Workplace Relations Reform: Article by Jennifer Westacott

This opinion article by Jennifer Westacott, Chief Executive of the Business Council of Australia, was published in The Australian on 26 September 2015 under the title 'Workplace relations system must be overhauled to keep nation nimble and competitive.'

Last week Prime Minister Malcolm Turnbull told Parliament his new cabinet would undertake a comprehensive review of existing policies to ensure Australia could seize the opportunities in an intensely competitive and disruptive world.

With the Productivity Commission this week winding up hearings as part of its review of the workplace relations system, a renewed focus by the government on reforms which will set our workplaces up for the future must be a top priority.

This is nothing short of a clarion call that we must acknowledge and respond to the changes and disruption which are transforming Australia’s economy, its competitiveness, and the nature of work and workplaces.

Digital transformation, internet commerce, mobile workforces, products designed in one country and made in several others, and changing preferences in how people want to work are all causing profound challenges to existing business models across almost every sector.

In the face of these challenges our current workplace relations system, which in essence was designed decades ago in a very different world where there was no internet, far fewer global supply chains, and far less movement of people around the world, looks ridiculously out of date.

When something looks ridiculous, it’s generally because it is.

Let’s start with awards – they are meant to set the minimum pay and conditions in an industry.

Most workers wouldn’t have read their award, but they are the starting point for the conditions of 60 percent of all workers.

This means the more that’s in them, the more rigidities they create in the labour market.

Awards are meant to be a safety net, but over time they have been allowed to encroach far beyond what anyone ought to regard as a sensible safety net.

For our recent submission to the Productivity Commission, we reviewed 25 awards and found comprehensive evidence of how far they have gone beyond common sense minimum standards.

Some include leave loading. Some detail when annual leave can be taken. Some specify how and when higher duties should be paid or within what time frame a worker should progress to the next pay point. Some say how rostered days off should be organised. Some define occupations and, in effect, control how enterprises manage their workforce. And they go to job design.

Take the Health Professionals and Support Services Award 2010 as an example.

This award includes a minimum pay rate of $96,127.20 per annum. This is 181 per cent higher than the national minimum wage – clearly beyond a safety net.
When you unpack the role associated with that salary, it becomes apparent the Award is venturing into job design territory.

Job design is not basic fairness. It is not the role of the safety net. And restrictive job design is not how the modern workforce operates. 
Enterprise agreements are also problematic.

Agreements are meant to be about employers and employees agreeing the unique circumstances of their relationship required for the enterprise and its workers to be productive.

Again, the evidence indicates this is not the case.

The Business Council analysed 20 enterprise agreements and found clauses that go far beyond the employment relationship.

Most contained clauses that give employees, or third parties, such as union officials, control over how business or staffing decisions are made.

For example, take the Australia Post Enterprise Agreement 2013 which commits the enterprise to not changing its retail network:

40.2.2 Australia Post is committed to the long term viability of its retail network. This network is currently and will continue to be a mix of corporately owned outlets and privately owned outlets under one of a number of arrangements. It is not intended that the overall mix will change over the term of this Agreement.

Or take the Pacific National Bulk Rail Enterprise Agreement 2013 which gives employees power to decide how and when new technology will be trialled and implemented:

2.4 Tests and trials shall only be carried out using modified locomotives which modifications have been the subject of consultation with the local Drive Only Operations committee.

2.5 Prior to the commencement of any test or trial, agreement shall be reached between the Employee and Employer representatives who are on the relevant local DOO committee, on DOO relief points, locations and sections…

In a modern economy, we have to understand that a system with these sorts of restrictions and rigidities is holding us back. As Mr Turnbull said, we must see opportunities in our challenges to continue to prosper in a changing world. That’s why we have to be willing to let go of old ideologies and be prepared to talk about these previously difficult issues.

Codifying these types of arrangements is in direct contrast to the modern world in which an enterprise operates. Business models can change overnight; an agreement sets the rules for three to four years.

The workplace relations system must be understood in terms of its cumulative burden on enterprises.

We have the minimum wage, the National Employment Standards, Modern Awards, and then we have agreements that can cover operational decision-making. It is true some enterprises have found ways to work around the current system. But we shouldn’t have a system that is complex, difficult to use, unnecessarily slows business decisions, and needs to be worked around.

Australian workers and enterprises grappling with how to stay competitive, maintain and grow jobs, and succeed in a global world deserve a system that is designed for today, not a system designed for a very different world and a very different generation of workers.

As Glenn Stevens said at the National Reform Summit we have to be willing to talk about workplace relations.

This is the only way the system will be durable and sensible in the face of the global challenges Australia – like many other countries around the world - is confronting.