Business verdict on fair pay agreements

22 Feb 2019

Business has now seen the detail around proposed changes to our wage bargaining system.

The proposals are for collective agreements - ‘fair pay agreements’ - that would set minimum pay and conditions for all workers in each industry.

The proposal is that centralised bargaining and large collectives would become the norm, unlike the present system where workplaces can choose collective or individual agreements according to their needs.

BusinessNZ was a member of the Fair Pay Agreements Working Group that proposed the change but was unable to agree with this recommendation.

Most businesses prefer to choose individual or collective agreements or both according to their needs, and would not want a system where a collective agreement was compulsory.

Most businesses want to be competitive and innovative and want to reward staff to their best ability, and don’t believe compulsory collectives would help this.

This view has been expressed through all recent employer surveys and through engagement by the Otago Southland Employers’ Association and BusinessNZ with many New Zealand firms.

Businesses say fair pay agreements would limit operational flexibility because a collective covering every business wouldn’t be able to meet the needs of individual firms and individual employees.

Businesses wanting something different from the collective would have to negotiate again separately on top of their fair pay agreement, making wage-setting more complicated and costly.   This secondary bargaining would also be prone to industrial action, as happened in the past when we had a system of centralised plus secondary bargaining.

Business fears the potential for strikes and instability such as occurred as in the 1970s and ‘80s.

A system of industry-wide collective agreements would require a lot of administration and negotiation.  Everyone would have to attend paid stop-work meetings to agree on their fair pay agreement.  Industry-wide stop-work meetings would tie up whole industries at a time.

The impact on productivity would be significant.

Also concerning is the inflexibility of wage rates that would be set through centralised bargaining.

A fair pay agreement for the grocery sector for example, would require a small dairy in Invercargill to pay the same wage rate as a large supermarket in Auckland.  This inflexibility fails to recognise that there are different labour, goods and services markets in different regions.

The inflexibility inherent in fair pay agreements is a key reason that BusinessNZ could not support the proposal.

Compulsion is another factor.

International employment law is clear that employment agreements should be voluntary.  An employment agreement, like any other contract, should be voluntarily entered into without coercion.

Yet fair pay agreements would oblige employers and employees to take part in a collective and no-one could opt out or decline to take part.

Implementing a compulsory system as proposed would put New Zealand on the wrong side of international law.

BusinessNZ has a suggested a range of modifications that could make a system of fair pay agreements more workable, including making them voluntary, but these were not accepted into the working group’s proposals.

It is now up to the Government to determine whether the fair pay agreements proposals should be implemented.

Businesses are supportive of ongoing discussions to find the best possible wage-setting system.

But business does not support compulsory fair pay agreements as proposed and thinks they should not proceed.