Fair Pay Agreements

Fair Pay Agreements are a system that brings together unions and employer associations to negotiate and agree on a set of employment terms for all employees within a specific industry or occupation. The process begins with a union collecting evidence to show that it meets one of the initiation tests required, and then applying to the Ministry of Business, Innovation and Employment (MBIE) for approval to begin bargaining.

The bargaining process is between an employee bargaining side and an employer bargaining side, where eligible unions act as representatives for the employees, and eligible employer associations represent the employers. These organizations must also bargain on behalf of non-members within the industry or occupation. The parties must act in good faith towards each other and make sure that Māori employees or employers are represented in the process.

The Fair Pay Agreement must cover certain terms such as what work is covered, standard hours, minimum pay rates, training and development, leave, and the duration of the agreement. The process to create an agreement involves several steps, including initiation, formation of bargaining sides, the bargaining process, and reaching an agreement. In certain situations, the process may differ.

The initiating party would be an eligible union, who must specify if they are applying for an industry-based agreement or an occupation-based agreement. The initiating union must also specify which initiation test they rely on, either the representation test (at least 10% or 1,000 employees who would be covered by the proposed Fair Pay Agreement support the application) or the public interest test (showing that employees covered by the proposed Fair Pay Agreement receive low pay for their work and have little bargaining power at work or a lack of pay progression at work or are not paid well enough when factors like working long hours, night shift, weekends or employment uncertainty are considered).

If the initiating union’s application is based on the 10% representation test or the public interest test, MBIE may invite public submissions before deciding whether to approve the initiation application. The submissions period will be at least 20 working days long. Once the agreement is reached, it applies to all employees within the specified industry or occupation, regardless of union membership.