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Agency bargaining in the Australian Public Service: a stocktake

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D e p a r t m e n t o f t h e P a r l i a m e n t a r y L i b r a r y

RESEARCH NOTE Parliamentary Research


Number 18, November 1996-97 ISSN 1323-5664

Agency Bargaining in the Australian Public Service: A Stocktake

APS employment policy has tra-ditionally been the preserve of the central agencies: the Depart-ments of Finance, Industrial Rela-tions and the Public Service and Merit Protection Commission (DoF, DIR and PS&MPC).

Two reports in 1991 evaluated the scope for departmental or 'agency' bargaining in the Austra-lian Public Service (APS) and foreshadowed the intent of senior APS managers and the Govern-ment— • to devolve pay bargaining

arrangements to agencies, • to raise productivity of agen-cies; and • to look at the options for dis-

tributing that productivity.

A report of a group of senior de-partment heads looked at pursu-ing efficiency measures while making the link between effi-ciency and public service values. Their report, Improving Produc-tivity: A Challenge for the Public Service, noted that in recent years the APS had achieved good pro-ductivity outcomes, and that therefore the question was how to distribute the gains between cli-ents, government and employees. Agency negotiation on productiv-ity redistribution was one avenue identified by the group.

Three models for agency bargain-ing were suggested, which al-lowed an agency to retain the benefits of productivity to vary-ing degrees. Model 1 allowed each agency to develop its own responsibility for pay and condi-tions. Model 2 retained an APS enterprise base pay system but allowed the agency to pay the benefits of productivity on top of the base level at the agency's dis-cretion. Model 3 allowed agen-cies to negotiate productivity improvements, but pooled some

of the financial gains flowing from these to fund service-wide pay increases.

Also the then Minister for Indus-trial Relations, Senator Cook, commissioned a further report by John Niland, William Brown and Barry Hughes. Breaking New Ground: Enterprise Bargaining and Agency Agreements for the Australian Public Service high-lighted bargaining issues which would have to be addressed in agreements. For example, it ad-dressed methods of assessing productivity in the APS environ-ment, suggesting the establish-ment of performance indicators to assist with such a task.

These two reports put a struc-tured case for agency bargaining, although some of the actual is-sues had been raised earlier. (Per-formance pay, for example, was flagged in APS wage rounds of the late 1980s.)

Agency bargaining generally commenced in the APS from the start of 1993, and has since been implemented through three com-plex APS enterprise agreements (note that there had been earlier agency agreements, for example, in the Australian Tax Office and Department of Social Security). Agency bargaining nevertheless has been accommodated within these APS enterprise agreements.

The first, called Improving Pro-ductivity, Jobs and Pay in the Australian Public Service 1992-1994, allowed agencies to pursue local agreements which could pay all staff, excluding the Senior Executive Service (SES), addi-tional to the APS enterprise in-creases of 4.9% provided in the first agreement.

In terms of the three-model op-tion developed by the heads of departments, the bargaining structure chosen by the parties was Model 3, in which productiv-ity improvements of agencies involved in agreements would in part be pooled.

In addition, this first APS enter-prise agreement required certain payments to be paid to senior officers and equivalents, and to members of the SES.

The senior officer and equivalent group numbered about 10 000. For this group there were a senior officer allowance, performance pay and reimbursement of work related expenses. Senior officers at the top of the 'C' level earned around $47 000 per annum in 1994. For such an officer, the allowances would have added (on average) $3500.

Performance pay was tied to an annual appraisal process. Joint guidelines released from the cen-tral APS agencies in 1994 made it clear that performance pay should be paid to at most 80% of an

agency's senior officers.

On the one hand, the special treatment of senior officers

sought to respond to the percep-tion that this group were being denied wage justice in light of pay trends benefiting their private sector counterparts, a point noted by the Government at the time.1 Yet, the senior officer package hinged upon the group adopting responsibilities consistent with those generally expected of mid-dle ranking executives in the pri-vate sector, such as appraisal and acceptance of some need to work longer hours, or at home on

weekends despite any personal costs on family life.

The elite of the APS is made up of around 1500 SES officers, CEOs of agencies and statutory officers. The SES was to be sub-ject to performance appraisal and pay, with limits of $10 000 for lower band executives, and $15 000 for the higher band SES offi-cers. Where performance was not found satisfactory the SES officer could be regressed within band.

Agencies which secured agency agreements were to identify fi-nancial gains from improved pro-ductivity brought about by their agreements and divert part of their productivity gains into a pool operated by DoF.

At the expiry of the APS enter-prise agreement, the funds in this pool would be distributed as pay increases for the agencies which did not reach such an agreement, and so maintain more or less uni-form pay structures across the APS. This scheme of make-up pay came to be known as Fold-back. However, the sooner an agency signed an agreement the sooner its staff would benefit from any salary increases, and they would have the possibility of gaining an extra salary over a two year period.

In October 1994 a review of agency agreements was under-taken, published as the Joint Re-view of the APS Agreement. By the end of 1994, agreements had then been struck in the key de-partments (such as Defence and Social Security) in 15 agency agreements, and it became appar-ent that while the large agencies had the financial independence to negotiate industrial agreements, that ability was not as available to

the smaller agencies, and smaller agencies formed a small agency network to highlight the particu-lar difficulties they faced in

agency bargaining.

The next APS enterprise agree-ment, Interim Framework

Agreement Australian Public Service, was certified in April 1995. Its purpose was to pay the first round of Fold-back to those agencies which had not struck enterprise agreements, in two instalments about six months apart. At that time, the quantum of funds available in the Fold-back pool was not precisely de-fined, but pay rates for agencies which had not arrived at a local agreement were to be increased by 2% on 12 January 1995. The second and final Fold-back pay-ment was timed for July 1995. In the event, this also turned out to be 2%. This agreement also pro-vided for a transitional arrange-ment to cash out senior officers' performance pay and senior offi-cer allowance.

A third APS enterprise agree-ment, titled Continuous Im-provement in the Australian Pub-lic Service Enterprise Agreement 1995-96, operates from Septem-ber 1995 to the end of 1996. It provides three increases totalling 5.6% over 18 months. Among its provisions are: • commitments to adopt the

principal findings of the Re-port of the Public Service Act Review Group • including the senior officer

allowance in base salary rates, while reviewing overtime rates for certain groups of

senior officers who worked rostered overtime • replacing the reimbursement of work related expenses with

an expense allowance, paid quarterly • agency bargaining was to

continue, but clause 8(c) lim-its such agreements by not al-tering service-wide pay struc-tures and classifications, nor deviate from APS regulations.

Agreements could address effi-ciencies, working time and leave matters, and they could be certi-fied in their own right or be at-tached as appendix to the parent award. (Also in 1995, APS

awards were reviewed under s.150A process of the Industrial Relations Act and over 100

awards were replaced by one award). A further review of

agency agreements, APS Agency Agreements and Continuous Im-provement (1995) concluded that 87% of the APS workforce was covered by 55 agency agreements by the end of 1995.

Steve O'Neill Economics Commerce and In-dustrial Relations Group Parliamentary Research Service

Phone: 06 2772463 Fax: 06 2772475

Views expressed in this Research Note are those of the author and do not necessarily reflect those of the Parliamentary Research Service and are not to be attributed to the De-partment of the Parliamentary Li-brary. Research Notes provide con-cise analytical briefings on issues of interest to Senators and Members. As such they may not canvass all of the key issues.

© Commonwealth of Australia

1 Senator McMullan explained to Estimates Committee D on 11 May 1993 that: From my own experience, the place in the public sector where the pressure was emerging, because the various changes that had taken place had left one group behind, was at what is called the senior officer level. ... There was, I think, a widespread perception that those were the people who had been left behind by the changes that had been made, both at the bottom and at the top.

Senator Cook, addressing Estimates Committee A on 12 May 1993, similarly noted that: If you compare rates of pay in Austrade to the going rate in the private sector for people of comparative standing, I think you would have to say that in Austrade they are on the downside and at the bottom line of that comparison. They are not at levels of remuneration similar to the private sector, although the private sector is the field from which you would attract this talent.