No room for flexible work

THERE are no bonus points for knowing who wrote: "Political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind."

George Orwell would not be surprised to learn that political language is alive and well in the regulated world of Australian industrial relations. And my favourite oxymoron: modern awards.

By definition, one-size-fits-all, prescriptive documents that are a throwback to the 1950s cannot be termed modern. Modern would be the result of voluntary individual contracting between workers and employers, recognising that what one person regards as unsocial hours (a term used in the Fair Work Act) are desirable hours for another person.

In the past, there were thousands of awards, state and federal. Under the award modernisation process, undertaken by the wise members of Fair Work Australia, the number of awards has been pared down dramatically, to 120 all up.

It was initially hoped the number would be very small - 20 odd - until it was realised there were potentially perverse outcomes should seemingly related industries be covered by the same award.

The clearest case of this was the initial attempt to squeeze restaurants, cafes and fast food outlets into the same award as hotels, the latter with very high penalty rates and shift allowances. The attempt subsequently was abandoned.

The section of the Fair Work Act dealing with modern awards talks about a "simple, easy to understand, stable and sustainable modern award system for Australia". The reality has not quite panned out that way, with a set of detailed and inflexible documents that employers must read in conjunction with the National Employment Standards.

The new modern awards lock in overtime and penalty rates, as well as shift and other allowances. Included in modern awards are: hours of work; rostering; notice periods; rest breaks; variations to hours of work; penalty rates for employees working unsocial, irregular or unpredictable hours and for working on weekends and public holidays. Modern awards must also deal with: leave; leave loading; arrangements for taking leave; procedures for consultation; flexibility clauses; representation; and dispute settlement. It is hard to square this list with "simple and easy to understand".

As a result of the commitment of then minister Julia Gillard that no worker would be worse off as a result of award modernisation, members of Fair Work Australia opted for the most generous conditions contained in the selection of awards being streamlined.

The effect has been to raise labour costs alarmingly for employers, even though Gillard had curiously and unrealistically pledged that costs would not rise for employers.

In response to employer concerns, the tribunal opted to phase in the new conditions.

But award-covered employers are already facing higher costs as a result of modern awards. And as enterprise agreements expire, these very generous modern awards become the benchmark for the negotiation of new agreements.

We have seen one consequence of modern awards this Easter, when several restaurants, cafes and other food outlets could not afford to open during the break because of the stipulation that public holidays attract a 2 1/2-time loading on normal pay rates.

It was a case of losses all around: the public could not eat out at the affected establishments; the workers who would have been happy to work during the break were not offered any hours of work; and the employer faced the costs of having capital sit idle for those days.

As noted above, all modern awards must include a flexibility term, enabling an employee and employer to vary the award to "meet the genuine needs of the employee and the employer". On the face of it, this requirement sounds promising but the catch is twofold.

First, the employee must be better off overall and, second, the term can be cancelled by the employee by giving written notice.

In practice, these flexibility terms are going nowhere, in part because of trade union resistance. Moreover, because of the employee's ability to cancel the arrangement with relatively short notice, there is little incentive for an employer to enter into prolonged negotiation to secure such terms.

There is also a possibility that employers may be liable for retrospective payment of award conditions that were foregone as a result of the operation of the flexibility term, as well as be fined (up to $33,000) should the flexibility term not comply with the act.

Modern awards are one of the starkest examples of the re-regulation of the Australian labour market. Ironically, they are, in effect, the offspring of Work Choices, which created a national system covering all incorporated enterprises.

An unanswered question is why the Howard government did not opt to abolish awards altogether when it could, replacing them with a short list of national employment standards. One possibility is that awards were expected to wither on the vine as enterprising bargaining became more prevalent. So why rock the boat by abolishing awards?

Given the tsunami of unpopularity unleashed by Work Choices, this decision now looks ill-judged. Reinventing awards by the Rudd-Gillard government would have been a much more difficult task than modernising those still on the books.

Judith Sloan is an economist and a company director.