Once again collective bargaining in Australia is a hot topic. Both the Prime Minister and Senator Abetz have bemoaned the making of ‘soft deals’ by employers.
Employers in response, feeling somewhat chided, might blame the Fair Work Act. What will they complain about? A system that makes it easy for unions to exert their muscle in bargaining through the taking of industrial action. The same system that makes it hard for employers to stop such action – indeed there are few avenues to do it. On the union side, if you take away the capacity to take such action, what leverage remains?
This is not a new issue and the employer lobby has been somewhat split on the solution. Some argue for a regulator such as the Fair Work Commission to step in and determine intractable and volatile bargaining outcomes more readily. Others regard such intervention as dangerous. The Government’s policy to improve the Fair Work laws aims to moderate the ease with which industrial action can be taken.
More fundamental change which might see, for instance, the return of an individual bargaining option, is somewhat dependent on the Productivity Commission review of the Fair Work Act. A galvanised employer body will need to make its case. The scene is set – but the actors need to play their parts.
The same is true for the award review process. This process sees the Fair Work Commission review the way awards are working. You will hear plenty from employers about: painful weekend penalty rates; more difficult trading conditions; the folly of a Sunday penalty being higher than a Saturday penalty (when working on a Sunday no longer commands the premium on our time as it did when the church and family roast prevailed). All of which might be true.
But you have to prove it in a contested hearing before the Fair Work Commission. Ironically it’s the employers that find it hard to properly resource such hearings in order to make a case. Alignment amongst employers and funding is a real challenge. This is not so much a criticism, as an observation of reality.
But back to bargaining. There are no doubt circumstances when employers are placed in an invidious position. Major project construction, which sees enormous capital investment at risk is an example. Faced with such risk, major contractors and their clients endorse deals aimed at getting the job going. It’s no accident then that we learn of pay outcomes well outside otherwise rational norms – over $300,000 and sometimes $400,000 for offshore construction workers. The price of saying “no” is too high having regard to the cost of having capital lay idle over the life of a particular project. But in the long run, and from a macro perspective, the price of saying “yes” becomes unstainable. The price of labour for the last major project becomes the minimum benchmark for the next, irrespective of any other factors which might otherwise reasonably dictate the price. But that’s the major project dynamic.
"There are other cases where the short term cost of industrial action (and in the vast majority of cases it is short term) is overestimated, whilst the long term compounding cost of doing the deal is underestimated. Fear of industrial action outweighs the reality.
Sometimes there is a skill imbalance. Line managers whose day job it is to run a production plant, warehouse, or blue collar services business are often pitted in a negotiation against union officials whose day job it is to negotiate enterprise agreements. This is despite the fact that for many businesses, the labour cost outcome attributable to the enterprise agreement is a major, if not the major, line item in operating expenses. Plenty will tell you that such a negotiation is a far cry from the negotiation of a commercial contract. Like any meaningful business project, the enterprise bargaining negotiation demands preparation, resources, expertise and a well-founded strategy backed by the leadership of an organisation. Sometimes the employer has only begun to put in place effective communication systems with employees as enterprise bargaining kicks off. Too late. Sometimes workplace grievances are left simmering, leaving the enterprise bargaining process to open and exacerbate a wound. Ultimately there is a leadership issue here.
Sure there’s cause to review the regulatory environment – as the Government is promising to do. But there is also room for greater resourcing and more rigour at the negotiating table and outside it.
I’m reminded of a story told to me by an engineer who headed up a large regional Victorian manufacturing facility. Together with a direct report, he was tasked to negotiate an enterprise agreement with two unions. They were opposed to 6 union negotiators. The union representatives arrived disrespectfully and unapologetically late. The meeting opened. “They’ve given us 5 by 3 (a 5% increase for each of 3 years) down the road – so why don’t you do the same?” the managers were immediately asked. Unprepared and under-resourced, they responded with “Ah… we’re not really sure. We’ll have to get back to you on that”. In the words of the engineer “things went downhill for us from there”. That manufacturing facility is no longer with us.