The Aussie, The Brit And The Dane

How Three Overseas Corporates Are Keeping A Lid On Cleaners’ Pay

- Alastair Duncan

Alastair Duncan is a CAFCA member with a day job at E Tū.

Sixteen years after the scrapping of the Employment Contracts Act in 2000 nearly 75,000 workers depend on the annual review of the minimum wage to set their pay rates. Twice as many Kiwis are paid within a few cents of the rate. In March 2016 the Government announced an increase in the minimum wage to $15.25 per hour. The same day the Living Wage movement released an update recommending a rate of $19.80. The living wage is aspirational, the minimum wage mandatory.

In 2016, as it has in every year of the current Government, the minimum wage rate has gone up.  Ironically the increase of 50 cents an hour was probably more than many other wage earners are going to get in 2016. The NZ Council of Trade Unions estimated that 47% of Kiwis didn’t get a pay rise in 2014. In 2016 with inflation as low as 0.1%, wage and salary earners can expect little by way of real increases unless they are able to leverage their skill or their muscle against their employer’s interest. Only the union-led equal pay campaign for $26 an hour for aged care staff shows signs of delivering real increases for the 50,000 carers and community workers – but that’s not yet a done deal.

The minimum wage has a flow on to many occupations, including commercial cleaners. The army of invisible workers in our office blocks and malls are in one of the few occupations whose pay and conditions are still largely set by a single multi-employer collective agreement – the MECA. MECAs used to be the way pay and conditions were set in this country (they were called awards. Ed.), but since 1991, and the passing of the former Employment Contracts Act, most have been wiped out. Today just 10% of the private sector workforce is union members protected by collectives - but the influence of collective bargaining goes beyond those who hold a union card. In aged care, where 30% of the workforce are unionised, collectives impact on 60% of the workers. In commercial cleaning the numbers are even more glaring. By contrast, while just 5% of an estimated 20,000 commercial cleaners are union members, their MECA is the industry benchmark as most employers simply “pass on” the deal to non-union workers. Since 2015 those workers have been paid $15.10 an hour – 35 cents above the old minimum wage of $14.75 - so the new minimum wage rates have overtaken them.

The cleaners’ MECA is dominated by overseas-controlled companies and overseen by the lobby group Building Service Contractors of NZ (BCS). In 2014 BSC said they were “proud” to celebrate the fact they were not a minimum wage employer. “Businesses contracting a BSC member can be confident they are using a reputable company which treats its cleaning staff fairly, ensuring fair pay, reasonable hours and safe conditions,” said BSC CEO Lillian Small. “The MECA is a strong point of difference between companies which are BSC members and those which are not”. Small rejected the widespread perception that all cleaners are paid the minimum wage. She was right, but not entirely.

Spotless

Three companies dominate, controlling cleaning in offices, malls and hospitals (hospital workers, with higher levels of unionisation, have a separate MECA – with higher pay rates than their commercial sisters). These are the Australian-controlled Spotless, the Danish transnational ISS and the UK firm OCS.  All were members of BSC in 2014, but recently ISS pulled out. ASX-listed Spotless’ NZ operation is controlled by its big brothers across the Tasman. Its claim to fame was opening the first KFC in 1968. Today it focuses less on broiling chickens and more on “facilities management”, employing 39,000 staff in Australia and NZ. Spotless has long had a dominant market share of public hospital cleaning and catering services with a history of industrial disputes including locking out its staff. In February 2016 Spotless reported a net profit of $A48 million – up 14.3% on the previous year and an 18.6% increase in earnings before interest, tax, depreciation and amortisation. Though its NZ arm is a small part of the trans-Tasman operation, Spotless still employs 1,800 commercial cleaners.

ISS

Danish-based ISS employs nearly 2,500 New Zealanders, mostly part time cleaners. While its remuneration policy seeks to attract “top talent for key positions”, like the rest of the BSC it was paying its cleaners just 35 cents above the minimum wage. By contrast, ISS Board members receive a “base fee” of four hundred thousand kroner ($1NZ = 4.5 Danish kroner) and the Executive Management Group typically pull down salaries of two to three million dollars NZ. In 2013 its Australasian profit was 5% or around $50 million. ISS Cleaning was founded by female cleaners in pre-war Denmark, and ISS has grown to be one of the top performers. At one point it was even run by proto feminists – though with just one female Chief Executive Officer in the 48 countries it operates in, those days are long gone.

OCS

British firm OCS, founded in the 1900s by the aptly named Frederick William Goodliffe (sic), turned up in this country when it took over the QSE Company which, in turn, has purchased/taken over the Government’s Internal Affairs cleaning service, a victim of the Rogernomics purges of the 1980s. In 2010 it was immersed in a bitter dispute at Massey University – a dispute in which Massey Chancellor Steve Maharey failed to actively support the workforce. OCS’ branding is ‘Outsourced Client Solutions’ – an apt brand given their history. It employs 3,800 cleaners. OCS financials are not public but the pay rates are. Back in the 90s the margin between commercial cleaners’ pay and the minimum wage was 24%. Last year it was it was just 35 cents. If the 1999 margin had been maintained cleaners would be paid $19 – almost a living wage.  Lillian Small is and was correct – they don’t pay minimum wage. But it’s close.

Cleaning TNCS Clean Up

Taking a leaf from the union book the cleaning companies in NZ have operated as something of a cartel. Controlling wages means controlling prices and a “level playing field” with wages taken out of competition. BSC rates a mention in Nicky Hager’s “Dirty Politics” book* when Cameron Slater attacked BSC boss Patrick Lee–Lo because the BSC had worked with the union to try and manage a process of protecting staff when building contracts changed hands. Part 6A of the Employment Relations Act protects so called “vulnerable workers” from losing their jobs just because contracts change, and to date has escaped the latest wave of anti-worker law changes. But the law doesn’t protect workers against subsequent cuts to their hours after a new employer takes over. And there’s the rub. If wages are out of competition then the next way to shave costs is to cut hours – and expect the same results.  * “Dirty Politics” was reviewed by Jeremy Agar in Watchdog 137, December 2014, http://www.converge.org.nz/watchdog/37/13.html. Ed.

As Watchdog goes to press the cleaners’ union E Tū (formerly the Service and Food Workers’ Union - SFWU) is negotiating the annual pay rise with the sector employers. Lillian Small says the sector wants a “mutually beneficial outcome” with cleaners paid “as much as possible”. In the same breath she then warns that the sector needs to be “realistic about what the market can sustain”. Theoretically "in a cartel environment" the industry could dictate the price – at least to a sector of the market - and thus ensure the “as much as possible” meant a real increase. It’s doubtful that it will – partly driven by the internecine competitiveness within the sector and the rising fear of smaller operators. Whatever happens in this year’s pay talks the cleaners will deserve more, a lot more than the sector is likely to offer. The prospect of an equal pay test case hangs over this female-dominant sector but that’s a bridge yet to be crossed. Absent a seismic growth in union power or a major change in the way society values cleaning staff, the transnational corporations (TNCs) and their Kiwi clones will continue to clean up.

Notes: the term “commercial cleaners” is used to distinguish cleaners working outside home support and hospitals. Hospital cleaners, who are highly unionised, earn $16.23 - $18.15 per hour depending on their qualifications.


Non-Members:

It takes a lot of work to compile and write the material presented on these pages - if you value the information, please send a donation to the address below to help us continue the work.

Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa.

Email cafca@chch.planet.org.nz

greenball

Return to Watchdog 141 Index

CyberPlace