Changes in labor relations that harm workers and employers

During the current federal election campaign, the major parties have been battling over a variety of issues, with the economy, defense costs of living and housing affordability all taking center stage.

Over the past week, as the last two leadership debates have revived the conversation, the issue of wages has moved to the top of the agenda. Despite several commentators warning of the economic ramifications of raising the minimum wage in line with inflation, one piece of legislation that has been conspicuously overlooked in the debate is the Omnibus law on industrial relations that the government passed to parliament last year. submitted.

The original bill was rejected by parliament 12 months ago, with the opposition refusing to make changes to the so-called “better off general test” (BOOT) it proposed.

A stripped-down version of the bill, effectively removing those changes, was eventually passed in the Senate in March 2021, limiting the bill to addressing changes to the definition of temporary employment.

It’s not that the topic hasn’t been discussed at all – the prime minister mentioned it in passing on April 16 – but this was just days after the elections were called and other issues were considered more newsworthy at the time.

Morrison’s comments on the subject four weeks ago centered on his commitment to reintroduce the Omnibus Act, which he would reintroduce if his party won the upcoming election. The question of whether that would mean another attempt to abolish the BOOT remained unanswered.

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A change in wage legislation entails a risk for employers

The BOOT refers to the principle that any changes in individual terms of employment should not result in the employee being generally worse off than under previous agreements.

This principle, introduced by the Rudd government in 2009, basically means that the Fair Work Commission (FWC) can only approve company agreements if they improve the “overall” compensation of employees compared to the industry’s minimum prices.

As such, the BOOT forms the basis for corporate agreements across Australia and any changes to this principle could pose significant risks to both employees and employers.

Independent Australia spoke to Brett Cowan, executive director of specialized payroll consultancy AgileXperts, to get his opinion on the matter.

Mr Cowan said:

“Australia already has one of the most complicated industrial relations systems in the world, and any proposed changes to the BOOT pose a significant risk to employers in their payroll compliance.”

He adds that this complexity creates additional overhead costs for employers, in the sense of seeking legal and professional advice to ensure employers’ payrolls are compliant.

Aside from the obvious concerns of workers, who understandably want to be protected from any wage changes through industrial relations reform, it is the risks to employers that are often overlooked or misunderstood, Mr Cowan says.

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Most Australian businesses, especially those in the small and medium-sized enterprise (SME) market, have relatively lean payrolls, with compliance with a seemingly ever-changing set of legislation presenting ongoing challenges.

Despite this, corporate lawyers such as the Australian Industry Group have argued for changes to the BOOT principle in the past.

Their chief executive Innes Willox has previously suggested that the original Omnibus bill would have made reasonable changes and that its failure to pass led to “The number of agreements, and the number of employees covered by them, has fallen like a brick over the past ten years.”

While Mr. Cowan admitted that companies hate extra labor costs because of government legislation on workers’ rights, he says that’s not the whole story.

He claimed:

“There is an underestimation of the risks — and the potential unintended costs — of making changes to the BOOT principle.”

The premise of his warning to business on the subject is based on the real-world experience of his company’s customers, who are often unaware of the amount of work required to ensure that their payrolls are compliant.

Mr. Cowan points out that the legal and reputational risks of incorrectly paying your employees – no matter how innocent – can be significant, as Bupa discovered late last year.

In addition, hiring extra payroll people to manage the changes, or even calling in a payroll consultancy if things go wrong, is not cheap; especially when demand for staff exceeds supply in many labor markets in Australia.

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As the risks and costs, unintended or not, of changes to industrial relations legislation are significant, companies will be eager to understand how this issue could affect them in the aftermath of the elections.

The answer, as indicated above, is not so simple. The Prime Minister’s comments in April that the reforms he wanted to reinvigorate were: “about simplification and providing more flexibility” made no mention of changes to the BOOT principle specifically.

On hearing Mr Morrison’s comments, Labor immediately accused the coalition of wanting to remove BOOT when it revived its Omnibus bill.

But just days later, Labor Relations Minister Michaelia Cash suggested that the opposition was scaremongering, declaring: “The suggestion that the Morrison government is trying to cut wages and working conditions is completely untrue”

The Labor Party’s stance is clearer, with a firm commitment to BOOT as part of its election pledges.

In any case, the uncertainty will cause unrest in the business community. The blows between political parties and their reluctance to implement fundamental reforms in labor relations creates additional complexity and risk for businesses across Australia.

The need to engage consulting firms to ensure their payroll remains compliant and to ensure that their payroll teams are adequately trained and resourced is a real one and not without significant costs.

Mr Cowan concluded:

“Legislative uncertainty is the biggest challenge facing most of our clients, and the current election period is accentuating this.”

The risk Australian companies face as a result of this uncertainty, and how they choose to mitigate it, is likely to affect their future success.

As May 21 approaches, removing this uncertainty around industrial relations would be something entrepreneurs would welcome from our politicians, whatever their beliefs.

Kevan Sangster is a freelance journalist based in Brisbane and holds a Bachelor’s Degree in Economics & Politics from Birmingham University in the United Kingdom.

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