So what is the Fair Pay Agreements Act 2022 all about?

fair pay


Some of us who are old enough will remember the days of compulsory unionism and national awards. We don’t have compulsory unionism [yet], but Fair Pay Agreements are just national awards under another name.

Simply put, Fair Pay Agreements means that employees who perform a certain type of work will receive the same pay regardless of where they are in the country, or who they work for.
So a knitting machine operator in Invercargill will receive the same pay as a knitting machine operator in Auckland. A small employer will be faced with paying the same wages as a large employer in the same industry.

So what happened to the national awards (and the compulsory unionism) of the 1960s and 1970s? During the 1980s there was a high degree of turmoil and militant industrial action, which ended up with some major employers choosing to move offshore where they felt that they had some control over labour costs and could actually run a business and make a profit.

In response, the National Government’s Employment Contracts Act of 1991, along with the deregistering of unions and a new concept of freedom of association, meant the end of compulsory unionism and allowed market forces to determine wages.

Many smaller unions, with no guaranteed membership, withered on the vine and either disappeared completely or were vacuumed up by larger unions, who were also struggling to survive. Since membership was no longer compulsory, they had to learn to ‘market’ their services. People wanted to know what they were paying their fees for.

And that, more or less, is where we have been, roughly since the mid 1990s.
The labour government has finally decided that the time has come to give some strength back to unions. It has done that in this new Act, by making a union the only bargaining agent for employees, (whether those employees are union members or not), and forcing employers to negotiate with those Unions.

Australia has had Fair Pay Awards for years now, and it is no surprise that New Zealand’s Labour government has decided to implement a similar system here in New Zealand.

Part of the purpose of the new Act is to guarantee minimum pay and conditions in certain industries, even though we already have a Minimum Wage set by law, and many employers pay that minimum wage, especially for new employees starting out.
We also have the Living Wage which many employers, and local and national government bodies, have chosen to use.

However, for some employees the new Act may lead to improved pay and conditions, particularly those in low-paid occupations. In order to motivate employers who might perhaps want to remain outside of this new system, Labour have included in the Act the power for the Employment Relations Authority to negotiate and set pay and conditions for an employer or range of employers in the event that those employers choose not to engage. So you can either be involved and hope to have some influence over the outcome, or you can choose not to be involved and find your pay rates being set for you whether you like it or not.

Employer representatives such as the Employers and Manufacturers Association strongly resisted this legislation at the Bill stage (Select Committee hearings) as did National and Act, but Labour has the numbers and, as we have seen with 3 Waters, can muscle legislation through regardless of opposition.

Labour and the Combined Trade Unions (CTU) have together produced a piece of legislation which will change the face of employment relations in New Zealand.
This new Act comes into force on 1st December this year (with the exception of certain specific sections), so Unions and Employer groups will be preparing themselves and making applications to the Employment Relations Authority to be named as the bargaining agents for specific occupations. Then the fun will start.

We are coming into an election year, and you don’t have to be an expert to know that Labour is not doing well in the polls, and, based on current polling, might find itself in Opposition by the end of next year. No doubt a National/Act coalition would repeal this Act.

Bearing in mind that the number of voters who are employees vastly outnumbers the number of voters who are employers, and you can see how this legislation might be enough to recover Labour’s chances at the next election.

The downsides of National Awards – sorry, Fair Pay Agreements – is that the cost of living in a city like Auckland or Wellington is far higher than it is in, say, Taupo. An SME employer with 20 staff in a joinery shop or a retailer with 5 employees or a café with 2 staff – all may end up having to pay a wage rate higher than they can afford, since it has been set at negotiations they were not a party to. SME employers do not have the same resources or ability to absorb costs as larger employers.

For some observers, myself included, this is ‘Back to the Future’ and I am concerned at the effect it will have on SMEs, who make up the majority of businesses in NZ but who will likely not have much power to control their labour costs.

The devil will be in the detail of course. It may not play out the way it did in the 70’s, because the situation is different. We will see.

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