Income

Revenue insurance scheme could be a ‘camel’s back-breaking straw’ for businesses

Southland Chamber of Commerce chief executive Sheree Carey said the proposed revenue insurance scheme would exacerbate businesses. [file photo]

Robyn Edie / Stuff

Southland Chamber of Commerce chief executive Sheree Carey said the proposed revenue insurance scheme would exacerbate businesses. [file photo]

The government’s proposed revenue insurance scheme could be the “straw that breaks the camel’s back” for many companies, according to business leaders in the South.

Southland Chamber of Commerce chief executive Sheree Carey said New Zealand’s proposed revenue insurance scheme and its associated levies would come at a time when businesses could least afford it.

“It has its merits, but there hasn’t been a tougher time for business than the past two years…it’s not a bad conversation to have, it’s just not the time to have,” she said.

Under the proposed scheme, employers are required to provide laid-off workers with four weeks’ pay at 80% of their salary, with an additional six months’ pay at the same level under the scheme. It would be financed by a 2.77% payroll levy, shared between workers and employers.

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Business South and the Southland Chamber of Commerce submitted the proposal, saying the timing was wrong as businesses faced the rising cost of inflation, minimum wage hikes and increased furloughs illness while recovering from the impact of Covid-19.

The Southland Chamber of Commerce had surveyed its 567 members before the submission, with 70% of members saying the 1.39% levy was not affordable for them. Only 10% of respondents said the program would be good for New Zealand employers.

“It will affect businesses at every level,” Carey said.

Feedback from members said the scheme would not be suitable for all professions and was “another cost that small businesses have to bear”.

Business South chief executive Michael Collins said with rising costs, the insurance scheme could be the

Provided

Business South chief executive Michael Collins said with rising costs, the insurance scheme could be the “straw that breaks the camel’s back” for many companies. [file photo]

Business South chief executive Michael Collins said the scheme had implications for small and medium-sized businesses, which would struggle the most to cope with compounding costs.

“Our members can’t see the benefit of introducing this now – it could be the straw that breaks the camel’s back for many,” he said.

It would also have a significant and disproportionate impact on low-income workers, he said, with a minimum-wage worker expected to contribute about $12 a week.

He acknowledged that the need for retraining and protection programs for laid-off workers was warranted, but argued for a more industry-specific and affordable approach for employers.

The proposed scheme was developed in conjunction with BusinessNZ and the New Zealand Council of Trade Unions, but has been criticized by industry bodies such as the Association of Employers and Manufacturers (EMA).

Opening consultations on the scheme, Finance Minister Grant Robertson said the proposal was a lasting solution that would protect people and the economy after crises like the Canterbury earthquakes and Covid-19.

“Our proposed program provides direct economic security to individuals and helps them transition into a good new job, as opposed to economic support programs that keep people in their current job even if that role is no longer viable,” did he declare.