How new industrial relations laws will shake up employment in all businesses, big and small

Minister for employment and workplace relations Tony Burke in the House of Representatives. Picture: Martin Ollman

Corporate boards and the sharemarkets are in blissful ignorance of how the government’s industrial relations blueprint will transform the Australian business community.

The impact in 2024 will be small, but in the years following the act will reduce productivity, meaning, in the longer term, Australia will have high inflation.

My discussions with directors indicates the impacts of the legislation are all too often being placed in the “too hard” basket.

I have written about many aspects of the legislation, but never brought it together so directors and the markets can understand the linked forces they are dealing with and how it reduces productivity.

Companies, such as Telstra and Bunnings, realise after August 26 (when the act comes into operation) the drastic reorganisations of their businesses they are now proposing will be much harder to execute.

However, it’s unlikely the unions will fully exercise their post-August 26 powers until after the election.

Longer term, what is ahead is a combination of the 1950s and the 1960s management structures, interposed with current CFMEU operating systems.

Few executives outside the commercial building sector have had any experience in managing in this sort of environment. Many successful executives of recent times will lose their jobs because they can’t adapt.

In the past few decades, we have been operating under enterprise agreements for particular businesses. Large companies might have a number of enterprise agreements covering various aspects of their business.

Often, agreements are based on locality. Then, of course, there are businesses — often family run — which don’t have an enterprise agreement but operate a generous system for their staff to optimise maximum flexibility.

Others use the independent contractor business model, and they will not be impacted. But, operating under this system, while incredibly efficient, requires different skills.

The new industrial relations rules aim at industry agreements, not enterprise agreements. They will be negotiated between the unions and the industry bodies, both of which have been awarded tens of millions of dollars to upskill and expand their staff to conduct the negotiations.

We don’t know exactly how the private sector will be carved up into specific industries and it will take some years for it to finally settle.

But, there will be one central theme: the unions will require the rights to be consulted over most management changes, including Telstra-style reconstructions, rosters, new technology, and changes in product processing.

Big business is still unaware of the threat it is facing from the Labor government’s new industrial relations rules. Picture: Martin Ollman

The legislation requires all enterprises with 15 or more employees to send their representatives to the unions for training. They will be instructed as to how to alert the union to any changes in ways a business is being managed, given the industry agreements will require the union to be consulted.

Telstra’s latest reorganisation was planned without union consultation. Enterprises planning Telstra-style reorganisations need to act quickly.

When appointed, the union representative might agree to small management changes on the spot, but they will be trained to check with their union “bosses”.

Companies will need to try and increase prices to recover the extra costs. But, where they can’t, then profits will need to be reduced.

Investment to lower labour content makes sense, but unions may put rules on how new technology is used.

The motor industry in Australia was operated this way for decades and the extra costs were met by government subsidies. When the government subsidies were withdrawn, management had to take control to make the business work.

When the unions baulked the overseas companies closed the plants.

One of the large impact industries will be transport, where productivity is currently kept high by the use of independent truckies. They will be hauled into the union system and their work will need to be consistent with union rules and industry agreements. Productivity will fall but the legislation’s ‘Amazon Clause’ will be significant.

The clause prevents the productivity mess which will be imposed on the general transport industry being applied when goods are being delivered direct to the home.

This means highly automated or overseas-based online operations will be very efficient in their delivery of goods to households. In-store retailers in many sectors will be at a great disadvantage.

But, there is another blow planned for bricks and mortar retailers, particularly supermarkets and pharmacy chains.

For a person to be allowed to be employed as a casual, there will be long, complex eligibility tests which are almost impossible to pass with certainty.

The obvious answer will be to replace casual with part-time employees. But, part time employees are nowhere near as flexible as casual employees, so the cost of labour will increase.

Currently, in lieu of holidays, casuals get a 25 per cent premium and there will be great unhappiness among causal staff if their take-home pay is cut by 25 per cent.

The ACTU says the casual premium should be 35 per cent. Companies prepared to pay 35 per cent premium may be allowed to have casuals. The enterprises will need to trade the efficiency of casuals against their higher cost.

Company boards and top executives have spent so much time on other issues they ignored what was happening in parliament.

Major management changes will be required. We know from the building industry medium-sized business skilled at dealing with unions and union officials can gain considerable efficiencies.

Many larger companies simply don’t care and pass on the costs, particularly if they are dealing with the governments.

I don’t think the sharemarket understands it may not be possible to pass on all the costs in higher prices, so the level of profitability of many Australian enterprises will be reduced. And high long-term inflation means higher interest rates.