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Former National prime minister Jim Bolger will chair the working group set up to make recommendations on its design.
"It is time to move toward new models of bargaining. It is time New Zealand adopts a sector-level approach that is common across the developed world," said Workplace Relations Minister Iain Lees-Galloway.
Lees-Galloway said he picked Bolger because of his record as a minister of labour and the ability to get "his teeth into meaty issues".
Legislation would be introduced to allow employers and workers to create Fair Pay Agreements that set minimum employment terms and conditions for all workers in the industry or occupation covered by the agreement.
There had been fears that sector-wide agreements would lead to whole industries taking industrial action but under Fair Pay Agreements, any industrial action by either side, such as strikes or lockouts, would be banned during negotiations.
Bolger will lead a group of 10 people to develop recommendations on the design of the system and will report back by the end of the year.
"We will work closely with businesses, organisations and workers to develop a new and enduring framework that is good for employers and workers," Lees-Galloway said.
"The team includes worker and business representatives, those with practical on-the-ground experience and experts in law, economics and bargaining systems.
"The aim of FPAs is to prevent a race to the bottom, where some employers are undercut by others who reduce costs through low wages and poor conditions of employment. Fair Pay Agreements will help lift wages and conditions and ensure good employers are not disadvantaged by paying reasonable, industry-standard wages," he said.
Lees-Galloway said the group had been given a "blank piece of paper", with a couple of exceptions, to design the system.
Bolger said there was a sense that the world was no longer fair, and middle New Zealand was an example of that.
He thought the work he had been persuaded to do by the minister would go on long after the end of the year.
Richard Wagstaff, President of the New Zealand Council of Trade Unions, said genuine businesses wanted to do right by their staff but had been squeezed by undercutting from unethical operators.
"The logic of the current market-driven system pushes down wages by allowing the worst operators to set conditions for the rest of us."
What has been announced?
The Government has established the Fair Pay Agreement Working Group. The working group will make recommendations on the design of a sector-level bargaining system. Once the laws to enable Fair Pay Agreements are in place, it will be up to unions and employers to create Fair Pay Agreements in their industry or occupation.
What is a Fair Pay Agreement?
A Fair Pay Agreement is an agreement between unions and employers that sets minimum terms and conditions of employment for all workers in an entire industry or occupation. A Fair Pay Agreement is the outcome of sector-level bargaining.
What makes Fair Pay Agreements different to minimum employment standards?
• The minimum terms and conditions in Fair Pay Agreements are different because they will:
• Be based on the generally accepted minimum terms and conditions in the industry or occupation
• Be set by sector-level collective bargaining between unions and employers that represent an entire industry or occupation
• Apply only to the particular industry or occupation within the coverage of the agreement.
What makes Fair Pay Agreements different to existing collective bargaining?
Fair Pay Agreements are minimum terms that will apply to all workers in an entire industry or occupation without the need to bargain with every employer individually. Unlike existing collective bargaining, industrial action (strikes and lockouts) will not be permitted in negotiations for a Fair Pay Agreement.
Who is on the working group?
• Rt Hon Jim Bolger – 35th Prime Minister of New Zealand, former Minister of Labour
• Dr Stephen Blumenfeld – Director, Centre for Labour, Employment and Work at Victoria University
• Steph Dyhrberg – Partner, Dyhrberg Drayton Employment Law
• Anthony Hargood – Chief Executive, Wairarapa-Bush Rugby Union
• Kirk Hope – Chief Executive, BusinessNZ
• Vicki Lee – Chief Executive, Hospitality NZ
• Caroline Mareko – Senior Manager, Communities and Participation, He Whānau Manaaki o Tararua Free Kindergarten Association
• John Ryall – Assistant National Secretary, E tū
• Dr Isabelle Sin – Fellow, Motu Economic and Public Policy Research, and Adjunct Senior Lecturer at Victoria University of Wellington
• Richard Wagstaff – President, New Zealand Council of Trade Unions