What’s happened to enterprise bargaining?


Enterprise bargaining is currently in a stalemate. A legal expert unpacks why this might be, and offers five helpful tips for negotiating an enterprise agreement.

To a fly on the wall, enterprise bargaining in Australia often resembles a blood sport – the players jockey for position and aim to land as many hits on the other side as they can, with the ultimate goal being a “knock out” blow through getting an enterprise agreement (EA) over the line, or alternatively killing a deal stone dead.

But observing the state of bargaining in 2018, one is struck by a more fitting analogy: a game of chess locked in a stalemate.

Nobody seems to be “winning” this game and employers and employees alike appear to be equally aggrieved at the state of affairs.

What is going on? And how did we get to this point?

Where is the system falling down?

The key issues driving the debate relate to whether the enterprise bargaining system is achieving appropriate outcomes in relation to improving flexibility and driving productivity, employment and wage growth. Both employers and employees claim the system is failing them.

On the employer side of the coin, businesses have pointed to:

  • An unduly restrictive ‘line by line’ interpretation by the Fair Work Commission of the Better Off Overall Test, which is defeating the purpose of enterprise bargaining as a way to drive productivity, flexibility and sustain wage growth.
  • Overly technical procedural requirements which are resulting in delays, uncertainty and excessive cost.
  • Union tactics (in certain industries) in which bargaining power is used to impose what the average person would call “pattern agreements” backed by supposedly prohibited industrial action undertaken with relative impunity.

On the employee side of the coin, unions have pointed to:

  • Increasing claims to terminate EAs where bargaining reaches an impasse.
  • Poor wage growth outcomes, with the award system increasingly resembling a “ceiling”, rather than a “floor” for employment terms and conditions.

So where are we now?

While enterprise bargaining was ostensibly designed as a means to empower employers and employees to reach a bargain suited to their mutual interests, we seem to have reached a position where:

  1. Small business can secure necessary flexibility without using bargaining.
  2. Businesses with progressive workplace culture are unlikely to need to bargain or have found ways to evolve bargaining to a relational level where it ‘doesn’t get in the way’ of the direct relationship with employees and business performance.
  3. Unionised businesses that aren’t export exposed are increasingly unhappy with the damage sustained through industrial action during bargaining, driving up uncompetitive conditions.
  4. Employers in some sectors have to sign union agreements or find their forward order book disappear.

The net effect of this is a significant decline in the utilisation of EAs dropping by 25 per cent since 2014.

Five tips for effective bargaining

  1. Don’t rush into bargaining if you have not started. You need a material business reason to start. Employers should also avoid assuming that bargaining will improve their workplace culture. There are much better ways to do this.
  2. Consider your broader labour sourcing strategy before you start bargaining, maybe the flexibility you need can come from the mix of sourcing. If you are bargaining try not to industrialise things you need to keep fluid, such as safety and policies.
  3. Learn how to map your workplace culture and union relations to understand what bargaining environment you are likely to be in and then plan how to evolve this to not undermine your workplace culture.
  4. Try and achieve the longest agreement length you can get to give yourself time to work on your direct engagement strategies outside of bargaining.
  5. Understand that your objective must be to move bargaining to a relational basis where you and your employees place your ongoing relationship ahead of any transactional bargaining gain.

Sina Zevari is an Associate Director at Australian Business Lawyers & Advisors (ABLA). This article was originally published in the Volume 2 2018 edition of ABLA’s Insights Magazine.

 


Learn about the fundamentals of the employment life cycle – from recruitment through to retirement – including current legislation and labour conventions that underpin practice, with the AHRI short course ‘Recruitment and workplace relations’.

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5 Comments On "What’s happened to enterprise bargaining?"

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Brad
‘Try and achieve the longest agreement length you can get to give yourself time to work on your direct engagement strategies outside of bargaining.’ Its important to note that the nominal expiry date is restricted to a maximum 4 years from the date of approval by the FWC in accordance with s.186(5) of the Fair Work Act. Many employers are instead choosing to enlist shorter terms (mainly 3 year terms from date of approval) to ensure they don’t lock themselves into terms and conditions which may change or cause undue detriment to their workplaces. Enterprise agreements operate past their nominal… Read more »
Linda Norman
My last few EBA client experiences were dreadful. Line by line nit picking by FWC needing a pile of back and forth undertakings just to get it over the line. After months (sometimes years) of work, all you end up with is an agreement that is expensive to develop, costly to implement and negotiated with a tick box process that nobody enjoys. While employees will usually end up with a fatter pay check, a better option would be to offer the fatter pay check without the agony of going through the EBA process. I’ve been implementing innovative EBA’s since the… Read more »
Brenton
There are some limited positive points in this article, but some completely untrue and factually wrong comments, a few which have been indicated by colleagues below. We see this problem time and time again, when Lawyers (Sina Zevari) get involved in a process that is specifically designed to exclude them. Bargaining is and should be the realm of the IR professional and the workers. Broad based statements such as ‘Consider your broader labour sourcing strategy before you start bargaining, maybe the flexibility you need can come from the mix of sourcing; (which really means, be prepared to casualise/outsource your workforce)… Read more »
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Dan

Linda, you are 100% correct. Rudd and Gillard unwound over 20 years of IR reforms and lobbed us back in the 70’s. That’s not my opinion – those are the words of ALP luminaries such as Grahm Richardson, Martin Ferguson, etc. The FWC is full of pro-Union commissioners who have no qualms about imposing their ideological biases in their decision-making, resulting in a system that is now completely broken

More on HRM

What’s happened to enterprise bargaining?


Enterprise bargaining is currently in a stalemate. A legal expert unpacks why this might be, and offers five helpful tips for negotiating an enterprise agreement.

To a fly on the wall, enterprise bargaining in Australia often resembles a blood sport – the players jockey for position and aim to land as many hits on the other side as they can, with the ultimate goal being a “knock out” blow through getting an enterprise agreement (EA) over the line, or alternatively killing a deal stone dead.

But observing the state of bargaining in 2018, one is struck by a more fitting analogy: a game of chess locked in a stalemate.

Nobody seems to be “winning” this game and employers and employees alike appear to be equally aggrieved at the state of affairs.

What is going on? And how did we get to this point?

Where is the system falling down?

The key issues driving the debate relate to whether the enterprise bargaining system is achieving appropriate outcomes in relation to improving flexibility and driving productivity, employment and wage growth. Both employers and employees claim the system is failing them.

On the employer side of the coin, businesses have pointed to:

  • An unduly restrictive ‘line by line’ interpretation by the Fair Work Commission of the Better Off Overall Test, which is defeating the purpose of enterprise bargaining as a way to drive productivity, flexibility and sustain wage growth.
  • Overly technical procedural requirements which are resulting in delays, uncertainty and excessive cost.
  • Union tactics (in certain industries) in which bargaining power is used to impose what the average person would call “pattern agreements” backed by supposedly prohibited industrial action undertaken with relative impunity.

On the employee side of the coin, unions have pointed to:

  • Increasing claims to terminate EAs where bargaining reaches an impasse.
  • Poor wage growth outcomes, with the award system increasingly resembling a “ceiling”, rather than a “floor” for employment terms and conditions.

So where are we now?

While enterprise bargaining was ostensibly designed as a means to empower employers and employees to reach a bargain suited to their mutual interests, we seem to have reached a position where:

  1. Small business can secure necessary flexibility without using bargaining.
  2. Businesses with progressive workplace culture are unlikely to need to bargain or have found ways to evolve bargaining to a relational level where it ‘doesn’t get in the way’ of the direct relationship with employees and business performance.
  3. Unionised businesses that aren’t export exposed are increasingly unhappy with the damage sustained through industrial action during bargaining, driving up uncompetitive conditions.
  4. Employers in some sectors have to sign union agreements or find their forward order book disappear.

The net effect of this is a significant decline in the utilisation of EAs dropping by 25 per cent since 2014.

Five tips for effective bargaining

  1. Don’t rush into bargaining if you have not started. You need a material business reason to start. Employers should also avoid assuming that bargaining will improve their workplace culture. There are much better ways to do this.
  2. Consider your broader labour sourcing strategy before you start bargaining, maybe the flexibility you need can come from the mix of sourcing. If you are bargaining try not to industrialise things you need to keep fluid, such as safety and policies.
  3. Learn how to map your workplace culture and union relations to understand what bargaining environment you are likely to be in and then plan how to evolve this to not undermine your workplace culture.
  4. Try and achieve the longest agreement length you can get to give yourself time to work on your direct engagement strategies outside of bargaining.
  5. Understand that your objective must be to move bargaining to a relational basis where you and your employees place your ongoing relationship ahead of any transactional bargaining gain.

Sina Zevari is an Associate Director at Australian Business Lawyers & Advisors (ABLA). This article was originally published in the Volume 2 2018 edition of ABLA’s Insights Magazine.

 


Learn about the fundamentals of the employment life cycle – from recruitment through to retirement – including current legislation and labour conventions that underpin practice, with the AHRI short course ‘Recruitment and workplace relations’.

Leave a reply

5 Comments On "What’s happened to enterprise bargaining?"

avatar
  Subscribe to receive comments  
Notify me of
Brad
‘Try and achieve the longest agreement length you can get to give yourself time to work on your direct engagement strategies outside of bargaining.’ Its important to note that the nominal expiry date is restricted to a maximum 4 years from the date of approval by the FWC in accordance with s.186(5) of the Fair Work Act. Many employers are instead choosing to enlist shorter terms (mainly 3 year terms from date of approval) to ensure they don’t lock themselves into terms and conditions which may change or cause undue detriment to their workplaces. Enterprise agreements operate past their nominal… Read more »
Linda Norman
My last few EBA client experiences were dreadful. Line by line nit picking by FWC needing a pile of back and forth undertakings just to get it over the line. After months (sometimes years) of work, all you end up with is an agreement that is expensive to develop, costly to implement and negotiated with a tick box process that nobody enjoys. While employees will usually end up with a fatter pay check, a better option would be to offer the fatter pay check without the agony of going through the EBA process. I’ve been implementing innovative EBA’s since the… Read more »
Brenton
There are some limited positive points in this article, but some completely untrue and factually wrong comments, a few which have been indicated by colleagues below. We see this problem time and time again, when Lawyers (Sina Zevari) get involved in a process that is specifically designed to exclude them. Bargaining is and should be the realm of the IR professional and the workers. Broad based statements such as ‘Consider your broader labour sourcing strategy before you start bargaining, maybe the flexibility you need can come from the mix of sourcing; (which really means, be prepared to casualise/outsource your workforce)… Read more »
trackback

[…] post What’s happened to enterprise bargaining? appeared first on HRM […]

Dan

Linda, you are 100% correct. Rudd and Gillard unwound over 20 years of IR reforms and lobbed us back in the 70’s. That’s not my opinion – those are the words of ALP luminaries such as Grahm Richardson, Martin Ferguson, etc. The FWC is full of pro-Union commissioners who have no qualms about imposing their ideological biases in their decision-making, resulting in a system that is now completely broken

More on HRM