Australian employers going back to the future on bargaining, reveals new report

A new report, published today by global law firm Herbert Smith Freehills, suggests that while employees have been slow to protest about perceived social injustices at work, business leaders are anticipating a future where the cost-of-living crisis takes them back to the bargaining table.

Future of Work – Balancing Acts is the third in a series of reports exploring the future of our workplaces across the globe, with the first released before the COVID-19 pandemic. The latest report is based on research from more than 500 senior executives from prominent global companies.

77% of Australian employers surveyed agree that the economic downturn reduced the risk of employee activism in the last 18 months, but 63% expect activism to rise in future — and the growing cost of living is the most likely trigger.

HSF employment partner Natalie Gaspar explains, “Our latest Future of Work survey indicated that employers expect that future activism will be driven by the same financial pressures that are currently subduing it — half of Australian respondents believe the cost-of-living crisis will result in industrial action”.

The report comes as Australia’s industrial relations (IR) regime is in the midst of incredible transformation and we are seeing the some of the most significant changes in decades.

“Australia is on the cusp of some profound legislative changes that swing things very much in favour of workers and unions. Workers are feeling emboldened and businesses are feeling vulnerable, and we’re expecting to see a return to old-fashioned collectivism,” notes Gaspar.

“With further IR developments on the horizon, it is crucial for employers to navigate these changes effectively and stay ahead of the curve. One example linked to the cost-of-living crisis is employee sensitivity to remuneration — some of the recent legislative changes in Australia prevent pay secrecy clauses for employees, so if you pay people differently within your organisation, there are going to be conversations about comparing pay”.

Faced with the inevitability of activism, the number of Australian employers that have created official forums for employee activism; consultation now sits at 89%, with the remaining 11% reporting that they plan to establish a formal mechanism.

HSF employment partner Shivchand Jhinku explains, “Funnelling complaints to internal channels can promote meaningful engagement and protect employees. Employers know they can’t quell dissent, so they want to engage with it.

“But there’s also an obligation to protect people from some of the commentary that might come out — things like racist or homophobic behaviour. Employers want to place guardrails on those conversations. It's about meeting their obligations as employers rather than trying to stifle debate.”

Stronger focus on employee wellbeing

The report also reveals that employers are under increasing pressure from their employees to provide better working environments. In Australia, 57% of those surveyed said employee wellbeing will shape their workplace policies in the next three years, up from 33% in 2021.

Three quarters of Australian respondents (75%) said that employees are demanding greater support for their health and wellbeing, with 53% already incorporating wellbeing into job design and a further 39% planning to adopt this approach.

Jhinku added, “In Australia and in some other jurisdictions, legislation demanding increased attention to employee mental health may be forcing employers’ hands. In all Australian jurisdictions (other than Victoria which is still considering proposed changes), work health and safety laws have been amended to specifically impose duties to eliminate, so far as is reasonably practicable, psychosocial hazards in the workplace.

“Legislation will set minimum standards, but the leading organisations are doing a lot more than that because they see that wellbeing initiatives work from the retention and productivity perspectives. These are the organisations that others will seek to emulate or even surpass as they come to realise the value of taking wellbeing seriously”.

While some jurisdictions have already legislated to give employees the “right to switch off” outside of their work hours, Australia lags behind the adoption of this — only 30% of employers from the region responded to say that they’ve adopted this approach, lower than the 49% global average. However, it looks like the tide is changing, with 61% of Australian respondents planning to give employees the “right to switch off” work communications out of working hours. This was well above the global average of 40%.

“This will be an interesting area where employers will have to respond to forces pulling in different directions — mitigating worker burnout because they feel that they are 'always on’, against people working flexible hours and perhaps in different locations and time zones,” said Jhinku.

Remote work vs the office

The report found that the expectation for more in-person work within the next two years was higher in Australia than the global average — 83% of Australian employers surveyed expect more in-person work within the next two years, and only 8% expect more hybrid work, in contrast to global averages of 70% and 16% respectively.

Gaspar explains, “In Australia, we’re seeing a range of approaches for getting people back in the office. Some employers are still opting for soft encouragement — such as team lunches on Wednesdays, team drinks, or extracurricular activities on certain days. Some are using more of a direct approach — you must be in the office on Wednesday, Thursday and Friday, for example".

The report indicates that employers are also exploring ways to influence employees' working preferences through incentivisation. In Australia, 38% of respondents expect remote working to become a privilege earned through trust, and 37% said that they plan to differentiate pay for office-based and remote workers within the next three to five years.

HSF’s experts advise employers to exercise caution with this approach. Gaspar adds, “It’s clear that most employers are pushing back on the fully remote working models necessitated by the pandemic. Many believe that bringing employees into the office can foster collaboration, increase mentorship, and support their company cultures.

“Before implementing a return-to-office policy or any other fundamental change, meaningful engagement with your employees and their representatives should be front of mind — effective and proactive engagement with those in your business can improve buy-in and safeguard your company culture. It may also help protect you from costly legal challenges”.

Other key findings for Australia include:

• 99% have high or moderate restrictions on employee/worker actions
• Only 66% feel that remote working has been beneficial to greater diversity in applicants vs. 89% in 2021, a shift in line with other regions
• 65% of respondents think automation at work will substantially change their approach to the workforce challenges, a large increase from 33% in 2021
• 44% see cyber threats and data loss as one of the biggest potential reputational risks, a marked increase from 2021 at 32%

The report, which provides employers with five steps to employee engagement success, can be viewed here