july 2017 people watch - eyfile… · july 2017 people watch edition 2 in this issue: • does your...

July 2017

People WatchEdition 2

In this issue:

• Does your privacy programme function as a control or a competitive advantage?

• Is the future of work already here?

• Is New Zealand’s employment law fit for purpose in the gig economy?

• Where are your people located and what are they doing?

• What do you need to be thinking about in the BEPS environment?

• Are you getting what you bargained for?

• Don’t let your compliance hinder your ability to source the talent offshore.

People Watch is a publication produced by EY People Advisory Services. For People Advisory Services, building a better working world means helping to solve complex industry issues and capitalising on opportunities to help clients grow, increase and protect their business.

People Watch is a quarterly publication. We cover the latest people related updates, cross-border challenges and remuneration trends.

2 | People Watch Edition 2 July 2017

3People Watch Edition 2 July 2017 |

When the Privacy Act was enacted, Google did not exist. Worldwide, the approach to protecting personal information and realising the value of this asset is changing.

Many of these changes are coming our way. New Zealand is likely to enact new privacy legislation next year. When it does, key global data management practices will be incorporated into our legislation.

Like our recently enacted health and safety legislation, a new privacy regime will start a sea change in the way that data is managed. In the months prior to the enactment of the health and safety legislation, businesses scrambled to put in place resources, revise policies and took a “compliance approach” to risk management. We need to learn from this to take a more proactive approach to data management, focused on critical risk and an organisation’s commercial goals.

There are many parallels between a good privacy programme and a good health and safety programme. These include:

Looking at your privacy programme now enables an organisation to prioritise a programme of work centred on its risk appetite and critical data risks, set a timeframe for progress that reflects the organisation’s broader commercial strategy, leverage off the work done in other risk areas (such as health and safety) and take a long-term view as opposed to a quick fix.

Some of the changes that we expect to see include:

• Widening scope — the EU (through the General Data Protection Regulation) (GDPR)) is extending the territorial scope of its legislation to organisations offering goods or services to people in the EU or monitoring the behaviour of people in the EU, even if those organisations are not themselves based in the EU

• Focus on consent — consent needs to be positive (not implied by silence), clearly given and easily able to be withdrawn

• Control over data transfers — where data is stored or processed by a third party, the data controller will still be liable, even across borders

• Data portability — organisations will have increasing obligations to ensure that their data can be transferred to different providers if customers change provider

• Increasing accountability — putting the onus on business to demonstrate that they have taken appropriate steps to comply with their obligations and safeguard data

• Mandatory breach disclosure — requiring organisations to notify the regulator (and individuals) of breaches capable of causing serious harm are discovered

• Increased penalties — non-compliant businesses will be at risk of fines of up to €20 million, or 4% of their total worldwide annual turnover under the GDPR. In Australia, maximum fines have been increased to $1.8m. Damages could be sought on top of these amounts.

Board reporting and governance

Senior leadership visibility over and championing of good data management

Risk appetite and tolerance consideration

Mapping the assets held and the critical risks associated with those assets

Easy to use policies and processes

Comprehensive training

Consistent messaging throughout the organisation

Good assurance and monitoring practices

A crisis plan agreed in advance and in place

A culture of continuous improvement

Does your privacy programme function as a control or a competitive advantage?


Changes to our legislation sought by the Privacy Commissioner include fines of up to $1m, mandatory breach disclosure, regulation around data portability and reidentification protections. In addition, to retain New Zealand’s current data adequacy status with the EU, changes are likely to be required to update our legislative framework.

Smart businesses will be ahead of the curve. Organisations are beginning to realise the value of their data management practices in differentiating themselves to their customer base. They are moving beyond compliance and taking a risk based approach to look at how data can enable the customer experience and provide value. It is no longer sufficient simply to tick the compliance box. If the potential uses of data are unlimited, organisations need to consider where they stand and how their data management strategy fits with their broader corporate strategy. Are they about security at all costs? Optimising data value for customer benefit? For society’s benefit? An organisation’s data ethics strategy will serve to differentiate it in world where customers are increasingly aware of the value of the information they are providing.

Now is the time to start looking at these issues and putting in place the foundations to build a robust and sustainable privacy culture that supports the organisation’s wider corporate strategy.

New Zealand’s privacy legislation has been largely stagnant for the past 20 years. It is principle

based and has little teeth. As a result, for many organisations, investing in data management

programmes has not been a priority.

Christie Hall, Associate Director, EY Law


In the current business landscape we have become used to new buzzwords and trends popping up with ever increasing frequency. One that is appearing with increasing prominence — Google brings up 677 million results for the term — is the ‘Future of Work’.

While disruptive innovation in the workplace is not a new phenomenon, we are entering a period where the scope and pace of technological advances is unprecedented and this has far-reaching implications for how we communicate, collaborate and work. The World Economic Forum is calling this the Fourth Industrial Revolution, and it has already started.

Five significant workforce trends that will impact your people management strategy 1. Managing in the gig economy

The global contingent labour population is increasing, enabled by technological advancements and driven by demand for skills. The use of contingent workers can have multiple benefits, including increased flexibility to attract specialist skills and respond to changing market conditions, and easier labour cost management. Many organisations are starting to look at office space as a value generator rather than just a cost centre, and we expect to see a significant proportion seeking new ways to measure the ROI of their workspace beyond just cost.

2. Defining an Employee Value Proposition (EVP) fit for the future

There is a growing demand for organisations to adapt their employment models and reward structures to attract and retain the increasingly broad range of talent and workforce types — not just a multi-generational workforce but one that includes people and machines. This includes newly emerging offerings such as wellbeing and benefit programmes for not just permanent but also a flexible workforce. Employees increasingly want the same seamless digital experience at work that they are able to get at home and on personal devices. The focus for the HR function should be to define your organisational talent strategy and intent for the future of your employees, their role and function. It is important to consider what the employee value proposition is for employees whose roles and work are likely to change.

Is the future of work already here?


3. Integrating robotic process automation

Technological advances are expanding both where and how robots will support our workplaces in the future. We are now seeing robots entering new business environments including legal, professional services and education, and they are being considered the new ‘worker’ rather than just an enabler.

‘Bots’ are cheaper and more efficient to run, enabling process automation and releasing their human counterparts to focus on more value-added activities like creative thinking and social interaction.

We will start seeing RPA increasingly influence organisations and industries over the next couple of years; a study from Gartner indicates that smart machines will replace 1 in 3 jobs by 2025 . HR Professionals should consider how to anticipate and manage the ‘side effects’ of this change, including automation anxiety from employees.

4. Planning the future workforce

The nature of workforce planning is changing; organisations need to look beyond traditional evaluation methods and embrace new technologies such as predicative analytics to make informed decisions about what skills they need today and in the future. Leaders should consider how the short to mid-term impact of other Future of Work trends such as digitalization and robotics will impact their workforce and the competencies that will be required. The most critical attribute of the future leader is an ability to connect at a human level and show empathy.

5. Leading transformational change

The HR function has a lead role in managing change and must grasp the drivers of change across the organisation. The focus will be on creating a trust-based working environment that promotes continuous learning and skills development and flexible work practices that increase engagement, teaming, innovation and productivity. Technology can be leveraged to increase employee engagement and adoption as the pace of change within our organisations accelerates. Leaders need to consider how fast their teams can cope with change and how well they are supported.

EY Future Work Now

EY Future Work Now programme is designed to help the individual, team and the organisation adapt to emerging digital workplace trends. The approach uses seven complementary levers to drive change across the complex business landscape and support organisations to transition from simply sustaining their business to creating inspired employees and teams. This journey is tracked through a maturity model that measures the current state of the organisation and crafts a clear road map to the desired endpoint for the future.

Meredith Wilmot, Associate Director, People Advisory Services

Jennifer Pooley, Consultant, People Advisory Services

A study from Gartner indicates that smart machines will replace 1 in 3 jobs by 2025.


The increase in “on-demand” service providers such as Uber, TaskRabbit, and Lyft has grown the contingent workforce. A gig economy business model makes financial sense — connecting end users with service providers on a timely basis, providing workers with greater flexibility and avoiding costs associated with an employment model.

Yet this business model does not fit squarely with New Zealand’s employment environment.

Entrepreneurs and disruptors currently choose from:

• An employment model, with the minimum entitlements and restrictions

• Independent contractors, with the inherent legal risk attached.

Employment relationships are regulated to set minimum entitlements ensuring any asymmetry in bargaining power does not lead to unfairness. Independent contractors have little legal protection, but the Courts look closely at the true nature of these relationships when they are challenged to ensure that both parties are independent business people negotiating on an even footing.

In order for New Zealand and New Zealanders to prosper in the gig economy, is it time for a middle ground?

1 Workforce 2020: The Looming Talent Crisis, Oxford Economics, 2015

2 UK Department for Business, Energy and Industrial Strategy Press Release

30 November 2016

of the

of

83%global executives

they will be

contingent, intermittent, orconsultant employees1

increasing the usesurveyed said

15%UK labour marketof the

self-employed2is

Is New Zealand’s employment law fit for purpose in the gig economy?


The independent contractor model has been successfully challenged in two recent UK decisions.

Aslam & Farrar v Uber (ET 2202550/2015) — Uber retains its drivers (called “Customers”) as third party independent contractors. There is no contractual relationship between Uber and its passengers. Rather, Uber is described as a booking agent operating on behalf of the driver. The Employment Tribunal found the independent contractor relationship “faintly ridiculous”, full of “twisted language” and found “the notion as absurd”. Instead the Employment Tribunal found the drivers to be “workers”. In the UK, workers are a middle category that receive leave and minimum wages, but not all minimum employment entitlements.

Dewhurst v CitySprint UK Ltd (ET 2202512/2016) — Similar to Uber, CitySprint uses an app to connect self-employed courier drivers to different courier jobs. CitySprint provides its drivers with induction and a uniform and has greater control over their duties. The courier bringing the claim worked 4 days a week and drove about 50 miles a day for CitySprint. The Employment Tribunal described the contractual arrangement between CitySprint and its drivers as “contorted” and “window-dressing”. It again found the drivers to be “workers” rather than employees or independent contractors.

In late 2016, the Taylor review was initiated in the UK to look at how employment practices need to change in order to keep pace with modern business models. It is due to report back in mid-2017. The Department for Business, Energy and Industrial Strategy has also launched the first Government-commissioned research project into the scale of the gig economy.

Is New Zealand’s legal framework fit for purpose?

New Zealand does not have an equivalent “worker” category like the UK. Assessing whether a person is an employee or an independent contractor is a high risk game for both parties:

• Employees receive minimum wages, leave and holidays, unjustified dismissal and disadvantage rights, KiwiSaver contributions etc.

• Independent contractors receive no legal protection (save on human rights grounds).

Some thought has already been given to providing non-employees with greater protection. The Minimum Wage (Contractor Remuneration) Amendment Bill sought to require independent contractors in specific industries (including courier driving, building and construction, cleaning, catering etc.) to be paid no less than the minimum wage. Although it did not progress, the Bill was supported by Labour, the Greens, the Maori Party and NZ First. This could be an area to watch, depending on election results.

At the other end of the scale, amendments to the Employment Relations Act 2000 were introduced in April 2016 to limit the use of zero hour contracts and to prevent employees being engaged on an “on demand” basis. It prevents true employment relationships from being casualised and protects employees’ rights to their minimum entitlements.

Ultimately, we need to find a way to allow flexibility while at the same time protecting vulnerable workers. Forcing businesses to structure themselves in a traditional way flies in the face of international trends and may not reflect the way in which people are working in practice. Businesses will endeavour to find ways around the issue to ensure that they operate in the most efficient way possible. Careful consideration will also need to be given as to how our income tax structures will support changes in working arrangements going to forward to ensure that taxes are fair, easily calculable and easily collectable.

Creating a “worker” category as a middle ground may be worth considering. This would enable those in relationships that sit somewhere between an employment and a true contracting relationship to be provided with certain minimum benefits, such as minimum wage and leave entitlements. Some may see this as watering down current employment protections. However, the gig economy is coming, whether we like it or not. To enable New Zealand to compete on the global stage, our employment regulation needs to be as flexible and agile as our business practices.

Rohini Ram, NZ People Advisory Services Leader

Christie Hall, Associate Director, EY Law

Oksana Siminoff, Associate Director, People Advisory Services

14 | People Watch Edition 2 June 2016


In March 2017, New Zealand’s Minister of Revenue announced new measures to toughen the rules on taxing multinationals in response to the OECD’s project to align the taxation of multinationals worldwide — the base erosion and profit shifting (“BEPS”) project.

These proposals are currently subject to consultation. Any changes to the rules could come into force as early as 1 April 2018 and could impact not only the tax obligations of the multinationals themselves but also the potential application of tax exemptions currently available to globally mobile employees.

HR and tax teams in multinational organisations or those with globally mobile employees, including independent contractors, will need to stay on top of these developments and know how BEPS will affect the HR function to enable identification of any gaps in technology, HR data collection and global mobility policies.

Where are your people located and what are they doing? What do you need to be thinking about in the BEPS environment?


The right technology and effective communication will be key for HR in the BEPS environment.

What does HR need to be thinking about?

1. Broadening of the “permanent establishment” rule

Organisations will need to implement centralised systems for tracking mobile employees and should develop systems that are able to collect information from a range of data sources in the organisation to provide tailored data on the nature and length of their travels. Because each country will have slightly different requirements for triggering a permanent establishment, it is important that trigger mechanisms take this into account.

HR will also need to review the arrangements for secondees, business travellers, remote workers and executives with a global or regional role to ensure they do not trigger an unintended permanent establishment. It will be important to ensure that any documented transfer, assignment or secondment information captures the true nature of the role of the employee or contractor while they are overseas

2. Focus on taxing value creation

The BEPS focus on value creation will require affected organisations to re-evaluate their value chains and operating models.

Changes to operating models may result in:

• Activities being moved between different jurisdictions leading to redundancies, international transfers or new recruitment opportunities

• Revised governance structures and changes to allocation of duties, responsibilities and roles performed by employees

• The need to review current workforce resourcing, identifying skills gaps and reviewing global mobility processes to align these with the new operating model

3. Increased information sharing and reporting

Organisations will need clarity around what tasks are being performed and whether their performance and involvement relate to local profitability.

Developing a global set of policies on global mobility, cross-border activities and HR data requirements will equip organisations with the ability to respond to information requests consistently.

Multinationals with annual group revenue over EUR 750 million will need to identify all group entities doing business in each jurisdiction and their business activities. HR will likely be involved in annually reporting the total number of employees engaged. The definition of “employee” is broad and can include independent contractors, business travellers or secondees participating in the ordinary operations of the multinational.


Arrangements to look out for:

For an individual working as an agent for an organisation, a permanent establishment can be triggered if the individual is subject to comprehensive instructions or control by the organisation, carries no entrepreneurial risk and works solely for the organisation. Therefore, commissionaire sales arrangements where a local sales agent in a foreign country is directly engaged by an organisation that pays commission for the local agent’s sales services may be caught under the permanent establishment definition. Organisations that use these or similar arrangements will need to review the jurisdictions where they are in use but currently have no corresponding taxable presence.

When seconding employees, thought will need to be given to the skills, know-how and role that the secondee will perform. Information may need to be provided to the tax function so they can determine arm’s length pricing for the transaction through the secondment. This may affect secondment timing. It will also be important for HR to review existing inter-company secondment agreements to ensure that, where appropriate, they account for employee intellectual property and remunerate the relevant entity for it. For example, where an employee is seconded to a related company with knowledge of a secret formula owned by the first company, the related company cannot simply use the secondee’s knowledge of the secret formula without compensating Company A separately for the use of that intellectual property on an arm’s length basis.

Commissioner sales

arrangements

Intercompany secondments

Rohini Ram, NZ People Advisory Services Leader

Elizabeth Wheatcroft, Senior Manager, People Advisory Services

Sarah Field, Manager, People Advisory Services


claim in real time. It also enables the organisation to understand the impact of different scenarios on employee preferences and their corresponding impact on the overall workforce strategy.

Not only does it enable the company to assess its position based on a strong foundation of fact, but it can create a spirit of openness and trust with Union partners during the process and helps to develop a common understanding and consensus on the most critical claims and trade-offs.

Designing the right model requires an in depth understanding of all of the underlying drivers and inputs into collective terms and conditions, including rosters and shift patterns as well as employment taxes to ensure that the full cost-benefit is understood in absolute terms.

CA Total Cost Optimisation — a model that works

EY Cost Optimisation process, ensures an organisation can effectively manage the negotiation process with clear direction and quantifiable outcomes. Built from our strong base of work experience and research into collective negotiations we are able to provide a market-leading approach to our clients. Our data-centred approach guides you through your decisions in a transparent, defensible manner.

CA Total Cost Optimisation model

The collective negotiation process presents significant opportunities to achieve productivity gains, by simplifying wage structures and optimising workforce costs as illustrated in EY’s approach to cost optimisation.

In today’s business environment, organisations are focussed on agility and improving operational efficiencies in order to enhance returns.

Organisations with large collectivised workforces are particularly challenged in being able to respond with agility to changing workforce demographics and to optimise workforce costs to maximise productivity. As a result, the collective negotiation process becomes even more critical to enable the future goals of the business to be realised, with successful outcomes dependent on the execution of a clear strategic direction supported by fact-based data analytics. This combination facilitates that the realised benefits of approved claims and counter-claims are based on robust and defensible information and drive the Collective Agreement (CA) towards meeting the company’s strategic goals.

Aligning your Collective Agreements (CAs) with your business and workforce strategies

A CA strategy should align with the organisation’s vision of the future state workforce, targeting employee reward preferences and delivering on operational, productivity and cost mandates, i.e. a ‘win-win’ outcome for both the collectivised workforce and the business. A CA that is innovative and targeted can avoid a long, costly and protracted negotiation process.

Using analytics to support productivity objectives

Establishing a total cost optimisation ‘productivity model’ to provide support during negotiations enables the organisation to continually assess the cost–benefit of each CA claim and counter-

Are you getting what you bargained for?

Understanding inputs, drivers, strategic goals, employee preferences

and future state workforce

Measure and report on programme outcomes,

review effectiveness and refine

Current state v. future state − where are

the gaps, and opportunity for

change?

How do your CAs align with your business and workforce strategies

Drive approval and adoption of engagement

enhancing initiatives through the deployment

of structured change programmes

Define operating assumptions under a range of productivity

scenarios

Develop cost model to support simulation testing, for robust,

defensible and strategically informed

decisions

CA costoptimisation

1

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are getting what you bargained for?

4

How do your CAs impact your business?

2

Are you ready to implement changes?

3

Strategy

Implementation Desig

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Are you ready to implement the changes?

• Deploying the right change teams is key to a successful implementation that realises the intended benefits.

• Successful preparation of CA documents and supporting analyses will facilitate legal execution and approval from members.

• An implementation plan that prepares the policies, systems, individual behaviours and capabilities will help organisations realise the intended benefits from Day 1.

Susan Doughty, Partner, People Advisory Services.


From 1 April 2017, new measures may prevent employers from offering employment to foreign nationals when they do not comply with or breach employment standards.

The Ministry of Business, Innovation & Employment (MBIE) recognises that migrant workers are less likely to be aware of their rights and entitlements under New Zealand law than local New Zealand workers. This has led MBIE to amend immigration instructions in order to ensure that employers treat migrant workers fairly and to ensure regulatory compliance. Employers that receive a penalty (or similar) for a breach of employment standards will face a set stand down period from the ability to support visa applications. The stand down period could be for either six months, one year, 18 months or two years, depending on the severity of the breach.

Employment standards-related penalties include:

• Formal Infringement Notices issued by the Labour Inspectorate (following a Labour Inspectorate investigation)

• Penalties issued by the Employment Relations Authority or the Employment Court

• Declaration of Breach ordered by the Employment Court

• Banning Order issued by the Employment Court

Employers issued with penalties as a result of private actions taken by employees either through the Employment Relations Authority or the Employment Court may also be subject to a stand down period.

The new measures apply to all employers who rely on talent that require visas to work in New Zealand, including, those who are: supporting work visa applications; supporting approvals in principle; seeking accredited employer status; supporting residence class visa applications based on employment; and employers who are part of the Recognised Seasonal Employer scheme.

Don’t let your lack of compliance hinder your ability to source talent offshore.


The Government is sending a strong message that it is serious about protecting the rights of all workers, including migrant workers. Therefore, New Zealand employers wanting to recruit and retain key talent from offshore should identify any potential risk areas of non-compliance with the following legislation (note that this is not an exhaustive list and breaches of other legislation may be looked at when Immigration New Zealand (INZ) considers whether to apply a stand down period):

• Accident Compensation Act 2001

• Employment Relations Act 2000

• Equal Pay Act 1972

• Health and Safety at Work Act 2015

• Holidays Act 2003

• Minimum Wage Act 1983

• Parental Leave and Employment Protection Act 1987

• Wages Protection Act 1983

If steps are not taken to improve and update existing processes, policies and controls to avoid penalties employers could find themselves being put on the non-compliant employer list and unable to hire offshore workers. The imposition of a stand down period on employers may also result in their reputation being tarnished in the market, with employees and with INZ on a long term basis.

Compliance with the Immigration Act 2009 (Act) is also a must in ensuring an organisation avoids penalties and can continue to access offshore talent. Compliance under the Act requires an employer to:

• Know which employees are NZ citizens, NZ residence visa holders and NZ work visa holders

• Track promotions, relocations and expiry of visa conditions

• Adopt policies and processes which demonstrate reasonable precaution and due diligence when ascertaining whether someone is entitled to work for them

ContactsRohini RamPAS NZ LeaderPeople Advisory ServicesTel: +64 274 899 [email protected]

Christie HallAssociate DirectorEY LawTel: +64 2187 [email protected]

Kathryn McKinneySenior Manager EY LawTel: +64 274 040 [email protected]

Employment Law

Jennifer De Wald-HarrisonAssociate Director People Advisory Services Tel: +64 274 899 [email protected]

Immigration

Meredith WilmotAssociate DirectorPeople Advisory ServicesTel: +64 2167 [email protected]

Anne StevensonSenior ManagerPeople Advisory Services Tel: +64 275 506 [email protected]

Regina AldrinSenior ManagerPeople Advisory Services Tel: +64 272 024 [email protected]

Oksana Simonoff Associate DirectorPeople Advisory Services Tel: +64 21 2218 [email protected]

Performance and Talent

Una DiverPartnerPeople Advisory ServicesTel: +64 276 20 10 [email protected]

Jason BlackmoreSenior ManagerPeople Advisory ServicesTel: +64 21 534 [email protected]

Susan DoughtyPartnerPeople Advisory ServicesTel: +64 275 447 [email protected]

Reward

Graeme KnappExecutive Director Tel: +64 274 439 [email protected]

Employment and MobilityJames BarlowSenior ManagerTel: +64 274 899 [email protected]

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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About EY LawEY Law Limited (“EY Law”) is an incorporated law firm under the Lawyers and Conveyances Act 2006. EY Law is a member firm of the EY Global Network.

© 2017 Ernst & Young, New Zealand. All Rights Reserved.

APAC No. NZ00000883ED NoneNZ1730517

This communication provides general information which is current at the time of production. The information contained in this communication does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted to be done by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk.

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july 2017 people watch - eyfile… · july 2017 people watch edition 2 in this issue: • does your...

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