New Zealand used to boast about its place at the forefront of labour market reform and the image of crusading reformers sat comfortably with both political parties. Now, gradual re-regulation and tighter control are making the grass on the other side of the Tasman look greener.
We may argue about the impact and extent of Australia’s sweeping labour reforms, but the reality is our neighbour is attempting to address the issues and concerns of its business community in competitive and rapidly changing global labour market.
Workchoices, Australia’s revolutionary new system of industrial relations, shows sporting gold medals are not the only exemplars of national success where New Zealand lags well behind.
To be fair, much of Australia’s advantage has to do with critical mass, economies of scale and sectoral strengths such as vast mineral wealth that we simply cannot emulate. But it’s not so easy to explain New Zealand surrendering its lead in labour market reform where our single system of government and relatively free market economy should have us way out in front.
Workchoices, the rewrite of Australia’s Workplace Relations Act, has sparked predictable reaction. The Labor Party, unions and many industrial relations academics are foretelling return to dark satanic mills in much the same way their counterparts here did when National promulgated the Employment Relations Act in 1991.
The public controversy surrounding John Howard’s top-to-bottom legislative revamp tends to obscure his real agenda: How to retain viable, productive economy when confronted with the competitive advantage enjoyed by Australia’s giant Asian neighbours, India and China.
By comparison, our Government’s ongoing legislative programme appears aimed at more regulation of our labour market, not less. return to union-controlled collective bargaining, increased minimum wages, extended leave entitlements and costly process for reducing staff all compound to make us increasingly less competitive in global labour market. Now there are stark differences in our respective industrial relations systems particularly in bargaining and termination of employment.
Workchoices creates Australian Workplace Agreements (AWAs), certified form of stand-alone individual employment agreement that prevails over all other forms of employment contract, including collectives and federal/state awards. By contrast, our Individual Employment Agreements – IEAs – have no primacy and are seen as staging posts for unions seeking collective agreements which are given legal preference over individual bargaining.
Collective agreements in Australia are available as an alternative to federal or state awards, although unlike here, Australian unions no longer have monopoly over collective bargaining. Workchoices allows non-union collectives where employees can negotiate on their own behalf or through bargaining agent – feature of the repealed Employment Contracts Act.
AWAs and collective agreements will be overseen by federal agency to ensure they meet statutory requirements such as minimum wages, conditions and annual leave. Australian employers will be able to serve 90 days’ notice to cancel an AWA or collective once it has expired. Employees will then reduce back to the statutory minimum wages and conditions until replacement agreement is negotiated.
Workchoices is still more controversial on employment termination. The exemption period during which new employees cannot claim unfair dismissal has been extended from three to six months.
Any successful unfair dismissal claim after six months will be limited to lost wages up to specified cap – distress compensation which is feature of our system has been expressly prohibited. For Australian employees in organisations of 100 staff or less, the issues of exemption period and payments are irrelevant as they will be excluded from taking unfair dismissal cases at all.
Meantime back in New Zealand, the trend is in the opposite direction – aggrieved employees seeking “go away” money from typically small to medium enterprises where any breach of law is more likely to be about process rather than substance.
These diverging experiences not only highlight the different ideologies and policies of our respective governments, they also highlight the sometimes deep social and political divisions within our societies as we grapple with the constant threat of globalised labour markets.
No one is suggesting competing globally on the price of labour – business merely wants framework that encourages adaptability and flexibility to meet the challenge of the competition.
Labour market reform was always going to be easier for Australia’s Liberal government than New Zealand’s Labour government, but Workchoices now brings that competitive threat right to our back door.
When New Zealand firms start crossing the Tasman to exploit Workchoices’ more employer-friendly regime, our Labour Government will find that it has no choice but to take more pragmatic approach to reforming labour markets.
Rod Lingard is principal consultant with Right Management.
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