What a rollercoaster ride the last few months have been with our new Labour government. We’ve seen quite a bit of upheaval and discussion. Discussion is good, but it can also be unsettling and creates nervousness in the marketplace. Businesses like to know what’s around the corner as it helps them plan for the future. If doubt sets in then plans go out the window and economic development risks being put on the backburner. We’ve seen several new policies and changes come into effect that have impacted the manufacturing industry.
Employment Relations in NZ
Perhaps the most significant change of the past few months, even years, is to employment relations. We’ve seen unprecedented industrial actions from several unions and industries, not least teachers and nurses. There are no signs that this will ease, in fact we can predict that it will increase as unions become increasingly empowered through Multi Employer Collective Agreements.
The increasing NZ Minimum Wage
The hard facts are that this government will increase the minimum wage by 28% within its first term, and so what about its second term? We only have to look across the Tasman to Australia to see the devastating effects of increased costs and increased legislation on the manufacturing industry.
Such a high leap in the minimum wage not only causes increases through all wage levels, but brings with it an inevitable compacting of wage levels from top to bottom. That leaves the more highly skilled and experienced worker feeling that there is less value placed on their abilities versus the non-skilled worker who is earning only a little less.
The reality for Fero
At Fero, we are significantly affected by government changes to labour relations and minimum wages. It places undue pressure on our ability to compete in the global market. This aside the changes proposed by government have forced us to think differently and a little more ‘outside the box’.
Luckily we saw the writing on the wall a couple of years ago and we put a great deal of effort into finding ways to absorb and mitigate these skyrocketing costs.
“The next 14 months alone is going to see a 15% wage increase for us. For many businesses that could mean the beginning of the end, but we’re confident we can overcome it through innovation, a unique offering and experience”
Sam Fulton, MD Fero
The future for Fero
We are working very hard to improve our sourcing and supply chain to remove cost through better purchasing and more effective partnerships with suppliers and or customers. Our engineering and purchasing teams have been focusing on each of our accounts and looking at ways to optimise their production and not pass on cost increases.
We are very pleased with our decision to establish a production plant in Samoa. This has allowed us to maintain a lot of our prices into the market, whilst at the same time providing a future for the business and some much needed jobs in Samoa. We’re proud of our involvement in Samoa and we believe strongly that it will make a significant difference to our future.
We have been very impressed with the speed at which our plant has been able to deliver to market and the ongoing productivity and quality that we are able to enjoy. It is a perfect synergy with our plant in NZ and together we are proud to be able to support and deliver to our international customer base.