Federal Redundancy Test Case - progress report


Federal Redundancy Test Case - progress report

As the AIRC heads into the final straight of the Redundancy Test Case hearings for 2003, employer groups go into battle one last time to fight off ACTU claims calling for long-term casuals and small business employees to be covered by Federal redundancy provisions, plus bigger payouts for all award employees.


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As the AIRC heads into the final straight of the Redundancy Test Case hearings for 2003, employer groups go into battle one last time to fight off ACTU claims calling for long-term casuals and small business employees to be covered by Federal redundancy provisions, plus bigger payouts for all award employees.

Ai Group chief executive, Bob Herbert was concerned that allowing casuals to access redundancy would severely restrict business adaptability.

Both the Ai Group and the Australian Chamber of Commerce and Industry (ACCI) claimed that under the ACTU proposals, small businesses would be hit with a redundancy bill of about an extra $6,500 per redundant employee.

There also was concern that any increases in redundancy payouts for award employees in small and large business would damage employment opportunities.

However, ACTU arguments indicated that employer group predictions might not be as dire as employers think.

The ACTU submission to the Redundancy Test Case said extending the redundancy provisions to casuals with more than 12 months service would bring the provisions into line with unfair dismissal legislation and maternity leave provisions for casuals working under awards.

As a matter of fairness, redundancy provisions should be extended to small business and, contrary to the Ai Group and ACCI, small business did have the same capacity as bigger business to pay.

Also, an increase to the existing redundancy entitlement was necessary to adequately compensate retrenched employees, the ACTU said.

Under the ACTU’s claim, for example, employees with four to five years service would receive 12 weeks redundancy pay instead of eight, workers with two to three years service would receive seven weeks instead of six, and 20 weeks redundancy pay for the over 45s.

Less adaptability

Herbert argued that the ACTU’s claims lessened business adaptability and employment opportunities.

‘It would become far more costly to terminate permanent staff and prohibitive for companies to employ casuals to cope with fluctuating demand for their products and services.’

But while Herbert was arguing that the additional entitlements would remove casual and permanent job opportunities, he was also arguing they would increase employer incentive to ‘casualise’ the workforce.

‘Unions lament the casualisation of the Australian workforce but the increased redundancy entitlements which they have been pursuing at the enterprise level, and now at the award level, have been major contributing factors to this.’

Small business exemption

The proposal to remove the small employer exemption, making employers with more than 15 employees liable for redundancy payments was counterproductive, according to Herbert.

Herbert argued the ACTU claim would ‘cripple’ small business, reducing employment opportunities.

Small business would be up for on average an extra $15,000 per year to make employees redundant.

Larger employers would have to fork out an extra $3,500 per year, Herbert added. 

‘The focus should be on retention of employment through the maintenance of a business environment where companies can operate profitably and competitively - not making it more attractive for employees to lose their jobs.'

Further Ai Group concerns

Herbert was worried that as Australia already had sufficient redundancy entitlements, which ranked highly in comparison to other countries, any further upward movement would impact negatively on Australia’s global competitiveness. 

Additional redundancy payments might also make it more difficult for insolvency practitioners to keep a ‘financially distressed’ company ‘afloat’.

‘The ACTU’s proposals would make it more difficult for struggling companies to make some employees redundant during restructuring, in order to retain jobs for most employees.’

Herbert also claimed that a redundancy culture had developed over the last two decades in some workplaces, which led to some workers chasing redundancy packages and not getting behind efforts to restructure.

This culture would only increase if the ACTU claim was successful.

The ACTU quest for higher redundancy payments for the over 45s would also hinder the employment prospects of the mature workforce.

Labour market redundant friendly

ACCI chief executive, Peter Hendy said the ACTU redundancy proposals would be devastating to small business, claiming the average redundancy payout for small business would rise 400%.

Existing redundancy provisions must remain, he said.

‘Changes in the labour market have placed redundant employees in a better position now than before to find alternative work, with more jobs in our economy, more employment services for the unemployed and more skills, training and career options.’

According to ACCI figures, under the ACTU’s claim, shop employees with three years service earning $517.70 per week would see their redundancy pay increase from $1,553.10 to $5,177.00; while a tradesperson with three years service on $542.20 per week would see their redundancy pay increase from $1,626.60 to $5,422.00.   

Negligible redundancy burden

The ACTU argued that an extension of redundancy payments to long-term casuals with more than 12 months service was not founded.

As there was significant growth in the number of casuals with long-term tenure, predictable working patterns, regular income and expectations of ongoing employment, there was no reason to deny casual with more than 12 months service a redundancy payout, the ACTU said.

The argument that small business couldn’t afford the proposed redundancy claims was also rejected.

According to the ACTU, although small business accounted for 97.5% of all businesses leaving the market in any one year, only 0.5% of the businesses that left did so because of bankruptcy or insolvency.

Most businesses left because they realised a profit.

Also employment growth in small businesses was less than larger businesses - average annual growth rates of 2.3% compared to 3.5% from March 1992 to March 2001, the ACTU added.

Not expensive, existing provisions not enough

The ACTU said the redundancy provisions, including the additional payouts, would only add about 0.8% of the total wages bill arguing that the current level of federal severance pay was not sufficient.

‘The existing federal severance pay standard does not provide adequate compensation to employees when regard is had to the likely loss of an employee whose employment is terminated due to redundancy.’

Redundancy payout should cover trauma associated with  the termination; costs of withdrawing from the labour force or loss of earnings for the period of unemployment after termination; loss of non-transferable credits, for example sick pay; wage cost differential between the old and the new job; and costs associated with loss of job security, loss of seniority and similar.  

Labour market withdrawal

The ACTU rejected the ACCI’s stance that changes in the current labour market had put employees in a position where they were more likely to find jobs.

‘About a quarter of retrenched permanent employees experience more than 26 weeks unemployment and close to half experience unemployment of more than 14 week,’ the ACTU said.

Not only did some retrenched employees experience long periods of unemployment, many found it difficult to find full-time secure employment.

After redundancy, 19.5% went from permanent to casual;14.1% went from full-time to part-time; and 6.5% went from full-time permanent to part-time casual.

Also, 16% of retrenched workers withdrew from the labour market. Of the 55-64 year olds, 40% withdrew.

Final submissions to the Federal Redundancy Test Case are being made to the AIRC this week. It is not known when the AIRC will hand down its decision.



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