Opinion & Commentary
Labour debate ignores status quo
It is important that politicians, business leaders and commentators have a grasp of the facts before making brash statements about broken systems and agitating for policy change. This is particularly important in the industrial relations debate as the spectre of WorkChoices still looms large over labour market reform.
In August, former Coalition prime minister John Howard unknowingly pushed the IR debate back into the spotlight by announcing at an off- the-record speech to a forum hosted by Westpac that the Coalition should ''in their own way'' return to the issue of workplace reform.
Subsequently, many business leaders expressed their disappointment with the flexibility of the Fair Work system and many have voiced their support for a return to the Howard-era individual contracts.
But the debate proceeds as though the industrial relations system offers no form of individual contract at all. Liberal MP Steven Ciobo said it was ''absurd'' for Labor to say ''employers and employees should not be allowed to have individual contracts''.
Ciobo's statement is misleading. Individual contracts do exist. They form a pivotal part of the workplace system. Bureau of Statistics figures on forms of employment show that in 2010, 37per cent of the workforce were covered by individual contracts: They are the most common form of employment contract in the private sector.
These agreements are the old common law contracts. They are individual in nature, unregistered, and have existed since long before the labour market reforms of the 1990s and 2000s. It is true that the Fair Work Act got rid of the Howard- era statutory individual contracts, but it did not abolish common law contracts, as Ciobo's remark implies.
Individual or common law contracts play an important part in the flexibility of our IR system. They are particularly popular in non- unionised industries and sectors where labour is highly skilled - such as finance and law.
Common law contracts have been far more important for labour market flexibility - accounting for at least 30per cent of the workforce in the past decade - than the statutory agreements of the Howard era. Howard's statutory agreements never accounted for more than 3 per cent of the workforce, even under WorkChoices when the reforms were supposed to make them more appealing for employers.
But common law contracts are not the only form of flexibility in the labour market. Individual Flexibility Agreements are the instrument in the Fair Work Act that allows for additional flexibility. IFAs allow an employer and employee individually to vary the terms of an award or enterprise agreement to suit their particular needs.
As industrial relations management consultant Grace Collier has noted, these agreements can be used to cash in entitlements, alter regular working hours (ie, starting and finishing work earlier or later), or even negotiate financial incentives. By law, enterprise agreements and awards must allow for an IFA to be made, which means all employees on awards or enterprise agreements have the capacity to vary their arrangements with their employer to suit themselves.
All arrangements must be agreed to in writing by the employer and employee, and cannot be made a condition of employment. Most importantly they must leave the employee better off overall than they were on the existing arrangements. There is quite a bit of wiggle room in these agreements and, if utilised properly, they can create a large degree of flexibility within a workforce.
Statutory individual contracts are not the panacea for labour market flexibility, especially if they receive the same lukewarm take-up they received during the Howard years. There is no harm in bringing them back, but for many employers, the additional benefits of statutory individual contracts are small.
There are more important areas for reform than reintroducing statutory individual contracts. Reforming unfair dismissal and adverse action provisions is a possible starting point, as are having an alternative to the monopoly unions hold over Greenfield projects. The potential in these areas is far higher than that of statutory individual contracts.
Labour market reform needs to be debated, and reintroducing statutory individual contracts should be considered, but the public need to be properly informed about all the relevant facts if they are to support a reform agenda.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
