Award modernisation doesn’t have to be ruthless

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Award modernisation doesn’t have to be ruthless

What will Australia’s IR system look like under the new Fair Work Australia system? In the second of three articles, WorkplaceInfo spoke with our resident IR expert, Paul Munro, to get a feel for how the new award system might work.

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What will Australia’s IR system look like under the new Fair Work Australia system? In the second of three articles, WorkplaceInfo spoke with our resident IR expert, Paul Munro, to get a feel for how the new award system might work.

Recently, AIRC deputy president Michael Lawler said that the Commission was going to have to be ‘ruthless’ when modernising awards, but this is probably not the case.

History

Munro started by noting that the Government is saying that no-one is going to lose in the new system, so they probably don’t need to be ruthless.

They went through this exercise in the '80s where there were 365 classifications in the Metal Award and they crammed it into 14 classifications, with 14 wage rates. This also included a broadbanding exercise, where there were incremental increases in pay rates to bring people up to a rate within a particular period of time. So, no-one was going to drop, everyone was moving up.

Federal awards to replace various instruments

The system will have a federal award replacing various instruments - both Federal and State – so the problem of dealing with these different instruments has to be addressed.

Q    So you think that’s how the clerks problem might work (with different wage scales in different States to probably come under one modernised award), they will set up a classification and bring the bottom ones up?

Munro    If they want to comply with the requirements of the Minister that there are not going to be any losers, I don’t see that there is any other way that they can do it; that is, to bring the lower rates up by increment. That it is a transition, and the transitions could finalised by the year 2015.

Q    Will there be a skills requirement to justify those increments, so the bosses get something in return?

Munro    That is not how it has traditionally worked. If you do the qualification, you move up to the level that already existed. A person would still get a wage increase when acquiring a higher qualification, but it will have nothing to do with re-jigging the classifications. The modernisation of awards is more for the people who just stay doing what they are doing.

It seems to me there are two conflicting ideas at the moment anyway: the Government is saying no-one will miss out and the Commission is saying someone will miss out because we are going to be ruthless.

Q    The employers are saying they don’t want rounding up of lower rates to the higher ones in the new awards, do you think that via the increments you suggest there will in fact be rounding up by stealth?

Munro    The worst thing that employers don’t like is being hit by an increase they didn’t expect. As much as they don’t like wage increases, the next best thing is for them to say ‘at least we know what we’re up for’, so they can budget and take it into account for their costings for the next year. They would accept this if the transition is over a long period.

Employers will benefit from award modernisation anyway. They are going to get the flexibilities, and a simpler system.

The crucial difference between the old system and the new system was the fairness test. The Howard Government killed the no-disadvantage test, but people didn’t like that so he had to bring in the fairness test. There is a political sensitivity. The Government doesn’t want losers, because the original WorkChoices system did have losers and this was very unpopular. That’s a political dynamite area for a government. The new Labor Government doesn’t want to be victims of the AIRC’s ruthlessness in applying the award modernisation system.

Q    Why would an employer or anyone look to a collective agreement in the future, rather than this new award system?

Munro    I’d say that those companies that have a history of collective agreements, non-union and union, probably will continue to do so. Certainly with a union one they’ll just continue to do union collective agreements. It works fine, it’s a horses for courses thing - as long as there are no problems. People I know who work for large companies love collective agreements - they dislike this individual aspect because, in a very large company, individual arrangements are just not administratively friendly either.

In fact, a lot of big companies didn’t enter into AWAs specifically for that reason. Because it was just the sheer difficulty of keeping abreast of all the AWAs that were running around at the one time, specially since they all had different operative dates because people start at different times.

So there was an administrative issue involved with AWAs, which eventually became ‘pattern’ AWAs for those companies that did use them, because that way everyone was on the same thing. The individuality of it all was a bit of a misnomer in a lot of respects. Certainly the large companies, particularly those with union agreements, will continue to embrace collective agreements.

Those companies that have always been in collective agreements will probably find very little, if any, difference with any new regime that comes along. It’s worth noting that the Government’s preference is, if you enter into an agreement, that it be a collective agreement.

Speaking to people I know who are currently negotiating a collective agreement, they’re not fussed by whatever is going to happen. They’re not fussed by what’s happened last February (when the transitional system was announced), they are just doing what they’ve always been doing and to them its just not really an issue. They are looking to keep people - no system is going to affect an employer who is trying to keep quality people.

Q    What use is there for common law contracts for people under $100,000 when the new regime moves into full swing?

Munro    Common law contracts have always been subject to whatever is the minimum statutory provision, and the relevant award. I guess its more a question of whether those people will have flexibility available to them. Will someone under a contract of employment be able to cash out annual leave? It gets back to the non-award thing; to me a common law contract of employment is another way of describing a non-award person.

Common law contracts to me were never part of the formal process - so to say that that is an alternative is just saying what has always been there.

In any case, common law contracts have hardly been mentioned by the Government for months. It seems they will not play a big part in the new system.

The main thing is that there aren’t many restrictions on people who aren’t covered by an award; there’s no such thing as overtime, so whatever money or wage you negotiate as a non-award person or under a common law agreement is what you get. None of those things are an issue, so the only things that are an issue generally are the minimum entitlements, which strangely enough under WorkChoices increased for someone under a common law agreement. So in some respects they were better off under WorkChoices than they probably were prior to WorkChoices. Flexibility to them is probably not an issue.

Q    If you are right about the new award system not being comprehensive and not covering high paid executives, they’re under common law contracts by definition?

Munro    Yes, it is almost like a default. Everyone is under a contract of employment, we incorporate minimum conditions from particular documents or instruments - but there aren’t any except for the statutory provisions for non-award people.

 

Other articles talking to Paul Munro

Musings on new award system

  • What will Australia's IR system look like under the new Fair Work Australia system?

Future of existing awards and agreements

  • How existing awards and agreements fit in to the new system


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Musings on new award system

Future of existing awards and agreements

New flexibility clause for individual workers only
 

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