Fair Pay Agreement System returns Collective Bargaining

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Wellington, May 7, 2021

Image from MBIE Website

Workplace Relations and Safety Minister Michael Wood has announced that the government will introduce a new Fair Pay Agreement System.

He said that it will bring together employers and unions within a sector to bargain for minimum terms and conditions for all employees in that industry or occupation.

“The proposed system will include support for bargaining parties to help them navigate the bargaining process and reach an outcome, as well as processes to ensure compliance. Any union can initiate the Fair Pay Agreement process as long as they can demonstrate support from either 10% or 1,000 employees in the proposed industry or occupation. Bargaining for a Fair Pay Agreement can also be initiated via a public interest test in an industry or occupation where employment issues exist, such as low pay or limited bargaining power,” he said.

Financial Support

The government also announced financial support for the system.

This includes (1) $250,000 each a year for three years for the New Zealand Council of Trade Unions and BusinessNZ to support their role in coordinating Fair Pay Agreements (2) Identifying bargaining parties and helping to raise awareness about Fair Pay Agreements and the bargaining process (3) Giving the opportunity for bargaining sides to receive a contribution of up to $50,000 towards the cost of bargaining.

Workplace Relations and Safety Minister Michael Wood (Photo Supplied)

Mr Wood said that NZCTU and BusinessNZ may be able to seek additional funds where low union or industry body membership makes coordination difficult.

“They can also seek a bargaining support person to assist with the negotiations. Funding support is based on four Fair Pay Agreements each year. If more than four Fair Pay Agreements are initiated per year, support may need to be rationed or prioritised. It will be possible for parties to progress through the process without this support,” he said.

Legislation to Parliament

Mr Wood said that a Bill will be introduced to Parliament later in the year.

People will have the opportunity to comment on the Bill during the Select Committee process.

Contractors are not currently included in the system. Work is beginning shortly to address this and contractors will be included in a future amendment to the Act.

A Ministry of Business, Innovation and Employment (MBIE) notification said that while the economy has grown over the last 30 years, wages have lagged behind increases in labour productivity. It said that the highest earners have seen their wages increase at twice the rate of middle-income earners.

Low Collective Bargaining

“Less than one-in-five New Zealanders are represented in collective bargaining; that is down from around 70% three decades ago. There is increasing evidence of a ‘race to the bottom’ in some sectors, where some businesses compete for contracts by reducing wages or employment conditions,” the notification said.

MBIE said that the government’s Fair Pay Agreement system aims to address these challenges by bringing together employers and unions within a sector to bargain for minimum standards for all employees in that industry or occupation. The proposed system will include support for bargaining parties to help them navigate the negotiation process and reach an outcome, as well as processes to ensure compliance.

Source: Ministry of Business, Innovation and Employment

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