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Fair Pay Agreements Bill: What do you need to know?

Published November 01, 2022 (last updated February 21, 2023) - ANZ Head of Legal Services

The New Zealand Government has recently delivered on its promise of improving working conditions with the passing of the Fair Pay Agreements Bill. Workplace Relations and Safety Minister Michael Wood announced the passing of the Bill on 26th October 2022. The Fair Pay Agreements (FPA) System comes into effect on 1st December.

What is the Fair Pay Agreement System?

The Fair Pay Agreement System will bring together employers and unions in a sector to bargain for minimum terms and conditions for all employees in the industry or the occupation. The proposed system will include support for bargaining parties to help them navigate the bargaining process and reach an outcome, as well as processes to ensure compliance.

The design of the system was informed by the Fair Pay Agreement Working Group and public consultation, as well as involvement from the New Zealand Council of Trade Unions and BusinessNZ.

FPAs will be long-term, stable frameworks with Agreements being valid for 3-5 years.

Fair Pay Agreements and its benefits

The New Zealand economy has grown over the last 30 years; however, wages have lagged behind increases in productivity. The low-cost labour model has led to the suffering of employees with a race to the bottom.

Less than one in five New Zealanders are represented in collective bargaining. The Government wants to use the Fair Pay Agreements system to address these inequalities and offer employers and workers a chance to bargain for minimum standards for all employees in that industry. This bargaining will also allow the Pacific peoples, young people, and people with disabilities to benefit from a Fair Pay Agreement. It levels the playing field so employers who offer fair terms and pay don’t get undercut or disadvantaged.

The Fair Pay Agreements system aims to:

  • Create sector-wide coordination
  • Increase bargaining power for employees
  • Ensure the minimum pay and employment terms are reflective of the needs of sectors covered by a Fair Pay Agreement
  • Incentivise businesses to invest in training

Fair Pay Agreements and its challenges

The bill was passed with the support from the Labour, Greens, and the Te Pāti Māori. The National Party opposed the bill calling it an ‘ideological overreach’ that will harm the economy. Opposition around the bill has centred on the belief that the Bill will make workplaces less flexible and bind employers to a union agenda. It will also force employers and workers to bargain for minimum terms and conditions for all employees, whether or not they want to be included.

What do business owners need to know?

The FPA System will come into effect on 1 December 2022 and guidance will be provided for employers, employees, and bargaining parties. Employsure is working on creating resources and webinars for all our clients and supporting them in understanding their obligations.

Call our 24/7 Advice Line for information.

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