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freephone 0800 802 602.
Yours sincerely
Hon Judith Collins KC
Minister for the Public Service
Report Title:
Rebalancing Public Sector bargaining settings
Report No:
MoSR 2025-0417
Date:
8 May 2025
To:
Hon Judith Col ins KC, Minister for the Public Service
12 May 2025
Action Sought: Refer for discussion to the Prime Minister,
and the Minister of Finance
Contact Person: Alex Chadwick Contact No:
9(2)(a)
privacy
Encl:
No
Priority:
Medium
Security Level:
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Executive Summary
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Hon Judith Collins KC
Minister for the Public Service
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Current bargaining settings are not wel suited to the public sector
11.
The model for bargaining was set in the late 1980s and reflects the view at that time
that public services would increasingly be delivered through markets. As a result,
bargaining in the public sector is done under the same model as the private sector:
the Employment Relations Act 2000. This Act aims to balance the power of the
bargaining parties, and its central tenet is that parties deal with each other in good
faith. Other key settings are that bargaining is done at the enterprise-level (i.e.
individual organisations) and that collective bargaining through unions is supported.
12.
Our assessment is that the balanced engagement sought by the Employment Relations
Act has changed over time and that public sector employers are now in a
disadvantaged position in bargaining. This is due to a number of factors stemming
from the different nature of services provide by the public sector (its ‘market’) and its
overall design. Differences include that:
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a. Unionisation is considerably greater in the public sector (approximately 55% in
the public sector versus 8% in the private sector).
b. There are very large workforces in the public service covered by the same
collective agreement.
c. The public service delivers many essential services, such as in health and
education where industrial action is highly disruptive. And the tools in the
Employment Relations Act, such as the ability for employers to lock staff out,
are inappropriate for these services.
d. The cost and other impacts of bargaining processes and bargaining outcomes
are borne by the public and the taxpayer rather than by individual private
employers. This changes the incentives in the public sector.
e. While bargaining is done by agencies not Ministers, it is not possible to fully
separate it from political realities such as election cycles and media profile.
13.
In recognition of the differences between the public and private sectors, the Public
Service Act, the Crown Entities Act, and sector-specific acts (eg. in education, Police,
and defence) make provision for the Government to influence bargaining outcomes
by, for example, control ing macro funding settings and by setting expectations for
employment relations through the Government Workforce Policy Statement. While
these arrangements assist agencies, and particularly departments that bargain under
delegation from the Commissioner, with prioritising government expectations, they
do not necessarily ensure the timely, fiscally prudent, and low-disruption outcomes
that are desirable.
14.
Our current settings are increasingly giving rise to challenges, and a lack of ability to
be accountable to the public for the costs and outcomes of bargaining. Specifically,
we are seeing:
a. Unsustainable growth in personnel costs over time. For example, through
costly tenure-based pay systems that are not linked to performance
b. Bargaining focussed on union claims rather than agency needs
c. Inefficient and prolonged bargaining combined with short terms of settlement
d. Risk of high profile and co-ordinated industrial action early in bargaining and
before resolution processes are exhausted
e. Limited levers to avoid disruption to critical services
f. Precedent effect across large sectors and notably health, education, and
Police.
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