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Fair Pay Agreements are coming

Published 26 Apr 2022

Fair Pay Agreements (FPAs) are high on this years agenda for the Government.

The long promised Bill has passed it's first reading in Parliament this month and now will move through the usual Parliamentary process with general submissions on the Bill being sought currently.

If enacted this will represent the most significant change to employment and industrial relations in the last 30 years.

When labour first floated the idea back in 2018 the idea was conceptually similar to the award system in Australia. Jacinda Ardern said she did not believe it would be implemented on a large number of sectors, but rather for those "most affected by a depletion of their terms and conditions". So primarily designed to stop certain industries in a 'race to the bottom' to provide cheaper and cheaper services which arguably compromises working conditions and safety for staff in those businesses.

The question really remains whether a system which works in a much larger economy overseas would work for a predominantly SME led market such as in NZ.

Most employer advocacy organisations think not. Both the National and Act parties are strongly opposed to the Bill. National have long said that FPAs are "unionism by stealth" and they would repeal any such movement in the future, and Business NZ have very abruptly declined the Government's offer to be involved citing the system to be utterly incompatible with the needs of NZ from both sides of the fence. The chances are of course with a majority leading Labour Government, the Bill will be passed this year.

One of the main points against the FPAs appears to be 'what's wrong with the status quo?' With formal systems in place such as collective bargaining and agreements, and unions given more power in 2018, why can't that be applied to these struggling industries?

The way the Bill stands currently a union can initiate FPA negotiations if they can demonstrate either:

  • 1000 staff in the sector or 10% of all staff in the proposed coverage; or
  • there is enough public interest based on a specific criteria such as a typical low wage

If the Employer and union cannot agree on terms the Employment Relations Authority will decide.

FPAs will be enforceable across the country for the respective industry or occupation. The Bill does allow for regional variation, such as higher rates in Auckland due to the cost of living etc. FPAs will stand for between 3 and 5 years, the chances being of course, once in place it will effectively never be gone.

If you would like to make a submission on the Bill you can do so for the next 3 weeks here: