20-December-2005
Speeches, Workplace Relations
Address by Andrew Robb AO MP to the Recruitment & Consulting Services Association Breakfast Seminar.
Adelaide, Tuesday, 20 December 2005
E&OE
Some of you may think of it as punishment turning up here at a quarter past seven a few days before Christmas, but it’s very impressive.
I’ve had the pleasure of speaking to a number of similar gatherings of your fellow members around the country. You’ve been very active, and for good reason I think. You really are part of the industry which in many respects has shown a lot of leadership over the years. There’s been a lot of opposition to workplace reform, yet you have fought some really tough battles and have really contributed significantly to the growing flexibility in the workplace.
From my experience, of being in and around government for 25 years, in the main, governments respond to what’s happening on the ground. Since the ‘70s with the growing globalisation of the economy, lots of things had to be freed up. The labour market has been probably the slowest to do that, but never-the-less, a lot of people have gone to a lot of expense challenging unions in the Commission and in the courts to free up labour, and people like yourselves have really have forced a lot of the pace.
Businesses won’t stay in business unless they’ve got the flexibility to arrange things in an individual workplace which best suits their needs. That’s the whole purpose of this legislation, and as I say, I think that you ought to take a lot of credit for the role that many of you have played over the years in the legislation that’s now in front of us.
This morning, what I’d like to do is give you a sense of the context in which these changes are framed so that you can understand where the government is coming from. I would like you to see what has been in our heads as a government, what we are trying to achieve with this and why we are trying to achieve it. I think if you understand the direction and the motivation for the changes, then a lot of the detail you’ll work with a lot more comfortably, and a lot of it will make more sense.
Charles and I have done a bit of a double act a couple of times already. Charles has had a lot of experience, especially with your sector, and he will go through some of the detail, and if there are any questions during that, I can respond to some of that as well, but I’d like to primarily set the scene.
There are three challenges dominating the government’s agenda, not just in the labour area, but across the board – three things that are dictating where the priorities of the Prime Minister and his Cabinet when they sit down and work out the year’s agenda.
Firstly, there is the ageing population. This is a hugely significant development.
We’ve now got a situation where in five year’s time there’s an expectation that there will be serious labour shortages. There was a study out three weeks ago suggesting that in five years there will be 200,000 more jobs than there are people to fill them. I know that with this job I’ve had of going around the country, I have seen position vacant signs everywhere. This is starting to emerge not just in skilled areas but unskilled areas as well. We’ve really got a problem emerging that as a government we’ve got to look forward and see what we can do to try to make sure that as the years unfold, the ageing population problem is addressed as best we can.
There’s no one way to fix it, but it’s really important to try to get senior members of the community into the workforce for as long as possible, even if it’s part time. There’s a lot of work going on in things like in the superannuation area – people can now access their super and still work part time, they get a top-up and an amount to live on and stay in the workforce.
A lot of the changes that we’re talking about with workplace relations are designed to increase the flexibility so that businesses can accommodate senior workers.
There’s the independent contractor act, which is the first cab off the rank in the New Year. This is a body of legislation that’s really important to a lot of the senior members of the community staying in the workforce as consultants for one or two days per week perhaps, and not be deemed employees.
There are all sorts of ways which we’re trying to tackle the ageing of the population. We’ve got welfare to work legislation which just passed the parliament in the last two or three weeks. We’ve got at the moment 700,000 people on disability pensions and we’ve got 600,000 Australians on parenting payments. None of those 1.3 million have any obligations to seek or to do any work. A lot of them can’t do any work, but a lot of them have got the capacity at least for part-time work. Those that can do some work will be required to work. That is far.
We’ve got a multi-faceted approach to try and free up labour, even if it’s for fifteen hours a week, twenty hours a week, twenty-five hours. To do that effectively, people have to be able to employ them under flexible arrangements, and that has required the work that we’re doing in the workplace relations area. So workplace reform is really part of a matrix of things designed to address in part an ageing population.
I think the second big problem that’s really consuming the Prime Minister, the Treasurer and others is globalisation. Now we’ve had this with us for a long time, but with China and India recently emerging as they have so strongly, it presents enormous opportunity, but also huge threats.
I was in China a few months ago and I went out to a car manufacturer, a big plant just outside of Shanghai. I was talking to the management, and they were just in the process of building a capacity to roll off a million cars a year. The big question they were playing with was whether they double it to two million cars a year? The decision seemed to be a “will we or won’t we” sort of thing. When I heard that, I was thinking of this city, as well as Melbourne, where my home is. I’m thinking, if they do take such a decision, think of the impact that it can have on us and our export capacity, and the pressure on the industry. Now if you have three or four plants around China all doing the same thing, you can see the threat
But such situations also present enormous opportunity. If they built a two million car capacity instead of one million, it creates all sorts of opportunities for component manufacturers, but it is doing all sorts of serious things to other parts of the industry.
So there are opportunities and there are threats. But again it is back to creating more flexible arrangements. As a small country, highly skilled in a lot of these areas, unless we are very flexible in everything we do, but particularly in the way we employ and deploy labour, then we won’t be able to dodge the threats and take advantage of the opportunities.
Globalisation and the ageing population I think explain the very strong intent behind this legislation and a lot of other legislation.
The third issue dominating the Government’s agenda is terrorism, although this is obviously subject to other legislation.
These are the three things that form a kind of template being put across the government’s agenda as they sit down to plan what we’re going to try to do over this three year period. It’s certainly driven a lot of the legislation that you’ve heard reports on in the last few weeks, including in the area of workplace reform.
So what’s this legislation about? I think more than anything else, it is about cultural change. It is about going from conflict and distrust and a heavily rules-based system to collaboration and trust and flexibility. It’s about respect in the workplace.
In the ‘80s, I ran the National Farmer’s Federation. There was a dispute in the Northern Territory at a little buffalo meatworks in Kakadu called Mudginberri. The meatworks was very remote, with a very high cost because of its remoteness. It had a short killing season because of the nature of the climate there. This meatworks had about 25 meatworkers. The owner got half-way through the season and found that with the tally system that had been operating in the meat industry forever, he couldn’t keep the doors open. He could not kill enough meat in one day to cover the costs. So he sat down with his meatworkers and said, “I’ll pay you on productivity. I’ll pay you ‘x’ dollars a beast if you kill as much as you can in a day and not be constrained by the tally system. And if you do that, you’ll be the highest paid meatworkers in the country (by hundreds of dollars a week, in fact)”. They said “that’s fine by us, we’ll work our hearts out, we’ll make a lot of money and we’ll get out of this hellhole a lot earlier than we would otherwise and we’ll get back to where we come from. It’s a good deal all round. You keep the doors open so that we’ve got a job and we end up the highest paid meatworkers in the country and we’re out of here in five months not six”. So they started working on that basis. The union got wind of it and they said “not on your Nelly. The tally system is sacrosanct”. They established a blockade. Nothing could get in or out.
The long and the short of it was that we got involved to help the owner, Jay Pendarvis, and his workers. It took two years, a $10 million dollar fighting fund, twenty seven court cases, a $2.3 million dollar damages bill – the first one ever against a union – and $2 million costs against the union. It cost the union $5 million dollars, it basically broke the union. And they lost a lot of face.
But the bottom line was it took all of that effort and expense to stand up and to maintain an agreement which suited that workplace and everyone had agreed to. An agreement where there was trust and there was respect and where there was money in pockets. It took all of that of effort. There was a culture in that workplace which was one of mutual benefit, not one of conflict.
Since the ‘80s there been so many examples of this – in the mining industry, and ODCO – the work that was done there – think of what went on through all of that exercise. This is all about a cultural change because we certainly believe that if we have got workplaces where collaboration and trust and flexibility is the norm, then we have got productive workplaces. We’ve got Australia being competitive. We are dealing with our globalisation issues. We have got the flexibility to take opportunities and to avoid threats, and we are starting to bring labour back into the workforce at a time when we have got an ageing population.
So, it is about cultural change, and in that sense it’s about an evolution, it’s not a revolution.
But if you look at the campaign our opponents have run against all this, you would think there is some revolution. That there’s some drop dead date when the whole workplace is going to fundamentally change and a whole bunch of new and draconian procedures will be forced on workers.
Well that’s nonsense. If you were running their campaign you probably would create that sense, but it’s a little bit of crying wolf, because people are going to find out that the sun will continue to come up, there won’t be waste and famine. Life will go on as it has.
The fact of the matter is, as I said earlier, governments respond to what people are demanding on the ground, in my view. This has been happening since the 80s. Since Mudginberri, Dollar Sweets, the mining cases, ODCO and all of these – these all led to governments, and in particular Paul Keating in ’93, to realise the need for change.
Paul Keating made a speech to the Institute of Company Directors in 1993 which, if you have the opportunity to go back and read that speech, you’d swear it was John Howard in 2005. So it was Paul Keating in 1993, after a recession and a million people out of work and all the rest of it, who realised that the system was unsustainable. What was happening on the ground had to be reflected in legislation.
Paul Keating talked about the absolute necessity of getting away from the highly centralised system which dictated every minute of every day at the workplace, to a system where you had agreements at each individual workplace.
What Paul Keating said towards the end of the speech was that is the model we have to move towards. It’s not going to happen overnight, but we’ve got to move towards it. He said in the end agreements people strike in the workplace need to be full substitutes for awards, not awards with some add ons. Not a 400 page award with a few flexibility add-ons which sort of accommodate an individual workplace, but a 10 or 15 page agreement which is a full substitute for the 400 pages of an award, and is not linked to that award.
In many respects, we have reached that stage with this legislation where agreements can be full substitutes for highly complex awards. This legislation unhooks awards from agreements. In my view, the big ball and chain out there in not freeing up the system is the fact that every time you try to strike an agreement – collective or individual – there’s a no disadvantage test. You have to be at no disadvantage compared to the award. If you’ve got four awards in a small engineering firm – you could have 2,000 pages of awards that you’re trying to replicate inside of a 15 page document. What it has been is an invitation for the unions to stick their nose in and to frustrate that process, and for the Commission to aid and abet that in many cases.
That is the heart of the changes that we are making if you strip it all away. We are not getting rid of awards – we’re freezing them in many respects, and simplifying them. If people want awards, fine, that will remain, but we are decoupling the awards from agreements, so there are agreements that become a really full expression of what’s going to work in an individual workplace by agreement.
There is no drop dead date. I think that’s really important. People can sit out there and just explore it. Explore the value with their workforce. There’s a big educational program coming in February and March, through all the associations, where they will take out to individual members, and there will be templates of agreements – the RCSA, I’m sure, will be a part of all that.
I’ve got 4,000 shop-fronts in my electorate, all small businesses with a few employees. In future, each one of those people will be able to sit down with a five page template over the lunch-table and talk to their staff about what’s in it. They could take weeks if they like – play around with it, add a few things, take a few things off. There has to be five minimum conditions in that agreement, that’s all. They can play around with it, take their time. When they’ve all agreed, they sign it, the employer puts a Statutory Declaration in it, puts it in an envelope, puts a stamp on it and sends it off to the Office of the Employment Advocate and that is it. That is it.
It takes effect from lodgement. There’s no approval process. You think about how simple that is. At the moment, those same 4,000 people with their shop-fronts, if they try and get some agreement, they have to try and work it out and then they put it into the Commission. The Commission goes through it all, the unions come and stick their nose into it. There’s a long approval process – it mightn’t take effect for months potentially. They have to try to compare it with awards which they don’t understand, and which their workforce doesn’t understand. Currently, they’re having real difficulties trying to deal with the complexities of an agreement based system because it is linked to awards at the moment.
With these changes, they don’t have to make reference to the award. There’s a set of five minimum conditions which must be in there. There’s seven other things that must be on the table, such as penalty rates. They don’t have to be included in the agreement, you just have to have referred to them. In other words, penalty rates and overtime rates and other things are exchanged for another $1.50 an hour or $2.50 or $3.50– or whatever the deal is. They may not even be exchanged for anything, but they’ve got to be referred to in the document.
It’s a very simple process and I think it’s going to work its socks off once people have had time to sit down and see that it is easy, they can talk to their workforce and the workforce understands it. They all end up with a 5 to 15 page document, and everyone knows what the deal is – what they get, what they should get.
I think in terms of the vulnerable – which we’ve heard all about the vulnerable – I think the vulnerable are far less vulnerable when you can understand what you’re getting. And at the moment, in a lot of workplaces, the employees have absolutely no idea what their real entitlements may be under a highly complex award.
For casuals, there will be a 20% loading that must go on top of the minimum wage. In future, if a parent has a son or daughter who has just gone off and got a job, if they’re worried about their kid being worked over, a parent can ask – “are you getting the five minimum conditions?” or “are you getting 20% loading on top of the minimum wage?” Now they’re very simple things to find information out on. And if you’re getting at least that, there’s a great measure of protection that is not currently in the system, and I think there’s a lot of things we’ve done with a more transparent system, a simpler system, which actually helps the vulnerable, apart from all the others who are in a position to negotiate a good deal for themselves.
Finally, just let me go to the three core focuses of this legislation before Charles gets into some of the detail.
This is really designed to make agreement making easier. That is the heart of it - to make agreement making in an individual workplace – whether collective or individual – easier. There’s been a lot of focus on the individual agreements, and they’ve got a significant part to play, but as a government we’ve got no preferences between collective and individual, we just want the opportunity for employers and employees to reach mutual agreement. To sit down and talk turkey and do what makes sense in that workplace.
The unions and the ALP have put a focus on individual agreements because they feel that they can make it look like individuals are more vulnerable in that situation, so they’ve had the whole public discussion in that area, but actually, we don’t care. Doing agreements is the thing. We want to make agreement making easier, as I went through before with five, ten or fifteen page documents.
A lot of this legislation is really directed at small and medium businesses. We do feel that since ‘93 when Keating brought in some changes and since ‘96 when the Howard government brought in more, that there have been significant benefits. Keating was nobbled by the ACTU in ‘93 and only started the process, but it was an important start. We got nobbled by the Senate in ‘96, but we again made some important changes. This is really stage three in a 12-year deliberate process to free up the labour market.
In the last 12 years big business have been able to take advantage of a lot of the changes Keating put in place and John Howard put in place, but for a lot of small business and a lot of medium sized businesses, it is still far to complicated and the connection with the awards have made it super complicated. Most of them are effectively not in the system – half of them are not even in the system. There’s a handshake and they don’t really know what’s going on – you know that better than I do.
So we are really trying to make it a lot easier for small and medium sized businesses. That’s a lot of the provisions. There might be 1,200 pages of legislation you’ve heard about, but what it means is that someone can sit down with a 5 page template, tailor it to their workplace, sign it and send it off. They don’t have to know about the 1,200 pages. The legislation gives effect to a much simpler, transparent, understandable system.
There are also things in there for big businesses, especially removing privileges that unions have had for a hundred years. The monopoly position they’ve had. We’re making them earn their keep. Again, we’re not against unions, but they shouldn’t have a right to come in, even though they’ve got no membership in a workplace, and walk into the place as they see fit and start to cause a nuisance. They’ve got to be invited and they’ve got to play a constructive role. So that’s important. Also, stopping pattern bargaining is important, especially to bug business. We’ve banned pattern bargaining. That’s a really important thing. It was starting to really badly affect some of the good agreements that businesses were striking, and I think it’ll breathe some more life into productivity related agreements with big businesses.
The second thing is the one national system. Six into one. Again, you know this better than I do, especially many of you that are working across states. It’s a nightmare. It’s a mountain of detail. It’s potentially thousands of pages of awards, even in small workplaces. I could give you endless examples, but you could probably tell me more about that. We really are determined to have one national system.
We do think the States are playing politics. Most are coming up to elections in the next 12 to 18 months. They’re all Labor States and their base is the union movement. Their preselections are determined by the union movement and their funding is determined by the union movement. Because that is their base, they’re not going to do anything before those elections which will annoy the union movement. In almost every case around the States, either the Premier or the person responsible for industrial relations sometime over the last three or four years has said what a nonsense it is to have six systems.
We do expect, even if there are High Court challenges, we will win the High Court challenges and, after these elections, the States will slowly, but surely, cede their powers. At the moment, with this legislation in place, it will cover 85% of the workforce. So the States will really only be covering about 15% of their workforce, and spending $10, $20 or $30 million each year to do so. There’s a lot of incentive for the States to cede their powers, and you get back to one system.
So there’s a focus on agreement making and on one national system. The final thing is unfair dismissals. We think the blackmail that has been taking place by opportunistic and recalcitrant employees is seriously damaging. Its only 5%, but its enough to spook, to scare, to frustrate, to stop employment across hundreds of thousands of workplaces. And, again, you know better than I, but in a lot of cases, people, especially in those small workplaces, they have the prospect of $30,000 and all the disruption, and stress, the time and all of it.
I ran a business before I went into the parliament a year ago. It was a start-up business. I know when I had 30 employees, I was vulnerable. It was not only the cost, but also my time. At that size, I couldn’t afford a HR person. When I got to 100 people, I had a HR person, I had more cash and any potential trouble maker would know it, know that they couldn’t hold me over a barrel like they could when I only had thirty employees. So I do understand the psychology of it. That’s why we’ve drawn the line at 100. Below that we think people are vulnerable to blackmail. Above it they still are, but much less so. And we had to make a political judgment.
I think I’ll leave it there. That’s the context – it’s broadly what we’re trying to achieve. There are a lot of provisions and Charles will start to take us through that.
Just to finish up, could I again commend the role that many of you have played in all this. You have helped create a political and industrial climate in which government can act. We want to act on it, but also, the climate has got to be there. You’ve got to have people out there who have set the scene, who have put the pressure on, who have made the case and who create a general understanding.
You’ve played a big part in all of this, so thanks very much and have a merry Christmas.
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