Legislation that will see a radical overhaul of New Zealand's current workplace laws has passed its first reading.

The Fair Pay Agreements Bill will set up a new system for workers to negotiate minimum pay and working conditions across industries.

It's poised to pass under Labour's majority government, marking the biggest shake-up to workplace laws since the Employment Contracts Act 1991.

The Council of Trade Unions has endorsed the legislation while Business New Zealand has rejected the government's offer to play a role in the policy.

Minister of Workplace Relations Michael Wood says the bill fulfills a Labour manifesto commitment to improve the lives of working New Zealanders.

"This bill will help stop the race to the bottom. It will enable good faith bargaining at the sector level to overcome inequalities that have developed over the past 30 years."

Part of the government's reasoning for the new laws is to create a level playing field where good employers are not disadvantaged by paying reasonable, industry-standard wages.

However, its existence is entirely dependent on Labour; both the National Party and the ACT Party have promised it will not survive under their watch.

National's workplace relations spokesperson Paul Goldsmith says his party will repeal the legislation, arguing the potential new laws were not about fair pay.

"It is about the government imposing mandatory union deals on Kiwi workplaces. Let's not make any bones about this; there's no choice about this, either for workers or business operators."

Paul Goldsmith is making it clear National sees the bill as imposing mandatory union deals on Kiwi workplaces. Photo: RNZ / Dom Thomas.

ACT Party's workplace relations spokesperson Chris Baillie says his party will also roll the legislation back, saying workers are already free to join a union.

"This bill amounts to unionism by stealth and will simply make it tougher for businesses who have struggled to keep trading through a one-in-100-year pandemic, and who continue to struggle with the never-ending costs imposed on them by this government."

The proposed Fair Pay Agreements system is not compulsory, requiring either 10 per cent or 1000 workers' support or a public interest test to be met in order for the process to be triggered.

Wood acknowledges the bill proposed significant reform that will prompt questions but says spreading false information about the legislation is not helpful.

"The arguments that FPAs and sector-based bargaining stand contrary to good productivity growth are false. Debate based on misinformation and scaremongering will take us nowhere, and it will be seen by New Zealanders as a desperate smokescreen to block progress."

The Fair Pay Agreements Bill passed its first reading and is now headed to the select committee stage.

-RNZ/Anneke Smith.