On 1 February 2012 Fair Work Australia handed down an historic decision to increase pay rates of employees in the social, disability and community services (SACS) sector in order to achieve pay equity for female workers. A decision which is being estimated as costing the NSW State Government, for example up to $1 billion over the next five years in funding.
As a result of this decision up to 150,000 social and community service workers, both men and women, will receive pay increases of up to 41%.
This case has been heralded as the pinnacle of success for the equal pay movement, striking a blow against gender inequity. Indeed, it is an indicator that the historic undervaluing of female dominated work and industries is finally being reconsidered on a larger scale than ever before.
But what does this mean for employers?
While this decision affects all employees covered by the Social, Community, Home Care and Disability Services Industry Award (the SACS Award), it also unquestionably holds future flow on effects for other industries. In particular, other female dominated industries such as clerical, cleaning and nursing industries could well be next to seek similar pay increases on the basis of historical industrial inequities.
This case was driven by an application to Fair Work Australia under Part 2.7 of the Fair Work Act 2009 (Cth) by the ASU and multiple other unions ('the applicants').
The application sought an equal remuneration order applying to employees covered by the SACS Award. In support of their claims, the applicants contended that there existed significant gender-based undervaluation within the pay rates of SACS workers as a result of:
- the prevalence of female workers in the industry;
- the historical undervaluing of the work in the industry; and
- the undervaluing of 'caring work' within the industry.
The May 2011 decision
In May 2011 Fair Work Australia found that:
'...for employees in the SACS industry there is not equal remuneration for men and women workers for equal or comparable value by comparison with workers in state and local government employment.'
Fair Work Australia concluded that gender had been an important factor in creating the gap between pay in the SACS industry and pay in comparable state and local government employment. It indicated that it intended to make an equal remuneration order and invited submissions from interested parties as to the extent and content of that order.
The applicants and the Commonwealth put forward a joint submission which proposed an equal remuneration order (expressed in percentage terms) as an addition to the pay rates in the SACS Award, claiming that 'caring work' had been used as a proxy notion for gender undervaluing.
Many state governments as well as employer submissions however indicated fears of adverse economic repercussions as a result of any significant increase in pay rates. Amongst other submissions, many employers groups contended that:
- not-for-profit service providers would not have the capacity to pay for wage increases without increased government funding;
- no systemic wage gap exists in the SACS industry, but rather there exists a historical wage gap between public and private sector wage rates; and
- the case to prove a gender undervaluation had not been properly made out.
The February 2012 decision
In its decision, Fair Work Australia confirmed its view that the approach of comparing public and private sector rates was the appropriate method of identifying gender based inequity in the SACS industry. It determined as follows:
- while acknowledging that there were 'significant risks' in making the order for increased rates, including the impact on non-government funded employers and the potential of any order to affect provision of services, wage increases ranging from 19 - 41% (depending on the grading within the SACS Award) should be introduced; and
- while accepting that the order may affect enterprise bargaining in the future, it considered that this was addressed by ordering that a further 4% loading should be added to the pay rates to compensate SACS employees for the lost opportunity to collectively bargain during the phasing-in period.
Fair Work Australia also sought to address the issues identified in the submissions regarding the ability of employers to be able to fund the changes through the 'phasing in' period. It extended the phasing in period from the six years proposed by the joint submission to eight years. Therefore, phasing will now be implemented from 1 December 2012 to 1 December 2020 over nine equal instalments.
Interestingly, Vice President Watson did not agree with the findings of the majority. Amongst other findings he considered that the wage gaps between the private and public sector had not been adequately proved as related to gender considerations.
Furthermore, he claimed that the decision would unduly restrict the ability of SACS workers to bargain collectively as they would unable to negotiate any higher than the ordered amounts, thus threatening the future of enterprise bargaining itself.
What it means for employers
As a result of this decision, up to 150,000 social and community service workers will receive pay increases of between 19% and 41% over the eight year transitional phasing arrangement.
For a Level 2 graded employee the increase to the rate in the SACS Award will be 19%. This has the practical impact of around an extra $6324 per annum. A Level 8 graded employee will be entitled to a wage rate rise of 41%. This will equate to a wage increase of $24,346 per annum.
There are fears amongst service providers that the impact of wage rate rises will be felt most heavily by non-government funded organisations who will bear the brunt of the cost. This could well have implications on job security and result in retrenchment or reduction of available services despite the phasing in period. For example, the NSW Government has warned that having to fully fund the pay rise could lead to cuts to other government services and higher taxes.
Given Fair Work Australia's approach in this matter, we can expect that similar applications by unions will be made in respect of pay rates in other modern awards. In particular, other female dominated industries such as the clerical, cleaning and nursing industries will be likely union targets. Indeed the Australian Nursing Federation has already commented that the pay rises awarded could pave the way for aged-care nurses and staff to achieve pay equity.
The true impact of this landmark decision on employers, and the economy more generally therefore remains to be seen but there can be little doubt that pay equity is now high on the industrial relations agenda and will likely remain there for quite some time to come.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.