Alternatives to company-wide pay increases

During enterprise bargaining, employees often request wage increases, but what if your company can’t afford to pay them?

Negotiating a new enterprise agreement can be a stressful time for employers, particularly when your employees want a wage increase but the economic reality is that you can’t meet their financial expectations.

Companies can consider offering a range of incentives to their employees in the place of pay rises, says Matthew Smith, partner at Sparke Helmore Lawyer.

“Employers are able to consider all kinds of incentives such as linking pay rises to workforce performance or output in order to increase productivity so that the impact to the balance sheet is diminished,” Smith told HC Online.

“Employers can also consider offering more flexible working arrangements,” he says.

However, this will depend on the specific employer and what compromises that employer can facilitate without compromising its business operations, Smith says.

“In tough economic times employers may be reticent to offer significant pay rises to employees for fear of the financial impact these additional costs will have on its business or its ability to avoid redundancies,” Smith says.

“However, any matters to be included in the agreement must be ‘permitted matters’ meaning matters pertaining to the relationship between the employer and employees, the relationship between the union and the employer, wage deductions authorised by employees or how the agreement will operate,” he says.

He says the new agreement must also leave the employees “better off overall” (meaning employees receive on an overall basis more beneficial terms than they would otherwise receive under the applicable modern award) for the agreement to be approved by the Fair Work Commission

While there is no one-size-fits-all approach, both employers and employees should be minded to think flexibly in order to achieve a mutually acceptable outcome.

“It is in the best interests of employers and employees if a business is profitable and performing well,” Smith says.

“This requires employer and employee cooperation.” 


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