The Albanese Government tabled its new Secure Jobs, Better Pay Bill (2022) in the Australian Parliament for consideration. The Bill was developed in response to the outcomes of the Jobs and Skills Summit in early September 2022, which was convened to explore opportunities to increase productivity and then share the dividends of this productivity between businesses and their employees to support wage growth.
The three key aspects of most interest relate to proposed changes to workplace flexibility, changes to the legal test of acceptability for new enterprise agreements (known as the Better Off Overall Test or the BOOT), and proposals to shift from single enterprise bargaining to whole-of-industry bargaining.
Much of the early media relating to the proposed new laws (made prior to the Bill being made public) openly criticised the proposed changes to workforce flexibility. The new law proposes to make it easier for an employee to seek arbitration via the Fair Work Commission where an employer has refused the employee’s request for more flexible working conditions to support family care responsibilities.
Closer examination of this proposal, however, suggests that these arrangements are already in place in most Modern Awards. In effect, all the changes are doing is making the existing appeal arrangements available in all workplaces by changing the umbrella Legislation – the Fair Work Act (2009).
“The changes to the legal test for acceptability of new enterprise agreements are welcome as the well documented decline in the use of Enterprise Bargaining Agreements (EBAs) is almost entirely attributable to the increased difficulty in securing approval of new agreements under the changes made by the Gillard Government in 2012”, said ACAPMA CEO Mark McKenzie.
“The Gillard Government set the bar for approval of new EBA’s so high that businesses could not get over it,” said Mark.
The result was that no-one was able to get EBA’s approved. Many businesses were forced to allow their EBA’s to lapse and revert to the standard pay and conditions in the relevant Industry Award. This action reduced the opportunity to negotiate productivity improvements and left nothing in the bank for the business to pay wage increases – and that is why wages have only been going up in accordance with movements in the national Award Wage over the last decade.
And so, if we stop at this point, the first two of the three major changes involve one that is simply standardizing an appeal practice that already exists (i.e. for employees seeking flexible work arrangements) and making a long overdue improvement to the bargaining mechanism that, of itself, would facilitate the delivery of business productivity improvements and employee wage increases.
“But all of this good work risks being undone, several times over, as a result of the changes proposed to the way that business and unions bargain to establish new EBA’s”, said Mark.
“The new laws appear to allow Unions that have initiated a new bargaining process with one business – typically a large business with some union membership – to rope in all businesses that have similar workplace environments (e.g. retail shops, transport enterprises, construction sites and service stations) regardless of whether they have union members or not”, added Mark.
This raises all sorts of serious issues and risks the creation of unnecessary inflationary pressures at a time when the Australian community – and in fact the global community – is dealing with economy destroying levels of inflation.
While there are perhaps some situations where this approach might work (although they are not immediately obvious) – and there remains a degree of interpretation about which industries will likely be affected by the more extensive forms of bargaining – the rushed preparation of the Bill and the limited consultation with business and industry to date, gives rise to concern that the draft legislation fails to properly guard against potential serious negative consequences.
The first of these is that the legislation must realise that all businesses in a given industry are different. Australia’s 8000 service stations for instance, are operated by around 3980 businesses. These businesses range from national subsidiaries of global energy companies, to large national organisations, to medium and small family owned businesses. All of these businesses have different business models and therefore different capacity to realise productivity improvements through workplace changes.
Any action that results in applying the same workplace changes across all of these businesses reduces business diversity and potentially weakens the capacity of small businesses to compete with larger businesses. The resultant marginalisation of small family-owned businesses risks ceding competition to a smaller number of large businesses and a reduction of price competition intensity in the national fuel retail market.
The potential forced participation of all businesses also raises a question about what happens if the businesses roped into a multi-employer bargaining mechanism already have an EBA in place – such as is already the case for many fuel distribution businesses in Australia. While the draft Legislation suggests that businesses with existing agreements would be excluded, it does not guarantee it and leaves the decision to the Fair Work Commission – effectively jeopardising any unrealised benefits that may have been negotiated under the existing agreement.
Most significantly, the proposed bargaining legislation appears to fail the core objective of the National Jobs and Skills Summit in that it focusses predominantly on the goal of lifting wages – with far lesser emphasis on the related goal of delivering the business productivity gains needed to fund wage increases.
Once again, the suggestion that small and medium businesses could realise the same productivity gains of big business is just plain wrong.
“In an industry like fuel retail, where the gross profit margins are already very skinny (i.e. less than 2%), some of the more extreme forms of multi-employer bargaining that compel participation of businesses risk increasing wage costs to a level that cannot be funded by wage productivity improvements”, said Mark.
“Wage increases forced by industry-wide bargaining without offsetting productivity improvements will ultimately have to be funded by putting up petrol prices at a time when Australia’s fuel retail prices are just starting to steady for Australian motorists”, concluded Mark.
It is vital that the Albanese Government take all necessary steps to advance reforms that will deliver wage increases and the productivity improvements needed to fund them to reduce inflationary risks. Great care should be taken to ensure that appropriate safeguards are put in place with respect to the proposed compulsory multi-employer bargaining and business is given the time to provide genuine feedback on the final form of the proposed reforms.
ACAPMA
Source: https://acapmag.com.au/2022/10/government-overreach-on-draft-ir-reforms/.
