With the Labor government rejecting the IR reform bill in its entirety, HRM asks two experts about where they’d like to see Australia’s industrial relations system.

Last year saw many unusual partnerships. Employers and employees collaborated in determining a path forward to remote work; corporate competitors sat down to align on their tactics for managing the increasing uncertainty of the pandemic; and those sitting on opposite sides of the political fence joined forces to quickly create and pass legislation to protect Australian employees.

As we now know, the latter partnership was short-lived. Weapons were lowered during the creation of the various iterations of the JobKeeper scheme and variations to certain awards; however, the Fair Work Amendment bill (IR reform bill) that was introduced to parliament late last year caused both sides to quickly take aim once again.

Last week, the Labor and Greens parties announced they would reject the proposed bill in its entirety, flagging employee pay cuts and the temporary suspension of the Better Off Overall Test (BOOT) as major concerns.

In an email following last week’s ALP caucus, Labor IR spokesperson Tony Burke, said there was no way his party would “vote for a bill that cuts pay”.

“The heroes of the pandemic are owed a debt of gratitude for the way they kept Australia running last year. Instead, Scott Morrison wants to give them a pay cut,” he wrote. “Before this legislation was introduced, we offered a simple test – it had to deliver secure jobs with decent pay. This bill delivers the opposite.”

IR minister Christian Porter responded by saying it was “a totally false claim that workers would lose pay” under the proposed bill. He maintains that those industries hardest hit by the pandemic will benefit from loaded pay rates. However, unions and the ALP stand strong in their view that an increase to employee paychecks wouldn’t compensate for lost penalty rates and allowances.

With the fate of the bill now lying in the hands of the five Senate crossbenchers – Pauline Hanson, Malcolm Roberts, Jacqui Lambie, Stirling Griff and Rex Patrick  – it’s unclear if the bill will pass in March or if amendments will be made to get it over the line, such as the removal of the suspension of the BOOT.

In the meantime, HRM speaks with IR experts – Susan Sadler CPHR, AHRI’s South Australian president and director of IR consultancy, Red Wagon Workplace Solutions; and Nick Ruskin, partner at K&L Gates – about their views on what the bill got right and where improvements could be made. (Both Sadler and Ruskin were part of AHRI’s IR working group that created AHRI’s IR submission document).

[Need to catch up on what the proposed IR bill entails? Read HRM’s wrap-up, here].

Softer punishment for an honest mistake

We need to draw a clear line between blatant cases of employee wage theft and accidental underpayment cases, says Sadler. 

“Is it fair to penalise someone for not properly understanding something that’s not entirely clear in the first place?”

Even large organisations, with all their relevant resources and expertise, are making honest mistakes, says Sadler, so think about how tough it can be for smaller, less-resourced businesses.

“It’s very scary for small business owners. For example, a 15 cents per hour [discrepancy] very quickly accrues to be quite significant. In a big business, a couple of thousand dollars might not make a difference, but it can kill a small business.”

In its IR submission, AHRI called for a shift in the relationship between the Fair Work Ombudsman and employers, stating: 

“AHRI believes the Ombudsman should provide more guidance to employers under its education compliance programs. Additionally, it should approach self-reporting by employers less aggressively and require less of employers that do so if the noncompliance arises from mistake or inadvertence compared to deliberate underpayment. This could encourage self-reporting.”

“The Fair Work Ombudsman has a policy that encourages self-reporting,” says Ruskin. “It says you must self-report if you’ve identified a serious underpayment issue that has occurred for more than 12 months and affects lots of employees – but there’s no legal obligation to do so. So why would people do it?

“It makes sense that you’d be punished, because you’ve underpaid your employees, right? But it gets to a point where you think, what’s the advantage of doing it? Because you can be treated pretty harshly, in my opinion.”

When the FWO asks employers to dob themselves in for underpayments, it then makes a call on whether or not to prosecute. Even if they don’t prosecute, they can still require employers to enter an enforceable undertaking – which includes sharing the information with the public, often through the media, says Ruskin.

“Employers sometimes have to put advertisements in the newspaper to say, ‘We the employer underpaid people, or didn’t pay loadings, and we’re very, very, sorry.'”

Ruskin proposes that there should be a more conciliatory approach for “sensible employers” who inadvertently underpay their employees as opposed to deliberate underpayments which could now be subject to new criminal penalties.

Sadler agrees that it’s not clear enough what an employer’s obligations are around self-reporting.

“Even some of the experts contributing to our submission were unclear about it,” she says.

“We were very clear [in our submission] that we think there’s a lot that Fair Work is doing right in terms of education. We just think it can go further to support smaller SMEs.

“Thinking about it logically, there are compliance obligations when you start up a business through ASIC. You have GST reporting obligations and STP [single touch payroll]. Why isn’t there a similar framework with industrial relations, in terms of paying people correctly, that helps to set businesses up? Something that an employer can cross check their processes against.”

Employers need to know where to go for the single source of truth, she adds.

“When you ring up the Fair Work hotline – and they do the best they can – but as someone seeking help, the advice can be inconsistent.”

Sadler and some other members of AHRI’s IR advisory committee experienced this in the past.

“We have all needed to ring the Fair Work hotline at various times, and sometimes called two or three times on the same issue as the matter evolved. Each time you can provide the exact same information but speak to different people and receive different outcomes. That’s an indictment on the system.”

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Clarifying the confusion

Both Ruskin and Sadler believe the element of the bill pertaining to casual workers was important and helpful to a certain extent.

“You’ll never be able to please everyone,” says Sadler. “We [AHRI] raised this in our  submission. We said there needs to be a balance between what employers are asking for and what’s right in terms of looking after employees. I think the bill did an okay job of that. The bill looks to clarify the confusion around what constitutes a casual worker, offers some award flexibilities and introduces compliance and enforcement measures for wage underpayment. These changes are good for everyone.”

Sadler says ever since she’s been working in HR, there has always been a rule that says if you’re employing a casual worker in a regular and systematic way, then after 12 months they have a right to be offered or be considered for permanent employment.

“But now they’re looking to legislate and force employers to make sure they’re following a process in terms of offering that level of permanency and security.”

“I think it was sensible to address it,” says Ruskin, “because of what we saw with the WorkPac decisions (Skene and Rossato), which involved cases of ‘double-dipping’.

“The bill addresses this issue very firmly. Whether it’s fair is a matter of debate. Unions, for example, think it’s retrospective legislation. There was always going to be debate about whether it’s the right definition [of casual work], but it’s good to have such a clear definition, because it was lacking.”

“Our current award system has grown out of tweaks and modifications and it has become unruly.” – Susan Sadler CPHR, director at Red Wagon Workplace Solutions and AHRI SA president.

The proposed IR bill addresses another of AHRI’s submission points, which is that the restriction on part-time ordinary hours of work under most awards should be loosened to allow for greater flexibility in worker’s hours.

“We need a workforce which is itinerant to meet the needs of business. That’s why you have a casual, of course. But if you try to use your part-time workforce as a means of supplementing the work that needs to be done from time to time, under many awards, you might have to pay overtime for those hours,” says Ruskin.

Sadler agrees: “Employers want the flexibility of being able to say, ‘We need you regularly now, but we might not need you regularly in the future.’

“How are we going to manage that fluidity in industries where they have peaks and troughs, such as transport where they’re busy during school term and then it drops off during holidays?

“I don’t think where they’ve landed in the bill answers the need of employers to have genuine flexibility without offsetting ongoing risks for themselves. What has been proposed for part-time employees, for example, is an improvement but it also has a number of conditions and there are circumstances when penalty rates may still be payable despite the employee’s agreement. 

“The process and requirements are complicated enough that implementing and maintaining the flexibility agreement would cause more trouble and risk of payroll errors than the flexibility gains could offset.” 

While Sadler agrees that the new definition of casual work was important, she says it’s part of a much bigger picture.

“Putting a definition [of casual work] out there isn’t going to solve the problem. It’s about updating the awards to reflect that level of flexibility in a way that’s easy to understand and implement,” says Sadler.

Creating a ‘base award’

Ruskin doesn’t believe the IR reform bill addresses the confusion employers are having around awards. As part of their submission, Ruskin, Sadler and the rest of the AHRI IR working group suggested that the creation of a ‘base award’ could be the answer employers have been looking for.

“We thought there should be a single award that covers a lot of employee benefits rather than having them spread out over 122 awards,” says Ruskin.

They suggested it could include common clauses in awards, such as when overtime applies or the rates offered to junior versus senior employees, for example.

A base award would work well for businesses with an employee pool covered by a range of different awards and would strip away some of the complexities faced when inputting payroll information or creating employment contracts.

“If you’ve got overtime kicking in at X time for one group of workers, and then it’s much later in the day for another type of worker, why is that? Because night time is night time,” says Sadler. 

“If some of the core things were exactly the same across the board, then we’ve got an even foundation. Where it needs to be specialised, we then build on that base award to account for specific skill sets or workplace risk, for example. 

“Awards would be easier to interpret, it would be easier for governing bodies to assess compliance, and it would be more fair and equitable for employees. Our current award system has grown out of tweaks and modifications and it has become unruly.”

It would be a significant move to wipe the slate clean and redefine the awards system (Sadler admits it’s probably a little “too radical” for this government), but with some training and a grandfather period, she says an approach like this would benefit everyone.

The future of the IR reform bill

Sadler says there has been a general sense of confusion from some of her clients about the proposed changes to the IR reform bill and she also notes that there’s a large amount of change fatigue following 2020.

“There’s also a level of anxiety, so some businesses are sticking their heads in the sand a little. It’s just too overwhelming for them and it’s hard to know where to go for a clear, honest interpretation.”

This is why, whatever form the IR reform bill end up taking, what’s most important is that they’re laid out in a clear manner that can be easily interpreted.

“There used to be a distinction between HR experts and IR experts,” says Ruskin. “In times gone by, perhaps when there was higher union membership, there was someone who knew about the award that applied and the classifications, but that’s kind of gone by the wayside. Now we’ve got HR professionals who seem to have to know lots about everything. But they also need to know what they don’t know.

“So that might be seeking more education about how the various awards work, what to put in a contract and how to properly classify people. They need to know where to go for advice. 

“Training is part of that – and that could be offered by AHRI – but also it’s worth the cost of getting external advice because that’s what can strengthen [employer’s] protection against prosecution.”

The IR reform bill is due to be discussed again in March.