A flagship social unemployment insurance initiative is getting new figures to oversee its design and implementation – even though Cabinet is still to formally sign off on the scheme

The Government is forging ahead with its income insurance scheme despite concerns about a lack of transparency and the impact on low-income earners, hiring senior staff to move ahead with its delivery.

Finance Minister Grant Robertson says Cabinet is still making final decisions on the scheme’s design, but the National Party has accused ministers of an “irresponsible” approach in hiring permanent employees for an initiative yet to be finalised.

In February, Robertson unveiled plans for a social unemployment insurance scheme to provide a seven-month cushion for those made redundant or rendered unable to work due to a health condition or disability.

The $3.5 billion annual cost would be funded through a 2.77 percent levy split equally between employees and employers, with the Government covering the administrative costs of running the fund through ACC.

In May, Parliament passed enabling legislation allowing ACC to start work on the scheme, with $60 million of funding for establishment costs provided in that month’s Budget.

Now, ACC is recruiting for a head of policy and strategy for the scheme, as well as a head of delivery, a head of scheme architecture and design, and a senior research advisor.

While the job advertisements note the Government is “continuing to explore” its options, only the senior research advisor role is listed as being a fixed-term contract, while a further position – income insurance policy manager for the Ministry of Business, Innovation and Employment – is specifically labelled as a permanent position.

The public consultation process for the scheme closed in April, but an official summary of submissions is yet to be released; a regulatory impact statement for the preparatory work noted a formal decision on whether to move ahead was expected in “late June/early July”, a timeframe that has now lapsed.

National Party social development and employment spokeswoman Louise Upston told Newsroom it was premature to hire permanent staff for the scheme, given the lack of information about the consultation outcome and the next steps.

National Party MP Louise Upston says an income insurance scheme could dissuade people forced out of employment from making a swift return to the workforce. Photo: Lynn Grieveson

“We’re assuming there needs to be additional legislation to authorise it, so to be out employing people is irresponsible, in my view.”

Upston said National was concerned with the significant costs that would be imposed on the business sector and might then be passed onto consumers.

The scheme could also create an incentive for unemployed New Zealanders to spend longer periods out of the workforce, which made it harder to “reconnect” them to employment.

“Many businesses are saying they will train up people from scratch, so why is it at a time like this we would encourage or provide a scheme that would allow people to be out of work for seven months? It just doesn’t make sense.”

Peter Vial, the New Zealand head of Chartered Accountants Australia and New Zealand, told Newsroom it was unsurprising ACC was hiring staff given the significant amount of work which still needed to be done to make the scheme viable.

Vial said one of his organisation’s key concerns had been the lack of transparency around modelling for the scheme, which it had first asked for in February.

While they had last week received “a swathe of documents” from the Government, it would have been appropriate to provide such information before public submissions closed given the potential consequences for employees and employers.

“Even that work with those documents we’re working through indicates that there’s still a lot of uncertainty and a lot of assumptions as to the way that the scheme has been costed, so there’s a lot of work to be done … it absolutely needs really robust modelling, really robust analysis.”

“There is, I guess, a degree of irony here, in that the most vulnerable workers are often the most lowly paid, and so the scheme will benefit them, but they have to front up with and pay their levies. When they’re really struggling as it is, is this the right time to do that?”
– Peter Vial, Chartered Accountants Australia and New Zealand

Vial said another key issue was whether enough work had been done to consider alternatives to the current proposal, such as legislating for mandatory minimum redundancy entitlements over specific time periods.

The costs of the scheme on employers and employees, particularly low-income earners who were “struggling to put food on the table, let alone pay for compulsory income insurance”, also had to be taken into account.

“There is, I guess, a degree of irony here, in that the most vulnerable workers are often the most lowly paid, and so the scheme will benefit them, but they have to front up with and pay their levies. When they’re really struggling as it is, is this the right time to do that?”

It was “glib” to say the levy would be split evenly between employers and employees,Vial said, as exactly how the fee would be apportioned would in reality depend on the employment relationship.

In a written statement, Finance Minister Grant Robertson told Newsroom the Government was committed to moving ahead with the scheme, “but further work is needed on some of the more complex parts of its design before Cabinet makes final decisions”.

“This includes some of the matters you have raised – for example, how the scheme works for lower income earners.”

The Government had funded and legislated for ACC to do pre-implementation work on the scheme in May’s Budget, Robertson said, with the recruitment work part of that.

Speaking at the May Budget, Robertson said the scheme’s estimated implementation date had moved from 2023 to 2024 due to the “considerable work” needed to get the scheme up and running.

Sam Sachdeva is Newsroom's national affairs editor, covering foreign affairs and trade, housing, and other issues of national significance.

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