The Prime Minister Jacinda Ardern's defending the government's plan to introduce a new working group for fair pay agreements. 

The group will work with employers and unions to set terms and conditions for the new fair pay agreement system. 

National's workplace relations spokesperson Scott Simpson says the move will drive up costs for employers, adding that there won't be opportunities for employers to hire people on their own terms, but the Prime Minister says employers are on board. 

The working group will be headed by former Prime Minister Jim Bolger.