How will Productivity Commission’s inquiry affect employers?

by Chloe Taylor13 Feb 2015
The government is currently conducting the ‘Productivity Commission Review of the Workplace Relations Framework’, the biggest inquiry into workplace relations in 30 years.

Although the review is not due to be completed until November this year, the Productivity Commission has released five issues papers outlining areas on which it intends to focus.

So how will the inquiry affect employers? HC spoke to two HR practitioners about what the Productivity Commission could and should look into.

1. Minimum wage

The minimum wage is set to come under scrutiny in the inquiry, amongst other provisions described as a ‘safety net’ for Australian workers.

The Productivity Commission referred to the minimum wage as “a persistently controversial issue”, saying that although there are several equality-based positives stemming from its continuation, increasing the minimum wage would make “lower-skilled, less experienced employees less attractive to employers”.

“It’s interesting that unions have such a sway when they only have about 20% of workforce in their membership,” Nally told HC. “Of course, there’s a sense of equity in the national community and no Australian would want people to feel that they are underpaid.”

He added that many overseas employers earn a lot more in Australia than they would in their native countries.

“There are certain jobs in Australia that Aussies don’t want to do, but overseas workers would be happy to take on,” he said. “Employers don’t want to pay people pittance but there is a debate to be had about the wage we pay to these workers who are earning ten times as much as they did at home.”

2. Penalty rates

In the issues paper, the debate over penalty rates was described as “polarised” between the view that individuals should be compensated for working at certain times and the opposing opinion that “social rationale for regulated penalty rates has declined” as working on weekends and public holidays is viewed as less inconvenient.

“Around 70% of businesses in Australia are family owned or small businesses,” Nally said. “Yet it appears that as a nation we are driven by the big end of town. I’d suggest that we leave penalty rates as they are, but introduce a Modern Award for small to medium businesses, with penalties for working a sixth day rather than a specific day such as weekends. This would provide an extra day incentive.”

“None of the major parties seem to understand that small businesses are the driving force behind our economy,” he added. “We need to change the paradigm so that we are supporting fair rates for fair work.”

3. Modern awards

Not only is the role of national employment awards due to be discussed in the inquiry, the role of the Fair Work Commission (FWC) in setting them is up for consideration.

According to the Productivity Commission, there has been a large decline in the number of awards in recent years, as well as a reduction in the proportion of Australia’s workforce whose wages and conditions are set by a Modern Award. However, the existing awards continue to influence the setting of rates of pay and enterprise agreements.

“As it stands, the Modern Awards are not very easily understood,” Nally said. “We could expand that national employment standards to include core terms – if certain terms became fundamental then every award would be more understandable. The awards are also quite legalistic at the moment, so introducing tables and flowcharts as well as standard language and wording could simplify them for employers.”

He added that most of the awards could be reduced to around ten pages, which would lessen their complexity and assist in their much-needed modernisation and simplification.

4. Unfair dismissal and anti-bullying laws

In addition to investigating regulations surrounding employees’ minimum entitlements, the handling of unfair dismissal and workplace bullying will be reconsidered.

When it comes to unfair dismissal provisions, the Productivity Commission said that “there is emerging empirical analysis in Australia that unfair dismissal provisions have imposed modest, but not trivial, costs on employment and businesses, but had uncertain impacts on productivity”.

The Commission added that there are concerns that the breadth of the Fair Work Act’s anti-bullying provisions are “confusing and complex” for both employees and employers.

“My clients are telling me that it is very time consuming and challenging to dismiss staff and that adds what they feel is an unnecessary and costly administrative burden,” Ros Cardinal, managing director at Shaping Change, told HC. “They all believe they are ethical in their dealings with staff, and while they understand that it is necessary to protect employees from employers who may do the wrong thing and not follow due process, they feel that the rules are burdensome for those doing the right thing.”

“At the moment there needs to be a sorting yard at the FWC,” Nally added. “There are a lot of vexatious claims made against employers, so perhaps introducing a checklist for both employees and employers could help if workplace bullying allegations arise. By providing both parties with these, it could help to manage the rules and reduce these claims by detailing procedures step-by-step.”

“We need to take a whole new look at harassment and bullying,” Nally said. “As it stands, the only thing that the FWC can do is tell an organisation to make it stop – it’s time to introduce some consistent and effective laws and bring these legislations into the 21st century.”

Nally also suggested that the Productivity Commission look into OHS legislations.

“At the moment OHS laws are done state-by-state,” he said. “The Productivity Commission should harmonise these and make the rules federal. There should also be a federal and consistent set of workplace behaviour rules.”

He said that Australia needs a positive way of abiding by legislation, which he suggested could be achieved by outlining what employers and workers can do instead of simply listing what is prohibited.

5. National Employment Standards

The inquiry will also delve into the National Employment Standards detailed in the Fair Work Act, which include regulations on access to leave, hours of work and termination and redundancy for Australian workers.

“These standards have social and safety net goals similar to those that underpin the minimum wage, and in some case there is an explicit acknowledgement that a condition has a wage equivalent, such as cashing out of paid annual leave in an award of enterprise agreement,” the commission said in the issues paper. “Regardless, like minimum wages, there is a risk that they could impose a cost on employers that might exceed the marginal benefits of hiring some employees, with adverse implications for employment.”

Martin Nally is Founder and MD of hranywhere and has over 30 years’ experience in all aspects of managing people. Hranywhere is an Australian HR Services Company which specialises in HR Outsourcing.


  • by Paul 13/02/2015 12:41:35 PM

    Yes - small businesses are the driving force but why reduce penalty rates for employees.
    Consistently increasing rents are the biggest expense not a few extra dollars for those that sacrifice their Sundays.

    If you reduce penalty rates then the Greedy Wolfs will be knockin harder at the door. Yes that’s right! “Landlords” i.e. the Westfield’s. Go take a look at their recent profits.

    Go take a look at the small print in a lease agreement in these shopping centers. Lets not hit the employees that give up their Sundays to help his local struggling business pay the overpriced and forever increasing weekly rents.

  • by Kevin 13/02/2015 5:19:00 PM

    The FWA 2009 comprises 1512 pages, of which 34 are dedicated to the National Employment Standards (NES). So 2.25% refers to the actual standards and 97.75% on how it is to be interpreted and powers of the Commission. If you don't believe we are too litigious then what other proof do you need. And to expect a cafe owner to know and comply with this is absolutely rediculous. We have lawyers makingthe laws and lawyers enforcing the laws so what chance has society at reducing this overload?
    Long Service Leave was for people in colonies to travel back to mother England. Sundays used to be off so you could go to church. Neither are appropriate to modern contemporary life but we apply them to our industrial system. When you consider most people get 20 days AL, 10 days sick leave, 10 days public holidays and 10 days LSL that is 10 weeks paid leave or 20% of the year. Then you want penalties on top of that. No wonder 60% is added to FTE's to determine the true cost of labour. We now pay penalties on weekends and then give employees additional leave. Why?
    Who knows where it will end? But until we realise we are living beyond our means then it will continue.

  • by Amanda Rochford 17/02/2015 12:53:20 PM

    Thats a strange way to look at an employment agreement. "When you consider most people get 20 days AL, 10 days sick leave, 10 days public holidays and 10 days LSL that is 10 weeks paid leave or 20% of the year. Then you want penalties on top of that."

    This view believes that the employer owns 100% of your time and very graciously allows you to have 20% of it back.

    Another way of looking at it is that a staffer contracts a % of their time to an employer for a certain amount of salary or wage and said salary is paid out over a year. So yes, if the employer wants to encroach on my free time I would most certainly expect additional compensation for that. Its called penalty rates.

    If a staffer gets sick then they can claim up to 10 days but not more. Given that it is the workplace and the work that makes most people sick I dont think 10 days is over the top. And most businesses dont pay sick leave out of the kindness of their shrivelled little hearts. They pay sick leave because it is in their best interest to have the same employee return to work rather than have to recruit and train someone new.

    Long service leave in the public service is 9 days per year (not 10) and due to legislative restrictions governing how you take the leave that includes the weekend so in reality it is 7 work days. Long Service Leave is earned when an employee has worked in the same organisation for over ten years. LSL is an acknowledgement that employee loyalty and value to the business is worth something.