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Errata: Agreement making in Australia under the Workplace Relations Act: 2007 to 2009

Page 120

in the second paragraph, replace 530 508 with 524 151;replace existing Table 4.1 with the following:

Table 4.1: Operational AWAs and ITEAs, by regulatory period

Pre-fairness test (1/1/2007-6/5/2007

Fairness test (7/5/2007 - 27/3/2008)

NDT (28/3/2008-31/12/2009

Operational agreements

131 475

274 108

118 568

Average lodgements per month

31 324

25 687

5 611

Source: Fair Work Ombudsman

Page 121

in the first paragraph, replace 31 000 with 31 324;in the second paragraph, replace about 25 600 with 25 687

Page 122

in the first paragraph, replace 5646 with 5611

Page 125 replace existing Table 4.3 with the following:

Table 4.3: Operational AWAs and ITEAs lodged by state and regulatory period, 2007-2009

Pre-fairness test

Fairness test

NDT

Employee State

Number

Average per month

Number

Average per month

Number

Average per month

NSW

27 858

6 637

62 872

5 892

25 209

1193

VIC

25 694

6 122

52 639

4 933

21 662

1025

QLD

24 119

5 746

49 769

4 664

22 966

1087

WA

33 186

7 907

67 173

6 295

33 843

1602

SA

10 642

2 535

20 174

1 891

8 854

419

TAS

3 594

856

5 793

543

2 083

99

ACT

4 519

1 077

11 123

1 042

1 601

76

NT

1 863

444

4 565

428

2 350

111

Source: Fair Work Ombudsman

Australian Government Crest

AGREEMENT MAKING IN AUSTRALIA UNDER THE WORKPLACE RELATIONS ACT:

2007 TO 2009

A report prepared by the

Department of Education, Employment and Workplace Relations

Commonwealth of Australia 2010

978-0-642-33183-0 [PRINT]978-0-642-33184-7 [PDF]978-0-642-33185-4 [RTF]

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney-Generals Department, Robert Garran Offices, National Circuit,Barton ACT 2600 or posted at http://www.ag.gov.au/cca

Deputy Secretary

John Kovacic

The Honourable Simon Crean MP [add post nominals, if applicable]

Minister for Employment and Workplace Relations

Parliament House

[do not abbreviate Street/Road/Circuit etc]CANBERRA ACT 2600 [all capitals with 2 spaces between suburb/state/postcode] [3 returns]

Dear Minister[2 returns]

I am pleased to present to you the report on Agreement making in Australia under the Workplace Relations Act: 2007 2009. The report covers developments in bargaining for the making of workplace agreements in Australia for the period 1 January 2007 31 December 2009 as required by section 844 of the Workplace Relations Act 1996 (as extended by section 20 of Schedule 18 of the Fair Work (Transitional and Consequential Amendments) Act 2009).

Yours sincerely [6 returns]

John Kovacic

Deputy Secretary

Workplace Relations[2 returns] [do not put Deputy Secretary underneath, as it is on Deputy Secretary letterhead]

30 June 2010

(blank page)

Contents

HYPERLINK \l "_Toc275169776" Contentsv

HYPERLINK \l "_Toc275169777" Shortened formsx

HYPERLINK \l "_Toc275169778" Terminology used in the reportxi

HYPERLINK \l "_Toc275169779" Executive Summaryxiii

HYPERLINK \l "_Toc275169780" 20072009 reportxiii

HYPERLINK \l "_Toc275169781" Summary of developmentsxiv

HYPERLINK \l "_Toc275169782" Economic and legislative contextxiv

HYPERLINK \l "_Toc275169783" Collective agreementsxv

HYPERLINK \l "_Toc275169784" Individual agreementsxvi

HYPERLINK \l "_Toc275169785" Introduction1

HYPERLINK \l "_Toc275169786" Overview1

HYPERLINK \l "_Toc275169787" Legislative requirement2

HYPERLINK \l "_Toc275169788" Types of agreements considered in this report2

HYPERLINK \l "_Toc275169789" Legislative developments in the reporting period5

HYPERLINK \l "_Toc275169790" Chapter 1Economic context10

HYPERLINK \l "_Toc275169791" 1.1Growth and employment10

HYPERLINK \l "_Toc275169792" 1.1.1Growth10

HYPERLINK \l "_Toc275169793" 1.1.2Employment11

HYPERLINK \l "_Toc275169794" 1.1.3Unemployment11

HYPERLINK \l "_Toc275169795" 1.1.4Working hours12

HYPERLINK \l "_Toc275169796" 1.2Productivity15

HYPERLINK \l "_Toc275169797" 1.2.1Trend labour productivity15

HYPERLINK \l "_Toc275169798" 1.2.2Productivity cycles16

HYPERLINK \l "_Toc275169799" 1.2.3Recent decline in multifactor productivity estimates17

HYPERLINK \l "_Toc275169800" 1.3Wages and price stability18

HYPERLINK \l "_Toc275169801" 1.3.1Wages18

HYPERLINK \l "_Toc275169802" 1.3.2Inflation19

HYPERLINK \l "_Toc275169803" Chapter 2Pay setting developments21

HYPERLINK \l "_Toc275169804" 2.1Coverage by method of pay setting21

HYPERLINK \l "_Toc275169805" 2.2Earnings by method of setting pay29

HYPERLINK \l "_Toc275169806" Chapter 3Collective Agreements34

HYPERLINK \l "_Toc275169807" 3.1Approved collective agreements34

HYPERLINK \l "_Toc275169808" 3.1.1Overall coverage34

HYPERLINK \l "_Toc275169809" 3.1.2Agreement making by agreement type35

HYPERLINK \l "_Toc275169810" 3.1.3Agreement making by sector37

HYPERLINK \l "_Toc275169811" 3.1.4Agreement making by industry39

HYPERLINK \l "_Toc275169812" 3.1.5Employee coverage/size of agreement42

HYPERLINK \l "_Toc275169813" 3.1.6Union coverage46

HYPERLINK \l "_Toc275169814" 3.1.7Agreements approved in the June quarter 200947

HYPERLINK \l "_Toc275169815" 3.1.8Agreements in operation and current during reporting period48

HYPERLINK \l "_Toc275169816" 3.1.9Coverage of designated groups53

HYPERLINK \l "_Toc275169817" 3.2Wage developments in collective agreements58

HYPERLINK \l "_Toc275169818" 3.2.1Introduction58

HYPERLINK \l "_Toc275169819" 3.2.2Overall wage developments58

HYPERLINK \l "_Toc275169820" 3.2.3Wage trends in agreements by industry60

HYPERLINK \l "_Toc275169821" 3.2.4Wage trends by type of agreement68

HYPERLINK \l "_Toc275169822" 3.2.5Performance-related wage clauses68

HYPERLINK \l "_Toc275169823" 3.2.6Wage developments for designated groups71

HYPERLINK \l "_Toc275169824" 3.2.7Non-quantifiable agreements77

HYPERLINK \l "_Toc275169825" 3.2.8No extra claims clause77

HYPERLINK \l "_Toc275169826" 3.3Conditions developments in collective agreements79


HYPERLINK \l "_Toc275169828" 3.3.2Core provisions79

HYPERLINK \l "_Toc275169829" 3.3.3Hours of work provisions82

HYPERLINK \l "_Toc275169830" 3.3.4Family-friendly provisions87

HYPERLINK \l "_Toc275169831" 3.3.5Type of employment provisions92

HYPERLINK \l "_Toc275169832" 3.3.6Training provisions93

HYPERLINK \l "_Toc275169833" 3.3.7Equity provisions94

HYPERLINK \l "_Toc275169834" 3.3.8Conditions developments for designated groups96

HYPERLINK \l "_Toc275169835" 3.3.9Other conditions107

HYPERLINK \l "_Toc275169836" Chapter 4Individual workplace agreements111

HYPERLINK \l "_Toc275169837" 4.1Spread and coverage of individual workplace agreements112

HYPERLINK \l "_Toc275169838" 4.1.1Overview112

HYPERLINK \l "_Toc275169839" 4.1.2By industry113

HYPERLINK \l "_Toc275169840" 4.1.3By state115

HYPERLINK \l "_Toc275169841" 4.1.4By business size117

HYPERLINK \l "_Toc275169842" 4.1.5Operational and non-operational agreements118

HYPERLINK \l "_Toc275169843" 4.1.6Individual agreement coverage of workforce119

HYPERLINK \l "_Toc275169844" 4.1.7Designated groups120

HYPERLINK \l "_Toc275169845" 4.2Wage developments under individual workplace agreements122

HYPERLINK \l "_Toc275169846" 4.2.1Average earnings122

HYPERLINK \l "_Toc275169847" 4.2.2Wage data from Australian Workplace Agreements Database123

HYPERLINK \l "_Toc275169848" 4.2.3Wage increases125

HYPERLINK \l "_Toc275169849" 4.3Conditions developments in individual workplace agreements128


HYPERLINK \l "_Toc275169851" 4.3.2Core provisions128

HYPERLINK \l "_Toc275169852" 4.3.3Hours of work provisions130

HYPERLINK \l "_Toc275169853" 4.3.4Family-friendly provisions131

HYPERLINK \l "_Toc275169854" 4.3.5Training Provisions133

HYPERLINK \l "_Toc275169855" 4.3.6Equity provisions134

HYPERLINK \l "_Toc275169856" 11.1.1.Conditions developments for designated groups135

HYPERLINK \l "_Toc275169857" 11.1.2.Other conditions142

HYPERLINK \l "_Toc275169858" Chapter 5.Impact of the global economic downturn on federal collective agreements144

HYPERLINK \l "_Toc275169864" 5.1.Background144

HYPERLINK \l "_Toc275169865" 5.2.Wages145

HYPERLINK \l "_Toc275169866" 5.2.1.Introduction145

HYPERLINK \l "_Toc275169867" 5.2.2.Average annualised wage increases145

HYPERLINK \l "_Toc275169868" 5.2.3.Non-quantifiable wage Increases146

HYPERLINK \l "_Toc275169869" 5.2.4.Conditional increases148

HYPERLINK \l "_Toc275169870" 5.3.Conditions149

HYPERLINK \l "_Toc275169871" 5.3.1.Job sharing149

HYPERLINK \l "_Toc275169872" 5.3.2.Part-time work150

HYPERLINK \l "_Toc275169873" 5.3.3.Redundancy provisions151

HYPERLINK \l "_Toc275169874" 5.3.4.Management may alter hours clauses151

HYPERLINK \l "_Toc275169875" 5.3.5.Commitment to discuss change152

HYPERLINK \l "_Toc275169876" 5.3.6.Terms specifically related to the global economic downturn153

HYPERLINK \l "_Toc275169877" 5.4.Conclusion155

HYPERLINK \l "_Toc275169878" 6.Significant decisions of the Courts and the Australian Industrial Relations Commission156

HYPERLINK \l "_Toc275169879" 6.1.Introduction156

HYPERLINK \l "_Toc275169880" 6.2.Agreement making processes156

HYPERLINK \l "_Toc275169881" 6.2.1.Agreement-making processes157

HYPERLINK \l "_Toc275169882" 6.2.2.Prohibitions on coercion and duress in agreement making158

HYPERLINK \l "_Toc275169883" 6.2.3.Prohibitions on making false and misleading statements in agreement making160

HYPERLINK \l "_Toc275169884" 6.2.4.Genuinely trying to reach an agreement161

HYPERLINK \l "_Toc275169885" 6.3.Content of agreements162

HYPERLINK \l "_Toc275169886" 6.3.1.Prohibited content162

HYPERLINK \l "_Toc275169887" 6.3.2.Matters pertaining to the employment relationship164

HYPERLINK \l "_Toc275169888" Appendix A: Technical Notes166

HYPERLINK \l "_Toc275169889" Main information sources in the report166

HYPERLINK \l "_Toc275169890" Workplace Agreements Database166

HYPERLINK \l "_Toc275169891" Accuracy of data167

HYPERLINK \l "_Toc275169892" Legislative changes167

HYPERLINK \l "_Toc275169893" Employee coverage168

HYPERLINK \l "_Toc275169894" Coverage of designated groups168

HYPERLINK \l "_Toc275169895" Duration of agreements169

HYPERLINK \l "_Toc275169896" Measuring agreement coverage169

HYPERLINK \l "_Toc275169897" Average annualised wage increases169

HYPERLINK \l "_Toc275169898" Non-quantifiable wage increases170

HYPERLINK \l "_Toc275169899" Comparisons with previous reporting period171

HYPERLINK \l "_Toc275169900" Conditions of employment172

HYPERLINK \l "_Toc275169901" Awards and legislation172

HYPERLINK \l "_Toc275169902" Mix of industries172

HYPERLINK \l "_Toc275169903" Agreement size173

HYPERLINK \l "_Toc275169904" Australian Workplace Agreements Database174

HYPERLINK \l "_Toc275169905" Sampling methodology174

HYPERLINK \l "_Toc275169906" Accuracy of sample data175

HYPERLINK \l "_Toc275169907" Coverage of designated groups176

HYPERLINK \l "_Toc275169908" Wages176

HYPERLINK \l "_Toc275169909" Employment conditions177

HYPERLINK \l "_Toc275169910" Duration of agreements178

HYPERLINK \l "_Toc275169911" Mix of industries178

HYPERLINK \l "_Toc275169912" Terminology178

HYPERLINK \l "_Toc275169913" Appendix B: Coding framework for WAD and AWAD180

HYPERLINK \l "_Toc275169914" Appendix C: Comparison of AAWI with other economic variables189

HYPERLINK \l "_Toc275169915" Comparison with Wage Price Index189

HYPERLINK \l "_Toc275169916" Other economic variables190

HYPERLINK \l "_Toc275169917" Appendix D: Conditions by industry192

HYPERLINK \l "_Toc275169918" Appendix E: Core provisions by agreement type207

HYPERLINK \l "_Toc275169919" Appendix F: Designated Groups by Industry208

xvi

Shortened forms

AAWI

Average annualised wage increase

ABS

Australian Bureau of Statistics

AFPC

Australian Fair Pay Commission

AIRC

Australian Industrial Relations Commission

AMWU

Australian Manufacturing Workers Union

(formerly known as the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union)

ANZSIC

Australian and New Zealand Standard Industry Classifications

APCS

Australian Pay and Classification Scale

AWA

Australian Workplace Agreement

AWAD

Australian Workplace Agreements Database

CFMEU

Construction, Forestry, Mining and Engineering Union

CPI

Consumer Price Index

(the) department

The Department of Education, Employment and Workplace Relations

FW Act

Fair Work Act 2009

FWA

Fair Work Australia

ITEA

Individual Transitional Employment Agreement

NDT

No-disadvantage test

OEA

Office of the Employment Advocate

Pre-reform

Agreements, etc made before the commencement of the Work Choices amendments to the Workplace Relations Act 1996

RBA

Reserve Bank of Australia

(the) Standard

Australian Fair Pay and Conditions Standard

TOIL

Time off in lieu

WAD

Workplace Agreements Database

WPI

Wage Price Index

WR Act

Workplace Relations Act 1996

Terminology used in the report

For the sake of simplicity, this report uses certain terms to summarise more formal references to legislation and terms for agreements.

Legislation

The regulatory environment that was in operation under the amendments to the Workplace Relations Act 1996 (WR Act), made by the Workplace Relations Amendment (Work Choices) Act 2005 and before the introduction of the fairness test, is referred to as the Work Choices amendments to the WR Act. This regulatory environment was in operation from 27 March 2006 to 6May2007 inclusive. Agreements made under this legislation are referred to as prefairness test agreements.

The regulatory environment that was in operation under the amendments to the WR Act made by the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 is referred to as the Stronger Safety Net amendments. This regulatory environment was in operation from 7May2007 to 27March2008 inclusive. Agreements made in this period are referred to as fairness test agreements.

Amendments to the WR Act made by the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 commenced operation on 28March 2008 and were effectively in place until the end of the reporting period on 31 December 2009. These amendments are referred to as the Transition to Forward with Fairness amendments. Agreements made under this regulatory regime are referred to as no-disadvantage test (NDT) agreements.

Approved and made

This report is intended to cover workplace agreements that operated during the reporting period. However, the different regulatory regimes during the reporting period contained different rules that governed when different types of agreements were made and when they came into operation. This makes it difficult to use a simple turn of phrase to refer to all relevant agreements during the period.

When referring to all agreements that came into operation and that legally operated during the period, this report refers to agreements that were approved or were made and uses these terms interchangeably. Neither term is a technically appropriate reference to all relevant agreements in the reporting period but are used in this report for the sake of simplicity. The technical meanings for these terms are set out in Appendix A: Technical Notes.

Designated groups

Section 844(1)(e) of the WR Act requires that this report have regard to the effects of bargaining on the employment of women, parttime employees, persons from a non-English speaking background, mature age persons, young persons and such other persons as are prescribed by the regulations. For the sake of simplicity, this report refers to these various types of employees as the designated groups of employees.

All data about employees in these designated groups is based on information provided in statutory declarations made by an employer (or their bargaining agent) that accompanied the lodgement of each agreement.

For collective agreements, the statutory declaration forms defined young employees as being less than 21 years of age, mature-age employees as being over 45 years of age. The forms did not define disabled The lodgement forms provided to employers by the Workplace Authority use the word 'disabled.' Standard departmental style is the phrase 'employee with disability.' This report will therefore only use 'disabled' when referring to the term included on the lodgement form. or from a non-English speaking background and thus it was up to each employer to identify whether any of their staff fitted into these categories. As such, the Department of Education, Employment and Workplace Relations (the department) does not have set definitions of how these terms were interpreted.

For individual agreements, the statutory declaration forms requested data about whether the employee covered was under 18 years of age or covered by the Supported Wage System. This report uses this data, respectively, when discussing young employees and employees with disability covered by individual agreements. The declaration forms for individual agreements did not request data about whether the employee was mature age and thus this data is not available.

As such, for the designated groups, only data about female employees and part-time employees are directly comparable between collective and individual agreements.

Industry

All references to data broken down by industry are based on the industry divisions in the Australian and New Zealand Standard Industry Classifications (ANZSIC), 2006.

Executive Summary

20072009 report

The report, Agreement making in Australia under the Workplace Relations Act: 20072009, fulfils the requirements of Section 844 of the Workplace Relations Act 1996 (WR Act), under which the Minister must cause a person to review and report on developments in bargaining for the making of workplace agreements covered by the WR Act.

In line with the reporting requirement, this report also covers the effects of bargaining on the employment (including wages and conditions of employment) of women, part-time employees, persons from a non-English speaking background, mature-age people and young people.

The report covers agreements made under the WR Act in the period from 1January 2007 to 31 December 2009 inclusive.

The Minister for Employment and Workplace Relations requested that the Department of Education, Employment and Workplace Relations prepare this report.

Chapter 1 of the report examines the economic context within which bargaining occurred during the reporting period. It particularly notes the major challenge that the global economic downturn posed for the Australian economy and workplaces in 200809. Chapter 5 deals in more detail with the impact of the global economic downturn on federal collective agreements.

Chapter 2 provides information on the coverage of various types of industrial instruments and the average earnings of employees covered by those instruments as surveyed by the Australian Bureau of Statistics.

Chapter 3 reports on developments in collective agreement making during the reporting period. It examines trends and developments in coverage, wage increases and conditions of employment included in collective agreements.

Chapter 4 examines the coverage, wage rates and conditions of employment included in individual workplace agreements.

Chapter 6 discusses notable decisions of the Australian Industrial Relations Commission, the Federal Court and the Federal Magistrates Court during the reporting period in respect of agreement making processes and agreement content.

Summary of developments

Collective agreements

20042006

20072009

Collective agreements approved in reporting period

21057

24156

increase

Number of employees covered by collective agreements approved in reporting period

2 581 124

2 120 810

decrease

Proportion of Australian workforce whose pay was set by a federally registered collective agreement (non-managerial employees) (May 2006, August 2008)

28.5%

29.0%

increase

Average annualised wage increase for agreements approved in reporting period

4.3%

4.1%

decrease

Individual agreements

20042006

20072009

Operational individual agreements lodged in reporting period

688151

530508

decrease

Proportion of non-managerial employees whose pay was set by a federally registered individual agreement (AWA or ITEA)(May 2006, August 2008)

3.1%

2.2%

decrease

Average hourly total earnings, adult non-managerial employees on AWAs/ITEAs (May 2006, August 2008)

$25.60

$28.60

increase

Source: DEEWR, Workplace Agreements Database

Fair Work Ombudsman

ABS Employee Earnings and Hours (Cat. No. 6306.0), May 2006, August 2008

Economic and legislative context

Agreement making during the reporting period took place in the context of significant economic and regulatory changes.

During the reporting period, the Australian economy moved from a period of steady economic growth and tight labour market conditions to an economy responding to the global economic downturn. These changes had an effect on the content of workplace agreements, in particular, on the level of wage increases included in agreements. As noted above, these economic circumstances and the impact on wage increases and conditions in collective agreements are examined in Chapters 1 and 5 of the report.

There were also several significant legislative changes during the reporting period, which altered the regulatory framework for the making and content of workplace agreements. Of particular note, the fairness test was introduced in May 2007 and was then replaced by the no-disadvantage test in March 2008. The Introduction to this report discusses in detail these key legislative changes and Chapter 4 analyses developments in individual agreement making broken down by regulatory period.


A total of 24156 collective agreements were approved under the WR Act between 1January2007 and 31December2009. This was a 14.7 per cent increase from the 21057 collective agreements approved in the previous three year reporting period.

Twenty-nine per cent of employees had their pay set by a federally registered collective agreement during the reporting period. This was a slight increase from the 28.5 per cent of employees who had their pay set by a collective agreement during the previous reporting period.

Employees whose pay was set by a collective agreement earned, on average, more than those whose pay was set by an individual agreement. The average hourly ordinary time earnings of non-managerial employees on federally registered collective agreements was $29.00 in August 2008, compared with $28.60 for employees whose pay was set by a federally registered individual agreement. For female employees, the difference was slightly larger, with $27.10 under collective agreements compared with $26.00 under individual agreements.

During the reporting period, collective agreement making in the federal workplace relations system expanded in industry sectors that were traditionally more award reliant. For example, in 2004, 2.3 per cent of all approved agreements were made by employers in the Retail Trade industry and 3.3 per cent were made by employers in the Accommodation and Food Services industry. In comparison, Retail Trade accounted for 7.2 per cent of all agreements approved in 2007 while Accommodation and Food Services accounted for 8.0 per cent.

The size of agreements, as measured by the number of employees covered, continued to fall in the reporting period, in part due to the greater involvement of small and medium sized businesses in collective agreement making in recent times.

Wage increases in new collective agreements broadly followed the economic cycle throughout the reporting period, reaching a peak of 4.7 per cent in the March quarter 2009 and then trending downward as the effects of the global economic downturn were felt by employers.

By industry, collective agreement wage outcomes showed responsiveness to industry circumstances. For example, in 2009, collective agreements in the Construction industry included average annual wage increases of 5.7 per cent while wage increases in the Manufacturing industry, which bore a greater impact of the global financial crisis, grew much more slowly at 3.8 per cent.

Female, part-time, casual and young employees received, in an aggregate sense, wage increases that were lower than those for male, full-time and older employees. These outcomes continue the historical trends for these groups.

The overall incidence of family-friendly provisions in agreements increased slightly from the previous reporting period, with 89.3 per cent of collective agreements approved during the reporting period, covering 88.9 per cent of employees, containing at least one family-friendly provision. This compares with 76.3 per cent of agreements, covering 91.8 per cent of employees, that contained at least one family-friendly provision in the previous reporting period.

More collective agreements contained provisions allowing for casual employment, with 85.4 per cent doing so, compared to 79.9 per cent in the previous reporting period.

Female, part-time, casual and young employees had access to conditions of employment comparable to all employees covered by collective agreements approved in the reporting period.


A total of 530 508 operational individual agreements were lodged during the reporting period, down 23 per cent on the 688 151 individual agreements lodged in 20042006. This decline was due primarily to changes in the regulatory framework that came into effect on 28 March 2008.

The Retail Trade, Mining and Accommodation and Food Services industries were the largest users of individual agreements, together accounting for over one third of all such agreements in the period 20072009.

More individual agreements were made by employers in Western Australia than in any other state25.6 per cent of all operational individual agreements lodged in the reporting period were lodged by employers in Western Australia.

Over the reporting period, larger businesses became more likely to make individual agreements and small and medium sized businesses less likely. Larger businesses lodged 68.5 per cent of individual agreements during 20072009, a significant increase from the previous reporting period where 54.5 per cent of such agreements were made by large businesses.

There were significant increases in the incidence of most core conditions of employment after each legislative change during the reporting period. Similarly, the incidence of family-friendly provisions in individual agreements also increased after each legislative change.

15

Introduction

Overview

This report is about developments in bargaining for the making of workplace agreements, both collective and individual, made under the Workplace Relations Act 1996 (WR Act) in the period January 2007 to December 2009 inclusive.

Workplace or enterprise bargaining is the most common method for setting wages and conditions of employment in Australian workplaces.

During the period covered by this report there were three significant legislative changes. This means that there were, in effect, four significantly different approaches to the regulation of workplace agreements in a three-year period.

In May 2007 the then Australian Government announced the introduction of the fairness test for all new workplace agreements and the creation of the Workplace Authority to administer the fairness test. These changes significantly altered the legislative approach to the scrutiny of workplace agreements that had been implemented by the Work Choices amendments to the WR Act, which had taken effect only a little more than one year earlier. The fairness test required that for most agreements lodged with the Workplace Authority, fair compensation had to be provided in lieu of the exclusion or modification of any protected award conditions.

After the 2007 election, the first Bill introduced into the new Parliament was the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008. These amendments were passed in March2008 and made further significant changes to the regulation of workplace agreements, including preventing the making of any new Australian Workplace Agreements (AWAs), allowing for the making of a transitional form of individual statutory agreements, such as Individual Transitional Employment Agreements (ITEAs), in certain circumstances and abolishing the fairness test and replacing it with a more comprehensive no-disadvantage test.

On 1 July 2009, the Fair Work Act 2009 (FW Act) came into operation. This Act is centred on bargaining at the enterprise level underpinned by good faith bargaining and a comprehensive safety net, comprised of modern awards and the National Employment Standards (NES). Other key changes to the agreement-making framework in the FW Act include the removal of any provision for individual workplace agreements and the removal of the distinction between union and non-union agreements, providing instead that enterprise agreements can be made between an employer or more than one employer and their employees. As noted above, this report is limited to workplace agreements made under the WR Act in the reporting period.

Legislative requirement

This report is required by section 844 of the WR Act, which states that:

844 Reports about developments in making agreements

(1) For:

(a) the period of 3 years beginning on 1January 2004; and

(b) the period of 3 years beginning on 1January 2007; and

(c) the period of 5 years beginning on 1January 2010 and each subsequent period of 5 years;

the Minister must cause a person to review and report to the Minister in writing about:

(d) developments, in Australia during that period, in bargaining for the making of workplace agreements; and

(e) in particular, the effects that such bargaining has had in Australia during that period on the employment (including wages and conditions of employment) of women, parttime employees, persons from a nonEnglish speaking background, mature age persons, young persons and such other persons as are prescribed by the regulations.

While the WR Act has now been replaced by the FW Act, section 20 of Schedule 18 of the Fair Work (Transitional and Consequential Amendments) Act 2009 provides that section 844 the WR Act continues in operation in relation to workplace agreements made in the period from 1 January 2007 to the day that the Workplace Authority ceased to exist, which occurred on 31January2010.

As the provisions that require this report only relate to workplace agreements made under the WR Act, this report does not cover enterprise agreements made under the FW Act. Section 653 of the FW Act requires that the next report on agreement making be produced by Fair Work Australia covering enterprise agreements made in the three year period from 1 July 2009.

Types of agreements considered in this report

Under the WR Act there were a number of different types of workplace agreement. These can largely be divided into two types: collective agreements and individual agreements.


Under the Work Choices amendments to the WR Act there were four different types of collective agreement, which are detailed below.

Employee collective agreements were made between an employer and employees whose employment would be subject to the agreement (s.327 of the WR Act). When bargaining for the agreement, the WR Act allowed employees to appoint a bargaining agent (who could be a union official or other suitably qualified person) to represent them in meeting and conferring with the employer about the making or variation of the agreement (s.335). There was no provision in the WR Act for unions to be covered by such agreements.

Union collective agreements (s.328) could be made between an employer and one or more organisations of employees, each of which needed to have at least one member who would be subject to the agreement and whose industrial interests the union was eligible to represent.

Union greenfields agreements (s.329) could be made by an employer that was establishing, or proposing to establish, a new business with a union or unions that would be eligible to represent persons whose employment would likely be covered by the agreement. A greenfields agreement had to be made before any employees were engaged whose employment would be covered by the agreement.

Employer greenfields agreements (s.330) were similar to union greenfields agreements, in that they covered future employees of a new business, but were effectively made by the employer alone. The agreement could be made in writing by the employer and did not need to be agreed by another party.

Each of these types of agreement could also be made as a multiple-business agreement to cover any combination or combinations of one or more single businesses or one or more parts of single businesses (s.331). However, under section 343 of the WR Act, an employer could not lodge a multiple-business agreement unless authorisation to make a multiple-business agreement had been granted by the Workplace Authority Director under section 332 of the WR Act.

While the FW Act commenced operation on 1 July 2009, some agreements made under the WR Act could still be lodged after this date. Employee collective, employer greenfields and union greenfields agreements that had been made and approved before 30 June 2009 could be assessed by the Workplace Authority and come into operation if they were lodged within 14 days after being made. Section 4, Schedule 8, Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 Union collective agreements that had made been made before 30 June, i.e. agreed to by the employer and union, could be lodged until 30 September 2009, thus allowing time for employees to approve the agreement. Regulation 4.01, Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009

Pre-reform certified agreements and variations

Certified agreements made under sections 170LJ and 170LK of the WR Act prior to the Work Choices amendments i.e. pre-reform certified agreements, as defined by Schedule 7 of the Workplace Relations Act 1996 (as amended by the Work Choices amendments) correspond, respectively, most closely to union and employee collective agreements made under the Work Choices amendments. Unless otherwise noted, these agreements are simply counted as union or employee collective agreements in this report.

Greenfields agreements made under the WR Act prior to the Work Choices amendments were limited to the equivalent of union greenfields agreements. Where this report includes data about agreements that were current in the reporting period, pre-reform greenfields agreements are counted as union greenfields agreements.

Section 2A of Schedule 7 of the WR Act, as amended by the Transition to Forward with Fairness amendments, provided that employers and employees or unions could agree to vary and extend certain pre-reform certified agreements (i.e. agreements made prior to the introduction of the Work Choices amendments to the WR Act). These variations are also considered in this report and unless otherwise noted are counted as if they were new agreements approved in the relevant period. This is because, unlike most variations to collective agreements, these variations often substantially modified the wages and significantly extended the operating period of the original agreement.


Under the WR Act an AWA could be made between an employer and an individual employee.

From 28 March 2008, the Transition to Forward with Fairness amendments prevented the making of new AWAs and allowed, instead, for the making of ITEAs (in certain circumstances). Where numbers of individual agreements approved in the entire reporting period are considered as a whole, AWAs and ITEAs are counted together.

Agreements not considered in this report

While the FW Act came into operation during the reporting period, this report does not cover enterprise agreements made under it. This report only covers workplace agreements made under the WR Act, while enterprise agreements made under the FW Act will be considered in a future report on agreement making prepared by Fair Work Australia (s.653).

This report does not consider agreements, whether collective or individual, that have not been made in accordance with the WR Act. Such agreements include individual (common law) contracts, collective agreements that were made but not certified by the Australian Industrial Relations Commission (AIRC) or approved by the Workplace Authority and side deeds made between a union and an employer in parallel to a collective agreement.

Legislative developments in the reporting period

Due to significant amendments made to the WR Act during the reporting period, data in this report is considered in the light of three significant regulatory regimes.

The amendments to the WR Act made by the Workplace Relations Amendment (Work Choices) Act 2005 took effect from 27March2006 and were in place at the start of the reporting period.

The amendments to the WR Act made by the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 were introduced into the House of Representatives on 28 May 2007 and took effect on 1 July 2007. However, the Act provided that agreements lodged on or after 7May2007 would be tested against the fairness test.

The amendments to the WR Act made by the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008, which took effect on 28 March 2008, remained in place until 30 June 2009. While the FW Act commenced on 1July 2009, the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 provided that parts of the WR Act relevant to this report remained in operation after 1 July 2009, including the ability to make ITEAs, lodge collective agreements that had been bargained before 1 July 2009 and, in certain circumstances, vary and extend pre-reform collective agreements.

Work Choices amendments to the Workplace Relations Act 1996

Until 6 May 2007, the making of workplace agreements was governed by the Work Choices amendments to the WR Act.

Making of agreements

Under these amendments, workplace agreements operated from the date of lodgement with the Office of the Employment Advocate (OEA). The Act did not require the OEA to assess the content of workplace agreements when they were lodged. However, it was empowered to consider the content and remove any prohibited content. Section 359, Workplace Relations Act 1996 (as at 27 March 2006)

Division 4 of Part 8 of the WR Act set out several pre-lodgement procedures that an employer needed to follow when making a workplace agreement. These included providing the eligible employee or employees with a copy of the agreement and the relevant information statement (produced by the OEA) at least seven days before they approved the agreement and seeking the approval of the eligible employee or employees. The WR Act allowed employees to waive the seven day ready access period.

Content of workplace agreements

Under the Work Choices amendments, there were no legislated content that agreements were required to include. The Act provided instead that if an agreement did not include a dispute settlement procedure then a model dispute resolution term would be taken to be a term of the agreement. Similarly, the Act provided for a legislated nominal expiry date (NED) for agreements that operated if the agreement did not contain one or contained a NED that was inconsistent with section 352 of the WR Act. i.e. five years from the date of lodgement for AWAs, union collective and employee collective agreements and one year from the date of lodgement for union greenfields and employer greenfields agreements.

The Work Choices amendments also provided for protected award conditions, which would be read into an agreement unless the agreement specifically excluded or modified them. Section 354 of the WR Act defined the protected award conditions as Section 354 also stated that incidental terms or machinery provisions related to these terms were protected award conditions. The Workplace Relations Regulations 2006 did not specify any additional matters under subsection (j).:

(a)rest breaks;

(b)incentivebased payments and bonuses;

(c)annual leave loadings;

(d)observance of days declared by or under a law of a State or Territory to be observed generally within that State or Territory, or a region of that State or Territory, as public holidays by employees who work in that State, Territory or region, and entitlements of employees to payment in respect of those days;

(e)days to be substituted for, or a procedure for substituting, days referred to in paragraph(d);

(f)monetary allowances for:

(i)expenses incurred in the course of employment; or

(ii)responsibilities or skills that are not taken into account in rates of pay for employees; or

(iii)disabilities associated with the performance of particular tasks or work in particular conditions or locations;

(g)loadings for working overtime or for shift work;

(h)penalty rates;

(i)outworker conditions;

(j)any other matter specified in the regulations.

Under the Work Choices amendments there were a number of restrictions on the content of workplace agreements, including matters defined as prohibited content in the Workplace Relations Regulations 2006 and restrictions on calling up terms of other industrial instruments (s.355). Prohibited content was governed by sections 356366 and sections 810811 (which dealt with objectionable provisions) of the Act and Regulations 8.18.9.

Australian Fair Pay and Conditions Standard

The Work Choices amendments introduced the Australian Fair Pay and Conditions Standard (the Standard), which consisted of five statutory minimum conditions of employment, being:

a maximum of 38 ordinary hours per week (plus reasonable additional hours)four weeks paid annual leave (with an additional week for shift workers) for permanent employees10 days paid personal per year (and where this paid personal leave has been exhausted, two days unpaid carers leave per occasion) The Work Choices amendments also provided for two days unpaid carers leave per occasion for casuals. and two days paid compassionate leave per occasionup to 52 weeks unpaid parental leave (including maternity, paternity and adaption) for eligible employees, and guaranteed basic rates of pay and guaranteed casual loadings under an applicable Australian Pay and Classification Scale (APCS), underpinned by the Federal Minimum Wage.

The Standard prevailed over a workplace agreement or contract of employment to the extent that it provided for more favourable entitlements in a particular respect (s.172(2)). Pre-reform awards that existed before the Work Choices amendments came into effect and which already dealt with matters covered by the Standard had to provide for more generous entitlements than the Standard (s.530). For new awards, any matter dealt with by the Standard was not an allowable award matter other than terms about ordinary hours of work (s.516).

Stronger Safety Net amendments

On 4 May 2007, the Australian Government announced that from 7May2007 all new workplace agreements would be tested against a new fairness test, which was formally introduced in the Stronger Safety Net amendments to the WR Act. These amendments, which formally took effect on 1 July 2007, also established the Workplace Authority as a replacement for the OEA. Under these amendments, the Workplace Authority was responsible for receiving lodged agreements and, where applicable, determining if they passed the fairness test.

The fairness test was applied to all collective agreements and to individual agreements where:

the employee covered received a gross basic salary of up to $75 000 per annumwhere the employer and one or more employees covered by the agreement would otherwise have been covered by an award (or worked in an industry or occupation where the terms and conditions of the kind of work performed by the employees would usually be regulated by an award), and where the agreement excluded or modified one or more protected award conditions.

Section 346M of the WR Act, as amended by the Stronger Safety Net amendments, provided that an Australian Workplace Agreement would pass the fairness test if the Workplace Authority Director was satisfied that the agreement provided fair compensation to the employee in lieu of the exclusion or modification of the protected award conditions. In the case of a collective agreement, the Workplace Authority Director had to be satisfied, that on balance, the collective agreement [provided] fair compensation, in its overall effect on the employees whose employment [was] subject to the collective agreement in lieu of protected award conditions.

This provision had the effect that a collective agreement could provide a benefit to some employees but not others in lieu of protected award conditions, as long as the agreement overall provided fair compensation in lieu of the protected award conditions. The Workplace Authoritys Fairness Test policy guide Workplace Authority, Fairness Test policy guide (Version 1.0), 2007, p18 stated in relation to the provisions in s.346M that [a] relevant consideration in this regard will be the categories, number and proportion of employees who may be affected by the exclusion or modification of some or all protected conditions.

The Workplace Authoritys Fairness Test policy guide also explained that it was expected that in most instances fair compensation will be provided by way of a higher hourly rate of pay. Ibid. However, the fairness test also specifically allowed non-monetary compensation to be provided in lieu of protected award conditions and the Policy Guide provided detailed notes about how non-monetary compensation would be assessed under the fairness test.

Transition to Forward with Fairness amendments

On 28 March 2008, the amendment to the WR Act made by the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (the Transition to Forward with Fairness Amendments) came into operation. These amendments introduced several significant changes to the agreement-making framework in the WR Act. In particular, the amendments:

prevented the making of new Australian Workplace Agreements (though AWAs that had already been made could be lodged until 11April2008) allowed employers using AWAs as at 1 December 2007 to offer Individual Transitional Employment Agreements (ITEAs) to new employees and employees already on AWAs replaced the fairness test with a no-disadvantage test for new collective agreements and ITEAs provided that union collective and employee collective agreements would apply from approval rather than from lodgementprovided that a collective agreement or award that applied in the workplace would cover an employee following the termination of an AWA, andallowed parties to extend and vary pre-reform certified agreements in certain circumstances.

Individual Transitional Employment Agreements

There were several differences between AWAs and ITEAs. Most significantly, ITEAs had a nominal expiry date of no later than 31December2009, reflecting their transitional nature, whereas AWAs could have a nominal expiry date of up to five years from the date they were lodged. This change enabled ITEAs to be unilaterally terminated by either the employer or the employee once the full agreement-making provisions of the FW Act commenced operation on 1January2010, in order to encourage a move from individual to collective agreements under the FW Act. Though the Fair Work Act 2009 ultimately commenced operation on 1 July 2009

While not provided for in the legislation, when the Hon Julia Gillard MP, Minister for Employment and Workplace Relations, introduced the Bill into Parliament on 13February2008 she announced that as of that day no new AWAs would be entered into in the Australian Public Service. The Hon Julia Gillard MP, Second Reading Speech Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008, 13 February 2008 (House of Representatives Hansard which can be found at www.aph.gov.au/hansard/reps/dailys/dr130208.pdf" www.aph.gov.au/hansard/reps/dailys/dr130208.pdf)

No-disadvantage test

Under the NDT, a workplace agreement was compared with the entirety of any reference instrument, rather than with the more limited set of protected award conditions. Notably, severance pay and long service leave were not protected award conditions and thus were not considered within the scope of the fairness test. In addition, a collective agreement would not pass the NDT if any employee was disadvantaged compared with the award, whereas an agreement could pass the fairness test if some employees were disadvantaged.

Under the NDT, while collective agreements were tested against a relevant award, ITEAs were tested against any relevant collective agreement or workplace determination, or against the award if there was no relevant collective instrument.

Economic context

The major economic challenge faced by the Australian economy during the reporting period was the global economic downturn in 200809. Prior to the global economic downturn, and during the first half of the reporting period, the Australian economy experienced solid economic growth and strong labour market conditions fuelled by the resources boom. During this period, wages growth was strong, particularly in industries associated with mining and construction activity. The strong wages growth and higher fuel prices in the first half of the reporting period also contributed to inflationary pressures.

During the second half of the reporting period, the Australian economy faced a number of significant economic challenges associated with the global economic downturn. These included slower Gross Domestic Product (GDP) growth, lower employment and rising unemployment. Consistent with slowing economic conditions, wages growth slowed and inflationary pressures eased.

Growth and employment

Growth

While economic growth has slowed compared to earlier in the decade, Australia maintained above average growth compared with other Organisation for Economic Co-operation and Development (OECD) member countries. OECD, Comparison of Gross Domestic Product (GDP) for OECD member countries, 06/04/2010, www.oecd.org/dataoecd/48/4/37867909.pdf Indeed, Australia was one of the few OECD countries to escape recession following the global economic downturn.

Chart 1.1 shows that with strong world economic growth and large increases in commodity prices, the Australian economy grew strongly at 4.2percent over the year to the December quarter 2007 Chain volume measure, seasonally adjusted. despite effects from the severe drought. However, growth in GDP slowed to 1percent over the year to the December quarter 2008 as the global economy went into deep recession. The Australian economy performed better than expected with GDP growing at 2.8percent over the year to the December quarter 2009, seasonally adjusted.

Chart 1.1: Annual percentage change in GDP (chain volume measure), 1989to2009

Source: ABS, National Income, Expenditure and Product, Cat. No. 5206.0, March quarter 2010, seasonally adjusted data

The image of Chart 1.1has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. There is a written description of Chart 1.1 provided before the removed image.

Employment

Against the backdrop of surging commodity prices stemming from the mining boom, economic and labour market conditions in Australia were exceptionally strong over the year to September 2007, with employment (seasonally adjusted) increasing by 249600 (or 2.4 per cent) over the period (see Chart 1.2).

Labour market conditions, while still strong, eased somewhat over the following year, with employment increasing by 191300 (or 1.8 per cent) between September 2007 and September 2008. Over the same period, full-time employment increased by a robust 167300 (or 2.2percent), while part-time employment rose by just 24000 (or 0.8percent).

However, at the onset of the global economic downturn in September 2008, economic and labour market conditions in Australia deteriorated sharply. As a result, employment increased by just 13100 (or 0.1 per cent) over the year to September 2009. Over the same period, full-time employment fell by 150 400 (or 1.9percent), although this was offset by a strong increase in part-time employment, up by 163400 (or 5.3per cent). The rise in part-time employment during the global economic downturn reflects, in large part, the fact that employers first cut back on employee hours in an attempt to avoid redundancies and retain staff.

In terms of gender breakdown, over the year to September 2009, female employment increased by 37200 (or 0.8per cent), while male employment fell by 24 200 (or 0.4percent). This reflects, at least to some extent, the disproportionate impact the global downturn had on the male dominated industries of Manufacturing, Construction and Mining.

Despite the impact of the global downturn, the Australian labour market has held up much better than expected and has displayed remarkable resilience, particularly during the latter half of 2009. For instance, between September 2009 and December 2009 a cumulative increase in employment totalling 101500 was recorded.

Chart 1.2: Unemployment rate (per cent) and annual employment growth (per cent), December 1999 to December 2009

Source: ABS, Labour Force, Australia, Cat. No. 6202.0, May 2010, trend data

The image of Chart 1.2 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. There is a written description of Chart 1.2 provided both before and after the removed image.

Unemployment

In line with the robust economic and labour market conditions at the time, the level of unemployment fell over the year to September 2007 by 42300 (or 8.3percent), while the unemployment rate declined by 0.5 percentage points to stand at 4.2 per cent in September 2007 (see Chart 1.2).

The following year, however, as labour market activity began to ease, the level of unemployment began to rise, increasing by 19700 (or 4.2percent), while the unemployment rate increased slightly, to stand at 4.3 per cent in September 2008.

At the onset of the global economic downturn, the level of unemployment rose sharply, increasing by 166800 (or 34.2percent) over the year to September 2009. Similarly, the unemployment rate rose by 1.4percentage points to stand at 5.7 per cent in September 2009 (before reaching a peak of 5.8percent in October 2009).

However, between September 2009 and December 2009 the level of unemployment declined by 19800 (or 3.0per cent) and the unemployment rate fell by 0.2percentage points to stand at 5.5 per cent in December 2009, reflecting the clear improvement in the Australian labour market. Despite this, 147 000 (or 30.1per cent) more Australians were out of work in December 2009, compared with the commencement of the global economic downturn in September 2008.

The impact of the slowdown in Australia was experienced unevenly across various cohorts, as labour market conditions for certain vulnerable groups deteriorated as a result of the global recession. Young people, in particular, have suffered disproportionately, as they generally have less experience and training and are more likely to be employed in lower skilled jobs, which are often more precarious. Indeed, the youth (1524 years) unemployment rate increased significantly as a result of the global recession, from 8.7 per cent in September 2008 to a high of 12.2per cent in June 2009, although it subsequently declined to stand at 11.3 per cent in December 2009.

It is also worth noting that labour market conditions for mature-age (45 years and over) workers weakened during the global recession. For instance, the mature-age unemployment rate rose from 2.9 per cent in September 2008 to a high of 3.8 per cent in March 2009 (in original terms), although it improved over the remainder of 2009 to stand at 3.4 per cent in December 2009 (and remained well below the comparable rate for prime-age workers (2544 years), of 4.3percent in December 2009).

However, once mature-age people become unemployed, they often encounter considerable difficulties securing subsequent work. The average duration of unemployment for mature-age people increased significantly between September 2008 and September 2009, up from 47weeks to 65 weeks. This compares with prime-age workers, where the average duration of unemployment declined from 37weeks to 31weeks over the same period.

Working hours

Aggregate monthly hours worked

Australian Bureau of Statistics (ABS) estimates of aggregate monthly hours worked measure the total number of hours worked by employed persons in a calendar month. These measures complement other labour market indicators such as employment and unemployment to show the impact of the global economic downturn on the Australian labour market.

Chart 1.3 shows that over the longer term, total aggregate monthly hours worked have generally trended upwards, peaking in July 2008. Historically, economic downturns in Australia have been associated with decreases in aggregate monthly hours worked. This is evident in the recessions of the early 1980s and 1990s, and also following the bursting of the technology bubble in the early 2000s. The most recent downturn was no exception.

During the economic downturn, anecdotal evidence shows that many employers reduced staff working hours as an alternative to job shedding with total hours falling by 2.4 per cent from July 2008 to June 2009. Aggregate total monthly hours rose again in the latter half of 2009, in line with the emerging economic recovery.

Chart 1.3: Aggregate total monthly hours worked, 1979 to 2009

Source: ABS, Labour Force, Australia, Cat. No. 6202.0, March 2010 (trend data)

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Chart 1.4 and Chart 1.5 below show the trend estimates of full-time and part-time aggregate monthly hours worked. The estimate of full-time aggregate monthly hours worked displays a similar trend as that for total aggregate monthly hours worked, with the impact of the global economic downturn primarily reflected in the reduction of full-time hours. The trend estimate of fulltime aggregate monthly hours worked peaked in July 2008 and fell by 3.3per cent from the peak to July 2009 before rising again.

There has been a continuing upward trend in the estimate of part-time aggregate monthly hours worked. While full-time aggregate monthly hours worked fell between July 2008 and July 2009, part-time hours rose by 3.5percent during the same period.

Chart 1.4: Aggregate full-time monthly hours worked, 1979 to 2009


The image of Chart 1.4 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description of this chart is provided in the text before the removed image.

Chart 1.5: Aggregate part-time monthly hours worked, 1979 to 2009


The image of Chart 1.5 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description of this chart is provided in the text before the removed chart.

Average actual hours worked

The average hours worked by full-time employees stood at 40.3 hours per week (12 month average to November 2009), down from an average of 40.7 hours per week over the year to November 2008. It is important to note that over the longer term, average hours worked by full-time employees have been steadily declining since reaching a peak of 41.6 hours in mid-2000 (12 month average to August 2000) (see Chart 1.6 below).

Chart 1.6: Average actual hours workedfull-time employees, 1985 to 2009

Source: ABS, Labour Force, Australia, Detailed, Cat. No. 6291.0.55.003, February 2010

The image of Chart 1.6 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description of the chart is provided in the text before the removed image of the chart.

As shown in Chart 1.7, the average hours worked by part-time employees stood at 17.2 hours per week (12 month average to November 2009), compared with an average of 17.3 hours per week over the year to November 2008. In comparison to full-time employees, the average hours worked by part-time employees have been steadily increasing since the mid-1980s.

Chart 1.7: Average actual hours workedpart-time employees, 1985 to 2009

Source: ABS, Labour Force, Australia, Detailed, Cat. No. 6291.0.55.003, February 2010


Productivity

A principal object of the WR Act was to encourage the pursuit of high employment, improved living standards, low inflation and international competitiveness through higher productivity and a flexible and fair labour market.

Workplace bargaining allows firms and workers to link wage increases with productivity improvements.

Trend labour productivity

Chart 1.8 shows that trend labour productivity in the market sector rose by 1.5percent over the year to the December quarter 2007. Trend labour productivity in the market sector slowed to 0.6percent over the year to the December quarter 2008 but picked up again over the year to the December quarter 2009, increasing by 2.3 per cent. These annual rates should be interpreted with caution as productivity estimates are volatile over the short term.

Chart 1.8: Annual percentage change in trend labour productivity in the market sector (GDP per hour worked in the market sector), 1995 to 2009

Source: ABS, National Income, Expenditure and Product, Cat. No. 5206.0, March quarter 2010, trend data

Notes:

(a) With the introduction of ANZSIC 2006, quarterly data on labour productivity in the market sector now commences in the September quarter 1994. Therefore the first quarterly and annual increase values are for the December quarter 1994 and the September quarter 1995 respectively.

With the introduction of ANZSIC 2006, the market sector is now defined by the ABS as industry divisions AN, R and S; namely: Agriculture, Forestry and Fishing; Mining; Manufacturing; Electricity, Gas, Water and Waste Services; Construction; Wholesale Trade; Retail Trade; Accommodation and Food Services; Transport, Postal and Warehousing; Information Media and Telecommunications; Financial and Insurance Services; Rental, Hiring and Real Estate Services; Professional, Scientific and Technical Services; Administrative and Support Services; Arts and Recreation Services; and Other Services. In other words, it consists of all employing industries except Public Administration and Safety; Education and Training; and Health Care and Social Assistance (divisions O, P and Q).

(b) Quarterly and annual rates of labour productivity are prone to volatile and cyclical effects and are often revised in subsequent releases as more information becomes available.


Productivity cycles

The most reliable estimates of productivity growth over an extended period are those based on productivity growth cycles.

Year-to-year changes in measured productivity may reflect changes that are conceptually distinct from the notion of productivity. In particular, changes in the degree to which businesses are utilising their capital stock would ideally be recorded as changes in the capital services inputs. As there is insufficient information to implement such an adjustment, it is assumed for the purpose of measurement that this capital is utilised at a constant rate. This means that year-to-year changes in estimates may not be truly indicative of a change in productivity. By analysing average productivity statistics between growth cycle peaks, the effects of some of these influences can be minimised, allowing better analysis of the drivers of growth in different periods.

Productivity growth cycle peaks are determined by comparing the annual multifactor productivity estimates Multifactor productivity estimates are indexes of real GDP per combined unit of labour and capital. with their corresponding long-term trend estimates. The long-term trend estimates are calculated using an 11-term Henderson moving average of the original, annual indexes. The peak deviations between these two series are the primary indicators of a growth-cycle peak, although the more general economic conditions at the time are also considered. The most recent cycle was for the period 200304 to 200708.

Chart 1.9 below shows that during the most recent growth cycle of 200304 to 200708, annual growth in labour productivity averaged 1.2 per cent. This is 2.1 percentage points below the record average growth of 3.3 per cent recorded over 199394 to 199899 and 0.9 percentage points below the long-term average growth rate of 2.1 per cent. ABS Experimental Estimates of Industry Multifactor Productivity, 2008-09 (Cat. No. 5260.0.55.002), reissued 5 February 2010

While there has been no completed productivity cycle since 200708, average annual growth in labour productivity from the June quarter 2008 to the December quarter 2009 was 2.1 per cent. ABS Australian National Accounts: National Income, Expenditure and Product (Cat No. 5206.0), trend labour productivity (market sector)

Chart 1.9: Labour productivity growth for growth cycles, 197374 to 200708

Source: ABS Experimental Estimates of Industry Multifactor Productivity, 200809 (Cat No 5260.0.55.002)


Recent decline in multifactor productivity estimates

The most recent growth cycle from 200304 to 200708 was the first cycle to record a decline (0.2 per cent) in multifactor productivity. By definition, multifactor productivity estimates are indexes of real GDP per combined unit of labour and capital. Therefore, declines in multifactor productivity are possible when the growth in inputs (labour and/or capital) are greater than the growth in output, as occurred in the 200304 to 200708 growth cycle.

While market sector output recorded relatively strong growth (3.6 per cent), this was also accompanied by strong growth in observed inputsparticularly capital. Labour input grew by 2.4 per cent (second highest on record after the 2.9 per cent recorded for 198485 to 198889 cycle) while growth in capital input was the highest on record (5.4 per cent). ABS Experimental Estimates of Industry Multifactor Productivity, 2008-09 (Cat. No. 5260.0.55.002), reissued 5 February 2010

Wages and price stability

Wages

Real wages growth

Chart 1.10 shows real wages As measured by average non-farm compensation per employee deflated by the implicit price deflator for final consumption expenditurehouseholds from the ABS Australian National Accounts: National Income, Expenditure and Product publication (Cat. No. 5206.0)AusStats spreadsheets 2, 3 and 20. The data is seasonally adjusted. growth over the past decade. Consistent with solid economic growth, real wages grew moderately over the year to the December quarter 2007 and 2008 with growth of 1.3percent and 1.9percent respectively. However, real wages fell by 3.1percent over the year to the Decemberquarter2009, in line with weaker economic conditions flowing from the global economic downturn.

Chart 1.10: Annual real wages growth, 1989 to 2009

Source: ABS, National Income, Expenditure and Product, Cat. No. 5206.0, March quarter 2010, Table 2, Table 3 and Table 20


Wage Price Index

The Wage Price Index (WPI) is the ABS headline measure of wages movements as it excludes changes in the quality of labour and compositional shifts in the labour market. The stability of the WPI relative to other measures, such as Average Weekly Earnings, makes it the preferred indicator of wage trends for the ABS and the Reserve Bank of Australia (RBA).

Reflecting strong labour market conditions, the WPI displayed a strong upward trend since mid-2002. As shown in Chart 1.11, the WPI experienced solid growth over the year to the December quarter 2007 and 2008, increasing by 4.1 per cent and peaking at 4.3 per cent respectively. The slowdown in wages growth became evident in mid-2009 with the WPI growing at its slowest pace in just under 10 years, up by 2.9 per cent over the year to the December quarter 2009. The slowdown in wages growth reflects the lagged response of wages to the global economic downturn.

Chart 1.11: Wage Price Index, 1998 to 2009

Source: ABS, Labour Price Index, Cat. No. 6345.0, March quarter 2010, seasonally adjusted data


Inflation

During the first half of the reporting period, inflationary pressures were strong, with headline inflation increasing by 3.0 per cent over the year to the December quarter 2007 and peaking at 5.0 per cent over the year to the September quarter 2008. As shown in Chart 1.12, headline inflation continued to slow during 2009, reaching a low of 1.3 per cent over the year to the September quarter 2009 before picking up to be 2.1 per cent higher over the year to the December quarter 2009. Headline inflation, however, can fluctuate significantly as it includes volatile items such as fuel, food and vegetable prices. Underlying inflation measures are generally regarded as providing a more stable measure of inflation.

The RBA produces two measures of underlying inflation. They are the weighted median and trimmed mean series. The trimmed mean is calculated by ordering the Consumer Price Index (CPI) expenditure class components by their price change in the quarter and taking the expenditure weighted average of the middle 70 per cent of these price changes. The weighted median is the price change of the component in the middle of this ordering.

Annual underlying inflation (average of RBAs weighted median and trimmed mean measures) has remained above the RBAs 2 to 3 per cent target band since the September quarter 2007, peaking at 4.7 per cent in the September quarter 2008. Although underlying inflation has been gradually declining, the annual underlying inflation rate still stood above the RBAs target band in the December quarter 2009 with a reading of 3.3 per cent.

In line with the global economic downturn, inflation eased over the course of 2009. The moderation in inflation reflects the easing in capacity pressures and moderating labour costs over the latter half of 2009.

Chart 1.12: Inflation, 1989 to 2009

Source: ABS, Consumer Price Index, Cat. No. 6401.0, March quarter 2010


Pay setting developments

The most reliable data relating to the earnings and proportions of employees by methods of setting pay is obtained from the ABS Employee Earnings and Hours (EEH) survey.

This chapter examines the coverage of various types of industrial instruments and the average earnings of employees covered by those instruments as surveyed by the ABS.

In this chapter, unpublished methods of setting pay data for non-managerial employees has been reported so as to facilitate a comparison between 2006 and 2008.

The 2008 ABS EEH publication, while containing data about method of pay setting for all employees, does not present a comparable breakdown of the method of setting pay categories to enable a comparison with published data for 2006. For example, the 2008 publication does not present the proportion of employees who had their pay set by federally registered individual agreements. Accordingly, the method of setting pay data reported in this section for non-managerial employees will differ slightly to those contained in the publication (which relate to all employees).

It should be noted that EEH survey data is based on information relating to a sample of employers and employees for each year and are therefore subject to sample variability. That is, they may vary from the estimates that would have been produced if the information had been obtained from all employers and all employees. This means movements in the earnings data reported between survey years relate to changes in average earnings of a particular group of employees rather than changes in the earnings of an individual employee.

In addition, estimates produced at finer levels of disaggregation may show volatility due to the sample design. The ABS also advises that the EEH survey was not designed as a time series, so caution should be exercised when comparing data between different years.

Coverage by method of pay setting

Chart 2.1 shows the proportion of employees who have their pay set by different types of workplace pay arrangements, as surveyed by the ABS. The data in this section is from the ABS Employee Earnings and Hours publication. The terminology used in the ABS publication is based on the workplace relations environment prior to the implementation of the Work Choices amendments to the Workplace Relations Act. In particular, the survey refers to awards, not Australian Pay and Classification Scales (APCSs). The publication does not differentiate between APCSs, transitional federal awards and state awards but instead refers only to awards, which includes both federal and state awards. To avoid confusion, this report will refer to these employees as award-reliant employees even though the majority of those employees who were covered by the federal workplace relations system had their pay set by APCSs. While the EEH survey records the method by which an employees pay is set, this can be used as a proxy for the coverage of various types of industrial instruments.

One difficulty with this data is that it may overestimate the proportion of employees covered by unregistered individual agreements and underestimate the proportion of employees covered by an award. Many employees who are covered by awards also receive above-award payments, which would most likely be recorded as an unregistered individual agreement. The same is likely true, though to a much smaller extent, if the data is used to estimate the coverage of collective agreements.

Chart 2.1: Workplace pay setting arrangements, all non-managerial employees, May 2006 and August 2008

Source: ABS, Employee Earnings and Hours, Cat. No. 6306.0, May 2006 and August 2008, unpublished data

The image of Chart 2.1 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description of the chart is provided in the text following.

Unregistered individual agreements, which include those employees receiving over-award payments and employees engaged under common law contracts, were the most widespread industrial instrument in both the May 2006 and August 2008 surveys (31.3 per cent and 37.0 per cent respectively), followed by federally registered collective agreements (28.5 per cent and 29.0 per cent). The proportion of the workforce covered by unregistered collective agreements decreased markedly between May 2006 and August 2008 from 3.2 to 0.7 per cent.

Unregistered individual agreements were much more widespread than federally registered individual agreements (Australian Workplace Agreements) with 31.3 and 37.0percent of all non-managerial employees having their pay set by unregistered individual agreements in May 2006 and August 2008 respectively, compared with 3.1 and 2.2percent for federally registered individual agreements. The number of employees under federally registered individual agreements decreased from 228 800 employees in May 2006 to 174 300 employees in August 2008.

The proportion of non-managerial employees relying solely upon awards for their rate of pay has fallen from 21.0 per cent in May 2006 to 18.1percent in August 2008.

Chart 2.2 and Chart 2.3 show that women were more reliant than men on awards. In contrast, men were more likely to be covered by individual agreements (both federally registered and unregistered).

Gender differences in pay setting arrangements largely reflect the different industry composition of employment of men and women. Male-dominated industries such as Mining, Construction and Manufacturing had higher federally registered individual agreement coverage. On the other hand, industries with a high concentration of women such as Accommodation and Food Services, Administrative and Support Services and Retail Trade were the industries with the highest award reliance in August 2008. The decline in award coverage shown in Charts 2.2 and 2.3 for males and females respectively is consistent with the long-term decline in this method of setting pay.

For non-managerial male employees, 29.1 per cent had their pay set by federally registered collective agreements (up from 27.8 per cent in May 2006) and 2.6 per cent were covered by federally registered individual agreements in August 2008 (down from 3.8percent in May2006). For women, 28.8 per cent were covered by federally registered collective agreements (down from 29.1 per cent in May 2006) and 1.7percent of non-managerial employees were covered by federally registered individual agreements in August 2008 (down from 2.4percent in May 2006).

Chart 2.2: Workplace pay setting arrangementsnon-managerial male employees, May 2006 and August 2008


The image of Chart 2.2 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description of the chart is provided in the text above.

Chart 2.3: Workplace pay setting arrangementsnon-managerial female employees, May2006 and August 2008


The image of Chart 2.3 has been removed and replaced with a description of the image to ensure that the information is available to people with various information accessibility needs. The image is included in the PDF version of this publication. A written description is provided in the text before the removed chart.

Table 2.1 shows a number of patterns with regard to award reliance and formal agreement coverage. As this report is concerned with formal agreement making under the WR Act, the following analysis excludes informal agreement making. Award reliance tends to fall as the occupation level becomes more skilled; for example, only 5.0percent of managers and 4.5percent of professionals had their pay set by an award in August 2008 compared with 32.0percent of community and personal service workers, 31.0percent of sales workers and 30.2 per cent of labourers. Federally registered individual agreements were generally not a common method of setting pay but were found across most occupations. Federally registered collective agreements were a common method of setting pay in both survey years and ranged from 20.4 per cent of managers up to 37.4 per cent of machinery operators and drivers having their pay set by these instruments.

Table 2.1: Proportion of non-managerial employees by pay setting arrangement and occupation, May 2006 and August 2008

Awards only

Federally registered collective agreements

Federally registered individual arrangements

%

%

%

2006

2008

2006

2008

2006

2008

Occupation

Managers

7.0

5.0

16.4

20.4

3.4

2.4

Professionals

7.1

4.5

32.2

26.9

1.3

1.4

Technicians and trades workers

20.1

19.8

21.5

23.9

4.3

2.7

Community and personal service workers

39.4

32.0

22.5

26.1

1.6

1.5

Clerical and administrative workers

14.0

11.1

28.0

28.4

3.2

1.9

Sales workers

33.1

31.0

34.6

35.8

4.9

2.4

Machinery operators and drivers

17.0

13.1

33.0

37.4

4.3

4.2

Labourers

30.1

30.2

30.0

32.1

3.2

2.3

All non-managerial employees

21.0

18.1

28.5

29.0

3.1

2.2


As Table 2.2 shows, the method of pay setting varied considerably across industries. Award reliance remained relatively high in some service industries such as Accommodation and Food Services, Administrative and Support Services and Retail Trade. Public sector dominated industries such as Public Administration and Safety and Education and Training had a high proportion of employees under federally registered collective agreements, as did Electricity, Gas, Water and Waste services. The incidence of federally registered individual agreements was highest among non-managerial employees in the Mining and Information Media and Telecommunications industries.

Table 2.2: Proportion of non-managerial employees by pay setting arrangement and industry, May 2006 and August 2008

Awards only

Federally registered collective agreements

Federally registered individual arrangements

%

%

%

2006

2008

2006

2008

2006

2008

Industry (a)

Mining

n/a

1.6

n/a

27.6

n/a

15.0

Manufacturing

n/a

13.2

n/a

27.8

n/a

2.5

Electricity, Gas, Water and Waste Services

n/a

5.9

n/a

37.6

n/a

Construction

n/a

11.2

n/a

25.9

n/a

1.4

Wholesale Trade

n/a

10.0

n/a

10.6

n/a

4.7

Retail Trade

n/a

30.3

n/a

37.6

n/a

1.6

Accommodation and Food Services

n/a

51.8

n/a

18.5

n/a

2.7

Transport, Postal and Warehousing

n/a

9.3

n/a

46.9

n/a

2.8

Information Media and Telecommunications

n/a

6.3

n/a

32.8

n/a

14.6

Financial and Insurance Services

n/a

2.4

n/a

43.5

n/a

2.9

Rental, Hiring and Real Estate Services

n/a

23.9

n/a

9.8

n/a

2.5

Professional, Scientific and Technical Services

n/a

6.9

n/a

8.7

n/a

0.3

Administrative and Support Services

n/a

35.4

n/a

14.4

n/a

2.9

Public Administration and Safety

n/a

3.8

n/a

47.5

n/a

1.6

Education and Training

n/a

8.9

n/a

37.1

n/a

0.6

Health Care and Social Assistance

n/a

17.9

n/a

33.2

n/a

0.2

Arts and Recreation Services

n/a

15.5

n/a

30.4

n/a

2.0

Other Services

n/a

29.7

n/a

7.5

n/a

1.4

All non-managerial employees

21.0

18.1

28.5

29.0

3.1

2.2

Source: ABS, Employee Earnings and Hours, Cat. No. 6306.0, May 2006 and August 2008, unpubli

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