Media & Speeches

Workplace Relations Reform: Article by Jennifer Westacott

This is an edited extract of the Kingsley Laffer Memorial Lecture delivered by BCA Chief Executive Jennifer Westacott at The Sydney University Business School on 13 August 2015. It was published in The Australian on 14 August 2015 under the title 'Reframing the IR debate to put collaboration, innovation and jobs at the forefront.'

We are at a pivotal point in our discussion about workplace relations. Change and disruption are transforming the nature of our competitive and economic landscape, and the nature of work and workplaces.

As our economy undergoes enormous transformation we must prepare ourselves for the jobs of the future in a way that will offer people rewarding work.

Last week the Productivity Commission released its draft report into its view of the workplace relations framework.

How we frame the workplace relations discussion over the next six months will have a real bearing on Australia’s chance to be in the future what we are today — one of the best countries on earth in which to live and work.

No matter which side of the workplace relations debate we’re on, if we are looking to go back and settle old scores or using old mindsets in this discussion, we will fail.

What really matters here is how well we can create the workplaces and the businesses of the ­future that then create the jobs. This is the key challenge of workplace relations reform.

If I ask whether the PC’s review of the workplace relations framework, released last week, has addressed nagging issues with the system, the answer is yes. And we should just get on with implementing these recommendations.

If I ask whether the report ­offers us a way of designing a workplace relations system that will equip us for the future, I’m not sure.

But, let’s start by looking at things we can agree on. We agree about the continuing need for a regulated system that’s built on three central pillars:

● A safety net that proscribes the minimum standards in wages and conditions

● A cluster of matters for negotiation between employers and employees

● A recognition of matters that businesses and the individuals who work in them must be able to decide for themselves.

Our discussion on workplace relations should focus on what belongs in each of these three pillars because that’s what’s changed.

We support a safety net that includes a minimum wage, premium rates, the National Employment Standards, industrial protections and awards.

It’s easy for opponents of change to say that business wants to abolish penalty rates and the minimum wage. The truth is we did not start from that premise and we did not end up there.

When we moved beyond the safety net to look at the other two pillars, we looked through a productivity/innovation lens.

After all, labour productivity growth has accounted for more than 80 per cent of growth in hourly real wages over the past two decades. And it is enterprises that are agile, adaptive and globally oriented — be they large or small — that create job opportunities.

This lens highlights the problems with awards and enterprise bargaining, issues that have not been properly dealt with to date.

The PC believes awards must be repaired rather than abolished. We agree with that. But the task is more than a cosmetic renovation.

We support awards, as a set of minimum standards. But they have gone beyond minimum standards and crept into issues that should be confined to negotiation.

Awards should not define occupations or dictate to enterprises how they structure their workforce. The modern workforce involves individuals taking on broader tasks. It cannot be constrained by prescriptive lists of duties from which the enterprise or the worker cannot deviate.

Awards need an overhaul and they must be stripped back to the essentials. And the number of awards, currently 122, must be reduced. If awards are part of the safety net, agreement-making is the core of negotiations between enterprises and their workers.

Enterprises and workers should be able to negotiate agreements that make sense in the context of that enterprise and all of its employees. These negotiations should be limited to the employment relationship — that is, wages and conditions above what is set out in the safety net.

This is central to our core objective of creating a system that supports enterprises and people to be agile and to adapt.

In working through this key element, we took account of the decisions managers must make on a daily basis:

● how to adjust operations to compete with a company operating in a lower-cost labour market, say by changing hours of operation;

● when to recruit staff, and the best option in terms of casual, permanent or contract; and

● what emerging technology should the organisation incorporate into its business model and how quickly can it do so.

Many enterprise agreements give employees, or in effect a third party, some control over how these business decisions are made. The best known example is ­Toyota.

This is the fundamental problem with agreement making.

It goes beyond the employment relationship and loses the focus on the unique circumstances of the enterprise, and the shared interest of managers and workers in its success.

I am deeply concerned that the Productivity Commission has not yet grappled with this.

This has big consequences for how enterprises are managed, and stifles the potential for collaboration among teams on how to do things better.

I would argue this has created a class of conservative, risk-averse managers in many industries. I am concerned there is a view that these difficulties ultimately don’t matter because companies can simply work around them.

My response is why should they? Why should this be harder than it needs to be? When economic times were better, we managed to paper over this problem. Now, with so many sectors under the hammer to cut costs and change the productivity equation, this really matters.

The more rigid the system, the less capacity we have to adjust to the unknown. So where to next?

We should welcome healthy debate and a vigorous contest of ideas as the review process plays out.

What we shouldn’t do is allow it to descend into a fight between ­unions and business.

We shouldn’t allow it to be driven by ideology, and that’s on both sides. Most importantly, we must reframe this discussion.

Every single idea, every single proposition should be tested against whether it will drive collaboration, innovation and, ultimately, productivity — the key to job creation and wages growth.

The challenge of good reform will be finding the right balance — a balance that always provides protection, but also allows us to ­respond and adapt to the forces of change.

I am not asking people just to agree with me or the Business Council. I am asking them to ­approach the discussion with an open mind.

Every day we make choices. How we approach this debate is a choice. The choice I am asking people to make is to follow the path of aspiration and imagination.