Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

What the umpire said

When the Modern Award flexibility provision was being developed, the AIRC gave consideration to each of the matters that may be included in a modern award and determined that the operation of IFAs should be restricted to the following matters:

• 
  arrangements for when work is performed;
  
• 
  overtime rates;
  
• 
  penalty rates;
  
• 
  allowances; and
  
• 
  leave loading.
  

With respect to minimum wages, the AIRC noted that section 576J(1)(f) of the FW Act enables awards to include terms award annual wage and salary arrangements, including alternatives to the separate payment of wages or salaries and other monetary entitlements and concluded that:

In light of the fact that separate provision is made for flexibility in relation to the way in which wages, salaries and other monetary entitlements may be paid it is unnecessary to include terms about minimum wages in the model clause. Indeed it may be inappropriate to do so. It is difficult to see how the trading-off of minimum wages against other benefits could meet a genuine need for individual flexibility without at the same time weakening the function of the award as a safety net in an unacceptable way. There does not appear to be any sound basis for including award terms about minimum wages within the operation of the model clause. It follows also that award terms made under s.576J(1)(f), which is itself a flexibility provision, should not be included in the operation of the model flexibility clause either. We should emphasize that by excluding minimum wages from the model clause we obviously do not intend to limit arrangements which increase wages. Our concern is to guard against minimum wages being traded off.⁶¹¹

For similar reasons the AIRC concluded that it was more appropriate to provide flexibility in relation to the following matters through the modern award safety net than include such terms within the scope of IFAs:

• 
  Type of employment
  
• 
  NES entitlements
  
• 
  Superannuation.
  

The AIRC’s view in relation to procedures for consultation, representation and dispute resolution was that to include such terms in the operation of the model clause would be likely to add complexity and unnecessary regulation rather than increase flexibility.

During the 2 year review of modern awards applications were made by a number of organisations to vary the scope of the model flexibility term. The Commission was not persuaded to make the proposed variations, noting that those organisations were unable to identify any particular issues which have arisen from the current scope of the model term save in respect of frequency of payment and minimum engagement periods. ⁶¹²

The conclusion reached by the Full Bench in relation to minimum engagement periods recognises that some award entitlements are simply not amendable to variation in a manner that benefits employees and that including such provisions within the scope of an IFA is likely to result in employees being disadvantaged overall:

We are not persuaded that it is appropriate to include ‘minimum engagement periods’ within the scope of the model flexibility term. As we have noted these provisions relate to minimum wages and for many employees are an important aspect of the modern award safety net… Any variation to minimum engagement periods in modern awards should only be by application to vary the relevant modern award or by enterprise agreement. This will ensure that the variation is subject to appropriate scrutiny. It is not appropriate to permit such variations by IFAs, which are effectively self-executing. In our view, the inclusion of such terms within the scope of the model flexibility term would not be consistent with the modern awards objective.⁶¹³

For similar reasons, the FW Commission determined that frequency of payment of wages (ie weekly, monthly or fortnightly), was a matter that should be determined on an award-by-award basis having regard to the relevant award history and circumstances pertaining to each award rather than a matter for individual negotiation.

The ACTU strongly supports the FW Commission’s approach. Under the FW Act, the FW Commission is tasked with responsibility for maintaining a fair and relevant safety net that takes into account the needs of employees as well as employers. The content of modern awards is tailored to meet the needs of particular industries and provides flexibility in relation to a wide range of matters (as discussed above). The provision of ‘new’ flexibilities that are necessary for employers/employees in particular industries or occupations can be secured through changes to award provisions. The scope of IFAs made under the terms of modern award should, therefore, be limited to those matters that can conceivably be varied on an individual basis without undermining the modern award objective of providing a fair and relevant safety net.

The FW Act allows the content of flexibility terms in enterprise agreements to be either narrower of broader in scope than the model flexibility term.

Employees and unions engaged in bargaining commonly seek to restrict the matters that may be subject to an IFA, not because they wish to limit individual flexibility, but in order to prevent employers targeting vulnerable employees and utilising IFAs to undermine collective conditions.

These restrictions do not prevent employers and employees negotiating individualised salary packages or conditions of employment that are superior to those contained in an enterprise agreement or award through informal or contractual arrangements.

The sources of workers’ pay and conditions

According to the most recent ABS Employee, Earnings and Hours survey, there were 1 860 700 employees paid exactly at an award rate in May 2014, representing 18.8% of all employees. 41.1% of employees were paid according to a collective agreement and 36.6% paid according to an individual arrangement, with the remainder (3.4%) being OMIEs.