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Workplace Reform in Australia

Workplace Reform in Australia

A fortnight ago, the Australian government announced the long-awaited details of its workplace relations reforms, although the legislation itself remains under wraps.

This package follows earlier moves by the Keating and Howard governments to free up employment contracting and shift from national and industry-wide awards to enterprise bargaining.

Called WorkChoices: A New Workplace Relations System, the latest initiative takes the deregulation process further.

It establishes a national workplace relations system for the first time, replacing six state industrial systems plus the Commonwealth’s Industrial Relations Commission.

The framework will facilitate employment arrangements based on individual and enterprise agreements rather than the award system based on centralised arbitration and collective bargaining. This is expected to fade away.

A new, independent Australian Fair Pay Commission will set legal minimum wage rates, paying more attention to the impact on unemployed workers seeking employment than was the case under the IRC.

Two points of interest from a New Zealand perspective are provisions governing unfair dismissals and holidays.

Businesses that employ up to 100 employees will be exempt from unfair dismissal laws. For those over 100, an employee must have been employed for six months before they can pursue a claim. Dismissal on a variety of grounds such as trade union membership remains prohibited.

2 The distinction between small and large firms makes no sense, and Australian Treasurer Peter Costello has already signalled that it may be revisited in future.

Nevertheless, the move recognises that restrictions on terminating unsatisfactory employment arrangements are a barrier to hiring in the first place, and so push up unemployment or reduce wages as employers offset the risk.

As in New Zealand, it has become commonplace for Australian firms to resort to paying “go-away money” to avoid litigation over unfair dismissal claims.

Even Australian Labor Party leader Kim Beazley has acknowledged the problem for employers: “If you can get the small businessman to shut his shop for a couple of days … put him through the mill, it’ll be worth ten grand for him to send you away."

If adopted, the new regime will go a long way to granting employers the same freedom to terminate an employment contract, subject to any agreed provisions, that employees have to quit.

WorkChoices will also allow employees to request to cash out up to two weeks of their minimum four weeks paid leave entitlement every twelve months. This decision is for the employee to make on the grounds that “the employee is best placed to judge their work-life balance”, and employers will be able to refuse a request to cash out leave.

In these two areas, Australian employment legislation will be less restrictive than New Zealand’s. The Australian reforms will be occurring at a time when New Zealand law has moved in the opposite direction.

International comparisons of labour market regulation are difficult, but the Fraser Institute of Canada ranked New Zealand only in 33rd place for labour market freedom in 2002, below Hong Kong (3rd), the United States (7th), the United Kingdom (17th) and Australia (25th). New Zealand’s ranking was down from 9th in 1999. The planned moves in Australia will 3
see its score improve while moves since 2002 in New Zealand have increased employment restrictions.

The Howard government’s reforms will reduce union privileges in Australia, where union membership has already fallen to about 23% of the workforce (it is fractionally lower at 22% in New Zealand). More Australian workers are demanding customised work arrangements, rather than unionnegotiated collective agreements, to balance work and family responsibilities and cater for lifestyle preferences.

Speaking for the Business Council of Australia (the equivalent of the New Zealand Business Roundtable), vice-president Michael Chaney said the proposed changes could have gone further, but would help productivity and the economy by making hiring easier and more flexible.

Although the package is being fiercely opposed by the trade union movement and the Labor Party, it seems likely to be implemented and will give Australia new advantages in attracting investment and meeting global competition.

Roger Kerr is the executive director of the New Zealand Business Roundtable.

ENDS

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