Government proposes ACC-style income insurance scheme for New Zealand

The Government's proposed income insurance scheme would see workers made redundant, laid off or who have to stop working because of a health condition or disability, receive 80 percent of their usual salary for up to seven months.

It would include a four-week notice period and four-week payment, paid at 80 percent of salary, from employers. The worker would then get a further six months of financial support from the scheme, including support for training, also at 80 percent of salary.

However, the maximum payment would be capped at 80 percent of $130,911, in line with the maximum leviable income that ACC has in place.

To pay for it, the Government is proposing an ACC-style fund that both workers and employers would contribute to, paying about 1.39 percent each into the scheme. It would be administered by the Accident Compensation Corporation (ACC). 

The proposed scheme was jointly designed by the Government, Business New Zealand and the Council of Trade Unions. The latter two jointly approached the Government about this work.

Finance Minister Grant Robertson, speaking in Wellington on Wednesday, said such a scheme would protect people and the economy after job losses, such as after crises like the Canterbury earthquakes and COVID-19. 

The Government wouldn't need to fork out billions of dollars for support packages during difficult times, like the $18 billion COVID-19 wage subsidy. 

"As New Zealand moves beyond the economic and social impacts of COVID-19, there are important lessons to be learned from the way we were able to support one another through an unprecedented series of challenges," Robertson said. 

"During COVID-19, the Government protected livelihoods with the Wage Subsidy Scheme and Resurgence Support Payment. This was primarily done through keeping people in their existing jobs and supporting businesses most directly affected by the pandemic.

"We think it's time for an enduring solution."

Australia and New Zealand are the only countries within the OECD group of 38 developed nations without some form of publicly-mandated unemployment insurance, Robertson said. 

New Zealand Council of Trade Unions President Richard Wagstaff says every year more than 100,000 Kiwis lose their jobs.

"The COVID-19 outbreak is a stark example, but widespread job losses have occurred all-too-frequently over the last 40 years. As we rebuild the economy we have an opportunity to put better protections in place.

"A job loss often results in a significant income shock that can affect wellbeing and earnings, even when a person finds new work. That's because finding a good job takes time. Many people accept lower-paid jobs that don't match their skills because of the financial pressure to get back to work quickly."

Business NZ chief executive Kirk Hope said businesses lose out on important productivity gains because the current system doesn't give people time to find work that matches the skills they have. 

"Sectors facing critical skill shortages may miss out on key workers, simply because a vacancy wasn't available in the few weeks a worker was looking for work.

"Loss of work can affect communities and whānau, especially communities reliant on a major employer. When these businesses shut down, workers have little money to spend, which means other businesses suffer and the community can go into a long-term economic decline lasting for generations. 

"An income insurance scheme could cushion workers and communities from such abrupt income losses, allowing more time for regions and businesses to adapt."

The proposals are available here. People can have their say by completing a short survey or providing a submission. Consultation closes on April 26.