Money 700 x 333

11 May 2021

New Fair Pay Agreement System

On 7 May 2021 the Government announced a new policy on Fair Pay Agreements (FPAs). The Fair Pay Agreement System sets out the union/employer bargaining process and will set minimum standards for all employees and employers in an industry/occupation.


Unions must have at least 10% of a workforce or 1000 workers in coverage before they can initiate bargaining with an employer or group of employers. The Government also plans to incorporate contractors into the Fair Pay Agreements Act in future.


All FPAs must cover:


  • Base wage rates;
  • Ordinary hours
  • Overtime; and
  • Penalty rates.


Health and safety, leave entitlements and redundancy entitlements must at least be discussed but the parties do not have to agree on these points. The FPA may also be flexible about regional differences and other differential terms (provided these comply with minimum employment entitlements and the Human Rights Act 1993). If businesses can demonstrate significant financial hardship then the FPA may allow for an exemption.


The Government will also provide funding for Fair Pay bargaining – up to $50,000 per bargaining side, as well as $250,000 for both BusinessNZ and the Council of Trade Unions over the next three years.


If the parties have any issues during bargaining, the matter can go to mediation for resolution. If the matters remain unresolved then the Employment Relations Authority (Authority) may step in to assist.


Once terms are agreed, the Authority will vet the FPA to ensure the terms it contains comply with New Zealand employment laws. The FPA will then go to a vote before it is ratified. If the FPA is not ratified, then the parties must continue bargaining. If the FPA is not ratified for a second time, the Authority will make a determination on the terms.


A Bill for the Fair Pay System will be drafted in the coming months. We will keep you informed of any updates. For more information on the Fair Pay Agreement System see here.


If you have any questions about the Fair Pay Agreement System or any other employment relationship queries please contact Claire McCool and Deborah Hendry from our Employment Team.