“IR laws top CEO concerns”
This is The Australian’s 8 December 2022 headline. It reflects the result of its 2022 CEO Survey. We’re not surprised. It echoes the observation made in our previous blog about the new laws getting much C-suite interest.
This interest, and those concerns, stem from the likely shift away from enterprise bargaining and towards terms and conditions being set along industry lines.
The laws are very much aimed at employers who are able to compete on price through favourable labour arrangements. Protecting that competitive position will be harder in a framework that can result in employers being “roped” into industry terms without their consent, and without any negotiation. Just why this is so, we have previously explained in our blogs here and here.
The laws are also aimed at getting wages moving up. For many employers who are also dealing with other inflationary pressures, margins will be eroded.
The existing bargaining laws gave rise to many and varied complaints from employers about the agreement making system – chief amongst these being the “death by a thousand cuts” ability of unions to inflict damaging industrial action with limited legislative circuit breakers. The short term benefit of avoiding damaging industrial action was perceived as preferable to doing a deal that–in the long run–put the business at risk.
Ironically, this dynamic was typically most keenly felt by larger employers with capital at risk. Such employers have become the leaders in the price they pay for labour. Smaller, lower target employers have either been able to attract labour on lesser terms and conditions and either avoid enterprise bargaining or otherwise better able to reach deals on favourable terms giving them a competitive advantage.
This dynamic remains under the new laws. But added to the mix is the potential for industry based bargaining and industry targeted industrial action. In time, the smaller employers will become a bigger target. The new IR laws create scale efficiencies for unions to bring employers into the system without the hard work of negotiations on a site-by-site basis.
As will become obvious, the risks and opportunities associated with industry based bargaining will demand an assessment of: competitor terms; whether a shift towards these is desirable; and if not, what’s the potential to avoid them?
Here are some questions employers will need to ask themselves:
1. Can we avoid bargaining or do we have to bargain?
2. If ‘avoid’, how is this possible?
3. If bargaining is either preferred or inevitable, is a single enterprise agreement or multi employer bargaining preferable?
4. To unpack question three, where do we sit in the market vis-à-vis our competitors, and what factors make single or multi bargaining preferable?
5. If single enterprise bargaining is preferable, are we at risk of multi enterprise bargaining and what can we do about it?
6. If multi enterprise bargaining is preferred, which multi stream is optimal based on a relative assessment of each?
7. In turn, which of our competitors should be in the mix?
The answers to these questions will drive the business approach for years to come. We empathise with the CEOs’ concerns described in The Australian survey. They are well merited. But the Bill is now law and the new bargaining provisions will soon start to operate – unpacking what it means and dealing with this new reality will see some employers navigate the system successfully.