Brooke Van Veldon makes major Workplace Relations and Safety
policy announcement
The Government is planning a massive overhaul of New Zealand’s pay equity regime, which will make it more difficult for people to take pay equity claims.
The reforms will overhaul a 2020 law establishing a regime to allow people in sectors with a large female workforce to argue that they were underpaid relative to similar work done in sectors dominated by men.
The changes will be retrospective and passed under urgency. All 33 current claims will cease and those claimants will need to reapply under the new regime. The Herald confirmed with MBIE there was no regulatory impact statement for the changes because of the tight time frame.The Government is looking to do a post-implementation review of the changes, which will save it “billions” over the next few years in lower pay.
Workplace Relations Minister Brooke van Velden is in charge of the new regime and acknowledged it was likely to affect hundreds of thousands of workers.
A single claim made by teachers affects 75,000 people.
Kristine Bartlett, the aged care worker who took the pay equity case that created the current regime, told the Herald she was “just about crying” after hearing the news.
“What’s going to happen to these low-paid workers?” she said.
She said the lack of progress after her original claim succeeded in 2017 had been difficult.
“It sort of just stopped,” she said.
Bartlett took her claim in 2012 - now, thirteen years later, she said she was ready to fight the Government over these changes.
However, she was disappointed the lack of select committee process for the bill would make it difficult to make her case.
“Nobody is given a chance to stand up and say anything - it’s just done. It’s getting quite frightening if that’s what they can do,” she said.
‘Substantial’ savings
The changes will, however, save the Government billions of dollars in higher wages that would have been paid under the current regime – a saving that will come at the cost of lower-than-expected pay rates for people in sectors with high rates of female workers.
Those savings will be booked in the current Budget, which will be published on May 22. The changes are likely to be among the largest savings booked by the Government.
Van Velden’s Cabinet Paper said settlements under the current regime were costing the Government $1.55 billion a year.
“We are doing this under urgency because we want everyone to go through the same thresholds. I don’t think it would be appropriate to have some claims that are progressing under different comparators [and] different thresholds,” Van Velden said.
Van Velden said Ministers had been asked last year to find savings in their portfolios that might be recycled into other spending.
“Every Minister in this Government has been asked to find savings and be part of playing our part.
“I think it’s fairly clear that the policy changes that I am delivering today will go some way - and quite a substantial way - to find very real and significant cost reductions to Government,” Van Velden said.
Luxon changes answer, confirms cost to Government was considered
Prime Minister Christopher Luxon was pressed in the House about the Government’s decision to make taking a claim more difficult.
Labour Leader Chris Hipkins asked whether “he budgetary cost of settling pay equity claims considered when the Government made this decision?”
Luxon initially answered “no”, saying the decision was about making the regime “fit for purpose”.
At the end of Question Time, however, Luxon rose to make a “personal explanation” on his answer, confirming that budgetary costs were considered when making the decision.
“What I should have said was that while Cabinet received advice on a range of considerations, our primary motivation was ensuring the regime would be more robust, workable, and sustainable,” he said.
Luxon said money had been set aside in the Budget to deal with claims under the new regime, but he said these claims would be lower by “billions of dollars”, meaning a net saving to the Government.
The regime enshrined that specific agreement in legislation and created a framework for future claims to be made.
Pay equity claims relate to the underpayment of people who work in sectors with high rates of female employment, relative to equivalent roles performed mostly by men.
A successful pay equity claim would correct this by lifting pay rates in that sector to a level closer to an equivalent male-dominated sector.
The 2020 legislation
The Bartlett case prompted the then-National Government to look at a legislative regime for processing pay equity claims in other sectors.
After the change of Government, the Labour Government continued work on the new regime and expanded its scope. The legislation for the pay equity regime passed in 2020 and enshrined the 5-year agreement that emerged from Bartlett’s case in legislation and created a new regime for bringing new claims.
After the original agreement expired in 2022, several unions lodged a claim for a new one to be agreed.
The regime works by establishing whether a group of workers in a female-dominated workforce have a claim and then looking for an appropriate benchmark in a male-dominated sector.
Van Velden laid out criticisms of the current regime, saying that it encouraged overly broad claims: the District Health Board Allied/Technical claim covered more than 90 roles, representing work as diverse as pharmacy assistant, wheelchair technician and psychologist in one claim.
She also said the same comparator roles - jobs done predominantly by men that are used to benchmark appropriate pay rates in a pay equity settlement - were being used “repeatedly across several claims despite substantial differences in working environment and conditions from the claimant employers’ workforces”.
Van Velden also argued the threshold for claims is too low.
According to her Cabinet paper a claim raised under the act must just be “arguable”. Van Velden’s bill will lift this threshold to requiring claims to have “merit”.
Under the old regime the test for roles “predominantly performed by female employees” means 60% of roles filled by women. In the new regime, this will be raised to 70%.
Van Velden said the new regime will require claimants to use evidence to prove there are “reasonable grounds to believe the work is historically and currently undervalued”.
The new regime will also clarify the use of comparator professions, which Van Velden defined as “work performed by men that is different to the claimants’ work but has similar skills, responsibilities, levels of experience, or working conditions to the claimants’ work”.
The new regime will also allow employers to phase-in the new agreements over a maximum of three years.
Controversially, Van Velden has opted to make the legislation retrospective, applying it to all existing claims. Retrospective legislation is generally frowned upon - although governments do use it on occasion.
“While this departs from the presumption that legislation will not be applied retrospectively, it is justified to meet the policy objectives of the new legislation,” she said in her Cabinet paper.
Labour workplace relations spokeswoman Jan Tinetti said the changes showed the Government was “taking the women’s movement backwards”.
“Women have historically been paid less, currently it’s at around 92 cents to every dollar a man earns,” she said.
“If this is how Nicola Willis is planning to pay for her Budget then I suspect many people are going to let her know pretty quickly that she’s made the wrong decision,” Tinetti said.
Green Party’s spokeswoman for Women, Kahurangi Carter said the changes were an “attack on workers”.
“Women deserve fair pay. This move to undo years of pay equity progress is a monumental step backwards from the Government,” Carter said.
“The gender pay gap is one of the glaring shortfalls of our workforce. Employees and unions have been working towards pay equity for a long time,” she said.
Thomas Coughlan is the NZ Herald political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the Press Gallery since 2018.
