The following is a paper by Asher Judah, author of The Australian Century (available for $29.95 from Connor Court Publishing):
Ensuring Australian businesses remain competitive in an increasingly interconnected global economy will be one of the toughest challenges facing the nation this century. Confronted with rising demands for work-life flexibility, the third highest minimum wage in the OECD (60 per cent higher than the United Kingdom’s) and multiplying sources of product and service acquisition, employers will need a workplace relations system which has flexibility and autonomy at its heart.
In order for Australia to secure a productive and cost competitive edge, three areas of workplace relations reform must be enacted as soon as possible. These are:
- ushering in the era of 24/7 retailing;
- returning management certainty back to construction, mining and energy businesses; and
- reintroducing EBA’s which support growth, creativity and sustainable business activity.
Lamaze for 24 hour retailing
Recognising the end of the traditional 9-5 workweek is an essential first step in helping Australia prepare for the most competitive century in history. Since its conception in the Western world, the traditional 9-5 workweek has helped define normal work hours for millions of Australian workers. At the time of its introduction, it has helped protect the importance of the family unit, personal and recreational time and a workers right to reasonable work hours. For decades, these principles served society well. However, as social standards evolved, technology advanced and international trade accelerated; the primacy of a regulated workweek has given way before society’s preference for increased flexibility. Indeed, there is no better example of this evolution than that 1970s shopping innovation, the 7-Eleven. At the time of its arrival on Australian soil, its 7am to 11pm operating hours were unheard of. Yet the idea that you would name a non 9-5 convenience store by the same name
today is ridiculous. Whether we like it or not, contemporary consumers now expect service at all hours.
Where this represents a serious problem for Australia’s retailers is the fact that the workplace relations system in which they operate remains trapped in the inflexible world of the 9-5 workweek. On one hand, consumers and employees desire greater flexibility in their shopping and employment choices, but on the other, retailers are forced to compete with international and online competitors which enjoy a fraction of their operating costs. If retailers are going to survive being wedged between
these competing and complex interests, then new arrangements based around a 24/7 workweek will need to be pioneered.
The most important place to start is addressing the unsustainable rise in penalty rates for workers on weekends and during traditional work hours. In March 2008, the award modernisation and rationalisation process resulted in more competitive state awards being replaced by less affordable ones found in other states. Through the introduction of a “modern award”, this process caused considerable economic harm to employers in the retail, hospitality and tourism sectors by increasing the wage outlays for these businesses without balancing it with productivity improvements. This process caused serious economic harm to businesses operating in states where Sunday penalty rates and weekday after 6pm arrangements had historically been more competitive. Indeed, rural operations that depend upon the weekend tourist trade have been particularly caught out.
According to the National Retail Association, “the service sector in Queensland has been a substantial victim of the award modernisation process”. Similar impacts have also been reported in New South Wales and South Australia with some industry groups referring to damage done as “extraordinary”. Right across the nation operating costs have risen, retail jobs growth has eased, profitability has declined, domestic tourism has ventured overseas and hard won competitive niches have been lost. Indeed, the situation has become so bad that full time retail business managers on fixed incomes now substitute for casual workers on weekends because the cost to the business is lower. Put another way, the system has grown so out of sync with modern requirements that it is now beginning to distort basic business operations.
With such problems emerging, it comes as no surprise to learn that “two-thirds of tourism operators want penalty rates reviewed”, as does the collective memberships of Australia’s largest employer organisations – the National Retailers Association, Restaurant and Caterers Australia, Business Council of Australia and the Australian Chamber of Commerce and Industry. In a flat economy facing rising unemployment and intensifying competition from online and overseas, it is hard not to understand why.
If Australia is to secure its place as an international hub for retail trade, host global cities which operate 24-7, offer small businesses cost pressure relief, and provide workplace choice for employees who feel less compunction for working weekends and evenings, than its retail sector will need new methods of managing today’s trading expectations. A good place to start would be a comprehensive review of penalty rate arrangements for employees working in the retail sector, especially on
weekends and during weekday evenings.
Management with a capital “M”
Restoring management control to businesses operating in the construction, mining and energy sector will also be crucial to efforts to keep Australia’s economy competitive.
Over 10 per cent of the Australian workforce is employed in the construction sector, mining and energy sectors, but very few business managers in those sector feel like they have full control over their worksites. The reason for this is because of the disproportionately high level of union militancy. As a result of weak law enforcement, poor workplace leadership and the unique vulnerability of their companies to organised exploitation, a workplace environment has developed in which owners and managers are not in control of their own operations. The end result has been a cost of construction “for high-rise apartments, CBD offices, hospitals, schools and roads” which is amongst the highest in the Western world; an energy and mining sector with globally uncompetitive labour costs; a remuneration structure which is predicated upon employer exploitation rather than mutual corporation and negotiated productivity gains; a highly inflexible work year calendar; and, a workplace environment rife with fear, intimidation and criminal activity.
If Australia wants to host a dynamic economy, perpetuate a modern infrastructure, maximise rising demand for energy and raw materials and maintain pace with population and economic growth pressures, it will need a workplace relations system which is efficient and functioning at peak capacity. To achieve such outcomes against the backdrop of the above mentioned problems, three critical reforms will be necessary. They are:
- restoring “right of entry” provisions;
- reintroducing the “rule of law” and harsher penalties for non-compliance; and
- introducing a higher industry standard for industry participants.
Reasserting managerial control on worksites is a must if productivity and investment is to rise. The surest way to return control of workplaces back to employers is by restoring the Right of Entry (ROE) provisions which existed before the Fair Work Act was introduced.
Since the introduction of the Fair Work Act, ROE rules have been relaxed considerably leading to increased business costs and workplace disputation and politicisation. At present, union officials are using the watered down ROE rules to enter workplaces and recruit members, conduct non-essential union business and perform their own workplace law breach investigations. Occasionally, this is occurring when there are no union members present, causing considerably disruption in the workplace. Restoring ROE provisions will ensure that site managers can adequately prepare for unscheduled non-workforce visitors (union activists), separate onsite safety matters from industrial disputation, concentrate on business activities and more easily manage who can come onto their sites, how much notice they provide in advance and what they can do when they arrive.
Ensuring that the law is enforced on building sites and that effective penalties are in place to deter reoccurrence will also be essential for changing the behaviour which presently undermines productivity, safety and competitiveness.
The most important reform which can be made to address this would be the reinstatement of the Australian Building and Construction Commission (ABCC) which was replaced by insipid Fair Work Building and Construction Inspectorate in 2012. During its seven years of operation (2005-2012), the ABCC enforced the rule of law on building sites across Australia for both employers and employees. Several studies examining the ABCC’s performance have revealed that it was successful in reducing industrial disputation in the construction sector, cutting construction costs and boosting productivity. In 2009 and 2012 however, the Rudd and Gillard Governments weakened the ABCC by amending its Act of Parliament, changing its personnel and by reducing the penalties it could seek for breaches. As a result, Australia-wide industrial militancy on construction sites has risen. Between 2011-12 and 2012-13 workings days lost due to industrial disputation rose from 24,000 to 89,900. Consequently the construction sector presently has the nation’s worst record for working days at more than triple the national average.
The surest way to reverse these consequences would be to reactivate the ABCC, recruit new personnel, restore and extend the original penalty provisions and amend its accompanying National Code of Practice and implementation guidelines. As flagged by the current Commonwealth
Government, expanding its areas of responsibility into ports and offshore mining and energy projects would also be worth considering.
Securing definitive cultural change in the construction, energy and mining sectors will also require a decade long commitment to higher professional standards. Unfortunately, over the past decade, inconsistent oversight and the resilience of union militancy have made the achievement of lasting cultural change difficult to achieve. In order to secure the cultural wins necessary to clean up the sector, another layer of reforms will be required to change the landscape permanently.
First, efforts must be made to directly confront the number of unsavoury characters who dominate these sectors. Far too many union leaders have criminal records ranging from assault and intimidation, to asset destruction and failure to obey court orders. In some cases, union officials have dozens of different criminal and civil charges to their name. If these sectors are to properly clean up their image, they must first clean up their personnel. The Commonwealth and each state government
should begin by imposing good character tests on positions of significant public prominence. If a company director can be banned from assuming a position on a company board as a result of his/her past misdeeds, than there is no reason a similar requirement cannot be imposed on a union official. While everyone deserves a second chance to rehabilitate their reputation, too many senior positions within the union movement are filled by individuals who are too comfortable with criminality. With trade unions recently registering the lowest level of trust amongst Australia’s major institutions (at just 49 per cent), it seems the public agrees.
The second level of reform relates to the organisations which consistently engage in illegal behaviour. Far too often, union representatives will gladly break the law if they feel they can justify it politically. In order to deter such behaviour in the future, governments at all levels should legislate to empower the courts to seize assets and/ or delist organisations which continue to defy court orders. In cases of extreme union militancy, the law is effectively useless unless the perpetrators are afraid of the financial or legal consequences. Changes to asset confiscation and delisting laws will ensure that quickly becomes the case.
The final area where workplace relations reform is necessary is in regard to the enterprise bargaining agreement (EBA) environment which operates in Australia. At present, EBAs are a vital tool for organising labour resources for business operations in the internationally exposed sectors of construction, infrastructure, manufacturing, energy and mining sectors. However, since the introduction of the Fair Work Act, a number of changes have been made which restrict their design, content, flexibility and duration.
In order to maximise economic growth and industry competitiveness in an increasingly globalised world, Australia will need to have an EBA environment which supports business expansion and investment, encourages creative workplace practices and promotes sustainable business activity. Two key reforms should be considered:
- reintroducing prohibited content rules and agreement certification standards to avoid the EBA dilution; and
- expand the variability, exclusivity and duration of Greenfield EBAs.
Removing the ability to insert restrictive, costly, unnecessary and overtly union friendly conditions within EBAs is an important first step towards reducing business costs and improving the quality of EBAs in Australia. Since the introduction of the Fair Work Act, the number of nuisance provisions within EBAs has soared as a result of the softening of prohibited content rules. At present, Australian EBAs are able to include “trade union training leave, payroll deductions for union fees, right of entry clauses, shop stewards’ rights clauses, union offices on site and use of contractors” despite these matters having little to do with the “employment relationship”. Further, union friendly content has
also been inserted into EBAs which undermines business productivity, breaches Freedom of Association laws and directly challenges the managerial prerogative of employers. Some of the worst examples include:
- restricting the use of on-hire workers and contractors;
- providing the names and contact information of all on-hire workers and contractors the business intends to engage;
- mandatory union consultation on any effort to engage on-hire workers or contactors, including clauses which prohibit greater flexibility/wages in any agreement;
- promoting union membership and activity in the workplace; and
- broadening the circumstances under which strike action may occur.
These changes have severely complicated the employer-employee relationship, increased the cost burden for business, undermined sector competiveness, deterred investment and undermined managerial control of business entities. They also place in jeopardy any chance of Australian
businesses being able to compete internationally. Consequently, putting a stop to these abuses and restoring fairness to the workplace relations systems is a must. In order to do so, the Commonwealth Government should restore the prohibited content rules, reactivate the legislative provisions which prevented the inclusion of invalid terms in EBAs (agreement certification) and close the loophole within the Fair Work Act which permits agreements to be Code Compliant even if they breach the
National Construction Code and Implementation Guidelines.
The second area of EBA reform which must be instigated is a revitalisation of Greenfield Agreements. Greenfield Agreements are a form of EBAs designed for early stage business operations. Their intent
is to allow greater flexibility for businesses in their vulnerable start up stage.
Since the introduction of the Fair Work Act, the variability and exclusivity arrangements governing Greenfield Agreements has changed to the detriment of business growth and workplace practice innovation. The biggest challenges in regard to variability exists in regard to the restriction on employers to negotiate only two different kinds of agreements (union elective agreements or union Greenfield agreements), down from six prior to the reforms. Not only is this a severe downgrading of employer-employee choice, the flexibility arrangements are also deficient. Under these arrangements, employers are unable to negotiate on fair terms with unions across a number of distinct areas. The end result is a decline in productivity and workplace practice creativity. This must be rectified.
In regard to exclusivity, Greenfield Agreements may now only be reached with unions as opposed to that not being the case prior. Where this becomes a problem for employers is through the union tendency to increased business costs, complicated negotiations, create wage and condition uncertainty, undermine flexibility and make extortionate and inflationary claims. This approach is particularly harmful during the critical start up phase where absolute flexibility is necessary. A reversion to the old system in this policy space is also required.
The final area where Greenfield Agreements policy should be amended is in regard to their duration. At present, Greenfield Agreements may only run for 12 months. Unfortunately, due to the complex and uncertain nature of business start up, the design and construction process and the global economic environment, this length of time is proving too short to be fully beneficial. Amendments should be made to double the length of time a Greenfield Agreements may run before they transition to normalised agreements. By doing so, the government can help embryonic businesses find their feet more easily, thereby improving their chances of long term success, workforce security and tax generating profitability.
In a century where Australia will face the most competitive business environment it has ever know, ensuring its businesses have ultimate flexibility will be essential. The above reforms can help Australia craft a workplace environment best suited to meeting the evolving needs of workers, customers and entrepreneurs. Consequently, consideration of their introduction should be given the utmost attention.
 ANRA, Economic structure and performance of the Australian Retail Industry, 2011, pp. 4-5.
 Source: http://www.nra.net.au/images/NRASubmissionMarch2012.pdf (p. 6).
 Victorian Government, Securing Victoria’s Future, Melbourne, 2012, p. 7.
 Victorian Government, op. cit., p. 7.
 Multiple reports prepared for the ABCC and Master Builders Australia by Independent Economics (Econtech), 2007; 2008; 2009, 2010, 2012 and 2013.
 Independent Economics, Economic Analysis of the Building and Construction industry Productivity: 2013 Update, Kingston, 26 August 2013, p. vi.
 ABS, 6321.0.55.001, Industrial Disputes, Australia, December 2012; ABS, 6321.0.55.001, Industrial Disputes, Australia, December 2013.
 Prof. A. Markus, Scanlon Foundation Surveys, National Report 2013, Mapping Social Cohesion, Caulfield East, 2013, p. 27.
 Australian Mines and Metals Association, Finding Fairness, Melbourne, July 2010, p. 1.
 Australian Mines and Metals Association, op. cit., p. 10.