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Five New Year's resolutions to get workplace relations back on track

By John Slater - posted Friday, 6 January 2017


2016 saw the coalition government tally up a number of modest wins on the industrial relations front. The abolition of the anti-small business Road Safety Remuneration Tribunal and passage of the Registered Organisations Bill and ABCC were important steps towards returning fair competition to sectors of our economy stymied by a lack of competition and rent seeking. But with potentially only two years left before a Shorten Labor Government takes the reigns and barely any discernible industrial relations agenda, a healthy dose of New Year's introspection could not come too soon.

With talk that a below-trend growth and lagging productivity could well be the new norm, Turnbull needs to strike while the iron is hot.

Here are five ways the Coalition could get started.

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Give BOOT the BOOT

The Fair Work Act's requirement that all employees be 'better off overall' under any proposed enterprise agreement as opposed to the award sounds like a well-intentioned safeguard to prevent employees being short-changed. In practice, the so-called 'BOOT test' has proven to undermine the core purpose behind enterprise bargaining's introduction – encouraging productive and flexible work arrangements that meet individual employee and employer needs.

The problem lies in the fact that the BOOT test has been strictly applied to mean every single employee covered must be 'better off overall' under any proposed deviation from the award. For example, an agreement that trades a higher base rate of pay for reduced overtime or weekend loadings will not pass muster if 1 per cent of workers are not left better off based on their work schedules, irrespective of the other 99.

For retail and food chains open long hours, this is an impossible standard to meet. So much was confirmed by last year's revelations that Coles and McDonalds enterprise agreements covering hundreds of thousands of workers did not pass the BOOT because some workers, typically those who only worked weekends or late night shifts, were not left financially better off.

Judith Sloan and other commentators have noted that the requirement that the BOOT must fit all, even in a workforce as large and disperse as Coles is likely to see a return to awards as the dominant mode of pay setting. In other words, without action we are likely to see a future labour market more regulated than the two decades just passed.

Giving the 'better off overall' test the boot and returning to the Howard era 'no disadvantage' test would give some much-needed life support to an enterprise bargaining system at risk of going the way of the woolly-mammoth.

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This would herald the return of the more flexible approach of weighing the benefits of the award against the proposed agreement to ensure that, overall – not individually in every conceivable circumstances – employees were not worse off. The benefits of this macro approach to enterprise agreements would be shared by employees enjoying on the whole better wages and conditions and businesses freed from the straightjacket of the award system.

Public sector pay freeze

It's a little known secret that Australia's public servants are paid more and work less than their private sector counterparts. As research from the IPA's Aaron Lane has found the average public servant brings home nearly $8,000 more than their private sector peers. Add to this perks like overgenerous leave entitlements and beefed up super contributions and there's no doubt our public service are living large.

Everyone thinks public servants should be paid fairly. But fairness doesn't mean overcompensating those whose vocation is ostensibly to serve the public good. At a time when state and federal budgets are only set to be further, a lean public service that delivers taxpayers value for money is a no brainer.

Reform penalty rates

Much like the VHS and horse and buggy, penalty rates are a relic from a bygone era whose time has well and truly expired. Penalty rates were first introduced to compensate fulltime workers forced to work weekends after a full week on the job. Nowadays, penalty rates see a predominantly part time workforce paid one and a half or double rates to work during what for many businesses are core trading hours. Indeed, for the 40 per cent of retail workers who are full time high school or tertiary students, weekend shifts are often the only way to reconcile work with study.

The Productivity Commission, the Restaurant and Catering Association and basic economic theory agree that penalty rates reduce not only jobs available, but hours worked by existing employees. One survey last year found that 52 per cent of café and restaurant owners would employ additional staff if penalty rates were unified to time and a half across Saturday and Sunday.

For small businesses like cafés and family run restaurants, it should surprise no one that a minimum wage of more than $40 an hour promotes cost cutting, understaffing, or simply not opening. But even in cashed up chains like Coles and Woolworths it's standard practice for salaried managers to step in for part-timers on Sundays when wage budgets are facing strain.

While hard-headed economic rationalists will always argue for the wholesale abolition of penalty rates, a pragmatic alternative may be to return to their founding purpose by mandating bonus rates are only paid on the sixth or seventh days of work, whenever they fall. This small change would add thousands of jobs and hours worked while continuing to compensate workers whose long hours impinge on their home and family life.

Ban corrupting payments

Perhaps the most significant, yet undermentioned, finding of the two-year Royal Commission into Trade Union Corruption was the prevalence of corrupting payments between employers and unions. You don't have to be a lawyer to see the inherent conflict of interest in money changing hands between an employer and union while negotiating a workplace agreement. After all, how can workers be sure their trusted union rep is negotiating with their employer without fear or favour if their pockets are also being lined from the boss's coffers?

If you're curious about how these corrupting benefits work in practice, the union career of none other than Bill Shorten offers a neat working example. As secretary of the AWU, Shorten brokered a deal with cleaning company Cleanevent that saw the business's 5000 workers paid $10 less than the award rate an hour. When the agreement was set to expire, the AWU agreed to extend its operation for three years in exchange for lump sum payments of $25,000 a year. How confident should Cleanevents gypped workforce be that the AWU was negotiating with undivided loyalty to their members' interests?

Employment Minister Michaelia Cash has indicated a crackdown on corrupting payments is in the offing and the government should not delay. The Trade Union Royal Commission's recommendations should be implemented, rendering the giving and solicitation of corrupting payments a jailable offence.

Simplify the National Employment Standards

A hallmark of Australia's workplace system are the ten 'National Employment Standards' that serve as legally guaranteed minimum conditions for all non-casual employees. However, including rights such as community service leave, 10 days paid personal/carer's lave and a maximum workweek of 38 hours plus 'reasonable additional hours' - whatever that means - these national standards go well beyond locking in bare basic minimum standdards. Indeed, with unions and Labor politicians now calling for 10 days paid domestic violence leave to be added to the list, it's clear these national minimums have become more about providing ideal or desirable work conditions; a function more in keeping with the role of the award system. But unlike awards, the national employment standards lack any tailoring or specification to the needs of individual industries.

At a time when the habits and patterns of Australia's workforce are growing increasingly diverse, it's doubtful whether there is any role at all for wide-ranging national employment minimums in addition to those specified by awards. Consider the work life of a taxi driver, or FIFO mining worker in regional Western Australia. Nobody enters these occupations under the illusion that they will be working 38 hours a week, with the requirement to work above this determined according to the empty standard of whether doing so is 'reasonable.' Moreover, how much sense does it make for FIFO workers with work schedules carefully coordinated months in advance to have recourse to a statutory right for community service leave?

No doubt there are legalistic justifications of how some occupations shirk national employment standards wholly out of step with the realities of their industry. But if that's so, why then impose the confusion and complexity of having national minimums in the first place?

The point is not that workers should be stripped of certain leave entitlements or workplace rights. Rather, it is that a one-size-fits-all approach is ill adapted to the cut and thrust of the modern Australian economy. Short of wholesale appeal, the ten national employment standards should be substantially pared back and simplified. Give employers and employees the freedom to cut their coat according to their cloth.

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About the Author

John Slater is the Executive Director of the H R Nicholls Society.

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