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04.08.2015Change penalty rates, reform work agreements, urges Productivity Commission: experts respond

Hospitality, entertainment, retail, restaurant and cafe workers will have their Sunday penalty rates cut


David Peetz, Griffith University and Rob Bray, Australian National University

Hospitality, entertainment, retail, restaurant and cafe workers will have their Sunday penalty rates cut, while minimum wage workers can expect modest pay rises, if draft workplace reform recommendations from the Productivity Commission are accepted by the Coalition government.

Despite criticism from business lobby groups, the Commission has described the current system of minimum wage setting as “justified”, saying the view that existing levels are “highly prejudicial to employment is not well founded”.

But it says significant minimum wage increases pose a risk for employment, especially against a weakening labour market. It also says the Fair Work Commission should be allowed to make temporary variations in awards “in exceptional circumstances after an annual wage review has been completed”.


Michelle Grattan: “Nevertheless, whatever reforms the government proposes for its next term will face tough counter-attack from Labor and the unions”.


The Commission recommends that Sunday penalty rates be removed for hospitality, retail and entertainment workers, aligning them with Saturday rates. The Commission believes lower regulated Sunday rates would increase opening hours and encourage higher staffing ratios and job opportunities.

Rebutting business complaints that the system needs comprehensive reform, the Commission found Australia’s labour market was performing relatively well against global standards.

But among other major recommendations on reforming Australia’s enterprise agreement system, the Productivity Commission has suggested the creation of an enterprise contract, a new type of enterprise agreement allowing business to negotiate individual flexibility arrangements without the need for an employee ballot. The report said the Australian Government should also replace the better off overall test for approval of enterprise agreements with a new “no-disadvantage” test.

The report suggests employees could only receive compensation for unfair dismissal if it was found they had been dismissed “without reasonable evidence of persistent underperformance or serious misconduct”. It also recommends the emphasis on reinstatement as the primary goal of the unfair dismissal provisions, be removed from the 2009 Fair Work Act.

Among recommendations that will anger unions, the Productivity Commission has said the Fair Work Commission should only grant a protected action ballot order to employees if enterprise bargaining has commenced, and suggests the Fair Work Commission be allowed suspend or terminate industrial action causing, “or threatening to cause, significant economic harm to the employer or the employees… rather than both parties (as is currently the case)”.

It also suggests increasing the maximum penalty for unlawful industrial action to reflect “the high costs that such actions can inflict on employers and the community”.

The report also addresses the potential exploitation of migrant workers by employers, suggesting penalties for underpaying staff be boosted.


Enterprise Contracts

David Peetz, Professor of Employment Relations at Griffith University:

The Productivity Commission says its recommendation of an “enterprise contract” will “go a long way in allowing enterprises to negotiate with individuals without union representation if that is their wish”.

Unfortunately for the Productivity Commission, it would not be an “agreement”, because the Commission recommends employers be able to establish an enterprise contract “without having to negotiate” with anyone. Indeed it could be offered “to all prospective employees as a condition of employment”.

The EC would not be subject to the existing “better off overall test” that currently applies to enterprise agreements and individual flexibility arrangements. Instead, it would be tested against a weaker “no disadvantage” test.

It therefore has the key features of two previously abandoned instruments. One is “employer greenfield agreements” (EGAs), which only existed under WorkChoices. These enabled an employer to agree with itself the conditions that would apply to new employees – but only in a new establishment, whereas ECs would apply in any establishment of any size. These greenfield agreements led to frequent cuts in penalty rates and other conditions.

The second is Australian Workplace Agreements (AWAs), which even when they were subject to a no-disadvantage test (before WorkChoices), were shown to lead to lower pay and conditions (and/or to be used for union avoidance), and which under WorkChoices could be offered as a condition of employment. AWAs were a major factor in the defeat of the Howard government.

It is hard to believe that the Productivity Commission really expects that the government would agree to this recommendation, as it would form an easy basis for another political mobilisation by unions against any reform package. More likely, it would end up a sacrificial lamb, dumped by the government to protest it is only after moderate reforms.


Minimum wage

Rob Bray, Research Fellow at Australian National University:

The Productivity Commission is quite cautious in its discussion, in many ways reflecting the extent to which submissions did not argue too strongly for change, and the considerable weakness of the available data. It supports the maintenance of a national minimum wage, recognising a need to “address bargaining power imbalances”, but makes some recommendations for change in the setting of this. These are a mixed bag.

Responding to special pleading from the rural sector and an employer organisation, it suggests that there should be capacity to vary awards in “exceptional circumstances” (without really saying why this mechanism, rather than say drought relief is appropriate). The Productivity Commission also suggests that the Fair Work Commission “systematically considers the risks of unexpected variations in economic circumstances” – a rather challenging concept, and one that tends to ignore the extent to which changes in wages tend to be retrospective; that is, justified on the basis of what has happened.

While discussing the interaction with the tax and transfer system the Productivity Commission comes to no conclusion, doesn’t come to grip with family payments, and simply issues another “Information Request” for further input from participants. Tucked away in the discussion of the minimum wage is a call for a comprehensive review into apprenticeships and traineeships, and another information request about the structure of junior wages.

Looking at the report overall one can only get the impression that while the Productivity Commission may have taken its first wobbling step in considering these issues it has a long way to go. Given the timing it may be sensible for it to consider what it can and cannot feasibly cover in the time available to it.


More comment to come.

The ConversationThis article was originally published on The Conversation.

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