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Fair Pay Agreements (FPAs) are sector-level arrangements that set minimum terms and standards for your workers in their relevant occupation. These agreements typically develop through extensive bargaining procedures between employers and employee representatives. Although New Zealand does not have any agreements of this kind yet, the Prime Minister has signalled that the first of these arrangements will begin in the new parliamentary term (2020-2023). This article explains how FPAs work and what industries they are likely to affect in New Zealand.

How Do Fair Pay Agreements Work?

New Zealand does not have any FPAs at present. This means that some details as to their function and operation still require further clarification. However, broadly speaking, FPAs are sector-wide collective agreements that set workers’ minimum terms and conditions.

If an FPA is in effect, you and your employees will still be able to agree to terms that are more favourable to the employee than those set out in the FPA. The aim is to guarantee minimum standards. 

FPAs are different from standard collective agreements, both in terms of design and scale. A fundamental feature of FPAs is that they have compulsory coverage across a sector or an occupation. That means that: 

  • it includes all workers under the coverage of the FPA; and 
  • individual employers cannot opt out. 

FPAs will differ by industry, but are likely to cover terms and conditions common to typical collective agreements. 

For instance, the likely content of FPAs will include: 

  • pay rates; 
  • hours of work; 
  • conditions of work; and 
  • leave arrangements.

What Is The Process of Bargaining for a Fair Pay Agreement?

An FPA in any given industry or sector would eventuate after a bargaining process between employers and employee representatives, such as unions. The Government has not yet decided what specific event may trigger this bargaining process. However, the FPA Working Group recommended two options for initiating bargaining for a FPA, including a:

  • ‘representativeness trigger’, in which workers in any sector or occupation would be able to initiate a bargaining process if they could meet a minimum threshold of 1000 or 10% of workers in the nominated sector or occupation, whichever is lower; and 
  • ‘public interest trigger’, which allows someone to initiate an FPA even where they do not meet the representativeness threshold, on the condition that there are harmful labour market conditions in the nominated sector or occupation.

It is likely that the Government will use a system like that recommended by the Working Group to decide when the bargaining process for FPAs will begin.

What Is The Status of Fair Pay Agreements in New Zealand?

There are currently no FPAs in New Zealand. The Government has signalled that it would like to commence bargaining for the first FPAs in the next three years. 

There has not yet been any announcement about which sectors will see the first FPAs in New Zealand. However, there is general agreement that sectors which are already heavily unionised with popular collective agreements, such as in education, are less likely to see early FPAs.

Prime Minister Ardern noted in 2020 that while she did not expect the implementation of FPAs in a large number of sectors, she did expect that bargaining for an FPA may take place for those “most affected” by a “depletion” of their terms and conditions.

Key Takeaways

FPAs are collective agreements that cover an entire industry or sector, meaning that you cannot opt out. While there are currently no FPAs in New Zealand, the Government has indicated that bargaining will commence for the first agreements in the next three years. FPAs set minimum standards for all workers in a particular sector or occupation. They are likely to be agreed only after an extensive bargaining process between employers and representatives of employees. If you have any questions about FPAs in New Zealand, contact LegalVision’s New Zealand employment lawyers on 0800 005 570 or complete the form on this page.


What are Fair Pay Agreements?

Fair Pay Agreements are sector-wide collective agreements that set the minimum terms and conditions for all workers in that sector. Employers cannot opt out and all workers are included by default.

How many Fair Pay Agreements are there in New Zealand?

There are currently no Fair Pay Agreements in New Zealand.

What sectors are likely to have Fair Pay Agreements in New Zealand?

It is not clear at present what sectors will have Fair Pay Agreements, although the Prime Minister has signalled that Fair Pay Agreements will be prioritised for occupations with relatively tough terms and conditions. 

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