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The Human Resources Institute of New Zealand

Human Resources Institute of New Zealand (HRINZ) is the professional body for those involved in Human Resource Management and the development of people.

HRINZ represents the interests of 3,000+ individual members who make up around 45% of the known New Zealand HR market. Read More

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Submission to the Contracting Out Advisory Group on the Draft Transfer Clause

September 2001

This submission is presented by the Human Resources Institute of New Zealand [HRINZ]. HRINZ is the professional organisation for people who are interested or involved in the management and development of human resources. HRINZ represents the interests of individual members who work in private and public sector organisations throughout New Zealand. There are over 1600 members working in such organisations around New Zealand. HRINZ provides its members with education and information services, conferences and seminars, publications, representation at government and official levels, and networking opportunities. HRINZ helps members to develop their professional skills and knowledge as human resources practitioners and key decision makers in their organisations.

HRINZ' mission is:

  • To encourage and support the development of professional knowledge and competence, and high standards of performance amongst our members;
  • To promote understanding of all aspects of human resources management and development, and the contribution they make to organisational and individual performance;
  • and To provide an authoritative and influential viewpoint on all matters affecting HRINZ members and the management and development of human resources.


The position of HRINZ

HRINZ has consulted with its members and this submission is a synopsis of their views. It should be borne in mind that it is HR practitioners who will have the task of implementing any proposed legislation.

Overall, there is opposition to the Draft Transfer Clause [DTC] both in principle and in its present form. The basis of the opposition is that it:

  • Creates an inequality of bargaining power between the employer and employee as it is weighted heavily in favour of employees;
  • will generally impede the growth of business;
  • will generally impede the restructuring of businesses that is sometimes commercially necessary and; is likely to create conflict within the workplace.

There are particular concerns that the DTC will hinder sale of businesses and the contracting out of, especially, non-core functions. The DTC would discourage new ventures and innovations, which often use contractors on temporary arrangements because of the risk.

The law should provide pragmatic workable solutions. There is little in the DTC that indicates its workability for employers. The DTC appears to be pre-occupied with change resistance and compensation.

Some of those contributing to this submission express a genuine concern for employees in the process of contracting out and in the process of sale and transfer of businesses. Concern, some members argue, can be dealt with within the existing legislation. There could be confirmation of agreement that a process to discuss employee rights and compensation on such an event occurring would be useful.

Most submissions appear to support the position that the employer should be able to choose which employees that are to be transferred to the purchaser organisation. Further, there should be no redundancy compensation made where there is a technical redundancy or if the employee decides not to transfer to the purchaser organisation.

Perhaps the most strident voice of opposition is aimed at the ability of an employee, upon a transfer, to decline to transfer to the transferee and then receive a redundancy payment. Some members did take the view that redundancy payments should be given to those who would not be offered work by the transferee.

The following table will identify issues with the DTC, clause by clause.

Clause Comments
  1. Object

Members acknowledge the necessity for employees to be protected in their employment especially from (the minority of) employers who seek to use contracting out to unfairly disadvantage terms and conditions.

However, some other members took the view that in commercial life, employment cannot be guaranteed and flexibility is needed when restructuring/structuring a work force.

Employers should have the option to select which positions are to transfer where not all employees are required in a sale, merger or contracting out situation.

  1. Definitions

There is an issue with the phrase "change in legal status, merger, division and lease"

There were concerns that if an organisation changed in legal status, this would allow employees to exit the organisation, upon the transfer, even though a de facto continuance of employment would occur.

  1. Notification and Information
  1. Some members identified the requirement to inform unions/employees and give 30 days notice, may conflict with the need, in transfers, for business sensitivity, that is, in the context of commercial negotiations and obligations on publicly listed companies to keep the market informed.

    Other members felt the need for employees to be involved in the early stages of the contracting out process.
  1. Employment transferred
  1. Many strong views were expressed in opposition to this clause. Members felt that the transferee should retain the liberty of choosing what employees should be transferred to the organisations.
    1. Members expressed concerns that the transferee organisation could have employees from the transferor organisation who had different (possibly more favourable) terms and conditions than the employees who worked in the transferee organisation.
    2. This clause requires further definition. In some organisations, there are various provisions given to employees that become de facto terms and conditions of employment. This issue has to be clarified.
    3. There could be problems with issues like superannuation for employees being transferre
  1. Choosing not to transfer
  1. This clause attracted much criticism through the ability of employees to choose not to transfer employment with the transferee.
  2. Again, this clause attracted further criticism through the combination with Clause 4(a) giving an employee a right to compensation even if the employee should choose not to join the transferee.
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