Fair Pay Agreements - what you need to know

Fair Pay Agreements - what you need to know

New fair pay agreements (FPA) law came into effect on December 1 last year, marking the biggest shakeup in New Zealand employment in decades. Six months on, how could your business be affected?

What’s an FPA?

The new fair pay agreements law allows employees to bargain collectively for industry- or occupation-wide minimum employment terms, such as pay, leave, and training standards. It’s designed to give workers more power to negotiate terms within an industry.

To initiate bargaining for a fair pay agreement, a union needs to represent either 10% of the employees who would be covered by it or 1,000 employees, or show there’s a public interest case. Importantly, an employee does not need to be a member of the initiating union, or indeed any union, to be covered by a fair pay agreement.

What does it mean for you?

The FPA system will bring more small businesses into the industrial relations process, though the bargaining party/ies for employers are employer associations, of which they may or may not be members.

Unions are now more likely to seek access to businesses to obtain information about pay and working conditions from employees.

Recent FPA approvals

In May, MBIE approved the initiation of bargaining for a fair pay agreement for the hospitality industry, covering more than 150,000 workers and 24,000 employers. The application was made by the Unite Union, which will now start negotiations with bargaining parties on the employer bargaining side to work out the terms of an FPA.

Approval to initiate bargaining has also been given to unions representing the bus transport, security, commercial cleaning, and early childhood education sectors. Two applications to initiate bargaining (in the supermarket and grocery industry and the waterside industry) are still being assessed by the Ministry of Business, Innovation and Employment.

What happens next? And what should I do?

It would be best to seek business advice ahead of an FPA affecting your business coming into effect. By law, compliance is expected of all within coverage, regardless of whether they have been involved in the bargaining.

The compliance burden will likely grow for SMEs in the years to come. The changes could eventually lead to rising costs for small businesses as industry-wide and occupation-wide pay agreements are agreed.

Consult with your business advisers to discuss how you might be affected.