Government to cancel pay equity claims, book Budget savings

Tuesday, 6 May 2025

The Government has announced a sudden overhaul of the Government’s pay equity regime, cancelling current claims and making it harder to get big settlements, in a move that could save the Budget billions of dollars over the forecast period.

The move has been attacked by public service and teacher unions, and the Opposition. Labour has promised to reinstate pay equity work if elected.

Minister for Workplace Relations Brooke van Velden has announced changes to the Pay Equity Act which will effectively cancel any current claims (settled claims will be honoured), tighten requirements around the proportion of women in a workforce required for a settlement, as well as changing the rules around job comparisons.

The amendments to the Act will be introduced into Parliament today and then rushed through under urgency, ahead of the May Budget, without any public input.

“These changes will mean the pay equity claim process is workable and sustainable,” van Velden said in a statement.

“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..”

Van Velden said that while she had been interested in changing the law since she became minister, the budget savings would be “significant”.

“Every minister across this government has been asked to play our part to find savings across government. My policy changes will make significant cost reductions to the Crown,” van Velden said in a press conference in Parliament.

The threshold for an industry to be considered “predominantly performed by female employees” will be lifted from 60% to 70%, and that will have had to be the case for the past 10 years, making claims more difficult for some industries.

The changes will also “discontinue” any current pay settlements. Currently there are claims by teachers in education and in healthcare.

“The changes will discontinue current pay equity claims, but new claims can be raised under the amended Act if they meet the new requirements,” van Velden said.

Current settlements cost the Crown an estimated $1.75 billion, according to van Velden who said that she expected that the discontinued claims could affect hundreds of thousands of women who have been in unions making claims.

Given the number of claims under way and the cost of the current deals, it could save the Budget billions of dollars over the forecast period.

While van Velden focussed on the changes being made because she believes the current regime conflated collective bargaining with sex-based discrimination, an accompanying Cabinet paper which was released with the decision was mark “Budget Sensitive’.

Van Velden would not disclose how much money would be saved in the Budget by these measures.

The bill is being introduced in Parliament this afternoon and is expected to pass into law this week.

Prime Minister Christopher Luxon said the Government remained “deeply committed” to pay equity and dealing with sex-based discrimination. He denied the law was being passed with urgency to book savings in the Budget.

“It's got nothing to do with the Budget. This is about making sure we have a piece of legislation that is incredibly workable and not as complex as it has been.

“We’ve set money aside in the Budget to deal with … pay equity claims under the new legislation, equally we’re making -- I suspect those costs will be lower as a function of the changes that we’re making with the legislation.

“It could be up to billions of dollars. Obviously, that information will be Budget sensitive and revealed in due course.”

Labour workplace relations and safety spokesperson Jan Tinetti said the Government was making it harder for women to get ahead.

“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.

Public Service Association national secretary Fleur Fitzsimons labelled the proposed changes a “dark day for New Zealand women” and a constitutional overreach.

She said the proposed changes would severely limit fair pay in female-dominated professions and “throws away all the work that has been done to date solely to save the Government money”.

“Women across the country will pay the price for this.”

The association was exploring how it could oppose the changes. It was involved in 15 pay equity claims, including 65,000 care and support workers.

A protest on Parliament was scheduled for 1pm.

Post Primary Teachers Association Te Wehengarua president Chris Abercrombie said pushing the law through under urgency, bypassing the select committee stage, showed “a lack of confidence in the public’s response”.

“This Government has made …a deliberate choice not to value work that is predominantly done by women. It’s a message to teachers, many of whom engaged in the claim process in good faith, that their contribution doesn’t count. It feels like we’ve been sent back to the 1950s.”

A claim for 95,000 teachers is also live.

A bit of history

The Equal Pay Act passed in 1972 but the law was tested in the courts in 1972 when Wellington care and support worker Kristine Bartlett, and her union E Tu, filed a claim against her resthome employer, TerraNova, arguing that the type of work was underpaid because it was largely performed by women.

In relation to that case, in 2015, the Court of Appeal held that the act required equal pay for work of equal value, not just the same pay for the same work.

A working group was held following that to establish a set of principles for raising and resolving pay equity claims, and in 2017 the Public Service Commission and the New Zealand Council of Trade Unions agreed to apply the pay equity principles to claims in the public sector ahead of amendments to the law in 2020.

Since then more than 100,000 employees had had their pay corrected following multiple settlements.