Compliance costs hurting business but government oblivious

New research commissioned by the Employers and Manufacturers Association shows successive governments are no longer keeping an accurate tally of the cost to business of complying with regulation and the impact new regulations have on productivity.

An NZIER report released today by the EMA noted that in 2016, the cost of compliance for business was $5 billion, or 2.9 per cent of Gross Domestic Product (GDP), but that is based on 2012 data because government has not updated accurate figures since 2012.

Clearly, says Brett O’Riley, chief executive of the Employers and Manufacturers Association (EMA) that cost would be much higher today.

"On one hand, businesses are being urged to improve productivity, but on the other there is an increasing focus on compliance with government requirements that individually might be manageable, but together exponentially increase compliance workload," says Mr O’Riley.

"In the past there was comprehensive measurement and assessment of those costs, but since this has fallen by the wayside we’ve had major new legislation in areas such as health and safety and employment law, all increasing business compliance costs."

Each of the businesses NZIER spoke to highlighted the cost of compliance was not just about money, but time, with the load being particularly heavy for management unless they hired a specialist resource.

"It’s worrying to find that in some cases half of an employer’s time at a management level is taken up dealing with compliance - at the expense of leadership - which means lower productivity, lost opportunities and burn-out," says Mr O’Riley.

"Despite successive governments’ attempts to review, assess, address and justify the cost of business regulation it just hasn’t happened, and it is undoubtedly having a negative impact particularly among SMEs, which are 97 per cent of businesses in New Zealand."

"We have long taken pride in being the country where it is easy to start a business. But the government needs to focus on how easy it is to manage a business. This is simply not happening in and integrated and coordinated manner."

All employers spoken to by NZIER acknowledged that responsible regulation was good for business, but that how well a business responded to requirements was of no commercial benefit to it in the market.

However, a surprising finding was that companies that responded well to health and safety regulation benefited by attracting and retaining staff.

"It is great to see that employers support regulation where it helps their business, but the question remains ‘Is the current raft of regulations too high a cost?’" says Mr O’Riley.

"On behalf of our members, we challenge the government to address this problem as a matter of urgency. Providing authoritative, reliable and accurate information on the burden of regulation is a fundamental, core responsibility of good government."

Please click here to read the full report.

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