Fair Pay agreements Bill

by | Apr 13, 2022 | News & Events

The new Fair pay agreement Bill has now been opened for submissions and I would strongly recommend that you have your say.  Submissions can be made on the Parliament Website (Link here) and submissions are open until Thursday the 19th May.

The submission process is not lengthy or difficult, but, it is very important that you take this opportunity to have your say.

What is the Proposed Fair Pay Agreement Bill?
In brief summary, the Fair Pay Agreement Bill means that industry-wide or occupation-wide terms of agreement can be negotiated and agreed between Unions and an Employer negotiating body (NB these currently either don’t exist, or are not set up to manage this kind of negotiation, or, as with EMA and NZ Business, are not supportive of this Bill).  This will generate a 3 to 5 year agreement that is legally binding on all employers and employees who are within the defined coverage of the agreement e.g. the coverage may be for “cleaners”.  If you employ a “cleaner” even part-time, you would fall within the coverage of that FPA.  There is no ability to opt-out from any party, and there are fines for businesses that fail to comply.

Some important Stats about NZ

  1. New Zealand has the 3rd Highest Minimum wage in the world, and, with the 1 April 2022 increase we are fast closing the gap to becoming No 1. 
  2. 90% of New Zealand businesses who employ staff have less than 20 staff 
  3. 37% of employees are employed in companies with less than 20 staff 
  4. Unions already have the right to initiate bargaining with any employer
  5. If a collective agreement exists in a workplace where you (as an employee) are employed you have the right to opt into or out of this collective agreement.  Under this legislation employees will lose that right.
  6. The details of this act effectively remove the rights of employers and employees to negotiate their own terms of engagement.  For example, you may currently have a Kiwisaver inclusive pay rate, however, the terms of these FPA’s may dictate that is either no longer allowed, or that all pay rates are inclusive of KiwiSaver contributions.

The following are the submissions that I have made on this Bill.  I would strongly encourage you to make submissions.

Fair Pay submission
Made by Lisa Mackay, Managing Director of HRtoolkit ltd on 13th April 2022

Opening statement
I am totally against this proposed legislation. 

  1. It removes the right of choice of individuals to decide who represents them and what employment terms they wish to negotiate. 
  2. It puts a level of presumption of guilt onto employers which goes against the fundamental duty of good faith
  3. The representation test of 1,000 covered employees OR 10% means that a union could meet the representation test of 1,000 employees (for example) within the Construction sector with only 0.5% of covered employees advising that they wanted bargaining initiated.  This cannot be considered a fair representation

Under existing New Zealand employment legislation employees already enjoy the 3rd highest minimum wage in the world with additional benefits on par or in excess of other countries.  The Employment legislation and grievance framework already provide extensive protection for employees from being exploited by their employers.  And provides sufficient flexibility to allow for the exceedingly diverse nature of businesses and employment relationships in New Zealand.

In New Zealand, according to Stats NZ February 2021 90% of employers employ less than 20 staff, and those employers account for 37% of the employees in NZ.

The New Zealand GSP was only 42.4 in 2020 compared to the OECD total of 54, and Australia at 55.8 (https://stats.oecd.org/Index.aspx?DataSetCode=PDB_LV)

Commentary has been made about this being to protect those employees who are over-represented in jobs with low wages.  As an HR consultant with over 30 years experience working mainly with small businesses I find that the vast majority of small business do not wish to be perceived as minimum wage employers and will therefore seek to pay above minimum wage wherever possible.  And, in the vast majority of cases, those employees who are on minimum wage are those who are not performing or are starting out. 

Sadly, over the last 2 years the government has imposed a 20% rise in minimum wage, increased sick leave to 10 days (a further 2% cost to employers) and the additional Public holiday of Matariki.  This is at a time when many businesses have struggled significantly due to COVID which has meant that higher-paid employees have not experienced a 20% pay increase, and, for many, no pay increase at all.  This has certainly not been through any malice or malintent by employers, simply that they cannot afford it.  And this is not unique to small business owners.  In 2021, the government themselves have imposed a 3 year pay freeze on all public servants earning over $60K.

Why are people in low-income jobs?
In the vast majority of cases people are in low-income jobs because of the following reasons:

  1. They have chosen not to upskill
  2. They are not performing well in their job
  3. They choose to take a low pay job and therefore low stress job
  4. They do not have the capacity to upskill

Why do people work for small businesses?
The unions already have the rights to request a collective agreement in any business.  Due to economies of scale, under the current regime, focusing on the larger organisations would make most sense for the unions.  And, with only 2,580 companies with more than 100 employees, and that accounting for 47% of the workforce, they could readily achieve significant steps without undermining the value that small business can offer.

Many small employers do already offer better pay than their larger counterparts.  However, far more than pay or tangible benefits, many small employers offer very attractive benefits which staff want:

  1. Greater flexibility on a personalised basis
  2. The opportunity to work directly with the subject matter experts
  3. The feeling of being part of the solution, rather than simply a cog-in the wheel as tends to end up happening in large business.
  4. Wider scope of access to the end of end job, even though that may not necessarily be their area of specific expertise.  I.e. they are upskilling through experience

However, by imposing enforced increase pay and benefits for some groups of people, simply because of their industry or job title the ability of small business owners to offer such additional benefits will be hugely eroded.  This will result in closure of many businesses due to them simply being unable to meet the minimum standards or will they have to drive productivity to such a level that the “friendliness” will no longer be there.

Why is this proposal removing individuals’ rights?
Under the proposed Bill there is no ability for a company or individual to opt-out, this removes the right of choice.  Though it purports to say that you can’t force someone to be a union member, Clause 13 allows that payment of an amount up to the value of the union membership fees can be included in the FPA.  Personally, I do not want to be a union member, either by choice, affiliation or implication.   To be forced to do so because of an FPA that I did not vote in favour of is removal of my rights. 

Impact of this Bill on Businesses
Many businesses are already on the brink of closure, both directly from the loss of sales due to COVID, from increased supply chain costs, and from scarcity of supply.  For example, the estimated delivery for GIB board is now December 2022, 8 months away.  These kinds of delays will be catastrophic for businesses in the building sector.

To further add to companies increased cost through:

  1. Paid time off for any staff covered by a proposed FPA
  2. Compliance costs of fulfilling the necessary documentation, communicating with staff about changes and implementing the changes etc
  3. Paying for whatever awards may be dictated

This will result in significant business closures and therefore redundancies.

Response to the contents of the Bill
For the purposes of this submission I have not responded to every clause in the Bill, however, I have responded to those with which I have the greatest grievance.

  1. Clause 8 – No contracting out – this expressly reduced freedom of choice
  2. Clause 11 (2) – representation of employees who are not members – this expressly removes an individuals right to choose who represents them
  3. Clause 12  (2) – representation of employers who are not members – this expressly removes a companies right to choose who represents them
  4.  Clause 13 – inclusion of fee no larger than union membership fee – this expressly removes an individuals right of association with a union
  5. Clause 21(5)  – rebuttal presumption of contractor rather than employee to avoid benefits – under current legislation there are extensive tests to assess the nature of the relationship (i.e. contractor or employee).  This clause entirely overrides those assessments and imposes a presumption of guilt on the employer, however that relationship came to be.  In many industries the engagement of personnel on a contractor basis is widely used, and fully accepted and welcomed by both parties.  In fact, for the Film industry, and the Real estate industry it is expressly legislated that the status is contractor in certain situations.  The current legislation already allows for challenge of any employers who is misusing this status to avoid employment law.  However, to legislated a default position that the employer is guilty without any assessment goes totally against the duty of good faith.
  6. Clause 24 – under the Privacy Act an employee has to give their permission for personal information to be released, even to the Chief Executive.  This clause breaches the right to Privacy
  7. Clause 26 – only allows for the union to initiate bargaining, not for an employer to initiate bargaining
  8. Clause 29 (1) – 1000 employees OR 10% of the covered employees.  For example, in construction there are 191,500 employees.  So, under this clause only 0.5 % of the covered workers would need to be in favour of initiating bargaining.  This is definitely not representative of the desires of those potentially covered.  NB the wording of Clause 100 contradicts this by only referring to “10% of covered employees”
  9. Clause 29 (1) – SUPPORT initiating bargaining – this is exceedingly loose terminology which could readily be achieved without individuals actually knowing or understanding what they were agreeing too.  For example, the union putting out a facebook poll to members saying “do you want an FPA for the industry?  Yes/No” could readily achieve this criteria without it actually being a reflection of what individuals actually wanted.
  10. Clause 29 (4) – Public Interest test – Without any reference to what employees want the union would be able to meet the test of “public interest” simply by saying “it’s a low paid industry”.  For example, Hospitality is a traditionally low paid industry, but to impose a FPA on the hospitality industry (even without the horrendous impact of COVID) would be devastating for that industry.  Yes, you may negotiate for higher pay, however, you would also end up with a lot of companies simply going into liquidation because they couldn’t afford to comply.  Therefore, the potential for massive job losses is catastrophic.
  11.   Clause 31 – Coverage – For employers who employ people across a number of categories of staff the risk of them having multiple FPA’s and therefore creating disparities in treatment is huge.  This creates very high risk of inadvertent discrimination.  For example, I used to work for an industry association in the UK covering one of the trades.  The Joint industry board for the Tradespeople met monthly, and was a very comprehensive and well negotiated agreement, with good benefits for all the trades people.  In recognition of the office workers (who the companies also employed) there was also a national agreement for back office staff.  However, this was a minor side bar agreement, with minimal attention given to it.  The net result was that office-based staff, many of whom were female, did not have such a good pay rate negotiated.  The risk that you end up with inadvertent discrimination based on the skill and focus of the respective negotiating teams is high.  Further, if one group (e.g. electricians) are covered by a FPA, but other staff members, e.g. the office admin, are not covered, the likely outcome is that those covered by the FPA will end up with a disproportionally higher pay rate.  When organisations are negotiating between a Union and a Single Employer, these discrepancies can be addressed and minimised.  With national agreements these cannot be addressed on a case by case basis.
  12. Clause 33 – all decisions rest with the Chief Executive – there appear to be no rules, with the exception of the very broad tests commented on above to control the decisions made by the Chief Executive, or as to how they “invite public submissions”.  To have this level of control vested in one person is not democratic.
  13.  Clause 37 (4) – employer may not amend the wording of union provided statement – for a whole host of reasons the employer may not agree with the tone or wording of the statement provided by the union.  Therefore to prohibit the employer from editing this wording is not acceptable.  Further, for the employer to face penalties if they do change the wording is unacceptable.  This also contradicts the requirements to be inclusive to for Māori.  For many Māori organisations they like to include a Mihi at the start of communications.  This would be expressly prohibited under the clause.
  14. Clause 39 – provision of information – under current Privacy legislation the employee must actively give consent for release of information.  Under this clause the employer must provide very detailed personal information unless the employee has expressly elected NOT to have it provided.  This default opt in position breaches privacy requirements
  15. Clauses 44 to 47 – the wording of these clauses is very strongly towards any employer bargaining party having to prove that they are allowed to be involved in the negotiation, whereas the unions are accepted by default.  This is unfair.  Further, as there are very few bodies who will fulfil the requirements or who are willing to be the employer bargaining party, the requirement to form and incorporated society within such a short timeframe (3 months) means that there will be no employer bargaining parties which comply.
  16. Clause 48 and 54 – The Human Rights Act states to treat everyone the same irrespective of Race.  To specifically include reference to the requirement to represent one group, Māori, is discrimination. 
  17.  Clause 71 – how is the default bargaining party defined and appointed?
  18. Clause 83 – payment for attending FPA meeting at employers expense – even though there may be a limit of 2 hours for 2 meetings, plus 1 variation meeting this is a significant additional expense to an employer.  However, when considering industry wide agreements it is likely that meetings will be held in centralised places to which the employee has to travel.  Though they are not entitled to be paid for the additional time, it is likely that the employees is more remote locations will be unhappy about not being paid for this time.  The net result is a likely lower level of representation of those people outside the main centres.  This, in turn runs the risk of creating exclusion, particularly for areas such as Northland, with high Māori population, spread over a large geographic area.
  19. Clause 86 (7) – payment for time – there is no definition provided as to what is “reasonable” time, nor any limitation on the number of visits that a union may make.  This is open for significant abuse.
  20. Clause 100 (2) (a) contradicts clause 29 (1).  The representation clause is here defined only as 10% of covered employees.  Clause 29 states 1000 OR 10%
  21. Clause 114 (1) (d) – refers to “class of employee”.  The “class of employee” needs to be clearly defined within the FPA.  For example, in trades you may be a first year, 2nd year or 3rd year apprentice etc, and your pay rate is defined accordingly.  However, in New Zealand you may have a “head cleaner” who is in charge of a small motel, being classified in the same category as a “head cleaner” at the Hilton.  The roles are not the same, despite the job title.
  22. Clause 114 (1) (d) (ii) – implies that Kiwisaver can be listed as inclusive within the pay rate which is contradictory to what the kiwisaver legislation states
  23. Clause 115 (1) – given the fact that coverage could be for anyone from a small business employing 2 staff, through to a large company employing 1,000 staff, to include generic rules to cover matters such as H&S, Training and flexible working arrangements further than is already legislated is fraught with difficultly and highly likely to result in contradictory rules.
  24. Clause 133 (2) – no right of appeal – this provides an arbitrarily high level of power with the Chief Executive, who appears to be the sole decision maker in this process.
  25. Clause 144 (3) (a) (i) – Why have a complicated voting system – one person, one vote?
  26. Clause 160 – The removal of freedom of choice for a person in a particular role of industry goes against the Bill or Rights
  27. Clause 162(1) automatic override of terms of employment.  An employee may have very happily agreed to increased annual leave or increased kiwisaver contributions in return for a salary sacrifice.  However, that agreement could be voided by a FPA.  This is a restriction on an individual’s right of choice.
  28.  Clause 197 (2) (b) – penalty not exceeding $20,000.  For a small employer a $20,000 will be sufficient deterrent to them not adhering to the terms of a fair pay agreement.  However, for a large organisation who employs a 1,000 covered staff, but refuses to apply (for example) a $1 per hour pay increase conferred by the FPA, they will recoup the value of that fine within 2.5 days, so there is no incentive for them to abide by the terms.  This will create a significantly uneven playing field between small and large organisations.
  29. Clause 204 (2) (b) (iii), (iv) – Coverage for Maori employees and employers – the Human rights act states that everyone should be treated equally, irrespective of race

In summary
This Bill will significantly remove individuals’ rights, and goes against the duty of good faith fundamental to the employment relationship.  I am therefore strongly opposed to this Bill.


Lisa Mackay

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