Will award rationalisation push up wages?

Rationalising awards sounds like great idea. After all, who could object to simplifying, and reducing the number of, long and complex award documents? Less employment red-tape is good for everyone, right?

That perception probably explains Prime Minister John Howard’s commitment yesterday to kick on with the award rationalisation process. But his comment also pointed to the dangers involved in what can be a very difficult process.

“We announced a process of award rationalisation at the time the policy was announced, and we will continue what we have said on that subject, but in the process, we won’t in any way be weakening the protections and if that involves weakening the protections, we won’t do it,” Howard says.

The problem is, if you have several awards that contain, for example, different penalty rates for workers at a similar level, it is difficult to simplify things unless you are prepared to put in place just one or two penalty rates. And in that process, somebody has to lose out – either the employer, if the rates are rounded up, or the employees if they are rounded down.

For that reason, commitments to rationalise awards – and there have been a few over the years – often don’t translate into action as quickly as some might like. The process is expensive, time consuming, and involves careful negotiation by employers, workers, lawyers, business groups and unions, among others.

This time around, however, there is a deadline that will push the process along. In March 2009, old state awards that have been transferred into the federal system, covering tens of thousands of workers, expire. If the rationalisation process hasn’t delivered them into new awards by then, there will be chaos.

So all that means, whoever is elected in November, we may see some real action on award rationalisation in the near future. So what does that mean for employers?

CCI Victoria Legal principle Peter Vitale predicts it will be the manufacturing and construction sectors that will be the most heavily affected. There are hundreds of awards in those sectors, Vitale says, many with very detailed prescriptions for the working conditions of employees in those sectors.

Vitale says that the objective of the award rationalisation process is to simplify, and in theory shouldn’t have any significant effect on the wages and conditions of employees.

Even so, he says, employers would do well to inform themselves on the awards that are most relevant for them.

“It’s definitely worth keeping your finger on the pulse of what’s happening, you need to understand your legal obligations and to the extent they may be changing you need to be on top of that. So SMEs need to at least have an understanding of the questions to ask and the people they can seek advice from, whether that’s business organisations, accountants or lawyers,” Vitale says.

And if they do change, don’t assume that means you can just go ahead and implement new conditions at your workplace – read our story on the perils of changing employee hours.