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Employment Law: What to look out for in 2023 (Episode 2: Fair Pay Agreements)

Home Insights Employment Law: What to look out for in 2023 (Episode 2: Fair Pay Agreements)

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Published on: March 07, 2023


Please note, this is a script from Episode Two of our video series, Employment Law: What to look out for in 2023, which you can access here.

Welcome to the second instalment in our series of What to look out for in Employment Law in 2023. Today, we're going to be talking about Fair Pay Agreements.

As you'll recall, the Fair Pay Agreements Act came into force on the 1st of December 2022. The idea of this is to provide a framework whereby employers and employees can bargain collectively for terms and conditions across a whole industry or occupation nationwide. Those agreed terms would apply to everyone regardless of whether they were involved in the bargaining or not. The process is likely to be pretty drawn out - issues around bargaining side representation and ratification is likely to be a minefield.

The Fair Pay Agreement process is pretty complex and there's a lot of technical detail involved. We're not proposing to go into all of that detail today, but what we would say is it is important to know enough about the Fair Pay Agreements and the process involved so that you know whether it's relevant for you.

There are a number of things that must be included in any Fair Pay Agreement:

  • Wages - penalty rate; overtime rate

  • Leave entitlements

  • Training and development arrangements

  • Date of expiry - between three and five years

There are also a number of topics that must be discussed between the parties but don't have to be included in Fair Pay Agreements. Those are: health and safety matters, flexible working, and redundancy arrangements.

So far, four Fair Pay Agreements have been initiated by relevant unions. They cover hospitality, bus and coach drivers (and associated work, including bus cleaning), and supermarkets. The hospitality Fair Pay Agreement, in particular, is worth watching. It has an incredibly broad coverage clause that will include work such as receptionists. That certainly means that with that Fair Pay Agreement a large proportion of New Zealand's employers will be caught, including employers who wouldn't traditionally think of themselves as providing hospitality services.

Key things for employers to note

1. Check if you're covered by one of the Fair Pay Agreements that have been initiated.

The initiation notices, including the coverage clauses, are on MBIE's Fair Pay Agreements dashboard.

2. If you are, or could be, covered by an initiation notice, you can expect to receive notification of that from the relevant union.

At that point, it's up to you as an employer to decide what level of involvement you'd like in the bargaining, and that's a strategic call for you to make.

3. If you may be significantly impacted consider if there is an Employer Bargaining party that represents your interests.

If the Fair Pay Agreement you're interested in could cover a large proportion of your workforce, or the terms and conditions of your employees are particularly relevant to you commercially, it will be worth understanding what employer bargaining parties are participating in the bargaining and whether any of those could serve your interests or represent you in that bargaining. 

4. You could consider setting up your own Employer Bargaining party.

If the Fair Pay Agreement really is mission critical for you, you may, as an employer, like to consider whether you set up your own incorporated society to become a bargaining party. There will certainly be a lot of work involved in that, and I'd get on to it if you're involved in any of the four Fair Pay Agreements that have been initiated, but it may be the right decision for some employers in various industries.

Finally, if you do have roles covered but it's only a small section of your workforce, or you already pay well above market rates, it may be that there's not much point putting too much time and attention into this process at this point. The National Party has indicated that it would repeal the legislation, should it win the election in October, so we may well find no Fair Pay Agreements actually come into force.

Thanks for watching. We'll see you next week, when we are going to talk about employees and independent contractors.

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