Australian Workplace Relations Report

The following graphs from Appendix C show the comparison between wage rates and inflation. It can be seen that there is some correspondence between the two graphs, but they are still very different. Though both the Wage Price Index Year-ended and the CPI Year-ended increase around the same time periods, the CPI increases to a greater extent, suggesting that there are many other factors contributing to the rise in inflation.

 

Both growth and productivity and inflation are effected due to changes in workplace relations. It is the government’s responsibility to change industrial relations to control these impacts.

Recent Changes

Under the Howard Government there have been two major changes to industrial relations. These two changes have dramatically altered Australia’s Labour Market.

Workplace Relations Act 1996

Before the Howard Government came into power, the Australian Labour Party was in power, and had a strong policy on employee favoured industrial relations. A more in-depth analysis of the Workplace Relations Act can be found in Appendix B. The decentralised the labour market as (seen in Appendix E) they want to “focus on giving primary responsibility for industrial relations and agreement-making to employers and employees.” There three main aims were (as seen from Appendix B):

• “Awards were [to] be retained as the benchmark against which employment contracts will be judged.” Now though there were only twenty allowable matters that were enforceable (including minimum wage, sick leave and long service leave) in any wage agreement. The Australian Industrial Relations Commission (AIRC) would arbitrate these allowable matters and subjected some agreements to the no disadvantage test to make sure that a worker was no worse off than on an award.

• Introduction of Australian Workplace Agreements (AWA). These contracts meant that they could have a “formalised individual agreement” and as seen in the extract from Appendix E allows for bargaining agents.

• Reduce Union Power by removing unionist preferences and allow for more competing unions to enter the Labour Market.

These changes brought greater productivity, as seen in the diagram from Appendix C on labour productivity where productivity has been climbing steeper since 1996 thus increasing living standards. It has also increased overseas competition of our products and thus greater wage outcomes and employment friendly environment.

Workplace Relations Amendment (Work Choices) Bill 2005

Work Choices was established to hand greater control of industrial relations to the federal government. It has seen many changes from the original Workplace Relations Bill. A more in-depth analysis of Work Choices can be found in Appendix B and D. As seen in Appendix D, Work Choices aims to:

• Abolish state Industrial Relations systems
• Exempt employers with under 100 employees from unfair dismissal
• Diminish the power of the AIRC with the AFPC
• Enable employers to undercut Collective Enterprise Agreements with AWA’s.

The reason for the amendment was to create a more efficient labour market. As seen in Appendix C, with unemployment as low as 4.4% seasonally adjusted in April 2007 a more efficient distribution of resources (especially labour) is needed to increase productivity. The increase of productivity and living standards is another long-term goal of Work Choices. On the short-term, though, Work Choices looks at smoothing out the fluctuations of the business cycle especially by controlling key economic indictors such as inflation. One such way of doing this is through the AFPC.

The Australian Fair Pay Commission (AFPC) sets and adjusts the minimal wages and casual loadings for employees. As seen in Appendix C, it is an independent, statutory body “established under the ‘Workplace Relations Amendment (Work Choices) Act 2005’ on the 14th December.” This commission replaced the Australian Industrial Relations Commission (AIRC) Safety Net, though the AIRC still retains the role of dealing with employment disputes.

The AIRC safety net did not immediately apply to all awards, first needing the confirmation of the trade unions before they were applied. The APFC on the other hand does not need this approval, and their decision is immediately effective across the board. Also with the AFPC, minimal pay can be set that would benefit the economy in general, looking at figures such as inflation and unemployment, rather than just benefiting the workers and looking at employee/employer relations. It is through the APFC that the government are trying to smooth out the fluctuations of the business cycle that were not addressed by the old system.

Conclusion

Through the recent changes of the Workplace Relations Act, it can be seen how Workplace Relations is a contemporary issue and has a large affect on the economy, not just the labour market. Work Choices seems to have a positive affect on the Australian Economy, as both inflation and unemployment have been decreasing. Along with the increased productivity (all seen in Appendix C) it is safe to say that the Howard Government are introducing industrial relation laws that will benefit the economy and households in the long-term, though there is a sacrifice of benefits in the short term.

Bibliography

• Bulmer, J. (2007). Update Economics B. Nahroonga NSW:Bulmer Chapman & Co Pty Ltd
• Dixon, T. O’Mahony, J. (2006). The Market Economy. Port Melbourne, Vicotoria: Leading Edge Education
• McConnel, J. Nailon, K. Johnston, C. (1996).  Economic Activity Book 2. South Melbourne: VCTA Publishing.
• Skulley, M. Rollins, A. (2007). Union Wage Claims Threat to Employers. Australian Financial Review. 30th March, pg 18

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Appendix A

Skulley, M. Rollins, A. (2007). Union Wage Claims Threat to Employers. Australian Financial Review. 30th March, pg 18

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Appendix B

Bulmer, J. (2007). Update Economics B. Nahroonga NSW:Bulmer Chapman & Co Pty Ltd

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Appendix C

APRIL KEY FIGURES

*This is the figure used at footnote 8

* Here is the website. Only a small amount was used, but this is the full summary for your connivance

About the Commission

The Australian Fair Pay Commission is an independent, statutory body responsible for setting and adjusting Federal Minimum Wages to promote the economic prosperity of the people of Australia.

The Commission was established under the Workplace Relations Amendment (WorkChoices) Act 2005, on 14 December, 2005.

The Commission replaces the wage-setting and adjusting functions of the Australian Industrial Relations Commission, which retains its role as a national tribunal dealing with employment disputes.

The Commission uses a combination of commissioned research, meetings with stakeholders, public consultations and written submissions to inform its wage-setting decisions.

There are five  from a range of backgrounds, including economics, business, social justice, workplace relations, academia and community service. The inaugural Chairman is .

The Australian Fair Pay Commission:

• Adjusts the standard Federal Minimum Wage;
• Determines and adjusts minimum classification rates of pay in Australian Pay and Classification Scales;
• Determines and adjusts special Federal Minimum Wages for junior employees, employees with disabilities or employees to whom training arrangements apply;
• Determines and adjusts basic periodic rates of pay and basic piece rates of pay payable to employees or employees of particular classifications; and
• Determines and adjusts casual loadings.

In fulfilling its wage-setting function, the Commission must have regard to:

• The capacity for the unemployed and low paid to obtain and remain in employment;
• Employment and competitiveness across the economy;
• Providing a safety net for the low paid; and
• Providing minimum wages for junior employees, and employees to whom training arrangements apply and employees with disabilities that ensure those employees are competitive in the labour market.

The Australian Fair Pay Commission is supported by the  which performs functions including commissioning research, managing communications and coordinating consultation to assist the Commission in its wage-setting functions.

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Appendix D

* Here is the website. Only a small amount was used, but this is the full summary for your connivance

In summary, the Act will:

• effectively abolish state IR systems (including the NSW Unfair Contracts Regime);
• exempt employers with under 100 employees from unfair dismissal applications;
• diminish the powers of the Australian Industrial Relations Commission (including the transfer of wage fixation responsibility to a new Fair Pay Commission);
• rationalise the content and quantity of Industrial Awards; and
• enable employers to undercut Industrial Awards through agreement making.

UNFAIR DISMISSALS

All companies with fewer than 100 employees (about 90% of the workforce) will be exempt from Unfair Dismissal claims.  Exempt employers need not provide valid reasons or procedural fairness when terminating employees. 

The probationary period for employees will also be increased to 6 months.  Further, redundancies can no longer be challenged for procedural reasons.  For non-award employees, the maximum payout has been reduced to $32,000. 

Unlawful terminations (terminations for prohibited reasons such as failing to sign an AWA or one’s race or religion) will continue to be prohibited for all employers. These claims must be litigated in the Federal Court.  A $4,000 grant for legal fees can be provided for certain employees.

Employers should be aware that other means exist for terminated employees to take action against their former employers. Updating your employment contracts and termination procedures can alleviate the frequency of those alternative actions.  

 

DISMANTLING OF STATE IR SYSTEMS AND TRANSITIONAL ARRANGEMENTS  

The Act will implement a unitary national system where all businesses covered by the Act operate under the Federal jurisdiction only (to the exclusion of any State IR systems). 

Moving employers from State to Federal systems will be a problematical exercise.  The Act provides for all constitutional corporations to enter into the Federal System upon its commencement.  State based agreements (i.e Certified Agreements) and Awards will continue for three years (unless agreements are terminated earlier) as transitional agreements, after which time employers will be moved to Federal laws.

Substantial teething problems are expected in regards to the transitional arrangements.  To further complicate matters, the States have mounted a High Court Challenge to the validity of the Act.  The challenge is likely to take most of 2006 to resolve.  

 

ESTABLISHMENT OF A FAIR PAY COMMISSION (FPC) AND STANDARD 

The FPC has been created to set a single minimum wage (currently set at $12.75), Award Classification Rates of Pay and casual loadings (with the default loading currently set at 20%). 

In addition to the minimum wage monitored by the FPC, the Act also establishes 5 minimum conditions of employment referred to as the Fair Pay Standard (FPS).  The FPS includes:

• maximum ordinary hours of 38 per week.  Reasonable additional hours and an averaging out of hours worked per week over 12 months can be agreed upon;
• annual leave  (four weeks per year), personal carer’s leave (10 days), compassionate leave (2 days) and parental leave for up to one year unpaid. 

All employers are advised to update their employment contracts to include the FPS, including the right to request reasonable additional hours or average out ordinary hours.   

 

AGREEMENT MAKING

Traditionally Australian Workplace Agreements (AWAs) and Certified Agreements (CAs) have been subject to the No Disadvantage Test (NDT).  The NDT provides that, on balance, AWAs and CAs must leave employees no worse off than the applicable Industrial Award. 

The NDT will be scrapped.  For agreements to be valid under the Act they will need only conform to the FPS (explained above).  Certain benefits contained in Industrial Awards but not the FPS (i.e annual leave loading and shift allowances) will be referred to as “protected content” and will apply to employees under agreements unless expressly excluded.  Employees will also be allowed to agree to “cash out” up to two weeks of their annual leave.

Certain types of clauses (i.e those restricting the use of AWAs or providing a remedy for unfair dismissal) will be classed as “prohibited content”.  If a proposed agreement contains prohibited content financial penalties may apply.

Both CAs and AWAs will be registered via the Employment Advocate.  The process for agreement making will be simplified such that an information sheet and copy of the Agreement needs to be provided to employees 7 days before voting.  AWA’s and CA’s can be terminated unilaterally after the nominal expiry date.

New Greenfield Agreements have also been introduced, which apply to a new business or project and allow an employer to make an agreement with itself where employees are yet to be engaged.  

 

AWARDS

Under the Act no new Awards will be created or existing Awards amended. 

The number of “allowable matters” (subjects which may be contained in an Award, ie. annual leave loading and redundancy pay) will be reduced to 18.  Those being removed are generally covered by alternative sources of legislation (such as long service leave or Jury Service). 

An “Award Review Taskforce” will be appointed to further simplify Award content and minimise the number of Awards.  Recommendations will be submitted to the Minister for implementation by the AIRC.

Whilst the FPC classification structures will replace those already in Awards, Award conditions above those in the FPS (i.e annual leave loading or enhanced notice of termination entitlements) will be preserved and included in any rationalised Awards (“preserved entitlements”). 

 

ROLE OF THE AIRC

The role of the AIRC will be dramatically reduced.  For example:

• the wage fixation powers of the AIRC will be transferred to the FPC (as outlined above); and  
• the compulsory dispute resolving functions of the AIRC will be stripped back, allowing mostly voluntary dispute resolution.  A new dispute clause will be included in all Awards and Agreements to facilitate this.  

 

Although the AIRC will continue to have powers to settle industrial action:

• the AIRC must determine applications to stop Industrial Action within 48 hours; 
• Courts can make injunctions and hear claims against Unions regarding industrial action without AIRC involvement; 
• Protected Action can only occur where a secret ballot occurs, 50% of employees vote and a majority vote in favour; and 
• bargaining periods may be suspended where “pattern bargaining” (seeking terms offered by other employers) or claims for prohibited content occur. A suspension may also be ordered as a “cooling off” period where industrial action is having an adverse affect on the employees, employers or any third parties.

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Appendix E

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