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Complexity Costs Jobs


by Peter Strong, CEO, COSBOA and Castaly Haddon, Policy Manager, COSBOA

We are now trying to get people back to work and keep managing the health crisis. This is the time to confront the incredibly complicated employment processes.

The Prime Minister at his National Press Club address in May 2020 described Australia's IR system as one "...that has to date retreated to tribalism, conflict and ideological posturing," he called on all parties to lay down their arms. "No side of that debate has been immune from those maladies. This will need to change or more Australians will unnecessarily lose their jobs and more Australians will be kept out of jobs."

The mantra is to consult, concede and get people employed, by moving away from positions to practical solutions. COSBOA is on three of the five IR Consultation Committees formed to review Australian IR policy in the wake of COVID-19.

Each committee of 10-15 participants, will be chaired by the Minister for Industrial Relations Christian Porter, and each will separately focus on one key area of the system, being:

  1. Award simplification
  2. Enterprise agreement making
  3. Casuals and fixed term employees
  4. Compliance and Enforcement
  5. Greenfields agreements for new enterprises.

COSBOA is presented on: Award simplification, Casuals and fixed term employees, and Compliance and Enforcement.

There is a stage in all processes where complexity impacts efficiency. When a system's design has become overly complicated and unfit for purpose; there will then be a necessity for reform, in the interests of everyone. The Fair work Act is over 214,000 words, 800 sections and 122 modern awards. Even if we only look at one award, it soon becomes obvious it is impossible to navigate for most small business owners. As an example, we cite the case below of Business X (a real company whose name is suppressed for privacy purposes).

Complexity Example

Business X, a health food company, that exports a product from the South Pacific to 10 countries, including Australia where is has a retail brand, wholesale distribution, and online sales. They have 9 staff and turn over less than $4 million. They are based in regional NSW. A couple started the company, but it is now owned largely by a charitable foundation they and their board established, to allow franking credits to flow back to its international development work. This is a conscientious business that is keen to do the right thing by its staff.

They want to put some formalised structure around their employment processes. At the time they hired people who worked in the warehouse, administration, sales and marketing staff, and managers. They reviewed the Awards and picked the Food Beverage and Tobacco Manufacturing Award ma000073, as the best fit.

It is 27,097 words, 85 pages, contains 38 major clauses, 10 schedules and appendix.
It contains at least 24 references to clauses in the Fair Work Act.
It contains at least 32 references to other Acts.
It contains about 19 references to National Employment Standards (NES).
In total, it contains 75 references to other laws in other documents of similar size and complexity. Many of the clauses contain links to amendments and revisions.

The payment of individual wages is affected by:

  • Christmas bonus
  • District allowances
  • Training costs
  • Training time
  • Relocation payment
  • Remote work
  • Travelling fees payment and travelling expenses
  • Adjustment of expense related allowances
  • Special rates, for cold, hot, wet, confined, dirty, dusty, fumigation gas conditions
  • Vehicle allowances
  • Damage to clothing, spectacles or hearing aids
  • Meal allowances
  • First aid allowances
  • Special clothing and equipment allowances
  • Job search entitlement
  • There are five levels of adult payment
  • depending on a classification structure and definitions, (and none of the training categories applies to the businesses X staff.)
  • Higher duties allowance
  • Apprentice and trainee wages - four different classifications
  • Adult apprentice payment
  • Junior wages - four categories
  • All-purpose allowances
  • Leading hand allowance - 3 categories
  • Heavy Vehicle allowance - 4 categories (but no forklift allowance, which Business X uses)
  • Boiler attendants' allowance
  • Shift work allowances including, Continuous or non-continuous, Saturday, Sunday, Public holidays
  • Rostered days off
  • Personal leave
  • Leave loading
  • Make-up time
  • Meal breaks
  • Meal allowances
  • Overtime
  • Call backs
  • Stand-by
  • Rest Breaks
  • Transport allowances
  • Time off instead of overtime
  • Adjustments for flexible work arrangements

Just to name a few... there is no payroll system that caters for this complexity. It all must be manually collated, every pay run. This system is so complicated that it cannot be digitised and systemised. This complexity stops the employment of more people.

In the above example we find that after the Manager allocated a wage level classification based on further confusing criteria and ticked the 38 conditions for all nine staff, using best guesstimates, they are then approached by two staff. One is a person at reception who wants to be paid under the Clerks Private Sector Award MA 000002 and another is in marketing wants to be paid in the Journalists and Published Media Award MA000067, or the Graphic Arts Printing and Publishing Award MA 000026, as the job covers aspects under both awards. They are not sure which. Both awards are of similar complexity and detail, constructed in highly legalised, contractual jargon.

The Workplace Relations Act states that any changes for employees must satisfy the Better Off Overall Test (BOOT). This means that the employers must assess across a matrix of at least 38 scenarios that may or may not happen in an uncertain future to correctly predict what Award will be better.

It is not practically possible to achieve what is required.

The above business sought advice. The government website (Fair Work Commission) declines to confirm what is right or wrong - obviously it cannot. It gives generalised advice. Industry associations will provide advice and automatic notification if an Award is varied. However, they often cannot take responsibility for their advice being correct. Bookkeepers and accountants, who manage payroll, can be helpful, but again do not have the on-the-ground experience to guarantee their advice. This business is like hundreds of thousands of other businesses - it does not have a dedicated HR resource.

COSBOA members have identified the overwhelming need to create secure employment for people, an environment where business can easily employ, pay people and fairly dismiss them when necessary.

Barriers to employment are clear:

  • Fear of making mistakes and reprisal from unions and regulators.
  • Too hard to dismiss an unsuitable employee, it will cost too much in time and money if unfair dismissal is claimed by an ex-employee.
  • Onerous record keeping which is often impossible to achieve.

So, the key principles we seek, to make it easier to employ people, are in summary:

  1. Simplicity
  2. Work within the current regulatory system
  3. Sit within the current industry specific award framework
  4. Flexibility
  5. Fairness

COSBOA believes that one solution is consideration of a 'Model Schedule' for inclusion in all Modern Awards. This Schedule would operate along the same lines as a "model clause' but would establish specific carve outs for small businesses operating in each industry.

The principal benefit of this approach, as opposed to a dedicated small business award (our first priority), is that it does not cut across the foundation architecture of the current award system - which is almost entirely occupationally based. This also means that the system would be developed as a supplement to the existing system - as opposed to a replacement, and can be accommodated within the existing institutional framework of oversight by the Fair Work Commission.

The other issue we take great offence at is the use of the term "Wage Theft" when a mistake is made by an employer.

If the employer navigates the Award incorrectly (and as from the example above that is not a hard thing to do) and they are called out for under payment, they can only prove themselves in court, after it has gone wrong. As victims of complexity, they are cast as thieves.

This is a system that sets up a confrontational and an adversarial approach for those who get caught out by unintended mistakes of interpretation of an overly complicated system.

This is a system that also makes it difficult for employees to take intentionally dishonest businesses to court.

When a system is complicated everyone loses.


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