused by benefit abatements Benefit abatement is one obstacle to negotiating fair rates for people with disabilities, particularly where these disabilities are intellectual or behavioural. Labour inspectors' experience with issuing permits in open employment is that workers and/or their representatives are fearful of negotiating on the full potential of a person's working ability because of the risk of loss or abatement of their benefit. Early signs are that this is just as likely to be a problem in sheltered workshops moving out of the DPEP Act umbrella.

Employers/providers have also come to rely on benefit abatement levels as a benchmark, with the result that both parties are resistant to negotiating higher wages. Inspectors can find themselves a focus of animosity as they try to change these entrenched positions. Additional resources will enable some new Labour Inspectorate positions to be established, with appointments expected in July. This will allow some pro-active work to be considered.

Ministry of Social Development The Ministry of Social Development National Contracts team is working closely with providers affected by the repeal of the DPEP Act to assist them to manage the transition. This includes: · helping providers determine the types of services (employment or community participation) they will provide in future - following advice from the Employment Relations Service about whether an employment relationship exists; · working with providers to develop their capacity to provide sustainable employment opportunities through viable businesses that provide ongoing, worthwhile work for fair wages; and · building vocational sector capacity and service quality.

The ministry is working with providers who do not want to become employers in the new environment to ensure there are alternative services for their clients such as quality community participation or supported employment. To assist these providers, the ministry has been holding meetings with sheltered workshop boards. A programme to review each provider's financial position has been put in place to get an understanding of the ministry's true contribution level and the development of realistic funding strategies for providers.

Governance training and advice The ministry has also held a number of seminars to provide governance training, advice and assistance to providers. Many of the providers attending the meetings are working toward the directions outlined in Pathways to Inclusion, though there are still some issues that remain to be worked through. Feedback has been very positive, with providers valuing the opportunity to network and finding sessions on governance issues constructive and informative. I might add that they are also an excellent resource for the ministry.

Quality fund A quality fund has been set up to provide grants to service providers to build capacity and improve service quality. Project proposals totalling more than $300,000 have been received from a small number of providers for phase two of the Quality Fund. This phase is focussing on paid employment initiatives, including assisting sheltered workshops to move toward the new environment. Projects being funded must be designed to fit effectively with the action points in Pathways to Inclusion.

Conclusion Our initial priority is to strengthen and improve the current provision of services. This includes evaluating existing services, establishing areas of need, and providing assistance to improve services.

Preparations are also underway for the significant jump of more than $9 million in new funding for vocational services in the 2004/2005 financial year. Additional funding will be offered to successful providers who are committed to employment outcomes for their clients and to ensuring services are responsive to the needs of groups who have traditionally missed out - people with significant disabilities, school leavers with high and complex support needs, Maori, Pacific people, people with mental illness, people who live in rural or isolated areas, and women.

We have made great progress in laying the groundwork for positive change and I am confident that, if we continue to work together, our efforts will succeed.

I wish you well for the rest of your meeting, and a safe trip home, and now I am happy to answer any questions.

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