This opinion article by Jennifer Westacott, Chief Executive of the Business Council of Australia, was published in The Australian on 28 February 2015 under the title ‘A more flexible, innovative IR system would promote a competitive economy’.

It is the second in a series in The Australian about the BCA's submission to the Productivity Commission's Inquiry into the Workplace Relations System.

If the Australian economy is to be stronger and more competitive, there are two major challenges the Productivity Commission’s review of workplace relations must come to terms with.

The first is facilitating a better relationship between workers and enterprises. The second is ensuring the workplace relations system is more flexible. The starting point for both of these are enterprise agreements and modern awards.

So what are the ingredients that underpin a positive relationship between a worker and their ­employer? While they share an interest in a business’s success, they have different needs and priorities.

Workers value flexibility and the ability to balance their work and personal responsibilities. This balance is unique to an individual’s circumstances and it isn’t static — the preferred balance changes as a person’s circumstances change.

Enterprises also need flexibility in balancing the different requirements and expectations of workers with business imperatives.

There are two prerequisites for creating a work environment that allows workers and enterprises to collaborate towards a shared objective while also meeting their different needs and priorities.

Workers and enterprises must have a direct relationship with each other, and sufficient trust and opportunity to negotiate the conditions of employment. Enterprises also must be able to negotiate with an individual or across their workforce.

Australia’s workplace relations system fails to meet either of these prerequisites. Improving it involves looking at how employment conditions are established and negotiated.

The enterprise bargaining process does not facilitate either of these prerequisites. The matters that some workers and representatives want to bargain on go beyond employment conditions.

But if I turn to modern awards, they are the starting point for employment conditions. They are created by the Fair Work Commission and are meant to “provide a fair and relevant minimum safety net of terms and conditions”.

The conditions in the awards are mandated and not subject to negotiation. In 2014 a modern award was the starting point for an employment contract for 60 per cent of Australian workers.

While Australia is the only country in the world to operate an awards system, the Business Council is not proposing their abolition.

We recognise and support the role awards play in contributing to a safety net to protect vulnerable workers. But the terms and conditions in modern awards have gone beyond a minimum standard. The scope and content of awards must be reviewed and pulled back to this core purpose.

Take rostering as an example. An award could specify minimum standards for rostering. These might include the maximum number of hours a worker is required to work in a day or the minimum break time between shifts. But an award should not go into the detail of how a roster is constructed. Another example is meal breaks. The minimum number of meal breaks that a worker is entitled to could be specified in the award, but when and how they are taken should not be specified.

Not only do awards go beyond determining minimum employment conditions, they delve into roles and occupations. As a result, we have 122 modern awards operating across the Australian labour force. Allowing the inclusion in awards of prescriptions beyond minimum standards creates rigidities in the employment relationship that undermine the capacity of an enterprise and its workers to negotiate a balance that meets each of their needs.

Having 122 modern awards, including occupationally specific ones, creates rigidities across the labour market and can effectively dictate to an enterprise how it manages its workforce.

A system that has a broad set of conditions built into it before the two main parties in the system, enterprises and their workers, have a chance to sit down and negotiate how they can most effectively work together establishes the relationship on an adversarial footing.

Productive, successful and high-quality workplaces are not guaranteed by a fit-for-purpose workplace relations system. But a flawed system can certainly restrict people’s capacity to create the workplace that meets both their shared and different needs.

No system can satisfy all these needs. But to be effective, it must have general support from workers, enterprises and the community more broadly. It needs to be founded on the common ground between the parties. They must have confidence in the system, which means they can’t feel that it’s stacked against them.

Changes to Australia’s workplace relations system that came about when our economy was opened up to the world and exposed to global competition in the 1980s were hard won. But they were negotiated and accepted by all parties in the labour market.

Changes over the last decade have not had the same level of success. They have generated concern and mistrust across the community and created unnecessary divisions between workers and enterprises. There are perceptions on both sides that the system has been designed to favour the other.

Neither the workplace relations system nor the one that preceded it has had sufficient support or confidence to move the national discussion about workplaces to where it must be — creating a culture of collaboration and innovation that is the key to continued business and national competitiveness.