As we reported previously, in May 2021 the NZ Government announced the design of the so-called Fair Pay Agreement system, with implementation in 2022, aiming to bring together employers and unions within a sector to bargain for minimum terms and conditions for all employees in that industry or occupation.

In an August 2021report entitled Fair Pay Agreements. What will they mean for New Zealand businesses?, PricewaterhouseCoopers New Zealand examines the details of the Government’s proposed system and the possible challenges, especially for small to medium-sized businesses (SMEs) which account for the vast majority of all organisations in New Zealand. It confirms that it will force SMEs to be involved in the industrial relations process and for many employers, the new system could have considerable impact in terms of both increased compliance and direct employee costs. On the other hand, the report finds nonetheless some possible opportunity for businesses. For instance, it could provide a platform to debate future workforce and skills development, helping to stimulate a high-skill and high-wage economy.  On that point, BusinessNZ notes that there was no guarantee that such opportunities would translate into value for workers and businesses as existing platforms for such debates have not delivered concrete outcomes to date. Indeed, seeking strategic agreement on future direction in the same forum as negotiating terms and conditions of employment for workers risks diluting the benefits of both debates.

One of the main points of disagreement raised from the outset is that in the framework of the new system, the outcome of collective negotiations is translated into minimum legal employment standards. Indeed, Fair Pay Agreements apply to an entire industry setting minimum employment terms and, as a result, employees who are not members of a union will be bound by FPAs as to their minimum terms. This would be a clear move back with regards to traditional industrial relations in New Zealand and would lead to an erosion of the voluntary nature of collective bargaining.

BusinessNZ, confirmed it refuses to be the Government’s nominated partner in implementing FPAs. BusinessNZ CEO, Kirk Hope, said that, after thoroughly reviewing the latest proposal, they have formally refused the Government’s offer. “It’s wrong for us to be part of a scheme that will do more harm than good to businesses and employees”.

New Zealand’s main business organisation considers that the FPAs are not needed, as they remove the flexibility and autonomy of modern workplaces and do not improve employee’s pay and conditions.  They are also not in compliance with international labour standards ratified by New Zealand.

Despite opposition to these agreements, the legislation is currently being drafted and the Fair Pay Agreements Bill is expected to be introduced in the next months.  BusinessNZ will continue to oppose their introduction during the legislative process and through complaints laid with the ILO via the ILC Committee on Application of Standards.