Fischer and Paykel – Victim or Villain

With the recent proposed closure of their Brisbane plant, Fischer Paykel are most likely being frowned upon whereas they may in fact be the first victim of the recent wage rise allocated in what can only be described as ‘tough times’.

In my opinion it puts light on the fact that pay increases MUST be linked to either productivity gains or improved profits, not just because someone feels the workers need a boost.

With some 300 workers involved, which, when calculated amounts to in excess of $400,000 per year from an already suffering bottom line, perhaps this is the first of many such cases on the pipe line because of what may well of been an un-warranted wage rise.

I sure hope the ‘do-gooders’ that lobbied for this rise have a contingency plan for the people whose jobs may well be in jeopardy.

To be honest, I reckon it has more to do with lousy management and poor quality, if my own experience is any guide. I used to be a dyed-in-the-wool F&P buyer with a houseful of their gear, which the missus got when she shot through. When it came time to get new gear, i went the F&P route again, buying a washing machine and a fridge. The fridge lasted only a month before the first plastic door shelves started breaking and only 24 months in total, at which time it was cheaper to replace it (with a decent Westinghouse this time). F&P were happy to keep supplying me with shelves at $20 or so a throw, but the dud compressor was the clincher. Likewise with the washing machine. 2 replacement solenoid valves so far and more expected, along with one (very expensive) mylar control panel. The solenoid valve is a known corrosion problem with these machines, apparently. It'll be going soon in favour of the mate's 15 year old whirlpool, which they've just updated.

If F&P were producing decent gear, they'd be in business, simple. not the workers' fault, either, it's down to lousy design or poor materials.

"In my opinion it puts light on the fact that pay increases MUST be linked to either productivity gains or improved profits, not just because someone feels the workers need a boost."

Losses have more as much to do with the poor strtegic decisions as with poor productiving, e.g., expanding too quickly moving outside core expertise. Circa 1990 lost Westpac six billion dollars lending toWA entrepreneurs and others at top-end of town with Board breaking Westpac's Credit And Risk Assessment guidelines.

When the small shareholders complained about Sir Eric Neal et al and moved a vote of no confidence in the Board, a Board member having the proxies of the AMP Society outvoted every one on the floor.

Perhaps the behaviour of Boards needs closer scrunity. Where directors st*ff-up, maybe share splits should be used, so government canre-sell the devaluated shares to the Public. The existing shareholders losses are the penalty they pay for having voting the wrong directors or giving proxies to institutions.

If F&P were producing decent gear, they'd be in business, simple. not the workers' fault, either, it's down to lousy design or poor materials.

I think you are missing the point, they are not going broke, nor are they going out of business. They are simply out-sourcing their labour citing 'increased labour costs' as their reasoning.

You see as I said in my previous post, 'awarding a pay increase just because people are struggling may well be flirting with danger'.

Well it looks like I may have been right. Only time will tell but I fear this is the first of many because businesses, of any size, can't simply grant a pay rise without justification. Businesses must be profitable or why have millions of dollars tied up for the sake of 'jobs creation'.

As for the quality of their goods, well they are simply supplying a product of a certain quality to a certain market.

The problem is that many consumers pay peanuts then bag the manufaturer because they wanted the 'benz' but paid for the 'mini'.

Sorry, can't have it both ways!

The choices are these;we either raise tarrifs or decrease wages.We cannot have it both ways.This is the price of Globalisation.Why do so many try to evade the real issues?

rehctub please! you and your threads have always had interest for me.
But you fail to understand the issue of industrial relations.
Minimum wages was raised and you started a thread about its impacts.
Those on minimum wages, who got that increase are not these workers, not one of them.
These folk work on an EBA such agreements always yes every time, include productivity increases and mostly measures such as KPI,s key performance indicators to insure more productivity comes.
Better quality less injury's, all targets for increased wages EBAs get more bang for the buck.
Now the race away from manufacturing in our country and New Zealand is fueled by cheaper , very much so wages in Asia.
To ask us to work for that money is to ask some to starve while others prosper.
In time we will have to confront the fact we already do just that.
No suffering for FP we will buy cheap washing machines like every thing Asia sells us and not blink when asked to think about jobs.

rehctub: "they are simply supplying a product of a certain quality to a certain market."

Actually, I think you missed my point; their quality used to be such that I was prepared to pay more for it. Now it is such that I wouldn't touch it at any price. Blaming increased labour costs is an excuse for the fact that their quality has gone down hill as has the price they can ask for it. It may also reflect a drop in the market for whitegoods generally, as economic conditions change. I doubt that outsourcing was their only option, but it has become a favoured tool of poor managers everywhere, simply because it means they don't have to actually manage - all they have to do is bean-count

Antisetic, your experience mirrows ours.This is a big dissapointment to us.We try to buy AUSTRALIAN, when we can.Do they try to compensate for paying higher wages by using inferior components? I dont know the answer, business is business, and to see all our manufacturing going overseas to make shareholders happy at the expense of customers isn't what we want to see either.Their advertising budget was high.T.V. Ads. aren't cheap!

anticeptic -I doubt that outsourcing was their only option, but it has become a favoured tool of poor managers everywhere, simply because it means they don't have to actually manage - all they have to do is bean-count

Yes you are right as most businesses out-sourse now where possible due to the lack of incentives they receive for employing staff.

Major supermarkets have many of their shelves stocked by company reps rather than by employees.

You see in our country you get punnished for employing which is why so many businesses now out-sourse their labour.

Although I don't like it either, I can see why they do it with penilies such as 'pay roll tax' for example and, with the thresh-hold now at $1 million it only takes a few hundred employees to take you over the limit.

Wouldn't it be great if our tax system 'rewarded' high level employers, or is this to easy?

rehctub:"in our country you get punnished for employing which is why so many businesses now out-sourse their labour."

I have a small business, which occasionally employs staff, invariably on a casual basis, as I have only an intermittent requirement for the extra labour. I have the choice to either employ directly or to approach one of the labour hire organisations and pay them a (rather exorbitant) margin for the convenience. I choose the former, and I don't have any sense at all of being "punished", and obviously the labour hire companies that employ staff to hire them out don't feel there is any "punishment" either. The principal reason I can see for outsourcing is that it makes the relationship one of business-to-business contracts rather than the mutual obligation implied by an employment contract and a secondary reason is the cost-shifting from the wages budget to some other form of (possibly amortisable) budget. If the cost can be appended to a particular project, it will come straight off the bottom line.

IOW, it is laziness and a wish to avoid responsibility, not any sense of coercion that makes most firms choose outsourcing, as far as I can see. It can hardly be cost-based if the labour hire firm is making a profit, can it?

How do you see firms being "punished"?

How do you see firms being "punished"?

Quite simple, by having to pay payrole tax just because they have empoyed to many staff.

You see out tax system charges a large company additional taxes, I think in the order of 4.5%, and calls this 'pay roll tax'.

Now if this isn't a form of punishing you for a great effort then what else is it?

Common sense would suggest that large employers should be rewarded for employing large numbers of staff. But then, where would common sense fit into the running of our great nation?

I have two retail shops and employ 10 staff. There is no way I will employ enough staff to put myself in the 'pay roll' tax bracket, rather I would up-grade my equipment, mostly imported, and be rewrded by way of 'depriciation' write downs and interest/lease payment deductions.

Now where is the lodgic in this I ask?

They punish us for employing to many staff, yet reward us for increasing the national deficite!

rehctub:"You see out tax system charges a large company additional taxes, I think in the order of 4.5%, and calls this 'pay roll tax'."

I understand that point, yet the labour hire firms seems to have no trouble paying such a tax and tacking on a margin, ending up with a healthy profit. If it is such a punishment, one would expect firms whose business model is entirely based on having lots of employees would be doing poorly. That is not the case. Besides, 4.5% of wages is hardly a large cost burden. In my own case, I can hire casual staff for about $18/hour, or go to a labour hire firm and pay $30 or so, a margin of well over 50%, yet lazy managers continue to use this form of casualised workforce, sometimes in large numbers. One of the major logistics firms I'm somewhat familiar with has up to 50% of its floor staff at one of its depots supplied by Drake on any given day and many of those staff have been there for extended periods. Each is employed to work on a specific client project, which means there is no "complicated" accounting and a lazy manager can simply look at income and outgoings as a whole, with no complex calculation of on-costs, etc.

I suspect that when it was first introduced, payroll tax was specifically intended to encourage inefficient firms to upgrade their plant and modernise their operations rather than simply hiring extra labour if their workload increased. At the time, that would have made good sense. In today's "boom" climate (soon to end) that still makes sense.

I suspect that when it was first introduced, payroll tax was specifically intended to encourage inefficient firms to upgrade their plant and modernise their operations rather than simply hiring extra labour if their workload increased. At the time, that would have made good sense. In today's "boom" climate (soon to end) that still makes sense

Are you for real?

Now just let me get this straight. You actually think it is better for our economy for business to upgrade their plant and hire less employees.

As for labour hire it is a no fuss, non direct employment option at no additional cost to the host employer as the cost is passed on to the end client. This is why it is so popular within certain industries and less popular, in retail for instance' as consumers will not wear the extra costs involved.

Blame unfair dismissal laws for this beauty!
As for your prediction of 'the end of the boom time' there is one simple answer that will defy your logic and that is CHINA & INDIA.

China is expanding at a rate of one and one quater times Brisbane per month and we are the preffered supplyer of comodities.

That is provided the 'do-gooders' don't scare our mining compnies away from employing our own people.

They will continue to mine, sell and enjoy their spoils but without us enjoying the cream.

This is the only way I see our 'boom times' ending within the next few years.

Back to pay roll tax, you really need to speak to someone who pays it to understand the frustration it causes.

rehctub: "You actually think it is better for our economy for business to upgrade their plant and hire less employees. "

In the current economic climate it may well be. Tried to get skilled staff lately? For an example of how well a concerted program of upgrading equipment works to boost an economy, look up the Marshall Plan. No country can expect to be able to compete in terms of productivity with outdated equipment and it is relative productivity that ultimately creates prosperity - a country able to produce more per worker will be richer.

As for the "boom", sure it will last for an extended period in some industries, but in the rest of the economy it is already fading fast. Any business that is too heavy with insufficiently productive labour will suffer. Note that I said "insufficiently productive" when responding please.

rehctub:"As for labour hire it is a no fuss, non direct employment option at no additional cost to the host employer as the cost is passed on to the end client."

Funnily enough, the labour hire firms seem to be able to make a profit whilst paying payroll tax.

rehctub: "Back to pay roll tax, you really need to speak to someone who pays it to understand the frustration it causes."

Lots of things are frustrating, yet we accept their existence as necessary. I find it difficult to feel too sympathetic to the frustrations of someone with sufficient employees to become liable for payroll tax.