National's first economic policy under Muller's leadership: A $10k cash payment to businesses for every new full-time hire - payment capped at $100k

National's first economic policy under Muller's leadership: A $10k cash payment to businesses for every new full-time hire - payment capped at $100k
Amy Adams, Todd Muller, Nikki Kaye

National has released its first economic policy since Todd Muller became leader, promising to pay businesses $10,000 for every new person they hire.

Employees would have to be full-time and hired on a permanent basis, under National’s proposed “JobStart” programme, which it would implement if elected into government.

Employers would have to sign a statutory declaration, similar to the wage subsidy scheme, stating the job is genuine and offered in good faith.

Employers would get an initial $5,000 payment, then a second $5,000 payment after 90 days.

The payment, administered by the Inland Revenue, would be for all existing New Zealand businesses.

It would be capped at 10 new employees, or $100,000 per business. The scheme would also capped at $500 million or 50,000 jobs.

It would run for five months between November 1 and March 31, and be reviewed in early January.

National’s finance spokesperson Paul Goldsmith said thousands of small businesses across New Zealand were starved of revenue during the lockdown and many are still struggling under level two restrictions.

“They are desperate for cash flow and this payment could alleviate some of the pressure they’re facing while also supporting growth,” he said.

Asked by interest.co.nz what would prevent an employer making someone redundant on say October 31 and then re-employing them on November 1 to get the payment, a National spokesperson responded:

  • The FTE number is average over previous month so fire one day hire the next doesn’t work. 
  • Businesses would need to sign a declaration that it was a genuine new employee over and above their normal payroll.
  • The job has to be genuine, permanent and offered in good faith.
  • We trust Kiwi business people to do the right thing. If circumstances change, they’d need to notify the reasons, but would be given a fair hearing.
  • We have several months to design robust rules to defeat any rorting of the scheme.
  • The scheme will also be audited by IRD.

Interest.co.nz also asked National: How would the payment help struggling businesses (in retail and hospitality for example), faced with deciding how many people they make redundant, not how many new people they employ? What would prevent a profitable large business like a supermarket or growing law firm from receiving the payment? A spokesperson responded:

We just want to maximise new jobs and we are agnostic about who creates them but we expect that cash payments of this style are most likely to impact the decision of a SME for whom some cash assistance to help meet new hire costs could be a big help.

Again, we trust Kiwi business people to do the right thing and have several months to design robust rules to defeat any rorting of the scheme.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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105 Comments

Disproportionately benefits low wage employers, like tourism and hospo for example. A $10k payment is effectively one third the wages of a min-wage worker. Not a bad way to target relief to those areas badly affected.

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This election will be a race to offer more and more freebies under the guise of Corona Virus.

Print more and more money.

25
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OK but person has to come off the dole, in my view.
And citizens only.

Or someone who has recently been let go due to the recession

The person needs to come off the dole so the company comes in.

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"And citizens only."

Come on, this is National we are talking about.

No doubt Muller's father's fruit picking employees will be eligible.

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Business can swap employees and start earning money.

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But but but you have to sign a paper that says it was a legit new hire!

Create a subsidiary that then hires all your employees

Small businesses (fewer than 20 employees) could hire staff on permanent basis, receive the 10k from the government and fire the new hires within the trial period.

Actually they'd only get $5k per employee as the second $5k is paid after 90 days.

The fact that they haven't proposed that it be $10k after 90 days almost suggests that National wants companies to hire people with no intention of keeping them for 90 days, just to get some cash flow.

That's a good point. I've had a bad experience with the 90 trial. A company I started working at hired two of us and only really had enough work for one. They kept me on but let the other guy go before the 90 days. This system allows for cheery picking staff with no consideration of what the employee has left to join the company. The other guy had given up a perfectly good job and before the 90 day trial was over he was unemployed.

National had a bad experience with 90-day trials too:

A report by Treasury in 2016 found they had a "statistically and economically insignificant" effect on hiring rates, didn't increase employment opportunities for beneficiaries or youth, didn't increase short-term hiring and didn't increase the likelihood employees would stick with the same employer for a lengthy period of time. National MP Michael Woodhouse - who was Workplace Relations Minister at the time - disputed Treasury's findings, saying he had anecdotal evidence it was working :-|

...data-driven, yada yada yada

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As an employer, you actually need business growth to warrant taking on an employee, the carrot they are dangling would not entice me to take anyone on.
Id suggest they put the money into growing the productive economy. If you build it, they will come.

I'm sure it wont be the only policy they roll out. yes one of these party's need to do something to create some productivity in the economy.

As a business man, where is NZ productive economy that needs investment into?

Another storage dam in AKL is a good start, increase end product manufacturing of NZ dairy products in NZ is another.

Everyone always says invest in infrastructure, which off course makes sense and I assume these type of initiatives are in addition to ramping up work on infrastructure.
As for end manufacturing products, the NZ exporters do not seem to believe that this is an actually lucrative path, or why they have not invested in it already? they may be wrong, and a clever person with a clever plan may prove them wrong, but until the clever person who proves this is found, there is no room for extra investment.
In ideal world, government could scout for these extra clever people with uncommon capabilities and ideas and help them deliver. But actually doing it is super difficult. So most people will say yeah, good idea, fantastic, we would love to encourage innovation and cleverness. but they are awfully short on how? like if you and me were running things we would have come out saying: you know what, we hate innovation, we hate cleverness, hurrah stupid.

Does Kiwi culture nurture or encourage innovators and cleverness? Or is it more of a conservative, homogeneous culture that dislikes tall poppies?

It is becoming ever less conservative and less homogeneous and it is becoming more tolerant of tall poppies. However it is far less patriotic (ref battle of Manners St 1943) so our clever innovators go overseas and are replaced by less imaginative, less diligent POMs like myself. Certainly if we have any left in NZ they are not wasting time reading these comments.

We see some worrying things though. We have education now as a business that issues credentials companies demand as prerequisites for employment, a first check of whether someone is worth considering. Because it's a business we make it expensive. And we rely on credit bubbles for our economic policy rather than productive investment. Then we resent investment in education.

Bad signs in (for example) Dalio's analysis of rise and fall in countries and empires. If we want to succeed we need to invest in real education and in support or incentives for innovation rather than credit-driven speculation.

I think our culture does, but our systems don't. We've had incredible innovation in the past but innovation often takes risk, and we have so many systems in place that transfer liability to other parties that don't allow us to take risks and try things. Take building for example. Liability has been passed on to council's, engineers, LBP s. Trying something inventive or creative with all the systems in place is incredibly difficult.

"Everyone always says invest in infrastructure"

Not everyone. A road, a cycleway, a walkway through a forest. These hardly even qualify as an 'investment'. They are holes into which we pour money without return but with a continual cost of ownership in maintenance.

Tourists of the local and foreign ilk certainly like driving on roads to cycleways and in particular walkways through forests, so exactly how is that not a good investment?
Each proposal should be taken on individual merits of course, I'm not arguing for carte blanche, but I have seen business cases for cycleways that have underestimated the actual impact on tourism in practice, so they are not necessarily all rubbish as you seem to be implying.

Cycle ways and forest walks provide indirect financial benefits.

I just had my first red kiwifruit this week, delicious. Zespri are releasing limited licensing, could look into that. (I have no idea about best growth regions, storage quality etc though)

https://www.plantandfood.co.nz/page/news/media-release/story/new-red-kiw...

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The red boys rock, they're onto a winner there. This sort of product development is a good story.

Zespri certainly on to a winner. Able to sell licenses to grow their fruit and use legislation to stop dead anyone else growing any competitive equivalent in NZ. Others can grow their own variety no trouble but then have to have Zespri market it for them or somehow convince Zespri to allow them to go alone.

200k for a gold license I heard. It's a rich man's hobby, beyond reach of most people. Family groups maybe. Kiwifruit cartel spending up large on new consstruction projects in BOP so thats a positive

Yip, this mostly just looks like a subsidy to businesses that were going to hire people anyway.

Exactly.
But apparently National are 'business savvy'...

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this is so open to rorting its loopy, what a dud policy

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Are they seriously this naive?

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Yes we all know it will be exploited at the tax payers expense. Not only that but wasn't it National who also wanted to increase employment probation periods of new hires from 3 to 6 months and they do want to increase immigration intake. So what's to stop employers from using a revolving door every six months and exploiting this 10k business benefit payment per immigrant? Or have National not considered the long term risks as usual?

No, they just think WE are.

Speaking of rorts: is there anything preventing business running reduced hours right now in order to meet the reduced turnover thresholds to get the wage subsidy? Just speculation, but was speaking to someone on a desk the other day who said they were both very busy, and on reduced hours. Didn't seem to add up...

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Yeah I just had a window installer ask me to delay paying a deposit till June.

Ah. I was rather hoping I was wrong. Looked up and they are claiming the subsidy, too. Thought to be fair they would have been shut for 7 weeks so probably no need to exaggerate. Who knows.

I think one unintended consequence of the wage subsidies is people see so many others around them slurping at the government trough even though they look plenty fat already. (An example is a prominent commenter on this forum who proudly announces their increasing wealth while at the same time grabbing taxpayer cash).

So citizens think they are just being a mug not joining in the looting. Its a dangerous mindset for a country to have.

Grab what you can when you can and don't feel guilty because if you don't someone less worthy certainly will. Being retired all I can get is the winter heating allowance but I certainly don't return it even on warm days. It is for our govt to make systems rort proof - it is not that difficult - wherever possible make it universal not means tested.

I'm waiting for the news articles about the engineering consultancies taking the piss to hit the front page. The law firms have already had the ethics of them taking the subsidy questioned, and they've mostly all said they'll give it back.
I'm grateful I challenged my company on it and they have changed tack now and said they are just holding it till profits are announced end of June. When (not if) they confirm profit, they will not send the wage subsidy to overseas shareholders as profit. Thank goodness. But other companies are on track to do exactly this. It's not right. The amount of profit these companies make is obscene in a bad year

No bad, can help offset initial training costs and some of the non productive time associated when hiring a newbie. Also it will help some of the min wage increase which has knocked a lot of businesses. Yes NZ citizens only and those who have lost their jobs because of CV19.

Socialism bad, mkay?

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Time to set myself up a company. I will need 100 new employees to help me hire another 10000 new employees. Free money for all. Socialist NZ is just wonderful. I love all this free money, don't you? I wonder where it comes from? Not to worry!

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Watch a lot of people get made redundant between the 20th and 30th September if the Nats win the election.
Rehire 1st November and pick up 10 grand.

Funnily enough those getting fired will be paying with their own taxes the subsidy that encouraged the company to send them home.

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quote - The job has to be genuine, permanent and offered in good faith

Didn't realise they'd taken over building new billboards for Tui

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followed by - The scheme will also be audited by IRD.

Is that the IRD that just laid off 5000 people?

Maybe IRD could start hiring people to investigate any fraud and get the 10k, BINGO!

Yep just after they have finished investigating all the companies that went to town on the wage subsidy...

That money will never be seen again. Some people have become very rich from COVID-19 that's for sure.

Some of the money will be recuperated FB but on the whole you're right.

FCM, I can assure you that investigation is a long, long way from being finished.

Of course that is now being done with even less investigators than they started with as a bunch got laid off, and others left because they couldn't handle the incompetence the restructure was done with. But then those investigators only get back 5 times what it cost to have them in jobs so why wouldn't you go cull a bunch of people that chase our tax evading citizens.

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"The job has to be genuine, permanent and offered in good faith" If this was the case wouldn't they have hired them anyway without a 10K incentive?

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I suspect that dairies of the future will have more staff than customers.

These businesses will be booming with multiple side income streams just through their hiring process. Many employers in this sector are already known to game the system with their "cash for jobs" and "cash for residence" schemes. National seeks to add a third revenue stream to that.

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I’m not sure how this policy helps with businesses with limited cash flow given that it would only pay for a 1/3 of the salary of a minimum wage worker? I think this is going be free money for businesses who were already in a position to hire new staff anyway regardless of the $10k.

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That's pretty much it. Millions of dollars for companies like Countdown, Bunnings, New World etc. that go through employees by the hundreds

It’s says “new employees”. Surely it would be cheaper to re-hire employees that had to be let go from a business over the previous months?

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This is can of worms. Just lower GST for a period or PAYE.

Exactly. Why not just reduce the taxes you already have good systems in place protecting. GST is a no brainer IMO, regressive tax that affects velocity of money around the economy. Take it to 0% for a year and watch everyone's spending (particularly the poor) increase significantly. Would subsidise landlords too though, so I am thinking some form of rent control as well.

We are all playing lolly scramble now.

Except they haven't given the people a 1500$ payment yet. Surely its inevitable

Perhaps the wage subsidy is best after all,reading all these comments.It is sad to think that in this crisis,so many would be looking to rort the system.Heard anecdotally today that some businesses are picking up the interest free loan and paying off their car or just putting the money in the bank to earn interest(doesn't sound smart given the current rates).At least when it goes to individual employees,you sort of know where it is going.
Guess it shows human nature,the very people that would bag beneficiaries,when they get taxpayers cash,they can quickly become benefit fraudsters...or are they just entrepreneurial?

The wage subsidy has been rorted as well. Money should have always gone directly to the workers. Going via companies was always going to lead to issues.

Not sure how else you'd do it quickly though, have companies give employee bank accounts to the IRD so the IRD can pay them?

It's supposed to be a base rate of pay beyond which the company tops up the amount, and it's taxable. So hooking into the company's payroll system is the only feasible way to do it. At that point giving the company a lump sum of cash is the easiest.

It's not rocket science. We already do it for paid parental leave.

Employee applies, Company signs/agrees. Govt takes over paying employee for x period.

I suspect the problem is less to do with science and more to do with admin volumes.

Under a PAYG system the costs of admin are pushed onto business.

It was presumably to hit( not kill) two birds with one stone. Helps cash flow as it's lumpsum that then goes out over 12 weeks. Pays employee wages or part there of.

I don't mind at all if some companies use the loan to pay off a car or earn interest. The loan has to be paid back. For some companies, having the cash buffer in the bank or paying off an expense which might be exactly what they need to move forward. The wage subsidy rort however is free money and without a comprehensive investigation, how will we ever know how much of that wage subsidy was put to the intended use?

I agree,there are rorts all round,which like I said is a sad indictment on our society...and I would like an interest free loan for a year too.

Only a year or two?

Come on, shoot for the moon!

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This may become the stupidest proposition even made by National for many reasons"
- It encourages businesses to recycle (fire) staff after 90 days once they got their payment.
- There's no cap or restriction to which business are allowed to benefit from it.
- Business that need to hire they will do it regardless of this anyway.
- This is basically a corporate universal basic income to which they oppose when it comes to workers.
- It is probably not a coincidence this is exactly over the minimum wage a worker would get for those 90 days? Do business deserve getting 10K just for employing someone while in National's opinion the minimum wage is already too high?

Oh no!!!!

Already coming up with stupid policies.

A business is only going to hire, when there is work there not just to get 10k. So effectively this is gifting 10K to each new job that was going to be to be filled anyway.

What a waste...

Yes, this could be abused, but so could Labour's policies too. The reason why I would support this kind of policy for better or for worse, is mostly that for companies well-positioned in this environment, this could be a real chance to grow. Whereas much of the other policies so far have been about survival mode, this could create real jobs in the long term in a wide number of industries.

I understand but I eschew the pessimism, firing people is an ugly business for everyone and while worker rights have been tested at times, let the good do good and the bad do bad, as it was going to do regardless.

will companies hold off hiring till after the election?

God help us if there is a gap between the wage subsidy ending and this kicking in,there will be 50% unemployment in between.

This is a perfect example of fallacy of relative privation, National's proposal is not better just because there might be other bad things in the world. Let's just make better policies, not by comparison but in absolute terms.

But thats how politics works, isn't it? Make others look bad rather than execute your own policy

At least it has the boldness to fail. I've been mostly uninspired by responses around the table by the different parties. If this triggers a better policy response then thank god for that.

Sorry but couldn't agree less, this is just incompetent lawmakers trying to find some political space after an internal coup.

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What about just refunding all GST paid in the last year to businesses under a certain size? The money would flow to where added value was created (it is called value added tax elsewhere). So, more productive businesses would get more, and less productive ones would get less.

A zero rate business tax band would also be good. Profits left in SMEs should not be taxed. The money is taxed when paid to employees or to shareholders.

If you want jobs created, you need to favour those who can create them, at a profit. Otherwise, no jobs.

And the benefit of that is that the businesses that have creative accountants or do lots of 'cashies' won't be rewarded.

Because it destroys GST as a consumption tax.
I simply can't get my head around the idea. Need a accountants perspective.

A MUCH better idea, for all the reasons you state. Tax refunds are easy to do, all the IRD has to do is calculate GST paid between 2 dates (which it always knows), then pay it back.

Have thought about this for a while now... can't see any downside. Anyone?

I would also suggest they refund any amount of R&D a company undertook. R&D tax breaks are recorded, so they know how much R&D a company is paying. Would also be focused on future productivity.

A big downside is the GST includes capital purchases and sales. So the amount of GST that has been paid to the IRD might be a poor indicator of the size of the business and of the need. So I think its a terrible idea.

Like wage subsidy many business will exploit.

Check and balance should be in place. They say that do have but still many will exploit.

The lolly scramble has begun in earnest. Of course, it's easier for National as they are very unlikely to have to make good on all their promises-unless of course, they offer Winston the crown jewels(in secret).

You don't have to make good on your promises anyway. No one expects politicians to do that nowadays do they?

That was Labour's situation last time around, then look what happened... er 100,000 houses how the f we gonna do that?

Better to promise something, try and fail (even miserably) than to promise you're not going to do something and do it anyway (GST).

Didn't take long for David Shearer 2.0 to go straight to the pork barrel. Next!

Is this the grand thinking of Nationals economic strategy....?
If you can't beat em join em.

Pretty lame.
This guy isn't up to it.
Ardern landslide victory.

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Just when you think they couldnt get worse than Bridges this plonker rolls up with this bollocks.

Shows the lack of depth to their thinking, totally uninspiring to say the least

Get your money here! Free money here! Roll up, roll up, money being dished out by the tens of thousands!

I think nationals voter base would respond better to a policy of "no more handouts"

Come on, they've always been about no more handouts for "them" with outstretched hands. They've never been against slapping it into the hand behind the back.

They managed to borrow $70 billion during their tenure. Their handouts are just sneakier and for the rich instead of the poor.

If no more handouts means only taxing the poor and not the rich, then traditionally yes, this is quite in line with national policies over the last 20 odd years.

Blatant vote bait !

I’d love to see National push back against all this additional spending by Labour and push a more fiscally conservative agenda of less government handouts. Even at 15% unemployment the majority of the population is still working and getting taxed to pay for this. I don’t think they can win in a spending spree with Labour- they need to change tack toward managed austerity

15% unemployed doesn’t account for the vast number more that are underemployed. Austerity won’t win an election, most voters don’t see the consequences of all these goodies till later.

If this is the best National can come up with then we can safely dismiss them....it will create nothing

Can't see how this would be abused at all./s

Seems like window dressing only.

"Paul Goldsmith said thousands of small businesses across New Zealand were starved of revenue during the lockdown and many are still struggling under level two restrictions.They are desperate for cash flow and this payment could alleviate some of the pressure they’re facing while also supporting growth”

No business in the position he described will be in a position to hire staff, they will be struggling to pay existing staff and make a profit. The only businesses able to take advantage will be those whose income stream has not had a significant drop - in other words, the ones that don't need handouts.