Mediation for employment issues, you may have heard of it, but what is mediation in the context of employment? What can it be used for and what does the process look like?  Many people believe that mediation is only for when an employee brings a grievance against their employer, and while this is a common use for mediation, there are many other ways that mediation can be a useful tool for both employer and employee for a range of issues in the employment relationship.

What is Mediation?

Mediation is a service for employers and employees which is run through Employment New Zealand who operate under MBIE; the Ministry of Business, Innovation and Employment. It is free and confidential, and generally a quick process to engage in, with some mediations lasting only a couple of hours before being resolved, which means less stress and lost productivity for all parties involved.  Mediation is a fantastic first step in resolving employment issues without having to go to the ERA (Employment Relations Authority) which is more costly, largely due to legal fees, more time consuming and usually more stressful.

Mediation is a collaborative approach; finding an outcome that both parties are happy with and avoids the win-lose approach that court can have.  Mediation is voluntary however mediation is your friend and if matters can be resolved in mediation then this is the best outcome for all involved as whatever settlement is reached remains confidential, keeping both employer and employee reputation intact.

When can I use Mediation?

Mediation can be used after employment ends and for employment problems while the employee is still working for the employer.  Issues such as bullying and harassment claims, issues between teams, collective bargaining with unions, strikes, lockouts and of course personal grievances like unjustified disadvantage or unjustified dismissal.

I Want to go to Mediation but What is the Process?

You have an employment problem that is not being resolved by speaking to the other party involved.  You’re starting to get a bit frustrated and have decided that mediation could help resolve the issue. So what do you do?

Mediation applications are found online. There is a Mediation Pre-application form above the Request Mediation button and this is a useful tool to use before you Request Mediation.  It gets you thinking of the issues and what supporting documentation you should attach.  Giving the mediator lots of information while sticking to the facts will give them a good sense of what the issue is about.

How do I apply for mediation online?

  1. Go to Employment.govt.nz and click on Resolving Problems, then Steps to Resolve, Mediation and Request Mediation
  2. Both parties are then contacted by Employment Mediation Services Staff and a suitable time and place for mediation to take place is arranged. (During Alert Levels 2, 3 and 4 COVID-19 Restrictions, all mediation will be done via phone or zoom video calls).
  3. Once it is convened (whether at a physical venue or via phone or zoom), the Mediator will speak to each party separately before group discussions take place.
  4. Discussion and negotiations take place.
  5. Settlement is reached, and a section 149 Record of Settlement will record the settlement details with both parties signing it and the mediator will sign this off, ensuring the settlement is full, final and confidential. The matter is now settled, usually within hours of entering Mediation.
  6. If settlement cannot be reached at mediation, you can either choose to adjourn the process and come back to mediation after a period of time, you can keep negotiating after Mediation and perhaps leave an offer on the table for a set time (seven days perhaps for thinking time) or the matter can be taken further to the Employment Relations Authority.

The Dos and Don’ts of Mediation

DO:

  • Stick to the facts. Try to keep emotions out of it even though emotions can be running high.
  • Remain calm, focused, and open minded.
  • Be collaborative and conciliatory. You should have the problem-solving mindset of working together to find a satisfactory outcome of both parties.
  • Put yourself in the other parties’ position to help give you perspective.
  • Focus on the issues, not the person. Try to keep personality out of it, stick to the issues involved not the person involved.
  • Listen for understanding. This will help you identify the other parties ’underlying need and concern.  If you can understand for example that what they really want is an apology as opposed to money, then negotiations may reach settlement quicker with this in mind.  Alternatively, perhaps they just need enough money from the mediation process to pay their rent while they look for another job and will accept the termination of their employment if the figure will satisfy their rent requirements to reach settlement.

DON’T:

  • Be aggressive and have an opponent mentality.
  • Make personal attacks or use accusatory language, such as “you always singled me out in front of others” or “you are the worst manager I have ever had.”
  • Act like you are in a courtroom. The other party is not on trial.
  • Refuse to compromise. If the matter escalates to the Employment Relations Authority you may end up worse off than if you had of compromised and reached a mutually agreeable settlement at Mediation.
  • Get caught up on small details, look at the big picture instead. There are worse alternatives to a negotiated agreement such as lost time and productivity, huge legal fees, and loss of confidentiality if it escalates to the ERA and this can be damaging to the reputation of both employer and employee.

Other Points to Note About Mediation

Yes, you can have a legal representative with you, or an employee advocate, an HR consultant or a Union Rep.  You could bring a friend or family member as support or a community leader. Other people in the room could be an interpreter if required.

Keep the Lines of Communication Open

Keen to settle but want to informally discuss what the other party will settle for so an offer can be made? “Fireside chats” (without prejudice discussions) can take place in negotiations prior or after mediation.  These are discussions around what you might settle but can’t be used against you in court. Be careful to ensure all communications are clearly noted “without prejudice” otherwise they are admissible. It is wise to use a legal representative for without prejudice discussions as these are normally only used for serious employment problems.

It’s Not All About Money

Maybe their bottom line is a “Sorry.” Apologies can speed up resolution processes. Sometimes an aggrieved party just wants to hear the words and be assured that they won’t repeat the behavior again. Hearing the other party say sorry and be genuinely apologetic can ensure parties can heal and move on.  Mediation can be a cathartic experience for those seeking a humble apology.

Make Sure You Know What a Settlement is For

If there is a settlement that includes a payment for hurt and humiliation, remember that Hurt and Humiliation payments are non-taxable but payment for lost wages are. The employee may settle for a figure that comprises both hurt and humiliation and a payment for any lost wages so be careful about knowing the difference and taxing these payments accordingly.

Be Mindful of Timelines

Mediators can set time limits for mediation with the agreement of parties involved.  Parties may agree that if the matter is not resolved for example within 5 hours, the Mediator can then make a recommendation in writing about the solution and the date it will become binding.  You can accept or decline the recommendation before the date it becomes binding and if it is not rejected it becomes fill, final and enforceable.

If you are an employer and have employer insurance, you will need to follow the advice of the Insurer who will likely take the matter over and recommend you attend mediation and advise what you should settle for.

Final Thoughts

Mediation is a fantastic way to collaboratively and openly nip employment problems in the bud. Settling by way of mutual agreement which means buy-in of both parties and a salvageable employment relationship in some cases.  Mediation is a quick and easy dispute resolution service that is cost effective for everyone involved. So if you find yourself in a situation where you are unable to resolve an employment issue yourself by talking to the other party involved, apply online for mediation to get it resolved and get back to doing the things you’d rather be doing.

The Government’s Business Finance Guarantee Scheme has been an epic failure. Today, some welcome changes to the scheme have been announced by Finance Minister Grant Robertson.

The scheme has been too restrictive and there was far too much red tape for struggling businesses to jump through. The Government budgeted more than $6 Billion for the scheme when it was originally announced. However, to date, only $150 Million has been lent to just 780 businesses.

Today, the Finance Minister has announced some very welcome changes to the scheme.

What Has Changed:

  • The scope of the loans has expanded from supporting COVID-19 impacted cashflow to supporting businesses to respond to, reposition and recover from the impacts of COVID-19
  • The maximum loan amounts have increased from $500k to $5m; and
  • The loans can now be used for capital expenditure.
  • The maximum loan term has been extended from 3 years to 5.
  • There is now an ability to refinance other debt under the scheme.
  • The turnover cap for businesses has been expanded from $80m to $200m.
  • There are no establishment or early repayment fees.

The total funding available under the scheme is limited. Applications need to be made by 31 December 2020. More detail can be found here: https://treasury.govt.nz/information-and-services/new-zealand-economy/covid-19-economic-response/measures/bfg

The loans still do not apply to residential or commercial property investment. We think the Government has missed an opportunity here as a housing shortage looms with the significant number of New Zealanders returning from overseas.

Let’s hope these changes to the Business Finance Guarantee Scheme allow many more businesses struggling through their response to the pandemic to access the funds they need to secure their operations and thrive in the new normal.

How to Apply

Like the original scheme, applications are made through the participating banks (ANZ, ASB, BNZ, Heartland Bank, Kiwibank, SBS Bank, TSB, Bank of China and Westpac).

Normal credit processes apply, so if you intend on applying you will need to pull together information to support your application.

What the bank will require will vary case by case, but we suggest at a minimum they will want your most recent financial statements and up to date forecasts/budgets (ideally three-way).

If you need help with any of this, reach out to the team for help by emailing your regular MBP Business Partner or support@mbponline.co.nz.

As small business owners plan for how they will operate after COVID-19, there are some important business questions to be asked about the coming business recovery. These questions will help you determine what adaptations you want to keep, whether your business model is working, and if there are additional changes you want to make to keep your company operational through future economic downturns.

It’s not always fun to do this sort of examination, but the answers to these questions will help you to make the best possible decisions for the future.

What Worked and What Didn’t Work in my Business Model?

Almost all small business owners had to make changes to their business model. Whether it was hosting meetings with clients on Zoom, learning about encryption technology to allow employees access to sensitive information from home, offering restaurant food for take-out or managing dance classes online, most small businesses adapted in some way.

Ask yourself:
Have I have to adapt my business model? Did I alter my goods or services in any way? Have I changed how my premises are used? Do these adaptations enhance my business in any way? Do these changes highlight gaps in my business model that should be addressed? Should I make some of these adaptations permanent?

Maybe you have a lot of clients who would prefer to have meetings online rather than face-to-face. Perhaps offering classes online is a way to reach out to students or clients who can’t attend weekly sessions in person. There may be perfectly good reasons to continue with a revised business model.

Do I Need to Make Changes to my Supply Chain?

You have some control over your supply chain, but not a lot. Disruptions happen and they can drastically affect your business.

Review how the various components in your supply chain reacted to the pandemic and whether they helped your business or hurt it.

Ask yourself:
Did the suppliers in my supply chain remain open and transparent with me? Did they reach out to me to discuss revising our agreement? Were they reasonable in their expectations and willing to work with me? Do I need to have alternate arrangements or back-up plans in case there are future supply chain disruptions?

Your supply chain has a huge impact on your business. Trusting your suppliers and knowing you can work with them will allow you to feel more secure in the future.

How has my Team Adapted?

Your team has faced a great deal of stress and uncertainty during COVID-19, due to professional and personal concerns. Team members may have had to transition to new ways of working—at home, on a new schedule, or with new policies and procedures in place.

Ask yourself:
Are there changes to how my staff works that I could continue to implement? Should I provide additional training for staff? Have I communicated openly with them? How adaptable was my team?

One benefit from having employees work from home more days a week is that such opportunities for remote working can boost employee morale while saving you money. Now that you’ve invested in the technology to allow staff to work from home, is it worth it to allow this scenario to contine, even a few days a week?

Final Thoughts

In addition to looking at your business, take a look at your customers and clients. Were they supportive of your business during this time? Did they turn elsewhere? Did they respect the changes you made to your business or the policies you put in place?

Each of the above questions about your business model, your supply chain, your team and your customers, will help you make informed decisions about your business recovery as COVID-19 restrictions are lifted.

Get in touch with us to chat about your business recovery.

Have you given any thought to which business structure is right for your business? We’ll be honest and admits it’s not usually the first thing that comes to people’s minds when starting or buying a business. However, the way that you structure your business plays a significant role in how it functions down the track.

In NZ, there are three common business structures, along with some which are not so common. We’re sticking with the most common of these structures today, though if you think another type would be better for your business, get in touch and we’ll help you sort it out.

The three most common NZ business structures are:

  • Sole trader
  • Partnership
  • Limited liability company

To help you decide which one you should choose, we’ll work through them individually.

Understanding the Sole Trader Business Structure

A sole trader structure involves only one person: you. It is the simplest structure in which you are the only individual who is liable for every part of your business. This doesn’t mean that you have to do it all alone as you can hire employees to help you run it. You’ll just need to register yourself as an employer with the IRD and meet the required obligations.

As a sole trader, you use your IRD number for tax purposes, filling in a personal tax return. You can claim expenses to lower the amount of tax you pay and generally, any business losses can be offset against any other personal income. Trading under your own name is fine, as the operational life of this business structure simply depends on you.

The advantages of choosing to become a sole trader include:

  • it is quick to set up with no red tape
  • there are no legal fees to pay during the establishment phase
  • you receive all the profits
  • you’ll have total control of the entire business
  • no business name registration is required
  • you can change your business structure easily in the future

Downsides to being a sole trader are:

  • you are completely responsible for all debts and claims
  • your assets can be at put at risk
  • harder to get finance should you need it
  • more difficult to sell as a working business
  • can be harder to grow a business using this structure
  • there are no shares to sell to raise capital
  • you are responsible for your KiwiSaver contributions

For further advice and information about this business type, get in touch.

Understanding the Partnership Business Structure

The partnership structure is often used by two or more professional individuals who already have experience in running a business. There are no rules regarding how much each partner can own, meaning an uneven split of 95% to 5% is acceptable. What does happen though, is the profits you receive and amount of work you are required to do often depends on the ownership percentage.

Instead of the partnership paying tax, each of the partners themselves is responsible for paying tax based upon the profit share they receive. To avoid problems, it is seriously recommended that there is a legally drawn partnership agreement which sets out all the details on how the partnership will be run.

The pros of choosing a partnership business structure include:

  • everyone shares costs and responsibility
  • relatively simple and low cost to run
  • each partner can focus on their specialities
  • you can offset losses against your other income
  • partners can bring in capital investment to the business
  • the running tasks of operating a business are shared

The cons of choosing a partnership can include:

  • each partner has an equal share in the business’ liabilities and debts
  • you need to make decisions with your partners
  • disagreements amongst partners are common
  • you can’t sell shares
  • you are responsible for your KiwiSaver contributions

To discuss if this structure is right for your business, get in touch with us.

Understanding the Limited Liability Company Structure

Commonly referred to as a company, a business with this structure is separate from the business owners. In other words, a company is a separate legal entity.  Any money earned will belong to the company and will pay its tax at the corporate tax rate. The shareholders then receive the profit from the company, who then individually pay income tax on this.

The shareholders, AKA the business owners, have less exposure to any financial or legal issues relating to the business.  So, while the company has full responsibility for all its own financial and legal obligations, the liability of the shareholders is less. This means a shareholder is only responsible for any personal guarantees they have given and losses to the dollar amount of their shares.

The advantages of choosing a company business structure include:

  • less personal responsibility for business debts and liabilities
  • easy to sell or pass on ownership
  • shareholder profit distributes are flexible
  • lower tax rate than top personal rats
  • easier to get funding approved
  • seen as a highly credible business structure by the market
  • easy to keep growing

The downsides include:

  • more red tape and paperwork to do
  • need to register business through the Companies Office
  • more time consuming to get up and running
  • higher establishment and compliance costs
  • often require more investment to grow
  • you are responsible for your KiwiSaver contributions

It is important to note, that the limited liability company is only one of three company structures. It is the most common one though. Others include co-operative companies and unlimited companies. To discuss which company structure is best for you, get in touch with us today.

Where to Next When Choosing a Business Structure?

While there is a simple tool available on the MBIE website to help select a business structure, there is no substitute for personal advice. As accountants and business advisors, we deal with these structures daily, putting us in the best position to help you make an informed decision. To make a time to discuss your business with one of our business advisors, book your free 30 minutes chat with us via our website now.

We’ve heard this before: the COVID-19 pandemic is an unprecedented global health and financial crisis that has caught many off guard. While the threats to human life are very real, the damage to the health of businesses is really just starting to show. In the coming weeks and months, many businesses will be in a fight for financial survival.

The seriousness of the disease and the lack of a vaccine (at the time of writing this) have prompted governments around the world to impose strict measures to contain the virus. These restrictions in people’s movements and the temporary lockdown of non-essential services have definitely taken a toll on businesses and families across the country.

While there has been a lot of talk on how to avoid contracting the virus and how businesses can operate safely to adapt to the current conditions, this article will focus on helping you manage the financial survival aspects of your business during COVID-19. Read on for our tips on cushioning the impact on your business.

Update Your Financial Records.

The first step in planning your financial survival in such a difficult environment is getting a crystal clear and up to date understanding of the financial position of your business. This means updating your financial records and keeping them in order as frequently as possible. Knowing things such as your cash position and assets that can be sold quickly will go a long way in helping you make informed business decisions. Good records build a solid foundation for a successful business. They’re also really important when applying for loans or government grants, subsidies and assistance.

Examine the Financial Health of Your Business.

Following on from the first item, it is important to get a good grasp of your business’ current financial health through a careful analysis of your books and statements. By looking at key financial figures, you will get an idea of how your business is doing. You can see fundamental factors such as the liquidity and solvency of your business which will help you decide on the best steps forward as you deal with the crisis and the aftermath. Chat to us for help with these financial pieces.

Improve your Cashflow.

A lot of businesses across the country are facing cash flow problems at the moment. If you are one of them, you’re certainly not alone. However, the key here is not letting the problem worsen or become unmanageable.

Preparing a cashflow forecast should give you some forewarning before issues even arise and will allow you to address them early on. By quantifying your forward bookings, forward orders, and work in progress, you will get to identify future cash flow and plan accordingly.

You can also take the following measures to boost your cash flow:

  • Identifying the demand for your products or services, so you’ll know where to focus on and where you can reduce stock orders
  • Cutting back on unnecessary expenses
  • Urging your debtors to pay you, negotiating on a payment scheme that will work for both of you
  • Seeking payment extensions or debt re-structuring
  • Invoicing as soon as you deliver the product or service
  • Seeking external investors or lenders
  • Taking advantage of financial support from your government

Increase Online Sales Where Possible.

With the government implementing stricter restrictions to prevent the further spread of the virus, you should find ways to move your products and services online – if you can – and continue to serve existing and new clients. The situation that we are in is forcing business owners to re-imagine their business and re-evaluate their business models. You’ve got to adapt and be resilient. It’s those businesses that will survive.

Survive 2020 by Managing Your Financials

It’s safe to say not many of us factored a global pandemic into our 2020 business plans. Although there is no foolproof strategy to get through what’s proving to be a turbulent 2020, the tips for financial survival shared here should be able to give you some guidance on minimising the risks to your small business.

Want some more help? Our team of advisors love to help businesses. We’ll help you develop a plan to weather the headwinds of the coming months, while saving you time and money along the way. Contact us today and we’ll work through it together.