Businesses oppose as Fair Pay Agreement Bill enters Parliament

Minister Michael Wood says Bill fulfils its election commitment

Venkat Raman
Auckland, March 29, 2022

The Labour government has just introduced its long-promised ‘Fair Pay Agreement’ to be negotiated between employers and employees but the two opposition parties and BusinessNZ were quick to denounce it as ‘harmful’ and a ‘major step backwards.’

Workplace Relations and Safety Minister Michael Wood, who tabled the Bill in the Debating Chamber this afternoon, described his proposed Bill as ‘an investment in people.’

“Fair Pay Agreements (FPAs) have long been a part of our wider work programme focused on lifting the wages of those on low to medium incomes and ensuring better wages for employees is even more essential now as we begin to feel the global economic pressures caused by the war in Ukraine,” he said.

Opportunity for Unions

New Zealand already enforces the minimum wage for all workers of all classes, which is currently set at $21.20 per hour.  In addition, employment of migrant labour in many sectors is at a higher threshold. The proposed Fair Pay Agreement will provide another opportunity for unions to negotiate wages with their respective employers.

But achieving a Fair Pay Agreement is not as easy as it sounds. It can be initiated only by a union that is eligible and prove that it has at least 10% of the employees or 1000 employees in the industry or occupation. It can progress only if there is a public interest, where employment issues such as low pay and limited bargaining power exist.

“Parties can agree to have regional differences in terms in a Fair Pay Agreement. In some instances of financial hardship, bargaining parties can agree to give businesses limited, time-bound exemptions to such Agreements,” Mr Wood said.

The proposed legislation excludes contractors, but Mr Wood said the government will introduce a new proposal to protect this sector. However, employers who deliberately otherwise eligible employees as contractors to circumvent the law will face penalties.

Grants for coordinators

Mr Wood said that government will offer an annual payment of $250,000 for three years each to the New Zealand Central Trade Union and BusinessNZ to support their role in coordinating Fair Pay Agreements, identifying and supporting bargaining parties and helping to raise awareness about Fair Pay Agreements and the bargaining process.

In addition, the bargaining parties will receive up to $50,000 per year towards the cost of bargaining based on the Agreements.

“They may be able to seek additional funds where low union or industry body membership makes coordination difficult. They can also seek practical bargaining support to assist with the negotiations,” Mr Wood said.

BusinessNZ rejects Bill

But BusinessNZ Chief Executive Kirk Hope said that his organisation will neither participate in the discussion nor accept any payment.

“The Fair Pay Agreements Scheme is unacceptable, and it shows that the government is not listening. The scheme would make it compulsory for businesses to take part in collective bargaining and make them accept union demands or imposed arbitration,” he said.

Calling on the government to discard the Scheme, he said, “Fair Pay Agreements would be deleterious to the economy, to people’s prosperity, and the human rights of those involved.”

Ideological outreach

National Party Workplace Relations Spokesperson Paul Goldsmith described the Bill as an ‘ideological outreach,’ saying that it will reduce flexibility and harm New Zealand’s economy.

“This Bill is deliberately going to war with employers at a time when we are facing huge economic challenges. The modern workplace is changing rapidly and people value flexibility. Labour’s Bill would take us in the opposite direction, towards rigid national awards,” he said.

ACT Party Small Business Spokesperson Chris Baillie said that the Bill is ‘1890s style compulsory unionism’ and ‘a major step backwards.’

“The government’s so-called ‘Fair Pay Agreements’ Bill amounts to unionism by stealth and will simply make it tougher for businesses who are already doing it tough. Labour has dusted off this Bill to appease their union mates. But while union organisers make up 30% of Labour’s caucus, they represent just 0.026% of the general population. New Zealanders are free to join a union, it should not be forced upon them because of Labour’s blind ideology,” he said.

The Fair Pay Agreement Bill will through Parliament Reading and Select Committee hearings in the coming months.