Contentious workplace laws setting minimum terms and conditions of employment for workers in the same industry or occupation have been thrust back onto the political agenda.

The changes could herald the biggest shake up in industrial relations in years.

Workplace Relations Minister Iain Lees-Galloway said a 10-person working group led by former National Party Prime Minister Jim Bolger would report back by the end of the year on the design of Fair Pay Agreements. Bolger was also a Minister of Labour under the Muldoon Government.

The Government says Fair Pay Agreements will lift pay and conditions by preventing a "race to the bottom" by preventing employers from competing with each other by lowering wages.

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But employers have been nervous about their impact on business, and the uncertainty has contributed to the slump in business confidence since the election.

Lees-Galloway said many workers had not shared in the growth in the economy over the last 30 years and the result was a "hollowing out" of wages for middle income earners.

ROSA WOODS/STUFF Workplace relations minister Iain Lees-Galloway says middle income earners have seen a "hollowing out" of wages.

Fair Pay Agreements would work by requiring agreement between unions and employers on minimum terms and conditions of employment for all workers in an entire industry or occupation - which employers say is effectively a return to centralised bargaining.​

Fair Pay Agreements were the cornerstone of Labour's industrial relations policy in the lead-up to the last election, but the Government has moved slowly for fear of spooking business.

Council of Trade Unions President Richard Wagstaff said today's announcement would help rebuild "a decent quality of life for working Kiwis".

The current system was market-driven and pushed wages down, Wagstaff said.

"We are losing our best home-grown New Zealand talent to better organised countries with regulated industries," Wagstaff said.

The return of Fair Pay Agreements would be a turning point for workers and employers, he said.

"Fair Pay Agreements put New Zealanders first and show our real competitive advantages are the Kiwi values of dignity, opportunity and respect."

Business NZ spokesman John Milford said business would participate constructively in the group, but made no promises in support beyond that.

"What I would say is that the Business NZ family, and members we represent, want to look to the future as well."

The business community had significant concerns, particularly centred around flexibility for employers, costs related to fair pay agreements and industrial harmony.

"We're going in with concerns but having said that, we're pleased to be part of the solution and we're pleased to be around the table. Because if we don't put up our concerns there, then we can't stand on the outside and lob hand grenades in," said Milford.

"At the end of the day, we have members who have a particular point of view on the past and they also think that that's going to be reflected in the future going forward. That may be the case; I would hope seriously not.

"That what we're actually talking about is new mechanisms here, a new way forward for collaboration and cooperation between employees and employers.

"We will participate willingly and enthusiastically with this body to get the best outcome. If at the end of the day, we don't like the outcome, that won't stop us from having a position," Milford said.

Business NZ chief executive Kirk Hope would be joining representatives of employment law and certain industries, individual unions and academics, on the 10-person panel.

In a speech to a business audience earlier this year, Ardern acknowledged business confidence was the "elephant in the room".

The Government has moved quicker on other workplace laws, including changes to National's 90-day 'fire at will" law, and legislation raising the minimum wage to $20 an hour by 2022.

It has also announced plans to overhaul the "nightmare Holidays Act".

In appointing Bolger to head the group, Lees-Galloway hoped for an "enduring" framework that crossed the political divide. However National Party spokesperson Scott Simpson was already criticising the premise, saying compulsory bargaining would hurt business competitiveness.

"The Government's determination to force workers and industries to collectively bargain wages and conditions will drive down the competitiveness of our employers, while undercutting workers' rights to tailor employment contracts to suit themselves," he said.

It sent a "chilling message" to employers and exporters that "competition will be sacrificed in order to advantage unions".

"The Government fails to explain why these changes are needed. In an environment of record job growth, they make no sense for the New Zealand economy, employers, or the 82 per cent of workers who do not belong to a union."

The Government says its 10 person working group includes "worker and business representatives, those with practical on-the-ground experience and experts in law, economics and bargaining systems".

Lees-Galloway said the Government would introduce legislation to implement its Fair Pay Agreements once the working group reported back.

Once the laws were in place it, would be up to unions and employers to create Fair Pay Agreements in their industry of occupation.

Fair Pay Agreements would differ to existing collective bargaining because they would set minimum terms applying to all workers in an entire industry or occupation that all employers would be expected to meet.

Unlike existing collective bargaining, industrial action, including strikes and lockouts, would not be permitted in negotiations for a Fair Pay Agreement.

Cabinet has agreed to a budget of $300,000 for the working group.