Harmans Lawyers
20 December 2022

Fair Pay Agreements – What are they?

All Articles & News, Litigation and Dispute Resolution

The Fair Pay Agreements Bill (“FPA”) has been passed into law, with the bargaining system to take effect from 1 December 2022. 

The purpose of an FPA is to provide for minimum binding terms and conditions (including wages, hours, overtime and leave) for employers and employees in a particular industry or occupation. These terms and conditions will be set through a system of industry or sector wide collective bargaining, between unions (as employee bargaining parties) and employer bargaining parties.

To start the bargaining process for an FPA, a union can apply to the Ministry for Business, Innovation and Employment and must meet one of two tests: 

  • Either 1,000 or 10% of employees support the FPA; or 
  • Show that employees who have little bargaining power, low pay or poor pay progression would be covered by the FPA. 

The minimum standards set will apply to all employees in the relevant industry or occupation. The aim of a fair pay agreement is to ensure employees are treated equally with a view to improving working and living conditions for some employees. The FPA process may however limit the flexibility and autonomy employees and employers currently have in negotiating individual terms and conditions of employment. Furthermore, the terms forming part of an FPA will apply to all relevant employees in the applicable industry, whether or not their employer took part in the bargaining process or were even aware of it. 

For the above reasons, it is crucial that employers keep up to date with the FPA to ensure they are providing their employees with the minimum terms and conditions applicable to their industry/occupation. 

If you would like further advice or information about fair pay agreements, what industries/occupations are currently being reviewed, or your rights and/or obligations under an FPA bargaining process or FPA agreement, please don’t hesitate to contact one of our team at Harmans Lawyers.