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Fresh thinking and new approach needed on IR reform

"Now is not the time for tired old arguments about IR reform. What is needed is fresh thinking and a new approach, aimed at boosting productivity, growing jobs, encouraging investment and restoring economic growth," Australian Industry Group Chief Executive, Innes Willox, said today.

"The decisions made by the Federal and State Governments over the coming months about reform options will play a big role in determining how long the recovery period will be. IR reform has an important role to play in the recovery from the COVID-19 crisis. Unfortunately, the much talked about "V" shaped recovery from the crisis is unlikely. Far more likely is a period of high unemployment and underemployment, and a struggle to restore economic growth."

Three key areas that need to be given attention include:

1. Australia's award system: Sensible changes are needed to the relevant provisions in the Fair Work Act to deliver a simpler and more flexible award system, including:

  • Removing matters from awards that are largely dealt with in legislation, such as annual leave, personal/carer's leave, redundancy pay and public holidays. This has already been achieved for long service leave (see s.155 of the Act) but this approach needs to be extended to several other areas.
  • Amending the Act to remove barriers to award flexibility. Annualised salary clauses, exemption rates, loaded rates and flexible part-time provisions all have an important role to play in awards.
  • Barriers to the use of Individual Flexibility Arrangements (IFA) need to be removed. IFAs were intended to be a key part of the award system but they have not yet delivered the flexibility that was envisaged.

2. Australia's enterprise bargaining system: Changes are needed to the enterprise bargaining laws in the Fair Work Act to encourage employers and employees to enter into enterprise agreements that suit their needs. Over recent years, the number of enterprise agreements in Australia has declined substantially due to the excessive complexity of the system. Key areas that need to be addressed include:

  • Replacing the current Better Off Overall Test, which has often proved to be unworkable, with a No Disadvantage Test like the one that operated very successfully for over 15 years prior to the introduction of the Fair Work Act.
  • Implementing new objectives for the enterprise agreement approval process which reinforce the importance of employers and employees being able to reach agreements that suit their needs, and reinforce the need for the Fair Work Commission to approve agreements without delay or excessive technicalities.
  • Preventing unions intervening in the approval of an enterprise agreement unless they are representing any of the employees covered by the agreement.
  • Overcoming the current minefield that exists regarding the obligations upon an employer to explain the terms of a proposed agreement before the employees vote. A common-sense, practical approach needs to apply, like that which existed for 20 years up until the past few years.

3. Casual employment: Casuals make up 20% of the Australian workforce, providing vital flexibility to employers and employees. The Fair Work Act needs to be amended to define a casual employee in a simple and clear manner to address the uncertainty caused by the Federal Court's Workpac v Skene decision which is operating as a deterrent to the employment of casuals. On the pathway to recovery from the COVID-19 crisis, employers need to be encouraged to employ more people, not deterred from doing so.

"A much more productive and flexible IR system can be achieved, without compromising fairness.

"Ai Group will have more to say in coming weeks after further ongoing consultation among our membership from across the economy," Mr Willox said.

Media enquiries: Tony Melville – 0419 190 347