Government’s IR reform costs based on outdated, limited and flawed data

26 September 2023

The impact of Labor’s radical workplace relations overhaul on Australian business is impossible to quantify based on the flawed data and analysis in the Government’s own legislation, Business Council chief executive Bran Black said.

“While the BCA strongly supports the ambitions set out in the Government’s White Paper of sustained employment growth, job security and productivity, none of this can be achieved if the Government pursues the measures in its Fair Work Legislation Amendment (Closing Loopholes) Bill.

“In the lead up to submitting a formal response to the proposed legislation, Mr Black said the 521-page explanatory memorandum for the Bill contained multiple admissions that the data it was relying on to justify the changes was either outdated, limited or unavailable.

“In addition, certain assumptions used by the Government as part of its cost-benefit assessment were unrealistic, including the estimated 15 minutes it would take employers to apply the new multi-layered test as to whether a casual employee was entitled to an offer of permanent employment.

“These flaws call into question the Government’s estimates of the impact on individual businesses, and the extra $9.1 billion the labour hire and gig economy reforms alone are forecast to cost over 10 years – costs that will increase pressures on households already coping with a cost-of-living crisis.

Key data and analysis issues identified include:

  • The Government’s admission that it relies heavily on the findings of previous inquiries, such as KPMG’s statutory review of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021 and the Senate Select Committee on Job Security, which drew dissenting reports from Senators;
  • The Government’s admission that its calculations regarding the labour hire workforce contain “a high degree of uncertainty” due to “significant limitations” on available data (p402-403);
  • The Government’s admission that “there is not explicit alignment” between the statutory provisions in the Bill and the data used to estimate the number of casuals who will be affected by the changes (p331);
  • The Government’s admission that it cannot estimate the cost to business of disputes based on its new casuals test “given the inherent uncertainty in how independent parties will respond to this policy” (p344);
  • The Government’s admission that among the data projects that have “informed design of the proposed new legislative settings” were qualitative interviews with just 12 “current and recent casual employees and just 8 employers of casual staff (p315-316).

“Of significant concern is the back-of-the-envelope calculation that it will take just 15 minutes for employers to determine whether their casual employees meet the criteria to be offered permanent roles under the new pathway for conversion after just six months.

The explanatory memorandum for the Bill reveals the Government took the 10 minutes estimate for the existing legislated test for conversion at 12 months and arbitrarily added 5 minutes, even though the new test requires up to 12 different criteria to be considered, compared to just one currently (p334).

The Government has used these figures to estimate the total cost to business of implementing the new test at just $593,055 a year for all Australian businesses employing casual workers (p341).

Mr Black said: “The analysis in the explanatory memorandum just doesn’t stand up. Imagine polling just 1200 of the 2.7 million casual employees in Australia, and interviewing just 12, before proposing a complex new test that will affect every business employing casual workers in Australia.

“Imagine estimating that it will take a small business just 15 minutes to step through a dozen different criteria to determine if an employee is a casual – and then having no idea about the cost to Australian business if the process ends in a dispute determined by the Fair Work Commission.

“The Government is proposing nothing less than a radical rewriting of our workplace relations system, and what is abundantly clear is that the cost impacts of the Bill, which will hit employers, employees and consumers, will be significantly higher and wider-ranging than claimed.

“Again, we recommend the Government take the opportunity to go back to the drawing board to identify the problem it is trying to solve before it imposes increased complexity, confusion and cost into the workplace relations system at a time when business and workers are facing a cost-of-living crisis.”


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