Guest Post: John Slater Five New Year’s Resolutions to get Workplace Relations Back on Track

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, albeit modest, 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 heady dose of New Years 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.

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 be give some much-needed life support to an enterprise bargaining system at risk of going the way of the woolly-mammoth.

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 salaries 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 Reduce 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 minimum have become more about providing ideal or desirable work conditions; a function more in keeping 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 disperse, 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 cloth according to their cloak.

John Slater is Executive Director of the HR Nicholls Society

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18 Responses to Guest Post: John Slater Five New Year’s Resolutions to get Workplace Relations Back on Track

  1. Stackja

    Good dream! Now get ALP to agree!

  2. memoryvault

    Give BOOT the BOOT

    aka Workchoices Mark II.

    Sorry, but even if it isn’t, that is how it will be sold by Shorten. Howard well and truly shat in the nest on that one, and it is going to be at least another decade before the stench clears enough to for the Libs revisit the issue, without automatically forfeiting the following election.

  3. Snoopy

    Good dream! Now get the CFMEU and ETU sponsored Greens to agree.

  4. Jeremy

    Good article!
    Can it be reduced to specific requests for changes to existing laws/regs?
    The overall thrust is excellent, but communicating with politicians requires very simple specific actions to be detailed. Left to themselves they will usually find a way to make things more complicated and hire more public servants.

  5. Entropy

    MV is right. Workchoices was doomed when it didn’t have a no disadvantage test right from the start. After that no repair could fix it in the minds of the voters, and the end result once Rudd and Gllard was finished was antediluvian. Not sure if that was a Howard or areith’s fault.

  6. JC

    Senile

    You can call yourself whatever you want, as in the end it doesn’t matter. The GOP manifesto is pretty clear where the party stands. If you don’t believe in the manifesto, which reads like the chapters of a book on classic liberalism, you aren’t that much of a rightie.

    You could be a centrist -a term laughably butchered the other day by the Hippo, when she bumbled her way trying to describe libertarian philosophy as centrist. It’s not of course.

    Like the mentally ill Andrew Sullivan, Milo applies the SSM test. That’s not good.

  7. Just interested

    Reithy had well and truly retired by the time Workchoices came around.

  8. Will

    Jeremy
    #2252823, posted on January 5, 2017 at 6:41 pm
    Good article!

    No, it isn’t. It is missing half a title and the rest of the article on “and why it will never happen”.

  9. Paul

    I’ll accept the argument of penalty rates being an anacronism the day the AFL Grand Final is staged on Thursday morning.

  10. Rabz

    Commenting on this thread is too much like work, however:

    At a time when state and federal budgets are only set to be further (word missing), a lean public service that delivers taxpayers value for money is a no brainer.

    Reduced?
    Enlarged?

    I’d prefer the former, but presumably you were bowing to inevitability with the latter.

  11. paul

    Just kill the ACCC and introduce legislation to prevent any sort of money transfer between employers of any descriptions, their associates, and unions.

    Then, disable the senile or just plain incompetents who wander the halls of the Fairwork Nursing home, pretending to be judges. Limit their terms to three years.
    :Problem solved.

  12. Cpt Seahawks

    Capitol Hill has lost the plot.

  13. Baldrick

    Surely you jest? As if the Turnbull Coalition Team is going to disaffect the Labor Party base.

  14. Herodotus

    Work Choices was doomed by a series of untruthful ads paid for by the union movement (allegedly around $26m) along with reflexive negativity from a media cohort which was aching to see the back of a coalition government. They were determined to avoid any positive aspects of Work Choices. No “disadvantage” amendment to it would have made a scrap of difference whether done at the outset or as damage control later.
    Of course the biggest positive of Work Choices was that it would defang a rabid union power clique which was in decline. It could not be allowed to stand, and the forces aligned against it were considerable.

  15. The large majority of Australian workers and self-employed business owners want to see a simplified WR system which allows them to maximise their own earnings.
    Hence Give employers and employees the freedom to cut their cloth according to their cloak is spot on.
    An enterprising politician should be able to frame this message to voters – reduce Government interference in
    Workplace Relations and thus provide opportunities for all to get wealthier.

  16. Muddy

    That the Skru.th.Wukkas Party is not daily verbally smashed in Parliament and the public arena regarding their arisotocratic lives, and deals to thieve from those they purport to represent, is due to an indescribable incompetence (or simple unwillingness?) within their political opposition. There is an opportunity there, just begging to be embraced.

  17. Whalehunt Fun

    Bollocks to a pay freeze. Nothing less than a 30% pay cut and the instigation of mandatory 3 year maximum contracts for all public service staff is warranted. And it needs to be legislated with criminal penalties for any obstruction or obsfucation. A few departmental heads serving thirty year terms with confiscation of all close family relations assets would set the correct tone. Nothing like seeing you colleagues children and siblings starving in the gutter for focussing the mind on the fact that Deplorable Me is running things now.

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