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Redundancy Protections Come With A Hidden Cost

6 May 2002

Redundancy protections come with a hidden cost, warns Business NZ.

Commenting on the release today of the Ministerial Advisory Group's report on protection for workers when a firm is sold or work is contracted out, Business NZ Executive Director Anne Knowles said such protections were not all they seemed.

"It's an attractive concept, ensuring employees keep their jobs with all existing conditions or get a redundancy payout if there's been a sale or transfer of business," Ms Knowles said. "The union movement certainly gains kudos for attempting to negotiate such protections.

"But it's important to put this kind of policy in its context, and see where it might take us.

"It's a policy that's come out of the large, unionised workplaces in Europe, where there's high unemployment - people with jobs have a lot of security, but those without jobs don't have a chance. The trade-off has been security for existing job-holders at the expense of new jobs.

"It's an expensive trade-off, since the price of those protections significantly increases the cost of being in business, and in many cases leads to company closure and more unemployment, so nobody wins.

"Is that what we want for NZ - ring-fenced protections for a small number of workers, while unemployment rises and the economy stagnates? We are a nation of very small enterprises, and the survival of those enterprises could be put at risk by an inappropriate regime imposing costs above and beyond those agreed to by the parties to an employment agreement."

Ms Knowles said a balance was needed between the interests of job-holders and those without jobs, within an economy that encourages new job creation.


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