Auckland timber business backs staff loans to beat payday lenders

A south Auckland timber business has stepped up to guarantee small loans to its staff and provide budgeting advice, in a bid to help them avoid high-interest payday lenders.

Akarana Timbers employs about 50 workers in its pre-nail timber factory in East Tamaki.

General manager Gareth Williams says it began getting requests from staff to borrow money soon after it put its factory workers on permanent contracts in May 2015.

"Shortly after that the calls for help started."

"Boss, my car is broken down ... my wife is sick and I need to get the kids to school."

While it would seem easy to turn your back and say it's not the company's problem, Williams says in reality, it is.

"If one of your employee's car breaks down and he can't get to work then it is your problem."

At its worst, as many as half the staff would not turn up because of financial difficulties, he says.

While the company tries to pay its factory staff the living wage, says Williams, those without experience have to start on the minimum wage.

"If you have a family it's impossible to live off the minimum wage, especially if you rent in Auckland."

Last year the number of loans climbed to more than 50 and the company decided to seek outside help to manage them.

Williams says it initially wanted to set up an in-house credit union but decided to go through NZCU Auckland - the local credit union.

Now Akarana guarantees some of the loans made to staff through the credit union.

"To me it was just about finding them an easy way to loan money. With low interest rates. Some of those they can loan money off in Otara have filthy interest rates. It is criminal."

Borrowers pay interest rates of between 10 and 19 per cent, depending on their individual circumstances.

Workers who want to get a loan also have to set up a savings account which they must pay into at the same time. They can't get access to the savings until they pay back their loan.

Akarana Timbers have stepped in to help its staff with small loans.

As well as backing the loans, last year Akarana bought in numeracy and literacy specialists through a government-run programme, to help staff.

This year it is running a budgeting course, provided through a Samoan trust and taught in Samoan to its mainly Samoan workforce.

Workers who take part are guaranteed a pay rise.

Taitasi Samuelu, a worker in the pre-nail factory, turned to his employer for financial help to buy a second car after seeing a car for sale for $600 on the side of the road.

Before that, if he came to work it meant his wife couldn't get to her work and the kids couldn't go to school.

Samuelu says Akarana is the first employer to help him out with a loan and getting that support has made him very happy.

"Before I didn't know who to turn to," says the father of four.

For the first time, he also has savings. In the future, he wants to buy a house.

Co-worker Sam Iefata says he got a loan to help send money back to family in Samoa.

He borrowed $500-$600 and is paying back his loan at about $100 a week.

I would like to see that sort of social responsibility come back to big employers or even smaller ones. Because it can be a win, win, win.

Rob Collins

He is also saving $50 a week and says he hopes to spend some money on his kids when he finishes paying back the loan.

Longer term, he wants to save $10,000 to take his family back to the islands for Christmas.

Rob Collins, managing director of NZCU Auckland, says few companies step up to help workers with their financial difficulties these days.

"To a large degree, since the advent of individual contracts, the idea of employee benefits has gone out the window."

While some large employers, including Ports of Auckland and Tip Top, still had in-house credit unions, many did not.

Credit unions are owned by their members and profits go back to back to their members on a proportional basis.

Williams says that for Akarana, the support means staff turn up to work and are less stressed and more productive.

"These guys that we have helped are incredibly loyal and they turn up six days a week. The ones that don't turn up wouldn't get a loan. It goes both ways."

Doing more

Business leaders say employers are stepping up to do more for their staff because of skill shortages, but a union representative says what many workers need is much simpler: more money in their pockets.

Business New Zealand chief executive Kirk Hope says the biggest challenge for many businesses at the moment is getting staff and keeping them.

"Even for workers with lower skills there is a lot of demand."

Hope says the provision of workplace literacy and numeracy courses has been abundant for some time, although they tend to be offered by large and medium sized businesses rather than smaller employers.

He says companies which operate in geographically remote areas often have to work with staff to bring up their skill levels.

"There is always industry training. Upskilling so they can get a higher wage. So that is on the job training."

Hope says it is expensive to bring a new worker on. "Then you have to train them - it's not just the cost of wages and salary. It's the opportunity cost."

Kim Campbell, chief executive of the Employers and Manufacturers Association, says that when he moved to Auckland 30 years ago, he got a loan to buy a house from his employer.

But that kind of assistance was rare these days.

"Unfortunately many of the things that are sensible attract fringe benefit tax."

Campbell says the big problem in Auckland is that housing costs are making employers uncompetitive.

People are moving to the regions, where they can get the same pay but much cheaper accommodation.

Campbell says that instead of other benefits employers may have given in the past, now they generally just pay people a salary or wages.

"With the pressure on getting good people, we are seeing real wages rise. It does mean costs are going up for businesses."

But Anita Rosentreter, industry co-ordinator for manufacturing for the E Tu union, says there have been low wage increases for a long time and employers need to pay more.

"I think employers should consider what they are making through the businesss, what they are paying shareholders and if they have got staff struggling financially - you have to ask why?

"Perhaps they are not being paid enough at work."

She says there are particular challenges in Auckland, especially in the manufacturing sector where wages are low.

"I think we do have a really big problem in Auckland.

"People are realising that. We have got a lot of businesses that operate in Auckland in manufacturing - and manufacturing is quite low wages."

Rosentreter says some are solving the problem by bringing in migrant workers.

"It is a delicate point to make. We are not against people coming to New Zealand. But I think those people deserve to be paid as much and treated as well as Kiwi workers."

She says the number of employers offering literacy and numeracy courses - while it is great - is indicative of the fact that New Zealand has more and more migrant workers coming into the workforce.

"Unfortunately we often see those workers exploited and paid less having to work longer hours.

"So that kind of training is necessary if you have a workforce which is largely migrant and there are benefits to the employer."

Rosentreter says it is unusual for a company to lend money to staff or guarantee loans.

"That sort of behaviour from employers is quite a rare thing. We don't come across it very often.

"I think we see some employers going over and above, but we would certainly like to see a lot more."