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 act that established 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. The Government is looking to do a post-implementation review of the changes.

Workplace Relations Minster Brooke van Velden who is in charge of the new regime and acknowledged it was likely to affect hundreds of thousands of workers.

A claim made by teachers alone affects 75,000 people.

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 March 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.

Pay equity

The pay equity regime was legislated following legal action last decade by Lower Hutt caregiver Kristine Bartlett, who argued her $14.32 hourly pay rate was a result of gender discrimination under the Equal Pay Act.

That specific $2b settlement expired in 2022 and negotiations began under the previous Government for a new agreement to replace it.

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. Pay equity aims to correct that by lifting wages.

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.

Labour set aside funding for a new deal, but did not manage to agree it by the time the Government changed.