Pay equity in focus: From left, Nicola Willis, Finance Minister, Catherine Beard, Business NZ, Alan McDonald, EMA, Tracey Martin, Aged Care Association, and Alex Davies, PSA. Graphic / Phil Welch
Pay equity in focus: From left, Nicola Willis, Finance Minister, Catherine Beard, Business NZ, Alan McDonald, EMA, Tracey Martin, Aged Care Association, and Alex Davies, PSA. Graphic / Phil Welch
Opinion by Audrey Young
Audrey Young, Senior Political Correspondent at the New Zealand Herald based at Parliament, specialises in writing about politics and power.
The Government’s changes to pay equity law are expected to reduce claims and settlements significantly.
Employer groups have mixed reactions, welcoming cost savings but criticising the rushed legislative process.
Unions argue the changes create barriers for women, cancelling claims for 180,000 workers.
The response to the rising costs of pay equity sounded pretty simple.
Narrow the grounds on which women can make a claim, enhance employer powers to reject claims and, in case women head to the courts, limit the ways in which courts can find in favour of workers.
href="https://www.nzherald.co.nz/nz/politics/hundreds-brave-downpours-to-protest-govts-pay-equity-changes-mps-claim-misinformation/7SSEWQEUKFBC5HOOO6FLRAGNFY/" target="_self" rel="" title="https://www.nzherald.co.nz/nz/politics/hundreds-brave-downpours-to-protest-govts-pay-equity-changes-mps-claim-misinformation/7SSEWQEUKFBC5HOOO6FLRAGNFY/">The gutting of the previous law under urgency will almost certainly result in fewer pay equity claims and smaller settlements.
And that is about the only thing the Government, unions and employers agree on.
However, one employer group has criticised the process, stating that pay equity is so complex that it requires broad agreement to be effective.
Another said settlements agreed to by the previous Government did not take account of consequential market forces that have put some private businesses under huge stress.
And one sector is worried by signals from Finance Minister Nicola Willis that Government is taking a hands-off approach to claims in the funded sector – private organisations that are funded to provide Government services.
The estimated reductions in future pay claims and settlements gave Willis $12.8 billion in savings to reallocate over four years when she produced her Budget a month ago.
Employer groups have largely welcomed the outcome, although not necessarily the rushed process by which the changes were made, over two days of urgency in Parliament.
Alan McDonald, head of advocacy and strategy at the Employers and Manufacturers’ Association in Auckland, says the process was “pretty awful”.
And he is worried that the pendulum will simply swing back the other way whenever there is a change in Government.
“I think what concerns us is the way it was done.”
He is happy that the amendments took pay equity settings closer to 2017 and a law drafted under the Bill English National Government.
“We’re okay with that, but we are not okay with the way they went about it because it is a complex area that needs broad agreement, so people get it done properly.
“That’s not what was done here.
“And retrospective legislation is never a good look.”
He is referring to the mandatory cancellation of 33 claims in train and claims before the courts, but it also reaches into existing settlements and removes mandatory review clauses.
McDonald wouldn’t go so far as to say that the settled pay equity cases were not deserving.
But he said that because the barriers for taking a claim had been lowered in 2020 – under the Jacinda Ardern Government - there had been more cases than would have met the previous test.
“We saw a surge in numbers.”
“We had widespread agreement between both sides in 2017 [unions and employers], and in 2020, it got changed to make it easier for unions and harder for employers to say no.
“It’s the balance. Our concern is the way it has been done, and the next time the Government changes, the pendulum will swing again, and that is unhelpful for everybody.”
If there had been proper consultation this time, who knew what the outcome would be?
“But it wasn’t, and the process around this has been pretty awful, to be honest.”
He noted that not many of his members were involved in claims and that pay equity was very much an issue for employees, either directly employed by the Government or by private sector employees funded by the Government to provide services.
Since 2017, there has been only one truly private sector claim, and that was of veterinary nurses claiming from privately funded employers. He believed they would be able to make a case under the new law.
“The biggest cost of any business is the workforce”
Pay equity is different to equal pay, which is about being paid the same amount for the same job.
Pay equity is about being paid the same for work of equal value, which is when a group of women workers claim they have been systemically undervalued and paid less because it is women’s work compared to male-dominated jobs [known as comparators] with similar levels of skill, responsibility, effort and conditions of work.
Between 2017 and the 2020 act, three pay equity claims were settled in total. After the 2020 act and before the current Coalition was elected in 2023, 13 were settled, and 33 new claims were lodged. One has been settled under the current Government.
Catherine Beard, the director of advocacy at Business NZ, said some of the settlements between the Government and its employees have had a big impact on some businesses in the private sector.
For example, when the Government settled pay equity claims with people such as physiotherapists and medical technicians employed directly by Health NZ, it did not factor in increases for the same services contracted by Health NZ from private sector providers, such as blood testing services.
That had affected the labour market with staff leaving the private sector because it could not afford the same large pay increases.
“It’s a very profound amount of cost,” said Beard. “The biggest cost of any business is the workforce, and if you get that wrong, in the private sector, you’re out of business, frankly.
“In the state sector, you’ve either got to tax people more, or take on more debt or introduce user-pays.”
The changes made to the pay equity law in 2020 meant it “ran away and got bigger than Ben Hur” and allowed bizarre comparisons, for example, between librarians and air traffic controllers.
Council of Trades Union Secretary Melissa Ansell-Bridges last week raised the pay equity issue at a plenary session of the 187-member International Labour Organisation in Geneva.
“Overnight, this world-leading system was gutted and what remained in its place is a series of roadblocks, impossible thresholds, and obstacle sources masquerading as pay equity,” she said. Claims on behalf of 180,000 workers, including many low-paid women, had their claims cancelled.
The CTU would be considering whether to make a formal complaint to the ILO, but in the meantime is supporting a “people’s select committee” chaired by Dame Marilyn Waring to hear evidence of the sort that might have been presented in a proper select committee process.
Melissa Ansell-Bridges, secretary of the Council of Trade Unions.
The first settled case in New Zealand was a $2 billion deal over five years and the result of direct negotiations in 2017 between the National-led Government and unions representing care and support workers.
After that deal was done, the Government drafted legislation setting out the framework for other claims to be made because it did not want the courts to set the rules or parameters.
But the Government changed after the election in August 2017, and the legislation, which had been through a select committee process, lapsed. A new law, allowing wider use of vocational comparators, was passed in 2020 under the Jacinda Ardern Government.
The pay equity regime was further changed in 2022 when the Cabinet agreed to a wider set of milestones that claims in the funded sector had to meet.
One of those new steps was a provision whereby the Cabinet had to be persuaded to agree in principle to fund a settlement.
When Willis was Public Service Minister last year, she not only abolished a specialist pay equity unit within the Public Service Commission to assist unions and employers with pay equity claims, but she also got Cabinet to abolish the framework of milestones.
The effect of that is that there is no early point at which a Government agency is required to seek funding from Cabinet for a case with merit in the funded sector. That provides a disincentive for employers to even get to the table.
Claims system “lacks the robustness of what you see in a commercial job-evaluation methodology”
Paul Mackay is an employment specialist at Business New Zealand and a walking encyclopedia on the history of pay equity. He was also at the ILO in Geneva representing employers.
He is especially critical of how the comparator system has developed in New Zealand, claiming it is based on a relatively small database of jobs and is not robust.
He believes long-standing commercial international job evaluation methodologies, such as Hay, Gallup or Strategic Pay, with hundreds of thousands of jobs in their databases, could have been used instead of a home-built system.
“The comparator process and the lack of robust data is distinctly unsound.”
Paul Mackay, an employment and pay equity specialist with Business NZ.
Even though the recent changes narrowed the range of male-dominated occupations from which comparators can be drawn, to the same or similar employer or the same sector, Mackay believes it is still too open.
“It has all the elements of a job evaluation methodology, but it has no database to compare with...It lacks the robustness of what you see in a commercial job-evaluation methodology.
“I welcome the current change but feel there is still a lack of specificity around how to go about the process to give a better and more statistically valid answer when people do the comparisons.”
Of the 33 claims that were cancelled by the rushed law, most have a workforce of at least 70% women as opposed to 60% under the old law, and will be able to file new claims, but with greater restrictions on comparators.
But when it comes to evaluation methodologies, the unions argue that the large commercial databases do not provide the granular information they are looking for about sex-based discrimination.
Alex Davies, Assistant Secretary of the Public Service Association, rejects the suggestion that job evaluation methodologies such as Hay would be better.
She said when pay equity came in, the parties looked carefully at methodologies like Hay to see if they would be useful tools to identify less visible women’s skills required under the act.
“It’s not what it is designed to do. It is a different tool for a different purpose.”
It was designed to look at what people in your organisation were being paid and how that compared across the same market.
It was not designed to challenge existing understandings of women’s work and the less visible skills, such as empathy and patience, that were often undervalued.
“It is not built to do that. None of its market data does that,” she said.
“Even if you could redesign a Hay questionnaire or interview process, the market data they are comparing it to hasn’t done that.
“We did spend quite a long time looking at whether it was workable [for pay equity], including meeting with Hay.”
She said male-dominated comparators used in pay equity claims were very rarely just one job. If you were looking at the skill of problem-solving, for example, you would look at whether the problems were new and different every time or the same each time, whether the worker had to come up with solutions or could get external help.
The 60-page Te Orowaru guide covers four categories, skill, responsibility, effort and conditions, that must be examined under the act, and measures 14 factors within which there are varying levels to reflect the complexity of the work, such as problem solving, organisational skills, emotional effort, and responsibility for information.
“When you break things down into those kinds of components, jobs can look very different, but you can still make useful comparisons.
“The point of the process is not to say ‘this looks the same as that job, therefore it should be paid the same.’
“The point is to understand how are skills and efforts and levels of knowledge being valued in female and male dominated work and you are supposed to get to the point at the end where you can say, more or less, this is what this job would be paid if it was done by men.’
“You use the comparators to help you gather that information.”
A huge amount of time went into interviews of the claimant roles and comparators, which were quality assured by the employer. Everything was triple-checked.
If someone had said a librarian’s job was like an air traffic controller, that might be silly.
“But nobody was ever saying that.”
Davies also pushes back on the assumption that most of the 33 claims that were cancelled by the new law can just lodge new claims. Probation officers, for example, whose claim was well advanced, would not be able to lodge another claim for at least 10 years. They hovered around 68% and 69%, women-dominated and the new threshold was 70% for 10 years.
She said other changes made it a lot worse than the 2017 position.
The initial hurdle was higher; a claim had to have merit rather than be arguable; employers could opt out in more circumstances and end an entire claim; and claimants could not go beyond their sector for comparators, unlike in 2017.
A claim could use another pay equity settlement for comparison, but only ones passed under the current regime, not since 2017 or 2020.
“There is a range of restrictions that have been added to this law that were not there in 2017.”
The PSA is not preparing any claims at present to lodge under the new law. The New Zealand Nurses Organisation is doing so, however.
Concerns aged care providers “don’t have the capacity to do pay equity”
One of the biggest workforces adversely affected by the new law is the care and support workers, whose landmark pay equity deal spearheaded by Kristine Bartlett in 2017 expired in 2022.
Their negotiations for a new deal stalled under the Jacinda Ardern-led Government, and now they won’t be able to even lodge a new claim until 2027, 10 years after the settlement of their old one.
It is a highly complex sector. Take residential aged care, for example, which does not mean retirement villages. There are four levels of care, which are subsidised by the Government to some degree, including hospital-level care, which could be described as a Government service.
Former aged care worker Kristine Barlett, who spearheaded the care and support claim. Photo / Mark Mitchell
The providers can vary between small for-profit businesses, such as might be set up by a nurse in a small town, large not-for-profit charities such as Presbyterian Social Support, to large publicly listed companies such as Ryman and Summerset.
Tracey Martin was the Minister for Seniors between 2020 and 2023 when she was an NZ First MP, but is now the chief executive of the Aged Care Association, the peak advocacy group of providers.
She is seeking advice to give to her board on what the sudden pay equity changes mean for her sector, but she is certain of one thing.
“We absolutely value our staff, we absolutely want them to be paid appropriately for the work that they do, the skills that they bring and the care they provide.
“But we cannot do it if the Government doesn’t believe, as the major funder, that they have a role in ensuring that happens.”
Nicola Willis has questioned in Parliament why the Government should be funding the pay settlements of publicly listed companies.
But many of the patients in their hospital-level care come from referrals from the public health system, not always people from their retirement villages. Martin argues that the Government funding of the service, including staffing costs, does not cover the costs of that hospital-level care.
One company, earlier this year, Summerset, said it was considering declining referrals from the public health system. If they all did that, the public health system would be swamped.
The Aged Care Association is studying the Australian system in which providers, whether they are profit or not-for-profit, are given an evidence-based price by the Government for the service they provide.
That would be ideal, but there was still an unknown question, said Martin: “If we have an evidence-based price, does the Government believe that pay equity should be the staff component of that price?.
“If the Government decides as the funder that they don’t have any responsibility around providing extra funding to cover pay equity, then our people are already struggling, and they don’t have the capacity to do pay equity.”
That is the $64,000 question - or perhaps that should be the $12.8 billion question.
