Enterprise bargaining: Are you putting your eggs in one basket?

by External28 Mar 2017
While Enterprise Agreements are widely used, Nigel Ward questions whether it’s the optimal solution for every employer

Bargaining in its modern form started in NSW in the late 1980s and gained speed nationally during the ’90s. For many businesses, it has become the norm. For every client we talk to about Enterprise Agreements (EAs), we spend just as much time exploring the strategy of not using them. Why? Because:
  • Moving to collectively bargain will impact your employees’ relationship with your business
  • Once started, it is hard to stop
  • Bargaining opens doors for union and thirdparty involvement in your business
You must see bargaining in the context of a holistic employee relations strategy aimed at driving direct engagement with employees. If bargaining will not achieve this, think long and hard before you do it.

Over my 25 years working as an industrial advocate, the top reasons I’ve seen for employers considering using EAs are:
  1. To legalise more suitable employment arrangements
Employers often commence bargaining because the modern award conditions do not suit their operating model and they need to legalise more suitable arrangements in an EA. The rigorous manner in which EAs are scrutinised for approval by the Fair Work Commission and the application of the “better off overall test” at an individual employee level is making this reason more complex than it once was.
  1. Union compulsion
Some employers operate in industries that are largely union controlled (eg building and construction), and for them bargaining is a licence to operate. If bargaining has been brought about through union compulsion (whether through a majority support determination or shop floor pressure), it might be said that a more important battle has probably been lost; that being the failure to engage employees directly through effective leadership, internal grievance resolution and the development of a participative and inclusive workplace culture.
  1. Historical reasons
Many employers got into enterprise bargaining to move out of the system of centralised wage fixation. Today they are in a position where they have culturally evolved to a point where they would prefer not to bargain anymore. However, the current Fair Work system makes escape difficult. The critical issues are always the quality of the employer/employee relationship between bargaining cycles. It is important to ensure that during bargaining the employer maintains the primacy of the relationship with employees, rather than it degenerating into a transactional approach, creating a negative bargaining cycle and, consequently, erosion in employee engagement and workplace culture.
  1. To lock in employment arrangements
Some employers have grown to a point where their local arrangements need to be formalised because they have reached a size where a union is taking an interest in them. It is common to find these employers locking in their arrangements directly with their employees through the enterprise bargaining process, while the environment for doing so is conducive.
  1. Workplace stability
Employers, particularly in contracting industries, often need to demonstrate through a tender process that their industrial arrangements are settled for the period of a contract, guaranteeing continuity of work and services during the contract period. This is a common feature in industries such as contract cleaning and industries providing contracted services to government, especially where liquidated damages might be in play.
  1. To create a common employment platform
Lastly, some employers participate in bargaining because they have a broad portfolio business and they want to develop a common employment platform as part of a simplified employment brand strategy. Taking this step is complex because it raises a series of HR and industrial/ strategic trade-offs. As one employer put it, “Putting your eggs in one basket is fine as long as you control the basket.”

Nigel Ward is the CEO and a director at Australian Business Lawyers & Advisors (ABLA). Serving business and only business, this legal and advisory firm is trusted by the Australian Chamber of Commerce and Industry and is the leading voice for industry in the Fair Work Commission. Call Nigel on 1300 565 846 or email nigel.ward@ ablawyers.com.au if you have any questions about matters raised in this article.