UPDATED 4.50pm

Care workers in women-dominated industries will get pay rises worth up to a $5000 a year after a historic settlement with the Government.

In all, the package will cost more than $2 billion and could require a lift in ACC levies or higher fees for aged care residents.

It will cover 55,000 care workers, mostly women, in the aged residential care, home support and disability service sectors.

The settlement comes after a pay equity claim brought by E Tu (previously the Service and Food Workers Union) on behalf of care worker Kristine Bartlett against her employer TerraNova.

It is the first legal settlement in New Zealand which recognises that some jobs pay less because they are done mainly by women.

Announcing the deal today, Health Minister Jonathan Coleman described it as the largest pay increase in New Zealand's history.

It would benefit some of New Zealand’s lowest-paid workers, he said. The workforce was mostly female and part-time, with average wages of between $16 and $18 an hour.

As a result of the agreement, carers who were on the minimum wage would receive a pay rise of between 15 and 49 per cent, depending on their qualifications.

"For the 20,000 workers currently on the minimum wage of $15.75 per hour, it means on July 1 they will move to at least $19 per hour, a 21 per cent pay rise," Coleman said.

"For a full-time worker, this means they will be taking home around an extra $100 a week, which is over $5,000 a year."

All 55,000 workers in the affected sectors would see their wages increase to between $19 and $27 over five years.

Asked whether the settlement meant care workers had been mistreated in the past, Prime Minister Bill English said: “It has been part of the way the health sector works.

“You can make a number of arguments about how and why they’ve been paid … but what we’ve come to here is a fair settlement.”

He added: “If we thought they were being paid unfairly we wouldn’t have gone into the negotiation.”

The settlement is expected to have wider ramifications, and English said he understood other sectors were considering pay equity claims.

These would be dealt with by pay equity principles which are being developed alongside unions and businesses, rather than by direct negotiation.

English warned that the carers’ case was “unique’ and that the "hurdle would be pretty high" for any other groups making claims for equal pay.

The $2 billion settlement over five years would be funded through increases in the Health and ACC budgets.

That could mean an increase in ACC levies over the next decade, Coleman said.

"However, that is not definite. There may also be an increase in costs for people in aged residential care facilities, whose assets keep them above the subsidy threshold."

Legislation would be introduced to Parliament soon to enact the changes.