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The Future of Australian Workplaces

Speech

E&OE

Good morning everyone and can I start by just thanking the CCI WA for having me back again today at what is such a critical time for our economy and national prosperity.

I spoke at this same event 12 months ago – but that seems like a lifetime ago given what has happened in those 12 months.

When I last stood here.

  • The Morrison Government had recently been re-elected.
  • We'd passed the income tax cuts – something that was also considered to be another small miracle.
  • More than 1 million new jobs had already been created
  • And we were well on our way to delivering the first budget surplus in well over a decade.

And then along came the mother of all Black Swan events.

Having been heavily involved in preparing the Government's responses to the pandemic in those early stages, the efforts have always been directed to planning for the best outcomes, but also on being briefed constantly about the worst case scenarios and preparing for them as aggressively as possible in what often turned out to very short planning periods.

The only constant over the past 12 months is when the problems rolled off the Covid Problem Production line - we understood that we needed to act incredibly fast.

Firstly to save lives by shutting down our international borders and getting people to keep their distance in a way that still left as much of the economy functioning as we could safely allow, while also preparing our ICUs and our health systems for ever evolving worst case scenarios.

And secondly, we had to save the livelihoods of business owners and their staff whose workplaces were effectively being put into carbon freeze by measures that were necessary to flatten the curve.

One of the key solutions that we came up with to help support our economy was of course the JobKeeper scheme.

In my view it has served Australia extremely well by keeping hundreds of thousands of businesses afloat and millions of workers connected to their employers.

Yesterday was of course is a fairly significant day in relation to JobKeeper, being the start date for phase two of the scheme which runs for another six months.

As part of that second phase, we have also extended the workplace flexibilities for distressed business, as well as keeping key IR flexibilities for those businesses that don't meet the 30 per cent decline in turnover test (but are still clearly a long way from being back to full strength).

While I have been asked to speak about the future of the workplace, that can't be attempted without a short consideration of how much IR reform has actually occurred in the last 12 months and how critical it has been to saving jobs.

The IR flexibilities that sat alongside JobKeeper mark 1 and 2 were critical for businesses who had to rapidly adapt their operations in response to the pandemic in order to survive.

The pandemic has put a spotlight on the inflexibility of our current IR system, which was in many respects found wanting back at the start of this year.

When we were designing JobKeeper IR flexibilities something as simple as being able to get employees to work from home didn't fit comfortably with many modern awards.

If an employee working from home works at such times as suits the employee's circumstances, such as starting early, attending to family responsibilities for more than an hour, and working later than normal hours, the working arrangements will not conform to clause 25.2 that hours are worked continuously.

Before the IR flexibilities enabling directions to be given on location and hours of work, the awards made coping with the pandemic with increased working from home incredibly difficult.

  • If the employee, commenced work at 6am, instead of within the normal spread of hours (e.g. 7am-7pm), the employee will be entitled to overtime for the hours worked before 7am.
  • If the employee worked 7am-9am, attends to home schooling, cooking, shopping etc from 9am-1pm and then performs the remainder of the work from 1pm-7pm, the work will breach the requirement for work to be continuous and require the last hour to be worked at double time because work continued for longer than 5 hours without a 30-60 minute meal break.
  • If a period of work continued beyond 7pm, the performance of the additional work will attract overtime rates where it is outside the spread of ordinary hours, or be regarded as an afternoon shift and the employee will be entitled to a 15 per cent loading for the entirety of the shift.

That is why urgent changes were required to the Clerks award when Covid required simple practices like working from home.

In the new world of work where working from home will become more common, is it any wonder that employers might complain that awards are often in key areas increasingly less fit for modern purpose?

The same rigidity existed when it came to asking employees to take on new roles. As an example, restaurants that could no longer open due to lockdowns needed to switch to take-away only models. That meant workers such as wait staff were now required to do deliveries. But their relevant award classifications didn't allow for those sorts of flexibilities.

And perhaps the biggest hurdle of all was around the ability of employers to reduce the weekly hours of their full time staff, which was necessary so that hours worked could equal the JobKeeper payment amount of $1500 a fortnight. That was particularly important for those businesses in the retail, hospitality and restaurant sectors – many of which had been forced to close their doors virtually overnight.

The JobKeeper IR flexibilities were critical in actually letting business adapt pivot and overcome during the worst parts of the pandemic and in so doing they contributed to saving tens of thousands of businesses and hundreds of thousands of jobs.

It is illustrative of the key role played by these flexibilities that although they were designed in a short three weeks - very few people complained about them in practice.

THE Fair Work Commission had very few disputes and was able to resolve them expeditiously. In the five and a half months from the commencement of the jurisdiction on 9 April 2020 to 22 September 2020 there were 714 JobKeeper dispute applications to the Fair Work Commission, 70% of which had a jurisdictional issue identified.

There were 53 decisions and orders issued in relation to JobKeeper applications, including decisions on jurisdictional matters.

Keep in mind 3.3 million employees were liable to be subject to the new flexibilities.

The flexibilities that we legislated as part of JobKeeper made all these things possible, and I am grateful to the employer groups who understood these challenges and helped us to design the package that moves into its second phase today.

A survey commissioned by my Department found:

 

  • 3 out of 4 surveyed employers used the flexibilities available under the provisions;
  • 80% of employers want to continue to use the provisions beyond 28 September;
  • Just 22% of surveyed employers were confident they would resume full operations by September 2020, and only 36% by March 2021; and
  • Job losses or business closures were seen as the most likely consequences of not being able to access the provisions

I will soon be releasing survey material which shows that an overwhelming majority of employers – between 84 to 98 per cent depending on the specific direction or agreement – saw the provisions as 'important' or 'essential' to maintaining operations through the pandemic and 87 to 98 per cent of employers said the provisions were 'important' or 'essential' to keeping their staff in work.

Employee representatives were also generally supportive of the provisions as a key enabler of the JobKeeper scheme. They observed that the directions allowed employers to re-allocate hours available more equitably among staff, rather than standing down some employees and not others.

But those necessary immediate changes to the IR system saved jobs and the question now becomes what problems can we fix on a more permanent basis to grow jobs.

I'm sure all of you will be well aware that since June, I, with the help of fellow West Australian Tim Marney, have been chairing a series of industrial relations working groups that have brought businesses and unions together in an effort to find solutions to five recognised problems within the IR system.

Those working groups are looking at:

  • greenfields agreements – something of particular concern here in WA,
  • the enterprise bargaining system,
  • award complexity,
  • compliance and enforcement and
  • lastly, the issues of casuals and temporary workers – something that has become a priority since the recent Rossato decision.

We chose these five areas because we believed genuine problems exist that inhibit job growth that might otherwise occur. It is not so much about grand restructures as it has been about finding practical sustainable solutions to known problems that have persisted in the IR system to the detriment of job growth.

The working groups have last week formally concluded and now the time bound task of synthesising views into workable products for change is on foot with a view to having legislative products finished in the weeks after the next budget.

So I'm not quite yet in a position to reveal exactly how we plan to fix the problems in these five areas although I will provide some overview of the problems we have sought to address.

One thing I can say today is that – at many points it appears that trying to get agreement on IR changes between employer groups and the unions is about as easy as getting Clive Palmer and Mark McGowan to go out for a relaxed dinner together.

Despite the endless media search for any form of discord - the IR working group process has been extremely useful for the parties involved and the Government and it was undertaken in good faith and good spirit.

And while conversations with the parties about final legislative products is ongoing - I'm still sensing that a degree of consensus will be possible but of course, it will ultimately be our job as a government to take what we've learnt from this process away and come up with products that we think will deliver the best outcomes for the Australian people. The government intends that meaningful reforms will be brought to the parliament in coming months.

Given that I am not going to break the rules of engagement of the working groups and reveal specific proposals put before them – it is equally as useful to do here what we did in the groups which is going back over what the problems in each of those key areas we have been looking at are and I'll start with greenfields.

Greenfields

A key driver of the economic recovery will be finding new investment opportunities, and equipping employers with the confidence to bring forward hiring decisions.

The working group on greenfields has therefore been focused on how to make major projects more attractive to investors by providing greater certainty of construction costs and delivery timeframes.

The current four-year nominal expiry date of enterprise agreements means that, particularly for major projects, agreements can nominally expire partway through the project.

The risk of nominal expiry occurring during the construction phase introduces greater uncertainty for investors by exposing parties to unexpected delays and cost increases.

In particular, the perception of enhanced exposure to protected industrial action at a critical time is a significant risk factor. Anyone looking to invest in a project of the size of our lengthy major projects will want to see all risk factors taken out of the equation. However the time limit for enterprise agreements prevents this from being possible – even by agreement with unions.

In 2015 the Productivity Commission found that current greenfields agreement arrangements 'pose risks for large capital intensive projects with urgent timeframes'. This is why we want to address the role greenfields agreements play in the major project space.

Over its lifetime the Chevron Wheatstone project is estimated to create over 30,000 jobs and add $180 billion to GDP. Similarly Woodside's Burrup Hub will create an estimated 4,000 jobs per year and add $414 billion to GDP over the next 40 years.

What we have been looking at in the working group is how life-of-project agreements could be utilised to provide the greater certainty needed to incentivise investment in these economically significant, job creating projects.

Importantly, the jobs these projects create are good jobs – greenfields agreements, especially in construction, provide higher base wages and higher annualised wage increases than the average. So if we address some of the risks posed to major project stakeholders, we'll be attracting more capital and creating more good jobs which is going to be key to economic recovery. If more investment dollars come to Australia for major projects of this type, employees, business and the community will be better off.

Even Bill Shorten speaking to this very forum before the last election recognised this.

Awards

The issue of award complexity in multiple classifications in 121 deferent awards is long standing and I am regularly told by employers - particularly small business owners - that fear of making a mistake is a major barrier to employment.

In our modern award system the various classifications, loadings, breaks, rostering and other entitlements differ markedly across awards and present a complex picture.

For example, there are around 2,000 adult award rates of pay across the hundreds of different classifications.

Even a very large employer told us recently "We are not arguing that Awards are complex in the sense that they are hard to read and apply, we are arguing that they are too complex in that they are overly prescriptive, overly detailed and are quickly falling out of step with modern workplace needs."

AND that is the observation of a large business – SMALL business will often need greater flexibility and have far less resources to navigate the intricacies of the system. AND that was true pre Covid and its certainly true mid Covid.

Award complexity impacts on compliance, it impacts on enterprise bargaining via the Better Off Overall Test, and it impacts on the utilization of alternative work models.

The award simplification working group has discussed how awards, especially those covering distressed industries such as hospitality, retail and restaurants, can be made simpler and more fit-for-purpose to better encourage employment and effectively protect employee rights.

Practical Reforms to modern awards, appropriately balanced against other reforms in the compliance space, could assist businesses to navigate problems within the complexity of the current awards system. Employers now more than ever need more time to focus on growing their business and creating jobs.

Compliance

We've all seen the media about wage underpayments and the treatment of migrant workers. There is a community expectation that we do something about compliance with, and enforcement of, our workplace laws.

This hasn't just occurred at the small enterprise level, we are all familiar with the recent disclosures by large corporations of some quite significant underpayments.

While I acknowledge that the vast majority of businesses do the right thing by their employees -- there has been some examples of deliberate, noncompliant behaviour by unscrupulous operators.

Robust enforcement measures are effective in deterring and punishing deliberate, unlawful behaviour. On the other side are measures that will help prevent underpayments, and measures that will help recover underpayments.

The fundamental philosophy behind these changes is that it should be easy to understand what and how to pay your staff, and when that's the case there is an obligation to get that right.

Discussions in this group have talked about how compliance tools can be best drafted and targeted to ensure a culture of attention to payroll. BUT also there has been much focus on how a simplified system and importantly how government can play a role in providing that simplicity to help business with the task of payroll certainty and efficiency that will make life easier especially for small business and help them employ more Australians at a critical point of need for job growth.

Agreements

This was the virtuous vision for the enterprise agreement making system of non-other than Paul Keating - outlining the system he intended to create in a speech to the Australian Institute of Company Directors in 1993. He said:

"Over time the safety net would inevitably become simpler. We would have fewer awards, with fewer clauses. For most employees and most businesses, wages and conditions of work would be determined by agreements worked out by the employer, the employees and their union. These agreements would predominantly be based on improving the productive performance of enterprises, because both employers and employees are coming to understand that only productivity improvements can guarantee sustainable real wage increases."

Clearly, that vision does not describe the system we have today but equally clearly there is room for improvement to reengage employers with EAs.

Enterprise agreements allow employers to implement productivity improvements, allow workers to get paid more than the award and avoid some of the complexity of the awards system. BUT counterproductively award-reliant employment has increased from around 15 per cent in 2010 to 21 per cent in 2018.

Contrary to a vision of more bargaining meaning better pay, more productivity and less reliance on awards - enterprise bargaining is in decline and has been almost since the commencement of the Fair Work Act.

The proportion of employees covered by enterprise agreements has decreased from its historical peak of 43.4 per cent in 2010 to 37.9 per cent in 2018.

There is general agreement that one contributing factor to the decline of workplace bargaining relates to the complexity of the approval process and the delays which ensue.

These delays have largely been because the process has become overly technical, proscriptive and tediously theoretical – such that the FWC has increasingly required undertakings to address concerns the members have about non-compliant agreements and the intervention of opponents to agreements have been increasingly able to use the increasing technicality of approval tests to prevent agreements made at the workplace with employees from being approved by the Commission.

There's evidence that users of the system experience confusion about where to get advice, assistance and support. Unnecessary layers of frustration makes businesses more inclined to disengage with the process.

The government, like Paul Keating, want Australian businesses to use our enterprise bargaining system to increase productivity and increase wages – in short – mutually beneficial deals are the bedrock way to get better results and we want to see more deal doing between businesses and their employees.

Enterprise agreements generally provide higher wages for employees and allow employers to tailor arrangements that suit their particular workplace.

So the job of the agreement making working group has been to interrogate the current process to examine points of tension, and seek opportunities for reform that will reinvigorate the agreement making process, create jobs and deliver higher wages.

My view on this is that the enterprise bargaining system should focus on productivity, which will best be achieved through cooperative working relationships and interests that employers and employees share, rather than the current rigid, technocratic and process-driven bargaining system.

Casuals

If there's one thing I think everyone agrees on, it's that we need to do something about the confusion that now exists around casual employment.

Currently there is insufficient certainty for employers and employees who want to use casual employment as a genuine employment option, and we have to recognise that casual employment has a number of legitimate applications across the Australian economy.

Post-the recent Rossato decision, the employment status of over 2 million workers in Australia is accompanied by an unreasonable and unhelpful degree of doubt.

AND of massive economic significance in a time of economic crisis, the decision also means that employers face the prospect of paying for the same entitlements twice.

I have intervened in the Rossato case in support of special leave being granted. But we have to address the root problem and that is the remarkable failure of the Fair Work Act having been originally drafted without an agreed definition of casual employment, an omission made all the more baffling by the fact that many entitlements in the National Employment Standards are expressed to not apply to casuals.

It is now a matter of some considerable legal uncertainty regarding in what circumstances, and to what extent, businesses are entitled to 'set-off' any casual loading payments against a claim for unpaid entitlements from an employee later found to be not a casual at common law.

These aren't academic issues. The financial liability for business is unhelpful given the current economic climate. My department estimates that the potential back pay liabilities from the decision could be between $18 and $39 billion.

This working group is discussing these issues and I've tasked myself and our working group on casuals with the critical goal of achieving certainty and fairness around casual employment, so businesses can be confident to legitimately use this form of employment in a way that's fair for employees too.

I understand the importance of this issue for many people here today and I want to assure you that I am confident we will solve it.

Conclusion

In conclusion, I would like to personally thank all of those who have taken part in the working process and shown such good faith and a genuine willingness to deliver positive outcomes – especially for those Australians who are currently sitting in the ranks of the unemployed.

I can also leave you with one last insight about the likely package of reforms the Government will take forward from this process. It will not be driven by ideology. It will need to be pragmatic, appropriately balanced and be realistic in scope. It will be driven by the necessity to improve employers' confidence to hire and thereby create jobs. That is the singular goal of this process.

Polarising or extreme proposals aren't likely to be successful, especially given the current make-up of the Australian Senate that any legislative options will need to pass through.

The JobKeeper IR flexibilities were critical in actually letting business adapt, pivot and overcome during the worst parts of the pandemic and in so doing they contributed to saving tens of thousands of businesses and hundreds of thousands of jobs. Unheralded flexibilities in a time of crisis – allowing directions with protections on hours of work, location of work duties, of work days and agreements on leave represented more industrial relations reform in two weeks than in 15 years and it saved hundreds of thousands of jobs - and if not agreed to, it was not the subject of divisive disagreement between unions and the government.

The two lessons for the future from this immediate and successful past are that fixing problems that stand in the way of job growth and doing it in a practical, clear and certain way will be vital to our continued economic recovery, which is why the second lesson is about how important it is that we at least try first to get as much agreement and discussion about fixing those problems as humanly before legislation goes into parliament.

But whatever the level of agreement the fact of the problems and the need to fix them for the purpose of growing jobs remains undeniable. So after 33 meetings spanning some 120 hours, when we move forward to the next stage I look forward to your ongoing support for these efforts.

Thank you all for your time this morning.