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Workplace reform issue in focus: Expand agreement making options

AS part of our ongoing advocacy for a modern, flexible workplace relations system that supports employment and investment in Australia’s national resource industry, AREEA is campaigning for ‘5 workplace relations reforms over 5 years’  during the lead-up to the 2016 Federal Election and beyond.

These reform priorities have been identified by AREEA members as key areas for workplace change through the 2016 AREEA Federal Election Survey.

This week, we take an in-depth look into the third of our 5 key reform priorities: Expand agreement making options to facilitate employment arrangements, both individual and collective, directly between employees and employers.

Agreement making under the Fair Work Act

Resource employers continue to report that the limited agreement making options available under the Fair Work Act 2009 are not providing a supportive foundation for productivity and competitiveness, and are limiting the choices of both individual employees and employers.

The resource sector was a successful proponent of individual statutory contracts from 1997 under the former Workplace Relations Act. However, the capacity to enter into a statutory individual agreement was removed and replaced with the former Labor government’s introduction of Individual Flexibility Arrangements (IFAs), which can be terminated at short notice by either the employer or employee.

Despite Labor’s promises to the contrary, and trade union hostility towards employees’ use of IFAs, it is clear that IFAs have failed to live up to expectations of delivering genuine individual flexibility which meets the needs of both employers and employees.

The ability for employers and workers to enter into a genuine non-union collective agreement was also removed by the Fair Work Act. Under the Fair Work system, employers who wish to bargain directly with their own employees must also negotiate with a relevant trade union, even if the majority of employees are not union members or are union members but wish to negotiate directly with their employer.

Whilst recent changes to new project (greenfield) agreement making by the Coalition government are a step in the right direction, further reforms are needed to support further investment in large scale resource projects.

Employer feedback confirms a range of problems

Evidence shows that the current lack of genuine choices for individuals and employers under the current enterprise bargaining system is not fit for purpose in our modern economy, and greater flexibility and choice, including voluntary options for individual and collective agreement making, would generate dividends across the resource industry.

89% of respondents to AREEA’s 2016 federal election survey reported that an inability to structure employment arrangements to suit operational needs is a key growth impediment.

One respondent to the survey noted that IFAs are “complex and inadequate forms of individual contract-making”. Another respondent in the onshore and offshore construction sector stated:

“Bargaining is required for enterprise agreements which then limits the matters that can be agreed with individuals under an IFA, which waters down the extent of IFAs where union bargaining agents are involved”.

The overwhelming majority of employers (9 in 10) agree with the proposition that the next Australian Government should as a matter of priority reintroduce options for employers to enter into a collective agreement directly with employees without the need for a union party.

Similarly, 8 in 10 employers want the next Australian Government to introduce a genuine statutory individual agreement making option and 84.2% of respondents desire greater freedom for high income employees to tailor wages and conditions directly with employers.

What are the benefits of AREEA’s reforms?

The benefits of AREEA’s reforms are detailed in a report prepared by KPMG for AREEA’s submission to the Productivity Commission’s inquiry in 2015.

The KPMG report, Workplace Relations and the Competitiveness of the Australian Resources Sector, relevantly noted that:

“There are a number of potential benefits of enabling a range of workplace agreements – individual and collective – to be established between employees and employers, including:

  • Increase the flexibility of the system by making it easier to establish agreements;
  • Reduce the time taken to make agreements (hence reduce costs to workers and business); and
  • Increase certainty to employers, employees, customers and other stakeholders.”

In terms of new projects and containing costs, KPMG found that “removing delays due to greenfields agreement making negotiations could result in a reduction in project costs of over 3%”. This is consistent with previous research by RMIT University which found that the negotiation of greenfield agreements under the Fair Work Act caused major delays to 20% of projects since the removal of non-union greenfield agreements and minor delays to another 20% of projects.

In assessing the economic implications of AREEA’s reform options to the agreement making framework, KPMG found that AREEA’s reform proposals was likely to reduce costs associated with delays during construction of major projects potentially resulting in higher investment.

Where to from here?

AREEA’s detailed submission to the Productivity Commission’s inquiry into the Australia’s workplace relations system and supporting research from KPMG, secured positive recommendations for change from the PC in the area of agreement making.

In its final report, the PC adopted many of AREEA’s reform proposals, including extending the maximum nominal expiry date of agreements (to five years), ensuring IFAs are durable and workable, and replacing the current ‘Better Off Overall Test’ with a ‘No-Disadvantage Test’  for approval of agreements.

The PC also recommended more substantial reforms to the current greenfield agreement making system to support the resource sector in attracting investment and building projects on time and with limited disruption. The PC adopted AREEA’s reform proposals for a limited duration employer greenfield agreement, extending the life of an agreement to match the life of a project, and adopting a ‘project proponent’ agreement framework to ensure certainty in industrial arrangements during the crucial phases of new project construction.

In the 2016 Federal Election campaign AREEA is advocating that the next Australian Government not only adopt and implement these recommendations but further commit to reforming the Fair Work Act to ensure the agreement making framework better meets the needs of employers and employees, and of the general community through increased productivity, economic activity and job creation.

AREEA’s road map for reform [see page 4 here] summarises key changes AREEA proposes to address the current failings and shortcomings associated within the agreement making and bargaining framework under the Fair Work Act.

KPMG research found that implementing all of AREEA’s recommended reforms could add up to $30.9 billion to Australia’s GDP and create up to 36,000 jobs.

For regular updates on AREEA’s workplace relations advocacy during the 2016 Federal Election campaign, visit our ‘Getting Back on Track’ campaign page.

Stay tuned for next week’s AREEA News Update, where we’ll explore the fourth of AREEA’s ‘5 Reforms over 5 Years’ – unfair dismissal and general protections laws.


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