Friday, June 8, 2018      

JOHN SLATER                

The Fair Work regime has failed to simplify the

wages system, hurting small businesses the most.

Fair Work Commission President Iain Ross has identified Australia’s “super-complex” modern award system as the biggest obstacle to small businesses paying their workers correctly. 

 

In an interview on ABC Radio National, the Fair Work chief also dismissed that recent reports of hospitality employers deliberately underpaying their staff were indicative of a sector-wide problem. “Overwhelmingly small business operators want to meet their legal obligations,” he said. But doing so was inhibited by the Fair Work Commission's 122 modern awards.  

 

A former president of the ACTU, Ross’s belief that the system is the main reason for employees not receiving the right wage and not the ill-intentions of employers, puts him at odds with today’s trade union leadership. 

 

According to current ACTU Secretary Sally McManus, wage theft is “systemic… often [involving] deliberate manipulation of the system” and “cannot be blamed on ignorance of the rules.”  McManus’s claim certainly fits the ACTU’s broader narrative that wage-theft has reached "epidemic proportions" and is going unchecked by the Fair Work Ombudsman. 

 

Yet the ACTU’s insistence that navigating the byzantine obscurity of the modern award system isn’t a burden on business – especially small operators – just doesn’t stand up.

 

A survey conducted by the Fair Work Commission in 2014 found a clear majority of small businesses had difficulty identifying which award correctly applied to their workforce or were too lengthy and ambiguous for them to confidently interpret without external advice. It also found the ambiguities in award provisions had a stultifying effect on business decision-making, with many businesses believing “they could not afford to make a mistake on something as important as wages and entitlements.” 

 

These frustrations cut both ways. Fair Work Ombudsman Natalie James has previously admitted that even from the regulator’s standpoint, it was difficult to enforce the law when awards were ambiguous on basic questions such as which pay rates should apply at different times of the day. 

 

Although choosing the right award can involve drawing fine legalistic distinctions and even guesswork, the punishment for noncompliance or employing workers under the wrong award is punitively high. In one instructive case, a small Melbourne design firm made repeated inquiries about the appropriate award for its workforce, whose prescribed duties didn’t obviously fit within any of the prescribed categories. Months later, it was issued with a notice for back pay by the Fair Work Ombudsman amounting to $700,000. 

 

The notice was finally withdrawn after several costly months of lawyers and Fair Work hearings – not to mention the dozens of hours of wasted time and inconvenience taken from the firm’s management.

 

One of the most unfair aspects of the current award system is the way it disproportionately hurts small business. Whereas large corporates with a small army of human resource consultants and inhouse legal counsel are well placed to steer through the bureaucratic rigmarole, paying a lawyer to work out an employee’s hourly wage is a luxury many small businesses can ill-afford.  

 

Eight and a half years on, it’s clear the Fair Work Act’s aim of consolidating the previous 4,000 federal and state awards into a “simply, easy to understand, stable and sustainable modern award system” has failed.

 

But unlike most stoushes in the industrial relations policy space, cutting through the complexity of our award system shouldn’t be a partisan issue. 

 

Employers, employees, regulators and even unions share a common stake in making sure there’s clarity and consistency when it comes to the terms and conditions governing workers' pay.

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2019 by Menzies Research Centre