Fair Pay Agreements - are they fair?


The Fair Pay Agreements Bill was introduced into Parliament on 29 March 2022. The legislation aims to give low to medium income workers more bargaining power with their employers. Although FPA’s are primarily about wage bargaining, the proposed agreements will also touch on employment conditions, leave entitlements, training and redundancy.


New Zealand has moved from a heavily unionised environment to one where, according to the government, less than one in five NZers are covered by collective bargaining. It argued that labour shortages and demand for skilled workers have mostly benefited those on higher incomes.


According to Workplace Relations and Safety Minister Michael Wood, FPAs are a way for unions and employer associations to agree on a set of minimum standards for the employees and employers in their industry. The benefits for low paid workers seem obvious, although there are some potential pitfalls. For employers, the bill is likely to add even more complexity to employment relations.


Here are some of the key points of the bill:

  • Agreements last 3 to 5 years

  • FPA’s are initiated by workers/unions

  • Unions will represent all workers (union and non-union)

  • The threshold for beginning an FPA is low (1000 workers or 10% of the group - whichever is the smaller)

The legislation is designed to offer more protection to low wage groups, casual and seasonal workers etc. The government believes the bill will also help employers who are trying to do the right thing but are being undercut by competitors who underpay or exploit their workers.


The EMA has expressed concern that the threshold for initiating an FPA is too low. Unions only require support from 10% of the group, or 1000 workers (whichever is the smaller) to request an FPA. An FPA can also be triggered if it passes a public interest test. Even organisations that only have one employee covered by an FPA need to comply. Opposition parties National and Act have vowed to scrap the bill - accusing the government of compulsory unionism by stealth.


The government’s argument is that by lifting wages, improving conditions and offering more training—companies can expect better productivity and a more level playing field. People working as cleaners, supermarket workers, and bus drivers have had a tough few years with the pandemic and the rising cost of living. While the prospect of compulsory bargaining is going to be challenging, the need to improve employee welfare through training and fair pay is undeniable. Whether the bill remains law in the future or not - employers should proactively prepare for the bargaining process and put their best case forward.


The bill is now in the select committee for submissions and is expected to pass into law later in 2022.



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