Wage negotiations are becoming tougher, with the First Union leading the pack as it adopts more aggressive tactics to win higher than average wage settlements than competing unions, says Adelhelm & Associates in its 10th annual review of recent wage bargaining.

The specialist industrial relations negotiation firm says First Union consistently achieved higher average pay agreements than its main rivals, E Tu and the Amalgamated Workers Union of New Zealand (AWUNZ). The three overlap in the industries they cover, with First Union representing workers in the retail, finance, commerce, transport and manufacturing sectors.

The survey of some 210 collective agreements covers a who's who of New Zealand's largest employers, including dairy processor Fonterra, electricity network owner Vector, construction firm Downer, as well as banks and supermarket owners, among a total of 65 organisations.

The report covers wage settlements spanning three years from 2018 through to next year. It shows First Union averaged increases of 3.15 per cent over that period, against averages of 2.44 per cent for E Tu and 2.1 per cent for AWUNZ.

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"First Union is putting a lot of effort into higher wage increases. We see it in recorded industrial action and in our own experience with the union across the negotiating table," said Adelhelm principal consultant Anna Holmes.

"They have changed their negotiating behaviour in the last 12 months because they consider themselves an activist union and they're pushing the boundaries."

"Tactics include opening high, holding out for higher rates and holding the line when their demands aren't met. It's working for them, as we can see from the higher increases they have achieved," said Holmes.

Just last weekend, First Union reported that clothing chain H&M had suspended workers for wearing union-provided stickers supporting their claim to be paid the 'Living Wage' of $21.15 an hour, above the statutory hourly minimum wage rate of $17.70.

"The years under a National government have made employers complacent to the extent that many have been caught off guard by aggressive union bargaining," said Holmes. "From my perspective, it looks as if they're not doing their homework in as much detail as they should be."

Firms had become accustomed over the last decade to rolling over existing employment agreements, but found "that's not necessarily achievable this year," she said.

While wage settlements covered by the survey ranged from zero to 6.6 per cent, the overall picture was one in which "employees are standing on a good ground with their increases".

The latest survey was taken in another year of very strong employment data in New Zealand, with labour market participation rates hovering near 80 per cent – high by OECD standards – and unemployment falling close to 4 per cent, a level typically regarded as 'full employment'.

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Adelhelm's clients were finding it harder to hire staff, Holmes said. She was unable to say whether the tight labour market conditions were behind the improving outlook for wage settlements.

Adelhelm forecasts upcoming settlements will be in the "2.2 per cent-to-3.2 per cent range, but highly dependent on the union involved", she said.

Public sector wage settlements and significant annual increases in the minimum wage through to 2022 also put pressure on private sector wage demands, with an increasing problem of "wage compression" emerging.

"Companies who have never previously been minimum wage employers are suddenly finding themselves in that space," the report said.

"Be mindful of the potential impact this can have on pay rates and employee dissatisfaction higher up the pay curve. Careful, pro-active remuneration management is required by organisations as they navigate through 2019-2021.

"Unions are feeling more invigorated and empowered on the back of significant settlements like that achieved by the nurses, teachers, St. John Ambulance and Jack's Hardware/Mitre 10 Mega. Unions and employees are more confident and employers are being taken by surprise," said Holmes.