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Fair Pay Agreements and You

Updated: Nov 14, 2022

As a follow up to our Blog on Fair Pay Agreements this Blog provides our thoughts on what these mean for businesses.

The comments herein are our opinion only and do not represent professional advice.

Should employers be concerned about FPAs?

My view on this question is yes. All employers / business owners, particularly those in the hospitality, retail, and tourism sectors should be concerned about FPAs from the perspective that these are sectors that are more likely to be targeted by an FPA.

However, you need to balance this concern with the fact that it is likely that only 4 or 5 FPAs are likely to be negotiated per year and even then, the negotiation process will also likely take up to a year at least to conclude.

This is due to there being a three-month period for negotiation teams to be formed once approval to negotiate an FPA has been given. There are also stringent notification requirements prior to and during bargaining. All parties still need to act in Good Faith, and this means being communicative with those who are impacted on by the negotiations.

All FPAs are mandated to provide for minimum wages for the Industry Sector or Occupational Group to which they intend to cover. If you are an employer who pays at the minimum wage, I suspect that FPAs are going to at least seek to set the Living Wage ($23.65 gross) as the minimum starting wage for anyone. The current minimum adult wage in NZ is $21.20 gross per hour. However, if you pay at or above the Living Wage, an FPA wage claim may have less of an impact on you and your business.

One concern over the information requirements, is that "best endeavours" does not require an absolute obligation to notify. Registered businesses should be identifiable via the Companies Register, however it remains to see just what lengths the bargaining parties are likely to go to in order to try and inform everyone who is likely to be covered by an FPA.

Eligible unions, who are the only parties who may initiate for an FPA, and the employer bargaining party must use their best endeavours to inform employees and employers that an FPA has been initiated. MBIE is also required to publicly notify if the Chief Executive approves an application for a proposed FPA.

Despite this, it is possible a "Mum & Dad" business may not be aware that an FPA will cover their staff. How big this risk is at the moment is an unknown. I suspect that most small businesses most likely do not spend a lot of time looking at the Public Notices section of their local paper nor do they spend time looking up Union websites. This means there is a possibility a "Mum & Dad" business could suddenly find they are now bound by an FPA that sets minimum wages, leave requirements and training/development obligations for which they have not budgeted for.

Therefore, Business Advisors, including HR practitioners, accountants, and lawyers, will need to lift their game to ensure that they are keeping abreast of approved FPAs so they can inform their SME clients should an FPA be approved that is likely to cover the work or sector in which their clients operate.

FPAs are not going to just focus on wages. While that is the most likely topic, we can expect FPA claims to include health and safety requirements, flexible working arrangements, and redundancy arrangements.

Redundancy would be a cause for concern given SMEs mostly only provide four weeks' notice for redundancy and no other entitlement. Unions may seek to have a redundancy payment of up to three months included in an FPA as well as the notice requirements. This will add a contingent financial cost should such an entitlement become the minimum. However, this cost is only realised in the case of a redundancy being enacted.

What can you do?

Once an FPA has been approved for negotiation, there is nothing an employer can do to stop the FPA. If the parties fail to reach agreement, then the Employment Relations Authority can make a binding determination on what the FPA will contain.

The best an employer / business owner can do is keep themselves informed, and ensure your business advisors are also keeping an eye out for any FPA that is initiated that might impact on your business. If this happens, ensure you are kept informed of what is going on with those negotiations.

IMAGE CREDIT: Photo by Medienstürmer on Unsplash

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