Fair Pay Agreements Bill

Members, the House is in committee for further consideration of the Fair Pay Agreements Bill. When we were last debating this bill, we were considering Part 6 of the debate on clauses 114 to 129, which is the content of fair pay agreements. The question is that Part 6 stand part, and the Hon Paul Goldsmith has the call. He has one minute and 12 seconds remaining, should he wish.

Hon Paul Goldsmith: Twelve seconds?

CHAIRPERSON (Hon Jacqui Dean): One minute and 12 seconds.

Thank you, Madam Chair. Well, I will just finish my speech, and, as I recall, I was surrounded by a very large crowd supporting Trevor Mallard for his valedictory. I sensed that quite a few of them were union supporters and not particularly keen on my particular insights on that matter, so it’s nice to have a clear audience here.

What I was trying to say, and what I’d like to just come back to in slightly more detail if I get a chance, is that we’re at Part 6 of the Fair Pay Agreements Bill, which is misnamed, in our view, because it’s not fair and it’s about mandatory union deals. But Part 6 is the important part of the bill which focuses on what needs to be included in the fair pay agreements, and there is a list under clause 114 of things that must be in the agreement: the date on which it comes into force, the coverage, the type of work covered, the minimum base wages, the rates of payment for overtime, penalty payments—[Time expired]

Thank you, Madam Chair. It’s my great pleasure to take what’s my first set of questions for the Minister in this bill, not being able to on previous days. My concern relates to clause 120, “Minimum wage exemption permits”. This has been something of a talking point for many, many years, going back to when Ruth Dyson attempted to, I guess, be rid of minimum wage exemptions, much to the chagrin of those who benefited from them, back in the Clark Government years.

For those who aren’t familiar with minimum wage exemptions, these are permits issued by the labour inspectorate for people with disabilities, often intellectual—and often through organisations that are euphemistically known as sheltered workshops—who nevertheless provide a valuable service to their clients and to those members of the disabled community but nevertheless would not be productive enough to earn the adult minimum wage.

The way I read clause 120 is that the minimum wage permit process will continue, but if the employee already has a permit, and the organisation is then covered by a fair pay agreement that sets out the minimum base rate that’s equal to or greater than the minimum wage—which is kind of obvious because it would have to by law—then that permit continues unless the minimum wage exemption is set at the percentage of the adult minimum wage.

Now, clause 120(3)(a) says that “if [a] permit is expressed as a percentage of the minimum adult wage … set [out in] section 4 of the Minimum Wage Act … the rate of wages must be calculated by applying that percentage to the minimum base wage rate set [out] in [a] fair pay agreement” ergo, despite the fact that there isn’t a change in the productivity of the person with a disability who has a minimum wage exemption, the cost to the employer will go up, potentially quite materially, depending on what the fair pay agreement comes up with. Now, that could be a problem for the employee. In fact, the employee may not benefit from that, because, almost always, those who are the subject of a minimum wage exemption are eligible for other income supports that are abated if the individual’s earning potential goes up.

So my questions around this are: firstly, can the Minister advise the committee what proportion of those, I think, about 800 or 900 people who are the subject of a minimum wage exemption have that exemption expressed as a percentage? So how material is clause 120(3)(a)? I understood that it was more of a dollar amount, in which case, clause 120(3)(b) would apply and the rate just goes until the permit expires.

If there are a large number of people who do have that permit expressed as a percentage, then am I correct in assuming that simply by way of settling the fair pay agreement, their income, the mandatory amount that they should be paid, should go up, despite the fact that a labour inspector has determined that their level of ability to contribute, their productivity, has not changed?

Thirdly, will the Minister commit—and this is the money shot, really—to ensuring that the changes in this legislation will not negatively affect those people who are the subject of a minimum wage exemption? If he has visited any of the organisations around the country that use these—and in my patch, it’s Cargill Enterprises in South Dunedin, who do a fantastic job, not only for their clients, the people who buy their services, and that’s Air New Zealand and a local gas fireplace company that has wooden pellets assembled for their freight movements—they will not be negatively affected, but it’s the staff themselves, those people with disabilities, who absolutely love coming to work every day. I have a family member who works there, and the money is important. He’s paid fairly; he’s very productive, despite his intellectual disability. It would be a tragedy if, as a consequence of these changes, those roles were put at risk. So we need a commitment that that’s certainly not his intention, to dispense with the minimum wage exemption process, but also his confidence that that won’t happen.

Thank you, Madam Chair. It’s just good to be here in the Chamber after the long weekend. I sort of touched on this a little bit last week, but I wanted to explore it more broadly in relation to my own experience in the private sector, which was in financial services, which is a significantly sized industry with a number of workers in the New Zealand workforce.

We’re talking about applying minimum base wage rates here. How would you apply this across sales roles, not just in financial services but you’re also going to look at, say, any sales role in a sense? I’ll take real estate agents, for example. Some of them will be on straight commission; some of them will be on wages plus commission. There’s quite a balancing act in that regard. How do you cater for this? Because what it looks like is that this is quite a blunt tool, probably designed for an era that we are no longer in. The issues we have here with where the modern workforce is at is that it’s a lot more specific to industries and workplaces around how they’re designed. So I’d like to know, Minister, how you would address something like that in a sales environment where people have got a wage structure—wage plus commission—and others are just purely on commission? I’ve got friends who are in that boat, because they opt to go straight for the commission option because that motivates them and that’s the way, they believe, they can make the most money.

With regards to 114(1)(d)(iii), it mentions “overtime worked”. Now, I know in the professional services industry, a lot of people will not have specifics around overtime; it will be expected that you will work until the job is done. That will also work in your favour sometimes; if you complete the task, then you are able to leave early, be what may, but there is also an understanding that it’s not, say, like factory work where you’re producing—which is probably more what this could be designed from—something and you work an eight-hour shift. But in a lot of professional workplaces, that won’t be the case. As you would know, Minister, from your time in Parliament, sometimes there’s not such a demand and sometimes there’s significantly more, so you’re expected to meet those needs as that comes through.

Also, how would you apply that across, say, the financial services sector where you’ve got numerous different roles within that? Some people will be stock brokers, some people will be analysts, and some people will do eight hours a day just on something fairly mundane like data entry. They are going to have significantly different hours and expectations. I know that you would’ve consulted quite vigorously on this, so I’d be interested in the feedback sessions from professional services industry and what feedback they gave you around how this bill could impact them in relation to the base wage rates and around the overtime worked.

I’d also note, just going down a little bit to the “training and development”, clause 114(1)(da), that I see a bit of an issue around how that could be applied, because if you’re doing it across an industry, you are going to have some companies within that industry that are very large and have got all the extra resources, like training and development staff. Some are just little mum and pop operations with a couple of staff, so they’re not going to necessarily have the resources that the bigger players would to be able conduct that training and development. With that, are you going to set base training and development requirements across the whole industry, and, if you are, what considerations have been given to the resources that some may have versus some that may not have access to that? Those are probably my major points on that, so I will leave it with you, Minister. Thank you, Madam Chair.

Madam Chair, thank you, and thank you to members for their questions as we carry on with this committee stage of the debate.

In respect of the Hon Michael Woodhouse’s questions, which relate to clause 120 and minimum wage exemption permits, I think the key point to be aware of here is that exemption permits will, effectively, operate in the same way against pay that is set through a fair pay agreement (FPA) as they will act as against the minimum wage.

The important thing here is that FPAs will set the minimum legal entitlement for the purposes of pay. It’s just an important point to reinforce that when FPAs are established, they will not actually have the legal character of individual employment agreements or collective employment agreements: they will be brought into force via statute and will form the minimum legal entitlements for certain terms and conditions that are described in this part, including pay.

So, effectively, this provision will work in the same way as it works as against the minimum wage. If a permit says 80 percent of the minimum wage, it will apply to 80 percent of the minimum rate in the FPA. So, effectively, the relativity of that person who the exemption permit might apply to because of their disability will be retained. If there wasn’t this mechanism in there, those people would potentially end up being paid disproportionately less than other workers otherwise. I’m afraid I don’t have information to hand—and neither do officials—in terms of the percentage of people who have a percentage. I’m happy to try and find that out, but we don’t have that at the moment.

In respect of whether this will have a negative effect on employment, this is really a broader question and debate around the Government’s intention that FPAs will improve pay and conditions for many workers who they cover. Our view on the whole is that that will not negatively impact employees. I accept some members opposite might have a different view on that as just a difference of view, but we do not believe so.

In response to Mr Uffindell’s question, he notes that the financial services sector is large, and so how will minimum rates apply across a large sector that might have varied roles? Well, I think the core answer here is one that we’ve canvassed quite a bit in this debate, which is that FPAs set minimum standards and there is capacity for employers, employees, and unions—at the collective bargaining or individual bargaining level—to vary terms and conditions over and above those minimum standards. So in the same way that there might be a collective agreement that’s in place at the moment that sets minimum conditions, people can still have more than what’s in there, just not less than what is in there.

In terms of questions about mandatory content in 114(1)(d)(iii), I think it’s a somewhat unlikely example he raises, but it’s theoretically possible that the good stockbrokers and analysts of Queen Street might want to organise themselves into an FPA. The key point here is that the Government will not set terms and conditions for those people. They will, through their representative mechanisms, bargain for what they think are appropriate terms and conditions in respect of hours or overtime or whatever.

The mandatory-to-agree provisions described in this part are simply headers. What is actually then bargained and agreed for each of those mandatory terms and conditions is entirely up to the parties to work through as they see fit—and will inevitably vary from FPA to FPA depending on the nature of that occupation or that sector and what seems sensible to the parties who are at the table.

And really, that same point applies to the provisions around training and development. I note we received very strong representations at select committee—and this is one of the changes made at select committee—that training and development should be something that’s in here because a core goal of FPAs is to drive a more productive workforce that provides more and better training pathways for people. But exactly how that is established will be up to the parties to bargain for themselves. It could be that the parties bargain for themselves that there is not a substantive additional requirement in place.

Thank you very much, Madam Chair. I want to carry on a little bit from the questioning by my colleague the Hon Michael Woodhouse around the minimum-wage exemption permits. This is particularly pertinent for me. I served on the Southland disAbility Enterprise board for a number of years, and I was there when Helen Clark sought to get rid of this in the early 2000s, which caused a lot of consternation, obviously, to that organisation. I very recently visited Abilities Group in Auckland, Attainable in Auckland, as well as Altus—they are three enterprise entities that serve a similar purpose, and, of course, my colleague has talked about Cargill Enterprises in Dunedin.

I heard the Minister’s answer to the questions about the minimum-wage exemption, but I am still a little concerned about the level of flexibility that is needed for the staffing or for the staff involved in these enterprises. If I can give some examples, because the Minister talked about how it would relate to the fair pay agreements set for that work—but in in the case of these enterprises, they are constantly looking for different work to attract into their enterprise. It may vary from untangling the headsets from Air New Zealand one week, to the packing or repackaging of spices another week, or to dealing with recyclables, particularly around e-recycling. So they are, within these enterprises, moving across different types of work, week to week, and, in fact, sometimes day to day, particularly when these enterprises have to take cognisance of the skill level of a person on any one day.

I think of a young gentleman that I know well in Recycle South, previously Southland disAbility Enterprises, who, from time to time, suffers from very bad epileptic fits. When that occurs, he will be very sleepy and very difficult to motivate for the rest of the day, so he may well be moved from working on the MRF—the material recovery facility—which is the big conveyor belt that does all the sorting of the recyclable materials. He may be moved into a much more repetitive and mundane task that requires less from him during the rest of that day. So I can see there being difficulties if the minimum-wage exemption is set against one particular negotiated fair pay agreement for a specific type of work, and yet the people within the enterprise are working, perhaps, across different types of work within not only a day but across, of course, a week, as different types of work comes in for them.

So I’m still not clear how the minimum-wage exemption permits will work for those enterprises. And I hope that they are not going to be struck with the administrative burden of having to try and make proportions of the day in one type of work that has one fair pay agreement minimum wage set, and then having to look at other rates for the rest of the day. Being very cognisant of how little administrative support they have in these enterprises, I’m just not convinced—from the Minister’s answer—that they are not going to be heavily burdened with a lot of extra administration within this. Thank you.

Briefly, in response to the member’s question, there is nothing qualitatively different that will apply here as compares to what qualitatively applies outside of the fair pay agreement (FPA) regime. I don’t imagine that the employee that Ms Simmonds has described who might do different types of work depending on their circumstances will have different rates of pay at the moment. They’ll probably have one rate of pay that the employer pays to that person, and the minimum wage exemption process might apply a percentage of the minimum wage to that person. That is likely to apply in the same way under an FPA; it’s just that the base starting position for what the wage is, rather than being the minimum wage, will be the minimum rate that is specified in the FPA.

Thank you, Madam Chair. I just want to make a brief comment in support of the intervention by Penny Simmonds but also in response to the Minister’s two answers—very thoughtful answers; thank you, Minister—to this important issue. When he answered my question, he talked about the scenario of 80 percent of the minimum wage. Now, my experience of the enterprises like Abilities, Southland disAbility Enterprises, and Cargill Enterprise is that if somebody was at 80 percent productivity, they’d probably be on full minimum wage. That’s the way that these guys operate.

I’m sure the Minister is familiar with Marxist theory of surplus value in labour. Well, actually, this works in reverse where it’s quite often the case—even with a labour inspector’s assessment of the productivity of the employee—that they’re paid more than their productive output. The organisations that run these schemes are perfectly happy to accept that negative dividend, if you like, on their productivity because of the other value that is provided by the meaningful nature of the work and the enthusiasm with which these people—some of them are severely disabled, blind, or intellectually disabled, but they live to come to work, to be and feel productive. So we’re more likely to have percentages that are lower than that.

I know of percentages—well, I should restate it. In my time as Minister, there were percentages as low as 15 percent of the minimum wage and there was very little productivity involved, but the value was exponentially greater than that. My point is this: if there’s a high proportion of those 800 or 900 minimum wage exemptions that are related to a percentage, automatically with the passage of this legislation, their rates of pay will go up from the minimum—rather, when a fair pay agreement is set, if one is, then their rates of pay go up. They’re already probably above the productivity that is created. That tipping point where it becomes uneconomic—just simply not able to continue—I think is very real.

That risk is real, so I would encourage the Minister to be cognisant of that as this bill progresses and as fair pay agreements progress, because I think I heard him say that he doesn’t see a time when these minimum wage exemptions wouldn’t be around, and Penny Simmonds has got a much better memory of the Clark Government’s attempts to do that. I don’t think they were ignoble attempts, but they had just so many unforeseen consequences for vulnerable people that wiser heads prevailed in the end. I hope that wiser heads will prevail here but also that the mathematics doesn’t get in the way of an excellent scheme that won’t benefit the employee, bearing in mind that the other income supports available through the Ministry of Social Development would be abated and the in-pocket earnings of these employees would probably only marginally go up, if at all.

So I’d just encourage the Minister, but I’d also encourage the Minister to go to these workshops, if he hasn’t already. He may well have. They are uplifting places, places that I think have a great future for the wellbeing of our vulnerable New Zealanders.

Thank you, Madam Chair. I want to return to where we left off last week, and specifically in relation to clause 115, “Topics that bargaining sides must discuss”. I asked a question last week and didn’t get an answer at all. We were cut off as the Rt Hon Trevor Mallard was about to give his valedictory, so we didn’t get an answer to this question. But I want to expand on it and talk about it in relation to clause 115 about topics that must be discussed.

The issue that I raised that hasn’t been answered is around migrant workers. Migrant workers currently are required, for the most part—there are some exceptions—to be paid the median rate, which in February next year will be $29.66. So my overall question last week to the Minister was: how does this affect the bargaining? We’ve asked this question at the select committee and we didn’t get an answer. I asked it again last week and we didn’t get an answer. It would be good to hear from the Minister how he expects that when bargaining is under way for a base minimum rate for a particular job in a particular sector, the migrant rate of $29.66 will be taken into account, and whether it will affect the bargaining. As you can imagine, if you’ve got a Kiwi worker standing next to a migrant worker, the Kiwi worker may be earning $23 or $24 and the migrant worker’s earning almost $30 an hour, how will that affect bargaining? Because you can imagine, if you’re sitting around a bargaining table and there are a whole bunch of migrant workers being paid the median rate and Kiwi workers are being paid significantly less, you can imagine that that would have a significant impact on the bargaining, because the unions and people who are party to the negotiating on the employee side would want that taken into account.

Nowhere in this bill and nowhere in any of the discussions at select committee have we talked about this or worked out how it’s going to be accounted for. It’s not included in clause 115 about topics that must be discussed, so we’re not required to talk about people on higher rates doing the same job. So I presume that it will just be something that comes up in conversation. And I guess that following on from that, the next question is—and this is not impossible—that a fair pay agreement takes all these things into account, under clause 115, and it comes up with a base minimum rate that is higher than the migrant rate of $29.66. It’s possible. The Minister might say that it’s unlikely but it’s certainly possible that that minimum rate may be negotiated at a higher rate. So my question to the Minister then is: what happens to the migrant rate? Are they bound by Immigration instructions which require them to be paid the median wage at least, and it is that going to be fine or will they then be pushed up to the new minimum rate? That’s a second question. So the first question is around how migrant wages, the minimum rate—in effect it is a minimum base rate for migrants—will be compared to Kiwis in these negotiations. And the second part is: what if a fair pay agreement is negotiated at a higher rate than what the migrant is required to be paid?

My next question is around a clause we haven’t discussed yet, clause 119, similarly in relation to migrant workers, because this could possibly come up. So clause 119(3) states, “If a fair pay agreement provides a minimum base wage rate that is higher than the minimum wage payable under the Minimum Wage Act 1983, the Acts listed in subsection (1)”—which are the Holidays Act 2003, the Minimum Wage Act 1983, and the Wages Protection Act 1983—“apply as if the minimum base wage rate provided under the fair pay agreement were the minimum wage provided under the Minimum Wage Act 1983.” That’s a mouthful but the Minister knows what that means. My question is: what happens to the migrant worker who is on a different rate than what is negotiated in the FPA? So the FPA negotiates a rate that is, say, $24 an hour. The migrant worker is required to be paid $29.66. So does the FPA kick in and does clause 119(3) apply to the migrant worker, and do those Acts listed reflect that median rate for that migrant worker or does it revert to the FPA so all of those Acts would assume that the FPA rate is the rate that the migrant worker is working under.

So it’s quite complicated. I know the Minister will understand it, and hopefully he can give me an answer on each of those three individual parts.

Happy to answer the member’s question. The starting supposition of the member is an accurate observation that for some—but not all—migrant workers, there will be a wage requirement that is a condition of their visa. So the member refers particularly to the median wage requirement, which is a requirement under the Accredited Employer Work Visa. There will be other categories of migrant visa where there is not that requirement in place, but many will come in on that rate.

The observation she makes is relevant now, before fair pay agreements (FPAs) have taken effect. There will be workplaces where a migrant worker enters under the Accredited Employer Work Visa on that median wage requirement, and that wage rate might be different to other workers who are within that workplace right now. That will be the case across workplaces where everyone is on individual employment agreements, and it could be the case if that workplace has a collective agreement that is in place. So it’s not a new and distinct issue to consider. It might have slightly wider application to a slightly bigger group under FPAs, but it’s not fundamentally different from what we deal with now.

The answer to the first part of the question is that that migrant worker, to be able to get that visa to work in New Zealand, has to be paid at the rate that is specified in instructions for that visa. That’s the entry point. If they then work in an area that is covered by an FPA, they will have to be paid at the minimum rate that is in that FPA. So if the minimum rate in the FPA is higher than the rate that was required for their visa, then they will have to be paid at that higher rate, effectively.

How that might affect bargaining: if there are migrant workers who have that rate and other workers who are at different rates—that will be for the bargaining parties to determine amongst themselves in the bargaining process, as it would be under a collective agreement bargaining process now. In fact it will be—that will be playing out as we speak across collective bargaining processes. It will up for the parties to work through as they understand what is happening in that particular labour market.

Then in respect of clause 119(3), which relates to the fact that certain terms and conditions under FPAs are minimum entitlements, the member asks what happens if the migrant worker is on a higher rate than those. Well, the migrant worker is not affected, they are above those entitlements. If the migrant worker’s rate is lower than those minimum entitlements, they will have to be brought up as a minimum to those minimum entitlements.

Thank you, Madam Chair. I’m just a little bit concerned around these fair pay agreements, because, as you can guess, you’re going to be lumping many sectors together, and a lot of small businesses can fall into multiple sectors. I’ve just got a little concern here and am asking for clarification, because at the moment, a lot of the small businesses are under ACC as part of this. If you have maybe, say, admin people and you have construction people and you’re in a small business, and your admin people decide they’ll go with the administration fair pay agreement and your construction people decide they want to go with this, but the small business’ ACC levy is based on the company, not on what the people do. So even though you’re offering probably better wage systems for these people, but their ACC—so I don’t know if anybody has asked this question: how is this going to affect the individuals’ ACC levy if you have multiple people in industries? Because ACC has been done under what the business does, rather than what the person does within that industry.

As I said, like Sam Uffindell mentioned, within the financial sector there are many different roles within that big sector, so it’s going to be quite confusing. I’m just concerned that people are going to end up still paying more money and losing money under these fair pay agreements, because some of these older systems may not have been necessarily looked at.

The Fair Pay Agreements Bill will not have any impact on the ACC levies that people pay. That will be based on the type of work that people do, as assessed by ACC.

I move, That the question be now put.

No, no, this is a substantive part of the debate. I’m not hearing anything in the way of repetition. There are a number of members seeking the call, so I call the Hon Paul Goldsmith.

Thank you, Madam Chair. I want to move on to clauses 122 to 126, around the “Differentiation of application and entitlement”. The Minister and the Government have conceded that some form of regional variation is required for these fair pay agreements. Obviously, there was a lot of concern originally when the fair pay agreements were first mooted that it would be a nationwide straightjacket so that somebody working in Ponsonby, in Auckland, in a cafe, had exactly the same arrangements as somebody in Balclutha or the Hokianga or Haast or maybe just in Christchurch. But the circumstances and the situation of those different parts of the country would have different requirements, and things that may make sense in Auckland may not make sense in Hastings, for example, in terms of the sorts of things covered in the fair pay agreements, which include research and development, which include pay rates, which include leave entitlements, all those different things. So the difference between urban New Zealand and rural New Zealand and the ability of businesses to pay different rates, they have conceded in this legislation by allowing, in clause 123, for some variation.

So one of the questions I have for the Minister is: well, are there any limits on that variation? Clause 122 says that the basic sort of objectives and date and coverage of the agreement can’t be changed, but things that can be amended are the minimum base rates, overtime rates, penalty rates, leave entitlements, and so forth. There doesn’t seem to be any limit in the differences, but I’d be interested to know that.

Then, following on from that, of course, is: surely the logic for that exemption or the ability to have district variation applies equally when it comes to the size of businesses. Any just simple common sense would conclude—you know, any rational New Zealander would conclude that a business with 10,000 employees has far different concerns and arrangements and capability when it comes to arrangements regarding training and development for covered employees than a business with two employees. The example I’ve always used is the superette up in the Hokianga or a little place like that. So the difference between a company that employs one or two people in a small, little operation and another business that employs 10,000 people, the Minister does not seem to concede that there is any argument for the ability to differentiate when it comes to all sorts of things, as well as base pay rates and overtime worked, penalty rates, and all that speaks to the kind of flexibility that is needed much more in a small business environment. You know, it’s just so common sense, it’s hard to understand.

So my fundamental question I have for the Minister is: how can he see and concede and understand that there does need to be regional variation between Auckland and Hastings and New Plymouth and Hokianga, that there’s different requirements for different kinds of business environments in which they are operating but refuse to concede that there might be differences between a company employing 10,000 people and one employing two? The fiction that he seems to have in his mind is that all those businesses can handle things such as leave entitlements and arrangements for training and development in the same way. That, to me, doesn’t make much sense.

Thank you, Madam Chair. I am concerned, from the answer that I received to my previous question about the minimum wage exemption permits, that the Minister perhaps hasn’t got a full understanding of the type of work that goes on in these enterprises. I’m also interested that it is within the Fair Pay Agreements Bill when in fact the Minister, Minister Sepuloni, has said that it’s her intention that the minimum wage exemption permits will actually go within this term of Government. So I’m wondering if he can, first of all, confirm that he has had a discussion with Minister Sepuloni to find out whether that is actually still in the work plan for this this term, and, if it isn’t, then we really do need to get down to the real details of how this is going to work for the disability enterprises such as those that I mentioned before.

I want to be very clear about the range of type of work that can occur within these enterprises, and I know that the Hon Paul Goldsmith was talking about the flexibility needed in small businesses but, actually, the flexibility needed in these enterprises, which are large businesses. I will try and illustrate the example of the differences in tasks that might be undertaken. So, for example, someone working there on a wage exemption permit may be doing the cleaning for the enterprise, but his or her disability is such that on any given day he or she may not be able to do that type of work. Cleaning has been given as one of the examples where, you know, a fair pay agreement for cleaners is a likelihood. But on some given days, that person with the disability may actually have to go and work in another part of the enterprise where they are sorting and putting two screws into a metal plate that is then ready to be used for another purpose by another business—very repetitive work, work that perhaps doesn’t require anything like the level of skill or physical requirement of the days when that person does the cleaning job.

So they are that extreme, and when I said that one day a person might be repackaging large amounts of spices into small 10 gram bags, but then on another day when they are physically able they might be working in the timber yard, dismantling pallets and working with heavy timber. So they would be covered by very—well, I presume, I don’t know, because it’s hard to tell within here, but they could possibly be covered by very different fair pay agreements; you know, a cleaner’s fair pay agreement and/or one where they are in a factory environment, just doing repetitive work over and over with a small metal plate and a couple of screws, or dismantling large amounts of spices going into a small package where they have to weigh and use skills there, or, another day, working with timber.

I just can’t understand how there won’t be this big administrative burden for these enterprises, trying to work out what fair pay agreement each component of their work might be, remembering that they are out hustling for contracts all the time, and so they take contracts that are going to provide work for their people at the enterprise and they won’t know from one month to another—except for the ones where they have continuity—just what type of work and what fair pay agreement it would be covered by.

Working backwards, I’m happy to assist the members with their questions. In respect of Ms Simmonds’ previous question, the answer to this is in Part 1 of this bill, which we dealt with extensively last week, and that confirms that only one fair pay agreement (FPA) can apply to a worker, based on the FPA which covers the largest part of the work that they do. That is covered in Part 1 of the bill, which we had a good debate on.

In terms of the broader question about the future of the minimum wage exemption scheme, that is a question for Government, Cabinet, and the Parliament later. That scheme currently applies, so it needs to be reflected in the FPA legislation because the FPA legislation deals with minimum entitlements.

In terms of Mr Goldsmith’s questions around variants based on size, there are really two responses there: the first is to remind the committee of the fact that FPAs set minimum terms and conditions in the same way that the Government currently sets minimum terms and conditions across the minimum wage and minimum statutory entitlements. There’s still, then, flexibility for parties to agree different terms and conditions over and above that to reflect size, complexity, and capability. And that will still be the case with FPAs. In addition, within FPAs there is no constraint on the bargaining sides agreeing for there to be different provisions which apply to different groups within that FPA, provided that’s not inconsistent with other legislation.

Thank you for that. It’s not going to affect ACC, but say I’m an admin person and I’m working in a construction company. I don’t go out on to the construction site at all. Or I could be an administration person sitting in a bank. We’re doing virtually the same sort of administration, but we end up paying different ACC rates because, again, it’s based on what the company that you work for does.

So this fair pay agreement, if it’s not taking into account via smaller businesses, may end up having a few awards because of what that person aligns with, what they do within their role. Is that going to be fair on, say, the administration person in a construction company paying that higher rate—who don’t go out on scaffolding—to have to pay the same as someone that does? And especially when that’s saying that this fair pay agreement is part of it, that ACC hasn’t been looked into or—

CHAIRPERSON (Hon Jacqui Dean): Order! The member is—her speech is now out of order. [Interruption] Excuse me. I’m telling the member that her speech is now out of order. So if she would like to continue, she has three minutes and 58 seconds long. But reference to ACC is something which is not part of this bill—let alone Part 6—so I invite the member to continue.

TONI SEVERIN: OK. It’s just that I’m—the reason I was asking for this was because it is all to do with around awards and different awards within different organisations. And the reason I asked that is because I have been asked—

CHAIRPERSON (Hon Jacqui Dean): Order!

TONI SEVERIN: Yeah, I just—

CHAIRPERSON (Hon Jacqui Dean): Order! The member does not question the Speaker’s ruling. I’m encouraging the member to continue with her call. She has three minutes and 44 seconds left. I am listening very carefully for the member not to dispute my call, but to stay in order.

TONI SEVERIN: Thank you. It’s just that it’s just really confusing and, as we’re saying, I was just trying to get some—it’s around the different awards within industries, not going to bring in ACC—

CHAIRPERSON (Hon Jacqui Dean): Moving on.

TONI SEVERIN: OK. Moving on around that—

CHAIRPERSON (Hon Jacqui Dean): Look. Right. The member will resume her seat. I’ve asked the member—still relatively new in this House and she needs to listen. I’ve encouraged the member to stay in order. And if the member doesn’t pick up the hint, again, I’m afraid I’m going to have to terminate her speech.

TONI SEVERIN: Thank you. Because it’s all to do with different awards and different things within different industries and fair pay and how people are going to be awarded with what they do in the companies or what award they choose to be with, people just would like to know that there might be something down the track for them.

If they look at the award that best suits their roles within smaller businesses and with industries, people would like to know that there could be something down the track there that this Government will look at in other areas that affect their work and money that may be coming out of their bank accounts for them to be working in those different industries.

Where I was sort of leaning is that because we’re going to have these different awards, that people are going to look at what’s going to benefit them and their pocket within small industries. And at the moment, it’s supposed to be fair and in some it’s still not fair.

Thank you, Madam Chair. I was just responding to the Minister’s comments and I didn’t quite understand it. Maybe that’s my problem, but he seemed to be saying that I was making the point that the bill allows for regional variations, accepting the fact that a business operating in Auckland might have different requirements and needs than one in Hastings, for example, or the Hokianga. I asked why wouldn’t that same logic apply to differences between very large companies with 10,000 employees in, too, and he said it sets a minimum floor.

Anna Lorck: Great workers in Hastings.

Hon PAUL GOLDSMITH: Thank you. What I can’t sort of work out is if we have a regional variation where that minimum floor, when it comes to pay rates or leave entitlements and so forth, which may vary in different regions—I presume that is the point of the regional variations, that you would have a different minimum base rate potentially and a different penalty rate potentially or different arrangements in relation to flexible working potentially. All those things would be different, because I would have thought that was the point of regional variations. So I don’t quite understand why that logic wouldn’t also apply in relation to the size of the company.

Secondly, I wanted to come to my two amendments in this part. The first is amending clause 114, which is the mandatory content for each fair pay agreement, and my suggestion is that that should include the impact of the agreements on the productivity of the sector in which the agreement provides. Because the Minister has very, sort of, casually claimed that this misnamed fair pay agreement legislation would improve productivity in New Zealand’s workforces and he’s offered no evidence whatsoever to back that up. So I’m just curious as to how he thinks that’s going to happen magically. But if it’s good enough to debate and include in a fair pay agreement arrangements for training and development and for leave entitlements, why does it not also have to include, if you’re going to have this—and of course, we don’t want to have these at all, but if you’re going to have them, surely some recognition of the need to discuss and consider the productivity of the workplace and the occupations, because ultimately it’s only improved productivity that leads to higher wages in the long term. You can legislate for them as much as you like and you can force companies to do it, but ultimately if the businesses are not productive, it won’t be sustainable. So my suggestion is why is that not part of the mandatory content? I just have a suspicion that he won’t agree to that. He may do; I don’t know. He could surprise me. You never know; he might agree to it.

But if he doesn’t, then my fall-back position is that it should be included in clause 115, which is the list of topics that bargaining sides must discuss. And I can’t think of any objection that you could come up with to argue against including it, at least in the topics that must be discussed for a fair pay agreement. So alongside health and safety requirements, alongside arrangements for flexible working, and alongside the objectives of the proposed agreement, why on earth would he not include a discussion around the productivity of the workforce and the occupation so that the two sides who are bargaining have to have a discussion and, if needs be, an argument about how we make our workplaces more productive? Because that is the key challenge for so many workplaces, and a focus purely on entitlements and allowances and what you’re going to get paid, without relating those to the productivity of the firm, I think would make it very difficult. It would be a limited discussion and not helpful. So that is my point there.

Finally, in clause 116, we have subclause (2), referring to any fair pay agreement that is contrary to law, and I wondered what he had in mind there. I presume he might have in mind things that might breach competition law in relation to cartel activity and agreements. I’m not sure, but I’d be interested if he was able to enlighten us as to what he had in mind in relation to clause 116 as well.

Thank you, Madam Chair. In respect of the member’s first question, I have already answered that. The reality is, as I said, that unions and employers can negotiate for differential terms and conditions based on the size of enterprises. In terms of the member’s suggestion, via an amendment, of inserting a discussion about productivity, the Government doesn’t agree to that, and the reason is that fair pay agreements (FPAs), as the member accurately describes, set terms and conditions for employees. Productivity is an outcome that we hope will arise from fair pay agreements and other investments that the Government is making. If we were going to insert productivity, then we could insert other measures, such as the happiness and satisfaction of the workforce and you could go on and on. Those are outcomes. FPAs are about setting minimum conditions, so a measure such as productivity is important but doesn’t fit into the space.

In respect of clause 116, it is simply about ensuring that FPAs which do get brought into force by a secondary piece of legislation are consistent with other laws. There’s nothing specific about which laws—they have to be consistent with all other laws.

Thank you, Madam Chair. I want to move on to clause 121A, differing minimum wage rates, the starting-out rate and the training rate. My questions here are around the ability of the bargaining side, on the employee bargaining side, to, effectively, get rid of the training rate or the starting-out wage. Now, obviously, these are set out in the Minimum Wage Act, section 4A(1)(c)(i) and (ii), and are set out under regulations. So my question to the Minister is around the ability of the union—because in most cases, the lead bargaining side on the employee side will be the union, and their views, as far as I’ve heard, on those starting-out rates and the training wage have not always been favourable.

So my question to the Minister is: in the fair pay agreement negotiations, is it potentially possible that the—because the first thing I’d note, in clause 121A it says, “A fair pay agreement may specify a starting-out rate”, and it says “may” a couple of times when talking about the training rate and the starting-out wage, so it’s not required to be negotiated. So my question firstly is: if it’s not negotiated, I presume, and can I get the Minister to confirm, then is the fall-back what’s set out in regulations under the Minimum Wage Act? But if the union on the employee side is particularly aggrieved by a starting-out rate or a training wage—and we have to remember that those are set out to give young people and people who are just entering a sector a go and give them a step up into that job. Is it possible for the union to negotiate so that those rates do not exist anymore? Could they go into a negotiation saying, “We don’t want these rates. That’s our bottom line. We insist, if there has to be one, that they are the same as the base rate of pay that we’re negotiating for every employee.”, thereby, effectively, getting rid of the training rate and the starting-out wage?

Further to that, in clause 121A(2)(a)(i) it states “the date on which the employee … completed 6 months’ continuous employment”. Is there the possibility for the negotiating side, the union side, to negotiate that down, so from six months down to two months or three months, if they don’t think that a starting-out wage should carry on for six months? Is that possible in these negotiations?

In the last part, staying there, though, in clause 121A(2)(a), the very first words in that line are “may pay the employee in accordance with that rate only until the earlier of”. Is it an oversight there that the word should be “must” rather than “may”? It would make sense, in this context, that the word should be “must” rather than “may”. So I presume, unless the Minister can correct me, that that may be an oversight, and should, in fact, say “must”.

So going back to my question: firstly, is the employee side able to, basically, negotiate out of a starting-out and training wage rate by setting it at the same price as the floor that they’re negotiating for everyone? Can they also negotiate out of the six-month minimum to make it less; for example, one or two months? And then also that final part of that question, the third part is: should that word be “must” rather than “may” in clause 121A(2)(a)?

Thank you, Madam Chair. I’m just responding to the Minister’s reply again, where he said that the fair pay agreement was about terms and conditions and that productivity was an outcome, and, therefore, it’s something that shouldn’t be considered directly through the legislation as a mandatory topic. Then I’m looking at clause 115 where it says “(1) When bargaining for a proposed agreement, the bargaining sides must discuss whether the proposed agreement will specify the following topics: (a) the objectives of the proposed agreement:”. That’s not the terms and the conditions; it’s the objectives, and I would have thought that one of the objectives would be to make it a happier workplace, as he referred to—perhaps. One of them might be to make it a more productive workplace, another one might be just to get higher wages, another one might be to have longer holidays—I don’t know. There could be a whole lot of objectives, but I would have thought that given that clause, a more productive workforce may be something that was coming.

Now, the only point that I was trying to make with my amendment was to highlight further the question of productivity, because it is so critical. We have a bit of a disagreement with this current Government about how we improve wages as a country. Fundamentally, in our view, on that side the Government seems to think that there are two primary levers that they can pull. One is to legislate for higher wages through higher minimum wages or longer holidays or fair pay agreements, and aggrandisements like that—so, firstly, legislate for them—and then, secondly, starve off immigration, and that forces up higher wages. That seems to be their approach. Our argument is that actually, yes, you can do that, but long term, the only sustainable way to improve wages in the country is to have more productive businesses that are more internationally competitive, that can compete with the best in the world, and that can deliver more product for the number of workers and the capital employed.

So that is why it is so important, and I would have thought that if clause 115 refers to the objectives of the proposed agreement as being something that must be discussed, it’s perfectly rational and it follows logically that that discussion should include a discussion around the productivity of the workforce and the impact of the decisions made in the workplace agreement. The most obvious one would be a shift to hourly rates rather than piece rates—that is, the number of apples picked versus an hourly rate. A shift in the balance between those two things can have a very significant impact on productivity.

The ability to pay excellent workers who are highly motivated and very hard-working differently to other workers is also related to productivity, and the Minister will say, “Oh well, this is only a floor. You can add higher rates to whoever you like.” But if the floor is so high that that is all that the business can afford to pay and it’s really at the margins, there is less flexibility because you don’t have the extra resources available to pay the higher rates to those who you want to pay more. The higher the floor goes, the less flexibility there is for most businesses—not all businesses. So I can’t quite see the logic for his dismissal of that point, and I’d like him to maybe just see if he could reassure us more on that topic.

Thank you, Madam Chair. I want to move on to getting towards the—I am, anyway—end of the section. I want to go on to a new part we haven’t talked about yet, clause 129, which is the delayed commencement provision.

This is an unusual provision, and I wanted to ask the Minister to give us some examples of when this might apply. It’s not something that came up in detail in select committee, but I’m interested to know because, in clause 129(1)(a), the bargaining sides must be satisfied that “declining the employer’s application would result in a less favourable overall outcome for the employer’s employees when approving the application;”, so under what circumstances would that happen? Under what circumstances would we find that by not implementing the fair pay agreement (FPA), which has just been negotiated, the employees would be worse off than if it was implemented immediately? This is not something that came up, and I’m interested in a situation where this could possibly happen so that that the FPA for that particular employer can be delayed—you can see, potentially, a number of employers wanting to have the provisions of the FPA delayed for their own purposes—but in terms of the employees being in a less favourable situation: if it was employed right now, compared to if it was in place later on.

So I’m not aware of any situation where that might be the case, and I was hoping that the Minister could give us some examples of when that might possibly happen, in relation to clause 129, “Delayed commencement provision”, so that we can better understand that clause. I’ve got more questions around that, but I want to make sure that I’m on the right track before I ask them. Thank you.

Working through questions from Erica Stanford and Paul Goldsmith in respect of the ability of parties to bargain for starting-out rates and training rates, it is as described in the bill. It is an ability for the parties to bargain for those, provided they do not go below the minimum statutory requirements. It is a “may” provision that provides parties with the flexibility to bargain as they see fit, dependent on their sector or their occupation. In particular, in terms of the provision around six months, the rate cannot extend for longer than that, but it could be shorter than that if the parties agreed to that through bargaining. It’s entirely up to them within those provisions.

In terms of Mr Goldsmith’s point around clause 115, he’s not wrong. Clause 115 describes the objectives of the fair pay agreement (FPA). That part is not about the terms and conditions. If parties did wish to include wording around productivity within that, then they could.

When it comes to Erica Stanford’s questions around clause 129(1)(a)—the delayed commencement provision—that will ultimately be up for the bargaining sides to determine, based on arguments that are made to them. But a potential situation in which that could apply is if a particular employer, let’s say, got most of their revenue for most of their business from a particular contract that required them to organise their work in a certain way and it was going to take some time for them to reorganise their affairs to be consistent with the FPA, the delayed commencement provision provides the ability for that employer to do that.

I move, That the question be now put.

The question is, That the Minister’s amendments to Part 6 set out on Supplementary Order Paper 264 be agreed to.

The question is that the Hon Paul Goldsmith’s tabled amendment to clause 114(1) be agreed to.

The question is that the Hon Paul Goldsmith’s tabled amendment to clause 115 be agreed to.