Fair Pay Agreements and Public Sector Bargaining: A Flashback



Last week, I had a fascinating experience that took me right back to the early days of my employment relations bargaining career, which commenced just over 42 years ago.

The first was the announcement by the Government and “guidance” given by the Public Service Commission to the Public Sector regarding how collective bargaining for pay increases should be effectively frozen except for pay for employees paid up to $60,000, exceptional circumstances between $60,000 and $100,000 and nothing for those earning over $100,000.

Other bargaining exceptions were announced, but the critical memory activated was the return of the “centralised” control of bargaining by the PSC and the centralised management and development of common terms and conditions of employment.

When I commenced my bargaining career at the State Services Commission in 1979, the SSC then had centralised control through the bargaining but ultimate issuing of State Sector Determinations. Subsequent Governments moved away from centralised control and empowered State Sector leaders to bargain pay and terms and conditions of employment that reflected the organisation’s needs and the people who worked there.

Despite the softening of the language from the Politicians over the subsequent couple of days, it is clear that centralism is a crucial part of the Government’s strategy around Public Sector pay. It will be even more fascinating when the issue of occupational relativity comes into play, including gender pay equity in comparator occupations.

The second was, later in the week, an announcement regarding Fair Pay Agreements. There has been much commentary already about how this is a return to the National Award system based on private sector terms and conditions until the Employment Contracts Act 1991. Currently, private sector businesses in the main set their terms and conditions of employment by way of what is, in effect, a direct bargain with their employees. Unions have limited membership and coverage and have not been successful since the subsequent change to the Employment Relations Act 2000 and its amendments in re-building the membership they had prior to 1991 and building a significant private-sector base of enterprise multi-employer Collective Agreements. These have been adopted by mainly in the Public Sector (once free from the State Sector Determination control process).

Under the previous Award structure of bargaining, there were well-established “secondary bargaining agreements”. These agreements (for those that remember s65 and s66 of the Industrial Relations Act) have formed the base for the private sector Collective Agreements that exist today. exceptions are the Metals and Plastics Industry MECAs that grew out of the Metal Trades National Award.

The shift from industry and occupational National or Regional Award bargaining to enterprise bargaining broke a long-established system of occupational relativity and demarcation.

FPAs will provide the base or minimum entitlements (which could otherwise be delivered through legislation as happens with some conditions in Australia). Secondary bargaining will continue with Unions, where they have or grow membership, will continue to seek MECA or single employer CA bargains. Industrial action is the ultimate sanction here.

The significant difference between National or Regional Awards and the proposed Fair Pay Agreements is that Unions don’t need to nominate or cite the employers into the Award but instead sign up 10% or 1000 workers to initiate an FPA. A subsequent FPA will apply to every employer with employees that fall within the FPA coverage, whether there are Union members or not and whether they had anything to do with the bargaining or even knew about the proposed FPA bargaining.

There is an assumption that FPA bargaining parties, Unions, and employer representatives (default being Business NZ of not easily identified) will play nicely and get these agreed. Even though a paid for Navigator will support the bargaining process, I anticipate that it will be challenging to get a community of actual employers to agree on the bargaining process quickly and offers FPA settlement and subsequent ratification. In my experience, its as undoubtedly a challenge for National Award bargains where the significant challenge for the Employer Advocate/Representative was getting the employers to agree on an offer. At one point, the Service and Food Workers Union attempted to develop a Multi-Employer Collective Agreement covering the Aged Care Industry – it eventually failed because the employer community would not agree on the process or terms. It can be argued that the action would not work because of low membership and would have been sustained by employers.

The FPA process will have the ultimate failsafe of an Employment Relations Authority determination of the terms and conditions of employment if the parties failed to agree and ratify an Agreement. While we have yet to see legislation, I would be concerned if ERA members had complete freedom (even with some advice) to set terms and conditions for an entire industry or occupation. I trust that legislation will specify that there are determination criteria and the potential of representatives being appointed by the parties to participate and advise the ERA in any hearing directly. Maybe also a good ideas to have the Employment Court check over any ERA determination!

It has already been identified that there are relatively few Union or Employer Advocates who have knowledge and experience of the centralised National Award or Public Sector bargaining processes.

Given that we are inevitably heading for PSC policy direction and drafting of FPA legislation, those who understand history lessons should pragmatically provide advice and support to ensure that whatever ends up in these centralised processes does have the best chance of creating sensible solutions.


Written by Paul Diver, Director of Three60 Consult.


This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.

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