Increasingly the analysis of pay rates in lodged agreements has become more stringent with some decisions to reject Agreements appearing not to be based on an employee being better off overall but a more slavish insistence that the methodology of the Awards be clearly applied and adhered to eg doubletime on a Sunday. As a counterpoint to this we have recently seen a decision to amend penalty rates based on a lengthy review of more than 6000 submissions from a range of stakeholders as a result of modern trends toward deregulated hours and 7 day trading.

The current fallout from the Commission’s decision to amend the application of penalty rates for employees in Hospitality, Fast Food, Retail and Pharmacy is a case in point. The avalanche of misinformation and incorrect conclusions which has resulted is based more on a ‘gut reaction’ than on the facts. This has detracted from a considered response to the impact of penalty rates in industries where the bulk of staff are casual employees who in a number of cases are not significantly impacted by this decision. It is also interesting that a number of Agreements made in conjunction with various Unions in these industries have been rejected by the Commission and openly criticised of late due to the unacceptably low pay rates for employees proposed in the lodged Agreements – presumably with the full knowledge and support of the Union(s) involved.

 So given that the process around the formulation and approval of EBA’s is becoming increasingly ‘fraught’ for SME’s in particular what alternative is there? Is there an alternative at all? The short answer is ‘yes’, and one of the chief advantages is that this process is one that is conducted individually with your employee and the subsequent Agreement is not subject to mandatory scrutiny by a third party prior to being activated.

All the Modern Awards contain a provision for this form of Agreement – and it is a mandatory component of all EBA’s – however it would appear that the ‘Individual Flexibility Agreement or ‘IFA’ is one which, up to now, has been largely overlooked by employers. Interestingly the IFA is based on the same premise as an EBA, in that employees must be ‘Better Off Overall’ and the provisions of the IFA are specifically clarified in the  Award document as they pertain to the hours of work, penalty rates payment and overtime amongst other things. The general understandings that surround this are that:

1. You cannot make signing an IFA a condition of employment
2. An employee must be better off overall
3. Either party may terminate the IFA at any time by mutual agreement or it can be terminated – in general terms – by a party giving 13 week’s notice of intention to terminate.

So as long as the IFA meets the minimum requirements of the Award there is a lot of scope for some innovative thinking about the employee relationship and entitlements. Next issue we will explore further some of these possible innovations.

Like to explore your options? Call us to discuss your situation today.

Background

In the first place the original concept of the Modern Award system was that they would all be industry based and therefore – it was hoped – a single Award would be able to cover an enterprise thus simplifying the reality of multiple Award coverage for a business. Regrettably – as most of the people involved in setting the Awards up have never owned a business or had to employ people – they were uniquely poorly placed to understand the commercial realities of 7 day a week trading and the impost of excessive penalty rates held over from a time when the vast bulk of private SME’s ran five to five and a half days a week. Does anyone remember the days when you had to buy up big in groceries to get you through a period of Public Holidays like Easter? So the practical reality is that a single enterprise could still be covered by multiple Awards with very different penalties and loadings and related entitlements, albeit that the total number of Federal Awards had been greatly reduced.

In fact the Modern Awards were ‘cobbled together’ and incorporated elements of older Awards with terms that are very difficult to understand, concepts that appear to be contradictory and a plethora of allowances and other payments that Einstein would have trouble getting his head around. All of this at a time when trading hours were being deregulated as the demand for flexible shopping hours by consumers was having a major impact.

Into this mix you have Unions who remain resistant to any form of change that might impinge on their concept of ‘workers rights’ and hold inviolate outdated concepts of entitlement from a commercial ‘bygone era’ but which actively work to stifle competition for SME’s across a whole range of industries. Employer groups maintain that the relaxing of penalty rates for small employers particularly for working on Sundays and Public Holidays for example would actively work to increase employment opportunities for workers. Except that most interestingly a number of Union backed EBA’s like the Coles Agreement have recently been rejected by the Commission on account of a determination that far from being ‘better off overall’ employees were in fact worse off, with low pay rates and stripped down weekend penalties. So it would appear that the protection of ‘workers rights’ is dependent on the size and influence of the employer involved.

The EBA Process

So what’s involved in getting an EBA together in the first place? The first step – in our view – is to formulate a draft agreement that ticks all the boxes from the employer’s perspective. Remembering that the original concept that sits around the EBA is a boost in productivity offset by more attractive working conditions than those offered by the Award. Of course once the draft agreement is set you have only just embarked on your journey because there is an entire process that must be stringently followed so that the Commission is satisfied that an employer has fully complied with their obligations to consult with their employees.

This process is kicked off when the Employer issues the ‘Notice of Representational Rights’ a formal letter to employees put together by the Commission which informs them that the employer wishes to commence bargaining for a new or replacement agreement and also advising the employee that if they are a member of a Union, then their Union is their default bargaining representative unless the member advises the Union that they do not wish this to occur.

There are stringent requirements around minimum time frames and related requirements with regard to consultation, voting and lodgement. An employer who errs in any of these areas may find themselves back at square 1 in terms of the consultation and voting process because the Commission has becoming increasingly more dogmatic in their requirements that the process set down by the Act has been diligently complied with. A smaller employer who lacks the support of an HR Department or HR Manager can be at a great disadvantage in this respect. So the current reality is that, far from being a fairly straightforward process it has become increasingly complex and onerous and this is unlikely to change in the near future.

The other economic reality for SME’s in the Construction Industry looking for work on larger projects is that it is highly likely that they will have to have an EBA to have any chance of winning a tender – given recent developments this means an EBA that has not reached its ‘nominal’ expiry date. Whilst Collective Agreements and EBA’s that have passed their expiry date are still completely lawful the fact is that pressure is being placed on SME’s to replace them with ‘current’ agreements. This reality is further complicated by Union interference in the approval process for employer employee agreements, an increasing emphasis on getting the process right by the Fair Work Commission and the need to be ‘Code Compliant’.

EBA Advantages

It is unfortunate that the above situation is occurring as the formulation of an EBA gives an employer a real chance to be ‘innovative’ and develop some thinking around their operations which an Award simply cannot do.

What about having your own career structure and levels with specific criteria and prerequisites? What about really enshrining what flexible work means within your business? What opportunities for incentivizing payments related to productivity might there be? What opportunity is there to diminish or entirely remove multiple Award coverage within your business?

EBA’s are not necessarily just a means of paying aggregated rates of pay and incorporating allowances and loadings etc in order to simplify payroll. Too many employers are limited by their own lack of imagination or capability to take their business to another level which – dependent on the size and scope of the business – an EBA has the potential to achieve.

With WA in a post mining boom downturn the ‘hey day’ of EBA’s would appear to have gone by, in the next article we’ll look at the practical application of an Enterprise Bargaining Agreement as opposed to an Individual Flexibility Agreement.