Commercial & Business, Employment & Health and Safety, Insights, Law Changes

Fair Pay Agreements Bill Introduced

The Fair Pay Agreements Bill (the Bill) has just been introduced to Parliament after several years of discussion and public consultation. Employers and employees will have the opportunity to make submissions on the Bill as part of the Select Committee process. If passed, the Bill will have a transformative impact on employment relations for many sectors and occupations within New Zealand, so it is highly advisable to provide feedback while you can. We outline the main components of the Bill to help prepare you to have your say.

The purpose of a Fair Pay Agreement (FPA) is to provide for binding minimum standards for both employers and employees in a particular sector or occupation through collective bargaining.

Unions can apply to the Chief Executive of MBIE to initiate bargaining, which will occur if the Chief Executive is satisfied that the application meets the following tests:

  • A representation test, requiring that either 1,000 employees or 10% of the employees in proposed coverage support the initiation of bargaining for the proposed FPA; or
  • A public interest test, based on certain criteria that are applied to the employees who would be covered by the FPA, such as low pay, little bargaining power or lack of pay progression.

The coverage of a proposed FPA must be described as either industry based or occupation based. All employers and employees within the proposed coverage will be covered by the FPA. However, an FPA can differentiate between employees in different regions.

The Bill currently does not cover contractors, but the Government has stated that they will work to incorporate contractors into FPAs in the future. There will be penalties for employers who seek to circumvent FPAs by engaging workers as contractors when they are really employees.

There are certain terms (‘mandatory content’) which must be written into an FPA, such as normal hours of work, minimum base wages rates, overtime and any superannuation requirements.

Bargaining parties are required to discuss certain terms, such as leave entitlements, but these are not mandatorily required to be included in an FPA.

An FPA must apply for no less than three and no more than five years.

Where disputes arise over coverage, parties can access mediation or seek a determination by the Employment Relations Authority. If there is a stalemate, the ERA can set an FPA’s final terms.

The Government will provide financial support for FPA bargaining of up to $50,000 per side, with additional funds to be provided in some cases.

The Government aims to have the Bill passed into law by the end of 2022. If you would like our help in preparing your submission to Select Committee, please get in touch.