Award shake-up to disrupt SMEs

Small and medium sized businesses could face disruption to their workforces and increased wage costs as a consequence of the award modernisation process kicked off by officials yesterday.

Australian Industrial Relations Commission chief Geoffrey Giudice yesterday released a draft list of the first industries in which awards will be rationalised and updated before the end of this year.

The aged care, hospitality and ICT sectors are likely to be among the first to be affected by the award modernisation process – a full list is set out below.

Tim Capelin, managing partner with Australian Business Lawyers, says the change to awards is likely to be most disruptive for small and medium sized businesses.

“The SME sector is generally more award reliant than other sectors – many just hire employees by a simple letter of engagement and then rely on awards to set out pay and conditions,” Capelin says.

The award modernisation process is not supposed to substantially alter the pay and conditions of affected workers, but Capelin says it is probable some businesses will find themselves facing higher costs.

“There is real potential for conditions to increase, and I suspect because of where the labour market is at the compromise is more likely to benefit employees than employers,” he says.

One objective of the award modernisation process, to remove pay differentials between different parts of Australia, could force wage rises in slower growing areas, he says.

“Awards in Tasmania and South Australia may still have lower wage rates than other parts of the country, so the process may see rates or conditions rationalised up in those areas,” Capelin says.

The award modernisation does have silver lining for employers, however, with the AIRC set to deliver on a Labor promise to introduce “flexibility clauses” into awards.

Capelin says these clauses have the potentially to make awards a more flexible and practical industrial relations instrument for employers than they have been before.

“You wouldn’t go as far as to say they are a replacement for AWAs, but certainly there is the potential for these clauses to give employers the ability to not provide certain conditions and to offset that by providing a higher rate of pay,” he says.

The award system underpins employee pay and conditions in most industries, either directly or as a minimum safety net for collective agreements.

But big changes to the IR system – particularly the extension of federal IR laws to the states and, more recently, the abolition of AWAs – has added urgency to the task of updating awards, leading Labor to commit to award modernisation in the lead up to last year’s election.

The AIRC will now engage in consultations with businesses, employer groups and unions around the country before confirming the first industry awards it will tackle, with the process due to be completed by 2010.

The AIRC’s draft list of priority industries for award modernisation include:

• Aged care industry (excluding nursing)
• Clerical occupation (with appropriate exclusions)
• Coal industry
• Electrical occupation (other than electricians covered by relevant industry awards)
• Gardening and sportsground maintenance industry
• Graphic arts industry
• Higher education industry
• Hospitality industry
• Information and communication technology (ICT) industry
• Insurance industry
• Metal engineering and associated Industries
• Nursing occupation
• Poultry processing industry
• Racing industry
• Rail industry
• Retail industry
• Rubber, plastic and cablemaking industry
• Technical services – engineers and scientists (with appropriate exclusions)
• Textile, clothing and footwear Industry