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Address to Australian Industry Group personnel and industrial relations conference



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Senator the Hon Jacinta Collins

Parliamentary Secretary for School Education and Workplace Relations 18 October, 2010

Speech

Address to Australian Industry Group Personnel and Industrial Relations Conference

Introduction

I wish to thank Heather Ridout [Chief Executive, Ai Group] for your invitation to address this conference in my new role as Parliamentary Secretary for School Education and Workplace Relations. It’s a pleasure to be here.

First, I want to congratulate you—the Ai Group—on your leadership in representing industry in the development of the Fair Work Act and the modern award system. That is not to say we do not have our difference.

The Australian Government will continue to welcome your views on how best we can work together to ensure the new system enhances productivity and enables industry to remain strong and internationally competitive. There is still some work to do.

At the start of this year, the Fair Work Act ushered in a new era of a truly national industrial relations system for Australia’s private sector.

The patchwork of complex arrangements is now a thing of the past and thousands of employers who were in legal limbo before now have certainty. In Victoria fortunately we were able to leave Victorians in the national system, which took some politically maneuverings at the time.

Working in concert—with the states, employers and unions—we have created national arrangements that will benefit industry, workers and the nation as a whole.

1st January 2010 saw the commencement of a uniform national workplace relations system for the private sector.

All states, except Western Australia, are participating in the new national system through referrals of power to the Commonwealth.

This means all private sector employers and employees in referring states can now access the same workplace laws, tribunals, minimum conditions, rights and entitlements.

It is estimated that, as a result of state referrals, the federal workplace relations system now covers approximately 96 per cent of all private sector employees.

Access Economics estimates that the total net benefit to business and government of the single national workplace relations system will be 4.83 billion dollars over 10 years.

This is a fantastic outcome.

Today, I would like to explore how far we have travelled with our new industrial relations system and then set out some of the key priorities on the Gillard Labor Government’s agenda in its second term in office.

The Fair Work framework: How well has it performed to date?

In the last parliament, the Government secured the adoption of a fair and flexible statutory framework for workplace relations in Australia.

Ensuring that this framework is implemented as intended is a key item in the Gillard Labor Government’s second-term agenda in workplace relations.

With the passage of the Fair Work Act 2009, Australia’s modern national system of workplace rights came into partial effect last July, and with full effect at the beginning of this year.

As with any major reform of the Australian workplace relations system, stakeholders want to test their interpretation of the new provisions.

So in a sense we are still bedding down the new Fair Work framework.

Having said that, decisions by the new independent industrial umpire, Fair Work Australia (FWA) have covered a range of issues - and it is perhaps reflective of how well the new system is working.

The bedding down and associated contest of ideas will continue over the next year or so, as employers and employees across the country become more familiar with the new system.

So far, the evidence in relation to important indicators like the extent of unenforced good faith bargaining, individual flexibility arrangements and disputes does suggest that the first year of implementation has worked remarkably well.

Good Faith Bargaining

Let me begin with the collective bargaining framework, which is at the heart of the new system.

In the 12 months to June 2010, some 7,209 enterprise agreements were lodged for approval— agreements that employers and workers have secured in good faith.

Such good faith collective bargaining at the enterprise level means industry can now focus on the business at hand.

During the first 12 months, only 121 applications for bargaining orders were lodged, with just 18 bargaining orders made.

The vast majority of agreements are being negotiated from start to finish without recourse to Fair Work Australia.

These are good early signs.

The Fair Work Act’s focus on collective agreement making at the enterprise level can deliver higher productivity and lead to higher employment growth over the longer term.

In fact, recent employment data released by the Australian Bureau of Statistics (ABS) showed 49,500 jobs were created in September, the strongest monthly employment growth since January this year and more than double median market expectations.

There was also strong growth in the number of full-time employment increasing by 55,800 - which has also been identified as a key priority by the Australian Council of Trade Unions’ president Ged Kearney.

The strong labour force figures also saw the seasonally adjusted unemployment rate remains steady at 5.1 per cent.

The unemployment rate is around half that of major economies such as the United States and Europe where the jobless rate is around 10 per cent.

The labour figures also reveal an increase in the participation rate from 65.4 per cent to 65.6 per cent, reflecting strong growth in the number of people entering the workforce.

Individual Flexibility Arrangements

The new enterprise-focussed system also provides opportunities for employers and employees in developing more flexible working arrangements.

The Act provides for flexibility by providing for Individual Flexibility Arrangements (IFA), which allow employers and employees to make flexible arrangements to vary agreement and certain award terms to suit their genuine needs.

Every IFA must be genuinely agreed to and must make the employee better off overall than under the relevant modern award or enterprise agreement.

The Fair Work Regulations 2009 prescribe a model flexibility term that bargaining representatives may choose to adopt in an enterprise agreement. If the agreement does not include a valid flexibility term, the model term is taken to be a term of the enterprise agreement.

Of the agreements analysed thus far, around 61.3 per cent, covering 64.9 per cent of affected employees, contain the model term or a term with greater flexibility than the model term.

Industrial Disputes

The information about levels of industrial disputation also demonstrates the system is working well.

Analysis of ABS industrial action data shows that the incidence of industrial action has not increased under the Fair Work Act, which is good news for industry.

What the data sequence clearly shows, despite the quarterly fluctuations, is that there is a continuing long-term trend of very low levels of industrial disputation and working days lost.

Under the Act, the right to take industrial action is governed by clear rules.

Significant penalties apply to individuals or corporate bodies that flout industrial action rules and the Fair Work Ombudsman will pursue parties if the law is not adhered to.

Illegal industrial action has no place in the Government’s agenda to boost productivity and maintain the international competitiveness of Australian industry.

ABS data shows that the number of working days lost per thousand employees decreased over the June quarter of 2010 to 2.5 compared with 3.0 in the previous quarter.

Over the year to the June quarter 2010, the industrial dispute rate fell to 13.3 working days lost per thousand employees, down from 15.8 working days to the March quarter of 2010.

The strike rate in the June quarter of 2010 is half that for the June quarter of 2009.

As I say it is early days, but these figures are promising and the Government expects this long-term trend of low levels of industrial action to continue.

The Government believes that the Fair Work Act has delivered an efficient, fair and balanced national system with a stable and orderly regulatory framework.

We also believe that we have a fair and flexible system that provides workplaces with practical opportunities to enhance productivity and to become more competitive.

Government help for industry

The Government is pleased to be able to support business and industry, including AIG members, in making the transition to the new system. We must not lose sight of the new benefits that this new system brings.

It was gratifying to know that your diverse education activities in the states, assisted by some 1.9 million dollars in grant funding from the Government, were very successful.

As you would be aware, this is part of our 30 million dollar education and training plan to enable business and trade union groups and the Fair Work Ombudsman to explain the Fair Work laws.

Our aim is to make the transition as painless as possible for everyone, particularly small businesses.

I am sure the information guides, fact sheets and electronic tools developed by the small business unit in the Fair Work Ombudsman have been helpful in the award transition.

Likewise, the Australian Government funded targeted information activities and specialist Fair Work Liaison Advisers appointed to sectors identified as being most in need of information.

At this juncture, I would like to reiterate the Government’s acknowledgment of the substantial role the Ai Group has played in award modernisation activities.

The Government was pleased to financially support your endeavours, which have contributed to the making of a new safety net through modern awards and a smooth transition.

I also welcome the recent announcement by the Fair Work Ombudsman that the Ai Group has been successful in its application for the Shared Industry Assistance Program.

The Fair Work Ombudsman will distribute 2.5 million dollars of grants under the program to enable 15 selected employer organisations, including as AIG, to develop guidance material on 25 modern awards.

These materials which will be provided free of charge via the Fair Work Ombudsman’s website, will be designed to help employers better understand and comply with the terms of modern awards.

This will help boost your capacity to inform employers about the changes to modern awards applicable to their industry.

Award Modernisation

Modernising and simplifying the awards system has been a high priority for the Government.

The former Australian Industrial Relations Commission delivered a new modern award system in accordance with the timetable set by the Government - modern streamlined and simplified awards commenced on 1 January 2010.

It is useful to remember that some 3,715 federal and state industrial instruments were reduced to 122 modern awards.

This meant a reduction from approximately 197,000 pages of regulation to just over five and a half thousand.

Of course, a streamlined system of awards allows business operators to concentrate on running their businesses, while still providing flexibility to tailor modern award terms to the needs of their business through making IFAs with their employees.

The Government, in establishing the award modernisation process, made available to the Commission a full five-year phase-in period (from 1 January 2010) to enable employers and employees to gradually transition from old state/federal award minimum conditions to the new terms and conditions in modern awards.

The Commission elected to spread cost increases and decreases over the full five-year period available to it.

The Fair Work Ombudsman has recently released (1 June 2010) a guidance note on how pay rates in modern awards will be phased in over the five year period, which will greatly assist employers navigate through this transitional phase.

Building and construction industry

Another key priority for the Government is to promote continued improvements in workplace relations in the building and construction industry.

The Government has made it clear that industrial lawlessness and thuggery will not be tolerated.

We will keep a strong regulator in place to ensure the building and construction industry remains productive, and employers and employees share the benefits of a fair workplace.

This determination was reflected in the Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2009.

This Bill was introduced into parliament on 17 June 2009, but consideration in the Senate was not completed during the last parliament.

Our proposed legislation delivers on the Government’s 2007 election commitments in relation to the regulation of the building and construction industry.

It includes the Government’s promise to abolish the Office of the Australian Building and Construction Commissioner and replace it with the Office of the Fair Work Building Industry Inspectorate.

The Bill reflects the recommendations of former Federal Court judge the Hon Murray Wilcox QC.

The Government is committed to reintroducing this Bill as a priority in the new parliament.

Harmonisation of occupational health and safety laws

The Government is also determined to reform the occupational health and safety (OHS) legislation in Australia.

Creating uniform occupational health and safety laws around the country is a critical piece of economic and regulatory reform that the country has been asking for 30 years.

For the first time, Australia is making real progress in achieving national uniformity of the OHS legislative framework.

In July 2008, the Council of Australian Governments signed an Inter Governmental Agreement, which commits all governments to work together to achieve national uniformity in the OHS regime through the development of model legislation.

These reforms will boost productivity, reduce business costs and most importantly they will make sure workers are protected by the same high safety standards, regardless of which state they work in.

Since coming into office, the Government has worked tirelessly with the states and territories to reach this historic agreement, which sits at the core of our economic reform agenda.

This legislation must be implemented by the end of 2011.

A model Work Health and Safety Bill was endorsed by workplace relations ministers in December 2009 and work is underway to release an exposure draft of the model regulations for public comment towards the end of this year.

It is, however, disappointing that the New South Wales Government, (as was reported last week), would want to walk away from this reform, considering these benefits.

But, the Government is determined that for the first time, Australia will have a comprehensive, integrated package of model laws, consisting of a principal Act, supported by regulations and codes of practice, as well as a national compliance and enforcement policy.

The new framework will replace 10 pieces of legislation and more than 400 OHS regulations and codes of practice.

These reforms should ultimately lead to significant and continual reductions in the incidence of workplace death, injury and disease in Australia.

I would like to take this opportunity to thank AIG’s contribution to the harmonisation work through your membership of Safe Work Australia and your involvement in other initiatives to assist in developing model OHS laws.

Equal remuneration

The Government has also continued its pledge to support equal pay for community sector workers.

The Government strongly supports gender pay equity, based on our values of fairness and equity. The community sector employs more than 200,000 employees, of which 87 per cent are women.

Federal workplace relations law has contained provisions relating to equal remuneration since 1993, but no case to date has been successful using these old provisions.

The ASU along with other unions, has lodged an application with Fair Work Australia for an equal remuneration order for workers in the social and community services sector.

This is the first case relying on the more generous pay equity provisions that the Federal Labor Government introduced into the Fair Work Act.

The Act has broadened the scope of the previous equal remuneration provisions to include the right to equal pay for work of comparable value, as well as equal value, reflecting the approach already taken in some states.

The Government will be lodging a written submission to assist the parties to the case by presenting research and evidence on matters, including the history of relevant awards and labour market features of the social and community services sector.

Under ‘Work Choices’, the Australian Fair Pay Commission was given responsibility for applying the principle of equal remuneration for work of equal value in making wage-setting decisions.

A report into equal pay commissioned by the Queensland Government in 2007 observed that Commonwealth legislation did not provide any real opportunity to correct the undervaluing of feminised work or skills, as it was limited to a very narrow test, that being work of equal value.

It was a fair comment and one this Government has taken to heart. Fair Work Australia can now assess a case on its merits.

In addition to the new pay equity provisions, the Fair Work Act includes several other benefits that will help to address pay inequity.

These include:

• new criteria to guide minimum wage increases; • the new low paid bargaining stream; and • new opportunities for collective bargaining.

Paid Parental Leave

The Government is also committed to providing greater financial support to working families, encouraging greater workforce participation by parents, and enhancing maternal and child health, and development.

From 1 January next year, the Government will deliver Australia’s national Paid Parental Leave scheme, a first for the nation. This reflects our commitment to support all parents in the workforce.

The Government-funded scheme provides 18 weeks of payments at the national minimum wage level of 570 dollars per week to eligible working parents who are the primary carers of a child born or adopted, on or after 1 January 2011.

Paid Parental Leave entitlements can be taken in conjunction with employer-provided parental leave schemes and other employer-provided leave such as annual leave or long service leave. It is important to remember that the Productivity Commission has noted that these 18 weeks, plus other leave, would lead to most women having access to 26 weeks paid leave.

Last week, the Prime Minister, Julia Gillard, and the Minister for Families, Jenny Macklin, called on Australian businesses to register with Centrelink to provide Government-funded parental leave to their employees.

Already 158 employers have registered with Centrelink, including Holden and the Bank of Queensland.

Parents have been able to make applications under the new scheme from the beginning of this month and in the first week, 129 families applied, including 23 on the opening day of applications.

The Government launched an information campaign to make sure that families and employers are ready for the 1 January start date.

I also note that the Paid Parental Leave Implementation Group, which the Ai Group is a member of, met for the first time last Wednesday in Melbourne, to help ensure a smooth roll-out of the scheme to working parents and in particular, employers who will provide the Government-funded parental leave pay to their employees.

I would also like to acknowledge the Ai Group’s constructive work in implementing the first Government-funded Paid Parental Leave scheme for Australian families

The Government consulted widely with employers, community groups and unions over the last two years before the scheme was legislated in June this year.

The Government’s scheme implements the expert recommendations of the Productivity Commission.

Our scheme is fully funded and is fair for families and fair to business.

In contrast, the Opposition’s scheme would impose a new tax on businesses and would have a gross cost, which is often not known in the public debate, of 4.3 billion dollars in the first year alone.

Under the Government’s Paid Parental Leave scheme, parental leave pay is delivered as a workplace entitlement, just like sick leave or any other form of leave.

To help women remain connected to their workplace when they take time off to have a baby, the Gillard Government’s scheme ensures employers provide Government-funded parental leave payments to their long-term employees.

The Government’s scheme will help employers retain skilled staff and boost workforce participation.

Protecting workers’ entitlements

The Government also believes that Australia cannot have a strong and competitive industry without adequate protection for workers’ entitlements.

The Government on the other hand is committed to delivering on our three pronged election package.

First, the Government will extend protection of workers’ entitlements where the company they work for enters liquidation and can’t pay them what they are owed.

We will introduce legislation to establish the Fair Entitlements Guarantee, an employee entitlements scheme to protect redundancy pay, up to a maximum of four weeks for each year of service.

The new scheme will also protect annual leave and long service leave entitlements and up to three months unpaid wages for employees who do not receive these entitlements due to the insolvency of their employer.

Development of the Fair Entitlements Guarantee legislation is underway.

Second, employees will receive information on their payslips about the amount of superannuation actually paid into their accounts, and notification from their superannuation fund if regular superannuation payments cease.

These reforms follow from the recommendations of the Cooper Review of Superannuation that called for more timely payment and disclosure of all superannuation payments.

Employers will also receive additional information from superannuation funds to assist them with managing their superannuation payments.

The Government will also enhance the powers of the Australian Taxation Office and the Fair Work Ombudsman to enforce compliance.

We will of course consult with the superannuation industry, employer representatives and unions about the implementation of these measures.

And third, the Government will strengthen Australia’s corporate and taxation law to give the Australian Securities and Investments Commission stronger powers to ensure employees get swifter access to their unpaid entitlements through the Fair Entitlements Guarantee.

We will also improve the ranking of employee creditors working for unincorporated companies to bring their ranking into line with the priority given to employee creditors of incorporated companies.

A process of public consultation will also consider stronger measures to prevent ‘phoenix’ company behaviour, where a business closes down one day and opens up the next day with a different name just to avoid paying its obligations.

It is very important to the integrity of the system that we insure that this kind of behaviour does not undermine the scheme.

Conclusion

Ladies and gentlemen, the Australian Government understands that reform of the workplace relations system is not an end in itself.

The primary objective has always been to enhance productivity—to enable industry to drive productivity in the workplace with the full cooperation of workers.

The new workplace relations system represents a balance of fairness and flexibility that will enable Australia to become internationally more competitive and prosperous, without taking anything away in workplace rights and guaranteed minimum standards.

The Australian Government remains committed to open and productive consultation with stakeholders to maximise the benefits of the new system.

The Ai Group is an important and valued stakeholder, and we will continue to consider your views and priorities carefully.

The Gillard Government is a consultative Government and all matters raised by the Ai Group will be carefully considered.

Any changes to workplace relations over the coming months will be for the betterment of Australia’s workers and employers.

Thank you for your attention and enjoy the rest of the conference.

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