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National Advisory Council on the Employment of Women - Mana Wahine, Mana Mahi

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New Zealand Context - Executive Summary

Research objective

The National Advisory Council on the Employment of Women (NACEW) has identified government contracting as one area where there may be potential for government as funder to influence improvements in the quality of work for women currently in precarious working situations or low paid work in the homecare, residential and cleaning sectors. The research was asked to describe the process of government contracting and whether precarious work or pay and employment equity outcomes for the provider's employees are considered when contracts are awarded.

Research methodology

  • Brief examination of literature provided by Department of Labour (DoL) on the impact of purchasing frameworks on employment outcomes;
  • Examination of government procurement policy and practice documents; and
  • Interviews with key stakeholders: policy organisations; purchasing agencies; national provider organisations and the Service and Food Workers Union (SFWU).

Contracting context

The Ministry of Health (MOH), Accident Compensation Commission (ACC) and the District Health Boards (DHB) are all funders of home based disability support services. MOH has devolved publicly funded aged related residential care contracting to the DHBs. DHBs pay providers for services to "subsidised residents" in residential homes with which they have a contract.

Home based support services are provided by independent providers often under contract to all three funders. The industry is largely unregulated. Sixty organisations belong to the provider umbrella organisation - New Zealand Home Health Association.

Residential services providers are a mix of for-profit and not-for-profit organisations. There are broadly three kinds of providers - religious and welfare groups; owner operator; and larger for-profit companies.

All government agencies contract for cleaning services with private providers. In the last few years three or four large provider organisations have dominated the field. An increase in the practice of syndicated procurement[1] among state sector organisations effectively means that only large provider organisations can tender for these contracts.

Government procurement policy and practice

Government expectations with respect to government contracting for goods and service are extremely well documented. There are three key government documents dealing with procurement policy and the implementation of that policy:

  1. Government Procurement in New Zealand - Policy Guide for Purchasers, Ministry of Economic Development, Regulatory and Competition Policy Branch, July 2002.
  2. Procurement: A Statement of Good Practice, Office of the Controller and Auditor-General, June 2001.
  3. Guidelines for Contracting with Non-Government Organisations, The Treasury, 2003.

Each government department is expected to develop their own procurement policy in line with these documents.

These documents provide extensive advice on procurement good practice including the support of other government goals or policy such as environmental sustainability and recognition of trade policies such as CER. Of the three documents, only the Treasury paper mentions taking consideration of the employment practices of the provider organisations but it appears that this in neither actively promoted or monitored.

The 1980's "funder/provider" split philosophy and practice has resulted in funders maintaining a deliberate distance from the employment practices of the businesses they contract for services. In the cleaning sector even when tender documents make reference to providers being a good employer this is rarely discussed and apparently never enforced except in extreme situations. The research found examples of government organisations contracting for goods from overseas companies without any assurance of the quality of the working conditions (physical or fiscal) of those making the goods.

Contract price and wages

Home based support

In the home based support sector, contract price is set by the three funders per service hour. Although the funding organisations are independent organisations, there is a high correlation between the prices set for the three levels of care[2]. The price includes all business and labour costs. Only one funder, ACC provides an allowance for the travel costs and holiday pay of the homecare worker. No-one interviewed in MOH was able to explain the funding formula on which these rates are based.

There is no minimum wage agreement in this sector and little provider support for union involvement. Hourly rates for the homecare workers are said to vary from around $9.50 - $12.00 an hour. The majority of homecare workers do not receive any allowance for travel costs, travel time, time for training or any increase in the hourly rate for up-skilling. Workers generally have no guaranteed hours of work. If a contract for services to an individual changes (though death, for example) the provider loses the contract and the homecare worker loses the work.

Residential care

The contract price for residential services is set by the DHB. There are four levels of care for "subsidised residents"[3]. Providers are paid per bed per day occupied. The price includes capital costs such as maintenance and building upgrade. This is said to be one reason why the religious and welfare agencies find it hard to compete.

There are two or three collective agreements with individual DHBs. The SFWU and New Zealand Nurses Union estimate that there is between 20-30 percent union density. The SWFU collective at Wairarapa pays a top rate of $10.79 and a base of $10.50 an hour.

While pay rates are low, staff are generally on fixed hours, have on-site supervision and training and do not have to pay for travel costs between clients as home based support staff do. This is part of the reason why many home based support workers find the residential setting more appealing.

Cleaning

Most of the large and medium-size cleaning services organisations are members of the Building Services Contractors New Zealand Ltd. They are party to a multi-employer collective agreement with the SFWU. This is a minimum document with a minimum hourly rate of $10.60 an hour (and provision for holiday pay, qualifications allowances, overtime etc). In areas of extreme labour shortage such as Queenstown, the pay rate can be as high as $15.00 an hour. The providers feel that having the minimum document means that they do not have to (and cannot) compete on prices that would reduce wages below this level.

Providers believe that about 12-15 percent of workers in the cleaning sector are unionised. The union thinks it is more like 5 percent. Unlike home based support providers, cleaning providers have welcomed the multi-contract.

In all three sectors providers may have workers who may not be employees but sub-contractors. This would allow the provider to avoid compliance under employment legislation. If they are not employees, they will have no entitlements under employment legislation such as the Holidays Act and Employment Relations Act.

There does not seem to be any dispute about the fact that profit margins for the providers of services in these three sectors in low. Disability support providers believe their situation is exacerbated by a covert believe on the part of some funders that making a profit out of services to vunerable people is somewhat morally reprehensible.

Current situation

The answer to the question of whether pay and employment equity and precarious work are considered in government contracting policy and practices is "no".

All funders are aware that as the main, only or significant funders of the residential, home based support and cleaning sectors their funding decisions, especially around prices, do have a direct impact on business profits and pay rates. They are also well aware that the poor pay and employment conditions for cleaning and disability support staff impact directly on recruitment, retention, training and career progression of staff. In a labour market of near full employment such issues are now hard to ignore. Quality service provision and the stability of the sectors (especially residential and home based support) are seen to be fragile. One senior DHB official noted, "The workforce issues are immediate. Turnover is the key determinant of quality - and old people hate having changes of carers."

Currently, government procurement advice to funders does suggest that the contracts should be let to encourage or support other government objectives such as environmental sustainability, support of SMEs, or business innovation. These precedents for "intervention" mean it is hard to sustain a "hand off" approach from an ideological point of view when it comes to positively influencing the employment practices of the provider organisations.

It was also apparent from the interviews that specifying either compliance with legal employment minimums or positive employment practices in the employment agreements has simply not occurred to many funders.

Emerging changes

In all three sectors there is a growing awareness that the relationship between the funders and providers is interdependent, particularly in the disability support area. Service failure or poor quality service directly impacts on public perception of government. Officials are moving towards a "partnership" principle for the relationships and there is general acceptance that the 'health' of the provider sector is the concern of government as much as it is the concern of the business shareholders. Relationships need to be enduring and supported by good will and a sense of mutual interest. Part of the mutual interest is having well-trained, motivated and committed staff. In the course of this research, all disability service funders interviewed acknowledged that wages and employment conditions for the front line staff need to improve and this is part of the answer to increasing the reliability and quality of the services provided.

There are already examples of funders directly intervening to improve the quality of the service.

There is wide acknowledgement that service needs in the disability support sector have changed in recent years. Some of this is to do with an increase in the volume of services required (and anticipated to be greater in the future) but it there is also a recognition that service needs are more complex and that a "paying for task per hour" approach to contracting is not producing quality outcomes for the funder or the service client. Some DHB s are doing considerable work to re-define the services they wish to purchase and the contracting arrangements that will support this. Purchasing "packages of care" is expected to provide more stable employment outcomes for support workers.

Other potential points of influence

During the course of this research informants suggested other ways in which influence on the employment outcomes for workers could be brought to bear through contracting policy and practice. These include:

Addressing equity issues in funding

  • A transparent, understandable and relevant model for prices setting in the disability support sector;
  • Contract prices that reflect the realities of the work being undertaken - such as travel in homecare work or the need for well trained staff; and
  • Fully addressing issues of holiday pay and training costs.

Preferred Suppliers

  • Further developing the responsible Contractor Policy initiated by the Department of Labour and MED and including it in the official policy and practice guidelines;
  • Educating government agencies for acceptance and implementation of the policy;
  • Making compliance with the Policy a preferred supplier condition; and
  • Preferring providers who have undertaken a pay and employment equity review in their organisation.

Minimum documents

  • All government cleaning contracts could use Building Services Contractors New Zealand Ltd and the SWFU collective agreement as a minimum document for employment conditions in provider companies; and
  • This same process could apply in the residential support sector.

Policy development

  • Any changes in contracting policy or practice should be examined for any intended or unintended impact on the actual pay and employment conditions of those providing the service

Guaranteed hours of work

  • The new approach to contracting for "packages of care" and the Community First model being piloted both assume that some guarantee of hours is vital to quality service delivery and sector sustainability. This could be adopted as a contract principle.

Conclusion

This research found that there is little or no disagreement about the negative impact of low paid and precarious work in the homecare, residential and cleaning sectors on both the quality and viability of the service purchased and the lives of the providers' employees. The level and nature of government funding and contracting processes is acknowledged as one of the key drivers of this.

Changes to the funder/provider relationship, the way in which the services are purchased and the nature of the services provided are all crucial. However, fundamental to the success of these changes will be the raising of funding levels and contract prices specifically targeted at improving the wage rates and job security of those actually providing the services.

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[1] One or two ‘lead’ Departments contract with a provider and the contract is then available for other state sector organisations to ‘piggyback’ on the same contract terms. While the service specifications may differ by department (e.g. allocated time to clear carpets rather than lino or the size of the office to be cleaned), only one tender for services is posted and only one price schedule is negotiated. This process prevents wheels being reinvented several times for similar services.

[2] Housework management - $15.60 per hour; Personal care - $17.20 per hour; Overnight care - $115 per night

[3] Rest home, dementia, hospital and psycho-geriatric.

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Contact: c/- Department of Labour, P.O. Box 3705 Wellington, New Zealand  Ph: +64 4 915-4027  Fax: +64 4 915-4710  Email: NACEW@dol.govt.nz