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Fair Pay Agreements – What could they mean for you?

The Fair Pay Agreements Act has now been passed, and applications to initiate bargaining can be made from 1 December 2022. This raises a raft of questions about how this will work and what the implications will be for employers.

Unfortunately, even though the legislation has been published, many of these questions remain unanswered. We anticipate a lot of change and a number of challenges in the implementation in 2023.

So how will it work practically?

Initiating and bargaining parties

  • The process begins when an eligible Union applies to MBIE for approval to start bargaining as they have either 1000 workers or 10% of the workforce who would be covered supporting the application. It can also be initiated by a public interest test showing that the employees who would be covered receive low wages.
  • Once bargaining has been approved employer associations may apply to be the employer bargaining party. If no one steps forward as an employer bargaining party after 3 months, a default bargaining party will be invited to participate and given one month to respond. If they decline, then the Union can apply to the Authority for the terms to be set without bargaining.
  • Bargaining must be publicly notified by the Union and efforts must be made to notify all employers in writing, who may have employees who will be covered.

While at this stage most employer associations have not agreed to be employer bargaining parties, with the default setting being a determination by the Authority it is in business’s best interests to come to the table on this – or risk having no say in the terms.

The bargaining processes

The bargaining process is very similar to normal collective agreement negotiations. Employers will need to:

  • Act in good faith
  • Provide information to their employees around bargaining
  • Provide employee information to the Union (unless employees opt out of the process)
  • Allow employee bargaining representatives on-site to provide information to employees
  • Allow employees to attend up to two, two hour paid meetings about the Fair Pay Agreements

Mandatory clauses

All Fair Pay Agreements (FPA) must have certain mandatory clauses, like pay rates, overtime provisions, penalty rates (if they apply), training and development arrangements and leave provisions, amongst others. So it will be worth reviewing your agreements now to see what’s likely to change and consider your approach. If you pay a higher base hourly rate and no overtime, you may end up having both once an FPA is in place, so we encourage you to consider your position now.

If my workforce isn’t currently unionised, will this change?

A FPA would cover all employees in an occupation or sector, even those that are not Union members. You will however have to understand how to manage your work force with several agreements in place. Employees can still have an IEA and an FPA can also be in place. However, they are covered by whichever agreement is most favourable, so you could have multiple agreements to balance.

Which Industries are likely to have Fair Pay Agreements first?

Several Industries have been signalled as first cabs off the rank (Security, Bus drivers, Cleaning, Early Childhood Centres, Hospitality, Forestry and Supermarkets). There are reports that at least one Union has already started collecting signatures to start the initiation process. Heavily Unionised industries would be easiest to target first, and with a real chance of a change in Government next year, Unions will want to move as fast as possible to secure an FPA before then. The speed with which this can progress will be hampered by the Unions’ resource constraints and the ability of MBIE to process requests. As this is new territory, we anticipate it will take a while to get set up and will have teething problems, which is likely to mean a slow start to any processes.

However, as employers, being prepared will be key.

What can you do to get ready?

While there isn’t much an employer can do to influence which industries are targeted first, or when bargaining for an FPA is initiated, you can make sure that you are tight with whatever industry or sector bargaining forum you may belong to.

You can also ensure you provide good communication and dialogue with your team if and when you are approached for either Union access or to start the process. Ensuring your team receive accurate and thorough information from you will help to keep your relationship strong and stand you in good stead for the future.

As this new legislation spreads into workplaces, as always, your best strategy within your own business is to have a strong bond with all your employees. This will ensure that any inevitable challenges and hiccups that arise are successfully ridden out in your business.

Positive People have over 25 years’ experience in Industrial Relations and can support and update you through the changes Fair Pay Agreements will bring. Contact us now to discuss any questions you may have.

Call us on 09 445 1077 or email