With 2017 all but in the record books, most business leaders are well on their way into 2018 – creating plans for a more successful and productive year ahead. However, before we get too far ahead of ourselves, it’s important to consider the events of 2017 and how these will affect what happens in the future. Whether it was the General Election in September, living wage protests or even the ongoing rebuild of Christchurch, 2017 was a historic year in New Zealand and 2018 is set to be just as busy. How 2018 will look like for local business leaders is hard to predict, but there are certain events that should be considered.
1) Challenges around low pay workers: Although New Zealand has a growing and stable economy, there appears to be a developing divide from a socio-economic perspective. There is increased focus on levels of pay with further challenges for business leaders around both the living wage and the planned increase to the minimum wage.
The current ‘living wage’ in New Zealand sits at $20.20 per hour – a figure calculated to provide families with adequate income for the basic necessities of life. This is $4.45 more than the current minimum wage, although this is set to change with an announced rise from $15.75 to $16.50 in April 2018.
When the minimum wage is increased in April, it could put pressure on small businesses that have limited cash flow and will require an update of business models in some instances. It will be interesting to see how it affects various industries as we can also expect workers to put more pressure on their employers on adopting the living wage as well – as we saw in 2017.
2) Labour, NZ First and Greens settle into government: As Jacinda Ardern has cemented herself in office, we’ve seen a number of significant announcements. These include changes to climate change policies, education, housing, immigration and, as mentioned above, the minimum wage.
Of course, in 2018, much of Cabinet’s concentration will be around passing these laws and ensuring it all fits into the budget. The Minister of Finance Grant Robertson’s first budget in May will be important for business confidence as leaders will be looking for evidence that the country can pay for everything the new government has promised.
There was a lot of attention at the end of 2017 around all the big policies. 2018 will see these announcements move into the next stage and impact various industries and sectors.
3) NZX Corporate Governance Code details: Earlier in 2017, the NZX Corporate Governance Code recommended that New Zealand’s top companies reveal exactly how much their CEO earns in their respective annual reports from October 2017. As well as a CEO’s base salary, the annual report would include short term incentives, long term incentives and bonus payments. This move brings New Zealand in line with Australia and aims to add another layer of accountability and transparency to our private sector. Of course, whenever data of this nature is released, the public always has a reaction of surprise and anger in some cases. As more annual reports are released in 2018, it could have an unexpected impact on remuneration.
As CEOs find out what other boards are paying their executives, there could be questions about why people are paid that compared with them. Although some of the figures are very high, the release of information could see CEO packages increase rather than decrease in the short term.
4) Health and safety legislation hurdles: In the wake of the Pike River tragedy, New Zealand’s health and safety laws were thrown into the spotlight and overhauled as a result. While Pike River was a one-off event, the country had a poor safety record across several industries including agriculture, forestry and farming – all targeted under the legislation.
While there are countless positives to the legislation, many small businesses have struggled to adopt the new, complex processes and, in some cases, are too scared to make mistakes. In 2018, as the legislation settles into normal business practice, we expect these challenges to continue to surface and potentially force the government’s hand for amendments. The possibility of re-entry to Pike River in 2018 could also add another complex layer to health and safety laws in New Zealand. With ongoing debate over the safety of the mine shaft, the new legislation could prevent this from occurring – the exact reason why the laws were put in place.
2018 is charging ahead and business leaders need to be aware of how 2017 may still continue to impact their business and the lives of their employees.
John McGill is the CEO at Strategic Pay.
