Please note that this information is for general information purposes and doesn’t cover every aspect of the Fair Pay Agreements Act. For more detailed information on working through the Fair Pay Agreement system, refer to:
The Fair Pay Agreements system – an overview
The Fair Pay Agreements system brings together unions and employer associations to bargain for employment terms for all covered employees in an industry or occupation. This means that these organisations will meet to discuss and agree on a set of employment terms for the work being done within an industry or occupation.
Bargaining is between an employee side and an employer side
Fair Pay Agreement bargaining is between an employee bargaining side and an employer bargaining side. Eligible unions that are approved to be an employee bargaining party bargain on the employee bargaining side. This includes employees that are not members of the union. If an employee is covered by the proposed Fair Pay Agreement, the employee bargaining side must bargain on their behalf.
Eligible employer associations that are approved to be an employer bargaining party may bargain on the employer bargaining side. These organisations must also bargain on behalf of employers that are not their members. In some situations, the employer bargaining side may also include specified employer bargaining parties representing state sector agencies.
The employer bargaining side must represent covered employers
The employer bargaining side must represent the collective interests of all covered employers. At a minimum they must:
- provide regular updates about the bargaining to all covered employers
- give all covered employers the opportunity to provide feedback on the bargaining
- consider all feedback received from covered employers during bargaining
- advise all covered employers of any ratification vote and
- consider whether all interest groups of covered employers are recognised and given the opportunity to provide feedback.
The employer bargaining side must not do anything either directly or indirectly that is likely to mislead or deceive a covered employer.
The employee bargaining side has similar obligations towards all covered employees.
Representation of Māori
Both bargaining sides must use their best efforts to make sure Māori employees and employers are represented in the process. This includes by:
- getting and considering feedback from representatives of Māori employees/employers and
- considering whether each bargaining side should include a person that represents the interests of Māori employees and employers.
Terms the Fair Pay Agreement must cover
A Fair Pay Agreement must include what work is covered by the Fair Pay Agreement, standard hours when the minimum base wage rate must be paid, minimum pay rates (including overtime rates and penalty rates), training and development, how much leave an employee can have and how long the Fair Pay Agreement applies for. It must also cover governance arrangements that apply when the agreement is in force and a process for varying the agreement.
The process to get a Fair Pay Agreement
The general process to get a Fair Pay Agreement involves several steps, which are described below. However, in different situations the process will be different.
1. Initiation – The start of the process. A party collects evidence to show it meets one of the initiation tests needed and applies to the Ministry of Business, Innovation and Employment (MBIE) for approval to begin bargaining. For a new Fair Pay Agreement, the initiating party will be an eligible union.
2. Bargaining sides form – The employee side and the employer side form. If a bargaining side doesn’t form on one side, the default bargaining party can step in. If they choose not to, the Employment Relations Authority (the Authority) can determine the terms of the Fair Pay Agreement without any bargaining having occurred between the employee and employer sides.
3. Bargaining process – The sides will work to come to an agreement on a set of employment terms that are acceptable to each side.
Once the sides have agreed, together they will send the proposed agreement to the Authority so that the Authority can assess whether the agreement complies with the law, and whether there is any overlap of the work it applies to with any other existing Fair Pay Agreement.
If the bargaining sides can’t come to an agreement either side can apply to the Authority to fix the terms of the agreement.
4. Ratification vote – Once the Authority confirms the proposed Fair Pay Agreement is compliant with the law, covered employees and employers in that sector will be able to vote on whether they agree with the terms or not.
If a majority agrees from both bargaining sides, the voting process and result will be confirmed by MBIE and the Fair Pay Agreement will be finalised and set as law.
If two votes fail to get a majority, the proposed agreement may be fixed by the Authority.
5. 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 covered employee where 25% or more of their work is covered by the agreement.
For more information about the process, refer to:
Your rights as an employer
If you are a covered employer, you have rights in the Fair Pay Agreement process including being kept informed about what’s happening and being represented.
Strikes and lockouts while bargaining for a Fair Pay Agreement is taking place
Strikes by employees and lockouts by employers related to bargaining for a proposed Fair Pay agreement or a variation of a Fair Pay Agreement aren’t allowed during the process. But strikes and lockouts related to health, safety or collective bargaining under the Employment Relations Act can still take place.
No employer representation
If, after three months from approval to initiate bargaining, no bargaining party for the employer side has stepped forward, then the law provides one month for BusinessNZ, the default bargaining party on the employer side, to decide if they want to become an employer bargaining party.
If BusinessNZ doesn’t want to, an employee bargaining party can apply to the Authority to make a decision on the Fair Pay Agreement terms. Decisions by the Authority are called a determination. If no employee bargaining party applies to the Authority within three months, development of the Fair Pay Agreement stops.
If this happens, the Authority will set the terms of the Fair Pay Agreement without any bargaining or vote. This can also occur if all the employer bargaining parties (aside from any specified employer bargaining parties) cease to be a bargaining party during bargaining or the bargaining sides are unable to reach an agreement.
Delayed commencement of terms
Bargaining sides can agree a process to allow employers to apply for a delayed commencement of certain terms of the proposed Fair Pay Agreement. If they agree, after bargaining is complete but before the proposed agreement is submitted to the Authority, employers may use the process agreed by the bargaining sides to apply to delay the timing of when one or more terms of the agreement will apply to them.
An employer may apply for one or more of the following terms to have a delayed commencement:
- minimum base wage rates, and when the rates apply
- how minimum base wage rates, overtime rates, or penalty rates change over time
- an overtime rate, and when it applies
- a penalty rate, and when it applies
- how much leave an employee has.
The delay can only be 12 months or less in length and it’s not automatic that it will be approved. Bargaining sides may only approve an application in limited circumstances. This includes that they are satisfied that saying no to the delay would result in a less favourable overall outcome for the employer’s employees.
The ratification vote
As an employer of covered employees, you will have the option of voting on the proposed terms and conditions in the ratification vote. At least 10 working days before the vote you will be sent information from the employer bargaining side about:
- how you can work out if you are able to vote on the terms of the proposed Fair Pay Agreement
- the first date that you can vote
- the final date that you can vote
- how you can vote
- what the consequences of the vote of the agreement are.
At least five working days before the vote you will be given:
- a copy of the proposed Fair Pay Agreement and
- a plain language summary of the agreement.
Employers allowed to vote and vote weighting
An employer is allowed to vote if they think they have at least one employee who will be covered by the Fair Pay Agreement, if the agreement were validated.
An employee is covered by a Fair Pay Agreement when 25% or more of their work will be within the coverage of the Fair Pay Agreement. However, if more than one Fair Pay Agreement covers 25% or more of the work the employee does, the Fair Pay Agreement that covers the greatest proportion of the employee’s work will apply. Each eligible employee gets one vote.
Employers get one vote for each employee that would be covered by the proposed Fair Pay Agreement. If they have less than 21 employees their vote is weighted. Employers with less employees are given more weight to their votes at ratification than employers with a large number of employees.
Your responsibilities as an employer during bargaining
Throughout the Fair Pay Agreement process you have responsibilities under the law. These are explained below.
An employer who fails to comply with these obligations may be liable to a penalty imposed by the Employment Relation Authority.
What it means for you after a Fair Pay Agreement is in place
Finalised Fair Pay Agreement applies to all employees covered
When a Fair Pay Agreement is passed into law, each covered employee must receive the minimum employment terms set in the Fair Pay Agreement.
An employee is covered if 25% or more of the work they do is covered by the Fair Pay Agreement. If multiple Fair Pay Agreements cover 25% or more of the work an employee does, the Fair Pay Agreement that covers the greatest proportion of an employee’s work will apply.
This also applies to employees who are not union members, and employees who opted out of having their contact details shared during the Fair Pay Agreement process.
If a Fair Pay Agreement applies to an employee, it also applies to you as their employer. This means the employment terms that are provided to an employee must, at a minimum, comply with the terms of the Fair Pay Agreement. However, if an employee already has better terms than the Fair Pay Agreement, those terms will continue to apply.
You and any employee can still agree at any time to employment terms better than those set out in the Fair Pay Agreement.
You can’t avoid the terms of a Fair Pay Agreement by engaging a person as a contractor
You can’t engage a person as a contractor to avoid the terms of a Fair Pay Agreement if the real nature of the working relationship is that they are an employee.
You may be liable for a penalty from the Employment Relations Authority if you were to do this, which can cost your business for each breach.
How Fair Pay Agreements work with other employment agreements
If an employment term in an Individual 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.
Terms may differ between groups of employees
The Fair Pay Agreement may include different pay rates or leave entitlements for different groups of employees, this difference can be based on:
- the different jobs your employees have
- the role of the employees within an occupation (for example differing by seniority)
- the district the employees live in. For example, if employees live in a district where the cost of living is lower (a rural area where the rent is cheaper than the rent in a city, for example).
The minimum base wage rate may also differ to account for:
- employees just starting out in employment (aged between 16-19 and have not been employed for more than 6 months by any employer) or
- employees being trained.
Minimum wage exemption permits will also still be relevant. If there is a permit in place that specifies a base wage rate, then that will apply instead of the Fair Pay Agreement. If the permit states a percentage then that percentage will be of the base wage in the Fair Pay Agreement rather than the national minimum wage.
Disagreements with your employee about Fair Pay Agreements
If you have questions about a disagreement, you can call or email our Service Centre for help using the details below:
- Email us a query
- Phone 0800 20 90 20.
For disagreements that aren’t related to coverage you can also use the Early Resolution and Mediation services through MBIE.
Read more about these services:
Once the Fair Pay Agreement is in force, if you and your employee disagree over whether you are covered, then our Labour Inspectorate or the Employment Relations Authority can help work out whether you are covered, and if you can’t reach an agreement, then they can determine the disagreement.
Information about employers’ rights under the Fair Pay Agreements Act is also available as a quick guide information sheet:
Up to date information about Fair Pay Agreements that have been applied for, approved or in force:
Information about the duties and rights of employees during the bargaining process: