The deal will cost the Government more than $500million a year when fully implemented in five years, assuming it is signed off by union members and the Cabinet.
The settlement will mean hefty pay increases from July in three government-funded service sectors which employ mainly women on low rates: aged residential care, home support, and disability services.
It is understood that for the primary litigant, rest-home caregiver Kristine Bartlett, it will mean an increase from about $16 an hour to about $23 an hour - more than 43%.
The deal allows for annual increases over five years to $27 an hour.
Overall, pay rises will range from between $3 an hour to $7, depending on the work and experience.
The statutory minimum wage at present is $15.75 an hour.
The case is the first legal settlement in New Zealand that recognises some jobs are paid less because they are done mainly by women.
Talking about the ongoing negotiations last year, State Services Minister Paula Bennett said the deal would put some pressure on the Budget by increasing the cost of the workforce.
``But, equally, we've got women who work incredibly hard in some sectors that are absolutely necessary and it does come down to us working in a fair way with them to make sure we are addressing some of the inequalities that are out there.''
Ms Bennett herself was once a rest-home shift worker, washing dishes and working as a nurse aid and said it was a tough industry.
``I've always had a genuine empathy with those who work in aged care.''
The Service and Food Workers' Union lodged a claim on Ms Bartlett's behalf with the Employment Relations Authority in 2012.
It claimed that she and other caregivers, male and female, were paid at a low rate because it was work predominantly done by women.
The union took the case on behalf of Ms Bartlett and 14 other union members of the 110 employed by Terranova rest-home owner.
Their wages were effectively set by the government subsidy paid by the Ministry of Health for rest-home services.
The case was elevated to the Employment Court, Court of Appeal and Supreme Court.
Once the Court of Appeal confirmed pay equity cases could be heard under the Equal Pay Act of 1972, the Government stepped into the process because it was loath to leave a case with such far-reaching repercussions solely in the court's hands.
The Government has been involved in two distinct processes.
One has been negotiating a settlement on the Bartlett case, which has been extended to other care services similarly funded by the Government.
It also set up a tripartite working group involving unions, employers and the Government to come up with a set of principles by which other pay equity claims can be lodged outside the court system, although they have not yet been enshrined in law.
The first of those claims - by education support workers - began last week.
Ms Bartlett's Service Workers' Union has merged with the Engineers Union to become Etu and if its members, along with the Nurses Organisation and the PSA representing other affected
workers, accept the settlement, the pay increases will take effect in July.
The new pay rates will not be backdated.
Employment law specialist
Christie Hall said the amount involved in the Bartlett case would be ``fairly sobering'' for quite a few employers.
``The private sector is by no means immune from this.''
It would convey to other employers what was expected of them and could make them nervous.
Birmingham Council in Britain settled a pay equity claim for about $2billion.
She said in terms of the Bartlett case, it would be interesting to see the detail and methodology used to determine the settlement. That could be of interest in future pay equity claims.
- Audrey Young
