People Watch Edition 2 - July 2018 - EY
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People Watch
Edition 2
July 2018
People Watch is a quarterly publication. We cover the
latest people-related updates, cross-border challenges
and remuneration and tax trends.
In this issue:
• Changes to minimum wage and impact on pay compression
• P
reparing for New Zealand payday reporting implementation
• P
rivacy legislation fit for the next 25 years?
• A
gile: from methodology to mindset
• A
critical risk approach to the future of health and safety
People Watch is a publication produced by EY People Advisory Services. For People Advisory
Services, building a better working world means helping to solve complex industry issues
and capitalising on opportunities to help clients grow, increase and protect their business.
Changes to minimum wage and
impact on pay compression
The new government implemented one of their Year on year increase in minimum wage vs forecast Having conducted analysis for several organisations, we know that Strategies that can be adopted to mitigate pay
pre-election promises on 1 April 2018, raising increases in the market the initial move (from $15.75 to $16.50) has very little impact compression include:
on the majority of organisations, but, by the time the minimum 1. Understand your key roles and adopt a “targeted disparity”
the statutory adult minimum wage from $15.75
wage reaches $20.00 per hour, there are few organisations in plan. This involves maintaining the current disparity in pay
to $16.50 per hour. Their commitment went our database who will not be required to adjust the earnings of rates for some roles that are considered key to your overall
further, promising to continue increases in a 26.8% at least some of their staff. Based on the data in our database, operations but who are paid just above the statutory minimum
“fiscally responsible” way in order to have the the majority of employers will have between 2% and 10% of their wage, by increasing their pay at a similar rate to the minimum
minimum wage reach $20.00 per hour by 2021. employees paid at or close to $20.00 per hour. wage increases.
These increases are projected to benefit around It appears many organisations are playing a “wait and see game”. 2. Revisit and review your current salary grade structure,
164,000 New Zealand workers, with employees in the 20.1% 29% of the respondents do not have any short-term plans in which may be structurally adding to pay compression.
accommodation/food services, manufacturing and place, although they are monitoring changes in market practice. Pay ranges may be too narrow from grade to grade.
wholesale and retail groups most likely to be impacted. A further 38% have no changes planned to increase pay for those Ensure that your ranges are keeping in step with the
employees currently paid just above minimum wage in order to external marketplace. If a remuneration framework is not
EY’s research found New Zealand’s proposed 27% increase to combat wage compression. in place, now may be the time to develop a formal salary
the minimum wage over three years is the largest percentage structure with minimum, midpoint and maximum rates.
13.4% Avoiding the squeeze —
increase to minimum legislated wages in any country or state in
recent history. strategies for managing pay compression 3. Analyse overtime usage and determine if this is the
10.0% best use of resources. The organisation’s current use of
The potential consequences of pay compression are significant
and in the current market, with low unemployment and skills overtime, including how it impacts employee pay relative to
7.5% supervisor pay, is an important part of resource management.
6.7% shortages, it is important to do everything possible to retain
“Understanding the impact 5.0% employees and ensure they are engaged and motivated. Prepare reports that map out all employee positions and pay
relative to their supervisor. What is the difference between the
of changes to pay for your 2.5%
Whilst the first move towards the $20.00 per hour minimum
wage may not have had much impact for the majority of two? Is it “enough” to be significant?
lowest-paid employees organisations, our data modelling suggests that, by 2020,
almost every organisation in our database will have had to
4. Consider non-monetary incentives and retention strategies.
What can be done to help with engagement that is beyond
requires a view beyond increase remuneration for their lowest-paid workers in order to pay? Strategies could include mentoring or developmental
just the minimum wage, 2018 2019 2020 2021 ensure they are not below the $20.00 threshold. Therefore,
pay compression presents a real risk.
opportunities, flexible working or team-based bonuses.
considering pay relativities Potential increase Forecast The first step in any remuneration-related strategy is analysis,
Given that over the next three years, the increase in minimum
wage will outpace forecast increases in the market by 250%,
and the impact of these
in Minimum Wage Market Increase and this is no different. Analyse your current pay practices to it is vital that organisations investigate the potential impact for
understand how many of your workforce will be at, or close to, them and start making plans now to mitigate this impact.
regulatory changes on all Know the impact — both now and for the future the likely minimum wage during the period 2018 to 2020,
and paid $20.00 per hour in 2020. Think about the roles paid
employees’ perception of their While the change to minimum wage affects only those who
earned under $15.75 per hour before 1 April 2018, the scale
similar to, or slightly above these roles. What is the likely impact
relative worth compared to of the change and our understanding of current pay rates for
of these pay increases on the perceptions of those paid similarly?
Una Diver, Partner, People Advisory Services
many administrative/team member career level roles suggests
other jobs.” that most organisations should be considering how potential pay Jason Blackmore, Senior Manager, People Advisory Services
compression effects may “play out” in their workplace.
2 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 3
Pay-As-You-Earn (PAYE) collection and reporting Coupled with this new interface, Inland Revenue are strengthening
forms an integral part of an employer’s tax their data analytics capabilities. It is widely expected that Inland
Revenue will begin forensically assessing all electronic payroll
obligations in New Zealand. Inland Revenue have
Preparing for New Zealand
data and we expect that error detection rates and the issue of
undertaken a plan to modernise the tax reporting data anomaly reports to employers each payday, with specified
process so it’s more efficient and accurate, making the response dates, will increase when employers start filing under the
payday reporting
tax system simpler and more reliable for New Zealand new system.
businesses. These changes will provide more timely We have seen similar automated payroll processes introduced in
information regarding government entitlements for the United Kingdom, and Single Touch Payroll reporting is about to
employees and their families, and so are in everyone’s “go live” in Australia. The global payroll automation represents a
best interests. governance and business risk for employers who fail to prepare.
It is with this in mind that the payday reporting changes to become Next steps
mandatory on 1 April 2019 have been enacted. Employers need to consider the impact of these developments
on their current payroll systems, processes and procedures.
What are the payday reporting changes?
Payroll managers should think about their payroll process
Currently, employers file employer monthly schedules (EMS) currently and map out the timing and challenges they may face
to meet PAYE and Employer Superannuation Contribution Tax under the new reporting regime.
(ESCT) obligations. In some cases, employers have up to 50 days
to remit PAYE withholding on their EMS. The data collected is then Now is the time to engage with payroll providers and ensure
reviewed and processed by Inland Revenue. they are on track to be “data ready” prior to April 2019.
This includes a review of the tax treatment of all wage codes
As a result of the payday reporting changes, the majority of to satisfy that there are no coding errors inherent in payroll
New Zealand employers will be required to report PAYE within systems. Many employers are utilising the window between now
a much shorter time frame, being 2 business days from each and 1 April 2019 to undertake an internal wage code and data
payday. Opportunities to file on paper within 10 business days analytics review of at least 1 years’ worth of payroll data to
from each payday have been removed for the majority of see how their organisation would stack up against an Inland
businesses. Some concessions for irregular payments such as Revenue review.
schedular payments, equity settled employee share-scheme
benefits, off-cycle pay and shadow payrolls exist, but will require Internally, businesses may need to consider changes to Human
process assessment and adjustment to implement. Resources or Recruitment systems to capture the current
data required for new starters on their first payday, including
As a result, for most employers, current payday filing processes whether they need to re-design their onboarding experience and
will require a substantial review (and a significant upgrade in many framework for new employees.
cases). Employers will likely need payroll processes integrated
into the payroll software used to pay employees. The reporting of This is also a pertinent time to consider the broader workforce —
PAYE will be part of the process of paying employees, rather than for example whether consultants or contractors have been
a separate activity. correctly classified in the business, or whether they should they
be added to the payroll as employees. Inland Revenue are likely to
Collaboration with Human Resources and Recruitment may also be focus on these questions, as they have access to more data and
required in order to gather the demographic information required implement automated review processes.
by the new reporting process for new employees in time for the
first payday. Inland Revenue have themselves acknowledged that the change
for businesses is complex, however, their goal is to reduce
Why the change? administration and additional reporting requirements for
These changes coincide with Inland Revenue’s transformation employers in the long run. Embracing this change in legislation
of their systems and processes. Their intention is to have the should reap benefits, and feedback from other jurisdictions is that
majority of employers involved in electronic filing, to take employers who prepare early are best suited to the change on
advantage of modern digital technology. Inland Revenue say there “go live” date.
is a need to utilise digital methods in order to ensure efficiency
and accuracy.
Rohini Ram, Partner, People Advisory Services
James Barlow, Senior Manager, People Advisory Services
4 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 5
Privacy legislation fit for
the next 25 years?
Mandatory data breach notifications. The Privacy Bill introduces New powers and obligations. The Privacy Commissioner will be What do organisations need to do to prepare for the
mandatory reporting of data breaches, in line with Australia and able to: new legislation?
“The Privacy Bill promises to the European Union (EU). Privacy breaches that pose a risk of
harm must be notified to the Privacy Commissioner and affected
• I ssue compliance notices requiring an agency to do something, In all, the changes to our current legislation are moderate
bring New Zealand’s privacy individuals as soon as practicable after the agency becomes aware
• E
or stop doing something, to comply with privacy law;
xercise stronger investigation powers that permit the
in nature. However, now is a good time to ensure that
data management practices protect the data of employees
protections up to date and of them. Although in line with Australia, the term “as soon as
practicable” is not as stringent as the 72 hour window prescribed shortening of time frames for compliance and customers.
align with international trends by the EU’s General Data Protection Regulation (GDPR). A failure
to notify will incur a fine of $10,000.
• M
ake binding decisions on complaints relating to
access requests.
• M
ap your data flows: Ensure that you know how your
organisation collects, stores, uses, discloses and destroys data.
in data protection. Does it?” Increase in maximum fines. Maximum fines are increased The Bill also introduces new criminal offences including
What data do you collect? Where is it stored, who uses it and for
what purpose?
to $10,000 but remain small in comparison with A$2.1m in an offence of misleading agencies in ways that affect other
• R
eview your terms and conditions: Be transparent about how
Australia and the greater of €20 million or 4% of global annual individuals’ personal information, making false representations
you treat personal data and ensure that you can back up what
New Zealand’s Privacy Act is 25 years old. It predates turnover under the GDPR in the EU. The Privacy Commissioner of authority under privacy laws, knowingly destroying documents
you are saying.
Google, Facebook and Snapchat. But change is on had sought fines of up to $1million (and $100,000 for containing personal information upon receiving an access
individuals). Damages (including for injury to feelings) are still able request. Additionally, the Bill clarifies the protections for • M
ake your data accessible: If someone requests access to their
the way. The Privacy Bill (currently before Select personal data will you be able to provide this promptly and
to be awarded. It was these damages provisions that have given cross-border information. New Zealand agencies will be required
Committee) promises to bring New Zealand’s privacy rise to recent well-publicised awards of $98,000 and $120,000 to take reasonable steps to ensure personal information disclosed easily? This can be difficult if data is stored or transferred across
protections up to date and align with international for injury to feelings, rather than any fine based regime. overseas is subject to acceptable privacy standards, including a number of different systems or if you have not mapped your
trends in data protection. putting in place contractual obligations or binding rules, data flows.
Low fine levels in the new Bill do potentially create a differentiated
where appropriate. • R
eview your crisis response: Ensure that you can quickly
The Privacy Commissioner has commented that the Act does playing field between those who may take a “risk-based” approach
identify data breaches. Once a breach has been identified, are
not go far enough, stating that “without real and meaningful to privacy compliance, and others (including multi-nationals A number of changes incorporated into the EU GDPR have not you comfortable that it will be escalated to the right level and
consequences for non-compliance, rogue agencies will continue required to comply with Australian or EU requirements) who adopt been adopted in the New Zealand legislation. These include notified to the Privacy Commissioner if necessary? Do you have
to thumb their nose at the regulation, meaning responsible a stricter approach to privacy best practice. It will remain to be the right to data portability, the right to be forgotten, the processes in place to minimise the damage resulting from a
organisations will disproportionately bear the cost of compliance, seen whether the fine levels survive Select Committee and, if so, requirement for consent to be freely given, specific, informed breach and to communicate effectively with affected parties?
while cowboys will ignore their obligations.” So what does the whether they (combined with the threat of reputational damage) and unambiguous, specific protection for children’s information
Bill contain? provide a sufficient deterrent to those who adopt lax data • B
uild a culture of doing the right thing: Clear policy and process,
and differentiation between data controllers and processors and
management processes. The Privacy Commissioner has indicated top down (and middle down) leadership, impactful training and
Business as usual. It is testament to the longevity of our between “sensitive” and non-sensitive personal data.
that he will continue to push the Government to adopt a harsher a culture where employees are empowered to make the right
current legislation that the principles-based approach to choices and are not afraid of speaking up are key to ensuring
penalty regime.
privacy protection has not changed. Privacy principles, the best practice data protection.
concept of “authorisation”, rights to access and correction,
• T
hink about data privacy when you are looking at new systems
and restrictions on collection use and disclosure will all remain
and data analytics tools.
in the new legislation.
Christie Hall, NZ Law Leader, EY Law
William Fussey, Solicitor, EY Law
6 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 7
Regardless of whether Agile is adopted, today’s An agile HR function
organisations must build agility to not only thrive, Agile transformations are, in some cases, failing to achieve
but even to simply survive. intended benefits as a result of people related challenges across
Agile: from methodology
the organisation. This calls for stronger support from HR to
Originally used to approach software development, build leadership capability and guide culture transformation.
the Agile methodology sought to address the What better way to achieve authentic buy-in to the agile way of
to mindset ”pain points” of the traditional waterfall approach to working than becoming a role model for change?
project management: high reliance on assumptions, As depicted in the diagram below, HR as a function typically
limited ability to react to change and late-stage develops policies, processes and models that are “one size fits all”
testing of the final solution. Agile is an incremental, rather than being tailored to the individuality and diversity of
the “customer”. It is also sometimes perceived as out of touch
iterative approach that values individual actions over
with the rest of the businesses with people related decisions made
processes and allows frequent adaptation in response on ‘gut feel’ rather than objective data. With an agile HR function,
to changing requirements and end-user feedback. these challenges can be turned into opportunities for the
HR function to reimagine their people practices by creating
Organised chaos multi-disciplinary teams to drive HR, allowing for greater
While Agile methodology is a far cry from the rigidity and planning diversity, and helping the business to work closer together.
of traditional project management, the idea that there is no
structure to the approach is one of the many misconceptions Challenges and opportunities of an Agile HR function
about Agile. Let’s dispel some of the common myths:
Challenges Opportunities
• There is no documentation: There needs to be a balance
of discussion and documentation. Often tasks to document
processes or requirements are included in the set period of time One size fits all approach Reimagine people practices
during which specific work has to be completed (sprints) and
made ready for review but not to the same level they would be Drives HR and the business
“Out of touch” perception
using traditional methodology. to get closer
• There is no planning: There is planning using Agile
Decisions made on
methodologies, just not forward planning to the degree of Decisions on real-time data
“gut feel”
traditional methods
• Agile is always better than a traditional waterfall approach:
Annual planning cycle Greater responsiveness
Agile works best when there are changing requirements and
rigorous documentation is not required.
• Agile means you can do what you want: The system of Difficult to do in isolation Test and learn incubator
practices, controls and disciplines inherent in Agile helps
maximise the translation of effort to value.
Agile HR — an easy move or a complex change?
Rapid innovation has become a strategic imperative for Because HR often touches every aspect of an organisation,
organisations to sustain and enhance their competitive position. a full Agile transformation may be more complex and extensive
The benefits of the Agile approach include better responsiveness than in other functions of the business. The good news is that
to change, increased efficiency, a stronger innovation culture HR can transform piece by piece, learning from each iteration and
and improved employee engagement. It’s no surprise, then, adopting agile principles only where they add value. For example,
that those outside of the software development space are using an early win may be the form of the major HR processes that
Agile in many different areas, from product development to are traditionally performed on an annual basis, such as
manufacturing to marketing. Some organisations are applying performance reviews, remuneration reviews and employee
the broader principles of Agile to create an agile mind-set and engagement surveys.
way of working.
Irrespective of whether organisations go “Agile” or not,
by function and as a whole they must build “agile” capabilities —
adaptability, responsiveness, learning agility, data-based decision
making — to remain competitive.
Meredith Wilmot, Director, People Advisory Services
Joshua Blackie, Manager, People Advisory Services
8 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 9The Government has released its draft Health and The Government’s vision is for all New Zealanders to be safe
Safety at Work Strategy 2018-2028 for consultation. and healthy at work
The strategy, which aims to achieve an evolutionary
A critical risk approach to
The draft strategy paper sets out a number of goals and
improvement in health and safety over the next ten associated priorities it intends to leverage to achieve the vision.
years, prioritises: • Focus on what will make the biggest impact.
the future of health and safety
• Ambitious and comprehensive targets that broaden Government investment where the most difference will be
made. Businesses need to ensure their risk management is in
the focus from acute harms to wider work-related
accordance with their industry and risk profile, and apply these
health risks concepts in practice. Government will provide greater support
• A future proofed regulatory framework that is to businesses and workers with greater need — primarily SMEs,
appropriate for businesses across New Zealand those in high-risk sectors, and Maori, Pasifika, young and
older workers.
• Ensuring all workers have the ability to influence
health and safety outcomes • Have a capable system where everybody plays their part.
This means integrating and aligning roles and responsibilities
• Strengthening the role of industry groups across the system to allow stakeholders to work together.
Leaders at all levels, from Government to workers, need to
prioritise health and safety. Worker engagement and
participation must be enabled. Investments need to be made
across the board (Government, businesses, tertiary institutions,
“What are our critical risks? etc.) in increasing specialist capability, and in leveraging data
How can we reduce them? to identify risks and understand the drivers of harm.
A comprehensive measurement framework, which will include
How do we know our efforts balanced indicators that measure attitudes and behaviours,
are making a difference?” lead and lag indicators of harm, and qualitative and quantitative
assessments, is being developed to track the strategy’s impact
on health and safety. In addition, a joint governance group, with
representatives from each part of the system, is being proposed
so that champions from Government, unions, business, iwi,
Making a tangible difference to our health and safety statistics is community, training organisations and specialist advisers
one of the key goals of the new strategy. Approximately 50 people can lead the development and delivery of the actions for
die each year in work related accidents, and 600-900 die due implementing change. Following consultation, the next stage will
to work-related ill health. Some population groups are at greater be for action plans to be developed aligning to the above priorities.
risk of harm: Maori, Pasifika, migrant workers, older workers The strategy’s 10-year timeframe enables action plans to be
and youth. developed periodically throughout this time period, in line with
the staged approach to implementation.
The strategy represents the next stage in the health and safety
legacy of the Pike River tragedy. It supports a proportionate and
results-based approach to health and safety centred around three
key questions: What are our critical risks? How can we reduce
them? How do we know our efforts are making a difference?
Christie Hall, New Zealand Law Leader, EY Law
William Fussey, Solicitor, EY Law
10 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 11Contacts
Rohini Ram
People Advisory Services New Zealand Leader
People Advisory Services
Tel: +64 274 899 917
rohini.ram@nz.ey.com
Workforce Advisory
Una Diver Meredith Wilmot
Partner Director
People Advisory Services People Advisory Services
Tel: +64 276 20 10 56 Tel: +64 2167 9963
una.diver@nz.ey.com meredith.wilmot@nz.ey.com
Jason Blackmore Joshua Blackie
Senior Manager Manager
People Advisory Services People Advisory Services
Tel: +64 21 534 668 Tel: +64 27 2626 555
jason.blackmore@nz.ey.com joshua.blackie@nz.ey.com
Employment and Mobility
Graeme Knapp Michael Harper James Barlow
Executive Director Director Senior Manager
Tel: +64 274 439 849 People Advisory Services Tel: +64 274 899 099
graeme.knapp@nz.ey.com Tel: +64 27 246 3854 james.barlow@nz.ey.com
michael.harper@nz.ey.com
Immigration
Kirsty Verster
Manager
People Advisory Services
Tel: +64 21 226 5723
kirsty.verster@nz.ey.com
Employment Law
Christie Hall Frank Peters
Director Senior
EY Law EY Law
Tel: +64 2187 2596 Tel: +64 9 348 8089
christie.hall@nz.ey.com frank.peters@nz.ey.com
12 | People Watch Edition 2 July 2018 People Watch Edition 2 July 2018 | 13EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit ey.com. © 2018 Ernst & Young, New Zealand. All Rights Reserved. APAC No. NZ00000956 PH1831594 ED None This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. ey.com
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