Changes to industrial relations to hurt workers and employers

The current Federal Election campaign has seen the major parties battle on several issues, with the economy, defence cost of living expenses and housing affordability all taking centre stage.

In the last week, as the final two leaders’ debates have invigorated the conversation, the subject of wages has risen to the top of the agenda. Despite several commentators warning of the economic consequences of increasing the minimum wage in line with inflation, one piece of legislation that has been noticeably overlooked in the debate is the industrial relations Omnibus bill the Government took to Parliament last year.

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

A stripped-down version of the bill, which effectively removed these changes, was eventually passed in the Senate in March 2021, limiting the bill to addressing changes in the definition of casual employment.

It’s not that the topic hasn’t been discussed at all – the Prime Minister mentioned it in passing on 16 April – but this was just days after the Election had been called and other issues were seen as more newsworthy at the time.

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

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Changes to payroll legislation creating risk for employers

The BOOT refers to the principle that any changes to individual employment awards must not result the employee being worse off overall than under previous agreements.

This principle, introduced by the Rudd Government in 2009, effectively means the Fair Work Commission (FWC) can only approve enterprise agreements if they improve the “overall” remuneration of employees compared to industry award minimums.

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

Independent Australia spoke with Brett Cowan, executive director of specialist payroll consultancy firm AgileXperts, to get his views on the issue.

Mr Cowan said:

“Australia already has one of the most complicated Industrial Relations systems in the world, and any proposed changes to the BOOT creates significant risk for employers in terms of their payroll compliance."

He goes on to add that this complexity creates additional overheads for employers, in terms of seeking legal and professional advice to ensure employers' payrolls remain compliant.

Aside from the obvious concerns of employees, who would understandably want to be insulated from any changes in their pay from industrial relations reform, it’s the risks to employers that Mr Cowan feels is often overlooked or misunderstood.

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Most Australian businesses, and particularly those in the small and medium enterprise (SME) market, run a relative lean payroll operation, with compliance to a seemingly ever-changing array of legislation causing them ongoing challenges.

Despite this, business advocates such as Australian Industry Group having championed changes to the BOOT principle in the past.

Indeed, their chief executive Innes Willox has previously suggested that the original Omnibus bill would have made reasonable changes and the failure to pass them has resulted in “the number of agreements, and the number of employees covered by them, has dropped like a stone in the past ten years.”

While Mr Cowan conceded that businesses are loathed to incur additional labour costs because of government legislation on workers rights, it’s not the whole story in his view.

He stated:

“There is an underestimation of the risks involved – and the potential unintended cost – of making changes to the BOOT principle."

The core premise of his warning to business on this issue is borne out of hands-on experience of his company’s customers, who are often unaware of the amount of work involved in ensuring their payrolls remain compliant.

Mr Cowan points out that the legal and reputational risks of paying your employees incorrectly – however innocently it may be – can be significant, as Bupa found out to their cost late last year.

In addition, hiring additional payroll people to manage the changes, or even engaging a payroll consultancy when things go wrong, is not cheap; particularly when the demand for staff is outstripping supply in many employment markets around Australia.

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Political points scoring obscuring the issue

With the risks and cost – unintended or otherwise – of changes in industrial relations legislation being significant, businesses will be keen to understand how this issue may affect them in the aftermath of the Election.

The answer, as indicated above, is not that straightforward. The Prime Minister’s comments back in April that the reforms he was looking to revive were “about simplification and ensuring that there’s greater 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.

Yet just days later, Industrial Relations Minister Michaelia Cash suggested that the opposition was scaremongering, stating “the suggestion that the Morrison Government is trying to cut wages and conditions is completely untrue".

The Labor Party’s view is more clear-cut, with a firm commitment to BOOT amongst its election commitments.

Either way, the uncertainty is likely to cause unease amongst the business community. The trading of blows between political parties and their unwillingness to undertake fundamental reform in industrial relations creates additional complexity and risk for businesses across Australia.

The need to engage consulting firms to maintain their payroll compliance with legislation, as well as ensuring their payroll teams are educated and resourced adequately, is real and not without significant cost.

Mr Cowan concluded:

“Legislative uncertainty is the biggest challenge that most of our clients face, and the current election period is accentuating this."

The risk Australian businesses face from this uncertainty, and how they choose to mitigate it, is likely to impact their success going forward.

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

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