Imagine you’re an executive at a large company – an incompetently run telecommunications monopoly, say. Profits are down and you have to sack several hundred staff. Under current labour laws none of your options are great: you can adopt a sinking lid policy, call for voluntary redundancies (expensive and you lose your most experienced staff) or forced redundancies (also expensive especially if they take out grievance cases against you). But soon you’ll simply be able to dismiss most or all of the employees you hired within the last three months – who have the least institutional value – with no cost to your organisation.
I think this is the real risk/benefit of the 90 day fire-at-will clause. Sure, some employers will use it to take risks on young and unemployed workers and some will use it to exploit their staff but the real advantage to them is the flexibility it gives large employers to quickly reduce staff costs.
Spending a couple seconds on Google reveals that Spain and Ireland both have employee probationary periods similar to the one National is introducing and both of them saw huge surges in unemployment as soon as the financial crisis hit in 2008. The Labour department tells us that roughly 400,000 New Zealanders change jobs every year, suggesting that at any given time 100,000 will be subject to the fire-at-will provision. If there were another economic downturn then a significant proportion of those people could lose their jobs with no notice or redundancy or chances of finding new employment. It might be good for individual companies but would certainly be bad for the overall economy.
You’re assuming that the institutional knowledge held by the long time employees is worth a pinch of piss. In my experience often these long serving employees are malingering idiots who get away with doing f all because they can talk about the event of 97 with some degree of authority and know a network of people that makes it look like they actually do some work. Now it’s not always the case but there is a flip side to your argument.
Comment by har — July 20, 2010 @ 8:14 am
Danyl: Spending a couple seconds on Google reveals that Spain and Ireland both have employee probationary periods similar to the one National is introducing and both of them saw huge surges in unemployment as soon as the financial crisis hit in 2008.
People start shouting: observer bias, observer bias!
To Danyl: interesting find, but European countries have had high unemployment levels, and very high youth unemployment levels for quite a while. Looks to me there are more things in play.
And as said before: the 90 days is optional, not mandatory, and assuming that people can negotiate their salary package but are to timid to mention the 90 days probationary period is quite unwarranted.
Comment by Berend de Boer — July 20, 2010 @ 8:29 am
It helps when you can just make shit up
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10659953
Comment by max — July 20, 2010 @ 8:38 am
You’re assuming that the institutional knowledge held by the long time employees is worth a pinch of piss.
In large/complex organisations institutional knowledge is very valuable. And you can’t just buy it off the shelf the way you can most kinds of knowledge.
Comment by danylmc — July 20, 2010 @ 8:43 am
Agree, some institutional knowledge is useful. In my experience people over-rate who has it and what it’s worth. Especially in incompetently run telecommunications monopolies.
Comment by har — July 20, 2010 @ 9:15 am
the other issue that hasn’t been mentioned is that if you get a job and leave the benefit only to be fired 3 months later you are required to stand down from the benefit for several weeks. if you’re on the UB you have to accept a job if you are offered one and you’re unlikely to have any savings to carry you through a 6 week stand-down. people in that situation would be deprived of any income whatsoever without any justification from the employer.
Comment by nommopilot — July 20, 2010 @ 10:07 am
I had a quick look at the OECD literature on probationary periods, and most OECD countries have them.
What the OECD says is that probationary periods promote hiring of minorities and older women, and countries with stronger protection for existing employees works against these groups plus reduces labour market flexibility. Offsetting that is strong permanent worker protection has many benefits also.
NZ has a large Polynesian population and a proportionately big immigration programme, so we have to be careful not to shut these groups out of the economy with over protection of longer term mainly European or older males.. introducing a 90 day probation threatens the latter groups and their unions.
.. back to the OECD, there appears to be no magic formula but the sense I got was you need a fair degree of stability for the existing workforce plus improved labour market flexibility to bring in new entrants via the likes of probationary periods. It isn’t rocket science.
JC
Comment by JC — July 20, 2010 @ 10:12 am
“the other issue that hasn’t been mentioned is that if you get a job and leave the benefit only to be fired 3 months later you are required to stand down from the benefit for several weeks.”
Thats a fairly critical flow on from increased flexibility via a 90 day period. National will need to work on this.
JC
Comment by JC — July 20, 2010 @ 10:15 am
@har – you are clearly a prejudiced person with no actual experience of any sort of large workplace, excepting perhaps a call centre where you nursed the obvious chip on your shoulder at the tier2/3 support team. If you have had worked in such a place, you would know most corporates – especially in New Zealand’s skill strapped technology sector – are held together by a core team of (usually) less than twenty experts of great experience. Across our big five telco companies, for example, probably less than one hundred people hold the entire NZ telecommunications network together.
Comment by Sanctuary — July 20, 2010 @ 10:15 am
Don’t get me wrong, I’m not for the proposed changes. I think job security is a very valuable asset. I also think that most large companies already treat their employees like shit, and don’t really deserve any extra abilities to do so. But then again, it’s probably not going to negatively effect too many people (who are good at their jobs) unless there is another economic downturn and could, potentially, help with unemployment/economic growth. I don’t like it, but I’m willing to admit that it could be beneficial for a period of time. Not a good idea for the long-term though.
Hey, if this extends to all employers, does that include elected officials? Could make for an interesting 90 days following an election.
Comment by Brad — July 20, 2010 @ 10:24 am
I had a quick look at the OECD literature on probationary periods, and most OECD countries have them.
Most of them are ‘opt-in’ though. National’s are ‘negotiate your way out, if you can’.
Comment by danylmc — July 20, 2010 @ 10:28 am
It seems to me that a trial of 30 days is more than adequate. Think about how an employee feels when they have to work 90 days, spend that much of time in dedication to the company, and not even know if they will have a job at the end of it. It’s horrible. Another example of National pandering to the wealthy and upper-middle-class.
Even if the employee passes their 30 day trial and gets the job and then things don’t work out for the employer, they have more than enough leeway to get rid of the employee. Most employees live paycheck to paycheck and won’t be able to afford to make a personal grievance claim anyway, so in summary a 30 day work trial is more than enough.
Comment by Troy — July 20, 2010 @ 10:44 am
“Most of them are ‘opt-in’ though. National’s are ‘negotiate your way out, if you can’.”
Maybe so. But as an ironic observation my experience is that employing an experienced person, say a manager, is even more fraught and risky than taking on a novice at the coal face; often you are just importing someone else’s problems
JC
Comment by JC — July 20, 2010 @ 10:45 am
Sanctuary, wrong, however what is clear is your inability to discuss the point at hand rather than blather sanctimoniously.
Comment by har — July 20, 2010 @ 10:51 am
When I worked for [large incompetently run telecommunications monopoly], there was already a probationary period in place for new employees by hiring them as temps through an agency while they were in training. Once training was complete, permanent contracts would be offered, but there was no obligation to do so – [large incompetently run telecommunications monopoly] would simply inform [temp agency] who they wanted to hire or whose temp contracts they wanted to extend. If the 90-day trial period comes into effect for everyone, does this mean new employees working through a temp agency would essentially have double the trial period, if they get hired permanently for a job they were already doing as temps?
Comment by otter — July 20, 2010 @ 11:12 am
Good question Otter, that’s how I got my job. Temp contract was extended to six months too before becoming permanent. It was annoying enough that no holiday pay or sick leave was accrued during this period, an extra three months of uncertainty wouldn’t be welcome on top of that.
Comment by Brad — July 20, 2010 @ 12:27 pm
Actually, now that I think about it that could be an advantage of the scheme (imagine that?!) as I know for a fact that the only reason my company went through all that temp contract stuff as opposed to just hiring someone, was to minimise the risk involved. So under the proposed changes I could potentially be six months ahead on holiday and sick leave. Hmmmmm…
Comment by Brad — July 20, 2010 @ 12:34 pm
Thats a fairly critical flow on from increased flexibility via a 90 day period. National will need to work on this.
You’ve got to be joking right? National have not been making things easier for people on unemployment benefits – the undeserving poor.
This policy will cause some people a world of pain. Just how many is the real question.
Comment by georgedarroch — July 20, 2010 @ 2:32 pm
Spending a couple seconds on Google reveals that Spain and Ireland both have employee probationary periods similar to the one National is introducing and both of them saw huge surges in unemployment as soon as the financial crisis hit in 2008.
Australia has an across-the-board 3-month probationary period and unemployment peaked in July 09 at 5.8%. New Zealand went to 7.1% without a probationary period.
Comment by SHG — July 20, 2010 @ 5:41 pm
Australia has an across-the-board 3-month probationary period and unemployment peaked in July 09 at 5.8%.
Australia also pumped $100 billion in emergency stimulus spending into the economy, including sending out $1000 to every single taxpayer. The differences between the way NZ and Australia approached the financial crisis and resulting recessoin are remarkable.
Comment by georgedarroch — July 20, 2010 @ 6:14 pm
What? So there are lots of other things that could affect unemployment besides whether or not there’s a probation period? That’s crazy talk!
Comment by SHG — July 20, 2010 @ 6:34 pm
SHG,
Yeah. Aussie takes on board around $57 billion deficit this year and $300 billion long term.. about twice ours, but they have the mining. I guess Rudd’s mining tax was designed to speed up the repayment issues.
JC
Comment by JC — July 20, 2010 @ 8:27 pm
Berend: the fact that these countries may have had high unemployment is irrelevant. What Danyl is talking about is the change in the level of unemployment. Western European (e.g. Spain, Ireland) labour markets are usually described as “inflexible”, i.e. resistant to change – unemployment doesn’t rise quickly because labour protections make it difficult to fire people, and it doesn’t fall quickly because those same labour protections make employers hesitant to hire people. In light of that, a large and rapid increase in the level of unemployment is significant.
And “observer bias” doesn’t necessarily apply here. If Danyl had said, “I’ve heard that Ireland and Spain have similar probationary periods, and I looked up their unemployment levels over the past few years etc etc,” then you could make that objection, but “a few seconds on Google” means he took the effort to actually find things out, rather than he assuming he already knew everything about
stonerscountries with probationary periods for new employees.Comment by derp de derp — July 21, 2010 @ 2:38 pm
I think the high unemployment levels in Spain and Ireland have far more to do with other fundamental economic problems rather than this rather minor industrial relations issue. I think danyl has posted scathingly on the Celtic Tiger before.
My own experince as a public sector union member over the past 10 years or so has been of workers being extremely frustrated over very poor management along with management bullying. The unions, even with the best of intentions, could do little about this.
Those were real issues that don’t appear to have the same class-warfare appeal to either side.
Comment by NeilM — July 21, 2010 @ 8:16 pm