Fair Pay Agreements (FPAs) set legally-binding minimum employment terms and conditions for an occupation or industry as a whole. These terms will be set in collective bargaining between unions representing employees and employer associations representing employers.
We have been getting a lot of questions from our members and employers about the Fair Pay Agreement system, so we’ve put together this page to answer them. We’ll keep updating this page as we get more questions.
Questions covered:
- How will occupations or industries be defined?
- Is there a list of industries that will be covered by FPAs?
- How do you establish what FPA your employees would be covered by and then what the details of that FPA are?
- What happens to employees already on an Individual Employee Agreement (IEA)?
- What about new hires; could the process change so that they are only covered by FPA but not IEA?
- What about employees who are not union members or who opted out of sharing their contact details?
- If workers are covered by both a FPA and a Collective Employment Agreement (CEA), which one should the employer follow?
- If a role is covered by multiple FPAs, e.g. a butcher in a supermarket, is there a method to determine which FPA has precedence?
- Do you get to choose which FPA to apply to your workers, e.g a butcher working for a supermarket vs a butcher’s FPA?
- What about employees with mixed responsibilities, e.g. a person who works 15 hours a week as a butcher, 10 hours a week as a delivery driver, and 20 hours in retail (not in the butchery department)?
- Will coverage be defined by the qualification a worker holds or the job they do, e.g. we employ registered social workers in both social work and non-social work roles?
- Will FPAs be backdated?
- How will FPAs affect small businesses?
- How much higher could hourly rates be compared to the current minimum wage?
- Will MBIE maintain a register or database of active FPAs?
- How do we go about setting up an eligible employer association?
- What happens if no group steps up to represent employers?
- How much are FPAs likely to impact workplaces that are not unionised?
- Is this forcing unionisation on businesses?
- If you knew you didn't want to offer employee redundancy (for example) in the IEA, but instead offered a higher pay rate or other benefits, such as healthcare, would the FPA cherry pick the best of each and you’d potentially end up paying out both?
- Where an FPA exists, would it be best to just transfer all relevant staff to that?
- Is retail being broken into different sections, e.g. furniture retail, supermarket retail, fashion retail, baby retail?
How will occupations or industries be defined?
The Australian and New Zealand Standard Classification of Occupations (ANZSCO) is the prescribed classification document for FPA occupations and industries.
The union initiating bargaining must provide the relevant ANZSCO code for any occupation- or industry-based agreement.
Is there a list of industries that will be covered by FPAs?
Not yet. The legislation has only recently become law and no FPAs have been ratified yet.
FPA negotiations will be initiated when the representation threshold (or public interest test) for an industry or occupation is met. The process to negotiate and ratify an FPA is estimated to be a year.
The Council of Trade Unions has identified hospitality, supermarket, security, cleaning, early childhood education, bus driver, and forestry as the first sectors that could go through the FPA process.
Track progress of proposed FPAs on MBIE’s FPA dashboard.
How do you establish what FPA your employees would be covered by and then what the details of that FPA are?
The details of the FPA will be specified in the relevant FPA document, which will be published once it is finalised and made into law.
The coverage of employees will be determined by the coverage clauses in the FPAs. Until we have some of these ratified, it is too early to predict who may or may not be covered.
If you need help interpreting any of these details, please contact MyHR.
What happens to employees already on an Individual Employee Agreement (IEA)?
Employees will still need to have an employment agreement (either individual or collective) in place as an FPA will not contain all of the mandatory employment agreement terms under the Employment Relations Act.
However, if the terms an employee has in their EA are covered by an FPA and the FPA terms are more favourable, you must comply with those terms. If the terms in the person’s EA are better than those set in the FPA (or are not covered by the FPA), those terms will apply.
What about new hires; could the process change so that they are only covered by FPA but not IEA?
As above. FPAs will not cover all of the employment agreement terms that are required under the Employment Relations Act, so every employee will still need an EA.
What about employees who are not union members or who opted out of sharing their contact details?
Employees who are not union members or those who opted out of having their contact details shared during the bargaining process are still covered by an FPA if 25% or more of the work they do is covered by that FPA.
If workers are covered by both a FPA and a Collective Employment Agreement (CEA), which one should the employer follow?
If a term of employment in an FPA term is more favourable than a corresponding term in a CEA, the FPA term will prevail (and vice versa).
If a role is covered by multiple FPAs, e.g. a butcher in a supermarket, is there a method to determine which FPA has precedence?
The employment terms of a FPA apply to any employee if at least 25% of their work is covered by that agreement.
If 2 or more FPAs meet the 25% threshold, the FPA that covers the largest portion of the employee’s work would apply.
Do you get to choose which FPA to apply to your workers, e.g a butcher working for a supermarket vs a butcher’s FPA?
As above. An employee will be covered by the terms and conditions of an FPA if at least 25% of their work is covered by that FPA. If two or more FPAs meet the 25% threshold, the FPA that covers the largest portion of the employee’s work applies.
What about employees with mixed responsibilities, e.g. a person who works 15 hours a week as a butcher, 10 hours a week as a delivery driver, and 20 hours in retail (not in the butchery department)?
Only one FPA will apply to any particular employee.
In this case, the employee would be under the FPA that covers the greatest percentage of their work, so probably the FPA that covers their retail work. However, this would need to be worked out carefully on a case-by-case basis, looking at the coverage clauses.
Keep in mind that FPAs only set out the minimum terms and conditions of employment, so as long as you ensure you meet all these requirements, you will be legally compliant.
Will coverage be defined by the qualification a worker holds or the job they do, e.g. we employ registered social workers in both social work and non-social work roles?
As we do not have any ratified FPAs to set a precedent, we are still unsure.
But ultimately, it will come down to the way the coverage clause is worded. We assume unions will want to make the coverage clauses as broad as possible to cover both qualified and unqualified workers, so the terms and conditions of employment will cover the role a person performs regardless of their qualification.
Will FPAs be backdated?
There is no requirement to include any terms regarding backdating in the FPA. That said, this will be a matter for negotiation between the bargaining parties.
How will FPAs affect small businesses?
There is no business size threshold or consideration of business size in this legislation; FPA's will affect small businesses the same as large businesses. If some of your employees are covered by the coverage clause in the FPA, the FPA will apply to your business.
How much higher could hourly rates be compared to the current minimum wage?
We do not have any indication at this stage how much wages may rise under the FPA system, but we do expect the cost of additional entitlements (e.g. overtime and other allowances) to push the cost of employment up.
Will MBIE maintain a register or database of active FPAs?
Approved FPAs will become what is known as “secondary legislation” (law made under a power formally delegated by Parliament), and published in an online database.
It is not clear at this stage whether the Ministry of Business, Innovation and Employment (MBIE) will maintain a separate register of active fair pay agreements.
How do we go about setting up an eligible employer association?
An employer association must be registered as an incorporated society, have at least one covered member, and have a constitution that enables them to promote the collective interests of covered employers for the purposes of bargaining for a FPA.
Employer organisations must be approved by MBIE before they can represent employers in negotiations, and they must bargain on behalf of employers that are not their members.
Many sectors and occupations in NZ should be covered by an existing employer association or industry group.
What happens if no group steps up to represent employers?
If no bargaining party for the employer side steps forward after 3 months (from the approval to initiate bargaining), then BusinessNZ, as the default employer bargaining party, has 1 month to decide if they want to become the employer bargaining party.
If BusinessNZ doesn’t want to, an employee bargaining party can apply to the Employment Relations Authority (ERA) to make a determination on the FPA terms. If no employee bargaining party applies to the ERA within 3 months, development of the FPA halts and the ERA will set the terms of the FPA without any bargaining or vote.
How much are FPAs likely to impact workplaces that are not unionised?
It is yet to be seen what impact the FPA system will have on union membership. Under the Fair Pay Agreement Act, there is no requirement for employees to become union members to be covered by negotiations or the resulting FPA. Union membership will be voluntary.
Is this forcing unionisation on businesses?
We are aware that this is an argument that has been raised by those who oppose FPAs. However, under the Fair Pay Agreement Act, union membership remains voluntary.
If you knew you didn't want to offer employee redundancy (for example) in the IEA, but instead offered a higher pay rate or other benefits, such as healthcare, would the FPA cherry pick the best of each and you’d potentially end up paying out both?
Yes, the employee would get the best of the terms in the FPA and the best of the terms in the IEA. The employer can't choose. So, in this case they would receive the higher pay rate from the IEA and the redundancy benefit from the FPA.
If all of the terms in the FPA are more generous than IEAs or CEAs, an employer can choose to offer these more generous terms to all employees (whether they are covered by the FPA or not).
However, you must still ensure that each individual still has an IEA / CEA in place, as an FPA won’t contain all of the mandatory employment agreement terms under the Employment Relations Act 2000.
Where an FPA exists, would it be best to just transfer all relevant staff to that?
Ultimately, this is a choice for you to make based on your remuneration strategy, budgets etc.
Remember, the employment terms of a FPA will apply to any employee where 25% or more of their work is covered by the agreement.
It probably makes sense to have one set of benefits in place (e.g. sticking with the FPA), but you will still need to ensure each employee has an IEA / CEA to establish the employment relationship, as the FPA doesn't cover all mandatory employment terms.
Is retail being broken into different sections, e.g. furniture retail, supermarket retail, fashion retail, baby retail?
It’s too early to tell at this stage. We will continue monitoring the progress of FPAs and update this information when we know more.
