2017 was a controversial year for IR in Australia. So what lies ahead and how can HR prepare?
Wage stagnation
Wage growth stuck at a record low under 2 per cent in 2017. Reserve Bank Governor Philip Lowe commented in the middle of the year that “prolonged weak wage growth is ‘insidious’ and could damage the economy”.
But there are few signs of change heading into 2018, says the convenor of AHRI’s Queensland Employee Relations/Industrial Relations Network (ER/IR), Amy Richardson.
“When you also factor in that inflation is 1.9 per cent, this translates to zero growth,” says Richardson, workplace relations law specialist, HR law. “Taking into account that wage growth has not exceeded 3 per cent since 2012-13, and has been on a downward trend since, I anticipate that we’ll see continued wage stagnation in 2018.”
What that means for HR professionals on an individual level is that if you’re looking for wage growth, you’re going to have to drive it.
“Know your worth and put the pitch forward for the pay increase,” says Richardson. On the job, “expect disappointed employees”, she warns. “Have relevant statistics available to explain that wage stagnation is occurring, and examples of comparable wages in the industry.
“If wage growth isn’t on the table, think about what other incentives or flexible arrangements could be offered.”
Flexible working arrangements, leaving work on time and working from home are shown in multiple surveys to be more highly valued than ‘perks’. There is also a trend towards customising benefits towards individual needs, as not all benefits will suit all employees.
“Understanding your workforce demographics and providing a menu of benefits is the solution,” says Garry Adams, partner and market business leader at Mercer.
“Providing choice is an absolutely positive approach. People value the opportunity to choose and customise their benefits.” All of which can help.
Enterprise bargaining agreements
Late in 2016, one commentator boldly predicted that enterprise bargaining was “set to go the way of the dodo”.
Statistics show a 25 per cent drop in the number of private sector workers operating under EBAs, and Department of Employment figures show a 36 per cent reduction in the total number of EBAs in operation over the past four years.
In 2017 we saw Murdoch University take the highly unusual step of tearing up its EBA, and Sydney University attempting to circumvent the union during negotiations.
In the private sector, the Fair Work Commission agreed to EA termination requests from both employers (AGL Loy Yang) and employees (Dominos).
So what does the future hold? Well, according to BAL Lawyers’ managing legal director – employment and workplace relations, John Wilson, we will see a continuing trend away from EBAs.
That is, “unless parliament addresses the test for EAs to ensure that it’s a combination of the no-disadvantage test and an assessment of non-pecuniary benefits”.
“Otherwise employers will say, ‘We just can’t maintain our profits and comply with a pecuniary-based better-off-overall test’.”
A trend away from EAs could mean significant change for HR professionals, and greater complexity. “You’ll have to get across the award system and, in augmenting the award system, look at more individual contracting for employees,” Wilson says.
“Many businesses have employees engaged under multiple awards, so you’re going to have to be skilled at arranging your business to accommodate that.”
Of course, a decline in EBAs doesn’t necessarily mean a decline in disputes. K&L Gates partner, Nick Ruskin, suggests that there may even be greater conflict as the economy tightens and employers find it tougher to accommodate improvements in wages and conditions.
“Everyone will be using the tactics available to them to reach an enterprise agreement,” says Ruskin, who specialises in labour relations and employment law. “Taking industrial action is one tactic which can be used legitimately. Taking employer response action such as locking out will be used, and terminating an expired enterprise agreement will be another.”
BAL Lawyers’ Wilson, however, predicts fewer disputes.
“I’m seeing more and more employers not negotiating for new agreements – they’re going back to the award and common law contracting,” he says. “And employees don’t dispute – they make the agreement, albeit through gritted teeth, because any delay means they don’t get whatever pay rise is on offer.”
This is an abridged and edited version of an article appearing in the Feb 2018 issue of HRM magazine.
The Governor of the RBA and not to mention Scott Morrison taking advantage of the low base wage increases and promote productivity remuneration (performance pay). The systems are available to share contribution above and beyond in a fair and equitable way. The added advantage is it encourages and develops employee empowerment.
A very thought-provoking article. A couple of observations on the possible (likely?) increasing momentum away from EAs to reliance on the Award system: * in the past one of the major drivers for businesses to move to EAs was to create a harmonised and consistent set of conditions in workplaces covered by a number of Awards, especially where the Awards had very disparate rates and conditions. This is still relevant, although perhaps less so as the Modern Awards are generally more standardised and less prescriptive and with a wider coverage than the Pre-reform Awards. * with the increasing standardisation of… Read more »
The Australian IR system with its stated objective of the primacy of setting employment conditions and rates of pay at enterprise level was developed because all parties in the early nineties saw it as in the nations best future economic interests. The only real dissenter was in fact the AIRC which publicly doubted the maturity of the parties to properly adapt and manage the change in focus. In the 26 years since the ’92 national wage case the fundamentals of the system have remained and it is interesting to note that an enterprise focus is still the policy of most… Read more »