IR package is a way forward through the middle ground

11 December 2020

This opinion article by chief executive of the Business Council Jennifer Westacott was published in The Australian Financial Review on Friday 11 December 2020

For decades, attempts at industrial relations reform have generated full-throated noise and division, often with little gain.

As a result, the system isn’t working. It’s become bogged down, overly complex, out of date and doesn’t reflect the realities of modern workers and modern workplaces. It’s riddled with crippling inflexibilities, particularly for small business, and its antiquated design has contributed to Australia’s low rates of productivity.

The Morrison government’s industrial relations reforms are a sensible, middle ground package which seeks to solve the worst problems in the system. It is neither revolutionary, nor extreme.

If we fail to seize this moment, transforming our economy to get people back to work and create new high-paying jobs becomes significantly more taxing.

Pre-COVID, the economy was stuck in the slow lane with annual growth a little above two per cent. Wages growth was sluggish, productivity flatlined and business investment was anaemic.

The pandemic has not only exacerbated these trends, it’s also brutally exposed the inflexibility of our industrial relations system. It’s exactly why unions and employers agreed together to amend awards during pandemic to save jobs and businesses and keep as many people in work or connected to their workplaces as possible.

To remove the barriers to job creation, the government’s industrial relations working groups focused on five key areas.

On enterprise agreements, it’s blindingly obvious the system has become so slow and technical that it’s on the brink of collapse.

The reality is people on EBAs get paid more, yet the number of employees covered by active EBAs has fallen by 20 per cent over the past decade.

Several factors are at fault. Agreements no longer offer a genuine alternative to awards, primarily because the Better Off Overall Test (BOOT) has distorted into a ‘better off in every respect’ test.

Agreement making has become extraordinarily technical and drawn out with some workers missing out on pay rises for years.

EBAs can be derailed at the eleventh-hour of the approval stage by third parties on technical grounds.  Think about it: an employer and union work out an agreement, more than 90 per cent of workers vote in support and at the last minute someone who wasn’t involved in the negotiations torpedoes it.

Fourth, hypothetical scenarios and workers who aren’t employed can be included in EBAs. The 2019 Officeworks agreement sought undertakings about serving alcohol and working in cool rooms despite the company never doing this and never intending to.

The proposed changes put the emphasis back on ‘overall’ in the BOOT. They also give primacy to the parties involved in negotiations, remove the capacity of people who are not part of negotiations to derail agreements, and scrap the requirement to consider hypothetical scenarios.

As a result, EBAs can be approved within 21 days, speeding up the delivery of wage rises and other benefits to workers. The focus returns to cooperation between employers and employees – the foundation of our industrial relations system – and incentivises more ambitious, win-win agreement making.

On awards, the system has become too complex and inconsistent. Under the revamp, JobKeeper flexibility provisions that enabled changes to employee duties and location of work during the pandemic will apply to distressed industries for a further two years.

Hospitality, fast-food and retail businesses will be able to vary rosters in response to external pressures, rather than stand workers down, let them go or close their own doors.

New flexible part-time arrangements will deliver greater flexibility and give employees the choice of picking up more hours of work. Workers will still be paid penalty rates for weekend work. This will increase take-home pay, address underemployment and reduce businesses resorting to casuals.

Casuals will have a clear definition and a proper pathway to become permanent. Employers must offer casual workers working regular hours the option to convert to more secure permanent employment after 12 months. If employers fail to provide this option, they are in breach of the Act.

Employers can only refuse requests in very limited circumstances, for example the change would make their business unviable. Where it’s contested, workers can go to the Fair Work Commission for conciliation and, if the parties agree, arbitration.

On greenfields, the current maximum four-year life of EBAs meant they didn’t always cover the entire construction phase on major  projects. We can’t afford the uncertainty this has created when we need job-creating projects to go ahead.

The proposed new option of making EBAs, where parties have to agree, last up to eight-years will inject more certainty into pay and conditions, making investment into major projects more attractive and giving people a wage rise every year.

And on compliance, the new system will help employers identify genuine mistakes and fix them without them.This will especially help small businesses meet their obligations and ensure workers are not underpaid. For deliberate and serious wage theft, higher civil sanctions will be introduced as well as a new criminal offence.

Put together, this package represents a way forward.

We cannot allow another opportunity at achieving modest reform to slip through our fingers.

The consequences of walking away again are incalculable.

We will be left with a dysfunctional system that eventually requires radical intervention.

Allowing the EBA system to wither on the vine will erode the pivotal role that both employers and unions play in the industrial relations system and undermine their ability to work through solutions together.

Unions need to help us retain the EBA system because it’s the system that puts them at the table. It’s the system built on the fundamental tenet of collective bargaining.

If we walk away from EBAs, we’ll be left with a rules-based system of technical awards which are overly complex, inflexible and unable to keep pace with the needs of modern workers and modern workplaces.

In working together to salvage the EBA system, we cannot fall back into the language of fear, confusion and ‘us versus them’. We cannot revert to the old language that has held us back.

To do so, would be to let down the almost one million people who don’t have a job, those who need more hours and the millions of Australians who will miss out on pay rises because our economy is stuck in the slow lane.

I believe Australians expect us to do better. So, let’s work together to get this right, get the right safeguards in place, and get this done.


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