Manufacturing News

Workplace Act not so fair after all

The Fair Work Act is discouraging productivity improvements and is hampering the ability of companies to restructure and maintain flexible workforces. Heather Ridout writes for MM.

IT is critical that employers across all sectors, including manufacturing, are able to maintain flexible and productive workplaces. It is this fundamental business capacity that Ai Group is working hard to preserve and indeed improve.

The recent appeal lodged by Ai Group against the decision in the Fair Work Australia (FWA) ADJ Contracting case goes to the heart of this issue. We believe that a number of clauses in the Communications, Electrical and Plumbing Union’s pattern agreement for the Victorian electrical contracting sector, approved by Senior Deputy President Acton of FWA, are unlawful.

The clauses in the Union’s agreement restrict legitimate commercial arrangements between employers and the contractors and labour hire providers that deliver support to their business. The agreement also grants expansive union entry rights and requires that employers encourage union membership.

While the appeal decision is yet to be handed down, the final outcome will have considerable cost implications for employers in the manufacturing, construction, transport and other industries. The appeal decision will be an important precedent because all industries need the flexibility to use contractors and labour hire in order to ensure the productive organisation of work.

Often union clauses imposing restrictions on contractors and labour hire are falsely badged as ‘job security’ clauses. Far from saving jobs, preventing Australian companies from maintaining a flexible and productive labour force destroys jobs and competitiveness.

Australia needs a workplace relations system that promotes labour market flexibility and productivity growth, not one that inhibits this. Restricting the ability of companies to remain productive and adapt to change is not in anyone’s interests.

Judging by the feedback from our member companies, there is a very strong case in support of the view that the Fair Work Act is not encouraging productivity improvements and is hampering the ability of companies to restructure and to maintain flexible workforces.

While there are many other challenges facing manufacturing at present, including our multi-speed economy, the high Australian dollar, intense competition from overseas firms, economic uncertainties, skills shortages, wages pressures and interest rate stress, the creation of another barrier to growth is not sensible.  

Australia’s productivity growth has plummeted over the past decade, while strong wages growth has occurred. In the manufacturing sector, for example, the combination of poor productivity and solid wage outcomes has put us firmly on the bottom rung of countries in terms of unit labour costs – a measure that combines wage and productivity outcomes.

Australia’s annual average unit labour costs rose by around 3.2% per annum between 1999 and 2009 – well above the OECD average of around 1% p.a. This has put us well and truly behind the eight ball, even among OECD countries, let alone the emerging economies.

While workplace relations is far from the only element in the competitiveness equation – an equation that includes skilling and education, innovation, infrastructure, tax policy and much more besides – workplace relations is nevertheless central to improved productivity performance.

With unions pressing the boundaries of the Fair Work Act with costly and damaging claims, Ai Group’s extensive efforts to preserve labour market flexibility and productivity growth have never been more important.


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