Everything Employers Need to Know About New Zealand’s Fair Pay Agreements

working in a factory

Since the New Zealand Government announced the upcoming introduction of Fair Pay Agreements (FPAs) back in May this year, employers and HR departments have started preparing for the implications of this fundamental change to the nation’s labour legislation. 

The Ministry of Business, Innovation and Employment (MBIE) explains that this massive policy shift is essential to standardising minimum wages and working conditions. The FPA system aims to regulate and expand the national job market and increase the uptake of Kiwi workers in collective bargaining across the sector. The goal? Ensuring fair treatment and decent working conditions of employees across the country.

Parliament is expected to introduce legislation on the FPA system at the end of 2021. Until then, policy advisory materials are being prepared, while the governmental working group continues to collect data and develop recommendations for the Parliamentary decision.


New Zealand’s Fair Pay Agreements: What Do They Mean?

New Zealand’s FPAs are the product of the Labour Government’s efforts to both modernise and solidify support structures in the national labour market.

Put simply, FPAs will work to combine employers, employees and union forces to standardise base wages and working conditions across certain industries. 

The focal aim of this initiative was identified by the relevant Government focus group as a policy to “create a level playing field’ that benefits employers and employees alike. This initiative is particularly advantageous in sectors severely impacted by an increasingly competitive market and the consequent employment shifts towards low-wage or outsourced workers.


Understanding Fair Pay Agreements

The short term impacts of this coordinated negotiation process are geared towards engagement amongst workers while ensuring compliance on behalf of their employers to determine baseline standards. But on a longer-term basis, FPAs are intended to drive businesses towards investment in training and development of their employees and minimisation of staff turnover. Additionally, the Government has positioned this legislation to have broader societal impacts — like improving living standards of low and middle income earners, boosting economic output and fostering cross-sector communications.


How FPAs Will Change Your Business Landscape 

The roll-out of New Zealand FPAs is predicated on the preexisting modes of employer-employee dialogue. According to the NZNO, collective agreements, statutory minimums, and unionised/worker-initiated negotiations are all strong foundations for income equity and fairness.

But for employers across the nation, questions about the role FPAs will play out amongst pre-existing contracts and agreements remain.


Everything You Need to Know About the FPA Negotiation Process

While the outlined purpose of FPAs is stated as the determination of minimum wages and conditions for your employees, further changes to the enactment of this process may occur during the rollout, under recommendations from the Fair Pay Working Group.

In short, the FPA process looks as follows:

  • A negotiation is triggered. Under the drafted model, application by 10% of a union-registered workforce or 1000 workers sector-wide will necessitate movement towards the institution of FPAs. The possibility of a public interest trigger is still up in the air.
  • Engagement with the governmentally moderated negotiation process begins. During this period, both parties get $50,000 in government funding to facilitate the process. It’s expected that business interests will be pursued by BusinessNZ and other national bodies.
  • A voting process starts. This step aims to reach a consensus between individuals and businesses, with employers awarded votes based on the size of their workforce.  
  • If parties can’t agree following two unsuccessful votes, enforcement will fall to the Employment Relations Authority, as per the Employment Relations Act 2000.

Image source: mbie.govt.nz

Employer Responsibilities and Fair Pay Agreements – Where Do You Stand?

While many focused on the long-term economic boost intended by the policy decision, this policy decision was not received without its fair share of critique. 

There is industry-wide concern about the similarity between FPA administration and the pre-1991 labour negotiation system, despite government efforts to differentiate between the two schemes.  Scepticism about the effectiveness and fairness of the system has also persisted.


Where to From Here?

As always, Employment New Zealand is your first port of call for advice and to ensure your business is currently meeting its industry minimums and standards.

Here at Ento, we understand that the changes accelerated by FPAs are significant for companies throughout New Zealand. We’ll continue to monitor these new labour laws and employer requirements to best accommodate your business in our rapidly changing and increasingly globalised environment. 

For businesses looking to handle pay rules at scale, Ento helps businesses manage complex pay rules easily. Our workforce management software simplifies the application of pay rules across your business, feeding these rules into your rosters to give you cost and compliance oversight at a glance. 


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