What is a Fair Pay Agreement?

Fair Pay Agreements are a new part of New Zealand’s employment law that are being proposed by the current Labour Government.

Fair Pay Agreements are a way of deciding what’s a fair way to treat working people in a particular industry. They cover things like pay, hours, leave and health and safety.

FPAs are a new part of New Zealand’s employment law that are being proposed by the current Government. They will set minimum standards of employment for everyone in a particular industry.

That means, for example, that nobody in that industry can be paid less than the rate agreed. It’s like the minimum wage, but for a specific industry. This will be negotiated by unions and employers in that industry. Fair Pay Agreements are also about lifting pay and conditions in industries that are often low-paying.

They will set some minimum standards of employment for everyone working in a whole sector or occupation. They will be negotiated between working people (in union) and employers in a sector. Employees and employers will get to vote on them, but if the sides can’t agree, a third party will step in and set the new rules. Click here to see the roadmap for getting FPAs.

What is the Process to Get a Fair Pay Agreement?

So how will Fair Pay Agreements happen? Minister of Workplace Relations Michael Wood released the draft law earlier this year. The legislation passed its first reading, and the second reading is due soon. The process contains five key steps:

Initiation

To start the process for an FPA, a union needs the agreement of 1000 employees in a sector (or 10% of all the employees in a sector – whichever is lower). Alternatively, the union must demonstrate there is significant public interest in the initiation of the FPA. This marks the start of the Fair Pay Agreement process. It is worth noting that once an FPA initiation is approved, the process must result in an FPA.

Representation

Next, all the employers in the sector are informed the process for an FPA has started. Those employers will ask all their employees to agree to share contact information with the union(s) who started the FPA process. For those that agree, unions will contact them and seek their view on what they want to see in an FPA. Unions will also invite employees to meetings to discuss the FPA.

Bargaining

All employers will come together to form a bargaining side. All employees, through their unions, will come together to form the other. The law requires both sides to show how they are considering the interests of Māori. The two sides will negotiate what should be in the FPA. Some topics will be mandatory to agree and some that are only mandatory to discuss. The topics in each category are still being discussed.

Ratification

Once the bargaining sides (employees and employers) have reached an agreement, everyone in the sector will vote on it. To pass, the FPA must get more than 50% support from both employers and employees. For employees it is one person one vote. For employers, their votes are determined by the number of people they employ in the sector. If the FPA is passed by both sides – employers and employees – then it is a done deal. If it is not passed by either side, they go back to renegotiate. Then the FPA is voted on again.

Determination

If a Fair Pay Agreement doesn’t pass a second time, then it goes to determination. In determination, it is the responsibility the Employment Relations Authority to decide what should be in the FPA.

How will a Fair Pay Agreement work?

Fair Pay Agreements are part of a new system designed to better protect working people. The new system will legally require all employers in a particular industry to meet new standards for their employees.
 
This is different from an employment agreement. FPAs simply provide a minimum floor, through which no employees can fall through. An employment agreement is negotiated separately. It must be as good as, or better than what is agreed upon in your industry's FPA.
 
If you find you aren’t getting what is in the Fair Pay Agreement you will be able to raise it with a Labour Inspector. It is also something you will be able to raise through mediation, the Employment Relations Authority or the Employment Court.
 
Fair Pay Agreements will apply to all employees – casual, fixed-term or permanent. We want to see them extended to contractors as well, and look forward to working with the Government on this.