The New Venue Payment System – Officialdom Loses Sight of Reality

The Department of Internal Affairs is looking to yet again amend the venue payment rules. The amendment will result in venue payments being further reduced, this time by 10% to 40%. The Department’s timing is impeccable, the new system is planned to be introduced during the traditional winter downturn and during the worst recession since the 1930s. The Department has had its officials spend weeks at venues with a stopwatch studiously counting and recording the number of seconds it takes to complete each gaming tasks, eg 2 minutes and 50 seconds for a hopper refill, 3 minutes and 10 seconds for cancelled credits, 3 minutes 35 seconds for undertaking a jackpot win and 15 minutes to resolve player disputes. The Department is able to track most tasks undertaken via the electronic monitoring system. The Department is proposing to reimburse venues on a per second basis for each task using an employee’s base hourly rate. For example if a staff member is on $12.50 per hour the venue will be paid 59 cents per hopper refill (plus a cent or two for holiday pay and Kiwisaver costs).

The absurdness of the model is highlighted if you were to look at imposing the same restrictions on any other business. If the same model was applied to a small mechanical garage the following would apply. The apprentice mechanic’s employment contract would be extremely harsh. The apprentice would be paid on a per task basis eg $1.04 per wheel changed, $1.66 per brake pad changed, $2.08 per car cleaned. The apprentice would not get paid any more if the tasks took longer, but simply advised that all jobs should be undertaken in this timeframe. The apprentice would not be entitled to any employee benefits as these extra costs are not covered. The apprentice would therefore not be entitled to use the lunch room, have a coffee on his employer, be paid for statutory holidays, take sick days, receive any training, and would be prohibited from attending work drinks on Friday and the staff Christmas party. The apprentice would be required to meet his or her own uniform costs. The apprentice would be required to be present at the garage at all times to instantly deal with all customers when they arrived but would only be paid for the actual seconds spent undertaking a set task.

The owner/manager’s remuneration would be fixed by the Department at $47,234.00 per annum or $15.14 per hour (based on a 60 hour week). This maximum is imposed despite the owner having invested hundreds of thousands of dollars in setting up the business. The owner would have to work under a system where they could somehow employee staff without any recruitment costs, don’t need a pay clerk or other management/administration staff, have all health and safety issues attended to without costs and must never incur any costs when dismissing an employee. Further, the staff employed must never steal from the business. In reward for the capital invested in the business and the risk taken the owner will be paid 50 cents per equipment malfunction fixed and $3.78 per customer dispute resolved. Although the owner and the staff will undertake a number of tasks on vehicles some of these tasks will not have been allocated a time by the Department and accordingly no payment at all would be made.

After setting up the business and running on an impossible costs structure the business owner is allowed a return on investment or management fee. Although the businesses across the road charge a mark up of a minimum of 100% on parts and labour the return that can be made by this business is limited to 25%.

No one can honestly believe that staff can be employed as set out above or it is fair to reward people in businesses as set out above. Why would anyone dedicate a large section of their profitable public front of house area to gaming and be rewarded under such a system? Have the Department’s officials truly lost all concept of reality or is the true agenda further reducing the number of gaming machines in New Zealand?

Without venues willing to host gaming machines the charitable gaming model in New Zealand comes to an end. When hosting gaming, venues accept a considerable amount of risk. Venues have the always present threat of cash theft, and face prosecution if the hundreds of gambling rules and regulations are not meet.

Why do we expect venues to operate on a cost recovery basis? Why should venues be prohibited from making a profit hosting gaming machines when they are devoting a reasonable part of their business to the gaming operation?

Perhaps the time has come for venues to stop being the punching bag of the gaming industry and stand up for themselves. Imagine if all venues went on a three week off, one week on strike, where all gaming machines in New Zealand were turned off for rolling three week periods. Every gaming society in New Zealand would have to decline every grant application received due to insufficient funds. The Government which is currently dealing with a reduced income tax take and budget deficits would be faced with a reduction in gaming taxes and duties of approximately $1,000,000.00 per day. If such a strike did occur the Minister of Internal Affairs would have to explain that the cause of the strike was because his Department believed it was fair to reward an owner of a venue 50 cents per equipment malfunction remedied and $3.78 per player dispute resolved.

If the new model is introduced it is only fair that the same rules apply to other people in the gambling industry, eg Lotto outlets and problem gambling treatment providers. The model would result in Lotto outlets being paid 3 cents per lotto ticket sold.

Incredible savings could be made on problem gambling treatment costs. A New Zealand Herald article in 2007 noted that Hamilton’s Pacific People’s Addiction Service received $143,160.00 to provide counselling for a target of 306 people – but it attracted only eight users at an average of $17,895.00 per gambler. Using the Department’s model counselling sessions would be timed. It would be deemed that the time taken to interview a client was 20 minutes, the time taken to make a follow up phone call 3 minutes and the time taken to text a client 30 seconds. Allowing for 3 visits, 5 phone calls and 10 texts the $143,160.00 remuneration would be reduced to $222.05 (using the maximum permitted hourly rate).

The above examples illustrate the ridiculousness of the proposed model, a model which assumes 100% efficiency and assumes that the mere seconds taken to complete various gaming tasks is the true costs of having on-call staff available to undertake the tasks. Venues are businesses. Businesses exist to make a profit. Venues should not be shy about making a profit from gaming, like they do with all other activities offered. The venue payment system should move away from “cost recovery” to a fair reward for the services undertaken. A commission based payment of approximately 16% will achieve this. The proposed new model should therefore be filed away next to flatulence tax and marijuana law reform, while all parties should focus on having a fair and transparent commission based system introduced.