The proposal to implement Fair Pay Agreements is one of the most controversial changes in the employment space proposed by the Government
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The proposal to implement Fair Pay Agreements (‘FPAs’) is one of the most significant, and controversial, changes in the employment space proposed by the current Government. Once implemented, FPAs will set minimum standards which bind any employer within certain industries or occupations.
This would be a significant change from New Zealand’s current system, which allows parties to employment relationships to set any terms they like, subject to national minimum standards and (of course) agreement.
Minister for Workplace Relations, Iain Lees-Galloway has just announced a working group to set guidelines for FPAs. In terms of a rough framework, it seems that the plan is for union and employer representatives in particular industries or occupations to negotiate and agree minimum standards, including pay.
Accordingly, it seems that FPAs will only be negotiated in sectors with heavy union participation. Once agreed, they will apply to all employers in that industry, irrespective of whether they participated in the negotiations, and to all employees, irrespective of whether they are union members. Fortunately, the Government has already signaled that industrial action will not be permitted during negotiations for FPAs.
The ideology behind the FPAs is appealing from an employee perspective – they will promote fairer pay and better working conditions. The Government also reports that some employers have supported the initiative on the basis that they want to do right by their workers, put in place safe processes and pay them what they believe is fair for the skills they use and the effort they put in.
Currently, they have to juggle being out-competed by other businesses in their industry that do not have the same moral considerations.
However, critics point out that there is also the risk that bargaining for FPAs could well become protracted (just like collective bargaining). Once FPAs are in, they will increase costs for many businesses. If minimum standards are set too high, there could be a risk that some industries cannot compete at the same level, particularly in the export space.
The cost of the FPAs could also raise the price of goods for the local consumer, and result in some smaller companies within certain industries not being able to provide the conditions and pay set by the FPAs. This could lead to potential job losses.
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Some say the FPAs will be a step back to a pre-Employment Contracts Act 1991 era where New Zealand’s industrial relations law was dominated by union-negotiated awards. National Workplace Relations Spokesman, Scott Simpson has already stated that it is a policy that National would look to repeal (despite Jim Bolger’s appointment as Chair of the working group).
Even if that does occur, new employment agreements may already be in place for affected sectors which reflect the minimum entitlements. As such, the introduction of FPAs will likely have a long-term impact on some industries and occupations.