Most Read Contributor in Australia, September 2016
An interesting recent trend has emerged in enterprise bargaining
in Australia: a two-tier wages system where there are different
rates of pay for new employees and existing employees.
A proposed new enterprise agreement for a Woolworths
distribution centre in Melbourne, having been approved by a
majority of voting employees, is being sought to be approved by the
Fair Work Commission. And a new enterprise agreement for a
Coca-Cola Amatil warehouse in Victoria has recently been approved
by the Fair Work Commission after it was approved by a majority of
voting employees. Both workplaces have union coverage of some
existing employees: SDA and NUW at Woolworths and United Voice at
The proposed new
agreement to cover the Woolworths workplace cuts the hourly
rate of pay of employees employed after 24 October 2014 from about
$24 to $22 and it will then be frozen at $22 until 2018. Rates of
pay for existing employees will increase by 4 per cent from October
2014, followed by annual increases of 3.8 per cent in October 2015
and in October 2016 and 3.6 per cent in October 2017. The nominal
expiry date of the enterprise agreement is in July 2018. The
enterprise agreement also provides for an increase to Saturday
loadings from 125 per cent to 135 per cent, increasing afternoon
and night shift loadings by 10 per cent in the first year and
increasing annual leave loadings from 17.5 per cent to 20 per cent.
The unions ran a "no" campaign against the employees
approving the enterprise agreement, however it was supported in a
ballot by about 60 per cent of the employees.
The approved Coke enterprise agreement cuts the base rate of pay
of new hires by about 28 per cent and provides for a pay freeze for
all employees in 2015 before an increase of 2 per cent in 2016.
For an enterprise agreement to be approved by the Fair Work
Commission, it must have been approved by a majority of employees
who voted for its approval and it must, amongst others things, pass
the "better off overall test". The "BOOT"
requires that each employee to be covered by the enterprise
agreement will be better off overall under the enterprise agreement
than they would be if the relevant modern award applied.
It is apparent from the Woolworths and Coke cases that
businesses, regardless of their profitable performance, are seeking
to reduce costs and one way of doing so is to reduce labour costs
of new employees through enterprise bargaining. However, for
employers to successfully pursue such a strategy there are various
factors that need to be considered before implementing such a
determining the likely attitudes of existing employees (there
are various workplace where a two-tier system has been put forward
in enterprise bargaining rounds however it has not been implemented
as the existing employees were vehemently opposed to it) and well
crafted surveys are a valuable tool for doing this;
the level of union membership;
the likely attitude of the union(s); and
the business realities, other options and whether not
implementing such a strategy will lead to the consideration and
implementation of more drastic measures to reduce costs such as
restructuring and redundancy.
Furthermore, employers would be well served as part of such a
strategy to develop appropriate communications, negotiations and
industrial action plans in order to give the strategy the best
chances of success.
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change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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