The implementation of the Fair Work Act has provided the industrial sphere with a great number of contradictions. Specifically, the newly introduced system has failed to enhance productivity due the removal of individual agreement and widespread use of pattern bargaining.
Although the Act reduced discrimination and introduced more opportunities for the employees, no improvement has been observed as far as increased productivity and competition are concerned. With regard to the above-presented problems, these issues should be carefully discussed and evaluated to propose possible changes aimed at increasing productivity in Australia.
Introduction. Current Situation
The analysis of the new Fair Work Act has revealed that the new conditions fail to strike the balance between all parties concerned. This balance cannot be sustained because major provision of legislation lead to unforeseen issues and consequences the where Fair Work Act is presented as the core problem of destroying the existing system (Australian Government, 2011).
According to the survey conducted by the Australian Industrial Group, one of the most influential employer’s organizations, 13 claims have been identified against bargaining decisions and against the removal of individual agreements (Ridout, 2011).
The claims focused on the absence of the workplace relation system development because no further improvement can be introduced due to the ignorance of one-to-one agreements.
Specific attention should also be paid to reduced competitiveness, decreased levels of employment under the rapid globalization process (The Australian Council of Trade Unions, 2011).
With regard to the world employment standards, the current situation in Australia makes it impossible to enter the world’s marketing arena and sustain a rigorous competition (The Australian Council of Trade Unions, 2011).
In this respect, the employers are primarily concerned with the development of legislation and industrial tools that would allow them to concentrate on productivity and improvement and eliminate the existing barriers halting the production and performance level.
It is very useful to highlight that the current provisions serve as the major obstacle to promoting productivity and increasing performance level (The Australian Council of Trade Unions, 2011).
This is of particular concern to limited possibility of outsourcing and restricted use of contractors. In addition, individual flexibility arrangements also hamper fruitful cooperation between employers and the employers.
Analysis of the Government’s Reasons for Submitting Changes to Fair Work Act
According to the Austrian Industrial Group, the change to be made will be openly discussed and thoroughly analyzed with regard to the previous shortcomings (Ridout, 2011). The government will have to pay closer attention to the needs of eliminating the barriers of the productivity increase.
The introduction of workplace flexibility should be the basis of introducing changes to the law. In this regard, Ridout states, “…there is a very strong case in support of the view that the Fair Work Act is not encouraging productivity improvement and is hampering the ability of companies to restructure and to maintain flexible workforces” (p. 6).
Indeed, numerous challenges come to the forth when it comes to the manufacturing process at the current moment. At this point, the Fair Work Act is one of the fundamental obstacles to increase productivity development.
In addition, the government should recognize that steady growth of salaries would not contribute to increased performance because it prevents the countries from establishing fair competition. Finally, the government should tackle this problem in the shortest possible time to hamper further rise of cost.
Contrary to common expectations, the new system of laws has failed to contribute to the overall welfare of the economy because it is impossible to meet interests of all stakeholders involved into business management.
Barriers to Productivity under the Fair Work Laws
The introduction of Fair Work Act to the industrial sphere has had negative impact on the majority of the Australian companies encountering a major cost gap. The statistics reveals that Australian dollar has been increased due to the cost boosting that has led to 45 % rise of wages (Ridout, 2011).
The cost-effectiveness of the product cannot stand the world’s competition and, as a result, the Australian industry has faced significant problems with importing production to other countries and sustaining a competitive edge on the global arena.
Union Activities and Influence of Fair Work Act on Its Productivity
According to the bargaining provisions presented in Fair Work Act, bargaining can commence without formal notification and, as a result, employees and employers can start negotiations. The problem is that when employers express their refusal to negotiate, employees can get support from the unions on the basis of enterprise agreement.
Consequently, “if Fair Work Australia determines that there is a majority employee support for pursing an enterprise agreement the employer is required to bargain collectively with the relevant employees” (Australian Government, 2010, p. 18). The majority support provided for employees leaves no choice for the employers who have to cede to the established norms.
The Fair Work Act provisions provide no changes to productivity growth. What is more threatening, the newly established law imposes no obligations and responsibilities on unions to encourage productivity gains being a part of a collective agreement.
Specifically, the employers are forced to bargain with unions, but many unions, in fact, believe it is less important to encourage the company’s production success (Australian Government, 2010). Many unions have been entitled to exercise freely the bargaining power which brought no positive changes to performance and productivity rates.
Changes to National Employment Standards with regard to Fair Work Act
The fact that the Fair Work Act has presented numerous benefits protecting the right of employees is undeniable. Specific attention requires the removal individual agreements and individual tests.
Hence, according to the Fair Work Act, “the court is required to ask why the respondent submitted the applicant to adverse action…” (Gray & Jaques, 2011, p 234). In this respect, the employer’s rights have been significantly reduced because the employees have the right to claim in case the action does not correspond to their interests.
The newly established standards under the Fair Work Act have significantly limited the rights of the employers due to many reasons. First of all, the employers does not have right to introduce changes to weight with regard to constantly changes rates and costs existing outside the country.
Second, low competitiveness makes it impossible to attract resources from the outside and cooperate with other companies all over the world.
The productivity level has been significantly affected due to the establishment of new minimum wages and safety net of the employees. In fact, the given policy neglects the necessity for raising the competition of the national economy because the flexibility and variation does not allow employers to fix the standards and justified the variations level.
Further on, the bargaining framework does not contribute positively to the increase of productivity because absence of strict rules and measures.
The introduction of good faith is unsustainable as fare relations between the employees and the employers are concerned. Much criticism should be given to the bargaining orders implying “…a refusal by the employees to respond to a proposal form the employers about new work method to increase productivity” (Australian Government, 2010, p. 19).
As a result, the employees endowed with this right pursue their personal interest, but not the ones imposed by the organization’s policy.
Comparison between the Fair Work Act 2009 and Workplace Relations (Work Choices) Amendment Act 2005
The Fair Work Act 2009 which has been operational since the beginning of 2010 replaced the Workplace Relations Amendment Act 2005. Compared with the previous legislation, the Fair Work Act 2009 provided a number of significant provisions, putting a regulator between employers and employees.
The principle of ensuring modern awards which is one of the most important provisions of the Fair Work Act in practice appeared to be rather complicated and damaging.
According to Sloan (2010, p. 20), the initial intention of modernizing the award system of Australia and creating a small number of industry awards had unexpected negative consequences of increasing the employment costs.
Due to the combination of different industries and covering them by the same awards, the process of determining the most appropriate award for certain workers was complicated.
Another consequence of the modern awards provision concerns the employment of students after school which became impossible in particular cases because the Fair Work Act specifies a minimum engagement period.
Regarding the provisions touching upon the enterprise agreements, the process of approval of particular agreements has become more complex and bureaucratic.
According to Sloan (2010, p. 21), the agreements can be made without trade unions only in theory, but in practice this option is unlikely to be used by employers. For instance, the introduction of the concept of ‘good faith’ bargaining is an important development of the Fair Work Act which enables the unions to intervene into the employment practices.
The Fair Work Act restored the practices of unfair dismissal payments for the employees regardless of the number of workers in the organization. Sloan (2010, p. 22) states that there were more than 12, 000 applications for unfair dismissal in 2009-10 that is more than 50% increase compared to the statistics of the previous year.
The role of setting minimum wages was assigned to a specialized panel within the Fair Work Australia. However, the practice shows that the considerations used by this panel for setting the minimum wages can be defined as conflicting.
For example, the principles of ensuring the competitiveness of the national economy and increasing the workforce participation and considering the needs of the low paid can be contradicting.
Taking into account the fact that the social inclusion implies not only having a job, but also ensuring the quality of this job, it can be stated that the relationship between the minimum wages and the rates of employment can be negative.
Because of the strict compliance regime, the Fair Work Act reduces the flexibility of individual employers in adapting the employment conditions to their specific circumstances. The Fair Work Ombudsman explores the complaints of underpayment and imposes substantial penalties upon the employers not complying with the provisions of the Fair Work Act.
Therefore, by comparing the Fair Work Act 2009 to the Workplace Relations Amendment Act 2005, it can be concluded that the latest reform was unfavorable for the performance of individual organizations and their productivity.
The limitations of the freedom of employers and employees to agree on wages and working conditions suiting their individual circumstances, these provisions integrate the third party (Fair Work Australia) into this relationship can be regarded as a backward step, reducing the flexibility of individual employers.
Proposed Changes: Main Argument
Taking into account the negative implications of the Fair Work Act provisions for the individual employers and the macroeconomic level, it can be stated that this labor legislation should be reviewed and expanded.
Fair Work Australia as a centralized body enabled to determine modern awards and minimal wages cannot consider the specifics of the circumstances of all individual employers and employees and satisfy their diverse needs.
Consequently, not complying with the individual needs of organizations and reducing their flexibility, this legislation may have a negative impact upon productivity of individual organizations. According to Gollan (2009, p. 269), the most important advantage offered by Fair Work legislation is the stability and predictability of industrial relations.
However, focusing on improved fairness at workplace and encouraging collective bargaining, this legislation overlooks the individual needs and circumstances of organizations which cannot be covered in a limited set of regulations.
The changes which should be made in the provisions of the Fair Work Act 2009 include an expansion of the section devoted to modern awards and minimum wages and more precise formulations for the unfair dismissal procedures.
Notwithstanding the noble goals of ensuring the fair workplace conditions, creating favorable environment for the greater workforce participation, the enactment of the Fair Work Act 2009 had a number of negative consequences, including those of complicating the practices of making the agreements between employers and employees as well as defining the appropriate size of their awards.
Making these practices more bureaucratic through inclusion of the third party (Fair Work Australia), the Fair Work Act 2009 strengthens the role of labor unions which pursue the goals of protecting the needs of employees and completely ignore the needs of employers. Therefore, the changes should be made in the current legislation act to eliminate the above discussed weaknesses.
In conclusion, the Government’s introduction of the Fair Work Act has significantly improved the working conditions for employees and has provided enough space for bargaining and resolving disputes. However, bargaining in good faith policy, along with implementation of minimum wages level and safety net, has not contributed much to the production development and growth.
Specifically, the majority of the Australian organizations under the auspices of the Australian Industry group provided deplorable statistics and facts proving that no improvements has been introduced to the manufacturing process.
In particular, the cases with overuse of bargaining power, removal of individual agreement, and the establishment of the modern award create become the main barriers to enhancing productivity and improving employees’ performance.
Specific emphasis placed on collective agreement has deprived employers of the right to impose responsibilities on their workers. In order to eliminate the existing problems, the changes should be particularly concerned with the re-evaluation of the minimal wages, modern awards, and unfair dismissal procedures.
Arising from these considerations, the Fair Work Act should be significantly expanded and corrected to fill the existing performance gaps and cost problems.
Australian Government. (2010) The Fair Work Act 2009 – an overview. [online].
Gollan, P., (2009) Australian industrial relations reform in perspective: Beyond Work Choices and future prospects under the Fair Work Act 2009. Asia Pacific Journal of Human Resources, 47(3), 260 – 270.
Gray, A., & Jaques, M. (2011) Protection against adverse action — the new protections available to employees under the Fair Work Act, Keeping Good Companies (14447614), 63(4), 233-236.
Ridout, H. (2011) Workplace Act Not So Fair, Manufacturers’ Monthly, p. 6.
Sloan, J., (2010) Evaluating the Fair Work Act. Policy. 26(4), 19 – 24.
The Australian Council of Trade Unions. (2011) The Fair Work ACT, two years on: a review of Labor’s changes to workplace laws. [online].