The government is defending its Pay Equity Bill following criticism from unions, which say the proposed law is fundamentally flawed and a step backwards for women.

Photo: RNZ / Claire Eastham-Farrelly

The Council of Trade Unions and the Public Service Association (PSA) said this week's historic $2 billion settlement would not have been possible under the new bill, which was released for consultation today.

The deal came after a caregiver, Kristine Bartlett, won a court case for more pay by comparing her female-dominated resthome sector to another industry. She argued that if her work employed mostly men, they would be paid at a higher rate.

Council of Trade Unions president Richard Wagstaff said the proposed bill would make it harder to make those comparisons.

"It's absolutely critical that women making claims of equal pay are able to find comparators that find the gender pay gap - and this bill, as it stands, inhibits that."

The PSA said the bill would "perpetuate discrimination" and would "slam the door on future claimants".

"Mrs Bartlett would be stuck finding a comparator in the aged care sector - which is poorly paid across the board due to discrimination," the union's national secretary, Erin Polaczuk, said.

Workplace Relations and Safety Minister Michael Woodhouse said the government was trying to figure out how similar two industries would have to be before they could be compared.

There were still issues to work through, he said.

"The question is when a comparator is used, what should that comparator be and how approximate it should be to the industry that is negotiating it.

"This is a point that the joint working group that the government set up could not reach a consensus on, and obviously we are trying to find a pathway through that."

Mr Woodhouse said the bill was out for consultation and he would welcome further feedback.

The Council of Trade Unions' Richard Wagstaff said he was hopeful that the limiting clause would be taken out after the bill's consultation process.