The federal government has flagged industrial relations reform as a big part of its political agenda and is convening working groups to discuss ways forward. HRM talks to three senior HR leaders about what they would like to see change in Australia’s IR system.

When the federal government announced it wanted to reform industrial relations laws, it was met with excitement from unions who saw it as a chance to improve employee bargaining power, and trepidation from some employers who worried their voices wouldn’t be heard. But many in HR saw it as an opportunity. 

HR has, for the longest time, battled with complicated IR laws, and COVID-19 only added to its complexities. Perhaps reform is a chance to simplify the system? A chance to combat underpayments and clarify enterprise agreements? 

HRM asked three HR experts what their ideal IR reforms are.

It’s time to look at the big picture

Hafiz Qadeer CPHR – people and management consultant, and convenor of AHRI’s Victorian IR network forum

When it comes to IR reform, the government should look at what’s happening around the globe, not just in Australia. New fields, professions and industries are emerging every day. Australia needs an IR system that’s incredibly agile in order to meet the demands of the future.

Awards in Australia are too numerous and too complicated. There are multiple pay points, and it’s a cumbersome task to interpret and apply the different classifications and their entitlements.

The system must be made very simple. The government should combine the Awards that are close to each other, either by occupation or industry, to reduce the burden on HR professionals and make it easier for them to interpret, and for employers and employees to understand.

I believe that enterprise agreements are becoming a thing of the past in a digital economy. Direct negotiation is required to hire high-calibre candidates and create high-performance teams. We need to leave potential employers and the employees to settle the matter of compensation.

Casual employment as a classification needs to go. In my view it leaves open the chance for an employer to exploit its employees. I agree with the Federal Court’s decision in WorkPac vs Rossato [that a ‘permanent casual’ employee was actually a permanent employee entitled to leave]. Casual employment is like an employment contract with zero hours. If a company needs a worker for a zero-hours contract, it should opt for a short-term contract (not longer than six months) using the worker’s ABN. If an employee is hired for a fixed term (not longer than 12 months) with all the perks and entitlements, that’s fine. 

However, again, if it is used as a strategy by an employer to avoid long service leave and other employee entitlements, then it must be stopped and discouraged.

In cases of severe non-compliance, organisations, as well as the owners, CEOs or directors, should face criminal charges. Organisations should also pay hefty fines for such behaviour. The IR system should be very clear on what level of compliance is required. The Fair Work Commission should have more authority to investigate a complaint and make a final judgement during the arbitration process if it finds any non-compliance or severe negligence. A law without proper enforcement is nothing more than a collection of statements. 

In the current IR landscape, we lack the scope to address future trends. Changes such as automation and digitisation are already happening – in many ways, the future is not too distant anymore. I believe that reform is possible, provided all parties are serious about making positive change. We don’t have any other choice – if we leave IR as it is, we won’t be able to compete on a global scale.

Current laws disadvantage small businesses

David Johns – human resources manager and member adviser at Natroads Australia

I work with employers in the road transport industry on a day-to-day basis, particularly small to medium enterprises. It’s a fact that the complexity of the Awards system does not assist the small business owner in understanding what they have to pay employees. I’d like to see a proper discussion about it – we need to realise that it’s a system designed for a different time when men were the sole breadwinners and Australia’s social welfare system wasn’t well-established. Attempts have been made to simplify the system, but the modernisation of the awards retained a lot of the rigid framework of the old system. It doesn’t accommodate the modern demands of flexibility and, since the COVID-19 pandemic, wide-scale working from home. Rather than tinkering with it, we need a complete overhaul. This is an opportune time to look at what we need and devise a framework that is not tied to historical arguments.

The expectations that enterprise agreements would deliver better outcomes for the workplace have largely been lost with some of the recent developments around the better off overall test (BOOT). For a lot of smaller businesses, the complexity of an enterprise agreement is just too great. To meet the approval process, you end up with a very detailed document rather than one that covers the key elements, such as wages and leave entitlements. We’ve also got to get rid of the BOOT test – it’s hard to monetise non-remunerated benefits. A better option is something like the No Disadvantage Test, where the employee is no worse off on an overall basis than if they were bound by the minimum terms of the modern award. 

Part of the problem with the Fair Work Ombudsman is that it has become too political rather than staying independent. It has reacted to sniping about the lack of enforcement against employers and taken it too far. Enforcement is required, but does it need to publicise every employer that has been hauled over the coals? 

The ombudsman needs to have a greater role in educating employers about the law. It’s one thing to penalise people where they’re aware of it; it’s another to name and shame them when the errors are found to be unintentional. As to calling every underpayment ‘wage theft’ – at a legal level ‘theft’ needs mens rea. That is, it needs to be a conscious decision. Labelling an erroneous underpayment of an employee as wage theft sensationalises the issue.

There’s no excuse for not paying people properly, but there are contributing factors to underpayment, such as the high dependence on payroll software. It was once customary for large companies to employ payroll staff who knew the awards inside out. A lot of that expertise has been lost, and unfortunately the software we now rely on often can’t handle the configuration required for some terms negotiated in enterprise agreements, which leads to a lot of these problems.

It’s my personal view that the pendulum swung too far against the employee during the WorkChoices era. Some of the changes we got with the passing of the Fair Work Act saw the pendulum swing too far the other way. At the end of the day, the value for a business is in its workers. Having workers treated respectfully and paid appropriately is what we need in order to recover from the COVID-19 recession

The unfair dismissal system needs reviewing

Kathryn Dent – Director of people and culture strategies, convenor or AHRI’s new ER/IR committee

I hope to see changes following this review that offer certainty to employers about their obligations to employees that will allow them to structure their businesses in a sustainable and viable way without exposing them to penalties, damages and compensation in situations they were not anticipating.

The system should recognise and reflect the reality I’ve seen, which is that, by and large, employers do not deliberately cheat or exploit their employees, but rather, most breaches and underpayments are inadvertent and due to the system’s complexities.

Inherent complexities still exist in the awards system despite the recent modern award reviews. Breaches and non-compliance with awards can arise from employers being confused as to what awards cover their organisation and their employees. 

Simplifying coverage and awards will facilitate more compliance. In my experience, award coverage is still a live and relevant issue in workplaces even though the current modern awards have been around since 2010 and have since been through two modern award reviews.

As we’ve seen with the spate of underpayment cases in Australia, which is so serious that federal and state governments are considering legislation to prevent wage theft, there are employers with very sophisticated HR systems that are having difficulty in implementing the right wage structures and payroll arrangements for people in their businesses. If the largest employers in Australia can’t get their obligations right, what hope do small businesses without the same infrastructure and resources have?

If employers want to move away from that award system towards enterprise bargaining, they then grapple with a different complexity, and that is meeting the better off overall test. The way the BOOT is interpreted and applied has meant it’s not uncommon for agreements to fail. I don’t recommend the abolition of the test entirely. Still, it needs to be reconsidered so that one employee’s personal circumstances don’t lead to an agreement’s failure when a great many more employees stand to benefit from its terms and conditions compared to the underlying award and have voted in its favour. 

Types of work arrangements and how they are regulated are also ripe for review. Many employers with a workforce comprising casuals or gig economy workers are worried that they might face hefty damages and compensation in the future. On that basis, it is vital that our IR framework recognises and allows for atypical work arrangements. 

The operation of the unfair dismissal system is another area of longstanding concern. There is little to no disincentive for applicants to bring proceedings against employers in cases which may not have any merit, which means that employers who face unfair dismissal more often than not look to settle the matter even when there has been substantive and procedural fairness and where they have fair prospects of success, should they run the case to arbitration.

The reality is that the cost of litigation outweighs the benefit in employers defending their position and has led to a commercial settlement mentality. The key is in balancing a dismissed employee’s rights to challenge their termination of employment in a way that ensures an employer is not penalised for making the usually hard decision to terminate employment, provided they follow a reasonable process.

A version of this article first appeared in the August 2020 edition of HRM magazine.

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