What the new employee safety net will mean for business

The impending employee award modernisation process will set a safety net that business owners will need to accommodate, as well as the costs. PETER VITALE looks at the choices.

By Peter Vitale

The impending employee award modernisation process will set a safety net that business owners will need to accommodate, as well as the costs.

Following the passage of the first round of its industrial relations legislation, the Rudd Government has been getting stuck into the detail of the new safety net, which will replace the Howard government’s basic Australian Pay and Conditions Standard (APCS).

Under the Rudd-Gillard version of industrial relations, minimum entitlements will be set by two primary mechanisms.

First there will be a set of 10 national employment standards (NES), which will become part of the legislation in much the same way as the five conditions of the APCS. That is, they will be legislated minimum standards.

The second mechanism is to return award making power to the Australian Industrial Relations Commission.

The AIRC has begun the arduous task of “modernising” some 2400 state and federal awards by trying to identify a list of “priority” industries or occupations.

This task is due for completion by 30 June 2008, with the modernisation of those awards to be complete by the end of the year.

The focus of award modernisation is to create a smaller, simpler set of industry-based awards that deal primarily with minimum conditions not set out in the national employment standards.

These conditions include minimum wages, arrangement of working hours and rosters, overtime and penalty rates of pay, annualised wage arrangements, allowances, leave loading, superannuation and dispute settlement procedures.

The concern for business owners is that modern awards will come to represent a selection of the most costly terms and conditions from among a group of awards in a given industry.

Federal Minister for Industrial Relations Julia Gillard has sought to reassure employers by specifying that modern awards are not intended to increase costs to business or extend award coverage to classes of employees not previously covered, such as managerial employees.

Another significant issue is that modern awards will be able to supplement the national employment standards, even though the NES is intended to be a minimum safety net.

Employer groups are concerned that the NES will become a base point for claims by unions to the AIRC for higher benefits to be incorporated into awards. The broad scope which the draft legislation allows for this to occur is a concern for business owners, particularly as a smaller range of awards covers a larger number of employers.

In the absence of refinement of the legislation by the Government, the challenge will be squarely with the AIRC to ensure that it maintains a consistent and disciplined approach to avoid awards falling back to the confusing mess they can often be.

In implementing the NES, the Government will be legislating many core standards that will form an absolute floor to employment terms and conditions.

There are unanswered questions about how the NES will apply to managerial or executive employees for example. While the Government has sought comment in its consultative process, business could be rightly concerned at present that the proposed NES does not allow the kinds of flexibility that have been expected of senior, well-paid employees, and that has been traditionally permitted by the regulatory framework.

There appears to be an escape clause for the Government, as the proposed legislation effectively allows regulations made by the government of the day that would allow the AIRC to override the NES in an award.

If the Government chooses to allow the AIRC the opportunity to build extensive flexibilities or additional requirements into the regulations, an extra layer of complexity will be added.

The extensive use of regulations by the previous government to deal with matters of substance was criticised by the High Court. Business should hope that this Government does not go down that path.

A challenge for the Government is to make the most of the opportunity to nationalise the industrial relations system, by ensuring the NES legislation covers as many employers as possible.

Ultimately the co-operation of state governments will be needed to seal the deal, but there does not seem to be any serious debate about the need for a national system in some form.

The NES themselves will cover maximum hours of work, requests for flexible work arrangements, parental leave, annual leave, personal/carers leave, community service and long service leave, public holidays and termination and redundancy pay.

One of the more significant “new” conditions is the right for employees to request flexible working arrangements to enable them to care for children under school age.

The employer may only refuse the request on “reasonable business grounds”. As the draft law currently stands there is a significant prospect that this provision will lead to extensive disputation and ultimately litigation, possibly supplementing claims of unlawful termination or discrimination.

The Government’s discussion paper states that it will not be open to any third party to impose flexibilities on an employer – but watch this space.

The proposed parental leave NES enables an employee to request 12 months unpaid maternity leave in addition to the mandatory 12 months, which can be refused by an employer only on reasonable business grounds.

Community service leave encompasses jury leave and emergency service leave. This extends the obligation to provide “make-up pay” to employees engaged in jury service to all states and territories, which is currently only required in Victoria.

The NES will also extend redundancy pay to a wider range of employees than those who currently enjoy it.

The lessons for employers:

Labor’s proposals offer hope of a simpler workplace relations systems, but there are challenges for the Government, the AIRC and the new Fair Work Australia regulator to ensure that the system doesn’t descend into unnecessary complexity.
Employers need to keep a sharp eye on developments in relation to modern awards and NES – there could be substantial additional costs resulting from their implementation.
Many sophisticated employers, such as BHP Billiton, are dedicating substantial resources to having input into the modern award and NES implementation process as it affects their industries. The award modernisation process will be a hard slog, and business owners need to think carefully about the best way for them to influence the outcomes.