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New Zealand’s New IR Laws Explained


At the beginning of May, the New Zealand government announced a radical overhaul of the country’s labour laws, beginning with a policy that will re-centre unions and collective wage bargaining as part of the industrial relations system – the ‘Fair Pay Agreement’ system.  

Criticised by conservative commentators as “compulsory unionism by stealth” and heralded by unions as “the best change at workplaces in decades” – the Fair Pay Agreement has certainly made a splash.  

So what’s the deal?  

The new Fair Pay Agreement (FPA) system is designed to set minimum wages and conditions for sectors by allowing industry-wide bargaining – effectively stopping the race to the bottom on wages and conditions.

One example of where this could be applied that has been put forward by the New Zealand Council of Trade Unions is supermarkets.

Instead of negotiating at each specific supermarket, a union would negotiate an agreement covering all workers at all companies across all of New Zealand. Powerful stuff. 

Fair Pay Agreements will be about more than just wages. While an FPA must cover base wage rates, ordinary hours, overtime and penalty rates, they will also make it possible to set better conditions around redundancy, leave and health and safety.  

How will it work? 

The Fair Pay Agreement process can be triggered by any union that can demonstrate support from either 10 percent of the workforce or 1000 workers (whichever is lower) in the proposed industry. A FPA process can also be triggered by a public interest test which would consider the low pay or limited bargaining power of workers.  

If the two sides fail in two attempts to ratify an agreement (by simple majority on both sides), the Employment Relations Authority would make a binding determination.  

Why are they doing this? 

While New Zealand has some of the highest work-force participation in the OECD, wages have stagnated (leading at times to the ‘brain drain’; an exodus of Kiwis across the Tasman seeking higher wages and living standards). There are also industries that have been identified by the government as effectively being market failures – where low wages and low productivity are entrenched.  

The key to FPAs is that all workers in the industry will be covered by the agreement – effectively setting an industry safety net. This means that companies cannot undercut existing wages and conditions of a workforce. Supermarket workers, cleaners, security guards and healthcare workers have all been identified as workers who would benefit from FPAs. It means that workers will have certainty that wherever they work, they will get decent pay and be treated fairly.  

This is what working people in union have been campaigning for; a more balanced employment relationship between working people and employers – putting people back at the centre of employment.
— Richard Wagstaff, President of the New Zealand Council of Trade Unions

 In a move that threatens a showdown with the big gig-economy players, the New Zealand government told reporters that while not covered currently by the proposal, contractors like food-delivery riders would be covered by the final law introduced to parliament.  

So should Australia steal this idea off the Kiwis, like they stole Phar Lap, pavlova and Crowded House?  

When announcing the policy, the New Zealand government emphasised the scheme’s similarities with our own Fair Work Act and modern award system.

Phar Lap and unions — both hate free riders

Phar Lap and unions — both hate free riders

In recent years, the Australian union movement has campaigned strongly for an industry-wide bargaining system – which at the last election the Australian Labour Party indicated they would start to implement in industries where workplace bargaining has failed. Economists like Alison Pennington have concluded that Australia’s flat-lining wages are associated with the widespread erosion of collective bargaining under our current enterprise bargaining system – meaning that our current settings are not up to the task of lifting our wages. While the NZ government has certainly drawn inspiration from our award system and the baseline it provides on wages and conditions, the introduction of industry-wide bargaining in Australia could help deliver the wage increases that Australian workers deserve.   

In an interesting move, in addition to the terms and conditions that must be agreed upon, an FPA can also set up a system where union members earn extra wages equal to the cost of their union dues. That is, union membership would effectively be free in these industries. In a system where bargaining fees are currently forbidden, this could be a nifty idea for Australian unions to pinch.  

While the FPA system centres unions in the bargaining process, the challenge for unions will be to ensure that the FPA system is leveraged to ensure that workers who benefit from these agreements join their union, especially in sectors where union participation has been historically very low. This is an opportunity for unions to build density as a way to strengthen and protect hard-won worker rights.  

The proof will be in the pavlova.