Hit for six by subsidy

By Susan Edmunds

Employers accused of abusing scheme

When the Government job subsidy ends so, too often, do jobs, putting dejected employees back on the hunt for work. Photo / File
When the Government job subsidy ends so, too often, do jobs, putting dejected employees back on the hunt for work. Photo / File

Nearly a third of employees who find work, partly thanks to a Government subsidy for their employers, are not kept on once the money runs out.

Employment advocates say this is evidence the system is not working.

Employers are able to access Government subsidies for the wages of people they hire off the benefit, for a six-month term.

Work and Income launched Job Streams in July last year, which combined all the available schemes. In the first year, about $20 million was spent on subsidy schemes Flexi-Wage Basic and Flexi-Wage Plus, which includes funding for mentoring.

But in that year, 30 per cent of the employees who had been hired through the scheme and finished their six-month contract were not in their jobs eight weeks later.

Almost 7000 Flexi-Wage contracts were issued. The amount that wages are subsidised can vary but is often about half.

In the scheme's first six months, the average subsidy was $4399.72 for people who got a subsidy only and $5400.28 where money was also allocated for other things. One received the maximum $21,060.

Karen Pattie, of the Beneficiaries Advocacy and Information Service, said because businesses did not have to commit to employment beyond the subsidy period, once it ran out, employees were often laid off.

"Businesses need to show a commitment to permanent employment. It's a hard system to work but there's no accountability on the part of the business," said Pattie.

Similar systems had not worked and there was no indication this incarnation would fare any better, she said. "It just seems like giving money away."

The only checks done on any job before a subsidy was granted were that it was legal, and the employer was a registered business.

Employment advocate David Flaws said he received about two calls a month from people who felt they were hired solely for the subsidy. "Employees, particularly in smaller organisations with relatively unskilled jobs, find they are taken on for a little while, then the employer turns the handle and they're gone, and the next one is in there."

So far none had wanted to pay him to represent them in court. "It's largely because a lot of them are living hand-to-mouth and don't have the resources to do that."

Dargaville woman Michelle Zein said she was caught out by an employer hiring too many people to get an upfront subsidy. She already had a job but was offered more hours if she moved to Legends, a bar in Whangarei. "He promised me 40 to 60 hours a week. The first week, I'd be lucky if I did 25 hours. Then he told me he had hired 22 staff, 21 of them from the benefit."

She said seven people were then made redundant a couple of weeks later. Legends has since closed and the owner could not be contacted.

A Ministry of Social Development spokesman said the organisation was not aware of any complaints.

The department would know how many clients had been referred to a particular business and could decline or limit requests for subsidies if it had concerns, he said, adding that the organisation followed up eight weeks after a six-month term ended to work out whether people remained in work.

Flaws and Pattie said there needed to be more checks on employers. But Flaws said he doubted the Government had the resources to seriously monitor outcomes.

Employers and Manufacturers Association chief executive Kim Campbell said the subsidies helped cover the cost of hiring new staff. "Even if you want someone to chop potatoes, they have to be trained in food hygiene."

He said it was possible that, in some cases, an employee was just not suitable for a role and the end of the subsidy would prompt the employer to reassess the position.

Have you received a subsidy for an employee?

Have you been hired through the scheme? Tell us your story. Email susan.edmunds@hos.co.nz

- Herald on Sunday

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