Business makes last ditch effort to persuade Government to drop sweeping industrial relations reforms

This country’s main voice of business says the Government has turned a deaf ear to the concerns of employers in a dispute over sweeping new employment relations policy. And it is speaking up in an apparent last-ditch effort to revise the plan before legislation reaches the House.

BusinessNZ on Wednesday wrote to Workplace Relations Minister Michael Wood and reiterated its call for further work on a “smarter and fairer” solution to labour market reform.

It is the second disgruntled letter BusinessNZ has sent to the minister in recent months. Despite that, Fair Pay Agreement legislation is slated for introduction in the House within the next few weeks, the Ministry of Business, Innovation and Employment (MBIE) has confirmed.

In the latest letter to the minister, Kirk Hope, CEO of BusinessNZ, outlined “deep concerns” with the “out-of-touch and out-of-date scheme” and the damaging effect it will have on both the country’s employers and employees.

It follows a December letter, in which Hope informed Wood that his group would withdraw from the Government’s “tripartite” approach (business, labour and government) to establishing Fair Pay Agreements (FPA).

The Government’s original plan, outlined last year, assumed a key role for BusinessNZ, as the default negotiator for employers in sectors without a dedicated industry body. The role would have come with annual public funding of $250,000.

Wood said he has met with BusinessNZ since receiving its letter last December, and that “agencies continue to engage with key stakeholders, including BusinessNZ”.

FPAs were a Labour Party manifesto commitment in 2017 and 2020, and Wood noted they have been campaigned on.

He said that BusinessNZ has “consistently made clear that they oppose Fair Pay Agreements from early in the process … [and] the specific part of the system that BusinessNZ has said they will not engage with is a fairly small aspect of the framework and will not have a major impact”.

Wood reiterated that in the “vast majority of cases” he expects that employer groups in each sector will bargain themselves.

Under the proposed Fair Pay model, unions and employers would bargain to set minimum pay, terms and conditions for workers across any sector or occupation.

Unionisation in the sector would not be a necessary precursor and the mandatory negotiation of such agreements would be triggered by the approval of 10 per cent of workers in a given occupation or sector, or 1000 workers, whichever threshold was reached first.

The New Zealand Council of Trade Unions (CTU) is strongly in favour of the plan which it says will lift wages, especially for workers on very low pay; under the plan, the union would be paid to act as a negotiator for employees.

In an interview, Hope said he’s fielded a wave of concern from employers who already face mounting pressure from “runaway inflation, labour shortages … supply chain issues and the Omicron response”.

He’s asking the Government to pause and rethink its approach to industrial relations, and to choose a path of reform already favoured by its own officials.

Officials at MBIE have indicated that FPAs are not the department’s preferred solution to improving worker pay and conditions.

In a regulatory impact statement on FPAs the department noted its preferred approach to improving employment standards is to “empower a government body” to introduce a limited set of sector-based minimum standards, where it establishes there is a labour market problem.

It also favoured strengthening existing collective bargaining mechanisms to improve employee bargaining power.

In contrast, MBIE said the plan for FPAs is “not well targeted. This means the proposed system may create significant labour market inflexibility and costs when it is used in sectors without a demonstrable labour market issue.”

Wood has frequently highlighted the plight of low-paid workers, like “bus drivers, supermarket workers, and cleaners” who have helped New Zealand through the Covid-19 pandemic.But MBIE’s advice is to target such sectors and occupations specifically rather than apply a scattershot remedy.

Hope also noted that the current course is all the more baffling in light of both Covid-related disruptions to the workforce and chronic labour shortages that highlight the importance of labour market flexibility.

Erling Rasmussen, a professor of work and employment at AUT, said the plan for FPAs will help form a suite of new labour market policies and approaches ushered in by the Labour Party since 2017 (including large annual increases to the minimum wage). Taken as a whole, he said, the programme of change is the most radical since the Employment Contracts Act of 1991.

Paul Goldsmith, National’s workplace relations spokesperson, said “the foundation for New Zealand’s moderate economic success is labour market flexibility” and FPAs would take employment relations “in the wrong direction”. Given the opportunity to form a government, Goldsmith said, National would repeal FPA legislation.

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