The New Zealand government last week passed its Fair Pay Agreements  (FPA) policy into law. The bill will provide a framework for collective bargaining for fair pay agreements across entire industries or occupations, rather than just between unions and particular employers.

The new bargaining system is set to take effect on 1 December 2022.

There are several key steps to establishing a Fair Pay Agreement. A union initiates the process by applying to the Chief Executive of the Ministry of Business, Innovation and Employment for approval to negotiate a Fair Pay Agreement for a specific occupation or industry. Applications can be received from 1 December 2022, when the new system comes into effect.

If the application is approved, employee and employer bargaining sides may form, and the bargaining process begins. Once the bargaining sides agree, covered employees and employers can vote on whether they support the employment terms proposed and, if there is a majority (from both bargaining sides), the Fair Pay Agreement will be finalised and set as law.

Certain employment terms are required to be included in a Fair Pay Agreement, this includes defining the work covered by the Fair Pay Agreement, the standard hours, minimum pay rates (including overtime rates and penalty rates), training and development, how much leave an employee can have and how long the Fair Pay Agreement applies for.

Eligible unions that are approved to do so can bargain on behalf of employees covered by a proposed Fair Pay Agreement. These unions must also represent employees that are not members of a union. Eligible employer associations, including industry associations, can bargain on behalf of employers covered by a proposed Fair Pay Agreement. These organisations must also represent employers that are not members.

The Recruitment, Consulting & Staffing Association is the peak body for the recruitment, staffing & workforce solutions industry across Australia and New Zealand and responded to this law, via submission, when it was referred to the Education and Workforce Committee for inquiry and report.

In its submission, the RCSA detailed its concerns with the FPA system. Specifically, it made clear how the framework would reduce the ability of individual employers and their employees to negotiate and determine their own working arrangements; how the legislation is inconsistent with the state of the current employment market.

“We argued that individualised working arrangements, terms and conditions are increasingly becoming standard practice and that the labour and skills crisis has given workers increased bargaining power,” the RCSA stated. “We also expressed concern that low thresholds for initiating bargaining, the lack of employer organisations with experience in bargaining and an inability to access information that identifies all employers across an industry or occupation, would combine to create a process, and subsequent agreement, that is ineffective in representing all of those to whom it may apply.”

The RCSA also highlighted that the legislation carries with it increased costs and considerable administration burden for employers and added that maintains these concerns.

The passing of the bill saw opposition from the National and Act parties, who have vowed to repeal it should they win government next year, as well as Business NZ who ran a campaign against it.