A Better Social Safety Net

Yes.

Yes.

Over 100,000 people are made redundant in New Zealand every year, with Māori, women, Pacific peoples and young people most affected.

Both the Welfare Expert Advisory Group and the OECD have recommended New Zealand act to create better support for displaced workers and social insurance delivers that. 

There is a strong economic case for the proposal which you can read about in the MBIE proposal document.

An income insurance system will:

• close a big gap in our social safety net for workers who are made redundant or have to reduce their hours or lose their job due to illness or disability.

• provide time for people who have been made redundant to find decent work. No one should have to take lower paid work out of desperation.

• Allow for a just transition for working people whose work is impacted by climate, technology or other change.

• give workers security and space to retrain, upskill and transition into good quality, sustainable jobs.

The proposal was developed by the Future of Work Forum which includes:

• Government

• Business (Business NZ)

• Council of Trade Unions (including representatives from CTU unions). PSA leaders, along with other unions represented on the CTU’s National Affiliates’ Council, the CTU Rūnanga, CTU Komiti Pasefika and CTU Women’s Council have had input into the proposal.

• Broad coverage for different working arrangements, including casual, fixed term and seasonal work.

• Coverage for job losses due to redundancy, layoffs, ill health and disabilities.

• A four-week notice period and four-week payment, at 80% of wages, from the employer.

• A further six months of financial support from the scheme, at 80% of wages.

• The option to extend support for up to 12 months for training and rehabilitation.

• A case management service to support people’s return to work.

• Funded by levies on wages and salaries, with both workers and employers paying an not more than 1.39% each.

• Workers eligible after six months of levy contributions in the previous 18 months.

They are not affected. If workers have contractual entitlements to redundancy compensation in their collective agreements then these are on top of the scheme.

The scheme would provide 80% of wages, which means those on or near the minimum wage may struggle financially. These people may be eligible for other support to help meet costs. 

The consultation asks whether there should be a “minimum replacement floor” (eg the minimum wage). See from p 73 of the full discussion document (pdf) for more detail.

The proposal is that the scheme covers: 

• full and part time permanent employees

• casual and fixed-term employees whose pattern of work resembles permanent employment, and who have a reasonable expectation of future income.

• Fixed term and seasonal employees where displacement prevents completion of time-limited employment agreements, with entitlements covering the remainder of the employment agreement.

The scheme would also cover self-employed people who most resemble employees. See from p53 of the full discussion document (pdf) for more detail.

The scheme would cover any health condition or disability that results in a reduction of capacity to work of at least 50% and that is expected to last for no less than 4 working weeks.

Income insurance for health conditions and disability would cover all working arrangements, with all forms of self-employment fully covered. 

To qualify, the claimant would need to provide a work capacity assessment (in the form of a medical certificate from the claimant’s health practitioner) and, where appropriate and required, supporting evidence from the employer of the claimant’s capacity to undertake their job. Any additional independent work capacity assessment would be undertaken as needed.

Employers would be required to help claimants to return to work and keep jobs open where a return to work within 6 months is likely.

For full detail of what’s proposed see from p96 of the full discussion document (pdf).

The services themselves are not designed yet but the aim is to make this process easy. The scheme will establish a case management service through ACC to assist clients who need help to claim. 

This is the same approach as for ACC, which is also paid for by levies. The benefit of a levy is that the money can only be used for the purpose it was gathered for, unlike a tax.

A levy also ensures decisions about the fund and entitlements are not subject to political whims, unlike a tax.

This will create a fund that spreads the risk of income loss amongst the working population. People who lose their jobs are supported by those who are still in work. 

Having both employers and working people contributing to the fund means both employers and workers share a stake in it. 

The fund will be governed with representation from workers (unions), business and Māori, so all our interest will be served. This differs from ACC, which has a board that reports to the Minister.

Over 100,000 people are made redundant in New Zealand every year, with Māori, women, Pacific peoples and young people most affected. These are the people who will benefit most from an income insurance scheme.

The proposal is for the scheme to cover New Zealand citizens and resident class visa holders.  For full detail on this see page 71 and 72 of the full discussion document (pdf).

No. 

Income insurance is not a benefit. The income provided by the scheme is only for a fixed time – usually 6 months but it can be extended to 12 months if someone is retraining. .

If a worker is still without work after seven months, then they can move over to the benefit system if they are eligible. 

Income insurance provides time and support for people to get decent work, without the need to move into the welfare system straight away.   

Yes.

The PSA supports reform of the welfare system that would increase benefits for all – we would go beyond just increasing benefit levels. 

You can read our vision for a social safety net for all here.

There are many gaps in the current system and benefit levels are a political football that keep people in poverty. Our current benefit system is part of what embeds growing inequality here in Aotearoa. 

A more independent way of setting benefit levels, genuine co-governance of the system and voice in setting benefit rules by Māori and others supported by it (like people with disabilities), the removal of the relationship rules and better protection of funding to provide stability are all needed, among other things.

The Government has said that if it introduces this scheme it remains “fully committed to overhauling the welfare system.” See page 45 of the full discussion document (pdf).

No.

Both of these priorities can happen at the same time.

This proposal for better support for displaced workers and those affected by illness and disability is part of fixing the gaps in our social safety net.  Both the Welfare Expert Advisory Group and the OECD have recommended New Zealand act to create better support for displaced workers and an income insurance scheme would deliver­­ that.