Case study: Ritchies Transport

Read the case study below, then answer the following questions.

Bus company Ritchies has come under fire by staff and the union after its bid to bring in 110 drivers from overseas was rejected.

Last year Ritchies, which holds major passenger transport contracts in Auckland and other parts of the country, applied for an approval in principle (AIP) to bring in 110 bus drivers from overseas to fill the driver gap.

It asked for pre-approval to hire up to 80 drivers for Auckland, 15 for Dunedin, and 15 for Queenstown.

The company is one of the biggest in the country and shares owners and directors with other major companies like Ritchies Murphy and Birkenhead Transport. It was looking to recruit drivers from Tonga, Fiji, Samoa and the Philippines.

Documents released to Newsroom under the Official Information Act show the labour market test undertaken by Immigration New Zealand revealed widespread concerns the companys low hourly wage and unsociable work hours, which include split shifts, were to blame for its inability to attract and retain drivers.

The attempt to use migrant workers to help stem the bus driver shortage in New Zealand comes as the industry faces an employment crisis.

Low wages and poor conditions, including split shifts, is behind whats repeatedly been described as a race to the bottom.

Immigration and Workplace Relations Minister Iain Lees-Galloway and Transport Minister Phil Twyford have voiced their concerns surrounding the state of the industry, and the low wages and poor conditions faced by drivers.

Now councils, bus operators and unions are working together to implement a 12-month trial of a flexible paid break system, and Twyford has committed to universally introducing the living wage and take a step towards addressing longstanding industry issues.

Ritchies has the lowest wages of any bus operator in the country about $20.60 an hour in Auckland, compared to between $22 and $23 elsewhere. FIRST Union said Ritchies was known in the industry for its low wages and unsocial hours something Ritchies rejects.

Ritchies said there was a shortage of workers across nearly all industries, including the bus passenger transport industry, referring to the low unemployment rate.

The company pointed out it ran driver training programmes and was working with prison reform group the Howard League to recruit people who had been released from prison.

We are not a large foreign owned multinational company that pays the minimum wage. We are a 100 percent NZ owned family business. We have a very low staff turnover and people work for us because of our family values and the way we treat our people, Ritchies said in an email in April 2018.

Of course, a union is going to seize the opportunity, start jumping up and down, when we are looking to source more drivers and they are preparing to negotiate a collective agreement. It does not detract from the extreme shortage of drivers across the heavy transport industry, which includes both freight and bus passenger transport.

Meanwhile, FIRST Union publicly opposed Ritchies application, and in consultation with Immigration, said it was concerned employment conditions, including below industry wages and unsociable hours, would deter suitable and trainable New Zealanders from working and remaining with the company.

Meanwhile, the labour market test also found Work and Income New Zealand (WINZ) had a pool of potential drivers, with the necessary licences, who were able to be recruited from within New Zealand, and particularly the Auckland area.

Immigration ultimately said it was concerned about the pay and conditions offered by Ritchies, compared to other bus operators.

We have carefully reviewed the pay and conditions offered by Ritchies Transport Holdings Ltd against a range of resources, including the three collective agreements referred to above, and we remain concerned that the pay rate and conditions offered by Ritchies Transport holdings Ltd is lower than the current market rate for the type of employment offer.

FIRST Unions Jared Abbott told Newsroom the current tendering system rewarded bus operators with low costs.

Abbott questioned whether Ritchies was fit to run a publicly funded service, given its low wages, conditions, split shifts and safety concerns. He said other operators would like to lift wages, however that would put their contracts at risk in the current climate.

Minister Lees-Galloway said no-one won from a race to the bottom. Before they reached for immigration to fill gaps they needed to be planning for their labour force needs, supporting Kiwis into jobs, paying decent wages and providing good conditions, he said.

Lees-Galloway said he was working across agencies to create a more productive, sustainable and inclusive economy", which included better workforce planning across the country.

The government was also aiming to create a more robust system to meet regional labour needs, without reaching for immigration as a first resort, he said. This was part of a wider discussion as part of the employer-assisted work visas and regional workforce planning consultation across sectors.

Transport Minister Phil Twyford says the Government's urban transport plan is a big part of the government's vision towards giving Kiwis a choice. For that to be delivered, longstanding sector issues need to be addressed.

Ahead of the 2017 election, Labour and NZ First both committed to lowering migration but despite the election rhetoric, this government has not drastically slashed migration, with net migration at 56,100 to March 2019.

However, it has focused on clamping down on migrant exploitation, targeting regional skills shortages, and upskilling Kiwis in the regions to stop employers from looking offshore.

Twyford wholly attributed the issue to the current labour market, where wages and conditions do not make the job attractive to Kiwis.

He said the industry was imperative to creating a 21st century, high-performing transport system, but there needed to be enough people to do the jobs.

1) One way to think about environments is in terms of the degree of uncertainty in the external environment.

a) Identify and explain if Ritchies Transport is facing an environment of low or high uncertainty.

b) Provide three specific recommendations for the management of Ritchies Transport to ensure the future success of the brand given the issue identified in the case study. Justify your recommendations.