The Fair Pay Agreements (FPA) Act was passed into law on 26 October and the Fair Pay Agreement system came into effect as of 1 December 2022.
From 1 December 2022, representative bodies – eligible Unions – have been able to apply to initiate bargaining for a Fair Pay Agreement. Unite Union applied to MBIE to initiate bargaining for a Fair Pay Agreement for the Hospitality sector on 1 December (this application is being assessed currently). You can view current FPA applications and their stage of progress here.
Reminder: what are FPAs?
FPA’s are legally-binding agreements that set out minimum pay and conditions between employers and employees across an entire sector. Mandatory inclusions in an FPA, include:
- when the FPA comes into force and expires (an FPA must apply for no less than three years, but no more than five years)
- its coverage
- the normal hours of work
- minimum base wage rates
- overtime penalty rates
- any superannuation entitlements
Fair Pay Agreements – Webinar
This webinar was recorded on 2 May 2023
Now the legislation has passed, what are the next steps for FPA’s?
Employers do not need to do anything, or make any changes, at this stage.
If 1,000 workers in an industry or an occupation, or 10% of their workforce (whichever is smaller) demand a Fair Payment Agreement, then an eligible Union can apply to MBIE to initiate bargaining for a proposed Fair Pay Agreement. Hospitality was the first sector for which an application for Fair Pay Agreement bargaining was initiated.
At the stage of an application being made:
- The application is reviewed and assessed against the legal requirements by MBIE. They will also go through a verification process to check that the threshold used to initiate the application (either 1,000 workers, or 10% of the workforce) has been met.
- If approved, MBIE will publicly notify that it has approved the application and will publish details. negotiations begin between employers / employer representatives and unions.
- Once a union has been given approval to start bargaining, within 15 working days of receiving the approval, the initiating union must use its best efforts to identify and notify in writing:
- all unions that have members that it considers are likely to be covered employees and
- all employers that it considers are likely to have covered employees in the occupation or industry that the proposed Fair Pay Agreement relates to (and provide an email address to which they must send their covered employees contact details).
Fair Pay Agreement bargaining is made up of employee and employer representatives.
- The employee bargaining side is made up of one or more eligible unions who are approved to be an employee bargaining party.
- The employer bargaining side is made up of one or more eligible employer associations, like the Restaurant Association, that are approved to be an employer bargaining party.
Please note, both the employer and employee bargaining sides must bargain for both employees and employers that are, and are not, members of their organisations.
Through the bargaining process, unions and employers attempt to reach an agreement on the minimum terms and conditions to be included in an FPA. That will then go to a vote – and needs more than half of workers and more than half of employers’ votes to be in favour. If bargaining reaches an impasse, or a deal is twice rejected by either workers or employers, then the Employment Relations Authority will step in and set the minimum terms and conditions itself.
MBIE will still need to approve each agreement and bring it into force through regulations.
The First Set of Regulations have been passed and a second set of regulations will be passed in 2023. These regulations can be found here: Fair Pay Agreements Regulations, covering:
- Details for the public interest test criteria
- Evidence required by MBIE to satisfy the representation test
- Requirement for how parties need to define coverage
- Who the voluntary default bargaining parties are under the FPA system
When a Fair Pay Agreement is in place
Once a Fair Pay Agreement is passed into law, the employment terms of the Fair Pay Agreement apply to any employee where 25% or more of their work is covered by the agreement. In addition, if an employee is covered by more than one Fair Pay Agreement, the agreement that covers the greater percentage of their work applies. This is so that only one Fair Pay Agreement will apply to a particular employee.
Fair Pay Agreements set minimum employment terms for covered employees. If an employment term in an Individual Employment Agreement or Collective Employment Agreement is better than the term in a Fair Pay Agreement, then that term will apply. If the Fair Pay Agreement term is better, the Fair Pay Agreement term will apply.
Restaurant Association and FPA’s
We did not support the Fair Pay Agreement legislation, however, we want to ensure that it is clear that the Association supports fair working conditions and as the representing body of most of the restaurants and cafes in New Zealand we provide support for our members in achieving this. We have always supported fair pay and appropriate working conditions and long done so without the compulsive force of the law.
We currently operate in an environment with extremely robust minimum standards in place, that provides wide-ranging protection for employees. Low unemployment and minimum wage levels that are already one of the highest in the OECD provide incentive for employers to put their best foot forward with regards to pay and conditions.
Having said that, the Association aims to ensure that we will be at the bargaining table of any negotiations around Fair Pay Agreements for hospitality and will be providing input from consultation with members.
Interested in being involved?
If you would like to put your name forward to be part of our consultation group on Fair Pay Agreements please apply here.
We will keep you up to date now that the implementation of the Fair Pay Agreements legislation is underway. MBIE also has a Fair Pay Agreements Dashboard here – which tracks the progress of proposed FPAs as they progress through the FPA system.