Australian employers go “back to the future” on enterprise bargaining

Rather than be concerned about the impending Australian Federal Election, when it comes to industrial relations, it seems to be a case of “back to the future” for employers, with businesses sticking to their usual bargaining life cycle and being occupied by traditional industrial relations issues, say experts from global law firm Herbert Smith Freehills.

Herbert Smith Freehills’ 2022 Australian Federal Election Workplace & Industrial Relations Survey asked clients for their insights into the key issues and trends impacting employers in the lead up to the Australian Federal Election.

When it comes to enterprise bargaining, the survey results show that half of the respondents are operating under enterprise agreements that have passed their nominal expiry date. An overwhelming 91% of respondents indicated this was normal for them compared with pre-pandemic levels. Most interestingly, of those with enterprise agreements that have nominally expired, more than half have commenced or recommenced bargaining this year, with only 16% saying this was due to union pressure or request.

Herbert Smith Freehills partner Natalie Gaspar said, “Despite the unprecedented events of the past couple of years, the headline issues in industrial relations are the same as they have always been — with limited new ideas to address them. Around three quarters of our survey respondents said that they did not put “pens down” on bargaining at the beginning of the pandemic.

“At the beginning of the current Australian Federal Election campaign, the expectation was that industrial relations issues would feature prominently in the conversation, if not dominantly. But that it is not what we have seen. The lack of detailed policy around IR reform could be one explanation for employers to continue bargaining as usual. For some employers, it will simply be habitual to renegotiate expired agreements.”

Outside the realms of legislative reform that may result from a change in government, survey respondents consistently revealed that wages is the big-ticket issue in bargaining.

Ms Gaspar added, “Unsurprisingly, given the current inflationary pressure and economic indicators of more to come, wages are expected to be the key in upcoming enterprise agreement negotiations. This was overwhelmingly identified by the responses to our survey. Whereas prior to the pandemic, agreements would routinely be rolled over with as little as a 2% annual increase in the wage bill, in the current landscape, even double that figure is likely to prompt rancour as a “real wage cut”.

“Alongside wages, our clients also identified flexibility to be of critical importance, and lessons learned from the pandemic can be expected to feature in the mix. Employees now have firm expectations about enhanced workplace agility, and businesses understand the competitive edge provided by the ability to nimbly and efficiently deploy labour. On both fronts there is scope to unlock productivity enhancements through innovation, which could offset higher wage claims.”

There is evidence to suggest that the major parties’ electioneering and policy proposals are having an effect, and it is clear that industrial relations issues remain front of mind for the business community. The commentary from survey respondents indicated a genuine lack of confidence to make significant business decisions until the result of the election is known.

Herbert Smith Freehills partner Rohan Doyle said, “There are strong themes in the survey responses including concerns about ALP reform of the use of casual workers, “same job, same pay” legislation, increased wage pressure, and IR reforms to concentrate union influence.

“The survey responses suggested that some businesses are treading water and are content to take a ‘wait and see’ approach to potential legislative change, and this reticence is understandable. There is however a case to be made that this uncertainty is actually a reason to proceed with implementing initiatives that are ready to go, rather than holding off. Employers could be missing an opportunity to get on the front foot, and the legislative landscape may only get harder from here.”

For more information click on the report link below:

Full report