Hon Brooke van Velden
Minister of Workplace Relations and Safety

The Government is amending the Equal Pay Act [the Act] to make the process of raising and resolving pay equity claims more robust, workable and sustainable, Workplace Relations and Safety Minister Brooke van Velden announced today.

Pay equity is achieved when women and men are paid the same for work that is different but of equal value: for example, care and support workers and mental health assistants perform work that is different but is of equal value.

“It is clear the current Act is not working as intended, and amendments made by the previous government in 2020 have created issues. Claims have been able to progress without strong evidence of undervaluation and there have been very broad claims where it is difficult to tell whether differences in pay are due to sex-based discrimination or other factors.

“The Government is committed to addressing these issues. The new and improved pay equity system will provide greater confidence that genuine pay equity issues will be correctly identified and addressed.

“New Zealand’s pay equity regime is an outlier internationally. The Act allows employees and unions to bargain a pay equity settlement with multiple employers. In most countries we compare ourselves to, people raise pay equity claims against their own employer only, or there are legal requirements on employers to proactively take steps to achieve pay equity,” says Ms van Velden.

Pay equity claims have been concentrated in the public sector, with a recent increase in the number of claims in the publicly funded sector. Costs to the Crown have become significant, with the costs of all settlements to date totalling $1.78 billion per year.

“These changes will mean the pay equity claim process is workable and sustainable. There are often significant costs involved with pay equity settlements which can involve large workforces [e.g. around 94,000 people for the teachers claim] and we need to ensure the process to raise and resolve claims is robust.

“The changes I am proposing will significantly reduce costs to the Crown,” says Ms van Velden.

There will be a better framework and guidance for parties to use to assess whether there is sex-based undervaluation. These changes include:

• Raising the threshold of “predominantly performed by female employees” from 60 percent to 70 percent and requiring that this has been the case for at least 10 consecutive years.
• Ensuring there are reasonable grounds to believe the work is historically and currently undervalued, including a requirement for evidence.
• Further clarity and guidance on the use of comparators – work performed by men that is different to the claimant’s work but has similar skills, responsibilities, levels of experience, or working conditions to the claimant’s work.
• Employers being able to meet their pay equity obligations in a way that is sustainable for their business – for example through phasing of settlements.

The changes will discontinue current pay equity claims, but new claims can be raised under the amended Act if they meet the new requirements. Review clauses in existing settlements will become unenforceable. Settled claims can be re-raised 10 years after settlement, if the claim meets the new requirements.

The changes are reflected in a Bill introduced today and going through Parliament under urgency, which will amend the Equal Pay Act and take effect the day after Royal assent.

Notes:

Pay Equity is when people are paid equal amounts for work of equal value. This means that people in different roles, even if the roles are not identical, are paid the same if their work requires similar levels of skill, responsibility, effort, levels of experience and working conditions.

Equal Pay is when people are paid the same for the same work. This means that workers in the same role are paid the same.

Pay Parity means the same pay for the same work across different employers, organisations and workplaces.

Gender Pay gap is the difference between women's and men’s earnings in the workforce at a job, organisation, industry, and national level.

Comparators refer to work performed by men that is different to the claimant’s work, however has similar skills, responsibilities, levels of experience, or working conditions to the claimant’s work. This is used for comparison to assess whether, and to what extent, the claimant’s work is undervalued based on sex.

Examples of problems with the current process

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.

Comparators: the same comparators (e.g., fishery officers, corrections officers) being used repeatedly across several claims despite substantial differences in working environment and conditions from the claimant employers’ workforces.

Review clauses: All current settlements must include a review. The short timeframe of the review cycle makes it difficult to determine whether any differences in pay are due to pay equity issues having re-emerged or other factors that are not connected (e.g. the Consumers Price Index).

Cabinet Paper here.

FACTSHEET: A table reference on pay equity changes here:

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