The Government has unveiled details of a proposed state income insurance scheme, which would pay those who lose their jobs up to 80% of their wages/salary for up to six months.
Two groups representing businesses and unions (BusinessNZ and the Council of Trade Unions) have for some time been working with the Government on a proposal under Finance Minister Grant Robertson’s direction. That proposal has now been released for consultation.
The big news is that the proposed scheme covers people who lose their jobs due to health conditions and disabilities - as well as redundancy and lay-offs.
The proposed scheme would be run by the Accident Compensation Corporation (ACC), and operate similarly to the existing scheme that provides cover for injury.
Accordingly, the proposal is for the scheme to be funded by compulsory levies paid by employers and employees.
These would be set at 1.39% of wages and salaries for both employers and employees. This would see a full-time minimum wage earner and their employer pay $11.20 a week each, a median wage earner and their employer pay $14.73 each, and someone earning $2000 a week and their employer pay $27.80 each.
Levy payments would be capped for employees (and their employers) who earn more than $130,911 a year.
If someone loses their job, their employer would need to give the scheme four weeks’ notice, and then pay the departing worker 80% of their salary/wages for their first four weeks of unemployment.
If the employer helps the employee find a job within the bridging period, the insurer would refund the employer for wages/salary payments made during this time.
If the worker doesn't find a job, they would start getting paid by the income insurance scheme for up to six months (in addition to the one month bridging period).
Payouts would be capped for those who earned more than $130,911 a year.
Once in the scheme, the displaced worker would be appointed an ACC case manager to support their return to work, including by supporting them to do any training.
Workers would only be eligible to partake in the scheme if they contributed for six months in the 18 months prior to needing to enter the scheme.
The scheme is expected to cost $3.54 billion a year - $1.81 billion for displacement and $1.73 billion for health condition and disability claims.
If the Government decides to forge ahead with the proposal, it will introduce legislation in 2022 and have the scheme operating in 2023.
The public has until April 26 to make submissions on the proposal.
National would abolish the scheme
National opposes the proposal on the basis it introduces another tax.
Leader Christopher Luxon said, “Given this Government’s track record of delivery, I doubt they’ll have this in place by the election. But if it is, National will abolish it.”
Note, Robertson managed to get BusinessNZ to help design, and thus support, the proposed scheme.
The Green Party is against the proposal for equity reasons. It argues it creates a two-tier welfare system disadvantaging low-income earners and those out of work due to family caring responsibilities for example, rather than redundancy.
It says the Government would need to help low-income earners cover the cost of the levy.
National is concerned about the impact levy payments would have on businesses, in addition to households, particularly in the current inflationary environment.
National believes the existing welfare system provides a decent enough safety net. The Green Party says it's broken and needs an overhaul.
122 Comments
My friends have had the misfortune of working for them. It's as much of a shambles on that side as it sounds like on the front line. They start an enormous amount of internal "transformation" projects every year, I would be surprised if 1 in 5 ever actually goes live.
https://www.acc.co.nz/assets/corporate-documents/annual-report-2020-acc…
"Enterprise change" costs 2020 - 101,000,000.00 2019 - 85,000,000.00
Transformation is an expensive business, although from the outside it looks like it has not changed at all.
Similar situation. My son chipped his tooth - time unknown - and it was picked up at a dental check. The dentist made an ACC referral. My spouse pretty much was told to lie by both ACC and the dentist and give a probable date. We had no idea, my son couldn't remember so we didn't. Because we weren't able to say when it happened, apart from between dental checks, he isn't covered. For life. In what circumstances other than an accident does a child chip a tooth?
No, only the leadership do, at all levels. They become career orientated, self-entitled and selfish. I've been a government employee and found many managers and team leaders both intellectually and professionally dishonest. But these traits are not unique to Government Departments. They are very strong in Health management, and some commercial industries.
Not really an accident is it ? Really its supposed to be mainly work related injuries is it not ? The thing I noticed when I tore my Achilles and went in to get a scan everyone automatically there getting treatment expected an ACC number. You just make something up and you don't have to pay. I couldn't determine how or exactly when I did it so I had to pay for the scan. I could tell from the way people handled the paperwork it was very rare. The whole ACC system gets ripped off big time.
John Key came up with that idea.
John Key has denied going back on his word by introducing a "border clearance levy"...
Asked what the difference was between a tax and a levy, he replied "many", and when pressed, to "Google it".
"There's a lot of technical answers, IRD can give you those answers," Key said. "I could too, but I'm not going to bother."
But realistically...
Not just raising taxes, this government has just proposed a new payroll tax by stealth on employers at a time when the bulk of the business community is doing it tough.
A small business paying minimum wages to all 10 of its employees has to shell out $5.8k annually in new payroll tax under this scheme.
Jeepers, so another 1.4% tax on income. And no capital gains taxes. It's a nice sentiment, but another example of government sucking more out of the productive economy to fund their failings (and by extension ours). I guess they are expecting a lot of people to become unemployed soon (when the housing market falls over and the economy goes with it), enabling even more people to be suckling on the governments teat.
If it's anything like Working for Families ("communism by stealth" - John Key) they will leave it there and even later increase it.
However, this scheme is an absolutely absurd idea. Terrible and completely unnecessary. People already choose to self-insure or pay for income or mortgage protection insurance. Apart from that, this is precisely what the existing benefit regime is for.
This seems more like a scheme to ensure mortgages are able to be paid for longer, much like the 2-tier welfare brought in during COVID. Designed to keep people in their existing layers and places in society.
Actual left-leaning commentators don't seem to like it much either, as they did not like the previous 2-tier welfare scheme.
The problem with current benefit is if you are on a high income you likely have high expenses that just don't just go away immediately when you lose your job.
As for income or mortgage insurance. I would rather pay this, I self insure by saving, not borrowing money on frivolous things even if I can afford to make the repayments at the time and had a revolving credit part of my loan so if I lost my job for a while I was not screwed, while paying it of as fast as I could. But some people are just not that way inclined.
Why can't they just fix the unemployment benefit. As it stands now, you lose your job you have to burn through all of your resources and potentially lose your house before you're eligible. Great safety net.
It's like a net that catches you after your dead cat bounce.
Naturally, I assume that I won't need to contribute towards social welfare through general taxation given that I am now funding my own social welfare (should I ever need it) through a direct for-purpose levy?
Also, watch our after-tax wages in real terms go backwards by another 1.39%.
They really seem to hate the productive part of the economy. Seriously, bring back land taxes already. And introduce an income tax free threshold like in Aus, or reduce GST to 10%. We need to incentivise productivity and trade. We've been choking it harder and harder for decades now. And don't undermine the damn welfare system and we won't need these bloated insurance schemes.
Land taxes will invariably affect Mana Whenua the most as they have significant land holding so they will need and exception, and the government, so that leaves farmers, a productive part of society.
The income tax-free threshold for a family with kids is NZD $70,000.00 each ($150k for a couple) so not sure this needs increasing, and with 4% already paying 30% of the tax it is already very punitive on productive, scarce people.
Reducing GST to 10% is regressive given it is our most effective tax.
The welfare system is not undermined (it has had uplifts in this government and last) and is comprehensive compared to other countries.
Our ACC is an under-skilled and very bloated organisation but the idea of social insurance is sound from a public good perspective, at least this tax increase is clearly funding the task it is supposedly collected for.
GST reduction is NOT regressive. Regressive taxes affect the poor more than the rich, got nothing to do with it's effectiveness.
Reducing it will help lower income people as they spend close to all of their income and it's on basics. Richer people save more of their income or put it into investments, so as a percentage of their income, GST affects the poor much more. Hence it's regressive.
Also IMO GST reduces the velocity of money in the economy, it's an insidious tax that discourages everyone from spending locally. It is also built into wages more and more over time, making us a more and more expensive economy to live in.
Put down the cool-aid, I meant regressive in it's actual real usage not the wokeford dictionary usage. That is to say we would regress from a point of value to another lower point.
It is in fact our most effective tax as PAYE has been manipulated by anyone who has every run a business and there are very few ways of getting around it, GST returns are compulsory for most businesses.
I will agree that GST lowers the velocity of money in the economy you are really talking about a tax break for everyone which is fair enough, I always in favour of paying less tax.
Cool aid? I mean the terms "progressive" and "regressive" have a standard international meaning when it comes to taxes, irrespective of the political standing of the person using it.
GST IS regressive it effects the poor more than the rich, if I earn $100 and spend $100 it I pay GST on all my income, if I earn $200 and spend $100 I only pay GST on 50% of my income paying less GST as a percentage of my income. The rich are far more capable of saving than the poor.
Yes eventually you may spend your money (assuming you don't go overseas and spend it) but before that you are using your and un-taxed money to make more money.
Official Information Act request, received on 26 November 2014 (the last time this question was asked.)
It talks about $70k as the threshold for a household with kids to pay any tax. So I am assuming there will be two income earners in the household and doubling that (should have been $140k not $150k my bad).
https://www.treasury.govt.nz/sites/default/files/2017-11/oia-20140291.p…
Not like we can apply Land Value Tax differently to different land, eh...
LVT would be ideal even if applied primarily or most strongly to residential land we need to intensify. That'll also encourage development more intensely, thus better enable transport solutions along existing infrastructure.
Actual productive working people are already carrying too much of society's burden while much of the biggest money-making goes untaxed through pretense of intent or through its relative lack of taxation.
A land value tax on urban land (residential, commercial and industrial) would be effective for addressing generation rent inequality and shifting investment away from land banking (and housing speculation in general) and towards investing in the productive economy.
If a LVT was imposed on rural land perhaps this revenue could be directed towards cleaning up waterways and for tackling agricultural related climate change effects.
Another disaster in the making look at the German experience
www.nzinitiative.org.nz/reports-and-media/opinion/new-opinion-147/
I met someone traveling round Europe. They were from a nordic country (can't remember which one). They had a similar system to this in their country. They told me a group of people basically become professionals at working the unemployment scheme. They get a job work it for a year to qualify for benefits then take 6 months off on unemployment.
I distinctly remember them telling me you can't leave the country if you are on unemployment as they cut your benefits so you have to drive out of your country and fly from a different county so they don't know you are leaving. You then fly to the cheap mediterranean place of your choosing - the Algarave, Silicy or Crete?? and chill out for 6 months, chase girls, party and lie on the beach. At 6 months when you lose your benefits you sneak back into your country and work for another year.
He told me overtaxed people with families (who can't do this due to work/life commitments) get pissed at all the young people that do this as they are rorting the system.
Good times!
So, for the last 20 years, I have paid 1500 bucks per year, which entitles me to 80-100% of my salary for the rest of my working life in the event of sickness, unable to work, redundancy provisions included, on which I get a tax deduction........or I can pay 1500 per year to the government and my employer can pay 1500 to the government and I can get a lower benefit for a very short period of time. Sounds like an awful deal to me. I hope there are options to opt-out for those that already have proper insurance in place....
Are you familiar with ACC deductions? They are not optional. This is not how a socialist government works, compulsory expensive central insurance schemes allow for bloated employment schemes masquerading as government departments as well as universal acceptance into the schemes. The latter part, universal acceptance, is the benefit.
Yes, I get that. But, it does sound so ridiculous that they seek to disrupt organized and prepared people, give them reduced coverage at twice the cost and lump them together with the disorganized masses. But such is the idiotic socialist way.
Luckily it will probably never happen, the tide on these guys has turned rapidly, they are on their way out. This announcement is effectively a tax, and another year of no pay rises for most people as employers won't wear this, and a pay rise for their staff. it will be one or the other if anything.
If anything this is a great announcement as it accelerates their decline and demise.
You may already have tried this - https://www.acc.co.nz/assets/general/a8eb7a5896/acc709-complaint.doc
and then - https://www.ombudsman.parliament.nz/sites/default/files/2019-03/Acciden…
Make sure to get a case number from both ACC and the Ombudsmen.
I'd rather put away 1.4% of my income for a 'rainy day' like, I don't know, a prudent working person might, you know, just in case I am without work.
This is the State saying, "you're too stupid to plan for the future, let us do it for you" - a bit like Kiwisaver but without the choice of opting out.
Another tax on hard workers to cover the butts of those too stupid to look after themselves.
No one takes personal responsibility anymore.
True. Speaking of stupid, let's see what this does to our household savings rate, which isn't much to begin with compared to OECD standards, now that the state is providing another safety net to earners.
Maybe this is another taxpayer-funded ploy from the government to stimulate our faltering economy with more consumers spending instead of maintaining a rainy day fund.
The New Zealand Income Insurance Scheme: Summary booklet is chokka full of smiley faces so it must be good right?
Who wouldn't smile for getting paid 6 months for doing nothing? Half of dissatisfied employees will be praying that their position gets made redundant.
So the Employer has to pay you 80% for 4 weeks before the insurance scheme kicks in. Sounds like a compulsory redundancy scheme which saves govt heaps in unemployment benefits while taxing more and piling costs on businesses. Lot of people would be happy to stay home on 80% for half the year, the cost savings on fuel and other work expenses would mitigate the 20% drop.
There was already a cabinet paper asking for approval for an ACC levy hike
https://www.mbie.govt.nz/dmsdocument/17454-consultation-on-2022-23-2024…
I hope this is not bundled in as well :(.
80% of your previous income - how OTT is that?
People on large incomes can afford to buy income protection insurance from the private market.
People on lower incomes would/should be covered by the existing Job Seeker/unemployment benefit IF that benefit were raised to the level of a living wage.
But let's just simplify everything welfare/tax and introduce a UBI alongside a land value tax. Not only WINZ, but ACC can go as well.
The thing about ACC, the NSF/Cullen fund and this new proposed social insurance scheme is that they make the government books look so much better.
And the thing about our welfare system is that there are just sooooooo many different sorts of subsidies and benefits (baby boost, WFF, AS, winter energy payment, emergency grants, and the lst goes on and on an on).
End it all with a UBI. And end tax minimization schemes with a land value tax. Might need to introduce capital taxes on other assets to offset the flight out of property - but it is time that we heavily tax capital, and go light on labour and profit.. .
Unemployment all-time low but yet there's a new levy *cough tax to help you if you become unemployed?
Does the government know something we don't (e.g. there'll be hundreds of businesses closing in the next 24 months), or is this a guilty handout to the thousands who will lose jobs thanks to the vaccine mandate?
AND they basically collect monies from millions of working Kiwis to pay a few thousand, does that sound about right?
With an objective hat on, thinking in the long term here, not just the immediate freak out in the short term of a tax increase.
In the event of a recession what would a large increase in unemployment cost the economy? Reduced spending etc If there was a underwritten guarantee that people could still go on spending - this should lead to less businesses closing, more people kept in employment etc right?
Also - this will probably be the end of the road for any future wage subsidy for future events. The wage subsidy which as Bernard Hickey pointed out has seen a huge transfer of money from Taxpayers to Shareholders. Much more should have been required to be paid back than was. It served a purpose, but many of the noses didn't need to be at the trough for as long as they were.
Finally with more money in the economy during an economic downturn - would also require less govt debt and also maybe to banish the need for QE hopefully once and for all.
I don't think its all bad at all, sure some things to be worked out - but taking a long term view, this could help keep a lot of people functioning in the economy than they otherwise would.
I wonder if all the lenders/banks are now factoring this in their CCCFA calculators and re-scoring prospective borrowers available cashflow for repaying debt?
So maybe in the short term it will reduce the amount of money in the economy and be another driver towards a downturn?
Another sleight of hand trick to transfer the liability of the government for her people to the private sector.
This is detrimental to the current and future employment market.
Companies will now come up with a checklist to tick off and compute the probabilities that job candidates and employees are going to become their liability.
Older than 30? Maori or PI? Have a surgery prior? Currently having a chronic issue or disability? Female? Smoker? Dirt bike activities on weekends? Done bungee jumping before?
Tick any of the boxes above and you won't be hired and if were you aren't now.
This my friends is the competency and intelligence of the people whom you voted in to rule you.
"The big news is that the proposed scheme covers people who lose their jobs due to health conditions and disabilities - as well as redundancy and lay-offs."
It might be big news but I'd say it's bad news. There'll be a big increase in malingering with mostly unintentional complicity by the medical profession. Back "injuries" and carpal tunnel syndrome come to mind.
As a minimum health conditions and disabilities need to be dropped.
I can't help thinking this an unemployment benefit on steroids.
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