Media & Speeches

Four Ways in Which the Fair Work Act Is Reducing Productivity

The Australian

By Graham Bradley,
President, Business Council of Australia

The Fair Work Act was introduced to deliver greater fairness and productivity in Australian workplaces. Two years after its introduction, its success in achieving these twin goals is in serious doubt.

Conspiring against these goals are two factors. We have a workplace relations system that is not well designed to support productivity, particularly in an economy undergoing significant transition. More disappointingly, while for the great majority of employers and employees adversarial relationships are a thing of the past, the actions of some unions would suggest this more collaborative workplace culture is missing in some sectors.

Disputes in the aviation industry, on the waterfront, in healthcare, mining and construction are showing up flaws in the current workplace relations system.

What is at stake is the capacity of companies to make decisions in consultation with their employees about how they will run their businesses locally and internationally to remain strong in an increasingly competitive global economy.

The Fair Work Act provides for trade unions to step in and demand changes to matters as diverse as which employees will work when, what jobs are guaranteed, how those jobs will be managed and when a company can use contractors.

The act has eroded the trends of the previous decade towards direct, constructive conversations between employees and their managers about the workplace arrangements that meet the needs of an individual enterprise. The result is that flexibility to balance the requirements of employers and employees is being lost.

We have wound back the clock on another front. There is now a growing reliance on third party (Fair Work Australia) arbitration with all its compromises and imperfections as the only way to deal with protracted and unrealistic union claims.

Australia moved away from a system that assumed the need for centralised arbitration of enterprise arrangements precisely because it had become clear this was a poor fit for a nation competing in a globalised economy.

Despite its claim to support good faith bargaining, there is growing doubt whether the rules of the act about enterprise negotiations and options for business restructuring are adequate to support genuine good faith bargaining in the equal interest of employers and employees.

The Business Council of Australia recognises the concerns of the community about job and financial security especially at a time when global markets are so volatile. However, regulating job security guarantees or restricting the ability of businesses to maximise their productivity denies the reality of competing in a global economy and will ultimately lead to reduced opportunities for Australian workers and lower living standards in the future for all of us.

Last May, the council wrote to the government with detailed concerns about the act.

The changes we have sought focus on four main areas. First, the ability of the act to support productivity improvements must be strengthened.

For example, individual flexibility arrangements should be improved by legislating a model clause for insertion in agreements. Companies ought not to be restricted from hiring contractors on a competitive rate if this best meets their needs and maintains an employment opportunity.

Second, the definition of bargaining content and the scope of matters on which industrial action can be taken are too broad. In addition, the rise of adverse action claims to thwart normal business processes are threatening the capacity of businesses to operate during enterprise discussions. The laws restrict the ability of employers to have direct and clear conversations with staff for fear of breaching either their good faith bargaining obligations or mandated rules of engagement. This militates against collaborative workplace relations.

Third, we need to simplify and reduce the level of regulation and prescription in the act. Small businesses in particular have greater regulation than under previous laws and many need significant support to comply. Even large companies require technical experts to navigate their way through the act. This does not support productivity.

Fourth, the award modernisation process that accompanied the implementation of the act has in some cases reduced flexibility and increased the costs of employing people to meet the changing demands and preferences of consumers. Penalties and loadings in awards covering retail and catering employees that might have been acceptable 40 years ago when it was rare to trade at night or on weekends are not appropriate now working at these times in these industries is normal in the 21st century.

The Fair Work Act is turning out to be another example of poorly thought-through regulation whose costs and risk outweigh the benefits. With the legislation due to be reviewed next year it is vital the government takes the process seriously, and conducts the review in an open and transparent manner, with full consultation with industry and the community to make sure we get the right workplace relations system not only for the future, but for the transition that is under way in the economy right now.