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Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Hits and misses in the Productivity Commission's IR review

Wednesday, August 05, 2015

Australian unions will be delighted with the Productivity Commission review of the workplace relations framework released yesterday. Finally unions might be able to run another ‘it’s the horror of WorkChoices’ scare campaign. They’ve been longing for this since Abbott won government.

Unions have taken a beating in the Royal Commission into union corruption. The exposure of payola from corporations lining union financial coffers has been most embarrassing. It shows unions to be frequently more chummy with corporates than with employees. What a relief for unions that the Productivity Commission has recommended a cut in weekend penalty rates; it provides a handy shift of public focus.

Predictably, unions have latched onto the penalty rates issue as Abbott going 'anti-worker’. But there are some problems with this. First, Abbott has vowed that the Fair Work Act will not be amended in this first term of his government. Don’t expect that to change. At most, the recommendations from the Productivity Commission may -- that is, may -- form the basis of some limited reforms included in an election manifesto.

However, it’s unlikely the Coalition would attempt to change penalty rates through legislation even in a second term. More likely it will rely on the Fair Work Commission to do this and largely stay out of the debate.

Anyway, the Productivity Commission’s recommendation on penalty rates is odd. It has called for Sunday penalty rates in the hospitality and retailing sectors to be brought down to Saturday rates. But there’s no such recommendation for other sectors such as hospitals, for example. It seems consumers should be entitled to have coffee at a coffee shop on weekends but people should avoid being ill on weekends. Hospital penalty rates on weekends make sickness at that time of the week very expensive!

Am I being a cynic about this debate? I don’t think so. There’s no consistency in the Productivity Commission's reasoning.

For example, the Productivity Commission notes that New Zealand has done away with regulated penalty rates, but New Zealand employers still voluntarily pay weekend penalty rates. It appears Australians want to regulate (nanny state) our wages, but New Zealand has more faith in market forces to do the job!

Other than this bit of penalty rate controversy, the Productivity Commission report has more to do with changing the colour of the carpets in the Fair Work Commission’s plush offices than anything else. The report is more about the process of the system, rather than the substance.

Recommendations include doing away with the ‘better off overall’ test, replacing it with a ‘no disadvantage’ test. It wants to introduce ‘enterprise contracts’ for small businesses because the existing ‘enterprise agreement’ process is too complex. It says there should be new arrangements for greenfield projects.

The Productivity Commission criticises the Fair Work Commission for how it handles award determinations, saying the FWC should instead give “greatest weight to a clear analytical framework supported by evidence”. Doesn’t it do this already? Apparently not! Moreover, the Productivity Commission says the method of appointment of commissioners is flawed. It’s an unflattering commentary.

There are more items including further controls over the taking of industrial action and higher penalties for illegal industrial action. Tweaking unfair dismissal laws is recommended including ways to address frivolous and vexatious claims.

These recommendations will only have high interest for people intimately involved in the day-to-day machinations of the industrial relations processes. For the bulk of people, including small business owners, employees and managers of larger businesses, the Productivity Commission recommendations are pretty meaningless. That’s because the industrial relations laws and processes are impossible to understand except by the experts. Most people hope to work around the system if possible.

This, however, is where the Productivity Commission report might have some relevance. It criticises the state of Australian management, saying that ‘…the performance of firms at managing employee incentives was comparatively poor.” This is the real issue of industrial relations.

There are plenty of firms and managers that seem to do an outstanding job of achieving productivity outcomes without industrial relations issues blocking their paths -- and they do this under existing laws. Other firms are a mess. Industrial relations laws have for a long time been an excuse for poor management rather than the cause.

I wouldn’t expect this Productivity Commission report to result in any startling changes to the industrial relations system. There may be some shifts in the way the Fair Work Commission is managed, but that’s about all. What’s more important is for business to get on with the job of quality management.

[First published in Business Spectator, August 2015]


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