Tag Archive for: Savage & Savage Chartered Accountants

Insurance consumers should welcome Fire and Emergency NZ review

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The Insurance Council of New Zealand and Internal Affairs Minister, Tracey Martin, applaud government review of current levy funding regime.

From the ashes of a Fire and Emergency New Zealand (FENZ) restructure has risen significant merger costs that, under the current funding regime are recuperated through a levy imposed on all home, contents, and auto insurance premiums.

In March, the Government decided to review the funding system with an eye to seek alternative solutions that are fairer to the wider population and insurance buyers. The move has been overwhelmingly supported by the Insurance Council of New Zealand (ICNZ).

“The current levy is a grossly unfair tax that penalises people who try to do the right thing to protect their assets, lumping them with the cost of running FENZ while also supporting access to emergency services for those who choose not to insure,” said ICNZ Chief Executive, Tim Grafton.

“The Government has made the right call to review how to fund FENZ in a way that is fair to everyone, simple, low cost to administer and lines up with what happens in most other countries,” he continued.

The benefits of the levy are not in dispute, with Internal Affairs Minister Tracey Martin acknowledging the services FENZ provide. “The establishment of FENZ has gone well and New Zealanders are beginning to see the benefits of a modern, unified fire and emergency service,” said Martin. “For example, FENZ has responded admirably to the Nelson/Tasman fire.”

But she, like the insurance industry welcomes the review and potential alternative funding solutions going forward. “FENZ, like the fire service before it, is funded by a levy on property insurance and there are flaws in insurance-based funding: property owners that do not insure are able to ‘freeride’, as they do not pay a levy but still benefit from FENZ’s services; charging people on their insurance increases insurance costs and can reduce the incentive for them to properly insure their properties; and levy collection is complex to administer for insurers, and FENZ’s levy income may become uncertain as the commercial insurance market evolves.”

“The Government considers that there may be better ways to fund such an important organisation,” she concluded.

This article was originally published in Crombie Lockwood’s SURE magazine

Debt Management and Recovery

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How do I ensure customers understand the importance of paying my invoices on time?

Customers juggle cash flow requirements on a frequent basis monthly, weekly or sometimes daily.
When cash flow becomes tight, some of your customers may choose whether they pay you and other creditors based on what effect non payment will have on them and their business.

Ensuring you have a robust process to follow up on overdue invoices is important, however, it is far more
important to adhere to the process. Far too often, we work with clients who have good processes but due to a variety of reasons, they don’t stick to them.

By having an effective debt collection agency to assist managing late paying customers as part of your credit management process is encouraged as it enables you to focus on what you do best. It also ensures your customers understand that you place importance on being paid.

Moving on from cheques

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IRD recently announced their decision to no longer accept cheque payments for any form of tax from 1st March 2020. We will be in touch with those who for one reason or another (ie no rural broadband) can’t pay online to help you identify other payment methods.

Here’s what IRD had to say in their news release:

Cheque usage continues to decline every year. Last year cheques only accounted for 5% of payments to Inland Revenue and some people who used cheques also used other payment methods.
From 1 March 2020, Inland Revenue will no longer be accepting cheques if customers have an alternative payment option available. This includes post-dated cheques (cheques dated after 1 March 2020).

Around 90% of the cheques we receive come from clients of tax agents. If you or your clients use cheques you will be instrumental in the transition to alternative payment methods. There’s plenty of time before next March for people to explore their options and find a convenient and secure way that works for them.

There are many different ways to pay – electronically or in person.

Ways to pay

Here’s a summary of payment options:

  • myIR: You can pay by direct debit and make debit card and credit card payments securely through myIR online services. Visit our website (ird.govt.nz) and login or register for myIR.
  • Online banking: You may be able to make payments using online banking. Contact your bank for more information.
  • Credit or debit card via our website: Use your credit or debit card to make online payments through our website. Visit ird.govt.nz/pay.
  • In person at Westpac: Pay by EFTPOS or cash at a Westpac branch or Smart ATM.
  • Money transfer: If you are overseas you can pay us using a money transfer service. Search for “make a payment” on our website for more information.

Charges may apply for some payment options.

We are soon going to start contacting cheque payers (and their tax agents) to let them know about this change and alternative ways to pay.

In the meantime, if you would like more information visit our website at ird.govt.nz/pay.

The ‘Cloud’ without a silver lining

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Many businesses are turning to the cloud for their IT services. The cloud provides reasonably priced access to the latest software and technology without the need for a business to make significant investments themselves.

There are numerous cloud suppliers including firms like Microsoft, Amazon, Apple, Xero, One Net, Spark etc. The list is huge and ranges from giant companies to quite small, niche operators. It’s estimated that by 2019 83% of data traffic will be cloud based (currently it’s at 65%).

But, while the cloud provides its customers with some huge advantages, there are also inherent risks that need to be considered along the way:

  • Typically cloud service providers will limit their liability through the contract their customer signs. Quite often this limitation will be very tight and will afford the customer little or no rights of recovery against a cloud service provider. In the event that a customer of a cloud provider suffers a loss because of a loss of data/operations then the chances of making a financial recovery from the cloud provider will be limited at best
  • Cloud customers are liable for their data irrespective of where it is stored. A breach of data stored on the cloud will still be the responsibility of the owner of the data and not the cloud provider. So any legal liability, fines, notification costs will be the customer’s irrespective of the cause or location of the data breach
  • Cloud service providers give customers access to the most up-to-date security. However; the weakest links in all IT systems are the operators. No matter what the level of security there is no software-based answer to human error such as sending e-mails to wrong addresses, inadvertently disclosing confidential information or passwords, etc.
  • In the event of a data breach caused by the cloud provider’s customer’s actions i.e. the negligence of an employee then the chances are the contract terms will exclude any liability at all on the part of the cloud provider
  • With the limited protection afforded under the cloud service contract it is unlikely that a customer would be able to recover costs incurred by their business if there was a cyber event or data breach

– even if it’s in the cloud. So costs such as business interruption, restoration of data and public relations are not going to be recoverable without resorting to litigation against the cloud provider and perhaps, not even after that

  • The cloud provides access to the latest editions of security tools such as fire walls and anti-virus software. However, the security can only respond to known threats. Hackers are discovering new software weaknesses every day and exploit what are known as zero day vulnerabilities to attack systems before any protection can be deployed. Even with their enhanced security cloud service providers are vulnerable to these attacks
  • Because of the success of the cloud it’s become a target for hackers. So while data in the cloud is often better protected, it is also more exposed because it’s seen as an attractive target for the bad guys
  • There are legal implications of where data is stored. Where a cloud provider hosts their data isn’t always disclosed and is quite often not in New Zealand. A breach of confidential data stored by a

cloud provider could expose their customer to the laws of the country where the data is hosted and these may not be as favourable as NZ laws resulting in extended liability

Most of the Cyber Insurance products in the market extend to cover the Insured for an event or breach on a cloud network. CyberSAFE defines a computer network to “also include a Computer Network that is under the operational control of a Service Provider”.

With CyberSAFE a breach occurring on a cloud based network would be an insured event and, subject to policy terms and conditions, will give the insured access to:

  • Cover for legal liability to third parties
  • Cover for fines & penalties for privacy breaches
  • Defence costs
  • Business Interruption costs
  • Public Relations costs
  • Data restoration/recovery costs
  • Ransom monies

Even if the cloud service provider is liable for the cause of the cyber event/data breach it is extremely unlikely that they will indemnify their client for any costs or liability and, even if they do, it may be for a limited amount and the management of the recovery/defence will be outside of the customer’s control.

Visit: www.crombielockwood.co.nz/cyber-insurance for more on CyberSAFE.

HAMISH KENT
GROUP BROKING MANAGER
+64 3 543 8693 |  +64 27 836 2553 | crombielockwood.co.nz
hamish.kent@crombielockwood.co.nz

Ring-Fencing Residential Property Deductions

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The proposed changes to residential property losses will once they are enacted likely to apply from 1 April 2019. The changes mean that residential property deductions can only be offset again residential property income, therefore losses from residential property cannot be used to offset other income.

The losses will need to be carried forward and utilised when the investment makes a profit. The ring-fencing can be applied on a property-by-property basis or on a portfolio basis. It will apply to all properties where the income is taxable in NZ and to all types of entities. The ring-fencing will work similarly to the ring-fencing of mixed use assets.

What to Say When #4

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Taking an Unauthorised day of leave.

We are open on the Tuesday between Nelson Anniversary on the Monday and Waitangi Day on the Wednesday. My employee has said he won’t be coming in on the Tuesday but I need him to work. He is a permanent employee who normally works on a Tuesday. What can I say?

Simply say– “No”, however a few extra words will be helpful if your employee still doesn’t come to work on the Tuesday. An explanation along the following lines will enable you to take action subsequently.

“You have not had leave approved for Tuesday so you are required to come to work. If you do not come to work it is likely to lead to disciplinary action which could result in a warning or dismissal. If you call in sick I will require you to visit a doctor and get a medical certificate. You need to be aware that a medical certificate will not necessarily be accepted as an adequate explanation for your absence if I suspect you were not genuinely ill.”

The key to this conversation is the employee understanding the potential consequences of not turning up to work.

We have just introduced a drug testing policy. A manager has told me she overheard an employee (John) say that if he gets tested he won’t pass. What do I say?

Your new Drug and Alcohol Policy will hopefully help you out here. If one of the circumstances for testing an employee is ‘reasonable cause’, the information the manager heard could be considered reasonable cause. Have a discussion with the manager and take a statement about what she overheard, then speak to the person who was having the conversation with John and take a statement. Then speak to John, providing him with the statements, and advising him on the basis of this information you believe you have reasonable cause to test him. Allow him the opportunity to respond to that proposal before confirming whether or not you will test. Then follow your policy in terms of steps to take for testing and consequences of a non negative result.

Zoom Consulting

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Business Systems Software Specialist and Consultant

Emily Thompson from Zoom Consulting

Emily Thompson is a business systems and software superstar. Using Xero accounting software and other add on software platforms, she can design a software solution for your business, implement the systems, then train you and your staff.

She supports businesses within the Nelson/Tasman region and throughout New Zealand with a vison of “to collaborate with my clients by finding them the best possible business system and software solutions for their needs.”

Emily supports her clients and their staff, enabling them to utilise the software and systems as much as possible.

“I provide my expertise and experience from day one and provide ongoing support wherever possible to help you implement systems that will streamline your business processes”.

Contact Emily at info@zoomconsulting.co.nz

ERA Bill Passes into Law

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Changes to the Employment Relations Act

We reported on the Employment Relations Amendment Bill earlier in the year.   In summary, the amendments introduce greater union and employee rights, and the described aim of the changes was to increase fairness between employees and employers (see our previous article here, outlining details of the changes). 

The Bill proposed some significant employment law changes and has therefore taken some time to go through readings and Select Committee processes.  Following endorsement by the majority of the Education and Workforce Committee and then the Bill passing it’s third reading on 5 December 2018, we can now confirm that the proposed changes are going ahead. 

How might the changes impact our clients?

The changes reintroduce more rigid rest and meal break requirements, together with new calculations for how breaks are paid.  If you have applied flexibility to break times and frequency, this may be something you need to change.  Check what you have included in your employment agreements too.

If you have 20 or more staff, you will no longer be able to utilise a 90-day Trial Period for new employees.

Also, if your workplace has a collective employment agreement or union membership, there may be a number of changes that will be relevant to your workplace, such as union representative entering the workplace without consent, pay deductions can no longer be made for partial strikes and businesses must now enter into bargaining for multi-employer collective agreements, if asked to join by a union, for example.

When do the changes take effect?

Most changes take effect at two times: the day after Royal assent (expected the week of 10 December), and on 6 May 2019. 

Changes we are asked about frequently, including the changes to rest and meal break requirements and employers with 20 or more staff no longer being able to use a Trial Period, will be effective 6 May 2019.  

To see all of the specific changes effective on each of these dates, follow this link to MBIE’s employment website: https://www.employment.govt.nz/about/employment-law/employment-relations-amendment-bill-2018/ 

If you would like to discuss how any of these changes may potentially affect your business, policies, employment agreements or processes, please contact us on 03 545 0877 to speak to one of our team.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

Personal Grievances – When a Win is actually a Loss

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A recent personal grievance case between Philipa Johnson and the National Business Review (NBR) resulted in a win for the employee, which actually ended in a financial loss for her when all was said and done. The Employment Relations Authority determined the employee was unjustifiably dismissed. However, the sting in the tail for the employee was that her legal costs were 10 times higher than the compensation she received.

As an employer, it can at times feel like the cards are stacked against you when dealing with a personal grievance. Frequently the better business decision can be to reach a settlement to resolve a dispute even when you have done nothing wrong. From a point of principle this may not feel particularly comfortable.

However, despite best intentions an agreement might not be reached, or you may decide the principle is more important. As a client goes through the decision process to determine which strategy to adopt, we take you through the risks of each pathway and the potential costs of both winning and losing a grievance in the Employment Relations Authority.

At the same time we analyse the risk for the employee and likely value of any compensation award, and this helps inform the decision on how  much to consider offering to reach a settlement if this is the preferred option. There are times the employee is either too greedy or poorly advised and their expectations of a settlement amount are unrealistic.

Affecting the level of the award Johnson received was the Authority’s determination that she breached her employment agreement when she took and distributed confidential information from the employer when she left their employment.

Johnson was awarded $1,666.67 in lost wages and $8,000 in compensation for the unjustified  dismissal. She had claimed $50,000. However, she was ordered to pay a $9,000 penalty for breaching her Employment Agreement, of which $6,750 was to be paid to the NBR and the balance to the Authority. Johnson paid a staggering $96,000 in legal fees.

The winning party ordinarily is awarded $4,500 in costs for a one day hearing in the Authority.  With this in mind, even without the penalty awarded against her, Johnson was always going to be on the losing side financially, as she claimed $50,000. This case demonstrates how principle can override common sense, and some people cannot be negotiated with.

Bullying, WorkSafe and Personal Grievances

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Recently WorkSafe announced that it will ‘typically only investigate bullying and harassment claims where there is diagnosis of serious mental harm’.

This significantly limits the complaints they will investigate. Although the clear acknowledgement of this is new, it is consistent with WorkSafe’s actions to date.

WorkSafe has never prosecuted anyone for bullying, despite receiving over 100 complaints of bullying in the past 4 years. Of those complaints, only 9 were investigated. WorkSafe receives over 10,000 notifications a year, and they only have the resources to investigate the most serious incidents, primarily those that result in serious physical harm.

Radio NZ recently reported on allegations of bullying at the Bay of Plenty DHBs’ Tauranga Hospital. Two Hospital staff, who were at times suicidal after feeling bullied at the DHB, had their cases turned down for investigation by WorkSafe. This demonstrates just how serious the harm must be before WorkSafe will investigate.

This does not mean employer’s are off the hook. The path to seeking some form of recompense is frequently taken by raising a personal grievance.

A recent case, FGH v RST, was heard in the Employment Court.  The employee was being performance managed, and during that process accused her manager of bullying her. The organisation chose not to investigate the complaint, concluding the employee was simply resistant to being performance managed. The Court criticised this approach, concluding that although the behaviour complained of was ultimately found not to be bullying, the employer had an obligation to investigate the concerns raised rather than dismiss it out of hand.

Bullying investigations are often complex, particularly as bullying behaviour is frequently underhand and out of sight of witnesses. Getting the basics right is a good start.

All of the information you gather has to be provided to the alleged bully. Only in extreme circumstances can information be anonymous. Case law consistently rules a person is entitled to know who is making allegations against them. The alleged bully then needs to be provided adequate time to consider the information before responding to it, and they are entitled to have a support person or representative with them.

Other issues include having one person’s word against the other and no witnesses, witnesses unwilling to provide statements out of fear, imbalances of power between a complainant and the accused, seemingly small incidents that separately are minor but collectively paint a different picture.

Bullying is a health and safety issue, and irrespective of the lack of action WorkSafe is likely to take, if you don’t take action it can adversely affect attendance, productivity, culture, employee retention, and ultimately result in a personal grievance.

If you have any issues at your workplace that concern you, please talk to one of our trained consultants for advice before embarking on an investigation process. We offer 10 minute free advice for any new enquiry.