Now that New Zealand has moved out of the Covid Emergency period, we see a ‘new normal’ being established in many areas including how we manage health, our use of technology, and the way that workplaces organise themselves. The same goes for our Workplace Relations system. While there are many strengths in the system, and much goodwill between parties, the pandemic shone a light on a range of weaknesses and inequities that have persisted for decades. Consistent with our electoral mandate, the government is moving forward with reforms that aim to address these issues and to build workplaces that are fair, safe, and productive.

It has been a busy period. Over the last year, we have increased the minimum wage, parental leave entitlements and working for families tax credits. We have introduced legislation to end migrant exploitation, and have taken steps to improve conditions for our RSE workers and bus drivers. We have restored access to collective bargaining for screen industry workers, and we have now legislated the biggest change to New Zealand’s employment law in over thirty years.

Hon Michael Wood, Minister for Workplace Relations and Safety

The introduction of Fair Pay Agreements (FPAs) will improve employment conditions, by enabling employers and employees to bargain collectively for industry or occupation-wide minimum employment terms.

For too long, New Zealanders working in critical roles like cleaners and bus drivers, whose work kept our country going during the pandemic, have lacked bargaining power to seek better wages and conditions. This has been shown in aggregate data which demonstrates declining returns to wage and salary earners since the radical labour market deregulation of 1991, and in sectors like bus driving where entrenched low pay and conditions have led to a workforce collapse.

Māori, Pacific peoples, young people, and people with disabilities have been disproportionately affected, and conversely will likely be over-represented in occupations which will benefit from a Fair Pay Agreement.

FPAs will improve wages and conditions for employees, encourage businesses to invest in training, and level the playing field so that employers who are trying hard to offer fair terms don’t get undercut and disadvantaged. As opposed to some international models which utilise a tribunal model in the first instance, we have drawn on the strengths of the collective bargaining process as the primary means to set FPA conditions. Employers and unions who know their own sectors are well placed to problem solve together, and to agree fair, relevant conditions.

These negotiated, sector-specific minimum standards can take into account the costs and opportunities businesses have while ensuring more workers receive higher wages and better employment terms and conditions. FPAs will be a long-term, stable framework with Agreements being for 3-5 years, meaning that employer associations and unions can identify the most critical issues in their sector and then negotiate a staged approach to making improvements across the sector or occupational group. Some employers have told me that this will be an important tool to help solve long-running issues such as labour shortages caused by low pay.

FPAs also signal the end of New Zealand’s 30-year failed experiment with a low-cost labour model. Over this period, many workers, have suffered through a ‘race to the bottom’, but, equally, our rates of labour productivity have been amongst the worst in the world. There is increasing international interest in re-establishing sector based bargaining as a means of addressing entrenched inequalities. We see this in the current Australian IR reforms, the commitment of the UK Labour Party to an FPA model, and developments in California.

There are other important changes afoot too.

The long, unwieldy Holidays Act has been the cause of many headaches over the years. The current Act has a high degree of ambiguity that has made it difficult to understand and implement for employers, and confusing for employees to understand their entitlements.

The Government established the Holidays Act Taskforce to suggest improvements to the Holidays Act, following a joint request from unions and employers.

The Taskforce included employer, worker and government representatives, and was chaired by Gordon Anderson, a law professor at Victoria University with extensive experience in employment law.

The Taskforce was asked to make recommendations on options for a clear and transparent set of rules for providing entitlements to, and payment for, holidays and leave.

In total, the Taskforce made 22 recommendations, all of which we have accepted.

The recommendations revise the system for determining, calculating and paying employees’ statutory leave entitlements. The recommendations also include some changes to employees’ leave entitlements and introduce greater transparency to ensure employees are fully informed about their leave entitlements.

MBIE is currently progressing with the detailed policy design work to implement the recommendations. We are determined to get this right and stress test the draft legislation from each perspective in the system to ensure that the policy works as intended. MBIE has brought together a range of stakeholders from across government, business and unions to help with the detailed design work. The team includes people with skills in policy, Holidays Act enforcement and compliance, payroll system provision, payroll practice across a range of employment environments, business analysis, and drafting legislation. I expect to introduce legislation into the house next year.

It is also time to carefully consider questions around the status of work and how we determine the boundary between employment and contracting. Legitimate contracting arrangements have an important role in our labour market, but there is also clear evidence of misclassification to the detriment of vulnerable workers.

Following feedback received from public consultation in 2020, we established a Tripartite Working Group, comprising of representatives from government, BusinessNZ, the New Zealand Council of Trade Unions, and chaired by Doug Martin, to recommend a set of policy changes to improve how regulatory protections apply to working arrangements at the intersection of “employment” and “contracting”.

The Working Group has recommended a set of changes, to help clarify or ‘test’ when a contractor is an employee, which we are currently considering.

Over time the nature of work has evolved and will continue to do so. As change occurs we need a Workplace Relations system that fairly balances different interests, keeps people safe and well, and builds on the strengths of both business and workers to drive a productive economy for the benefit of all. New Zealand’s success in managing the COVID-19 crisis was built on a high level of inclusion, co-operation, and social solidarity. These same principles will serve our Workplace Relations system well as we build a new normal in an uncertain world.