Workplace relations decline continues, finds AMMA report

On the three-year anniversary of the Fair Work Act 2009, the latest AMMA Workplace Relations Research report, on its operation and impact on the resource industry, has shown an ongoing deterioration of the Australian workplace relations (WR) environment.

The main findings of the report, which covers the survey’s findings for the period from November 2011 to April 2012, show a continued deterioration in the overall WR environment as well as in employer perceptions of levels of labour productivity and direct employee engagement, under the current IR system.

“This report marks two years since the first publication of the results of this ongoing study and clearly demonstrates the industrial environment has shifted dramatically for the worse,” said Minna Knight, Acting Chief Executive, AMMA.

Five surveys, six months apart, of AMMA members have so far been conducted under the research project, which aims to provide the federal government, the opposition and other policy-makers with an indication of how well the current IR legislation is performing its role of encouraging productivity growth in an environment that is fair for both businesses and employees.

The latest survey results provide updated data for the four main areas that have been covered by the survey since its commencement: the current WR environment; perceived levels of labour productivity; direct engagement with the workforce; and workplace flexibility.

Respondents were asked to rate their current WR environment on a scale ranging from a low of 1 (“extremely poor”) to a high of 7 (“excellent”). The results were then converted into an overall index score out of 100 for each six-month survey period. On this scale, the higher the score, the better the WR environment in each period. If the index score is rising, overall conditions are estimated to have improved; where the index has fallen, conditions have shown a measured deterioration.

The latest results demonstrate the lowest satisfaction levels since the commencement of the survey, which has consistently trended down as the number of respondents has grown with each six-monthly survey period; nearly doubling from 69 respondents in the first survey in April 2010 to 132 in the latest survey in April 2012.

This may indicate a growing level of interest in issues surrounding the operation of the Fair Work Act and an increased investment on the part of the resource industry in lobbying for necessary workplace change, says the author of the report, Dr Steven Kates from the School of Economics, Finance and Marketing, RMIT University.

The overall WR environment satisfaction index, which commenced at a reasonably high level of 75.9 out of 100 for the first survey in April 2010, is now more than 10 percentage points lower at 64.2 as of April 2012.

Looking at the breakdown of results, the report finds that when the survey was first conducted in April 2010, 92.6% of resource industry employers rated the workplace relations environment as “better than acceptable”, “good” or “excellent”.

“In part, this result reflected the many existing agreements that had been made under the previous regime,” says Knight.

“Just two years later and the number of resource employers who rated their industrial environment as unacceptable has risen almost five times,” (2.9 in 2010; 14.1 in 2012).

The report also reignites the productivity debate by demonstrating a 20% drop in employer satisfaction with workplace productivity.

The index score for employers’ perceptions of labour productivity fell by around eight percentage points between April 2010 and April 2012, from an already low 66.7 out of 100 to 58.8. This is below the level needed for a large and sustained lift in productivity, says the report.

Looking at the breakdown of results, the drop in satisfaction is more marked.

“Perceived resource industry productivity during the survey period was at its highest peak in April 2010 with 70.8% of respondents rating their workplace productivity as ‘high’ or better. In April 2012, this figure had dipped to just 52%,” Knight said.

The report cites a lack of flexibility and productivity at the heart of the dissatisfaction.

“At a time when greater flexibility and higher productivity are needed, we find there is less of both in the resource industry than required. It is increasingly evident that employers are being frustrated in their efforts to make positive changes at the workplace that would lead to increased productivity and that damaging union activity is becoming more difficult to deal with.

“The Fair Work Act was seen in a relatively positive light when it was first introduced. There is now a large degree of disillusionment that has become embedded as greater familiarity with the Act has led to the recognition of many additional problems for management,” says the report.

And the ability for unions to hold new resources projects to ransom as part of the Act’s greenfield bargaining processes continues to be one of the biggest concerns for significant Australian resource projects in the near future. Knight says the mandatory involvement of unions in greenfield agreements has led to a culture where employers are pressured to accept exorbitant claims or face lengthy delays to project timelines and the risk of severely denting investor confidence.

“This research shows that one-third (36.2%) of resource industry employers had tried to negotiate a greenfield agreement in the past three years; and of those, 19% had experienced unions refusing to make an agreement with them at all,” she said.

“As more than $500 billion worth of potential new Australian resources projects begins trickling down the pipeline, Australia cannot afford to have one in five projects stalling due to ongoing union tactics to extort unreasonable wages and conditions in already Australia’s highest paid industry.”

Knight says AMMA has recommended Fair Work Australia (FWA) be given a ‘greenfield determination’ power upon request by the employer, but stressed that AMMA remains opposed to compulsory arbitration in any form.

In the wake of the recent JJ Richards Full Court of the Federal Court ruling, she also called for the review process to eliminate the legislative loophole that allows unions to take protected strike action without the majority consent of the workforce and before bargaining has even commenced.

“These concerns are reinforced by the results of this latest research, which indicates that almost 40% of resource industry employers are yet to renegotiate new agreements under the Fair Work Act,” said Knight.

“This means we potentially have hundreds of agreements all expiring within the next 12-18 months, and without tightening the parameters in which unions can legally take strike action, the industry will be very exposed.

“Any serious reform of the Fair Work laws must examine major inconsistencies between the initial stated government policy and the written legislation around protected industrial action.”

The report also found that individual flexibility arrangements (IFAs) had limited utility for employers, with 29% of the industry believing IFAs are of “very little value” and a further 32.3% stating IFAs are of “no value”.

“The uptake of individual flexibility arrangements in the resource industry has been negligible and has had minimal, if any, impact on increasing industry flexibility,” states the report.

“Prior to the introduction of the Fair Work Act, up to 80% of resource industry workplaces were utilising Australian workplace agreements (AWAs) in one capacity or another, to deliver mutually beneficial flexible arrangements with individual workers,” said Knight.

“AMMA has made a number of recommendations that would see a return of genuine flexibility to Australian workplaces. Firstly, there is no reason why the government could not give greater security to both parties by enabling IFAs to extend for fixed terms of up to four years, and allowing for these agreements to be terminated or run for shorter terms by mutual agreement.”

However, on a more positive note, 75% of respondents that had granted requests for flexible working arrangements to staff, in order to care for a child, reported either that the benefits of granting such arrangements outweighed the costs or that the impact of granting such requests was neutral on their operations.

With the rapidly deteriorating state of industrial harmony in Australia, the Federal Government’s Fair Work Act Review could not have come soon enough, says AMMA, and these latest survey results reinforce some of the key areas that are in need of urgent reform.