The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The proposed Employment Act reforms will merely “kick the private sector when it’s down”, a well-known businessman warning that his labour costs were already “edging up towards” being equivalent to both 50 per cent of total costs and gross profits.

Rick Lowe, director/operations manager at Nassau Motor Company (NMC), the Honda and Chevrolet auto dealer, told Tribune Business that the increased labour costs heralded by the proposed changes would heap a further burden on an industry that had been “treading water” due to the recession.

Pointing out that NMC, and most other new car dealers, had declined the easy option and avoided staff lay-offs, plus salaries and benefits cuts, Mr Lowe said reduced top-line sales meant labour costs had “increased dramatically” as a percentage of operating income.

“Nassau Motor Company has not reduced wages, not cut benefits, not reduced staff levels, and would be penalised by this legislation,” Mr Lowe told Tribune Business.

“You tread water for four-five years, and for being as civil as we have been, the Government’s says: ‘Here’s the big stick’.”

He added: “The cost of salaries or benefits, or the percentage of salaries and benefits to gross profits and total expenses, has increased dramatically because of the decline in the marketplace. They’re edging up towards 50 per cent.

“You don’t adjust these prices - the cost of labour - down, and you’re not earning as much...... I don’t expect government policy to kick you when you’re down.”

Bahamian employers have argued that the proposed Employment Act reforms would further increase labour/hiring costs at a time when the private sector can least afford it, and be counterproductive to the goal of reducing the almost-16 per cent unemployment rate.

In particular, they have pointed out that the provision for a mandatory. paid lunch-hour would both increase costs and further lower already-suspect productivity, dropping the ‘work week’ from 40 hours to 35 hours.

This, and other reforms, such as ‘12 consecutive hours of rest’, negotiating fixed-days off at the start of an employee’s career, and paying workers for public holidays they do not work, have also been cited as raising costs and creating huge management/logistical challenges for companies that rely on shift work.

Mr Lowe, meanwhile, pointed out that Nassau Motor Company (NMC) and other firms in the auto industry were unable to turn to vehicle and parts price increases for recourse, as the sector was price controlled.

“We can’t say we will raise the cost of parts 1 per cent to cover the increased labour costs. We can’t even do that,” he explained to Tribune Business.

“Without a miraculous economic recovery, the proposed amendments could have a disastrous impact on our business forcing us to change our business model.”

By creating a rigid, inflexible workplace environment through statute legislation, Mr Lowe said the Government - if it chose to press ahead with the reforms as is - would take away the “freedom of choice” for both employer and employee.

Arguing that the two sides should be free to determine their relationship via contract, Mr Lowe said one response if the reforms became law might be to tell staff they could no longer work extra hours - even if the employee so desired - in a bid to control costs. And, as a consequence, customer service would suffer.

“Employees that wish to work certain ways, and at certain times, it’s their choice,” Mr Lowe told Tribune Business. “Now, public policy will restrict the choice of the employer and employee, with a knock-on effect on customer service and efforts to satisfy the client.”

If the Government’s planned reforms passed, Mr Lowe said one potential response from Nassau Motor Company might be to restrict the working hours of its technicians, who are paid flat rate time, to seven hours per day - thus preventing them working extra hours.

Acknowledging that this would reduce income for both technicians and the company’s service department, Mr Lowe assessed the impact thus: “It takes the free will out of the equation.

“That’ll be one way of counteracting it, but you can’t satisfy as many clients and your productivity is hampered.

“They [the Government] just never consider. What about food deliveries? These people come in at 6am in the morning, or earlier, and will now have to adjust their shifts.”

Pointing out that the Bahamas, especially New Providence, was “no longer a back water”, Mr Lowe said Bahamians and residents expected certain standards of service. Yet the Employment Act reforms, he added, would negatively impact such standards.

Expanding on his concerns, Mr Lowe said: “The policymakers do not appear to realise that employers and employees in different types of businesses operate on varying models with shifts, open 11 hours, open 24/7, and more.

“In other words, the Government official makes a decree, without due consideration to what it takes to make a business work in an effort to satisfy both clientele and associates, and because he says so, that’s how it will be. Like fitting a square peg in a round hole.

“Yes, there are mean employers, but is that sufficient enough reason to make such disruptive legislation that could marginalise the majority of employers and employees? Let business flourish with reasonable policies so the economy can grow and new businesses come on stream. That way, those employees stuck with unreasonable employers will have another option for employment.”

And, warning of the macroeconomic consequences, Mr Lowe added: “This inflexibility hampers the ability to trade/do business and forces employers to rethink their business model. This leads to less entrepreneurial investment, business expansion or Foreign Direct Investment (FDI), which ultimately impacts job creation.

“In other words, these proposed amendments are disincentives for employers and employees alike. The exact opposite of whatever good intentions might be involved.”