The Government’s new Fair Pay Agreements (FPA) legislation commenced on 1 December, which sets new minimum terms for working conditions.

The FPA system brings together unions and employer associations to bargain for employment terms for all covered employees in an industry or occupation.

An FPA must, as a minimum, include the following terms: the standard hours to be worked, the wages payable, arrangements for training and development, leave entitlements, the governance arrangements that will apply to the bargaining sides when the agreement is in force, the process for each bargaining side to engage with the other bargaining side, and the expiry date of the agreement (between three and five years).

Currently the first FPA in draft covers hospitality workers, with other vulnerable workers such as cleaners, security guards, check out operators and bus drivers, likely to follow shortly. Unions have already started seeking indications of interest from employees in these sectors.


MBIE webinars

MBIE will be holding webinars on the dates below. If you’re interested, please register for the relevant webinar below:

General public webinar: 16 February, 2-3.15pm
Employees webinar: 24 February, 10-11.15am
Employers webinar: 28 February, 3-4.15pm


What does the FPA process entail?

Firstly, a union applies to the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE), who must be satisfied that either the representation test (where at least 1,000 employees or 10% of employees within the occupation/ industry want an FPA) or public interest test (where there is an industry/occupation that sees employees earning lower wages or working unsocial hours) has been met.

If a union is successful, it must identify and notify all unions that represent affected employees, and affected employers. Both employers and employees will be represented throughout the process. For workers, this will likely be the union who initiated the bargaining process. For employers, this will largely depend on whether or not it is a public or private sector.

Once agreed between the parties, an FPA needs to be approved by the Employment Relations Authority (ERA) who carries out a compliance assessment. If approved, it will be ratified and come into force through regulations or orders.

All employers who fall within the coverage of the FPA will then be bound by it. This will also include employers who did not participate in the bargaining process.

Employees, their representatives and employers can still agree to individual employment agreements or collective agreements with better terms than those in a FPA that covers their type of work.

What does that mean for small business employers?

Once a FPA passes into law, the employment terms of the FPA apply to any employee where 25% or more of their work is covered by the agreement.

If an employee is covered by more than one FPA, the agreement that covers the greater percentage of their work applies. This makes sure that only one FPA will apply to a particular employee.

During the FPA process, employers must allow employees that would be covered by the FPA to attend two paid FPA meetings if they occur during work time. The meetings are organised by the union. Employers must also provide information about the FPAs to employees.

An important first step would be to get in contact with your employer association to find out what their plans are and to decide whether you want to be involved in the process.

The other thing to consider is the composition of your existing workforce, including whether they have any roles that may fall within the targeted sectors who are likely to have FPAs negotiated first. If you have employees in these categories you may need to review their employment contracts and evaluate how a change in their working conditions might impact on your business.

For more information click here

Dashboard for all FPAs

MBIE has launched a dashboard, which will include all FPAs that are in progress and their current status, along with those that have been passed into law.

This is available to view here


If you would like some help to understand how your team will be impacted by any new FPAs, please contact your Nexia advisor.

Find updates