Enterprise bargaining is down. That’s the big call out from the Department of Employment Report on Enterprise Bargaining February 2017. Comparing private sector agreement numbers from 2014 there is a reduction by a third overall, with close to 50% less in retail and construction and around 20% in most sectors.

As a result, the number of employees covered by current agreements (ones that haven’t expired) has declined. The decline is felt in respect of both union and non-union agreements.

If fewer agreements are being made or perhaps, more accurately, are taking longer to be replaced, why? The economic environment has a big part to play particularly in some key sectors. Unions are finding it harder to secure deals – obviously. Is this a function of the economic environment or is it a function of a longer more systemic trend borne out of declining union density, and therefore union organising power? Probably both.

The agreement making numbers are down, particularly in smaller enterprises. Unions are best placed to focus their resources on larger employers where the potential membership pool is larger. On the employer side, the cost of making a new agreement (2% per annum plus wage increases) outweighs the pain (union pressure/employee discontent) of not doing so. An employer’s “BATNA” (best alternative to a negotiated agreement) is the status quo. There is more leverage for employers in an environment where the termination of expired agreements is more readily available than once thought.

When this occurs employers start thinking about a concept that gets revisited every decade since the dawn of enterprise bargaining: “beyond bargaining”. How can we, the employer, operate in a sustainable, risk-free way without enterprise bargaining? The solutions here are well known, but long term and resource intensive. It relies on two key premises:

  • First, there is nothing to be gained operationally by enterprise bargaining. The “productivity lemon” has been well and truly squeezed. Employers consistently tell us this.
  • Secondly, bargaining can be avoided with manageable risk. Put another way, any risk associated with the bargaining process does not outweigh risks associated with making an agreement which, in the longer term, risks the viability of the enterprise.