A Full Bench of Fair Work Australia (FWA) has handed down a landmark decision to grant an Equal Remuneration Order to apply to social and community services workers.
The Order will provide increases ranging from about 19 – 41%, phased in via nine annual instalments from 1 December 2012 to 1 December 2020, plus a further 4% loading which is also phased in over the same period. The increases apply to the modern award rates, which are not necessarily the same as current pay rates which still reflect old award pay structures.
The decision of the Full Bench of FWA was by a majority of 4 - 1, with a dissenting decision delivered by one member of the tribunal.
This article outlines
- The key features of the decision;
- Implications for employers in the SACS sector; and
- Implications for community sector employers in other areas such as employment services.
The decision largely meets the claims made in the joint submission of the Australian Services Union (ASU) and the Commonwealth in the final stages of the case. That joint submission represented a compromise on the original union claim, together with funding commitments from the Commonwealth. The compromise on the claim, together with commitments around funding, enabled the claim to be supported by a wide range of employers and peak bodies in the community sector including Jobs Australia.
However, rather than phasing in over 6 years as proposed in the joint submission, FWA has decided that the increases will be phased in over 8 years. This will significantly reduce the short term burden on employers and government funders. We would hope it should ease concerns about the preparedness of state governments to fund their fair share, but we await developments.
FWA has also not agreed to accelerate the phasing in at lower classification levels where the increases are smaller. This also helps to contain costs in the short term.
The implementation of the decision over the next few years should contribute to the sustainability and quality of the SACS sector, by significantly helping employers to recruit and retain skilled and experienced workers.
Some key points about the decision
- The decision covers employees who are classified under the SACS (Levels 2 – 8) or Crisis Accommodation classification schedules of the Social, Community, Home Care & Disability Services Industry Award 2010.
- The final order is yet to be drafted, and the applicant unions have been given 21 days to provide a draft. Until the Order is finalised it is not appropriate to be producing paytables, however some comments can be made.
- The Order will provide for a percentage increase over the applicable modern award rate. This means that as the modern award rate increases via the annual national wage increase (in July each year), the percentage will increase in dollar value accordingly. This ensures the remedy for undervaluation due to gender maintains its value.
- An additional loading of 4% will be payable in nine instalments over the eight years from December 2012 to December 2020. This is a remedy for the impediments to bargaining in the community sector.
- The graduate entry points for 3 and 4 year degrees will each be moved up one pay point within Level 3. This corrects an historical anomaly in the award.
- The Order will permit salary packaging to continue where relevant.
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The percentage increases are on the modern award rates, which is not necessarily the same as the rate that any individual employee is currently paid. This is because the SACS industry is still transitioning from around 47 old awards with different pay and classification structures on to the modern award structure.
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Some employees will receive an increase in July where they transition from a current pay rate that is lower than the modern award, to the higher modern award rate. The ERO increase in December will then apply in full for those employees.
- Other employees whose current pay rates are higher than the modern award will receive the national wage increase in July, but might not receive the full amount, or any, of the ERO first instalment in December. The ERO increase can be absorbed where current pay rates are higher than the rates set by the modern award.
Implications for SACS employers
- The delay in implementation of the ERO, and the lengthy phasing in is a deliberate decision to assist employers and funders to prepare for the financial impact.
- There is no impact on the 2011-12 financial year. Because the ERO only takes effect from December 2012, with only one ninth of the increase in the first instalment, we estimate that the budgetary impact of the ERO for financial year 2012-13 will be in the order of just 2% of the wages bill on average for most employers. The exact amount will depend on the classification levels of employees but will range from zero (where all employees are paid above the modern award rates already) to 2.9% for employees at level 8 who get the largest increase available.
- In addition to the budgetary impact of the ERO, there may be some significant transitional costs for 2012-13. For some employees the current old award rates are less than the modern award pay rates which will apply from July 2012, and for those employees there will be a one-off transitional increase. The effect of this will vary across the states and territories, reflecting different award history.
- We anticipate that in addition to the Commonwealth commitments to funding, most state governments will fund the ERO to at least some extent. Peak bodies will be engaging with state governments around this issue over the coming months. For unfunded programs, employers will have a few years to prepare before the ERO increases start to amount to more than about 5% above current wage rates.
- The immediate task for SACS employers will be to resolve the translation from old classification structures to the modern award classifications by July 2012. For some employers this will be straightforward, but it will be a difficult exercise in other areas.
- Jobs Australia is developing resources to assist employers to transition to the modern award classification structure, and will be conducting workshops around the country – keep an eye out for details in CSIR Alert and on our website.
- In Queensland some employers will continue to bound to pay the higher rates in the Transitional Pay Equity Order that arose from the Queensland pay equity case in 2009, until the national ERO catches up.
- In Western Australia, some employers who are not constitutional trading corporations will not be covered by the ERO but will continue to be subject to the relevant state award.
What does the decision mean for community sector employers covered by other awards, particularly employment services?
1. Despite some fevered speculation in sections of the press, we are not aware of any concrete plans by unions to flow this on to other sectors, although this case now means an equal pay case is a more viable option than it was previously. There may well be further claims, but any follow on claims will take some time to run.
- This case took two years to run, faced significant opposition from private sector employer groups, and required a major commitment of resources by unions.
- Future equal pay cases will still have a high evidentiary hurdle to get over, and FWA has been at pains to ensure that this decision will not be easy to use as a precedent in other industries, by highlighting the unique features of the SACS sector.
2. Due to the delay in implementation, and the lengthy phasing in, the higher wage rates for SACS workers should not create significant pay differentials for at least a couple of years yet.
3. In the medium term, higher wages in the SACS sector has the potential to make other sectors, such as employment services, less competitive in attracting and retaining skilled workers. The pay differential will be more pronounced for experienced frontline workers and managers.
4. Many employment services providers already pay significantly above award and will remain competitive for at least the next few years. However over award payments are not universal in the industry, and employers paying just award rates may start to experience competitive pressure earlier.
5. the Labour Market Assistance Award will be subject to an equal pay case. But we also think that it would be strategic mistake to be content to remain on award rates over the next 4 to 8 years.
6. We anticipate that in the next few years there may be increased pressure to engage in enterprise bargaining. Where employees do not push for bargaining, employers may still need to consider strategies, such as significant over award payments, in order to remain competitive.
7. Organisations that employ workers on a number of different awards in addition to the Social, Community, Home Care & Disability Services Industry Award 2010 may face internal equity tensions as the wage differential develops. Again, this should not be a significant issue in the short term, but may require attention from about 2014.
