Enterprise Agreements in an Uncertain Environment of Change
25 March 2019
A brief look at the current political and industrial environment will leave no doubt that substantial changes are afoot. The Federal Government is on shaky ground, the ACTU has had a campaign for changing the rules underway for two years, with rallies and substantial advertising on prime time TV and we have a Federal election prior to May this year. Businesses looking for certainty in their industrial relations arrangements have much to be concerned about.
The Reserve Bank has identified poor wages growth as a key restraint in generating economic growth and key economic indicators, such as retail spending, point to a concerned community unsure of their economic wellbeing and wanting change.
The Liberal National Coalition is on the nose to many, due to a seemingly capricious change of leadership, resistance to the Banking Royal Commission, the continued stagnation of real wages, the ongoing housing downturn and a range of other community concerns depending on your politics.
Whichever way you look at it, the current wage fixation processes are not delivering a balanced share of the improvements in economic growth to those earning wages in a highly regulated system. Simply, company profits are up but wages are not and after the Banking Royal Commission, the community have little sympathy for big business.
The primary mechanism for wages growth in former times has been through enterprise agreements negotiated at the business level but in recent years this system has failed to deliver and the number of agreements being registered each year has fallen annually since 2010. Employers have seemingly lost faith in the process and are either not renewing agreements as they reach their nominal expiry date or in increasing numbers, are applying to cancel agreements and falling back on the award minimums. The mood is ripe for change and it is likely that the Liberal National Coalition will fall at the next election.
The Labour Party is under some pressure from the ACTU and others to deliver decisively for their base. Thus far, the Labour Party has stopped short of endorsing the more challenging aspects of the ACTU Campaign (including removing restrictions on access to workplaces), but has endorsed multi-employer, sector and industry bargaining for the low paid, such as child care workers, the retail sector and the like. A key action will be the protection of retail penalty rates.
It’s a sound strategy designed not to frighten the community about the potential for unfettered union action but how long this moderate approach will prevail post-election is anyone’s guess. Once established as a mechanism, it is easy to see industry bargaining spreading quickly to the more militant industries such as Construction and Transport at the least.
If we assume a Labor Government comes to power, the winds of change will blow through the industrial relations community and that brings uncertainty and sometimes a level of paralysis as organisations watch and wait. But any change takes some time with the likelihood of short term, medium and long term adjustments to the legislation.
In the short term, the protection of weekend penalty rates and increased restrictions on the termination of agreements are likely easy wins. In order to generate more enterprise agreement negotiations it is possible that they will grant Unions default representational rights and have the right to initiate negotiations for new agreements. Substantial changes take time and in a practical sense the government has to bring the business community along with them to a degree, albeit kicking and screaming sometimes.
There is much for a new government to do and until there is change, the current regulatory regime remains, so employers wishing to operate in the current enterprise focussed environment would be wise to develop a strategy and act now. Given that legislative changes could take 4 to 6 months to implement, there is time in most industries for well managed negotiations to be concluded beforehand.
Businesses with an expired agreement, or one which is expiring in the next 12-18 months should well consider taking decisive action and renewing their agreement while the current legislative environment prevails.
Adelhelm & Associates Pty Ltd
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