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Industry Update: Fair Pay Agreements

So, I really shouldn’t be saying this, but every time I hear or see the words ‘Fair Pay Agreements’ I groan and cringe.

This is mainly because I worked in Australia when Julia Gillard introduced the Modern Awards. It was a long-drawn-out process that created more complexity for employers to navigate.

Now in 2021, NZ are embarking on a similar journey by introducing Fair Pay Agreements.

You may have heard in the media the phrase “its back to the future for minimum employment entitlements” whenever the subject fair pay agreements comes up. That’s because these changes bring the 1980s out of the filing cabinet and into the digital 2020s.

Here is the 101 on Fair Pay Agreements

Fair pay agreements (FPA) will create minimum entitlements based on industry and job type. In essence it is like a collective agreement for an industry group or sector.

Here is the kicker, as an employer, you could have 3 or more fair pay agreements that apply to different parts of your business. For example:

a manufacturing business could have separate FPAs for the manufacturing people on the floor, then another for engineers who fix and maintain the equipment and another one for those in administration roles. If there are also logistics and supply chain specialists these people may also have a separate FPA.

Please note that this will not be a quick change so do not start rocking in the corner yet. In Australia it took 5 years for the modern awards to be completed. The FPA process will require Unions and Businesses, with involvement from New Zealand Council of Trade Unions and BusinessNZ, to work together.

If you do not have a Union in your business, I do wonder how you and your employee’s are going to be represented at the negotiation table. The voice of the SMB (small-medium business) workforce could be lost in this process. I am particularly nervous about this looking back on the Australian model. Some modern awards in Australia have allowances many SMBs would not have considered paying before now. For example – first aid responder allowance or a H&S Rep allowance or a prescribed higher duties allowance.

The scope of the FPAs will have to cover topics like base wage rates, ordinary hours, overtime, and penal rates. Some other topics must be discussed but don’t have to be agreed, like redundancy, leave, and health and safety. Other employment terms can be included if the bargaining sides agree.

If you are a SMB employer who works with or is in the same industry as big employers that have union presence, then I recommend you start digging for information on their employment terms and collective agreements. This is likely to be where FPA negotiations start from.

Take a look at the Fair Pay Agreement process so you know what to expect and also have a read of a recent Stuff article that highlights the arguments from both sides.

The take away for you after reading all of this is that now more than ever it is important to have your employment 101 basics sorted.

  • When was the last time you read the employment agreements you are using from start to finish?
  • What about your job descriptions, do they actually reflect the work your people do?
  • Do either of these reflect the language your business uses day to day? or do you need a legal translator?
Watch out for Part 3 ‘increased sick leave entitlements’ coming to an inbox near you.