Australian master human resources guide [11th edition.] 9781925356991, 192535699X


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Table of contents :
Product Information
1. HUMAN RESOURCE MANAGEMENT IN UNCERTAIN AND CHANGING TIMES
2. STRATEGIC AND SUSTAINABLE HUMAN RESOURCE MANAGEMENT
3. ASSESSING THE HUMAN RESOURCES CONTRIBUTION
4. DIVERSITY MANAGEMENT: A STRATEGIC INITIATIVE BEYOND EQUAL EMPLOYMENT OPPORTUNITY
5. EMPLOYMENT CONTRACTS
6. LAW AND THE EMPLOYMENT RELATIONSHIP
7. AWARDS, WORKPLACE AGREEMENTS AND ENTERPRISE AGREEMENTS
8. THE ROLE OF UNIONS — RIGHT OF ENTRY AND INDUSTRIAL ACTION
9. WORKFORCE PLANNING
WORKFORCE PLANNING
JOB ANALYSIS
JOB DESIGN
10. RECRUITMENT AND SELECTION
11. REMUNERATION MANAGEMENT
12. WORK HEALTH AND SAFETY
13. EQUAL EMPLOYMENT OPPORTUNITY: DISCRIMINATION, HARASSMENT AND OTHER UNLAWFUL BEHAVIOUR
14. BUSINESS IN THE DIGITAL AGE
15. EMPLOYEE CONSULTATION AND INVOLVEMENT STRATEGIES AT THE WORKPLACE
16. IMPLEMENTING CHANGE
17. ETHICS, CORPORATE SOCIAL RESPONSIBILITY AND HUMAN RESOURCE MANAGEMENT
18. LEADERSHIP
19. EDUCATION AND PROFESSIONAL DEVELOPMENT FOR HR PRACTITIONERS
20. LEARNING AND DEVELOPMENT
21. CAREER DEVELOPMENT
22. MANAGERIAL SELF-DEVELOPMENT: A SELF-DIRECTED APPROACH TO DEVELOPING MANAGERIAL TALENT
23. MANAGING PERFORMANCE: ESSENTIAL AND DIFFICULT
24. SOCIAL MEDIA, NETWORKING AND THE WORKPLACE
25. WORK/LIFE BALANCE
26. SKILLS SHORTAGES AND THE AGEING WORKFORCE
27. MERGERS AND ACQUISITIONS — MANAGING THE HUMAN RESOURCES
28. HUMAN RESOURCES OUTSOURCING
OUTSOURCING HR — THE “LAST CRAFT”
PREPARATION FOR HR OUTSOURCING
TRANSITIONING THE HR FUNCTION
A COMPANY’S RELATIONSHIP WITH THE NEW HR PROVIDER
29. MOVING FROM EMPLOYEE TO CONSULTANT
30. MANAGING KNOWLEDGE AND INTANGIBLE ASSETS
31. POLICIES AND PROCEDURES
32. JOB DESCRIPTIONS AND PERSON SPECIFICATIONS
33. MANAGING INTERNATIONAL WORKERS
34. PRE-EMPLOYMENT VETTING
35. INTERVIEWING FOR RECRUITMENT
36. INDUCTION
37. INDEPENDENT CONTRACTORS
38. ANNUAL LEAVE
39. PERSONAL, SICK AND CARER’S LEAVE
40. LONG SERVICE LEAVE
41. PARENTAL LEAVE
PARENTAL LEAVE
MATERNITY LEAVE
PARTNER LEAVE
ADOPTION LEAVE
GENERAL ISSUES
42. OTHER TYPES OF LEAVE
43. NATIONAL EMPLOYMENT STANDARDS
44. SUPERANNUATION
45. INCENTIVES
46. EMPLOYEE RETENTION
47. COACHING AND MENTORING
48. FAIR PERFORMANCE AND CONDUCT MANAGEMENT PROCEDURES
49. MANAGING GRIEVANCES AND CONFLICT
50. BULLYING
51. MISLEADING OR DECEPTIVE CONDUCT IN EMPLOYMENT
LIABILITY OF EMPLOYEES
LIABILITY OF RECRUITERS
LIABILITY OF EMPLOYERS
52. EMPLOYEES AND INTELLECTUAL PROPERTY
53. PRIVACY
54. EMAIL AND INTERNET USE
55. WORKPLACE SURVEILLANCE
OVERVIEW OF REQUIREMENTS STATE BY STATE
56. WORKPLACE INCIDENT NOTIFICATION AND INVESTIGATION
57. HEALTH AND SAFETY RISK MANAGEMENT AND COMPLIANCE
58. PLANNING FOR INCIDENTS IN THE GLOBAL WORKPLACE
59. WORKERS COMPENSATION
60. WORKPLACE COUNSELLING AND EMPLOYEE ASSISTANCE PROGRAMS
61. REDUNDANCY
62. ISSUES WHEN TRANSFERRING EMPLOYEES ON THE SALE OF A BUSINESS
63. UNFAIR DISMISSAL AND FAIR TERMINATION REQUIREMENTS
INITIAL ISSUES TO CONSIDER
HAS THERE BEEN AN UNFAIR DISMISSAL?
MERITS OF THE CLAIM
OTHER APPLICABLE LEGISLATION
REMEDIES
64. TAXATION OF TERMINATION BENEFITS
65. POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEES
66. INTERNATIONAL HUMAN RESOURCE MANAGEMENT
INDEX
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
CASE TABLE
A
B
C
D
E
F
G
H
I
J
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M
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Disclaimer No person should rely on the contents of this publication without first obtaining advice from a qualified professional person. This publication is sold on the terms and understanding that (1) the authors, consultants and editors are not responsible for the results of any actions taken on the basis of information in this publication, nor for any error in or omission from this publication; and (2) the publisher is not engaged in rendering legal, accounting, professional or other advice or services. The publisher, and the authors, consultants and editors, expressly disclaim all and any liability and responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything, and of the consequences of anything, done or omitted to be done by any such person in reliance, whether wholly or partially, upon the whole or any part of the contents of this publication. Without limiting the generality of the above, no author, consultant or editor shall have any responsibility for any act or omission of any other author, consultant or editor.

About Wolters Kluwer Wolters Kluwer is a leading provider of accurate, authoritative and timely information services for professionals across the globe. We create value by combining information, deep expertise, and technology to provide our customers with solutions that contribute to the quality and effectiveness of their services. Professionals turn to us when they need actionable information to better serve their clients. With the integrity and accuracy of over 45 years’ experience in Australia and New Zealand, and over 175 years internationally, Wolters Kluwer is lifting the standard in software, knowledge, tools and education. Wolters Kluwer — When you have to be right. Enquiries are welcome on 1300 300 224 . First published in print....................................October 2001

First published online....................................February 2008

Second edition in print....................................November 2002 This service is also available online and in eBook format. Third edition in print....................................February 2004 Fourth edition in print....................................April 2006 Reprinted....................................September 2006 Fifth edition in print....................................July 2007 Sixth edition in print....................................August 2008 Seventh edition in print....................................September 2009 Eighth edition in print....................................September 2010 Ninth edition in print....................................November 2011 Tenth edition in print....................................October 2013 Eleventh edition in print....................................September 2016

ISBN 978-1-925356-99-1 © 2016 CCH Australia Limited

Published by CCH Australia Limited All rights reserved. No part of this work covered by copyright may be reproduced or copied in any form or by any means (graphic, electronic or mechanical, including photocopying, recording, recording taping, or information retrieval systems) without the written permission of the publisher.

Foreword The way people work is rapidly changing. Companies and employees are increasingly coming to unique arrangements to accommodate issues as varied as late-night international meetings and presentations, to avoiding peak-hour traffic congestion. It is this changing-face of employment relationships — among other things — that makes the Australian Master Human Resources Guide such an invaluable resource in any office environment.

Now in its 11th edition, the Guide has built a reputation as an invaluable guide for professionals on topics across the entire spectrum of the HR role. It is also the product of ongoing collaboration between Wolters Kluwer, Baker & McKenzie lawyers, the Macquarie Graduate School of Management and a number of experts in the HR field. This edition of the Australian Master Human Resources Guide continues its tradition of easy-to-read, comprehensive information in the HR space covering a broad range of topics including: • Employment Law • Awards and Agreements • Contractors • Equal Employment Opportunity • Work, Health and Safety considerations • Workplace bullying • Privacy • Leave entitlements • Social Media and networking The Australian Master Human Resources Guide is part of Wolters Kluwer Master Guide series which includes titles on taxation, business, management, financial planning, GST, superannuation, work health and safety, family law and the environment. I’d like to thank all our contributors for this 11th edition and, in particular, Editor, Michelle Leighton as well as Bryony Binns and Michael Michalandos, Partners at Baker & McKenzie, who gave so much of their time to ensure the Guide you’ve come to rely on delivers the very best information at the time of publication. Scott Abrahams Content Director Wolters Kluwer September 2016

Wolters Kluwer Acknowledgments Wolters Kluwer wishes to thank the following who contributed to and supported this publication: Managing Director: Bas Kniphorst Content Director: Scott Abrahams Head of Content — Books: Alicia Cohen Content Coordinator: Su Yin Ng Editor: Michelle Leighton Contributing Wolters Kluwer writers: Carol Louw, Geeta Shyam, Annelies Herrmann and Rufina Cheung Marketing Executive: Eric Truong Cover Designer: Natalie Liew Operations Manager: Marilou Cortez Production Managers: Kanesh Arumugam, Sangeetha Saseedharan Production Team Leader: Joy Macayan Production Editor: Euneil Don Fernandez Sub-editor: Bernadeth Manalo Indexer: Jonefer Valdes

Author Acknowledgments Baker & McKenzie

Aran Alexander B Econ SocSc (USyd)/LLB (Hons) (USyd) Aran is a Senior Associate in Baker & McKenzie’s Employment and Industrial Law Practice Group. He advises corporate clients on all aspects of employment law with a particular focus on executive employment, business acquisitions and business protection issues. Aran conducts litigation in state and federal courts and tribunals pursuant to industrial law, anti-discrimination law and common law, and regularly provides training and presentations on a range of employment law and industrial relations topics. Before joining Baker & McKenzie, Aran practised for six years in employment and industrial law for various major Australian firms. Genevieve Auld BA, LLB (Hons) (ANU) Genevieve is an Associate in the Employment team at Baker & McKenzie, having joined in 2016. She previously practiced employment and industrial law in private practice and served as a Judge’s Associate at the Federal Court of Australia. Genevieve has also worked in community legal centre service delivery. Bryony Binns BA, LLB (Hons) (UoW), MA (UNSW) Bryony is a Partner at Baker & McKenzie, which she joined as a graduate associate in 2003. Bryony has provided legal and strategic advice to various industry and commercial clients in both litigated and non-contentious areas. She also has experience in advising on employment and human resources issues across the Asia Pacific region for regional corporate clients. Bryony regularly provides training in the areas of equal opportunity and discrimination, and has particular experience in anti-discrimination and change management issues. Ben Burke BA, LLB (Monash) Ben Burke has been a Partner in the Melbourne office of Baker & McKenzie since April 2007. Ben has extensive experience in relation to occupational health and safety regulation, compliance and prosecutions, employment contracts and litigation, redundancy, commercial transactions and other aspects of workplace relations. Before joining Baker & McKenzie, Ben was a partner in the Workplace Relations Group at Corrs Chambers Westgarth in Melbourne. Josh Crook LLB (Hons), BA (Hons) (Monash University) Josh Crook is an Associate with Baker & McKenzie, Melbourne. Josh works broadly in employment law, including assisting clients with executive and non-executive employment contracts, OHS liability, enterprise bargaining, as well as the employment aspects of commercial sales, restructures and acquisitions. Prior to joining the Employment team, Josh spent three years working as a research clerk at commercial legal firms, providing legal research and analysis on a broad range of issues within a full-service commercial practice. Bianca Dearing BEc, LLB (University of Newcastle) Bianca is a Senior Associate in Baker & McKenzie’s Employment and Industrial Law Practice Group, which she joined in February 2009. Bianca advises clients on all aspects of employment law, both contentious and non-contentious, including executive employment contracts, work health and safety liability, the employment aspects of due diligence, enforcement of post-employment restraints and confidential information obligations, redundancy, anti-discrimination law, and state and federal industrial instruments. Bianca also has significant experience in major commercial litigation for a broad range of commercial clients, with a particular focus on employment-related litigation. Stephen Hardy BComm, LLB (Hons) (USyd) Stephen is a Senior Associate in Baker & McKenzie’s Employment and Industrial Relations group. Stephen works on a variety of employment-related matters for a wide range of clients (both local and international) in the banking and financial services, insurance, retail, IT, manufacturing, mining, transport and recruitment industries. He regularly advises on executive contracts; executive remuneration arrangements; dispute resolution; post-employment obligations (protection and enforcement); OHS and WHS liability, prosecutions and associated matters; conducts OHS and WHS compliance reviews; industrial disputes; the employment aspects of due diligence processes in respect of mergers and acquisitions; and harassment, discrimination and bullying issues. Stephen has previously undertaken a secondment to a global retailer, during which he project managed the negotiation of a new enterprise agreement and dealt with day-to-day human resources issues. Stephen has also, more recently, been on a secondment to a multinational organisation within the banking and finance industry where he advised on a wide variety of employment law-related issues (including employment agreements, executive agreements, and day-to-day human resources matters). Samantha Healey LLB (Hons)/BBus (UTS) Samantha Healey is a Senior Associate in the Employment and Industrial Relations team at Baker & McKenzie. She joined the Firm in 2005 and is a Registered Migration Agent (MARN: 0426175). Samantha advises on all aspects of immigration law and acts for a range of local and multinational clients with a variety of commercial requirements. Her range of experience spans from visa processing to providing strategic advice to corporate clients regarding their global mobility requirements. Samantha also advises on immigration compliance issues and works closely with human resources staff in relation to meeting sponsorship obligations applicable to their business. Maria Hurley-Smith BA, LLB (UNSW) Maria is a Special Counsel in Baker & McKenzie’s Employment and Industrial Relations Group. Maria practices in employment and industrial relations law, both contentious and non-contentious, and advises on all aspects of employment law including unfair or unlawful dismissal litigation, redundancy, anti-discrimination law and the making and approval of enterprise agreements. Kerryn Kahler BComm, LLB (USyd)

Kerryn is a Senior Associate in Baker & McKenzie’s Employment and Industrial Law Group, which she joined in May 2006. Kerryn advises on all aspects of employment law, both contentious and non-contentious, including state and federal unfair dismissal litigation, redundancy, anti-discrimination law, collective workplace agreements, and enforcement of post-employment restraints and confidentiality obligations. Prior to commencing with Baker & McKenzie, Kerryn worked as the Associate to a judge in the New South Wales Industrial Relations Commission. Erica Kidston BCom, LLB (University of Tasmania), LLM (University of Melbourne) Erica is a Senior Associate with Baker & McKenzie and specialises in taxation with a focus on advising on employment taxes and employee share schemes. Erica regularly advises Baker & McKenzie’s global clients on the tax consequences of terminating employees’ employment, fringe benefits tax issues, design and impact of employee share schemes, pay as you go withholding and associated reporting requirements and relocating to Australia. Prior to joining Baker & McKenzie, Erica was a member of Blake Dawson’s taxation group where she worked closely with the Employment and Industrial Relations Group advising on employment-related taxation matters. Brigid Maher BA, LLB (ANU) Brigid is a Senior Associate with Baker & McKenzie, Sydney, and practises in all aspects of employment law with a particular focus on industrial relations, enterprise agreement making, modern award coverage and compliance, and negotiations with trade unions. As a secondee, Brigid has also had significant experience in employee and industrial relations within the media, banking and finance, and manufacturing industries. Brigid regularly provides training in employment, human resources and industrial relations issues. Brigid also has significant experience in employment-related litigation. Kellie-Ann McDade BComm, LLB (Monash) Kellie-Ann is a Senior Associate with Baker & McKenzie, Melbourne, and practises in all aspects of employment law and occupational health and safety law with a particular focus on executive employment issues, employee terminations, employee issues in acquisitions, restructures and occupational health and safety investigations and prosecutions. As a secondee, Kellie-Ann has also had significant experience in the employee and industrial relations department of a major global manufacturing firm. Kellie-Ann regularly provides training in employment, human resources and occupational health and safety issues. Michael Michalandos BA (UNSW), LLB (UNSW) Michael is a Partner at Baker & McKenzie and has practised employment and industrial law for over 15 years at various major Australian firms. Michael acts for a range of clients in industries including banking and finance, telecommunications, insurance, media and entertainment, information technology, and professional recruitment services. Michael regularly speaks on a range of employment law topics at seminars arranged by international conference groups and professional associations. Michael is also a member of the Honorary Editorial Board of the Wolters Kluwer Industrial Law Library and a member of the Editorial HR Expert Panel. Leanne Rich BA, LLB (Hons, 1st Class) (USyd) Leanne is a Special Counsel with Baker & McKenzie, Sydney. Leanne practises in the Dispute Resolution Practice Group, specialising in commercial litigation and dispute resolution, and in competition and trade practices advisory work. Leanne previously practised in the firm’s Employment Law Practice Group, specialising in employment litigation and dispute resolution, prior to joining the Dispute Resolution Practice Group in January 2004. Prior to joining Baker & McKenzie in 2002, Leanne was an Associate to the Honourable Justice Lindgren of the Federal Court of Australia.

Macquarie Graduate School of Management (MGSM) Paul J Gollan BA (Hons) Ind Rel (NSW), MBA (Nott), MSc Econ (LSE), PhD (LSE), FAHRI Professor Paul J Gollan holds an MSc (Econ) and PhD from the London School of Economics and is Professor of Management and Director and Head of Australian Institute of Business and Economics (AIBE) in the Faculty of Business, Economics and Law at University of Queensland. Previously, he was Professor of Management and Associate Dean (Research) and Member of the Faculty Executive in the Faculty of Business and Economics at Macquarie University. He was also a Visiting Professor in the Department of Management at the London School of Economics. He has recently been appointed as a Visiting Professor for Department of Management, Kings College London. He has lectured at a number of universities and colleges throughout the United Kingdom and Australia. He has also previously held a number of Senior Research and Lecturing positions at Macquarie University, University of Sydney, LSE, Imperial College London and Kings College London in the UK. Paul has authored, co-authored and co-edited 14 books in the fields of human resources and industrial relations including Employee Relations in the press (1997), Models of employee participation in a changing global environment — diversity and interaction (2001), Partnership at work: The challenge of employee democracy , Works Councils in Australia — future prospects and possibilities and Employee Representation in Non-Union Firms (2007). He is also a co-editor for The Oxford Handbook of Participation in Organizations (2010, Oxford University Press), and co-editor for Voice and Involvement at Work: Experience with Non-Union Representation (Routledge, New York) and co-author for Strategic human resource management: a critical review (Sage Publications) both due for release in 2013. He has also written over 34 book chapters and 50 refereed journal articles. Paul has published and/or guest editor on employee participation issues for a number of leading academic journals. He is also co-editor (with David Lewin) for the book series Advances in Industrial and Labor Relations . He is also Chief Investigator on a number of recent competitive research grants including Australian Research Council and Federal Government grants. He has also undertaken contract research for a number of private sector organisations.

Currently, the total of his research grants are in excess of $2.3m. Paul is a regular contributor in the media on workplace issues and a regular columnist on workplace issues for the Australian Financial Review with over 200 articles in newspapers. He is also an occasional workplace relations expert for BBC and ABC radio and television, and consulted for a number of private and government organisations on workplace relations, human resource management and organisational change issues. Paul is a Fellow of the Australian Human Resources Institute (AHRI) and Chartered Fellow of Chartered Institute of Personnel and Development (CIPD). In 2008, he was named in the most influential list for “The ones to watch” in Human Resources Magazine Most Influential HR People in the UK. Andrew Heys BA (Hons) (Macq), Politics (Macq), MIntS (Hons) (USyd), PhD (Macq) Andrew Heys serves as a faculty member of the People & Organisations cluster at Macquarie Graduate School of Management (MGSM) where he teaches human resource (HR) management and negotiation: theory and practice. He also serves as the Director, Academic Programs at MGSM. Andrew’s research interests include the role of HR management in driving performance in professional services firms. He also publishes in areas including negotiation, conflict resolution and organisational development (OD). Andrew consults to organisations around Australia and in the Asia Pacific region across a wide range of OD topics. Peter McGraw BA (Leicester), MA (Warwick), PhD (Macquarie) Peter is an Associate Professor and Director of the Executive MBA Program at UTS Business School where he teaches subjects in managing people, leadership and change management. Peter researches and publishes in a variety of areas concerned with management, human resource management and employee relations and is the author of 70 academic articles and book chapters as well as three HR textbooks. Current research interests include HR in multinational companies and expatriate adjustment. Peter is also a well-known consultant and executive educator and has worked with many of Australia’s leading companies running programs in management and leadership. Dr Paul Nesbit BA (Hons) Psychology, MA Sociology, MBA, PhD (UNSW) Paul is a Senior Lecturer in Management at Macquarie Graduate School of Management (MGSM), and teaches in the areas of human resource management and organisational behaviour. His research focus is on the development of leadership, especially the use of selfdirected approaches to personal change and learning.

Wolters Kluwer and External Contributors Lee Beyer BComm Lee was an HR Editor/Writer with Wolters Kluwer from 2004–2006 and was the Editor of: The Hands on Guide — HR Manager , The Hands on Guide — Employers Legal Guide , Online Equal Opportunity Training and HR Skills for Managers Training Kit. Lee has worked as an HR/Employment Law Consultant overseas and as the Executive Director of the Australian Chamber of Commerce in Vietnam (Hanoi). She has worked as a consultant to the federal government and currently works in the finance industry. Rufina Cheung BA, LLB (Hons, USYD) Rufina is the Portfolio Lead for Commercial Law for Wolters Kluwer and works in the area of competition and consumer law. Previously, she was the writer and editor for Wolters Kluwer’s contract law and intellectual property law reporters. Rufina is admitted to the Supreme Court (NSW) and the High Court of Australia, has worked as a lawyer in the NSW Office of the Director of Public Prosecutions (criminal law). She has also worked in the NSW Crown Solicitor’s Office (administrative law) and NSW Attorney General’s Department (Legislation and Policy Division). Dr Lynn Gribble MEd (T&D) (SCU), MLLR (USyd), PhD (SCU) Lynn is a regular contributor to the field of organisational behaviour and, more recently, innovative use of technology for teaching. Lecturing at AGSM and UNSW Business School, Lynn is well researched in understanding how people think and act, and what makes them successful in the workplace. Her research projects have included work in aligning corporate and personal values, understanding the psychological nature of workplace attachment, and transmission of business. She has both academic rigour and practical experience at hand having worked for some of Australia’s largest organisations as a management trainer and coach. She was awarded the Australian Journal of Carer Development (AJCD) research article of the year 2010 and was the recipient of the UNSW ASB teaching excellence award for Masters of Business and Technology (MBT) facilitation 2011 and the UNSW Vice Chancellor’s recipient of teaching excellence award (sessional) 2011 as well as the UNSW Business School Outstanding Technology-Enabled Teaching Innovation award 2014. Annelies Herrmann LLM (USyd), LLB (UNSW), BSW (UNSW) Annelies is a Senior Writer for Wolters Kluwer, working in the areas of employment and industrial law. She is currently the Contributing Editor of the Australian Employment Law Guide. She has contributed to a number of other publications, including as Contributing Editor of the Australian Industrial Law Reports and the Australian Labour Law Reporter. Annelies was admitted to legal practice in 2002. Robin Kramar BCom (Hons) (UNSW), MCom (Hons) (UNSW), PhD (USyd) Robin is a Professor of Management and Chair of the HRM Discipline at the School of Business, Australian Catholic University. She has published in a range of areas including strategic human resource management, sustainable human resource management, diversity management and equal employment opportunity. Her most recent research has been in the area of sustainable leadership and managing sustainable organisations. She is due to run a survey of human resource practices for the fifth time. This survey involves more than 40 countries. Simon Lane MComm (Workplace Relations) (UWS), Post Grad Dip Labour Law (USyd), Dip OHS (Cumberland), Dip HR Mgt (NSyd TAFE) Simon has held senior human resources executive roles in the following Blue Chip Australian Companies: Commonwealth Bank, TNT, Coles Myer Department Stores Group, AWA, Mitsubishi Electric, Australian Airlines, and the State Rail Authority of NSW. His accomplishments include large scale outsourcing and merger/acquisition work, the successful negotiation of over 60 enterprise agreements, the development

of work-based Masters of Business programs, the facilitation of significant cultural and strategic management workshops, and the management of sizable organisational restructures. Simon is based in Sydney and has worked for over 35 years in the field of human resource management. As Managing Director of Offsite Human Resource, he specialises in due diligence reporting, change management, executive development and coaching, development of online and web-based HR solutions, and business strategy facilitation and development. Simon has created several online applications for use in HR — some of which have been trademarked and patented. Simon also provides strategic facilitation of teams, negotiations on enterprise agreements, design and delivery of people management development programs, as well as a wide range of other human resources activities. He has consulted to local, state and federal government bodies over the last 10 years. He is also a Director of five other organisations in Australia, the United Kingdom and the United States. Simon is a member of the American Society of Training and Development, American HR Planning Society, Society for Human Resource Management (UK), Australian Institute of Training and Development, Australian Institute of Management, American Society of Human Resources, NSW Industrial Relations Institute, International Coach Federation and is a Fellow of the Australian Human Resources Institute (AHRI). He is also a member of the Advisory Council to the World HRD Congress. James Leow LLB (Hons), MTax James is co-author of the Australian Master Superannuation Guide . He is also a contributor to other Wolters Kluwer tax and superannuation services, including Australian Superannuation Law & Practice , the Australian Master Tax Guide and Master Financial Planning Guide. Carol Louw BLC LLB (Pretoria), LLM, LLD (UNISA) Carol is the Head of Content — Legal for Wolters Kluwer, working in the areas of employment law and equal opportunity. She is the Contributing Editor of Australia and New Zealand Equal Opportunity Law and Practice , and has also contributed to a number of other publications. Previously, Carol worked as an Employment Law Analyst for CCH New Zealand Ltd, where she was also a Contributing Editor of the CCH New Zealand Employment Law Guide and the author of the Employment Procedures Manual . Before joining Wolters Kluwer, she was a Senior Lecturer at the University of South Africa and a member of the South African Industrial Court. Anthea Lowe BA (Hons) Anthea has 30 years’ experience in people management and equal employment opportunity in Australia and the United Kingdom. In early 2001, after 11 years managing the widely respected education, training and publication programs of the Anti-Discrimination Board of New South Wales, she established her own highly successful consulting firm, Anthea Lowe & Associates. Her business focuses on the prevention of workplace bullying, harassment and discrimination, and effective grievance management, The business provides guidance, training and grievance management for the private, public and community sectors. Since 2004, Anthea has been hearing and deciding claims of discrimination and harassment as a general member of the Administrative and Equal Opportunity Division of the NSW Civil and Administrative Tribunal, (previously the Administrative Decisions Tribunal of NSW). She is also a member of the Australian Human Rights Institute and a past member of the New South Wales Law Society Equal Opportunity Committee. In 2001, Anthea published the first comprehensive set of Australian guidelines on preventing workplace bullying and harassment. Glenn Martin MEd (Online Education), BBus (Hons) Glenn is a writer and lecturer on human resources with a particular interest in business ethics, training and development, and leadership. He has been a contributor to Wolters Kluwer publications for over 15 years. He is the author of several books, including Human Values and Ethics in the Workplace. He currently lectures at Jansen Newman Institute and works as an instructional designer for online courses at The College, Western Sydney University. His two websites are www.ethicsandvalues.com.au and www.glennmartin.com.au. Shaun McCarthy BCA, Dip Soc Sci (Psych) Shaun is Chairman of Human Synergistics Australia and New Zealand — a member of the Human Synergistics International group. With a strong research base, Human Synergistics’ core purpose is changing the world — one organisation at a time. Human Synergistics leads the world in the measurement of human behaviour at the individual, group and organisational levels and the development of consequent strategies for organisational transformation. Shaun has been active in organisational development consulting for over 30 years and specialises in helping organisations build the connection between leadership, culture and performance. He has worked in leadership development and cultural transformation projects in a wide variety of organisations in many different countries. Jeanetta Munro BA Arts (Monash University), Strategic HR (Insead/AGSM) & Graduate Diploma Business Jeanetta is the Director of JJ People and has extensive industry experience and practical application of organisational change in businesses across Australasia. JJ People provides tailored outsourced HR solutions as well as specific leadership development to leaders who seek not only to be strategic but nimble and creative in adapting themselves and their business successfully to change. Polly Parker PhD (Auck) Polly is Management Cluster Leader at the University of Queensland’s Business School, Brisbane, Australia. Polly teaches leadership development to MBA and Executive Education students. Her PhD (University of Auckland, New Zealand) is on career communities. Polly has a lifelong interest in teaching and learning which she has applied in both academic and corporate settings. She is the originator and co-developer of the Intelligent Career Card Sort which is used worldwide. Polly’s research and practice is in career management and leadership development — particularly in the intersection of the two. A particular focus is peer coaching which emphasises her relational approach to development. Professor John Rodwell BA (UQ), PGDipPsych (UQ), GCHE (Mq), PhD (QUT)

Professor John Rodwell joined Australian Catholic University (ACU) from Deakin University, after having been at Macquarie University. Prior to Macquarie University John was based in London as a manager and the head of analytics (CRM, data mining) in the credit cards division of a large retail bank in the United Kingdom. John’s work primarily focuses on healthcare management building on successful applied research relationships with Catholic as well as forprofit and public sector healthcare organisations, with an aim towards developing a body of applied knowledge informing an evidence-based approach to healthcare management. More broadly, John’s research and consulting work has looked at the best ways of managing a modern workforce (including ageing workforce issues), employee engagement and work stress, with an aim towards making healthier, more productive workplaces and preventing employee turnover. His strategy research has focused on knowledge management, especially human resources management, in both the private and public sectors. Richard Rudman BA (Auck), MPP (Well) Richard is a Consultant and Writer in human resources management, employment relations and related areas. He has extensive experience of all aspects of human resources management in both corporate and advisory roles, in the public and private sectors. Richard has taught in the business schools at Victoria University of Wellington and Massey University, and led a number of other executive development programs. He has also addressed many international HR conferences. Richard has written widely on human resources and other management topics. His books include Human Resources Management in New Zealand (2010, 5th edn, Pearson Education, Auckland), the annual New Zealand Employment Law Guide (CCH New Zealand, Auckland), and Performance Planning and Review (2003, 2nd edn, Allen & Unwin, Sydney). He was a Contributing Editor to the Wolters Kluwer subscription services Human Resources Management and Managing Training and Development , is the author of the CCH New Zealand series HR Manager and Workforce Manager . Richard is a Life Fellow of the Human Resources Institute of New Zealand. Geeta Shyam LLB (Hons) Geeta is an Editor and Writer at Wolters Kluwer and works on a number of work health and safety (WHS) products. Geeta has a passion for WHS and has been writing and editing in this area for over five years. Michael Toten BComm (Industrial Relations) (Hons) Mike is a freelance Writer and Consultant specialising in human resources management. He has over 30 years’ experience in writing and editing in this field, the majority of it obtained at Wolters Kluwer, where he was the Editor of various loose-leaf services, including Human Resources Management and Recruitment and Termination Guide. He has also had almost 1,000 articles published on the websites WorkplaceInfo and WorkplaceOHS over the past decade. Karen van Druten MBA (AGSM) Karen is a Consultant, Facilitator, Executive Coach and Academic. She has over 30 years of experience in executive management and senior human resources roles, including 15 years specialising in change management, leadership effectiveness and developing high performance, values-based cultures. As managing director of her own company she consults to businesses of all sizes and designs customised solutions that effect people and performance. Karen is a Consultant across both the private and public sectors with clients including Air New Zealand, Siemens, Rio Tinto, QBE & QBE Mercantile Mutual, Coca-Cola Amatil, and the Australian Federal Police. Karen has completed research studies in Global Leadership at MGSM and holds a Masters of Business Administration from the AGSM and a Graduate Certificate in Management from Bond University. She is an AHRI Fellow and a graduate member of AICD. She is accredited in Genos EI, AMA Disc, MBTI, NLP and Human Synergistics & Team Management Systems tools. Karen is also a master facilitator and career coach for executives. She teaches subjects in Strategic Human Resource Management, Leadership, Change Management, Careers and Managing People in Organisations on the AGSM, ACU, Mt Eliza & MGSM MBA/MBA (Executive) programs in Sydney, PNG, Beijing and Hong Kong. She has also been an Adviser/Assessor on the UTS Work-Based Learning MBA. Chris Westacott MBA (CSU), BBus Marketing (UTS), Diploma of Directorship (AICD), Personnel Administration Certificate (Syd Tech) Chris is Managing Director of Realise Performance, a firm providing outsourced HR Support to a range of organisations who need access to specialist HR skills and experience but who do not employ a specialist HR practitioner. Apart from providing general HR support to organisations, Realise Performance undertakes industry remuneration benchmarking for the aged care and community care sectors and provides specialised remuneration advice to a number of its for profit and not-for-profit clients. Chris has extensive experience in HR, particularly in areas such as the development and implementation of major workforce change strategies, governance and strategy, performance management, remuneration, reward and retention, across industries as diverse as financial services, aged care, health, government, research and education, manufacturing and the not-for-profit sector. Chris holds Fellowships of the Australian Institute of Company Directors, the Australian Human Resources Institute and the Australian Institute of Management. Chris is a former chair of the Australian Human Resources Institute Performance and Reward (Remuneration and Benefits) Special Interest Group in NSW. David Werner BSc (Psychology & Communication Studies) (UoW), MSc (Psychology) (UoW), MBA (AGSM), Certified Member AHRI David is a Partner and Asia Pac regional leader for the Ernst & Young People Advisory Services Transactions team. David’s role focuses on supporting clients through corporate change and helps them to overcome the challenges of restructures, outsourcing, due diligence, “Day 1” readiness, and post-transaction integration. David works with a wide variety of clients, including Australian and multinational listed companies, government departments and private equity firms. David has over 15 years’ experience in managing HR projects and teams. He has supported businesses through transactions in both an internal HR and consulting capacity, which gave him an insight into the people-based challenges that organisations face throughout a transaction lifecycle and beyond. Janet Wood BA, LLB, Dip Ed, BLIS

Janet is a freelance legal and business Writer and Consultant, specialising in labour law, workplace relations and general business. She has 24 years of experience writing and editing newsletters, loose-leaf services and books for Wolters Kluwer. Janet has worked on a wide range of publications covering industrial relations, labour law, human resources management, payroll management, workers compensation and schools law. Janet’s clients come from a variety of sectors including publishing, government, industry, health, economics, medical software development, academia, website development, engineering and construction. Janet was a co-author of the book, Independent Contracting: Succeeding as a Contract Professional in Australia , published in 2000 by Pearson Education Australia Pty Ltd.

1. HUMAN RESOURCE MANAGEMENT IN UNCERTAIN AND CHANGING TIMES Editorial information

Professor Robin Kramar Australian Catholic University

This chapter is drawn from research undertaken in the author’s capacity as a staff member of the Australian Catholic University.

¶1-010 Introduction Human resource management (HRM) operates in organisational, economic, political, legal, technological and social contexts. During the last 30 years, there have been major changes in these contexts. HRM practices have been paramount in enabling organisations to adapt to these changes and to deal with evolving and future people issues which impact, or will impact, the organisation. The Global Financial Crisis (GFC) and continuing economic uncertainty pose dilemmas and create tensions for all managers, including human resource (HR) managers and line managers. There have been major shifts in power in the world of work. The wealth of global corporations has grown, so that, in many instances, their wealth exceeds that of many nations. These global corporations operate across political boundaries, which enable them to “escape overall surveillance by particular nation states” (Dunphy et al 2003, p 7) and to influence the management practices of the countries in which they operate (McGraw 2002, pp 205–227). At a national level, governments have chosen to respond to globalisation, the internationalisation of financial markets, increasing competition and technological change by encouraging flexibility in the economy, labour market and organisations. As a driver of economic change, productivity increases, and wealth creation (McGrath 2002, pp 299–301) and entrepreneurship have become increasingly important processes in the global economy. McGrath (2002, p 319) suggests useful metaphors for understanding entrepreneurial activities, including option recognition, uncertainty reduction, exercise and exit. At an organisational level, many managers have chosen to respond by seeking to cut costs through organisational restructuring, downsizing the workforce and redesigning work so it is done when it suits business requirements. At the same time, managers are seeking to communicate directly with employees to engage them in the organisation. They seek to elicit discretionary effort and reward people on the basis of their contribution to organisational outcomes. The explicit identification of organisational values and the use of these as a basis for decision-making and policy formulation have also become increasingly common. This chapter outlines the contexts in which HRM operates and explores some of the contemporary themes in management. It examines some of the ways in which HRM has adapted to changes in organisational and workforce structure and demographics.

¶1-020 Contemporary management themes Today, management is characterised by many emerging and often contradictory themes which represent divisions in management thought. Some of these are: • responsibility and accountability • stakeholders • legal compliance • corporate social responsibility (CSR) • sustainability • triple bottom line • balanced scorecard, and • competitive advantage. Responsibility and accountability to an organisation’s stakeholders are accepted as fundamental requirements of management. However, there is little agreement about what groups and individuals are stakeholders of an organisation, and the nature of an organisation’s responsibility to these stakeholders. Stakeholders can be categorised into two groups, primary and secondary, according to the extent to which they influence the survival of the organisation. Primary stakeholders are essential to an organisation, while secondary stakeholders are not essential, but can influence and be influenced by the organisation (Factor 2000, p 7). Clearly, management must be accountable to primary stakeholders, such as customers and legislative authorities, and take into account their expectations. Some managers might also believe they have an ethical responsibility to secondary stakeholders, such as the community in which the organisation operates. Organisations will vary with regard to who they identify as stakeholders and who they classify as primary or as secondary. There will also be differences in the nature of their responsibility to these stakeholders and, therefore, differences in the measures used to assess organisational effectiveness. Two fundamental measures used to assess organisational effectiveness are: (1) financial measures, and (2) compliance with legislation. Legal compliance implies behaving in ways required by legislative provisions. A range of legislation prescribes the standards of behaviour associated with financial reporting, treatment of employees, working conditions and communication. Equal employment opportunity (EEO), discrimination, work health and safety, workers compensation, superannuation, leave, industrial relations and privacy legislation define part of the legal context of HRM. Managers need to understand their legal obligations so they are able to manage people within the boundaries of the legal system and manage the risk of prosecution, fines and unfavourable publicity. Some organisations adopt a broader view of responsibility than simply legislative compliance and economic responsibility. They regard themselves as having moral responsibilities. They acknowledge that the activities of an organisation are bound by the same moral codes as those required to sustain the good of society (Whetton et al 2002, p 392). An even broader interpretation of an organisation’s responsibility is one where organisations believe they have a responsibility to “do good” in society. CSR involves going beyond merely meeting economic, legal and moral responsibilities, and acknowledges the significance of organisations being good citizens. A conceptual dilemma with CSR involves the justification for undertaking those actions that “do good” for society. The empirical evidence on the relationship between corporate social performance and financial

performance is ambiguous. However, focusing on this financial justification involves using empirical evidence to support a moral argument, and herein lies the dilemma (Whetton et al 2002, pp 373–408). A survey of 4,238 executives in 116 countries revealed that most executives believe corporations should balance their obligations of generating high returns to investors with contributions to the broader public good (McKinsey and Company 2006, pp 41–47). This strong support for social and environmental causes is driven by business concerns, such as profitability or public relations, rather than a genuine concern for social or environmental issues. The most common influences on shareholder value were identified as job loss, offshoring, corporate involvement and influence in the political process, and environmental issues, such as climate change. Managers perceived the role of business in society in traditional terms of respecting the environment, caring for their people through occupational health and safety and providing safe products and services (Pedersen 2008; Blowfield and Googins 2006). Very few managers saw that they had responsibilities for EEO, diversity management, work/life balance, supply chain management, human rights or third world development. They almost all thought responsibilities meant meeting legal responsibilities (Pedersen 2008). Another contemporary theme in management is sustainability. Sustainability can be an outcome of an organisation’s social role and involves creating more than short-term economic benefits for shareholders. Some of the aspects of sustainability are: • human and social outcomes, and • ecological and environmental outcomes. An organisation that is concerned with creating sustainable human and social outcomes could develop some of the following initiatives: • facilitating the accommodation of competing work and non-work responsibilities, respecting that people have a life outside the workplace • creating a workplace that fosters health and limits workplace stress • undertaking to build people’s capabilities, knowledge and skills • valuing individual differences and workplace diversity, and • attempting to influence stakeholders, community groups and governments to pursue practices that are consistent with the organisation’s values (Dunphy et al 2003, pp 62–73). The traditional financial accounting framework has been criticised as being too narrow, because business activities have economic, environmental and social impacts. The triple bottom line approach recognises that organisations add or destroy not only economic value, but also social and environmental value. The Global Reporting Initiative (GRI) is one framework that seeks to report on financial, environmental and social performance in one format. It includes measurement of performance indicators, such as the direct economic impact on customers, suppliers and providers of capital; the environmental impact on water, energy and transport; and the social impact of labour practices, human rights and product responsibility (Global Reporting Initiative 2002). The traditional financial accounting framework has also been criticised because it focuses on past economic performance. The balanced scorecard is one framework that seeks to provide measures of outcomes that track past performance and, at the same time, are able to drive future performance. It provides a framework for linking long-term strategic objectives with short-term actions. The framework is organisation-specific. It links the measures to mission and strategy. Four common groups of performance categories used in the balanced scorecard are finances, internal business processes, customers, and learning and growth (Kaplan and Norton 1996). The concept of competitive advantage has been popular in management for more than 20 years and continues to be commonly used. An organisation “achieves a competitive advantage in a given market whenever it outperforms its competitors” (Cool et al 2002, p 55). Competitive advantage can occur in a

number of different ways. It can occur because of: • lower costs of production • an ability to provide customers with higher perceived benefits, or • a combination of both of these. Sustainable competitive advantage can result from: • organisation-specific resources, such as capabilities, information, knowledge and reputation, or • privileged market positions (created because they do not have the incentive to replicate another organisation’s actions), such as brand proliferation (Cool et al 2002, pp 55–56).

¶1-030 Challenges and opportunities in the HRM environment Changes such as globalisation, deregulation, technology and developments in financial markets have altered the basis for organisational success. During the 1990s, there was an emphasis on downsizing, restructuring and cost reduction. Traditional hierarchies were redesigned in order to become flatter. The span of control for many managers became larger and many managerial positions disappeared. For many organisations, success in the current dynamic environment requires flexibility and adaptability so that emerging opportunities can be grasped. The Strategic Business Unit (SBU) emerged as a popular organisational form. The SBU decentralises operational authority, emphasises accountability for results and reduces levels in the corporate office (Stace and Dunphy 2001). Another emerging organisational form is the strategic network that is represented by joint ventures and alliance partnerships. Some organisations have also focused on their core activities and outsourced “non-core” work to external providers. Transactional work, such as payroll and distribution activities (eg sales), have been increasingly subcontracted out so that organisations manage a network of relationships. Other challenges and opportunities confronting organisations concern the changing demographics of the workforce. Women with family responsibilities, an ageing workforce and generations with different expectations all pose challenges for managers. Changes in demographics The demographic characteristics of the people doing the work of organisations changed dramatically during the last years of the 20th century. The prevailing pattern for much of the 20th century was that men constituted most of the workforce and they undertook predominantly full-time work. This pattern was based on the belief that a man was responsible for providing for the material and economic needs of his family, that is, his wife and children, as evidenced in the Conciliation and Arbitration Commission’s first major wage decision in the Harvester case in 1907. If women did work, it was only when they were single; that is, before they married and had children. It is interesting to note that this belief underpinned the determination of wage rates in Australia for much of the 20th century. The demographic characteristics of a workforce influence the way people are managed. Individuals will have certain preferences about the quantity of work, type of work and their working conditions. These preferences can be influenced by factors such as their life stage, age, relationship status, family responsibilities, racial background, educational qualifications, state of health, household structure and desire to further their education. When men with domestic support made up most of the workforce, and the business environment was relatively stable, it was possible to provide fairly standard, predictable working conditions and management practices. However, in circumstances when the workforce is comprised of people with more diverse personal characteristics and personal demands, and when the business environment is turbulent and rapidly changing, it becomes necessary to consider the impact of these factors on labour supply and demand. This then potentially influences working conditions and management practices. The diversity of the workforce in Australia increased substantially in the latter part of the 20th century. Women, particularly those with children, increased their participation in the labour market. In 2010–11,

57% of women were in the workforce (ABS 2005, 6105.0). The female participation rate was 65.3% (ABS 2012, 4125.0). The growth of female participation has been very strong in the age groups spanning 45–54 years and 55–64 years (ABS 2012, 4125.0). Family responsibilities and women Family structures have also been changing and the traditional breadwinner model referred to above is no longer the norm. Households are becoming smaller and the family structure of a couple with children is becoming less common. In 2006: • 44% of families were a couple with children • 14% of families were headed by a single adult • 40% of families were couples without children, and • 2% were other families (ABS 2008, 4442.0). Household size reflected changes. In 2011: • almost 25% of households consisted of one person, and • almost 72% of households comprised families (AIFS 2013). In 2006, couple families with children made up only 37% of all families. The traditional model of the man in the workforce and the woman and children at home represented only 10% of all families. Much more common was the situation in which both partners were in the workforce: 59% of couples with children conformed to this model. Only 3% of couple families had the woman in the workforce and the man at home (ABS 2006, 6203.0). It is increasingly likely that women with young children are in the workforce. It has been shown that the participation of women has increased as their children increased in age: • 35% of women with children under one year of age were in the workforce • 59% of women with pre-school age children were in the workforce, and • 75% of women with children in the senior years of high school were in the workforce (Pocock 2003, p 72). The traditional “male breadwinner”/carer family model has been replaced by a dual income family model. This model is characterised by full-time male employment and part-time female employment. This model also reflects assumptions made about the distribution of domestic work within households. Women continue to do most of the unpaid work in households. They spend 33 hours a week on housework, child care and shopping. Men spend 17 hours a week on activities such as gardening, lawn, pool care and home maintenance (ABS 2000, 5240.0, p 7). This distribution of unpaid work between men and women is unaffected by the nature of their participation in paid employment. Workplaces have begun to deal with some of the issues associated with enabling employees, particularly women, to manage their career as well as their domestic and work responsibilities. Many workplaces allow for part-time, casual and flexible working hours that enable women to combine these responsibilities, but these arrangements come at a cost. They can be less secure and poorly paid, and may not provide the opportunity for integration into the workplace. They may also offer less opportunity for promotion, and provide less superannuation. Ageing population and workforce Typically, people have tried to combine the carer responsibilities associated with children with their work responsibilities. However, the nature of carer responsibilities is likely to change. The population is ageing and it can be anticipated that many members of the workforce will need to assume responsibility for caring for their aged parents. Rather than exiting the workforce, people taking on this responsibility could seek work arrangements that facilitate the combination of both work and carer roles.

In addition, the ageing of the population has implications for the composition of the workforce. The Australian workforce is ageing, with 38% of the workforce aged 45 years and above. This is an increase of 5% from 2001 (DEEWR 2012, p 5). It is predicted that, as the proportion of older people continues to rise and the proportion of new entrants to the workforce continues to decline, there is going to be a shortage of workers and increasing pressure on the pension system. Employers may, therefore, need to modify their employment practices to accommodate the needs of older employees. See Chapter ¶26 for more information on the ageing workforce. Managing different generations A third demographic feature to be taken into account when managing people is the management of multiple generations. A framework for understanding the attitudes and motivations of different generations, the “generational model”, has been developed. This model assumes that the environment shapes generational identity, and defines different life stages such as: • childhood • coming of age • establishing adulthood • generation in power • empty nesting • retirement, and • old age. Although the concept of generation is loose, it refers to a group of people who can be demographically defined by social trends and have shared experiences. When generations grow up in significantly different environments, their attitudes, behaviours, outlooks and expectations will vary. An idea about the characteristics of a generation can be gained by using social research to construct a big picture out of a series of miniatures. Generalisations are made, and trends and patterns are teased out for each of the generations. Once this is done, it is possible to identify the differences between the different generations. Generations that are currently involved in the workforce are: • baby boomers — this refers to people born between 1945 and about the mid-1960s • generation X — those born between the mid-1960s and the 1970s, and • generation Y — those born between 1980 and 1995. The baby boomers grew up in an era of economic prosperity, stability and the prospect of boundless possibilities. Many people in the baby boomer generation were rebellious in their youth and became conservative in their 30s and 40s. They are optimistic, ambitious, loyal and initially believed employment was guaranteed. Job status and symbols of success are important to them. In the workplace, they focus on process and output. These expectations are very different from those of the members of generation X. People in generations X and Y live in an uncertain, rapidly changing and technologically advanced world. They share many common values and focus on: • meaningful relationships • challenge • living out their values • having a good quality of life

• experiencing sensation • expressing their individuality • wanting to make a difference, and • taking responsibility and being individually recognised (Korn 2001; McKay 1997; Towers Perrin 2001; McKinsey and Company 2001). In the world of work, these people desire: • an egalitarian and non-hierarchical workplace • to be involved and to work as part of a team • meaningful work • regular and informal feedback • opportunities for social interaction • to learn skills • to achieve their dreams in a job about which they are passionate, and • responsibility for what they are doing and for the end product or service. The studies mentioned above (Korn 2001) reported that people in generations X and Y often find the world of work a place of tension. They experience their baby boomer managers as “control freaks”. They believe managers spend too much time politicking and not enough time working and making a contribution. They experience them as two-faced (eg these baby boomer managers “want input but don’t care less what people say or take what they do say into account”). Generations X and Y also believe baby boomer managers are threatened by younger, technologically savvy employees. They also do not condone the view held by baby boomers that you should wait your turn for promotion.

¶1-040 Trends in HRM policy and practice Just as there have been profound developments in the concepts and concerns of management in the last two decades, there have also been significant changes in: • type of work available • industries in which work opportunities exist • hours of employment, and • terms of engagement. Where are the jobs? The structure of the Australian economy has significantly changed during the last hundred years. For instance, in 1910, the agriculture, forestry and fishing industry was the largest contributor to the Australian economy and accounted for the largest component (26%) of the workforce. It now represents only 3% of the workforce. In the 1940s, 33% of employees were engaged in manufacturing; however, although it still employs 945,000 people, this represents only 8% of the workforce. There has been a dramatic increase in knowledge and service work. Service sector work covers a broad grouping of industries, excluding manufacturing, mining, agriculture, forestry and fishing, and electricity, gas, water and waste services. In 1910, 40% of the workforce was employed in service industries. Now, 75% of the workforce is in this sector.

Since the 1980s the fastest growing services have been social services and business services. During the last five years, the highest job growth was achieved in health care and social assistance, professional, scientific and technical services, education and training, mining and construction jobs. Employment declined in manufacturing, information media and telecommunications, agriculture, forestry and fishing, and rental, hiring and real estates service (DEEWR 2012). What are the jobs? The greater demand for highly skilled employees continued just beyond the first decade of this century. During the five years to the end of 2011, over one million jobs were created, and professionals and managers with university degrees accounted for a third of these new jobs. Professionals represent 21% of the workforce. Another occupation with a very strong employment growth was community and personal service workers. This group increased by 22% and represented 10% of the workforce at the end of 2011. Technicians and trades workers, and clerical and administrative workers represent 30% of the workforce, but their numbers grew modestly between 2006 and 2011 by 6.9% and 7.3% (DEEWR 2012). Hours of employment Fred Hilmer (1989) argued that the world of business had changed and that it was imperative for Australian management to change the way they managed and paid people. At the time, this was hailed as preposterous by many commentators. Yet a little more than 20 years later, there has been a movement away from the standard model of working time. The standard working day has been extended to suit the requirements of production or service delivery and, in many respects, these working hours have encroached into what was once regarded as private time (Callus and Lansbury 2002, p 74). This trend has resulted in two features. First, many full-time employees are working long hours. Managers are most likely to be working long hours (an average of 43.3 hours per week) (ABS 2010, 6105.0). Between 1978 and 2010, the proportion of people who worked between 35 and 40 hours declined significantly, from 43% to 30%. During this same period, the proportion of the workforce working over 50 hours increased from 14% to 15%. It is interesting to note that, between 2000 and 2010, the proportion of the workforce working these long hours declined from 19% to 15%. The Fair Work Act 2009 (Cth) established a National Employment Standard of a maximum 38-hour week with hours averaged over a specified period of up to 12 months. Employees can be required to work reasonable additional hours, which provides employers with the possibility of restructuring hours of work to suit the needs of the business. Second, there has been a strong growth in non-standard employment. Increasing numbers of people doing the work of organisations are engaged on contracts other than as full-time, permanent employees. There has been strong growth in employment involving flexible hours, such as part-time, casual and fixedterm work during the last decade of the 20th century (Watson et al 2003). Casual work accounts for almost 20% of employed persons in Australia and, although it has been increasing, the rate of increase is lower than the increase for the entire workforce. Independent contractors accounted for almost 10% of employed persons in 2011, as did business operators. Five per cent of employed persons found their work through labour hire firms/employment agencies, and 23% of these people were paid by the labour hire firm. In 2011, 4% of employees were on fixed-term contracts and almost half of these were professionals (ABS 2011, 6359.0). Between 1992 and 2011 the proportion of employed persons working part-time with leave entitlements more than doubled, increasing from 6% of employed persons to 13% (ABS 2012, 6105.0). During the 21st century, the proportion of employed people working 1–15 or 16–29 hours made up a greater proportion of employed persons than earlier on. Increasing proportions of younger and older workers are working these hours (ABS 2010, 6105.0). There has been an increase in having the work done by people who are not employees. These people are either self-employed or are engaged through an organisation providing labour (eg a temporary employment agency or a labour hire organisation). In many instances, these alternative engagement arrangements provide people with a greater choice about the hours they work; however, this work is usually insecure. According to the Secure Jobs website, insecure work is defined as “poor quality work

that provides workers with little economic security and little control over their working lives”. More than 60% of workers are engaged in insecure work. They have inferior rights, entitlements and, of course, job security to those employees who are in full-time or permanent part-time employment. For more information, see www.securejobs.org.au. Terms of engagement As mentioned previously, one of the developments in workforce structure has related to the increased use of a wider range of engagement contracts other than just full-time employment. These contracts include fixed-term contracts, employment as a part-time employee, and employment as a casual employee. In the past, most rights and obligations in the workplace were associated with these types of contracts. Refer to Chapter ¶5 for more information on employment contracts. People can also be engaged as contractors. In these circumstances, organisations can contract in a person to provide specific services and perform specific tasks (eg a plumber who is engaged to repair a broken pipe). Alternatively, they can engage self-employed people as “dependent contractors”. These people are reliant on predominantly one employer for their work and are engaged on working conditions similar to employees. In addition, work can be done by people who are employed by another organisation, such as an employment agency or a labour hire organisation. Under these arrangements, the agency or labour hire organisation supplies people to a third party. The nature of the hours of work and terms of engagement people have with the employment agency or labour hire organisation can take a variety of forms (eg fulltime, casual or part-time employment).

¶1-050 Trends in HRM concepts Practices and concepts associated with managing people have developed as contemporary business and the structure and demographics of the workforce have changed. In many respects, these concepts reflect interdisciplinary concepts. This interdisciplinary nature of the concepts is not new to HRM. The concept of strategic HRM was developed using concepts from strategic management and HRM. Emerging trends in strategic HRM include: • knowledge management • engagement • intellectual capital • diversity management • work/life balance • family-friendly or “work and family” • stress (and its management) • employee attraction and retention (or “talent management”) • employer of choice • “war for talent” • the psychological contract • employability • managing survivors (eg following a restructure) • virtual workplace

• performance-based pay • performance management, and • HR functions. Knowledge management The changing industrial and occupational structure has been accompanied by a growth in knowledge work. “Knowledge has become the most important factor in economic life. It is the chief ingredient of what we buy and sell, the raw materials with which we work. Intellectual capital — not natural resources, machinery or even financial capital — has become the one indispensable asset of corporations” (Stewart 1997). A keen interest in the management of knowledge has been developing since the mid-1990s. This interest strengthened as it was realised that: • the rapid, continuous change in markets, technology, organisational structures and economies requires organisations and individuals to learn continuously • these changes also require the transfer of knowledge into organisations and the transfer of knowledge within the organisation (eg between functional and disciplinary areas) • knowledge and intangible assets increasingly generate wealth • much organisational knowledge is held in people • knowledge creation and its transfer and application are essential for innovation and transformation, and • technology has the potential for effective knowledge communication, but information systems are unable to capture the knowledge and information that managers require (Quintas 2002, pp 4–8). People are, therefore, at the centre of knowledge management and knowledge creation. They are assets of the organisation and can be regarded as intellectual capital. Once people are regarded as an asset or as capital of the organisation, it becomes important to identify, measure and value the contribution of people to the achievement of strategy and to the value of the organisation. Various frameworks have been developed to measure the value of human or intellectual capital. People management practices can be used to facilitate and enhance innovation and to capture knowledge. These practices can be used to manage the relationship between individuals and groups and the organisation. These individuals and groups could be either within the organisation or external to it. Management practices are also critical for sustaining organisational learning. They can facilitate the transfer of learning from one part of the organisation to another part and so assist the capture of knowledge based on “lessons learned”. Some of the ways in which intellectual capital can be measured and valued are explored in Chapter ¶30. That chapter also provides suggestions on how people can be managed to enhance their intellectual capital and facilitate knowledge management. Diversity, work/life balance, family-friendly programs and stress Diversity management is a people management process that has developed in response to the changing demographics of the workforce, the globalisation of business and the complex nature of organisational forms. Diversity management involves the management of the similarities and differences of people doing the work of organisations so that these management practices enhance the achievement of an organisation’s objectives by building a culture that respects the diversity of these people. For well over 20 years, various forms of legislation have prohibited discriminatory behaviour in the workplace and attempted to create work situations in which people receive equal opportunities for employment and rewards. Diversity management involves more than creating EEO outcomes. It is a wide-ranging management process that recognises differences between people as a source of competitive advantage for the organisation in the product, service and labour market. It acknowledges

that people need to be managed in different ways so that they may be as productive as possible. Almost half of Australian organisations report using formal diversity management initiatives (Kramar 2012). However, when these initiatives are examined, they reflect a very narrow view of diversity that is focused on solving particular people management issues. The most popular policies provide flexible working arrangements and the most often stated outcomes are EEO outcomes. Australian organisations are at an early stage of development in their implementation of diversity management and do not demonstrate an understanding that diversity management involves culture building (Kramar 2012). Equity and diversity are examined further in Chapter ¶4. A work/life balance program is an important component of diversity management. Such a program seeks to enable employees to manage their work and non-work responsibilities so that they are productive at work and still maintain healthy and balanced lives. A work/life balance program acknowledges that: • people have different responsibilities at different stages of their lives • all employees, no matter what their family responsibilities, have non-work responsibilities, and • HR policies can be used to help employees achieve a balance in these responsibilities. Following the federal government’s ratification of the International Labour Organization (ILO) Convention No 156 on “Equal Treatment for Men and Women Workers: Workers with Family Responsibilities”, Australian organisations were encouraged to develop and implement “work and family” or “family-friendly” policies. Flexible working hours, part-time work, job sharing, telecommuting or working from home, use of employee sick days to attend to family commitments, employee assistance programs and relocation services are the most widely used policies. However, these policies tend to exclude people engaged on short-term contracts or as casuals. Work-family or family-friendly policies are concerned with assisting employees with dependent care responsibilities, while a work/life balance program seeks to assist all employees, no matter what their responsibilities. Work/life balance and flexible working arrangements are discussed further in Chapter ¶25. A work/life balance program is not just a “nice” thing to do. More than 16% of men and almost 15% of women report that their work and personal life are never in balance (ABS 2012, 4125.0). Work/life balance is one way of attempting to manage the stress employees feel as a consequence of their experience at work. Workplace stress in Australia is widespread and increasing, with: • employees reporting increasing stress each year (Morehead et al 1997) • one in 10 workers suffering from depression, anxiety, stress and burnout (Long 2000), and • mental health problems caused by work issues resulting in more than $200m in workers compensation payments. The most frequently cited causes of employee stress are: • lack of communication • increasing workload • job insecurity • organisational change, and • poor work organisation (Moodie and Borthwick 1999). The legal and regulatory aspects of health and safety at work are covered in Chapter ¶12. Employee attraction and retention, employer of choice and “war for talent” A number of factors have encouraged employers to become interested in the attraction and retention of employees (or “talent management”). These include:

• an ageing workforce • the recognition that, in knowledge industries, the organisation’s competitive advantage comes from people • increasing turnover rates • the increasing cost of turnover • the globalisation of business, and • a shortage of skilled labour in many areas (stimulated by the above factors). In addition, studies have shown that people from the group known as generation X like to be open to all sorts of possibilities and flexibilities in their lives, including their employment (McKay 1997). Many employers are concerned with developing strategies that will attract people in this generation, as well as implementing policies that will retain them. Policies that are used to attract and retain people can be used to label the organisation as an employer of choice. An organisation that is an employer of choice is one for which people want to work and stay. Organisations with employer of choice status are able to compete effectively for people because they are able to meet their needs and the organisation’s needs simultaneously. Being an employer of choice is regarded as an important strategy in the “war for talent”. In 1998, McKinsey and Company coined the term “war for talent” as a way of referring to the competition between organisations for skilled employees in short supply. People regarded as “talent” have favoured status and power to negotiate terms of employment that suit their requirements. A number of chapters in this Guide are concerned with establishing and developing a workforce, including aspects of attracting and retaining employees. Other chapters also deal with processes associated with securing employees, the psychological aspects of retaining employees, and succession and developmental policies that can assist in retaining employees. Psychological contract, employability and managing survivors The rapidly changing environment within which business operates requires organisations to continually monitor their markets so they can transform their businesses and their structures when the need arises. The restructuring of organisations is often accompanied by the retrenchment and loss of employees. This process has been given a number of names, including “downsizing”, “rightsizing” and “decruitment”. The trend to retrench people has encouraged the application of a number of concepts to inform HR practice. These include: • the psychological contract • employability, and • managing survivors. All people who do the work of organisations have a psychological contract with their employer. A psychological contract refers to the implicit expectations, obligations and promises that the individual and the organisation have of each other: what they are expected to provide and what they expect to receive. A model of the psychological contract can serve as an analytical tool to understand the relationship between HR policies and employee expectations, experience, behaviour and reactions. For example, employees who are employed on a permanent basis in a large organisation could have the expectation of a career as part of their psychological contract. In addition, they will also be expected to display discretionary behaviour that reflects organisational citizenship. In contrast, people who are employed on fixed-term contracts are unlikely to have such an expectation as part of their psychological contract. The increased use of downsizing and organisational restructuring have fostered a change in the psychological contract between employers and employees. It is now less likely for employees to expect to have a long-term relationship with an organisation and, consequently, the prospect of promotion is not

part of the exchange in a psychological contract. Employees are concerned about maintaining their ability to get the “next job”: that is, they are concerned with being “employable” and, consequently, with ensuring they secure the learning, training and work experience necessary to do this (Guest 2001, pp 109–110). When organisations retrench people, they not only have to manage the people departing the organisation, they also have to manage the people who are left behind. People who retain their jobs often suffer a decline in motivation, poor morale and loss of productivity. To sustain productivity, it is essential that strategies are used to manage these people who are known as “survivors”. It is also important to thoughtfully manage the retrenchment process. Outplacement is one way of doing this. The changes to the labour market, as a result of the GFC and ongoing economic instability, indicate that the management of downsizing, management of survivors and the introduction of flexible work arrangements will remain an ongoing and important activity. Organisations might consider deferring recruitment, deploy staff to other positions, ask staff to work fewer hours (eg a nine-day fortnight or a fourday week), or take unpaid leave for a sabbatical, travel or family activities. When companies seek to reduce costs through downsizing to deal with an immediate financial crisis, they then face the later challenge of potential staff shortages when the economy picks up, as well as ongoing staff trust issues. So, a very stressful work situation is often created where this is not managed appropriately. Performance-based pay, performance management and the HR function Increasing competition and the imperative to operate more effectively and efficiently have encouraged the introduction of practices that seek to increase employee performance. Organisations throughout Europe and the United Kingdom have introduced performance management systems as a way of encouraging behaviour that supports organisational objectives (Kramar 2003). Performance-based pay is also increasingly used to reward individuals who have improved organisational performance. Performancebased pay can take a variety of forms (eg merit pay, incentives, profit sharing, employee stock ownership and gainsharing). Developments in technology, strategy and organisational structure have influenced the way the HR function is structured and the way HR activities are undertaken. During the latter part of the 1990s, many of the traditional activities undertaken by HR professionals were devolved to line managers. Training, recruitment and selection and performance management activities were increasingly being done by line managers (Kramar 2006a; Sheehan, Holland and De Cieri 2006). There is evidence that in many large organisations the most senior HR manager is represented on the executive team and this, therefore, involves them in strategy development (Kramar 2012). In addition to traditional and strategic HR activities, HR is also involved in transactional activities (eg record-keeping, pay administration and employee services). There is a trend for these services to be either outsourced to an external provider or, in the case of large organisations, undertaken by shared services. When organisations decentralise their HR function, the administrative costs increase. A shared services unit provides HR services to all sections of the organisation and the costs for providing these services are allocated to the sections based on their use of the services. In addition, technology has been applied to HR activities. Information about organisational policies, employee data and HR developments can be made available through an organisation’s intranet. Activities such as training, performance appraisals and selection can use technology in a variety of ways. Further, an organisation’s website can contribute to the recruitment and attraction process. A study of more than 50 HR and line managers (Kramar 2006b) indicated that, just as HR in 2006 is different in many ways from the management processes 20 years ago, we are starting to see the emergence of other practices and approaches for managing people. The globalisation of business, greater use of technology as a means of doing work, requirements for faster decisions and actions, and the growing awareness of the environmental and social impacts of organisations are challenging HR and line practitioners to develop sophisticated broad skills.

¶1-060 The future It is difficult to imagine that 30 years ago there was no HRM — there was personnel management. HRM represents a distinct way of managing people: it seeks to achieve organisational success through effective management of people and organisational culture.

The senior HR manager is critical in influencing decisions about how to maximise the benefit from people, and line managers are critical in delivering HR policies. However, many of the transactional activities (once the preserve of personnel management) are now done by internal employees, technology or external providers. As the context in which organisations operate continues to change and ideas about management develop, the approach to and the techniques for managing people will also change. Consequently, everyone involved in the world of work will continue to face challenges associated with managing people. It is difficult to predict what will happen in the future. However, the growing importance of Asia, growth in the mining sector and its flow-on effects, the ageing population, the development of new technologies (eg high-speed broadband), and increased focus on environmental efficiency, are expected to influence the workforce. Australia’s four largest export markets — China, Japan, the Republic of Korea and India — will offer Australia the opportunity to provide high quality value-added goods and services in areas such as food, energy, education and tourism. It is anticipated that in the five years to 2016–17, growth of more than 10% will be achieved in the health care and social assistance (26.4%), construction (14.3%), professional, scientific and technical services (11.8%), and mining (11.3%) industries. At the same time, it is expected that growth will occur in all occupational groups; however, professionals (30.7%), technicians and trades workers (17.7%), and community and personal service workers (14.3%) will represent the three areas of highest growth (DEEWR 2012). For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Australian Bureau of Statistics 2012, Australian Labour Market Statistics, Australia, July, cat no 6105.0, ABS, Canberra. —— 2012, Gender Indicators, cat no 4125.0, ABS, Canberra. —— 2011, Forms of Employment, Australia, November, cat no 6359.0, ABS, Canberra. —— 2010, Australian Labour Market Statistics, Australia, October, cat no 6105.0, ABS, Canberra. —— 2009, Labour Force, cat no 6202.0, ABS, Canberra. —— 2008, Family Characteristics and Transitions, Australia, 2006–07, cat no 4442.0, ABS, Canberra. See www.abs.gov.au/AUSSTATS/[email protected]/Lookup/4442.0Main+Features12006-07. —— 2006, Australian Labour Market Statistics, cat no 6203.0, ABS, Canberra. —— 2005, Australian Labour Market Statistics, cat no 6105.0, ABS, Canberra. —— 2002, Australian Social Trends, cat no 4102.0, ABS, Canberra. —— 2000, Occasional paper: Unpaid Work and the Australian Economy, cat no 5240.0, ABS, Canberra. Australian Council of Trade Unions, Secure Jobs, see www.securejobs.org.au. Australian Human Resources Institute 2002, Report Card: AHRI’s Workforce Diversity Survey 2001, AHRI, Melbourne. Australian Institute of Family Studies (AIFS), accessed 5 August 2013, Family Facts and Figures: Australian households, see www.aifs.gov.au/institute/info/charts/households/. Blowfield M and Googins BK 2006, “Step Up: A Call for Business Leadership in Society 2006”, A Boston College Center for Corporate Citizenship Monograph, Boston College Center for Corporate Citizenship, Chestnut Hill, MA. Callus R and Lansbury R 2002, Working Futures, The Federation Press, Sydney. Campbell I 2002, “Extended working hours in Australia”, Labour and Industry, vol 13(1), pp 73–90. Cool K, Costa LA and Dierickx I 2002, “Constructing competitive advantage”, in A Pettigrew, H Thomas and R Whittington, Handbook of Strategy and Management, Sage, London.

Department of Education, Employment and Workplace Relations (DEEWR) 2012, Australian Jobs 2012, Department of Education, Employment and Workplace Relations, Canberra. Dunphy D, Griffiths A and Benn S 2003, Organizational Change for Corporate Sustainability, Routledge, London. Factor A 2000, “Barriers and catalysts associated with environmental initiatives within small and mediumsized enterprises”, doctoral thesis proposal, Department of Organization and Management, Arthur School of Business, Aarhus, Denmark, May 2000, cited in Dunphy et al, op cit, p 68. Global Reporting Initiative 2002, GRI Sustainability Reporting Guidelines, Global Reporting Initiative, see www.globalreporting.org. Guest D 2001, “Industrial relations and human resource management”, in J Storey, Human Resource Management: A Critical Text, Thomson Learning, London. Harvester case, see Ex parte HV McKay (1907) 2 CAR 1, Higgins J, President, 8 November 1907. Hilmer F 1989, New Games, New Rules, Angus and Robertson, Sydney. Kaplan RS and Norton DP 1996, The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, Boston MA. Korn N 2001, “Young blood”, Boss Magazine, The Australian Financial Review, vol 1, August, pp 41–44. Kramar R 2012, “Diversity management in Australia: a mosaic of concepts, practice and rhetoric”, Asia Pacific Journal of Human Resources, 50(2), pp 245–261. —— 2006a, The Cranet-Macquarie Survey on International Human Resource Management, Macquarie University, North Ryde. —— 2006b, “HR in transition”, unpublished report, MGSM, North Ryde. —— 2004, “Does Australia Really Have Diversity Management”, in E Davis and V Pratt (eds), Making the Link 15: Affirmative Action and Employment Relations, CCH Australia Limited, Sydney, pp 19–26. —— 2003, “Diversity management in Australia”, paper for International Human Resource Management Conference, Limerick, Ireland, 4–6 June. Long S 2000, “Work-related mental problems on the rise”, Australian Financial Review, 10 January, p 31. McGrath RG 2002, “Entrepreneurship, small firms and wealth creation; A framework using real option reasoning”, in A Pettigrew, H Thomas and R Whittington, Handbook of Strategy and Management, Sage, London. McGraw P 2002, “The HR function in local and overseas firms: Evidence from the PricewaterhouseCoopers-Cranfield HR Project”, Asia Pacific Journal of Human Resources, vol 40(2). McKay H 1997, Generations, Macmillan, Sydney. McKinsey and Company 2006, The McKinsey Global Survey of Business Executives: Business and Society, no 2. —— 2001, The War for Talent: Organization and Leadership Practice, April. Moodie R and Borthwick C 1999, “All worked up: It’s enough to make you sick”, Australian Financial Review, 6 August, p 3. Morehead A, Steele M, Alexander M, Stephen K and Duffin L 1997, Changes at Work: The 1995 Australian Workplace Industrial Relations Survey, Addison-Wesley Longman, Melbourne. Patrickson M 1998, “Reversing the trend to early retirement”, in M Patrickson and L Hartmann, Managing an Ageing Workforce, Business and Professional Publishing, Warriewood. Pedersen ER 2008, “Modelling CSR: How Managers Understand the Responsibilities of Business Towards Society”, CBS Working Paper Series, CBS Center for Corporate Social Responsibility, Copenhagen. Philip C 2009, “Global job cuts could exceed 50 million this year”, Timesonline.

Pocock B 2003, The Work Life Collision, The Federation Press, Sydney. Quintas P 2002, “Managing knowledge in a new century”, in S Little, P Quintas and T Ray, Managing Knowledge: An Essential Reader, The Open University and Sage Publications, London. Sheehan C, Holland P and De Cieri H 2006, “Current developments in HRM in Australian organisations”, Asia Pacific Journal of Human Resources, vol 44(2). Stace D and Dunphy D 2001, Beyond the Boundaries: Leading and Re-creating Successful Enterprise, McGraw-Hill, Sydney. Stewart T 1997, Intellectual Capital: The New Wealth of Nations, Nicholas Brealy, London. The Towers Perrin Talent Report 2001, “New Realities in Today’s Workforce”, Towers Perrin, see www.towersperrin.com. Watson I, Buchanan J, Campbell I and Briggs C 2003, Fragmented Futures: New Challenges in Working Life, The Federation Press, Sydney. Whetton DA, Rands G and Godfrey P 2002, “What are the responsibilities of business to society?”, in A Pettigrew, H Thomas and R Whittington, Handbook of Strategy and Management, Sage, London.

2. STRATEGIC AND SUSTAINABLE HUMAN RESOURCE MANAGEMENT Editorial information

Professor Robin Kramar Australian Catholic University

This chapter is drawn from research undertaken in the author’s capacity as a staff member of the Australian Catholic University.

¶2-010 Introduction Regardless of how large or small an organisation is, people doing work need to be managed well and provided with leadership. The basic activities associated with managing people involve: • obtaining suitable people through planning, recruitment, selection and induction processes • improving employees’ skills, performance and potential through, for example, learning and development and knowledge management processes, and • maintaining and enhancing effective performance through the provision of opportunities, rewards and recognition, work/life balance programs, and consultation and participation in decision-making. These activities occur within a framework of legislation that establishes minimum standards and expectations regarding acceptable behaviour. Ideas about how to manage people changed during the 20th century as the economy, technology, social factors and values changed. Research undertaken by a number of academics (Pfeffer 1998; Huselid 1995; Capelli and Crocker-Hefter 1996; Legnick-Hall et al 2009) indicates that certain people management practices can contribute positively to an organisation’s performance, while other people management practices, such as downsizing, do not have positive outcomes in the long-term (Cascio 1995; Littler 1998). It is difficult to demonstrate the direct impact that people management practices have on organisational performance. However, research findings from the United Kingdom and the United States show that some human resource management (HRM) practices can influence organisational outcomes by facilitating the development of a positive psychological contract and a culture that encourages desired work performance, thereby facilitating the behaviours that contribute to organisational productivity, profitability and agility while reducing turnover (CIPD 1997; Richard and Johnson 2001; Brammer et al 2007). Strategy is more likely to be effective when human resources (HR) issues are considered during the formulation stage. HR policies can be developed to support the achievement of strategy. Chief Executive Officers (CEOs), middle management and line managers play a very important role in the

implementation of HR policies (Bowen and Ostroff 2004; Stanton et al 2007) within organisations. HR specialists can assist line managers to improve organisational performance by working with them to manage HR issues as they arise.

¶2-020 The evolution of people management and HRM Ideas about how best to manage people changed throughout the 20th century. The practices and policies used to manage people in the workplace were influenced by research and beliefs that focused on how to improve productivity and service quality. Developments in managing people have been similar in Australia, the United Kingdom and the United States. Differences between countries did occur; however, this was due to differences in legislation, as well as industrial, economic and social factors. Four stages of development are identified in Table 2.1 (see below). The first three stages represent the dominant ideas and methods of managing people during a particular period. Many factors influenced the evolution of these management practices, one of which has been the nature of regulation and legislation in the economy and the labour market. Deregulation during the 1980s and amendments to industrial relations legislation encouraged the development of people management policies that reflected the needs of the business. The fourth stage is emerging. It is characterised by an interest in the development of human capital, both positive and negative impacts on a variety of stakeholders (eg future generations and the environment) and a move towards more sustainable HR practices/management overall. Table 2.1: Stages of development of people management Stage 1

1900 to 1940s

Welfare and administration

Stage 2

1940s to mid-1970s

Personnel management and industrial relations

Stage 3

Mid-1970s to 2000s

Strategic HRM

Stage 4

2000 onwards

An emerging next stage — sustainable HRM

Stage 1 — welfare and administration During the first stage, the economy was based mainly on primary production and some manufacturing industries. Mass production industries in areas such as steel and automobile manufacturing had started to develop. Although the way people were managed varied between organisations, primary HR activities involved obtaining and maintaining a workforce, undertaking the administrative activities associated with this workforce and monitoring employee performance. Owners of companies, who were often seen as “father figures”, typically made decisions about selection, firing, pay and supervision. In larger organisations, line managers and supervisors managed employees as part of their daily activities. Although not widespread, some organisations (eg New South Wales Railways and David Jones) developed formal employment policies (Wright 1995, pp 20–21). In some organisations, employee productivity was encouraged through the use of welfare schemes. Welfare officers introduced schemes, such as canteens and benevolent funds, social and recreational activities and, in some cases, profit-sharing schemes. These schemes were often introduced by employers who believed employees were more productive if they were mentally and physically well, and treated equitably. Stage 2 — personnel management and industrial relations During much of the post-war period until the 1970s, the economy was developing and growing. Much of the economic growth relied on a strong demand for primary production and, in later years, a strong demand for mineral exports and the expansion of manufacturing industries. Employment growth also occurred in tertiary sectors, such as building and construction, retail and banking. Government departments and many employers in the private sector started to appoint specialist managers to take charge of activities associated with managing people. Personnel managers were appointed to handle the welfare, selection and training of employees. Industrial relations managers were appointed to deal with trade unions and industrial tribunals.

During this stage, employers became increasingly interested in using techniques that could improve employee productivity. A need for systematic, formal management practices was identified and a significant increase in the application of scientific management practices, such as works measurement, works study and wage incentives, occurred. A variety of approaches to trade unions was adopted, ranging from confrontational to consultative to minimalist. The ideas of human relations, scientific management and behavioural science began to be applied in the workplace. An important application was the development of new work-design principles reflecting Fred Emery’s ideas of socio-technical systems. During the 1960s and 1970s, there was also increasing application of methods associated with the organisational development (OD) movement. At the same time, some multinational companies began to import their management practices into Australia. For example, Standard Telephones and Cables (STC) imported its parent’s philosophy of a “human relations” approach. Stage 3 — HRM The economic environment began to change during the mid-1970s as competition intensified and business became more globalised. Australian businesses faced uncertain economic conditions, deregulation, a reduction in tariff protection and increased product market competition. Many organisations sought ways to become more efficient. Others restructured through mergers or acquisitions or changed internally from a functional to a divisional structure. Stimulated by the ideas of strategic management, there was increasing awareness that people management practices could potentially contribute to organisational performance and the achievement of strategy through the application of processes, such as planning, scientific selection, training, performance management, culture building and improved communication. During the 1970s, interest in employee participation and OD continued. However, at the same time, developments in industrial relations encouraged an enterprise focus with regard to pay and conditions. During this stage, line managers resumed more responsibility for managing people and, increasingly, HR professionals became consultants to line managers. Reference to strategic HRM began to appear in American literature during the 1980s. It refers to a particular method of managing people that involves the development of plans, policies and actions that support the achievement of the organisation’s strategy and objectives. This approach to managing people influences the role and skills required of both HR managers and line managers. During the 1990s, there was an increase in the use of non-standard work arrangements such as fixedterm contracts, part-time or casual work, and outsourcing (Michelson and Kramar 2003; Kramar and Lake 1997; Morehead et al 1997). The use of external providers of HR activities such as training, recruitment and selection became more widespread. At the same time, many HR professionals became increasingly aware of the need to demonstrate how they added “value” to the organisation. Increasingly, interest was expressed in framing people management initiatives in terms of the way they added value to an organisation and the achievement of its strategy and goals. The concept of “value” included providing policies that delivered organisational outcomes, such as customer satisfaction (Ulrich 1997), and generated value for internal and external customers and other stakeholders (Ulrich and Brockbank 2005). It also raised the issue of measuring and accounting for the value created or added by HR policies. The Balanced Scorecard (1996), The Strategy-Focussed Organisation (2001) and Strategy Maps (2004) by Kaplan and Norton were concerned with focusing the attention of employees and management on clear outcomes that reflect the strategy. These outcomes are expressed in terms of goals, measures, targets and initiatives, and include both tangible and intangible outcomes. At the same time, the issue of leadership emerged as a critical people management concern and one that was central to an organisation’s success (Byham et al 2002; Goleman et al 2004; Higgs and Dulewicz 2004). It has been found to be one of the main motivators for Australian employees (Hewitt Associates 2002–04). Employees from the age groups known as generations X and Y want to work for inspiring, visionary and egalitarian leaders (Korn 2000). The increasingly competitive labour market is making it imperative for managers to improve employee performance while retaining the high performers. “Engagement” is regarded as critical to achieving these aims (Corporate Leadership Council 2004). Engagement is defined by the Corporate Leadership Council

as “the extent to which employees commit — both rationally and emotionally — to something or someone in their organisation, how hard they work, and how long they stay as a result of that commitment” (Corporate Leadership Council 2004, p xii). The main levers of engagement include: • understanding how to do one’s job, a belief in the importance of the job, and understanding how to complete one’s work • managers having the personal attributes and skills to develop commitment to the job, team and organisation • cultures of communication, integrity, innovation, flexibility and customer focus • commitment to the careers of employees, especially by appointing mentors, and • instilling a sense of job importance early (ie soon after appointment). Therefore, HRM evolved during the 1980s and 1990s to focus on a range of initiatives which could be used to enhance the achievement of organisational goals and strategy. It is important to note that HRM exists alongside administrative activities previously known as personnel management. Stage 4 — an emerging next stage of sustainable HRM There is evidence that a new stage is emerging. Concern about the impact of organisational practices on the environment, the expected shortage of skilled labour and the negative impact of management and HRM practices on people within the organisation and in the community has encouraged interest in an emerging area, known as sustainable HRM. Just as there are semantic difficulties associated with the term HRM, there are also difficulties with sustainable HRM. However, at the heart of sustainable HRM is a concern for the use of HRM practices to develop human and social capital within the organisation (Browning and Delahaye 2011; Ehnert 2009). Some writers extend this to include the use of HRM to build positive social, human and ecological outcomes outside the organisation and minimise negative impacts (Mariappanadar 2012; Collinson et al 2007). Another group of writers have identified the interconnections between HRM, management and internal and external outcomes. The writers in this last group emphasise the interconnections between the various systems and national contexts (Avery and Bergsteiner 2010; Dunphy et al 2007). Sustainable HRM emerged in a turbulent economic, social and ecological climate in which people indicated their concern for the future. It adopts the moral positions that HRM can be used to create positive outcomes for a number of stakeholders, including future generations and the natural ecological system, and that the negative consequences of HRM should be minimised. It also has implications for practice. Ehnert (2009) developed a paradox framework for HRM which illustrates the key tensions between the efficient use of people and maintaining human capabilities over time. This is one of the great strengths of sustainable HRM: it acknowledges the contradictions associated with making decisions about HRM, but also explicitly identifies the difficulties associated with implementing HRM policies. A model which incorporates factors, necessary for effective implementation of policy provides a guide to the practice of HRM (Kramar 2013). These factors include the need for HRM messages to be consistent, decision-makers to display consistency and HRM policies to be distinctive (Stanton et al 2010; Bartram et al 2007). Other factors, such as the use of cultural and structural changes in developing HRM systems, employee involvement, family-friendly policies and making HRM departments accessible, have also been found to contribute to policy implementation (Khilji and Wang 2007).

¶2-030 People management practices, institutions, performance and sustainability It is difficult demonstrating the cause and effect relationship that exists between people management practices and organisational performance. However, it has been shown that — when certain HR practices are implemented in a culture which is supportive of employees — a positive psychological contract is developed. The psychological contract involves a sense of trust, fairness and perception that the agreed deal between employees and managers is being met. It has been found that this results in commitment,

motivation, a willing contribution and satisfaction among employees, improved productivity, profitability and organisational agility (Huselid 1995; Guest and Conway 1997; Patterson et al 1997). Three theoretical approaches have been used to explain the link between people management and business performance: (1) best practice (2) contingency, and (3) configurational. Best practice approach The best practice approach argues that a set of HR policies will contribute to high organisational performance in all situations. Based on significant research in companies in the United States, Pfeffer (1998) argues that a “high performance work system” involving: • recruitment of the right people • employment security • self-managed teams • high levels of remuneration linked to performance • investment in training • few status differentials, and • shared information will increase profits and organisational success. Contingency approach The contingency approach argues that the nature of the HR policies developed in a particular situation should be influenced by factors in the internal and external environments (Dowling and Schuler 1990; Schuler and Jackson 1999; Capelli and Crocker-Hefter 1996). The nature of the organisation’s competitive strategy is particularly important and influential. This approach involves: • identifying the behaviours needed to achieve the organisation’s strategy • acknowledging that different behaviours are necessary to achieve different competitive strategies • developing HR policies to encourage and reinforce the required behaviours, and • changing HR strategies and policies in response to changes in competitive strategies. Configurational approach The configurational approach argues that HR policies should not only support strategy, but should also reinforce each other. The key to effective organisational performance lies in selecting “bundles” of HR policies that support the strategy and culture and other functional strategies. According to this approach, investing in specific HR policies or external benchmarking is not viewed as being valuable (Guest 1998). The careful and systematic implementation of HR practices within a planned and integrated framework is seen as a way of effectively achieving strategy. Attention needs to be paid to: • careful work and job design • focused recruitment and selection

• induction and socialisation processes • performance management • involvement and communication techniques, and • targeted rewards and remuneration (Rudman 2000).

¶2-040 Strategic HRM characteristics, management, formulation and case studies Strategic HRM can be considered from different perspectives. The most common approach is based on principles of strategic management and linking HR to the organisation’s market position. An alternative approach focuses on implementation as a set of integrated strategic actions. This approach regards the organisation as consisting of capabilities which are transformed into economically valuable products. Strategic HRM can enable this by developing culture change strategies, organisational learning and knowledge management strategies (Purcell 2001). Characteristics of a strategic approach to HR A strategic approach to HR involves many of the characteristics of strategic management and others related specifically to people. It requires: • formulating strategy — including both environmental assessment and strategy and program development • implementing strategies and programs — involving effective communication, managing change, monitoring implementation and evaluating the effectiveness of the strategies and programs • fostering a long-term, proactive approach to the development of HR programs • recognising that people issues can be managed in a variety of ways • considering all people who do the work of organisations, not only full-time employees (ie people on non-standard working arrangements, such as casuals, part-time employees and fixed-term contractors, outsource providers, consultants and, in some circumstances, even customers) • making the organisation’s strategy, mission, vision and values the reference point for the development of HR strategies and programs • ensuring all people management activities are coordinated, consistent and reinforce one another, and • integrating HR with other functions, such as marketing, finance, legal and production.

Case studies Pacific Hydro Pacific Hydro, a renewable energy company, demonstrates the features of taking a strategic approach to HR to further an aggressive growth strategy. This company was privatised in 2005 so it could grow faster than it would have grown as a publicly listed company. In 2005, the company had 60 people and by 2010, it had more than 300. Pacific Hydro has offices in Australia, Chile and the Philippines. During this rapid period of growth, a major priority of the CEO, Rob Grant, was to maintain the “small organisation culture”, believing a collegial environment to be crucial for success. He was also keen to ensure HR was part of the strategy. “We had to build the team in order to be successful so it wasn’t an option and if we got it wrong — the business wouldn’t have grown”. Grant and the recently appointed HR manager developed a Pacific Hydro HR strategy and benchmarked it against other companies.

Three significant actions were taken: (1) processes and systems were developed so HR was not as “ad hoc” (2) there was substantial recruitment, and (3) organisational structuring and restructuring took place. Pacific Hydro is a specialised business and has a small recruitment pool in Australia. Therefore, developing employees is an essential aspect of its HR strategy. It emphasises developing employees so they “can go on and be able to do bigger things than they would have been able to do before they started at Pacific Hydro”. Involvement of employees is important in the company. Grant believes that one-on-one meetings with employees are important, as well as feedback through the employee opinion surveys. Feedback on what the company is doing well and not doing well, combined with measuring the performance year-on-year has been useful, providing the evidence needed to foster organisational change. One gap which was identified was work/life balance for employees in Chile. The time difference caused the Chilean employees to believe that they had to be available on Melbourne time. Grant states that Pacific Hydro has since implemented a work/life balance strategy and encourages staff flexibility. Unlike previously, now this topic isn’t mentioned as an issue in surveys (Nice and Donaldson 2011). Virgin Blue (now known as Virgin Australia) This airline has adopted a management approach that reflects many characteristics of strategic HR. The Virgin Group has a very strong culture. People recognise the airline as synonymous with quality, value for money, challenging the establishment and a fun environment to work in. When the airline was launched in Australia in 2000, it sought to establish this strong, consistent culture that was supported at all levels, ensuring it had: • a cohesive management team • an emphasis on recruiting optimistic, enthusiastic and humble people who suited the Virgin culture • the HR director as part of the senior management team, and • HR policies designed to match the business model (Donaldson 2003).

Strategic management and HR Strategic management involves two phases: (1) a strategy formulation phase, and (2) a strategy implementation phase. Both of these phases involve people-related issues. While people with HR expertise should participate in these phases, their level of involvement may vary. Four levels of integration can exist between HR and strategic management. These levels are: (1) administrative linkage — representing no linkage at all, with HR specialists engaging in administrative work only (2) one-way linkage — HR specialists are informed of the strategic plan and are responsible for designing programs and systems to implement the strategic plan (3) two-way linkage — people issues are considered during the strategy formulation phase. HR

specialists are advised of potential strategies and are required to analyse the HR implications. Once a strategic plan is created, HR develops programs and systems to enable its implementation (4) integrative linkage — the HR executive is part of the senior management team and part of the strategy formulation and implementation phases. Unlike the two-way process, which is a singular interactive process of information exchange, this level is a dynamic, continuing interaction. The levels of integration of HR and strategic management vary in Australian companies. In almost 78% of large public and private sector Australian organisations, the most senior HR manager is on the senior management team. In 46% of organisations, HR managers are involved in the development of corporate strategy from the outset, while in less than a third of organisations they are consulted (Kramar 2012). The same level of involvement does not appear to occur in small- and medium-sized organisations. Less than one-third of these organisations employ a dedicated HR manager and almost half do not have a strategic plan (Weisner and McDonald 2001). Strategy formulation The process of strategy formulation involves environmental assessment and strategy development. An environmental assessment involves examining and collecting information about factors in the external and internal environments that could impact on the organisation. The external environment factors could be: • economic • legal • political • social • technological • international, and • other organisations and stakeholders (eg customers, competitors and suppliers). The internal environment factors could include: • the effectiveness of functional areas (eg sales, marketing and research) • processes (eg resource allocation and customer service) • resources, including capital, technology and people • organisational structure and culture, and • the capabilities of management, employees and other people doing the work. When HR managers and specialists are involved in the development of strategy, they are able to provide information and judgments about possible strengths and weaknesses within the organisation that could impact on proposed strategies. They are also able to assess possible opportunities and threats in external factors, such as the changing composition and location of the workforce, changing demographics, legislation and social values. An example would be a situation where a company was planning to expand its business overseas. The HR function could contribute to the decision by providing information about the availability of the necessary labour in the area, legislation influencing employment, and wage and salary rates in the area. This information may inform the company’s decision on where to expand. Once a strategy has been formulated, the environmental assessment process can be used to identify people and HR issues that will need to be managed to achieve the strategy. This requires identifying HR

strengths and weaknesses within the organisation and HR opportunities and threats in the external environment. A number of issues are likely to be identified and only some of these can be selected. Criteria used to select the most important issues are the possible impacts on the organisation’s sustainable competitive advantage, on its core competencies and capabilities and on the critical success factors in the industry. Sustainable competitive advantage refers to a distinctive long-term competence that differentiates an organisation from its competition. This advantage can be based on a variety of factors such as cost, quality, image, service and convenience. A useful way of thinking about competitive advantage is to answer the question: “Why would someone buy our service or product rather than someone else’s?”. Sustainable competitive advantage can come from the distinctive capabilities and competencies of the people doing the work of the organisation. An example would be a university department of management that employs academics who conduct applied research, allowing employees to build close relationships with members of the business community. These close relationships enable the employees to involve business managers in their classes and to provide placements for work experience. Even when the distinctive competence of the organisation is based in technology, the technology is valuable only if people are able to transfer it throughout the organisation. An organisation operates within an industry that has a structure involving a number of factors. The factors that affect an industry include growth rates, the number of organisations that have a large percentage of the market, technology, the rate of change and substitute products or services. There are particular factors — known as critical success factors — that are essential for an organisation to be successful in its industry. HR strategy and programs need to be developed to support the organisation’s strategy and its critical success factors. The core competencies and capabilities of the people doing the work of the organisation are important critical success factors in an increasing number of organisations. During downturns in the economy, such as the one Australia has been experiencing, identification and retention of people with the core capabilities are just as important as in buoyant economic times. An alternative to reducing costs through forced redundancy is to take a longer term view. Actions, such as retraining, redeployment, career planning and voluntary “sabbaticals”, are possible ways of reducing or containing labour costs, while maintaining the morale of the workforce. At an organisational level, strategy development involves four stages: (1) establishing the strategic direction by defining or revising the mission, vision and values of the organisation (2) establishing strategic objectives (3) developing action plans and programs, and (4) allocating resources for the plans and programs. The strategic direction and strategic objectives and programs provide the basis for the development of operating plans, objectives and budgets in the various functional areas, such as HR. These plans, objectives and budgets then provide a context for the development of individual, team or unit performance plans and objectives. The strategies developed in each of the various functions need to be consistent and reinforce one another so that the organisation’s overall strategy is supported. Therefore, the functional strategies also need to mesh with one another. Integration requires people in each functional area to be aware of both the organisation’s strategy and the strategies in each of the other functional areas. HR strategies are plans dealing with the management of people. They are designed to address opportunities to obtain and sustain competitive advantage or to deal with threats to the organisation’s competitive advantage. They are based on the values of the organisation, provide overall direction to the management of people, and involve a number of programs, policies and activities. An HR strategy leads to the creation of an HR system comprising policies and practices that are designed to build and maintain

a bank of people with the required organisational capabilities and competencies, through: • acquisition processes (eg recruitment, selection, promotion, joint venture partnerships and relationship building with consultants and outsource providers) • the provision of support for the maintenance of capability levels through training, development, ongoing learning, knowledge and information management • implementation of policies that encourage desired behaviours and attract and retain high-performing people (ie these policies might include performance feedback, rewards, recognition and benefits), and • separation processes (eg disciplinary procedures, termination and redundancy policies).

¶2-050 HRM models and roles As highlighted previously, HRM and people management are different. People and relationship management activities are carried out by everyone involved in the organisation. Individuals, team members, line managers and senior managers are all involved in processes associated with people management. Managing HR is a broader and more wide-ranging activity that involves longer term strategic activities, as well as operational activities. This activity is conducted by specialists who are usually located in the HR department. Familiar HRM activities include HR planning, recruitment and selection, performance management, learning and development, remuneration/benefits, recognition and rewards, and termination. When a strategic approach to people management (or a managing HR approach) is adopted, HR specialists play a vital role in designing processes and solving people issues in such a way that the achievement of the organisation’s strategy and objectives is enhanced. Ulrich and Brockbank (2005) extended Ulrich’s (1997) earlier model. This expanded model identifies five aspects of this process and the role of HRM. These aspects are: (1) employee advocate (2) human capital developer (3) functional expert (4) strategic partner, and (5) leader. (1) Employee advocate The management of employee contribution also involves a day-to-day operational focus, and the provision of services that result in increased employee commitment and competence. This role involves listening and responding to employees and providing them with the resources necessary to behave in the ways required to achieve strategy. These processes could involve facilitating employee surveys and designing and promoting work/life balance programs. The critical aspect of the role involves HR specialists ensuring that line managers have the skills necessary to respond to employee needs (Ulrich 1997). It also involves building a caring environment, systematically discussing employee concerns and building an environment of mutual respect and inclusion through diversity management (Ulrich and Brockbank 2005). (2) Human capital developer This role focuses on preparing employees for the future through development. It involves developing plans to enable employees to develop their abilities through a variety of means (eg through performance development discussions, career plans, coaching and learning opportunities). HR professionals are also responsible in this role for building positive team spirit (Ulrich and Brockbank 2005). (3) Functional expert

Management of the organisation’s infrastructure involves a day-to-day operational focus on designing and delivering people management processes. It involves HR specialists providing a service to line managers to solve people management issues. It also requires HR specialists to provide efficient people management processes so that administrative efficiency increases and customer satisfaction improves. These processes could include recruitment and selection protocols and the delivery of training. The functional expert builds on this role by explicitly requiring that the policies, menus and interventions developed by HR will provide choice about the programs and policies used by the business. Therefore, a key aspect of the role of functional expert is specialisation (Ulrich and Brockbank 2005). (4) Strategic partner The strategic partner role has multiple dimensions. The management of strategic HR involves the development of HR priorities and people management practices that support the achievement of organisational objectives and strategy. This requires HR specialists to take a longer term view of HR. It also requires HR specialists to audit the organisation to determine the extent to which organisational requirements, such as competency needs, performance standards, communication, and organisational design features and learning opportunities contribute to the achievement of strategy. HR professionals need to be business experts, change agents, knowledge managers and internal consultants. The process of knowledge management requires disseminating learning throughout organisations. Such a process can facilitate innovation (Ulrich and Brockbank 2005). The management of transformation and change involves HR specialists developing initiatives that enable the organisation to undergo fundamental cultural change by identifying a process for managing change. Therefore, HR specialists need to act as change agents by identifying and framing problems, building relationships of trust, solving problems, and creating and achieving action plans. They need to work with line managers and often external consultants to implement change effectively (Ulrich 1997). Individuals with people management responsibilities, such as line managers, will often require advice and the transfer of skills from HR specialists if they are going to manage their people effectively. For instance, selecting employees requires interviewing skills, while performance management requires the ability to give effective feedback and identify “potential” as well as training needs. To effectively manage their people, line managers will need to have particular HR information about issues such as the legislative requirements associated with discrimination, dismissal, and work health and safety. HR specialists can work with line managers to solve particular people management problems. Productivity can be improved by enhancing employee commitment and managing people through organisational change. However, changing attitudes and mental frameworks is difficult, with executives in 60% of companies claiming inability to do this inhibited effective implementation of change. It is claimed that in these uncertain economic times HR professionals should develop an “internal, sustainable core change management capability within the organisation”, rather than using external experts (Donaldson 2008). (5) Leader HR specialists are also required to lead change and the transformation of an organisation, and innovate. They require competencies which enable them to identify capabilities that contribute to outcomes such as innovation, speed, customer focus and efficiency. They can assist line managers create meaning so that the organisation reflects the values of employees. As a leader, they also ensure the organisation has the required resources to facilitate change and ensure that business results are clearly and precisely prioritised. To do this, HR professionals need to be viewed as credible and knowledgeable, and they also need to be able to influence and persuade.

¶2-060 Strategy development through identification of HR needs This phase involves the identification of the HR needs required to achieve the organisation’s strategy. This can include the identification of the behaviours, skills and culture that are necessary. HR policies and programs should then be developed to enable the achievement of these requirements. These policies include recruitment, selection, induction, industrial relations, job analysis, job design, learning and development, compensation and recognition, benefits, redundancy and termination. HRM programs

include “bundles” of policies and actions which focus on particular areas, such as work/life balance and knowledge management. Ideally, processes should be developed to assess whether the required HR outcomes are being achieved. Therefore, policies need to be developed to monitor the implementation of intended policy in a timely manner. In addition, HR policies should be evaluated to assess whether they are achieving their desired outcomes. For instance, selection decisions could be evaluated using performance appraisal results and line manager feedback.

¶2-070 Strategic HRM and implementation/execution Strategy execution is complex as it requires the implementation and effective execution of plans developed at the organisational, functional, unit, team and individual levels. Initially, clear communication of the strategies to people doing the work of the organisation needs to occur. It also requires that these people have the skills, values, information and relationships necessary to behave in a way that is consistent with the strategies. Effective execution requires that a consistent message about HR is delivered and that organisational members perceive that decision-makers are supportive of the HR message and policies (Stanton et al 2010; Bartram et al 2007). Line managers play a very important role in the implementation of strategies and policies. HR managers can develop implementation strategies, such as cultural change, organisational learning and knowledge management strategies. Although their role will vary between organisations, there has been a trend for line managers to take more responsibility for HR activities, including the implementation of many HR policies and the delivery of employee commitment programs (Ulrich 1997). CEOs want their line managers to look after the performance management of individuals, staff ownership of strategy and knowledge management (Begley 2003). To undertake these activities effectively, line managers need to understand their employees. Implementation is more likely to occur if managers understand the way different employees take in information, how they relate to other people, how they react to change, what their goals and passions are, the relationship between their non-work life and work life, and their levels of skill. Line managers are also playing a greater role in the processes and decisions associated with the acquisition, motivation, retention and separation of employees from organisations. They are taking on more responsibility in recruitment and selection, training and development, workforce expansion and reduction decisions, and performance evaluation decisions (Michelson and Kramar 2003; Kramar and Lake 1997). Line managers should ideally work with HR specialists. This is especially important when many line managers do not feel they have the skills to undertake these activities (Sheldrake and Saul 1995). However, for line managers to work in partnership with HR specialists, they need to see the HR specialist as a partner in problem solving and skill enhancement. In such a partnership, line managers need to be able to: • explain their people management needs to HR specialists • identify any shortcomings in their own skills (eg interviewing or disciplinary skills) • identify any lack of knowledge about the organisation’s mission, vision, strategies, values and policies and what these mean for the expected behaviours of the people they manage • gain clarification of the impact of organisational strategies, including HR strategies for people management in their areas (eg what a recently developed policy on pay for performance means for employees in their areas) • discuss with the HR specialist any potential people management issues that could arise in their areas (eg employees resigning)

• suggest areas in which plans will not be met or will need to be modified due to developments in their area or in the broader organisational environment (eg a plan involving a reduction in turnover might not be met because a number of employees have spouses who have taken postings overseas and the employees have subsequently left the organisation to join them) • explain the areas in which knowledge, such as corporate information, processes and procedures, could be captured so that productivity could be enhanced, and • indicate ways in which existing policies and practices fail to achieve their stated desired outcomes (eg a performance evaluation and feedback process could be failing to increase employee productivity and commitment to organisational goals because it is experienced as a disciplinary process rather than as a supportive improvement process).

¶2-080 Organisational tensions Tensions may arise between the stated values of an organisation and the implementation of HR policy. For instance, an organisation could claim that people are its greatest asset, but at the same time retrench people on a regular basis. In this circumstance, there would appear to be an inconsistency between the espoused values and the HR actions. This tension can be reconciled by managers providing information about the business and how its staffing needs will change as the business, technology and other factors change. The tension can also be managed by assisting people through their retrenchment and managing those remaining more effectively. The management processes of people and HR issues are not simple, straightforward processes. The processes of strategy formulation and implementation throughout all areas of the organisation, including the HR area, are not always rational, logical, value-neutral or static processes. Strategy formulation is a dynamic process. Despite the existence of plans, it needs to change as unexpected changes in the internal and external environment, occur. This reaction to a perceived threat in the environment after it has occurred is sometimes referred to as “incrementalism” (Isenberg 1986). Consequently, the realised strategy, that is, the actual strategy the organisation follows, can often be different from the intended strategy formulated during the planning period (Mintzberg 1988). People are not always rational. Their behaviour is influenced by emotional, social and political needs. The early management writers (Fayol 1949; Gulick and Urwick 1937; Taylor 1911) neglected to take this into account when they were developing management theories. However, later research (Mayo 1949; Herzberg 1966; Simon 1948; March and Olsen 1976) identified that employees do not always maximise the interests of the organisation. Similarly, many other internal factors can influence the practice of HRM. These factors include the unique heritage of management decisions, administrative procedures and cultural heritage which influence not only the policies developed, but also the way these policies are implemented (Paauwe 2004). Within an organisation, people conform to social and cultural influences “without thinking” and members of the dominant coalition (ie those with the decision-making power) are able to shape HR practice (Farndale and Paauwe 2007). Therefore, when formulating and implementing strategic HR policies, it is important to recognise the interaction between past practice, culture, distribution of power and the interests of individuals. An HR policy is more likely to be effectively implemented by line managers when employees: • understand the policy • understand the implications of the policy for the way they behave • identify the way their personal needs (eg desire for promotion) could influence the way they respond to a policy, and • identify the way their emotions (eg fear of change) could influence the implementation of a policy. HR specialists and, particularly, the HR manager should be able to convince senior managers that HR

contributes to the success of the organisation by: • explaining the impact of people issues on the adoption of particular strategies • suggesting areas of strength in the organisation around which strategy could be developed • explaining the impact of HR initiatives on the achievement of organisation objectives and strategies • assessing the costs and benefits of particular HR initiatives for the organisation, and • explaining the impact of legislation on the management of people. HR specialists must aim to be viewed by line managers as partners in problem solving, skills development and knowledge dissemination. They need to be seen to be contributing to the success of the line managers in managing their people by: • developing policies, processes and services that suit the needs of line managers • promoting and communicating the policies, processes and services to line managers so they understand their value when used to manage people • assisting line managers to identify and/or articulate possible people management issues that are impacting or will impact on the performance of the managers’ department/area • coordinating the people management activities undertaken by line managers in a variety of areas • establishing and providing databases for line managers on matters such as employee competencies, sources of learning, training and development opportunities, and providers of specialist HR expertise (eg recruitment and selection) • providing information about people management practices in other organisations as a way for line managers to benchmark their practices against other organisations • explaining the impact of legislation on the way they manage people, and • providing information about how to communicate better with their team. HR specialists support employees by: • understanding what employees want from their work life and what drives them to perform well at work. This can be determined in a variety of ways, including through attitude surveys and performance feedback processes • designing policies and processes that take the factors identified in the first point into account when developing reward and recognition, work/life balance and career planning policies (and so on) • providing frameworks that give clear roles and responsibilities through job accountability statements • assisting employees to determine their competency levels and providing guidance with regard to possible avenues for development, and • providing advice and suggestions with regard to possible career development opportunities within the organisation or possibly in other sectors and/or organisations.

¶2-090 Measuring the effectiveness of HR HR strategies, policies and practices need to be assessed in terms of the extent to which they contribute to the achievement of the organisation’s strategy. This can be done by identifying and facilitating the outcomes of HR policies and practices that contribute to the achievement of strategy. These outcomes have been labelled “deliverables” (Ulrich 1997; Becker et al 2001).

HR deliverables refer to core people-related capabilities such as productivity, loyalty, commitment and satisfaction. These capabilities contribute to the performance of the organisation and the achievement of its strategy. HR deliverables also include the actions that reinforce the achievement of these capabilities. For instance, the process of development of senior employees could reinforce employee productivity (Becker et al 2001). During the last few years, additional attention has been focused on organisations maintaining high standards of corporate governance and on a broader concept of corporate governance. The triple bottom line concept requires organisations to report on economic, social and environmental indicators. HR has an important role to play in the management of the social indicators, such as work health and safety and quality of life.

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3. ASSESSING THE HUMAN RESOURCES CONTRIBUTION Editorial information

Richard Rudman Consultant and Writer

¶3-010 Roles and expectations Even before Robert Townsend advised chief executives to fire the personnel department, (Townsend 1970) people were wondering, and worrying, about the human resources contribution. Since then, personnel management has morphed into human resources management, personnel administrators have become strategic HR managers, and much routine HR work has been pushed off onto line managers. Over the same period, chief executives have hailed human resources as the organisation’s most important assets — yet not found room for them in the accounts, except as costs — and businesses worldwide have been fighting a war for talent (Chambers et al 1998). And a growing body of research shows how HR can make a significant difference to the organisation’s performance and market value. Yet HR people still wonder, and worry, about their roles and contributions — perhaps more than any other group of management specialists. They are constantly concerned, and nervous, about how others perceive their contribution. Why? One answer is that HR roles and expectations are unclear. Chief executives are unsure what they can, or should, expect from their HR people. They want to be strategic, to sit at the top table and influence business directions and decisions — yet relatively few HR people can talk the language of business. They set up service delivery models that provide information and advice, yet shy away from action — when many managers simply want HR to undertake or, at least, help with day-to-day activities like recruitment and induction, training, health and safety management, employee relations, contract negotiations, discipline, and so on. It is not just the managers. A UK survey found that almost half of all employees (48%) had no contact with HR in the previous year. Of those who had, 53% made contact for HR transactions (eg changing pay details or holidays entitlements). Moreover, despite HR’s push to be a strategic partner, most of the employees surveyed thought administrative and procedural matters, and wellbeing, were HR’s main areas of responsibility (People Management 2016). With such mixed signals, it is probably inevitable that managers become frustrated by what they perceive as HR’s unwillingness and inability to contribute. At the same time, HR is disappointed at not being given the opportunity to make the contribution it is confident it could make. Perhaps this all stems from a failure to define the HR role, and to spell out what managers and others may expect of HR people. Similarly, a clear prescription of HR’s role and scope could help to establish positional authority to support the expert authority on which HR people so often rely. Defining HR’s role is just the first step. An essential second step is to agree on what HR will seek to achieve. Those targets or expectations may be expressed broadly — eg “Our enterprise will be regarded as an employer of choice for university graduates” — or in specific and measurable terms (eg response times to employee enquiries; time taken to recruit). In both cases, they are targets that can be used to

assess HR’s contribution, provided it is given the authority and the resources to implement the necessary policies and practices, and the rest of the organisation co-operates.

¶3-020 Issues and questions Defining human resources Every organisation uses human resources. These resources have many labels (eg staff, workers, talent, colleagues, associates, advisors) and many legal forms (eg employees, independent contractors, external agencies). Whether they work inside or outside the organisation, all these people are part of its human resources, and thus part of the HR contribution, and should be included in any assessment of that contribution. Similarly, every organisation has HR policies, practices and procedures — even if they are not formally recognised as such. Organisations hire people, bring them on board, train them for the work that needs to be done, supervise them in that work, provide remuneration and other benefits, and so on. Those practices are part of the HR contribution and, therefore, should be part of any assessment. In every organisation, someone is responsible for human resources and for HR policies and practices. Traditionally, this responsibility sat with a specialist human resources department; today, it might be spread more widely. Obviously, HR specialists must be included in an assessment of the HR contribution. Increasingly, however, HR responsibilities are being devolved to front-line managers, and thus the scope of the assessment must be extended. Choosing assessment criteria Appropriate assessment criteria are needed, whatever aspects of HR the organisation decides to review. A single overall assessment is unlikely to provide useful material — although it could make top managers feel good (or possibly not). It could be confusing to undertake separate assessments of different aspects of HR at the same time, and it is unlikely that the same methodologies or criteria would work well for these different assessments. There is one key question. What is important for achieving the organisation’s strategic objectives? The answer to that question will help in the selection of appropriate assessment criteria or measures. Not all aspects of HR have equal importance for the organisation; the challenge is to sort out what is significant, and to focus the assessment in those areas. The selection of assessment criteria should not be left to HR specialists. To the extent that they “own” HR policies and practices, it is difficult for HR people to be objective. More important, front-line managers and others may have different perspectives on what matters — and their views should help identify which programs and practices truly make a difference. Resist the temptation to cast the assessment net too widely. It is better to focus on a small number of key indicators. Apart from the time and effort required, a broad assessment may overlook important issues. There is also a risk that too much data will obscure significant findings. Is the assessment about efficiency or effectiveness? They are different. Many HR practices trade off some efficiency to ensure greater effectiveness. It might be efficient to fill a vacancy quickly (and to measure the time taken to recruit), but more effective to slow the selection process, involve more people and factors in the selection process, and ensure a better outcome. That outcome might be assessed in terms of the recruit’s fit with the work group, job performance, and length of stay with the organisation — which is a measure of effectiveness rather than mere efficiency. Is the aim an evaluation — which implies numbers and measurement and efficiency — or an assessment, which might involve a more qualitative look at overall effectiveness? Or both? What kinds of data will be needed? The evaluation of hard criteria usually requires quantitative data, while an assessment of soft criteria is more likely to be based on attitudinal data. Again, both hard and soft data may be needed to assess both efficiency and effectiveness. Analytics and metrics What’s in a word? In this case, quite a lot of potential misunderstanding. So, for the sake of clarity:

“HR analytics is the application of mathematical, statistical and data mining techniques to HR and business data to explore concepts and ideas and solve HR-related business problems. HR analytics enables better decision making by providing an organisation with insights about the workforce and the HR policies and practices that support them. Analytics may be used to look at the traits of the workforce, in particular its human capital: the value of individual, knowledge, skills and experience of individuals and teams. This is also known as human capital analytics (CIPD 2015).” Analytics are not the same as metrics. Metrics are simply measures. A 30 cm ruler tells us nothing useful until it used to determine the dimensions of some object — and we usually have a reason for wanting to know that object’s dimensions. Similarly, the rate of labour turnover is simply a metric — a measure of how many people joined and left the organisation in a given period. It tells us nothing more than that. Any conclusions drawn from that simple statistic (eg about the state of employee engagement or job satisfaction), without further investigation or analysis, could be dangerously misleading. Cause and effect Unfortunately, it is too easy to assume a causal relationship between two or more situations or events when, in fact, there is no such relationship or the linkage is weak. Making the assumption that high labour turnover is an indicator of low employee engagement is an obvious example. Causation occurs when one thing happens because something else has happened. Correlation exists when two things happen at about the same time, but are not necessarily in a cause-effect relationship. Whether there is such a relationship requires investigation, not assumption. In HR, a particular result is seldom the outcome of a single other event or condition. For example, the fact that a work group with a high level of job satisfaction significantly increases its work output does not necessarily mean that job satisfaction leads to high levels of output. Other factors must be investigated — such as changes in work group membership, training provision, the work environment, the quality of supervision or leadership, and so on. Confusing causation and correlation can be misleading in an assessment of HR. For example, many organisations try to assess their corporate culture, assuming it to be a measurable state. More likely, corporate culture is the outcome of a unique mix of HR policies and practices, management styles, and business objectives; it might be more useful to identify and assess how those inputs contribute to corporate culture. Inputs and outcomes Confusing inputs and outcomes is another manifestation of the cause and effect problem. It applies to all aspects of HR’s contribution. Simply put, the best HR policies and practices do not necessarily lead to high quality outcomes — unless they are appropriate for the organisation, selected to meet its needs in a particular environment, and implemented and administered by people with the necessary information and skills, and commitment. Think about it. Managers generally, and HR people in particular, are expected to make inputs — usually with a view to achieving specific and agreed outcomes. But when it comes to assessing their performance, the focus is on those outcomes — even though it might be difficult to verify a causal link between an individual’s inputs and organisational outcomes. For example, how valid is it to attribute the bottom line result to the chief executive’s inputs, except in the broadest sense? In most cases, it would be more useful to assess an individual’s performance in terms of the appropriateness and quality of the inputs that person makes, however, much this might offend contemporary management ideology. The same is true when it assessing HR’s contribution.

¶3-030 Assessing the HR contribution — levels of assessment Any attempt to make a single assessment of how, or how well, the different forms of HR contribute would probably lead to serious data overload and great confusion. Thus, the first step must be to define the assessment target. This section discusses five possible targets, but each organisation will have different priorities for assessment, depending on the nature of its business or services and its operating environment, and on its perceived problems or challenges.

The organisation must also ask why it wants an assessment. Is it just seen as “a good thing” to be doing? Is it a “one off”, or part of a continuous process of review? Is there a particular concern? If so, would a specific analysis, followed by action, be more appropriate? In other words, if there is an identifiable problem, can it be resolved? A subsequent assessment could show whether the action was successful. The decision on what to assess — and how to make the assessment — will also depend on the resources available for designing the assessment, collecting and analysing data, reporting findings, and recommending and taking action. There is no point in an assessment that does not lead to action. The champions of the proposed assessment must get the enthusiastic support and commitment of other key stakeholders. Five types of contribution 1. HR’s overall contribution to organisational effectiveness It might sound good to say that people are our most important asset, but it is much more difficult to prove. What is the overall effect on the business of who people are (talent inventory), how they are managed (leadership profiles), and what they do (performance planning and review)? In other words, what are the linkages between selected HR metrics and the achievement of business objectives? How well do HR strategies, activities and capabilities align with business performance? Simple measures (eg head count) are not very helpful. Examining key relationships (eg between changes in levels of employee satisfaction and customer satisfaction) will be much more useful in assessing HR’s overall contribution. 2. Human capital management Assessing the state and contribution of an organisation’s human capital (ie the sum of its skills, knowledge and experience) is proving to be a frustrating and inexact science. Yet effective management of human capital is increasingly important in a fast-changing business environment, where success often depends on human rather than physical or financial resources. From this perspective, relevant metrics and analytics are those that show how human resources contribute to the organisation’s intellectual capital — through initiating and developing, for example, business systems, processes, and customer relationships. The analysis of human capital management should include changes in qualifications and skills profiles, trends in individual’s performance assessments, and customer perceptions of the people they deal with. 3. People management — role of front-line managers Many organisations have shifted responsibility for day-by-day HR management from the HR function to the front line and, through an emphasis on team work, have sharpened the focus on the leadership and people management skills of their front-line managers. It is well said that HR management is too important to be left to HR managers — the challenge is to assess how well that is being accomplished. A wide range of metrics can be used to assess the impact of front-line managers on HR and people management. They include assessments of leadership abilities, employees’ and peer group perceptions of team leadership and management styles and quality, managers’ use of selected HR programs (eg performance planning and review), and trends in work group sickness and absence rates and grievance levels (and the reasons for any changes). 4. HR policies and practices — relevance and impact The research evidence is clear. Selected HR practices have a positive impact on productivity, profitability and share market values. Unfortunately, this research is not widely known among directors and top executives. Worse, many HR specialists are unfamiliar with the findings, or choose to ignore them. The fact that “HR makes a difference” is an obvious reason why organisations should assess the impact and effectiveness of HR policies and practices. There are other, more specific reasons for keeping HR policies and practices under continuous review. 5. The HR function — efficiency and effectiveness The HR function includes all the people and other resources, systems, methods, policies, programs and practices that the organisation uses in managing and developing its people. It is more than the HR

department (if the organisation has one) and the HR specialists who provide expert advice and assistance. All aspects of the HR function should be assessed. In practice, a first step could be an assessment of the quality, consistency, responsiveness, efficiency and costs of the services that the HR department or HR specialists provide. There are endless measures of efficiency — such as cost per hire, time taken to fill a position, HR expense (ie the costs of the HR function as a proportion of total organisational costs), number of HR specialists as a ratio of total staff, and many, many more. However, measures of efficiency are of little use without a companion assessment of effectiveness. An organisation might lower its recruitment costs, or the time taken to hire, but those savings will be illusory if the new employees are inadequate performers and have to be replaced.

¶3-040 Assessing HR’s overall contribution Most organisations gather HR data and use it to produce workforce statistics, profiles and movements (eg head count, labour turnover, absence rates, wage movements), simple ratios of productivity and performance (eg labour costs per employee, average sales revenue per employee), and measures of the HR department’s own performance (eg the average time taken to recruit new employees). Unfortunately, workforce statistics add little to an understanding of HR’s contribution. Similarly, ratio-based statistics (eg turnover per employee) can be misleading when it comes to assessing contribution. In any case, today’s focus is less on measuring movements and transactions than on assessing the contribution made by HR in its various forms. This has led to the emergence of the concept of added value HR. It calls for HR to focus on deliverables, not on functions and activities. Deliverables include the execution of strategy and achievement of goals, organisational renewal, an efficient HR infrastructure, and increased employee commitment and capability (Ulrich et al 2012). As the organisation improves its understanding of the links between HR practices and organisational performance, the case for added value HR becomes more credible, and the focus easily shifts from measuring activity levels and counting costs to assessing HR’s overall contribution. But it is not enough to change the metrics — HR methods must also change. Unfortunately, most conventional models of HR management are concerned mainly with activity and process — or inputs — and that makes it more difficult to assess their real impact. Assessing economic impact It may be just as misleading to use management or economic models that assume a direct link between HR practices and organisational performance. Accountants and economists have long failed to agree on principles and methods for HR costing and accounting, so that “our most important asset” could be included in the financial statements. That should encourage second thoughts for those who believe it is easy to show the economic impact of HR. EVA (Economic Value Added) is probably the best-known method of demonstrating the economic impact of people and their performance on the business. Its proponents argue that EVA targets can be set throughout an organisation, with bonuses to be paid when targets are achieved. In this way, decisionmaking from the top of the organisation to the bottom is linked by economic incentives (Pollock 1999). EVA might be a basis for calculating rewards, but it does not directly assess HR effectiveness, nor does it solve the problem of linking overall organisational results to individuals’ behaviour. It is also complex and, some would say, cumbersome. Further, it requires the belief — happily held by agency theorists but very few others — that economic incentives are the main drivers of human performance.

¶3-050 Assessing human capital Human capital is the sum of an organisation’s skills, knowledge and experience. The term describes an organisation’s human resources and the knowledge, skills, abilities, and capacity to develop and innovate that they bring to work (CIPD 2015(2)). Human capital combines with social capital and organisational

capital to make up the organisation’s intellectual capital. Social capital is made up of the structures, networks and procedures which enable people to acquire and develop intellectual capital, as represented by the stocks and flows of knowledge within and outside the organisation. Organisational capital is the organisation’s institutionalised knowledge, found in databases and manuals. Human capital does not create value by itself. Value is added when intellectual capital is applied to tangible resources through appropriate and effective HR practices and people management. Thus, human capital management is concerned with the value of the organisation’s people and what they produce, and not with HR management or the HR function. To asses their human capital assessment, many organisations: “… start with the assessment of the effectiveness of HR, then move on, through evaluating the impact and effectiveness of people management processes, to using human capital data, developing measures to calculate the return on investment in people, to human capital management, which includes strategically-focused areas of human capital management reporting. As organisations evolve their human capital evaluation and reporting, they increasingly adopt a more sophisticated approach to their measurement techniques (Matthewman and Mantignon 2005).” Measuring human capital People think it would be helpful to have consistent human capital metrics, but there is little agreement on what they might be or how they might be used. It is suggested, for example, that investors would take human capital data into consideration if it could be provided on a reliable basis that would enable intelligent comparison (Scott-Jackson et al 2006). That sounds reasonable. Yet a proposal by the US Society for Human Resource Management (SHRM) to develop a national standard for reporting human capital metrics to investors was vigorously opposed and subsequently abandoned. The HR Policy Association, made up of chief HR officers from large companies, said the proposed standard would force companies “to disclose almost every corporate cost associated with the hiring, retention and training of employees and contingent workers, plus detailed information regarding how the company is organised and staffed” (HRPA 2012). The HRPA claimed its members believed strongly in the use of HR metrics internally, but objected to putting the internal workings of their companies on public display. However, there is consensus that no single measure or set of measures can adequately evaluate human capital for every organisation (Scarborough and Elias 2002; Kingsmill 2003). Valuing human capital is a highly contingent process. Particular employee capabilities or behaviours are valuable to an organisation so long as they contribute to positive outcomes. There is little point in assessing the value of employee attributes that are not needed for, or do not contribute to, desirable business outcomes. For this reason, most human capital measurement is designed to show the fit, or expose the gap, between employee capabilities or behaviours and organisational demand. Valuing human capital is also highly contextual. Many of the key outcomes that are influenced by employee capabilities or behaviours (eg customer service and satisfaction, product or service quality and innovation) are also affected by other influences. Determining how much value to attribute to human capital and how much to other factors is often little more than guesswork. One research-based guide proposes five key principles for measuring workforce value (Scott-Jackson and Tajer 2005): (1) Measure what makes a difference: Workforce measures should focus on issues which have a direct bearing on performance. (2) Identify clear links between measures and strategy: Strategic goals can only be achieved if measures are used as the basis to plan and manage activity. (3) Ensure measures remain dynamic: Revisit the chosen measures regularly to check that they are still the key drivers for assessing value.

(4) Produce simple measures and demystify the jargon: Measures are there to be used, so make sure they are easy to understand. (5) Focus on the value of the business, not legal compliance: Emphasise the value of the chosen measures in helping to manage the organisation more effectively. If information is collected that helps monitor and manage the organisation, compliance will follow. However, the organisation must still identify appropriate metrics and assessment methodologies. A survey for the UK Chartered Management Institute identified the five factors that investors, directors and stakeholders believed were most likely to affect an organisation’s future financial performance (ScottJackson et al 2006). They were: (1) leadership (2) employee motivation (3) training and development (4) performance improvement, and (5) pay and reward structures. Despite the views of those surveyed, there was a clear gap between what was considered valuable for future performance and what was actually measured. To help overcome this confusion, the researchers suggested a three-tier framework for understanding the value and application of HCM measures: (1) basic measures — quantitative data and employee profile statistics (2) standard comparable analytical measures — quantitative data indicating contribution to performance, which could be used for comparisons between organisations, and (3) strategic measures of workforce capability — measures showing the alignment of workforce capability to business strategy. These are not comparable between organisations and depend on each organisation’s life cycle and strategic context. This framework can be fleshed out with types of data recommended by the UK Chartered Institute of Personnel and Development (CIPD 2015(2)): (1) Workforce composition: demographics data including age, gender and ethnicity (2) Recruitment and retention: number of resignations/vacancies/applications, length of service (3) Skills, qualifications and competencies: levels of expenditure on training, types of training provided, length of time to reach competence levels, data on training needs (4) Performance management: performance management results, productivity and profitability data, targets set and met, levels of customer satisfaction, customer loyalty (5) Employee relations and voice: findings from employee attitude surveys (6) Pay and benefits: overall wage bill costs, distribution of individual performance-related pay awards, level of total reward package (7) Regulatory compliance: includes data on the compliance of employees to established standards and guidelines for working practices in particular disciplines (8) Organisation development and design: includes data on spans of control, skills mix and talent pipelines. Quantitative data can be used at any level of assessment to monitor work force movements and trends

(eg turnover), identify strengths and weaknesses (eg absenteeism control), and to alert managers and HR specialists to areas or practices requiring attention (eg recruitment, retention). Qualitative data (eg employee surveys) can also be used at any level. More sophisticated data collection and analysis can help to identify key performance drivers by linking human capital data to performance outcomes, and thus identifying the HR and people management strategies and practices that lead to better performance for the particular organisation. Gathering and analysing static data (eg headcount variations, total employment-related costs, operating costs or revenue per employee) is relatively simple and straightforward. However, it is more difficult to deal with dynamic indicators (eg employee engagement or talent management) even though they might be the real measures of HR effectiveness, and of its causal relationship with performance and outcomes. Reporting on human capital Investors claim to be interested in human capital data, yet few organisations report externally on HR or human capital issues, except in very broad terms. There are several reasons for this: • Most organisations struggle to find meaningful measures to communicate the value of their human capital (CIPD 2003). • HR indicators play little part in investors’ decisions, which are driven mainly by financial metrics, plus economic analysis of business plans and market dynamics (PIRC 2000). • It is impractical to expect that a generic set of reporting standards applicable to all organisations can be developed for the HR area (CBP 2002). • Companies which disclosed information “would be placed at a considerable competitive disadvantage relative to organisations seeking to raid their talent; competitors trying to gain insights into how they are organized, staffed and structured; and hedge funds and other entities seeking financial prey” (HRPA 2012). • Although some countries and stock exchanges require companies to provide specific information in annual reports, there is no general pattern or trend. It seems that investors want a mix of quantitative and qualitative data (Manocha 2005): • profile of the workforce and its diversity • quality of leadership and management • evidence of a robust people strategy mapped to the business strategy • current and forecast returns on people investments, and • evidence that people management practices are affecting business performance. A UK Government Task Force argued that human capital management should not be solely an internal matter for management. It said the link between HR policies and practices and performance was a material factor, and disclosure of relevant information could influence assessments of company value and effective management (Kingsmill 2003). Relevant information would include people strategy; how this related to business strategy; how it was delivered (policies and practices); and an assessment of its impact. In 2005, the UK Accounting Standards Board’s Operating and Financial Review reporting standard suggested a company review should include information about: • employee health and safety — days lost to injury, levels of occupational diseases in the workforce • recruitment and retention — employee turnover, retention rates, remuneration policies, number of applicants per post, offer/acceptance statistics, levels of skills shortages

• training and development — hours spent on training, number of courses taken, leadership/career development • morale/motivation — employee feedback results, absence rates, levels of employee engagement, and • workforce performance and profile — employee productivity, revenue/profit per employee, diversity, number of professionally-qualified employees. That standard was replaced in 2014. The new guidance from the Financial Reporting Council is much less specific (FRC 2014). In effect, it simply restates the requirements of the Companies Act 2006. It says: “… the strategic report should include an explanation of the main trends and factors affecting the entity; a description of its principal risks and uncertainties; an analysis of the development and performance of the business; and an analysis using key performance indicators. Disclosures about the environment, employees, social, community and human rights issues are required when material. There is also a requirement to include disclosures on gender diversity.” Elsewhere, companies undertake external human capital reporting mainly to comply with local or national legal requirements. Germany, the Netherlands, South Africa and Switzerland, for example, have extensive reporting requirements, intended largely to prevent employment discrimination. However, this can lead to “mechanistic, box-ticking” (Kingsmill 2003). In some countries, such as Australia and Canada, the efforts of governments to improve their own employment practices and to require their contractors to meet certain standards seem to be more effective than requirements for reporting. In the US (and elsewhere), greater openness has come in the wake of various corporate scandals. More positively, organisations that seek to be recognised as “employers of choice” or a “best place to work” see advantages in making information about management practices widely available, for example, on internet sites and social media as well as formal company reports. For the Australasian Reporting Awards (see www.arawards.com.au), the criteria for the category of Management, Personnel, Industrial Relations and Safety cover: • The Board of Directors — including experience, qualifications, terms of appointment, and financial and other benefits • Senior executives — including key staff, their experience, responsibilities and qualifications • A detailed statement of governance policy and practices • Measurement and disclosure of all forms of remuneration and benefits to members of the governing body and senior executives as well as related parties. Examples include share-based payments, options, bonuses, pensions, medical benefits, termination benefits, travel and accommodation benefits, and other benefits required by both accounting standard AASB 124 Related Party Disclosures and remuneration requirements under the Corporations Act 2001 (Cth) • Organisation or corporate structure • Personnel issues — including training and development; industrial relations; equal employment initiatives; productivity; relevant industrial awards; enterprise agreements; workforce details, including full-time equivalents/productive labour and an explanation for significant variations in staff numbers; union representation; wages and superannuation; and employee share plans • Outcomes of action taken by external authorities regarding monopolistic or anti-trust regulations • Occupational health and safety — including policies and procedures, lost-time injuries, any fatalities or serious injuries and significant breaches of occupational health and safety laws. Include both positive and negative outcomes.

¶3-060 Assessing front-line HR management Front-line managers are crucial to the effectiveness of HR management. They are also a principal cause of what has been described as “a strong disconnect between the ‘rhetoric’ of human resource management […] and the ‘reality’ experienced by employees” (Truss 2001). Front-line managers have a wide range of people management roles: • management of the work group and its activities, in accordance with plans and budgets • leadership of the group or team, including communication of goals and achievements (and, sometimes, bad news) • motivating, coaching, supporting and, where necessary, correcting individual group members • administrative HR tasks, including performance appraisals, salary recommendations, job applicant interviews, employee discipline, holiday approvals, etc. First, we might ask whether the organisation treats these HR/people management roles as the central responsibility of front-line managers — so that they can achieve results through other people? Or is their performance judged mainly on the basis of production or financial outcomes or results? Managers’ job descriptions, and the content of their performance plans and reviews, would provide telling evidence. How well are front-line managers prepared for this critical aspect of the job? Is it an important part of the person specification used for recruitment and appointment? What training do front-line managers get? Do they have ready access to information and advice? How much support is available, or are they mainly left to get on with it? In each of the HR roles, front-line managers act as translators and implementers of HR strategies, styles, policies, and intended practices. How well do they implement HR policies and programs “as intended”? Unfortunately, deliberately or not, managers may “translate” policies in ways that make them look good to employees or allow them to avoid having to deal with hard issues or make potentially unpopular decisions. Perhaps worse, some become inappropriately authoritarian and inflexible. Across the organisation, is there a gap between intended and actual HR practices (Truss and Gratton 1994)? Is there consistent interpretation and application of HR policies and procedures? These questions can be addressed by using employee survey results, peer group feedback, or examination of HR activity statistics (eg Does one work group have more discipline problems than others? Is a manager’s style leading to atypical levels of turnover or absenteeism?). The quality of front-line managers’ performance as people managers should also be assessed. What information does the organisation gather (from 360-degree appraisals, employee surveys, and other sources)? Is that information used to provide managers with feedback, and to plan developments and improvements?

¶3-070 Assessing HR policies and practices Managers and students of management have long known (at least intuitively) that organisations which manage people well, and have a balance between soft and hard management, usually enjoy positive and productive employer–employee relations. Human relations and motivation studies support that view. The intuition is now supported by an expanding body of research that clearly demonstrates causal links between HR practices and business performance (Rudman 2000, 2001, 2003). There are three main themes. First, organisations that use an appropriate mix of HR practices have better financial performance and, therefore, higher market values. The link between people management and company value is direct. For example, Boston Consulting Group research shows how companies that are “highly capable” in 22 key HR practices consistently enjoy better economic performance than less capable firms (BCG 2012). In some aspects, the correlation is particularly striking. For example, highly capable companies have up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable firms.

Second, organisations with selected HR practices are more likely to be, or become, high-performing workplaces (HPWs) — and that reflects in their performance, financial results and market value. The link is less direct but causation can be proved. An Australian study (Boedker et al 2011) shows that leaders in HPWs make people management a key priority, involve their people in decision-making, are more responsive to customer and stakeholder needs, encourage a high degree of responsiveness to change, have a learning orientation, and enable staff to fully use their skills and abilities at work. This has financial benefits and consequences — the difference in profit margin between high-performing and lower-performing workplaces averaged AU$8.8m for the organisation, or $40,051 per full-time employee. HPWs are not only more profitable and productive, they also perform better in many important intangible attributes, such as encouraging innovation, leadership of people, and creating a fair workplace environment. Can these outcomes be quantified? Early studies of 1,000 US organisations showed that HPW practices have an economically and statistically significant impact on both employee outcomes (eg turnover and productivity) and corporate financial performance (Huselid 1995, 1999). Improvements in HR practices were causally linked to gains in shareholder value. In this research, HPW practices included: • careful selection and hiring to support the organisation’s competitive strategy and operational goals • reward systems that recognised the successful implementation of strategy, and • training and development strategies and performance management systems that were guided by business objectives. The Boston Consulting Group research found that high-performing companies were differentiated dramatically in three areas: leadership development; talent management; and performance management and rewards. In these areas, high-performing companies did more than lower performers, and did it more effectively. Among other things, they: • used incentives to engage their leaders in people development • defined talent more broadly • strived hard to attract internationals • nurtured the potential of “emerging” employees • clearly defined and adopted performance standards and targets across the organisation. The third theme in the research seeks to identify causal relationships between particular HR practices and measurable organisational outcomes. One attention-grabbing example, from research in UK public hospitals, established a clear relationship between 10 HR practices and patient mortality (West and Borrill 2003). Lower patient mortality was strongly associated with the extent and sophistication of employee appraisals, the quality of and access to training, and the proportion of staff who worked in teams. The researchers used statistical modelling to take account of local and hospital-specific factors. They were also able to assess the likely impact on mortality of suggested changes in HR practices. In hospitals of equal size and local health needs, improvements in the appraisal system were associated, on average, with 1,090 fewer deaths per 100,000 admissions (12.3% of the mean number of deaths). Increased teamwork (to the extent of having 25% more staff working in teams) were associated, on average, with 275 fewer deaths per 100,000 admissions (7.1% of the mean number of deaths). Theory into practice It is impractical for most organisations to replicate the complex research reported here. Yet there are sufficient clues on how organisations might assess their HR practices, and what measures they might use. There are no prescriptions for success, nor any single path to follow or model to adopt. Not surprisingly, the research has spawned many commercial instruments that organisations might use to

identify and assess appropriate HR practices, and to compare their performance with others. But such instruments and comparisons have their difficulties. Similarly, computer-based HR metrics tools and packages are readily available. Inevitably, they propose a “one-size-fits-all” solution, often based on a consulting firm’s particular model, but that is not what the research tells us will work. Computers can do the maths and the modelling, but organisations must decide for themselves just what they want to assess, and why. Making measurements matter Even small organisations, or those with limited resources for research, can find ways to make HR data work for them. Why not, for example, record the source of new recruits (eg internet sites, recruitment agencies, print advertising, etc) and link that data to the subsequent retention and performance review statistics for those recruits? The analysis might reveal nothing, but it could also suggest that one source produces more successful performers than others. Here are some other examples: (1) A financial services company gave all short-listed applicants a series of general intelligence tests. Analysis of the test results over time showed that recruits who performed poorly in the tests were generally not good performers in the business. Just as significantly, those who scored best in the tests did not necessarily turn out to be great performers on the job. (2) A department store chain identified the attributes of its most successful cosmetic sales people. It used the results to screen potential sales representatives using tests of cognitive ability, situational judgment, initiative and other relevant traits. Applicants who score in the top half tend to sell more than others, and tend to like their work more. By recruiting these applicants, the store has significantly increased its sales per representative and reduced turnover by 25% (Garner, McGranahan and Wolf 2011). (3) A bank asked why it preferred experienced external hires over internal candidates — in part, because the outsiders often came to be viewed as “lukewarm” performers. Analysis of sales performance going back several years showed that internal appointees were significantly more productive in the first year. Over time, the outsiders narrowed the gap, but never caught up. The additional revenues and lower hiring costs added up to millions of dollars. Why assess HRM policies and practices? The “people management makes a difference” research is an obvious reason for organisations to assess the impact and effectiveness of their HR practices. But that is a very broad sweep. There are more specific reasons for keeping the efficiency and effectiveness of HR policies and practices under constant review. • To ensure accountability — People management is a key part of every manager’s job, but the need for specific accountabilities is often overlooked — until there is a problem. Does every manager’s job description include accountabilities for managing people? Does performance planning include a deliberate discussion of people management goals and achievements? Are managers reviewed on how well they manage people? Does management training include people management skills? • To promote change — When did the organisation last review its HR policies and practices? “If it’s not broken, don’t break it” is a tempting mantra in busy times. Yet, if HR policies and practices are working as intended (ie helping the organisation and its people improve and develop), their impact and effectiveness should diminish over time. Regular review helps identify whether policies and practices need to be tweaked or radically overhauled. • To assess financial costs and benefits — Cost-benefit analyses of HR programs should be made regularly. For example, some organisations which once enthusiastically outsourced their payrolls have subsequently discovered that it cost them more than an in-house pay office. Moreover, service to employees with pay-related enquiries was much slower (causing dissatisfaction) and the frequency of contact between individual employees and the payroll section fell away (robbing the organisation of a valuable source of employee feedback).

• To assess policies and programs — Ask questions. Are the original objectives still relevant? Are the policies and programs achieving those objectives? Would different approaches or content better influence employees’ behaviour and attitudes? Could the money and effort be invested better elsewhere? What do employees think of the policies and programs? How well are they implemented? Would employees prefer a different approach? • To contribute to “due diligence” — Measurement difficulties mean that the “most important asset” might get superficial treatment during mergers and takeovers. Does the organisation include an HR specialist in its due diligence exercises? Does it assess a target organisation’s human resources as carefully as it lists the physical assets and counts the financial reserves? How well does it understand the target’s corporate culture and its employee attitudes? Would a better appreciation of soft factors lead to a prediction that a merger which looks good on paper could fail in practice? More information on due diligence is presented in Chapter ¶27. See also Chapter ¶62, which considers issues when transferring employees on the sale of a business.

¶3-080 The HR function What is the HR function? It might be defined to include all the people and other resources, systems and methods, policies, programs and practices which an organisation uses to manage and develop the people who work for it. Thus, it is more than the HR department (if the organisation has one), where specialists are expected to provide expert advice and assistance on HR matters to the organisation and its managers. And it goes beyond the organisation’s HR policies and practices — its formal statements about how people will be treated and what they are entitled to receive. Assessing the contribution of the HR function is a multifaceted undertaking. This is because, as we have seen, the HR function is more than the HR department, and also goes beyond the formal statements and structures that make up its HR policies and programs. To a considerable extent, the HR function is a complex mix of behaviours and attitudes. So a good first step is to understand what the organisation thinks of its people. This calls for an examination of how clearly it sets out its people management philosophies and strategies — and a simultaneous review of how well high-sounding words are translated into real commitment and actual behaviours. How well are people management roles and responsibilities allocated, understood and accepted? Too often, HR seems to be everyone’s responsibility, and no one’s accountability. For example, the HR department can influence policies and practices for recruitment or remuneration or training, but the responsibility for implementing them lies increasingly with front-line managers, who often have to make day-by-day decisions about workforce issues in isolation from the wider strategic concerns of the corporate office. Front-line managers have more a direct influence on people management and employee commitment than HR specialists. Thus, a review of the HR function must go wider than the HR department. The HR department HR practitioners have long been worried about justifying their existence and finding a comfortable place in the organisational sun. To some extent, this uncertainty results from the organisation’s unclear expectations of the HR department. On one hand, the organisation says people are its most important asset and that business success depends on how well they are managed and developed. It wants the HR department to be a “strategic partner” in building a culture that recognises and rewards the true value of the human capital. On the other hand, the HR department is expected to focus on control (eg payroll costs and headcount) and compliance (eg legislation, employment contracts, and the organisation’s policies and procedures). In addition, HR is often an early candidate for devolution of its functions to line managers or for outsourcing. Unfortunately, HR specialists are not always the best advocates of their own expertise or potential contribution to the organisation. Their attempts to “market” the HR function within the organisation often fail because they insist on seeing the world through their preoccupation with “strategic” human resources management (HRM), when the rest of the organisation often just wants help to manage the people.

The organisation must define the role of its HR department and sets out its performance expectations. That should be an interesting discussion, especially if the role has never been defined or reviewed for some time. Is everybody agreed on the department’s purpose and objectives? Or has the organisation just signed off on a high-sounding mission statement, or a detailed internal consulting contract, or some form of service standards delivery agreement? Do front-line managers know what they can expect of the HR department — and what they are expected to do in return? Do top managers understand what it means to integrate and involve HR at a strategic level? No less than other functional departments, HR should be held accountable for achieving an agreed set of objectives. It should not be allowed to avoid accountability by claiming that the HR responsibility has been devolved to line management, or that the department’s role is limited to providing advice and consultative assistance. Whatever its role, the HR department should be taking an organisational lead in setting the style for managing and developing employees, determining the work environment, and ensuring that all managers have the skills and resources they need to implement the organisation’s HR policies and programs. Does the HR department have a statement of purpose, and agreed objectives, service and performance standards, indicators, ratios, or other metrics for assessing how well it is doing? Some care is needed, because reducing HR to numbers (eg the number of HR specialists, activity ratios and expenditure) can produce misleading results (Pfeffer 1997). Being lean, or using few resources, does not by itself indicate either efficiency or effectiveness, because these measures say nothing about what is being done with the resources used. Pfeffer complained that HR departments often use measures that are easily tracked through the organisation’s accounting and financial reporting systems, and they usually put an emphasis on costs and expenditure. Again, measures of activity and cost do not necessarily evaluate efficiency, and almost certainly do not offer any qualitative assessment. The associated problem is that many HR measures are based on historical data and allow only retrospective analysis. Making a business case is concerned with forecasting outcomes. Nevertheless, it often falls to the HR department to make a business case for HR programs and initiatives. Today, HR must be able to demonstrate that there is a relationship between HR practices and business outcomes. Even though there is increasing evidence of this link in the literature, most HR departments lack organisational information to prove it. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶45-000.

¶3-100 Assessing the HR contribution — what to assess Activities The assessment of HR policies and practices often focuses on activities and transactions, with an emphasis on numbers and time. How many employees? How many resignations? How long (on average) were people employed? How long did it take to hire a replacement? How many employees participated in training? And so on. These are mainly measures of efficiency. They assume, for example, that it is more efficient to hire in four weeks than six, or that reducing labour turnover will lower costs, reduce downtime and, in other ways, improve productivity. This can be useful information, as far as it goes, but that may not be very far. First, reducing the time taken to hire might get a replacement employee into the workplace more quickly, but the new employee might not be as well skilled as the person being replaced, and then cost more in supervisory time and lower initial production than a more experienced worker recruited through a slower process. Second, the use of efficiency measures assumes that a particular activity will inevitably add value. For example, assuming that better trained employees are more productive might lead an organisation to place a particular value on training, when closer analysis might show that improved recruitment practices would pay a better dividend.

Similarly, organisations and managers often make false connections. For example, retention rates are commonly seen as a leading indicator of employee commitment. But at least one study debunks that assumption. It seems to be a myth that people (especially knowledge workers) who change jobs frequently are less committed (Pittinsky and Shih 2004). Instead, these “knowledge nomads” form attachments and commitments when they stop, and can have commitment levels as high as people who stay in the same organisation. In other words, employee commitment (staff morale) is not necessarily linked to employee mobility (labour turnover). Nor should it be used as a reason — or an excuse — for the other. In fact, labour turnover statistics simply show how many people join and leave an organisation in a particular time period; any other inferences are little better than guesswork. Activity levels are often measured across a whole organisation or department. Less aggregated data might be more useful. For example, when assessing recruitment and retention, it might be more useful to focus on the business units and occupational groups that are most important to the organisation. That is part of the challenge associated with selecting appropriate metrics and using them where it can be shown to matter. However, the difficulty of finding appropriate measures should not be tolerated as an excuse for inaction. “[O]rganisations do not need accuracy at the 0.05 level of statistical significance or at the exactitude of what can be expected from a laboratory experiment” (Fitz-enz 1995). Management seldom demands that level of accuracy or precision from other areas of the business. Calculating costs Measuring the costs of HR programs can be useful to show how much is spent on delivering particular activities and services, and to justify past or future budget allocations. It can also lead to cost-cutting campaigns — which might be aimed at improving efficiency in HR transactions (eg introduction of HR software systems, outsourcing payroll), or reducing expenditure on recruitment, training and other HR activities. In this event, the objective is usually a financial one; there is little concern for the effectiveness of HR programs concerned or for the organisation’s people management overall. Calculating how much is spent on HR activities can be educational. For example, do managers grasp both the direct and indirect costs of replacing an employee who leaves? Do they compare the time and effort the organisation puts into selecting a $5,000 computer with the time, effort, expertise and expense spent on recruiting and selecting the person who will cost the organisation about $50,000 a year to operate it? Return on investment Attempts to measure return on investment (ROI) in order to demonstrate HR’s contribution, or justify expenditure on an HR program, can be misleading. The problem is that financial return is seldom the result of a single initiative or intervention — and measuring the response to that single action might not demonstrate real value. For example, a switch to online posting of recruitment notices might bring a significant increase in the number of applications — but does that represent a real return for the increased investment? Possibly — if the applicants are of better quality than those previously attracted; if selected applicants accept job offers and join the organisation; if online-sourced recruits stay longer with the organisation, and if their performance is better. Accurate calculation of the ROI of an HR effort requires that all outcomes be measured or assessed, and compared with all the costs of that effort. Yet many of the inputs to an HR process cannot be precisely measured or costed. Employees’ attitudes Former General Electric Chief Executive Officer Jack Welch believed that customer satisfaction, employee satisfaction and cash flow were the most important metrics. Many commercial instruments claim to measure aspects of employee satisfaction — mostly based on the assumption that happy employees are hardworking and productive. But that may confuse correlation with causation. Whether they use survey instruments in-house, or take part in competitive public searches for “the best

place to work” and the like, organisations are usually wanting to identify whether and where their people management and development programs are working positively, and if changes or improvements are required. Unfortunately, it is too easy to conduct a survey — to draw up a list of questions, ask people to answer them, and then analyse the responses. But it is not really that simple. Employee surveys that are badly designed or conducted can alienate the people being surveyed. Careful design and preparation are essential. They are even more important for online survey instruments which enable organisations to survey employee attitudes, or seek feedback on specific programs or services, and even individual business decisions. Another approach is to seek the views of selected employee groups on specific HR activities or the HR department itself. These surveys usually collect both quantitative and qualitative data. They tend not to ask for generalised opinions, but instead ask respondents to describe their experiences as users or consumers of HR policies and programs, or as clients of the HR department. Often, views will be sought (either by questionnaire or by personal interview) shortly after a recruitment exercise has been completed (eg so that the respondent has a recent experience to call on).

¶3-200 Approaches to assessment This section discusses some popular assessment methodologies. There are many more, especially if commercial instruments promoted by consulting firms and similar agencies are included. HR audits HR audits usually involve a comprehensive and systematic review of HR policies, practices, procedures, documentation and systems. They aim to identify what needs to be changed or improved — for the sake of efficiency or effectiveness, or to ensure compliance with applicable laws and regulations. There are three key questions: (1) What are the objectives and scope of the audit? Is it to assess the state of HR in the organisation overall? Or is it to assess particular HR policies and practices? Will it focus on the performance of the HR department? Or will it look at how well people are managed throughout the organisation? (2) What audit method will be used? The options include standard form questionnaires, online or printed employee surveys, checklists, one-to-one interviews and focus groups. The organisation must also choose whether to use external auditors (because of their perceived independence and expertise) or internal resources. (3) Who will see the results of the audit? Will they be made available to all managers, or to all employees, or restricted to top management and the HR department? Most organisations now accept an obligation to provide survey feedback to the people who provide information. An HR audit need not be elaborate or expensive. In some cases, it is simply a matter of analysing existing information or procedures. For example, exit interviews can be a form of HR audit — provided standard questions are used in all interviews, and that the departing employee understands it is a serious datagathering exercise and not concerned with allocating fault and blame. Employee surveys Employee opinion surveys can be used to assess HR at all levels of contribution — employees’ feelings about the organisation overall, about HR policies and programs, about the leadership and management they experience, or their views of HR specialists or the HR department. There are difficulties. Survey design and administration is not simply a matter of listing a few questions and analysing employees’ responses. At very least, there are problems of sampling — especially if the work force is not large, and there is limited participation in the survey. In addition, the data gathered in a survey may not turn out to be in a usable form. And an organisation which carries out a survey is implying a commitment to provide feedback and act on its results. Benchmarking and best practice

The American Productivity and Quality Center defines benchmarking as “the practice of being humble enough to admit that someone else is better at something and wise enough to try and learn how to match and even surpass them at it!”. Unfortunately, benchmarking can also be the handmaiden of mediocrity. Comparisons based on averaged or summarised survey data can be useful, so long as being “average” or “better than average” in a crowded marketplace is consistent with the organisation’s strategic intent. Today, organisations are more likely to be looking for points of differentiation, not for guidance on how to be more like their competitors. It can also be risky to seek out “best practice” programs and practices. What is good or appropriate for one organisation is seldom as good or appropriate for another. Best practice might be a catchy term and an attractive idea, but who decides what is best, and on what basis? Looking at what other organisations do, and what they achieve, can be informative. Applying their learning to an organisation might be helpful. But slavish adoption of best practice survey data is not a sound basis for management. Benchmarking exercises can become “industrial tourism” — collecting snapshots of what others are doing, but failing to examine the reasons for differences in performance, and not using the data to identify and develop best practice (Burn 1996). For HR, three types of benchmarks are particularly appropriate (Matters 1993): (1) Broad measures of performance: Use broad productivity measures (eg sales per employee, profit per employee, volume per employee, number of employees per HR specialist) and other relevant “output-over-input” ratios. (2) HR practices: Focus on how effectively HR programs and practices are implemented, and make comparisons with other organisations. (3) HR department and its competencies: Track the knowledge, skills and abilities of HR specialists over time. Balanced scorecard The balanced scorecard approach adds three perspectives to the financial measures traditionally used to assess organisational performance (Kaplan and Norton 1996). The additional measures — customer attitudes, internal operations (eg productivity and efficiency), and learning and growth — are aimed at reducing the risk of a short-term approach. The learning and growth perspective is principally concerned with: • employee capability — including employee satisfaction, retention, skills and productivity, and • employee empowerment, motivation and alignment with organisational goals — including organisational climate, suggestions made and implemented, process performance improvements, team performance, and alignment of individual performance goals to the criteria of the scorecard. The balanced scorecard is not a methodology for evaluating HR policies and practices, or other organisational processes. Rather, it is a framework for converting strategies into objectives, which can then be turned into actions that can be measured. The scorecard can be used to set targets for HR policies and programs — and to ensure that they are linked to other aspects of the organisation’s operations and management. The HR scorecard The HR scorecard is designed to help organisations manage their human resources as strategic assets and to demonstrate HR’s contribution to overall success (Becker et al 2001). While each organisation should develop its own scorecard, there are four shared themes: (1) key HR deliverables, which leverage HR’s role in the organisation’s overall strategy (2) the High Performance Work System which the organisation adopts (3) the extent to which that system is aligned with the organisation’s strategy, and

(4) the efficiency with which the HR deliverables are generated. These themes are intended to balance HR’s twin imperatives of cost control and value creation. Cost control is achieved through measuring HR efficiency, while value creation comes from measuring HR deliverables, the external alignment of the HR system, and the effectiveness of the HPW System. Like the balanced scorecard, the HR scorecard is not simply an approach to evaluation or assessment. Rather, it is an approach to HRM that contains its own methodology for measurement. For organisations with sufficient resources and commitment, an integrated approach might be particularly appropriate. Others may have more modest goals. References BCG 2012, From Capability to Profitability: Realizing the Value of People Management, Boston Consulting Group and World Federation of Personnel Management Associations. Becker BE, Huselid MA and Ulrich D 2001, The HR Scorecard: Linking People, Strategy and Performance, Harvard Business School Press, Boston MA. Boedker C, Vidgen R, Meagher K, Cogin J, Mouritsen J and Runnalls JM 2011, Leadership, Culture and Management Practices of High Performing Workplaces in Australia: The High Performing Workplaces Index, Society for Knowledge Economics, University of New South Wales, Sydney. Burn D 1996, Benchmarking the Human Resource Function, Technical Communications, London. CBP 2002, The Case for Corporate Reporting: Overwhelming or Over-hyped?, Centre for Business Performance, Cranfield, UK. Chambers EG, Foulon M, Handfield-Jones H, Hankin SM and Michaels EG 1998, “The war for talent”, The McKinsey Quarterly, 3. CIPD 2003, Human capital: External reporting framework, Chartered Institute of Personnel and Development, London. CIPD 2015, HR analytics, Chartered Institute of Personnel and Development, London. Accessed at www.cipd.co.uk (Membership required). CIPD 2015(2), Human capital, Factsheet, Chartered Institute of Personnel and Development, London. Accessed at www.cipd.co.uk (Membership required). Fitz-enz J 1995, How to Measure Human Resources Management, McGraw-Hill, New York. FRC 2014, Guidance on the Strategic Report, The Financial Reporting Council Limited, London. Accessed at www.frc.org.uk. Garner N, McGranahan D and Wolf W 2011, “Question for your HR chief: Are we using our ‘people data’ to create value?”, McKinsey Quarterly, March. HRPA 2012, “Letter from the HR Policy Association to the Society for Human Resource Management”, 18 May. Accessed at www.hrpolicy.org. Huselid MA 1995, “The impact of human resource management practices on turnover, productivity, and corporate financial performance”, Academy of Management Journal, vol 38(3). Huselid MA 1999, “Measuring human resource management systems for competitive advantage”, Presentation to IPD National Conference, Institute of Personnel and Development, London. Kaplan RS and Norton DP 1996, “Using the balanced scorecard as a strategic management system”, Harvard Business Review, Jan–Feb, pp 75–85. Kingsmill D 2003, Accounting for people, Report of the Task Force on Human Capital Management, London. Manocha R 2005, “Grand totals”, People Management, 7 April. Matters M 1993, “The nuts and bolts of benchmarking”, Benchmarking HR, Alpha Publications, Melbourne.

Matthewman J and Mantignon F 2005, Human capital reporting: An internal perspective, Chartered Institute of Personnel and Development and Mercer Human Resource Consulting, London. People Management 2016, UK employee survey: 48% of staff haven’t talked to HR in the last year, January. PIRC 2000, Assessing the value of human capital: The experience of investors and companies, Pension and Investment Research Consultants, London. Pittinsky TL and Shih MJ 2004, “Knowledge nomads: Organizational commitment and worker mobility in positive perspective”, American Behavioral Scientist, vol 47(6), February. Pfeffer J 1997, “Pitfalls on the road to measurement: The dangerous liaison of human resources with the ideas of accounting and finance”, Human Resource Management, vol 36(3). Pollock L 1999, “EVA believers”, People Management, 16 September. Rudman RS 2000, “People management practices make the difference”, Human Resources Management Bulletin, no 11, CCH Australia Limited, Sydney. Rudman RS 2001, “People management and the bottom line”, New Zealand Journal of Human Resources, see www.nzjhrm.co.nz/Site/Articles/2001.aspx. Rudman RS 2003, “After HRM: Choosing a better direction”, Human Resources Management Bulletin, no 25, CCH Australia Limited, Sydney. Scarborough H and Elias J 2002, “Evaluating human capital”, Research report, Chartered Institute of Personnel and Development, London. Scott-Jackson W and Tajer R 2005, “Getting the basics right: A unique guide to measuring and maximising the competitive value of your workforce”, Chartered Management Institute, London. Scott-Jackson W, Cook P and Tajer R 2006, Measures of workforce capability for future performance. Volume 1: Identifying the measures that matter most, Chartered Management Institute, London. Townsend R 1970, Up The Organization, Michael Joseph, London. Truss C 2001, “Complexities and controversies in linking HRM with organizational outcomes”, Journal of Management Studies, vol 38, pp 1,121–49. Truss C and Gratton L 1994, “Strategic human resource management: a conceptual approach”, International Journal of Human Resource Management, vol 5, pp 663–86. Ulrich D et al 2012, “Competencies for HR Professionals, Human Resources”, Human Resources, Institute of New Zealand, August/September. West M and Borrill C 2003, Effective human resource management and lower patient mortality, Aston Business School, Birmingham.

4. DIVERSITY MANAGEMENT: A STRATEGIC INITIATIVE BEYOND EQUAL EMPLOYMENT OPPORTUNITY Editorial information

Professor Robin Kramar Australian Catholic University

This chapter is drawn from research undertaken in the author’s capacity as a staff member of the Australian Catholic University.

¶4-010 Introduction Two forms of legislation, at both the federal and state levels, seek to prohibit discrimination in a number of areas. These are: (1) discrimination legislation, and (2) equal employment opportunity (EEO) legislation. Discrimination legislation seeks to prevent direct and indirect discrimination through a complaints-based approach. EEO legislation (and its overriding purpose, in the employment context, which ensures that employees are not detrimentally affected by subjective and irrelevant characteristics in any aspect of their employment) seeks to provide fair and equal access for employees to all employment opportunities, both potential and actual. Unlike discrimination and EEO legislation, diversity management is not shaped by legislation. It is a much broader management process that seeks to manage the similarities and differences between people in an organisation so that the organisation achieves its objectives and goals. Diversity management is a term that is well known in Australia. However, the essence of the concept is not well understood. This chapter briefly outlines discrimination, EEO legislation and its minimal compliance requirements, and the process of diversity management. More information on EEO and discrimination is discussed in Chapter ¶13.

¶4-020 Diversity management as a strategic management process The idea of diversity management emerged when the concept of EEO was broadened beyond legal compliance during the 1990s in the United States. The concept of diversity management is now understood in very different ways, depending on the context. It can refer to individual personal characteristics (eg race, gender or age). It can also be viewed in a

broader way and refer to a range of personal characteristics (eg sexual orientation), as well as differences relating to various functional and operational groups, and terms of engagement with the organisation. Policy responses that focus on diversity management are known to vary between countries. For instance, in the United States, diversity management is embedded in the business paradigm, while in France, Switzerland, Germany and Sweden it is closely aligned with equality (Kramar 2012). Diversity management (as a management process) recognises that using different employment practices and employment patterns for different groups contributes to organisational success. It is argued that managing the diverse characteristics of the workforce will contribute to business success, facilitate the management of change, provide a source of competitive advantage and contribute to the realisation of an organisation’s values (Kramar 1998). The process of diversity management involves managing the needs of all individuals in the workplace and acknowledging that different people will need different employment practices to maximise their productivity. In recent years, some organisations have recognised that diversity management processes contribute to financial and social sustainability. In these organisations, diversity management programs are used to enhance outcomes for internal and external stakeholders.

Case study — ANZ In the ANZ Bank, diversity management is integrated into corporate responsibility goals. Two of the corporate responsibility priorities are: (1) strengthening the capabilities for making business decisions that take into account economic, social and environmental issues and opportunities, and (2) improving social and financial inclusion of disadvantaged and under-represented groups in the community. The second of these priorities sought to build a diverse and inclusive global workforce. This extended the financial literacy and inclusion programs and developing practical initiatives to improve the accessibility of ANZ products and services for groups identified in the diversity agenda (ANZ 2009).

A genuine commitment to diversity involves a shift away from “equality”, which is based on the principle that everyone should be treated in the same way, and a move towards “equity”, which is based on the principle that it is important to acknowledge, accept and accommodate the differences between individuals. Such a commitment involves an acceptance of the following basic beliefs and values: • Diversity is inclusive: It embraces the needs of all employees, rather than prioritising the needs of one particular group over all others. • Diversity requires long-term organisational change: Changing the underlying culture, philosophy and dynamics of an organisation takes time and cannot simply be dictated to employees. • Diversity must meet both the needs of the organisation and the needs of the individual: The emphasis on “inclusion” applies to everyone at all levels of the organisation. • Diversity embodies the values of respect and dignity: Diversity is predicated on the principle that individuals will not be disadvantaged by their “differences”, whether real or perceived. • Diversity emphasises decisions based on merit. Benefits of diversity for employers There is little doubt that the appropriate management of diversity can lead to many commercial benefits for an organisation. These include the following:

• Increased efficiency and productivity: If the talents of employees are properly utilised then efficiency and productivity will often improve without the need to increase costs for the organisation. Furthermore, if differences in approach are encouraged and supported, employees will feel valued, will become more productive and efficient, and will be able to offer their best to the organisation. • Increased morale and motivation of employees, and decreased turnover and absenteeism: Benefits for employees include increased job satisfaction, lower absenteeism and lower employee turnover. In addition, retaining experienced employees will result in reduced recruitment and training costs and will help build morale in the workplace. • Increased ability to attract and recruit new employees: Many multinational organisations have found that being viewed as a leader in diversity-based initiatives enhances the organisation’s reputation as being an employer of choice. This is reflected in the amount of money spent by some organisations to develop diversity programs and implement initiatives which have won them awards for best practice. Developing such a reputation among potential employees will enhance the ability of the organisation to attract, retain and develop the most talented employees available. It will also lead to an overall reduction in recruitment costs. In addition, by embracing differences that may exist, the pool of potential candidates will also increase substantially. • Benefiting from overseas experience and qualifications: An additional benefit of embracing diversity for employers is the ability to tap into the enormous skill base which exists in Australia behind various language and cultural barriers. • Creativity and innovation in developing new approaches and new ideas: A diverse group of employees will be far more creative and innovative in approaching issues as they will bring a variety of viewpoints to whatever situation or issue they are asked to consider. • Understanding customers and realising business opportunities: Australian society is becoming increasingly diverse. This diversity leads to the development of products and services that appeal to a broader range of customers. If the composition of an organisation’s workforce closely mirrors that of its customer base, this is likely to improve the public image of the organisation. • Enhancing company image: An organisation which embraces diversity will often have a better public image, and be more likely to be viewed as a responsible corporate citizen. This will often impact positively on a consumer’s decision-making process. Benefits of diversity for employees There are many benefits which flow to employees in a diverse and inclusive workplace. These include: • increased levels of job satisfaction resulting from the ability to contribute to their fullest potential • feeling valued and recognised due to the increased ability to contribute • better career opportunities within the organisation • increased morale • increased trust in the employer • decreased stress • decreased conflict between work and family commitments, and • respect for differences of fellow employees. Diversity management and corporate social responsibility A limited number of organisations have recognised that diversity management initiatives can further its corporate social responsibility, particularly its human and social goals.

Case study — 3M At 3M, initiatives in areas such as health and safety, career development, maintaining stakeholder engagement and community giving all assist the company in meeting the needs of employees and the community. A diverse workforce is essential for company success. It is also a reflection of its social commitment. Diversity in 3M is defined as “respecting differences, maximising individual potential, valuing uniqueness and synergising collective talents and experiences for the growth and success of 3M” (3M 2008).

Costs of not managing diversity The promotion of diversity in the workplace is recognised as contributing to equality of opportunity in the workplace, as well as enhancing employee morale and productivity, and improving overall business performance. Conversely, ignoring the impact of diversity on business may expose an organisation to a number of risks. These are outlined in more detail below. Legal compliance and increase in complaints The first and most obvious cost arising from a failure to embrace diversity in the workplace is that there may be a corresponding failure to meet the minimum legislative standards set by EEO and antidiscrimination legislation. Where it is not embraced as common practice, employers will typically face an increase in complaints of discrimination in employment or harassment in the workplace. If such complaints are taken to an external tribunal and are proved, the employer will be required to make payments of compensation and may also suffer resultant negative publicity. If diversity is part of the workplace culture in practice, not just rhetoric, incidents of discrimination will be both less frequent and more readily managed internally.

Case study — American Express American Express, a diversified travel and financial services company, seeks to build an organisation that “brings diverse talent to the right job at the right time in an environment that reflects strong values and a focus on employee satisfaction”. American Express has implemented a number of initiatives which seek to build a workplace culture based on strong values consistent with respect of diversity. These values include one key value that links to employee competency ― “Valuing and Integrating Diversity”. This value is tied to rewards. It is also used as a tool which enables employees to increase their self-awareness — providing employees with the opportunity to enhance their ability to manage diversity through targeted training and development (EOWA 2008).

Other costs In addition to the legal costs that may arise from non-compliance with relevant legislation, employers will also often face additional organisational non-financial costs if diversity is not properly managed. These include: • an intolerance of change, which may become entrenched in the organisation, particularly if diversity initiatives are not supported by senior management

• the organisation operating below its maximum efficiency and profitability • a decrease in employee morale, teamwork and productivity, which will also lead to employee dissatisfaction and a decrease in employee loyalty to the organisation • a corresponding increase in absenteeism, job dissatisfaction, employee turnover and industrial activity among employees • an increase in recruitment, induction and training costs, and • an increase in the number of internal and external complaints received, which will lead to an increase in management time being spent in investigating and resolving/managing internal and external complaints.

¶4-030 Processes of diversity management and best case examples Flexibility and the need for balance Traditionally, organisations have approached workplace issues (eg involving employees) by looking at the way in which issues have been dealt with in the past. By their very nature, however, EEO and diversity practices encourage examination of the differences between individuals, and the adaptation of the workplace to accommodate these differences. Of course, employers are encouraged to treat identical cases in a similar manner; however, it is expected that they treat different cases differently and appropriately, so as to ensure fair and equal access for all employees. This change in attitude has partly resulted from the change in the mix of the workforce, and partly from the change in societal demands and expectations. It is no longer the case that males are the sole or primary breadwinners in the family. The traditional family unit is also no longer the most common household type in Australia. The cultural make-up of our society is in a constant state of flux. As a result of continuing advances in the treatment of medical conditions, mortality rates continue to fall and individuals are better able (and willing) to continue making a valuable contribution to the workforce. There is also a growing diversity of attitudes and expectations about the roles of men and women in both work and personal life, and a growing recognition that family responsibilities extend to caring for the elderly and disabled family members, as well as children. In these circumstances, the needs of the workforce can no longer be accommodated by traditional “onesize-fits-all” HR practices and policies. Effective HR management now requires that organisations consider the personal circumstances of their employees to establish policies and frameworks which accommodate their differences. More importantly, employees are no longer reluctant to demand that these differences be accommodated in the workplace. As a result, organisations are required to think differently about the needs of their employees. For example, the needs of young employees will be different from those of older employees. Similarly, the needs of employees with parental responsibilities will be different from those who do not have such responsibilities. The needs of employees from different cultural backgrounds will also differ. To remain competitive and to provide the flexibility that the marketplace is demanding, the implementation of initiatives aimed at achieving a balance between work and personal life has emerged as a key priority for many employers. Generation X syndrome A major driver of this increase in workplace flexibility in recent years has been the desire of organisations to be seen as employers of choice, and the corresponding rise of generation X in questioning the value of what is on offer from employers or potential employers. The work ethic has changed over time. Recent generations of employees have experienced a greater focus on the individual as part of their day-to-day social and cultural experience. In today’s workplace, generation Xers are more likely to interview their employers than be interviewed, base decisions about

accepting employment with a particular organisation on ethical and moral considerations, not just monetary considerations, and demand flexibility in the workplace. In these circumstances, in order to remain a viable employer of choice, organisations are being required to think creatively about the ways in which flexibility can be built into the workplace. This is discussed in more detail in Chapter ¶25, which addresses work/life balance. Developing and implementing best practice The approach to achieving workplace diversity and flexibility will vary from one organisation to the next. However, the following steps may assist in the development of an appropriate approach: • Assess the current internal situation: Identify any potential barriers and the needs of the organisation’s stakeholders. Restrictive policies, procedures and systemic attitudes need to be identified. Conducting a climate survey will help the organisation to assess the needs of its employees, its readiness to adapt to change, and the major barriers to such change. Such a survey will also ascertain the degree to which the organisation’s senior management is committed to the underlying values of diversity. Also, consider the organisation’s recent employee turnover to determine whether there are any identifiable patterns as to who is leaving the business and why. If weaknesses are exposed in the organisation’s ability to embrace change, other preliminary work prior to implementation may be required. • Align diversity to the company’s vision: An approach to diversity, which is aligned with both the strategic direction of the organisation and the commercial drivers of the marketplace, is more likely to enhance the competitive advantage of an organisation. It will also assist in encouraging internal acceptance of the diversity model. • Establish the business case and appoint an organisational champion: Diversity management is more likely to be successful when it is integrated into the strategic planning process and there is clear and active support from the organisation’s internal leaders. Establishing the business case for diversity management is essential to this process. Consider the business goals of the organisation, the position adopted by competitors on the issue of diversity, the need to establish minimum legal compliance, the risks of failing to implement diversity, and the broader organisational benefits of implementing diversity. Determine the actual costs of current practices and identify where the organisation can achieve cost reductions. Seek the support of senior management and appoint an internal “champion” of the diversity management strategy. Keep senior management involved throughout the process with regular briefings. • Develop a diversity policy: Base the policy on an inclusive definition of diversity which is aligned to the organisation’s vision. Obtain the input and support of the workforce through informal focus groups and consultation. Establish a joint management-employee working team to develop and implement diversity policies and flexible work practices. • Implement appropriate diversity programs and practices: Review all internal policies and practices to ensure that these are consistent with, and complement, the diversity policy. Communicate the diversity policy and provide regular training to all employees to ensure awareness. • Evaluate the impact of the strategy: Review the policy and practices regularly to ensure that they continue to meet the needs of employees and remain aligned to the company’s vision. Review internal trends in organisational turnover and demographics of the workforce, and consider how the workplace is changing. The following checklist may be useful in implementing and achieving best practice in diversity management.

Checklist

Yes

No

Has the necessary data been gathered to help in understanding the demographics of the workforce, and to identify any potential barriers to change? Has the approach taken by other organisations and competitors, which have successfully integrated diversity into their workplaces, been considered? Is diversity management integrated into the organisation’s strategic vision? Is there active commitment from senior managers within the organisation? Are there any “diversity champions”? Has a joint management-employee team been appointed to develop an appropriate diversity policy and flexible work practices? Is the approach to diversity “inclusive” of all employees? Have other internal policies and practices been reviewed to ensure consistency with the company’s approach to diversity? Does the organisation adopt a flexible attitude to workplace issues? Has there been diversity awareness training for all employees (ie including supervisors and managers)? Is the diversity policy regularly reviewed to ensure that it continues to meet the needs of employees?

¶4-040 Equal employment opportunity The need for minimal compliance Federal and state legislation prohibit discrimination and harassment in employment. There is legislation at the federal and state levels that covers women in many organisations. Sections of state legislation require state public sector organisations to provide EEO. The Equal Opportunity for Women in the Workplace Act 1999 (Cth) (since amended and renamed the Workplace Gender Equality Act 2012 (Cth) — see below) covers organisations with more than 100 employees including private sector organisations, trade unions, higher education institutions, private schools and community organisations. Prior to the changes, these organisations were required to introduce EEO programs for women and submit reports to the Equal Opportunity for Women in the Workplace Agency (EOWA). The administrative requirements of the Equal Opportunity for Women in the Workplace Act 1999 (Cth) sought to further build on common interests in the workplace and improve organisational performance. The Act attempted to do this by encouraging the integration of EEO initiatives with organisational objectives and strategy. A review of this Act and the EOWA commenced in 2009 and was concerned with identifying which aspects of the Act were working, and which areas needed a new approach, particularly with regard to finding better ways to implement EEO. The Equal Opportunity for Women in the Workplace Amendment Bill 2012 was introduced in May 2012. In November 2012, it was enacted. As a consequence, the Equal Opportunity for Women in the Workplace Act 1999 (Cth) was renamed the Workplace Gender Equality Act 2012 (Cth) and the EOWA was renamed the Workplace Gender Equality Agency (WGEA). The amendments sought to drive improved gender equality outcomes, increase female participation and boost Gross Domestic Product. The changes also sought to enable men to work more flexibly, and to promote gender equality and equal pay. Although employers with less than 100 employees will not be required to report, they will have access to

the WGEA’s advice, education and incentive activities. Reporting will also emphasise outcomes-based reporting which will simplify and streamline reporting. Legislative objectives EEO is an outcome of a series of processes that ensure the workplace is free of discrimination and sexual harassment. The aim of the legislation is to ensure that women and men have equal access to opportunities and benefits. The objectives of the legislation are to: • promote the principle that employment decisions for women and men should be based on merit • eliminate discrimination and harassment from the workplace, and • foster workplace consultation between employers and employees. The link with human rights Australian approaches to EEO have been influenced by the conventions of the International Labour Organization (ILO), a body established in 1919 which now has approximately 180 member countries, including Australia. A number of the conventions address equal opportunity, such as the: • Equal Remuneration Convention 1951 (No 100) • Discrimination (Employment and Occupation) Convention 1958 (No 111), and • Equal Treatment for Men and Women Workers: Workers and Family Responsibilities Convention 1981 (No 156). The ILO has long been a powerful advocate for EEO on the basis that all workers have the right to be treated equally. It is their human right. This argument is based on moral and ethical considerations. Countries ratifying ILO conventions are expected to introduce legislation to translate the goal of the conventions into domestic experience. The business case Considerable attention in Australia has been given to the business case for EEO. Champions of EEO have calculated that many managers would not be interested in EEO if its rationale were solely the pursuit of human rights. If businesses could be persuaded that attention to EEO would boost the “bottom line”, then they would be more likely to commit resources to it. The essence of the business case is that attention to EEO will: • reduce absenteeism • reduce turnover • lead to better recruitment and retention • increase continuity in jobs, and • increase motivation. The all-round impact will give a business a competitive advantage over businesses that fail to invest in EEO. The argument is powerful and there are compelling case studies of organisations that have been outspoken in their commitment to EEO, such as AMP, Hewlett-Packard, IBM and Westpac Corporation. They have taken steps to promote EEO and have linked business success to their EEO strategies. A sobering thought, however, for many advocates of EEO is that, although the business case has been advanced for the last 20 years, progress towards EEO is patchy and slow. The visible barriers to EEO, such as formal pay inequity and, in some organisations, the termination of employment for women after marriage, have been identified and removed. Much harder to detect and

remove have been: • workplace cultures and networks that encourage male advancement and discourage female progression, and • work patterns which involve early mornings, evenings and weekend work (ie they are unfavourable to those with family responsibilities). A further challenge in Australia is the perception that EEO is now a dead issue. This is because there was legislation on this in the 1980s and compulsory compliance for large- and medium-sized organisations. Add to this the rapid change, competitive pressure and turbulence that engulf so many organisations. Few managers seem to have energy or enthusiasm left over to commit to the pursuit of EEO. During the 1980s and 1990s, the representation of women in the workforce increased; however, women are still concentrated in: • part-time jobs • occupations characterised by relatively low pay, poor conditions and poor career prospects (eg clerical, retail and service occupations) • industries such as retail trade, property and business services, education and health, and community services • lower-level positions, rather than managerial positions, and • lower-paid jobs. How does Australia compare in terms of EEO with other countries? An analysis of Organisation for Economic Co-operation and Development (OECD) countries found that the gap in pay between men and women workers in Australia was narrower than in the majority of OECD countries, and attributed this to Australia’s history of centralised wage determination. The Equal Pay cases of 1969 and 1972 made an appreciable difference, diminishing (though clearly not eliminating) the gap (Whitehouse 1992). The shift in industrial relations away from centralised wage-fixing to a greater reliance on bargaining has been seen to contribute to a widening of this gap in the middle and late 1990s. A study by the ILO confirmed that Australia has maintained its position as a country with a relatively narrow gap in pay between men and women workers (Wirth 2001, p 15). However, the average wage gap between men and women remains at around 17% in 2011. The ILO study also explored the proportion of women who were legislators, senior officials and senior managers against the proportion of women in the workforce as a whole. By these criteria, countries such as Canada, New Zealand and the United Kingdom all had significantly higher proportions of women in these positions, suggesting that the barriers women faced in Australia may be relatively high (Wirth 2001, p 32). Key findings of the 2010 EOWA Census of Women in Leadership, which counts the number of women and men board directors and executive key management personnel in the ASX 200 listed companies, revealed that women chaired 12 boards and held 9.2% of board directorships in ASX 500 (EOWA 2012). In addition: • Women are under represented in the pipeline to senior leadership, especially in crucial line management roles. Men hold 2,148 line positions in the ASX 500, whereas women hold 141 line positions. • Female directors are more likely than male directors to hold multiple directorships. Of the female directors of ASX 500 companies, 23.3% hold more than one directorship, compared to 14.3% of male directors. • Pharmaceutical biotech and life sciences, consumer services, transportation, diversified financials, and retailing are the top five industries in the ASX 500 for female executive appointments (ranging

from 14.1% to 22.2%). • Consumer durables and apparel, utilities, capital goods, energy, and materials (dominated by mining) are the five worst performing industries in the ASX 500 for female executive appointments (ranging from zero to 6.4%) (EOWA 2012). Administrative requirements of EEO legislation The Workplace Gender Equality Act 2012 (Cth) requires an organisation covered by the Act to report annually to the EOWA. In the 2012–13 reporting period, steps continue to be taken towards the introduction of EEO programs for women and their success. In the 2012–13 report, employers are required to demonstrate that they have fulfilled six steps. These steps are: (1) prepare a workplace profile (2) analyse each of the seven employment matters (see following) (3) prioritise issues (4) take action to address priority issues (5) evaluate effectiveness of these actions, and (6) identify future actions. The seven employment matters to be analysed are: (1) recruitment and selection (2) promotions, transfers and terminations (3) training and development (4) work in the organisation (5) conditions of service (6) arrangements for dealing with sex-based harassment, and (7) arrangements for dealing with pregnant and potentially pregnant women. If an organisation fails to submit a report, it may be named in federal parliament and it will be ineligible for government contracts and any specified forms of industry assistance. If an organisation’s number of employees falls below 100, it must continue to comply with the Act unless the number of employees falls below 80. In the 2013–14 reporting period, organisations will be required to report against standardised gender equality indicators (GEIs). The precise matters for each GEI will be determined by the Minister for the Status of Women in consultation with the WGEA and other stakeholders. The GEIs will be set prior to the beginning of the reporting period to which they apply (eg prior to 1 April 2013 for the first full reporting period of 1 April 2013 to 31 March 2014). Organisations will also be required to comply with new notification and access requirements. These require the organisation to: • enable access to the report (for employees and shareholders) • inform employee organisations of the submission of the report • give all of the above an opportunity to comment, either to the organisation or to the Agency. In addition, in 2013–14, reports are required to be signed by the Chief Executive Officer of the relevant employer. It will also be possible to report online (see www.wgea.gov.au).

The role of HR Having an awareness of EEO legislation and the risks it poses for organisations is essential for effective management. To adequately address these risks, human resources (HR) managers and line managers with responsibilities for managing people should begin with the development of policies and procedures to ensure that employees are aware of the requirements of EEO legislation. Astute managers will also know that, in the process of addressing compliance concerns around EEO, they can also achieve changes in workplace culture that lead to improvements in productivity and morale. Thus, the most effective implementation of policies on EEO will incorporate broader strategies that are planned, implemented and evaluated in the same way as other change management initiatives. Organisational policy and procedures An effective EEO policy should ensure that employers can draw on the widest selection of HR talent. It must ensure compliance with legislation and codes of practice in the areas of sex, race and disability discrimination. It should also ensure that the organisation is not held liable for the behaviour of a “rogue” employee’s discriminatory conduct, provided that the organisation can show that it has taken all “reasonable steps” to prevent such conduct. Figure 4.1 presents a sample policy and procedures statement which may be useful. Figure 4.1: EEO policy and procedures

Equal employment opportunity (EEO) policy It is this organisation’s policy to treat job applicants and employees in the same way, regardless of their sex, sexual orientation, age, race, ethnic origin or disability. Further, the organisation will monitor the composition of the workforce and introduce positive action if it appears that this policy is not fully effective. EEO procedures Introduction This company is an equal opportunity employer. Equal opportunity is about good employment practices and efficient use of our most valuable asset, our employees. Every manager and employee has a personal responsibility for the implementation of the policy. Any instance of doubt about the application of the policy, or other questions should be addressed to [insert name and title], as should any requests for special training. This company will not discriminate against employees on the grounds of sex, marital status, ethnic origin, colour, nationality, disability, age, sexual orientation or other grounds of discrimination, including grounds that may not be prohibited by legislation. Policy scope The policy applies to the advertising of jobs, recruitment and appointments, training, conditions of work, pay and every other aspect of employment. The policy also applies equally to the treatment of our customers/clients. Staff involved in recruitment, in particular, should request training if they have any doubt about the application of this policy. Employees should note that the imposition of a condition or requirement which has an adverse impact on a person, because persons of that sex, race or marital status are more likely to be affected by that condition or requirement, will also be unlawful unless it can be justified on grounds of business need (eg a height requirement will eliminate some men, but proportionately more women, and so will be unlawful). In all such situations [insert name and title] should be consulted where anything is unclear. Grievances Any employee may use the grievance procedure to complain about discriminatory conduct. If the matter relates to sexual or racial harassment, or harassment on the basis of disability, then the

grievance may be raised directly with [insert name and title]. The company wishes to ensure that employees feel able to raise such grievances and that no individual will be penalised for raising such a grievance, unless it is untrue and made in bad faith. Disciplinary measures Any employee who harasses any other employee on the grounds of race, sex or disability will be subject to the organisation’s disciplinary procedure. In serious cases, such behaviour will be deemed to constitute gross misconduct and, as such, will result in summary dismissal in the absence of mitigating circumstances. Monitoring All employees and job applicants will be asked to complete a form denoting their sex, race, ethnic origin and any disabilities. The company guarantees that this form will be used for the purpose of monitoring the effectiveness of its EEO policy only. The composition of the workforce and of job applicants will be monitored on a regular basis. Should inequities become apparent, positive action will be taken to redress the imbalance, including such measures as: • advertising jobs in ethnic or female interest publications, as appropriate • introducing assertiveness training • introducing English language training • encouraging under-represented groups to apply for suitable training posts, and • making contact with people with disabilities through employment agencies.

A framework to support good practice Pursuit of EEO by employers and their managers demonstrates respect for the right of employees to work in a safe workplace that is free from discrimination and harassment. There is now ample evidence demonstrating that organisations which practise EEO reap a range of benefits in terms of lower rates of turnover and absenteeism and increased employee morale. The following elements provide a framework for organisations to use in their pursuit of EEO: • Data gathering: Systems should be established to gather data on the characteristics, views, attitudes, needs and experiences of employees. This will provide information on the workforce profile and on the needs identified by employees. Such gathering of data and its use should be discussed with employees to ensure that rights to privacy are not abused and that the gathering of data itself does not become an issue. Efforts should be made to ensure that the data is accurate and collected on a reasonably regular basis. • Discussion and analysis: There should be top level and expert discussion of the data so that it may be drawn on to assist in the development of strategy and its implementation. • Leadership: There is a significant role for top leadership and leadership at all other levels to reinforce the importance of EEO. Leaders must model good behaviour, encourage good behaviour in others and take steps to discourage inappropriate behaviour. The monitoring of competence in EEO can be built into performance management systems. • Training: Managers and employees throughout the organisation should be trained so that they have a good understanding of EEO and its application at work. Care and effort must go into the design and implementation of the training. Its effectiveness should be monitored.

• Communication: The organisation’s communication channels should be used to emphasise the importance of EEO and to refresh and sustain this message. • Surveys and reviews: The process of data gathering should begin again to check the effectiveness of the organisation’s strategy on EEO and prepare the ground for revisions to strategy and implementation.

¶4-050 The many forms of discrimination Discrimination Discrimination can be defined as any practice which makes a distinction between individuals or groups so as to disadvantage some and advantage others. Discrimination will only be unlawful, however, if it is based on a prohibited characteristic and occurs within a regulated area. Discrimination does not have to be conscious or calculated. It can, and often does, result from entrenched beliefs and attitudes. Neither motive nor intention is relevant in determining whether a particular act is discriminatory. The task is to determine whether the “true” basis of the conduct is grounded on an unlawful consideration. Furthermore, where an act is done for more than one purpose, if one of these is discriminatory under the relevant legislation, this will be sufficient to form the basis of a complaint. The two forms of discrimination under the relevant legislation (namely direct discrimination and indirect discrimination) are discussed in more detail in the following paragraphs. Direct discrimination Generally, direct discrimination occurs when a person treats or proposes to treat another person less favourably because of a particular characteristic or attribute. To establish whether a complainant has been subject to direct discrimination, three conditions must be present: (1) Less favourable treatment: Generally, all anti-discrimination legislation incorporates the concept of “less favourable” or “unfavourable” treatment. To establish this, the person complaining of the discrimination must be able to demonstrate that he or she has been subject to “unfavourable”, or “less favourable”, treatment. This can be demonstrated by comparing the actual situation of the complainant with the hypothetical situation (had the particular attribute or characteristic not existed), and then determining whether the actual situation is less favourable than the hypothetical nondiscriminatory situation. The underlying concept of this requirement is detriment, that is, the complainant must suffer loss or disadvantage as a result of the unfavourable or less favourable treatment. (2) Treatment based on attribute or characteristic: As noted earlier, discrimination will only be unlawful if it is based on a prohibited ground, such as sex or race. There must be a causal link between the conduct complained of and the discriminatory ground. As indicated above, even if there are several reasons for the conduct, if one of them is discriminatory, then this will be sufficient grounds for a complaint. The relevant legislation also covers discrimination on the grounds of characteristics which are generally related to, or are imputed or thought to apply to, persons within a particular group. This is the concept generally known as “stereotyping”. An example would be a belief that all married women intend to have children and, therefore, are likely to want to have a break in their career at some stage. (3) Treatment occurs in circumstances which are the same or not materially different: Finally, to establish direct discrimination, it is necessary to show that the less favourable treatment of the complainant has occurred in circumstances that are the same as, or not materially different to, the circumstances of the hypothetical non-discriminatory situation. In addition to these requirements, it is necessary to keep in mind that: • motive and intention are irrelevant — in some cases, the legislation specifically provides that a person’s motive is irrelevant

• the test of direct discrimination is an objective test, not a subjective test, and • “reasonable conduct” on the part of the discriminator is irrelevant and cannot form the basis for a valid defence in the case of direct discrimination (although it is a relevant consideration in the case of indirect discrimination). Indirect discrimination While direct discrimination deals with practices that are directly based on the various prohibited grounds, indirect discrimination deals with policies and practices that appear (on their face) to be neutral or nondiscriminatory, but that operate in such a way as to advantage one person, or group of persons, over another. For indirect discrimination to be unlawful, it must impact on a member of a group that is protected by the legislation (eg women), and it must occur within a regulated area (eg employment).

Case examples Griggs v Duke Power Company Indirect or “systemic” discrimination is a concept which evolved in the United States and was highlighted in the case of Griggs v Duke Power Company 401 US 424 (1971). The employer in that case introduced a testing system under which its employees were required to have both a high school diploma and a satisfactory intelligence test score for certain positions which had previously been available only to “white” employees. A number of “black” employees brought a class action alleging that the employer had breached the Civil Rights Act 1964. In what has become recognised as a landmark judgment on indirect discrimination, the Supreme Court of the United States held that the Civil Rights Act 1964 prohibited the employer from insisting on this requirement because: • the requirement was not significantly related to job performance • the requirement operated to disqualify “black” applicants at a substantially higher rate than “white” applicants, and • the positions in question had formerly been filled only by “white” employees as part of a long standing practice of preferring “whites”. The Supreme Court expressly rejected the proposition that business convenience was sufficient to justify a requirement which had a discriminatory impact. Australian Iron & Steel Pty Ltd v Banovic In Australia, the leading case on indirect discrimination is the decision of the High Court in Australian Iron & Steel Pty Ltd v Banovic (1989) EOC ¶92-271; [1989] HCA 56; (1989) 168 CLR 165. The employer in that case had a “last on, first off” approach to implementing retrenchments. In the past, the employer had directly discriminated against female applicants by giving preference to male applicants, and making the female applicants wait on a waiting list for several years before offering them employment as steelworkers. In comparison, male applicants were taken on as soon as they applied for positions. Six months before a number of retrenchments were introduced the employer abandoned its discriminatory hiring practice. However, the High Court held that the “last on, first off” retrenchment policy was indirectly discriminatory against female employees. The former discriminatory hiring policy meant that women were more likely to have been the “last on”. Despite the fact that the practice was apparently neutral in its application, it was found to be discriminatory in its impact. This is because it operated to the disadvantage of female employees who had previously been disadvantaged by the employer’s prior discriminatory hiring policy.

Other relevant cases More recently, a similar retrenchment policy to that mentioned in the last case was also found to be indirectly discriminatory against younger workers (see Brooks v Flight West Airlines Pty Ltd (1994) EOC ¶92-629). In Hopper & Others v Virgin Blue Airlines Pty Ltd (2006) QADT 9 (a case involving recruitment and selection), it was found that Virgin Airlines had discriminated against eight flight attendants on the basis of age. The women were aged between 36 and 56 and were awarded damages. The Queensland Anti-Discrimination Tribunal acknowledged that Virgin Blue’s behavioural competencies of assertiveness, teamwork, communication and “Virgin Flair” were legitimate criteria. However, they found that the assessors applied these criteria in a subjective, unconscious way. While legislative definitions vary, the test for indirect discrimination is, in general terms, very similar. In each jurisdiction, to establish whether a complainant has been subject to indirect discrimination, the following four elements must be shown: (1) The complainant is required to comply with a requirement or condition. (2) A substantially higher proportion of people without the relevant attribute or characteristic comply, or are able to comply, with the condition or requirement, as compared with those of the same status as the complainant. (3) The complainant does not or cannot comply with that requirement or condition. (4) The requirement or condition is not “reasonable” having regard to all the relevant circumstances of the case. However, a High Court of Australia decision (see New South Wales v Amery [2006] HCA 14) delivered on 13 April 2006 highlighted the limitations of anti-discrimination law as an instrument to address systemic inequities in the workplace. Thirteen “temporary” TAFE teachers, who had chosen to be temporary in order to be closer to home, claimed the lower salary scales compared to permanent teachers indicated that they were indirectly discriminated against on the grounds of sex. The judges believed it was reasonable in the circumstances to pay temporary teachers a different rate to permanent teachers and Justice Callinan pointed out that it was the teachers’ choice to work in particular locations (Price 2006, p 28).

Sexual harassment Sexual harassment is legally recognised in all jurisdictions as a form of sex discrimination. When a person is sexually harassed, the person is subjected to “less favourable treatment” because of his or her sex. Sexual harassment is, essentially, unwelcome conduct of a sexual nature. The definition of sexual harassment differs from jurisdiction to jurisdiction in Australia, but the types of conduct which amount to sexual harassment in each jurisdiction are largely the same. The federal Sex Discrimination Act 1984 provides that one person sexually harasses another if: • the person: – makes an unwelcome sexual advance, or an unwelcome request for sexual favours, to the person harassed, or – engages in other unwelcome conduct of a sexual nature in relation to the person harassed, and • in the situation, a reasonable person, having regard to all the circumstances, would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated. “Conduct of a sexual nature” could include making a statement of a sexual nature or displaying sexually

charged material. There are various types of conduct which could amount to sexual harassment. The underlying requirement, however, is that the conduct is unwelcome. Sexual conduct is unwelcome when: • it is not invited or solicited by the person on the receiving end of the conduct, and • that person regards the conduct as undesirable or offensive. In New South Wales, it has been held that a person must know, or be in a position to know, that his or her conduct was unwelcome. However, under the federal Act, a person need not actually intend to offend for his or her conduct to amount to sexual harassment. It is sufficient that a reasonable person would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated. Sexual harassment can involve physical, visual, verbal or non-verbal conduct. It can take various forms and can involve: • behaviour which is accompanied by a direct or implied threat or promise of a benefit, the acceptance or rejection of which is used, or is threatened to be used, to make an employment decision (eg in relation to hiring, promotion, work assignments or pay increases) which will directly impact on the person alleging harassment • behaviour which creates a sexually permeated or hostile working environment, and • behaviour which can also constitute criminal conduct (eg indecent exposure, physical assault or sexual assault). Some examples of sexual conduct which could constitute harassment are: • uninvited physical contact or gestures (eg attempts at sexual intercourse or some other overt sexual contact) • kissing, touching or pinching • sexual comments, jokes or innuendo • displays of offensive or pornographic material (eg posters, pin-ups, graffiti or calendars) • unwelcome requests for sex or other sexual propositions • gender-based insults or taunting • persistent declarations of love or proposals of marriage • intrusive personal questions at employment interviews • suggestive comments about a person’s appearance or body, and • unwelcome remarks or insinuations about a person’s sex or private life. This is not an exhaustive list. It is simply an indication of the types of behaviour that could give rise to a valid complaint. A single act of harassment is sufficient to give rise to a complaint. There does not need to be a continuous or repeated course of conduct to give rise to a complaint of harassment. However, the severity and number of incidents will have an obvious impact on the amount of any award of damages made by a tribunal. The intention or motive of the alleged harasser is not generally relevant to the question of whether the behaviour is unwelcome. The focus in sexual harassment is on how the conduct in question was perceived and experienced by the recipient.

A complaint of sexual harassment will not be defeated simply because the recipient of the behaviour did not directly inform the harasser that it was unwelcome. However, there will normally need to be some indication, either from the person’s conduct or the surrounding circumstances, that the behaviour was, in fact, unwelcome, to establish that a reasonable person would have anticipated that the recipient would have been offended, humiliated or intimidated. Sexual harassment does not include mutually acceptable, consensual or reciprocal behaviour, such as mutual flirtation, attraction, friendship or a consensual romantic/sexual relationship. However, if the circumstances change and one of the parties no longer finds the behaviour acceptable and this is communicated to the other person, any continuation of this behaviour could then give rise to a complaint of sexual harassment.

¶4-060 Diversity implications for HR managers This section considers situations relating to age that may arise for HR managers dealing with a diverse workforce. Most of the research into the productivity of older workers has found that they compare favourably with other age groups. This also accords with the actual experience of many employers. In fact, older workers often have a higher output than other groups, because of their level of seniority and experience. Despite this, older employees generally have more difficulty in obtaining employment than others. This results, at least in part, from the misconception that older workers who remain in the workforce will disadvantage younger employees, because there will be fewer jobs available for the younger employees. In fact, this is rarely the case, because older and younger workers rarely compete for the same positions. The reality is that older workers can often bring an enormous range of skills and experience, as well as loyalty, reliability and efficiency, to a particular role and to the workplace generally. The common experience of employers is that older employees have a much lower rate of turnover. On the other hand, age may also count against younger employees. For example, younger employees will generally be overlooked where experience is considered to be a requirement for a particular position. Although younger employees may have the skills and ability to perform the tasks involved in a position, they may not be given the opportunity to prove themselves. Employers who wish to ensure that they do not fall victim to these ageist attitudes and stereotypes should ensure that: • recruitment practices are competency-based and are designed to assess applicants’ ability to perform the job, together with factors such as responsibility, reliability, punctuality, commitment, attitude to authority, general life experience and judgment • where “experience” is said to be a requirement for a position, this is based on a genuine need rather than to mask a discriminatory decision • older employees are given the necessary access to training in new technologies to improve and maintain their skills • compulsory retirement is abolished, and • performance management processes are implemented consistently for all employees.

¶4-070 Conclusion Legislation on EEO provides a starting point for organisations and their managers to address the issues of mutual respect between people in the workplace. It provides the rationale for a minimum standard of conduct, which prohibits both harassment and unfairness. However, in meeting the challenge to be compliant with legislation, organisations invariably discover that it is not simply a matter of establishing policies and giving training to ensure awareness of legal obligations. Rather, it becomes a matter of promoting a positive workplace climate where everyone is treated with respect, and individual, cultural

and other differences are accommodated. Such an approach furthers the management approach known as diversity management. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶10-500. References 3M 2008, “Sustaining Our Future”, 2008 Sustainability Progress, see tinyurl.com/3M-sustainability. Australian Government, 2012–13, Workplace Gender Equality Agency (WGEA) website, see www.wgea.gov.au. ANZ 2009, “Employees”, see www.anz.com/aus/About-ANZ/Corporate-Responsibility/employees. Equal Opportunity for Women in the Workplace Agency 2012, 2012 EOWA Australian Census of Women in Leadership, Australian Government Publishing Service, Sydney. Equal Opportunity for Women in the Workplace Agency 2008, Case study American Express, Australian Government Publishing Service, Sydney. Kramar R 2012, “Diversity management in Australia: a mosaic of concepts, practice and rhetoric”, Asia Pacific Journal of Human Resources, vol 50(2), pp 245–261. Kramar R 1998, “Managing diversity”, in M Patrickson and L Hartmann, Managing an Ageing Workforce, Business and Professional Publishing, Sydney, pp 121–135. Price E 2006, “No fear of favour”, HR Monthly, August, pp 28–29. Whitehouse G 1992, “Legislation and labour market gender inequality: An analysis of OECD countries”, Work, Employment and Society, vol 6(1), pp 65–86. Wirth L 2001, Breaking through the Glass Ceiling, International Labour Organization, Geneva.

5. EMPLOYMENT CONTRACTS Editorial information

Michael Michalandos Partner, Baker & McKenzie

¶5-010 Introduction The employment relationship is a contractual relationship. At its most basic level, it constitutes a promise from the employee to serve the employer within the scope of the employee’s job description, and the employer to remunerate the employee for this service. This chapter deals with: • the nature of an employment contract • the relationship between the employment contract and other industrial instruments • common terms and conditions of employment • issues surrounding the preparation, drafting and variation of employment contracts • different types of employment structures, and • the impact of legislative requirements of “fairness” on employment contracts.

¶5-020 What is a contract of employment? A contract will arise where one party makes an offer, and the other party voluntarily accepts that offer. A further requirement of a contract is that “consideration” exists. This means each party must derive some benefit from the agreement. In the case of an employment contract, the employer receives the benefit of the employee’s service. The employee receives the benefit of remuneration. Generally speaking, there are no restrictions to the form of a private or “common law” employment contract. This is in contrast to an enterprise agreement or individual flexibility agreement sanctioned by the Fair Work Act 2009 (Cth) (FW Act). The purpose of these agreements is to override minimum conditions set out in awards. The form and context of types of these agreements are heavily prescribed. Private employment contracts may be verbal or in writing. A written contract may be constituted by a letter of offer that has been signed by an employee, or a formal contract of employment. A verbal agreement may be constituted by a discussion between the employer and the employee prior to commencement of employment, including discussions during the interview process. The acceptance of an offer may also be constituted by the conduct of the employee. For example, if an employer issues a letter of offer to an employee and the employee turns up to work, then a court may imply that the employee has accepted the offer, even though the employee might have failed to sign the letter of offer. Because of the existence of the award system, it is not unusual that employment contracts are informal. The courts will, however, require that there is a “meeting of the minds”, that is, an intention on the part of both the employer and the employee to enter into a legally binding employment relationship. The

presence of fraud, mistakes or duress can result in the agreement becoming unenforceable because the parties must enter into the relationship fully and freely, understanding what they are doing with mutual and genuine agreement as to its terms. The parties to the contract must have the legal capacity to enter into the contract. This means that they must be of sound mind. Although people under the age of 18 are minors and do not generally have the legal capacity to enter into contracts, they are taken to have the requisite capacity if the contract is for their benefit. The courts will look at the contract in its entirety to ascertain whether a contract is for the benefit of the minor.

¶5-030 The terms of an employment contract An employment contract comprises a series of terms and conditions. The terms are either express terms, that is, terms which have been specifically discussed or recorded by the parties, or implied terms, which are imported by law or incorporated into the relationship by the courts. The courts will not imply a term into the employment contract where it is inconsistent with the express terms of an agreement.

¶5-040 Implied terms As indicated previously, the courts will imply certain responsibilities and duties into the contract of employment unless the parties agree otherwise. Different duties and responsibilities are implied for the employer and employee. Employees’ implied duties The primary rights of the employer to manage the employee and protect the employer’s business are implied by the courts in the employment contract. First, it is an implied term of every employment contract that an employee will comply with the reasonable and lawful directions of the employer, provided that they fall within the scope of the employment (ie the nature of the position or job description). An employee who wilfully disobeys such a direction is guilty of breaching the terms of the contract. Second, employees owe a responsibility to act in good faith towards their employer. Employees will breach this duty if they engage in conduct which conflicts with the business interests of the employer or the proper performance of their responsibilities. The duty of good faith manifests itself in more specific obligations. These include the following: • employees must not compete with the employer’s business or assist a competitor • employees must protect the property and goodwill of the employer • employees must not divert customers or business away from the employer • employees must not accept bribes or secret commissions and must account to the employer for all monies received • employees must not use or disclose the confidential information of the employer unless authorised to do so by the employer • employees must fully and truthfully answer all questions of the employer within the scope of the employment, and • employees must act honestly. A serious breach of the provisions may give the employer the right to summarily dismiss the employee. Other implied obligations include the following: • employees must take reasonable care to protect the health and safety of their fellow employees

• inventions made by employees within the scope of their employment are the property of the employer and must be made available to the employer • employees must perform their duties in a proper and competent manner, and • employees must use reasonable care and skill in the performance of their duties. Employer’s implied duties The courts will imply into a contract duties and obligations the employer has towards the employee. These implied obligations include the following: • the employer must take reasonable care for the safety of its employees by providing a safe workplace (work health and safety in the workplace is discussed in more detail in Chapter ¶12), and • the employer must indemnify the employee against proper expenses and liabilities that the employee incurs during the course of the employment. Further implied terms are discussed in the following paragraphs.

¶5-050 Implied right to work It is important to note that the Australian courts have not recognised a general obligation for the employer to provide work to an employee, provided that the employer continues to pay remuneration to that employee. Conversely, an employer who does not provide work continues to be obliged to remunerate an employee who is ready, willing and able to perform work. The courts have adopted a general principle that those employees who remain available for work still serve the employer. Although this is the general rule, there are various exceptions, including: • where the employee’s remuneration depends on the ability to work (eg where the employee has the opportunity to earn a commission or performance bonus) • where the employee’s ability to practise his or her profession depends on a reputation or public profile that he or she derives from work (eg in the case of an actor, television celebrity or opera singer) • where part of the employment agreement involves the employee holding a special position or office (eg an editor of a newspaper or managing director), and • where the development of a trade or skill is part of the benefit for which the employee has contracted with the employer (eg in the case of an apprentice or trainee).

¶5-060 Fairness as an implied right? There has been no acceptance of a general implied obligation on the employer to treat its employees “fairly”, either during the employment or on its termination. Further, the general implication of a narrower obligation on the employer not to damage without reasonable cause the relationship of trust and confidence between the parties was rejected by the High Court in Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32. However, employers should note that a court may enforce commitments as to disciplinary procedures or fair process contained in policies to employees. Such policies may be incorporated into the employment contract, especially if the contract requires the employee to comply with these policies. The courts have recently held that, in these circumstances, there is a complementary obligation that the employer must also comply with its own policies. Employers should take care not to use language of obligation in these policies and to make it clear that they do not form part of the employment contract.

¶5-070 Termination and implied rights

Unless the employment contract itself specifies termination rights, the courts will imply that either party may terminate the employment for any reason by giving “reasonable” notice of termination. What is reasonable will depend on the circumstances. The courts will look at several factors, including the employee’s length of service, status, seniority and remuneration, and the length of time that might reasonably elapse before the employee obtains equivalent or other suitable employment. As indicated, unless the contract expressly requires it, or it is incorporated into the contract via a policy, the courts will not imply a term into the contract that the parties must act fairly before they terminate the agreement, and must have valid reasons to do so. The key principle in respect of termination of employment at common law was summarised as follows by Lord Reid of the House of Lords in Ridge v Baldwin (1964) AC 40: “The law regarding master and servant is not in doubt. There cannot be specific performance of a contract of service, and the master can terminate the contract with his servant at any time and for any reason or for none. But if he does do so in a manner not warranted by the contract he must pay damages for breach of contract.” If the employer fails to give the appropriate period of notice, then the employee is entitled to sue the employer for breach of the employment contract. In these circumstances, compensation is generally limited to the remuneration the employee would have earned had the employee worked through the notice period, less any remuneration the employee has earned elsewhere. The courts require an employee who has been terminated prior to the expiration of the notice period to make reasonable attempts to mitigate or reduce his or her loss by finding alternative acceptable employment. As indicated above, if an employee finds other work during the notice period, any remuneration earned may be deducted from the damages payable. If the employee makes no reasonable attempt to find other work, the court may make a deduction from any damages to reflect the fact that the employee was capable of reducing his or her loss by finding work. The courts will also imply a term into every employment contract that the employer may summarily dismiss the employee if the employee is guilty of serious and wilful misconduct. This conduct must be so serious and flagrant that it indicates the employee is not prepared to continue with the employment. Such conduct may include fraud, theft, assault or wilful disobedience. It does not include poor performance. Termination of employment is discussed in more detail in Chapters ¶61 to ¶65.

¶5-080 Custom and practice Terms may also be implied into the employment contract by custom and practice. This may be established if there is a well-known practice within an industry or an employer’s organisation that has been applied consistently without exception over a long period of time and which is so well known that it “goes without saying”. For example, if an employer, as a matter of course and over a significant period of time, consistently makes redundancy payments to all its employees at a certain level on the termination of their employment, an employee whose employment is terminated on the grounds of redundancy may be able to successfully argue that there is a contractual obligation on the employer to make a redundancy payment, even in the absence of a written redundancy policy.

¶5-090 Express terms Despite the fact that the courts will imply many terms of employment, it is still very important that employers draft formal agreements setting out the express terms and conditions of employment. A wellprepared contract will set out the expectations of both parties in terms of the scope of duties to be performed, performance criteria, remuneration, and termination rights and benefits. It may also outline measures designed to protect an employer’s business such as confidentiality provisions and postemployment restraints. Employers who include these terms at the commencement of the employment relationship will be better placed if problems arise later. Such contracts should also be kept up to date to reflect any changes in the roles and responsibilities of the employee.

¶5-100 Drafting the contract of employment Following is a list of terms an employer must consider carefully when drafting an employment contract. • A detailed job description, performance standards and requirements: The job description is one of the most critical parts of an employment contract. It will be used to determine: – the extent of the employee’s duties and responsibilities – whether or not an employee is covered by an award and the award classification of the employee – whether the employee has properly performed his or her duties – whether the employee is fit to perform work after suffering an injury, and – whether the position has become redundant. • The location of the employment: If there is a possibility that the location of the employment might change, the employer should set out in the employment contract the right to require the employee to work within a specified geographical area without paying any further remuneration. Otherwise, a significant change in the location of the employment may trigger a breach of the employment contract. Where the relocation is to a site which is unreasonably distant, an employee who is not prepared to relocate may have grounds to assert that the position they originally accepted is redundant, and claim redundancy benefits. • Commencement date. • Hours of work and status of employment: This refers to whether an employee is full time, part time or casual and is dealt with in greater detail below. The National Employment Standards (NES) under the FW Act provide that national system employers cannot require employees to work beyond a maximum of 38 hours per week plus “reasonable” additional hours. An employee may refuse to work unreasonable additional hours. In determining what “reasonable” hours are, regard must be had to a number of factors, including the nature of employment, the employee’s personal circumstances, and the operational requirements of the employer’s business. • Overtime: The contract should set out whether the employee may be required to work overtime and whether the employee will be entitled to receive additional remuneration for this work. The contract should also set out a method for authorising and recording overtime. These terms must be consistent with any award rights to overtime pay. • Notice of termination: The contract should specify a notice period which equals or exceeds the minimum notice requirements set out in the NES or under any applicable award or industrial agreement. If a contract does not set a notice period, then the court will imply “reasonable” notice and there may be disagreement as to the proper length of this notice. Employers should also preserve a right to make a payment in lieu of notice in circumstances where the employer does not wish or require the employee to work out a notice period. • Summary dismissal: The contract or HR policy should set out examples of circumstances in which the employer will have the right to terminate the employment without notice. • Annual remuneration: The provisions relating to annual remuneration should be set out in full. All benefits should be included, for example, the right to a company car or a car allowance, or the right to participate in a bonus scheme or incentive plan. The contract should either set out details of any car policy or bonus scheme or, if the employer has a separate car policy or separate document regarding the bonus scheme, these should be attached to the contract. It is important that employers check that salary/wages in the employment contract comply with any minimum requirements set by an award or industrial instrument. Because these do not remain static, they should be checked regularly.

• Superannuation: The contract should stipulate whether salary/wages are inclusive or exclusive of superannuation contributions. • Expense reimbursement: The contract should specify procedures for the refund of reasonable and proper business expenses. For example, these expenses may require approval in advance and receipts must be produced. Alternatively, the employer may wish to place a cap on the value of certain expenses incurred by the employee. • Annual leave: The right to take annual leave is comprehensively dealt with under federal and state laws. However, national system employers should note that the NES permit employers of “nonaward” employees to insert provisions into their employment contracts dealing with the taking of annual leave. This may include terms relating to taking leave in advance, that paid annual leave must be taken within a fixed period of time, and that a specified period of notice must be given before taking paid annual leave. • Personal/sick leave: In relation to national system employers, these leave benefits are dealt with in some detail under federal legislation and, unless the employer wishes to confer more generous benefits, it is not usually necessary to deal with them in any detail in the employment contract. The position is similar for state system employees, except that sick leave is not legislated in every state. • Performance appraisals: The contract should require the employee to attend regular performance appraisals and answer all questions honestly and completely. If possible, the contract should attach minimum performance guidelines that can be reviewed regularly. The employer may be able to refer to these, if required, to justify a termination. • Confidentiality requirements: These are discussed separately in Chapter ¶65. The employer should list in the contract any information the employer regards as confidential in order to avoid a dispute later as to what information attracts this protection. • Intellectual property rights: Provision should be made to ensure that the employee discloses all inventions, copyright, designs and other intellectual property to the employer. The employee must promise to assign all rights to the employer if, for any reason, the rights vest in the employee. Intellectual property issues in employment are discussed in Chapter ¶57. • Secondment: Employers may wish to retain the right to second the employee to work on a short-term basis for another company within the group, or for a client. The terms of any such secondment should be set out in the contract. Secondment agreements are addressed further in ¶5-140. • Post-employment restrictions: These restrictions are discussed in Chapter ¶65. • Internal policies and procedures, and employee handbooks: The contract should contain a requirement that employees comply with work health and safety and anti-discrimination procedures of the employer, and with other internal HR policies. It is important that these policies are provided to the employee together with the contract of employment and before the employee commences the employment. Employers should avoid inserting the primary terms and conditions of employment into these policies. Generally, employee handbooks should deal only with the following matters: – internal management issues (eg payroll, leave applications, expense claims) – internal policies and procedures imposing procedural requirements on the employee (eg codes of conduct, email and internet policies or grievance procedures), and – a description of legislative benefits (eg jury leave or parental leave). Provided that these policies do not contain “contractual rights”, the employer may be able to vary these policies as required. However, if an employer wishes to rely upon a policy, it is important that the employer can establish that it has been distributed and read by employees, and that it has also

been consistently enforced. Employers should note that — if they insert a disciplinary procedure into the employment contract — any failure by the employer to comply with this procedure will give the employee a right, not only under unfair dismissal legislation, but also to sue the employer for breach of contract. For example, an employer may be in breach of contract if it were to terminate an employee’s employment after giving one warning if the contractual disciplinary policy provides that two such warnings must be given before employment can be terminated. Further, under the FW Act, employees have rights of action where an employee lodges (or proposes to lodge) a complaint under an employer’s disciplinary or complaint policy and the employer takes adverse action against the employee as a consequence.

¶5-110 Confidential information As indicated earlier, the courts do imply an obligation in the employment contract that the employee must not use or disclose confidential information. This obligation continues after the employment ceases. The courts have a narrow definition of what information is confidential. Generally speaking, it will be extremely difficult to establish that information is truly confidential unless the following criteria are satisfied: • it must be information which is not available to the public • access to this information must be restricted within the employer’s business to those employees who need to know it for the purpose of performing their duties • the employer must have taken steps to guard the secrecy of this information • the employer must have impressed upon the employee the confidentiality of the information • the information must not be trivial information • the information must be valuable, that is, the employer must have spent some time and money developing or acquiring the information, and • the information must be information that is not easily acquired or duplicated by others. The employer cannot protect the know-how and skill of the employee that is acquired as a necessary consequence of the way he or she was employed and trained. It is important that employers specify in the employment contract what information is regarded as confidential and protected. This may assist in resolving any dispute about the nature of this information. For example, this may be achieved by attaching to the contract a list of the types of information to be regarded as confidential. Regardless of this, the courts have cast doubt on the ability of an employer to protect by agreement information which is not truly confidential.

¶5-120 Post-employment restrictions In the absence of an express agreement, a former employee is free to poach the clients of an employer or to compete with it, provided that in doing so the former employee does not breach the ongoing obligation to safeguard confidential information. An employer may, in certain limited circumstances, restrict an employee by agreement from competing with its business post-employment. The usual type of restrictions that are sought to be imposed include: • limiting the former employee from conducting certain work in a particular geographical area for a specified period of time or a combination of both, and/or • limiting the former employee from poaching the clients or employees of the employer.

Such restrictions will only be enforceable if they do not constitute an unreasonable restraint of trade. A restraint will be deemed to be reasonable and enforceable if it does not go beyond what is sufficient for the adequate protection of the employer’s business and is not unduly harmful to the interests of the former employee and the public. The courts have recognised that an employer may have a legitimate interest in ensuring that customers and/or employees are not enticed away from the employer and, further, that employees do not divulge or misuse confidential information. However, it should be noted that the suppression or reduction of competition in itself is not a legitimate business interest. A determination of reasonableness is a discretionary matter and the courts will look at the peculiar circumstances for each case. In particular, the courts will consider the following questions: • What interest is being protected and is the restraint relevant to this protection? • Does the employee have the ability to jeopardise the employer’s business? • Does the restraint cover businesses in which the employee has not been involved during the employment? • Does any geographical limitation extend beyond the area in which the employer conducts his or her business? • Is the time period of the restraint excessive (eg will it substantially impact on the livelihood of the employee)? • Did the employee receive a separate payment as consideration for entering into the restrictive covenant? • To what clients/confidential information did the employee have access during the employment? When drafting such clauses, employers must take the above into account and tailor the wording accordingly. Post-employment restrictions are dealt with in more detail in Chapter ¶65.

¶5-130 Relationship between the employment contract and industrial instruments Despite the proliferation of awards, industrial agreements and industrial relations legislation in Australia, the employment contract remains the primary source of the respective rights and obligations of the employer and employee. In respect of employees who are covered by awards or industrial agreements, the private employment contract remains very important for the following reasons: • Industrial instruments usually do not comprehensively deal with all aspects of the employment relationship. In particular, the employment contract is the main source of the employer’s rights against its employees (eg the employee’s obligation to act in good faith). • Awards and collective industrial agreements set out only general conditions applicable to all employees or workplaces covered by the award. The employer may deal with particular concerns of its business in the employment contract. This may include, for example, the job description and performance expectations, training and education requirements, rules and policies particular to the workplace, and post-employment restrictions. • Industrial instruments usually set out only minimum terms, such as short notice periods and minimum rates of pay. Provided that it also complies with these minimum terms, the employment contract may also provide for benefits that are more generous than those set out in an industrial instrument. However, a private employment contract cannot provide for benefits that are less than those set out in an applicable industrial instrument (eg a modern award or enterprise agreement) or attempt to

swap a benefit under an industrial instrument for a benefit of a different nature, even if the latter is of the same or greater value to the employee. Modern awards under the federal system do permit employees to enter into individual flexibility agreements. These agreements are supported and prescribed by the FW Act and enable the employer and employee to vary the application of specified terms of the award to meet the genuine individual needs of the employer and employee. The modern awards specify which terms may be varied. These terms are usually provisions dealing with working hours, overtime rates, penalty rates, allowances and leave loading. However, there are a number of important conditions which must be met. A key condition is that the agreement must result in the employee being better off overall. The employee also must have the right to terminate the contract by giving notice. National system employers are also able to “contract” out of modern awards in limited circumstances where an award employee earns in excess of a high income threshold. The FW Act contains a prescriptive procedure for this to occur. The employer must provide a guarantee of high income earnings to the employee for a period of 12 months or more and, if accepted, the modern award will not apply for the specified period. Rights under a contract and under an industrial instrument generally operate side by side. An employee can enforce contractual rights by running a breach of contract claim before a common law court. Award rights are enforced before the Industrial Commission or Tribunal that administers the award concerned. The provisions of an award do usually not form part of the employment contract, unless there is a term in the contract that adopts or incorporates them into the contract.

¶5-140 Particular types of contracts Flexible work practices Recently, there has been a move by employers towards adopting family-friendly policies within the workplace. This has led to the preparation of employment contracts that provide for flexible working arrangements. Employers should consider these arrangements when preparing their contracts of employment. Employers should note that, under the NES employees in certain circumstances will have the right to request flexible working arrangements in writing (s 65 FW Act). This includes: • Employees with dependent children who is of school age or younger. • Employees that are carers under the Carer Recognition Act 2010. • Employees that have a disability. • Employees that are 55 or older. • Employees that are experiencing family violence, or caring for a member of their household or immediate family who requires support due to family violence. Where a flexible working arrangement is requested, the employer must either accept the arrangement or reject the arrangement on reasonable business grounds within 21 days of receiving the request. This right has increased employee consciousness of the availability of flexible working arrangements and it is important that employers consider in advance what types of flexible working arrangements are suitable for the various categories of positions within their business. Whether certain arrangements are appropriate or suitable will ultimately depend on the duties and responsibilities of the job. Examples of these types of arrangements include the following: • Flexitime: This enables employees to work the hours they choose, provided that they work a specific number of hours per year. • Work from home: This may occur on a full-time or part-time basis. There are various issues that need to be addressed, which include ensuring that the employee’s performance can be monitored,

ensuring that the employee has access to sufficient facilities in order to perform the work, ensuring the security of confidential information, and ensuring that the home is a safe place to work. • Permanent part-time work and job-sharing: Employers should note that anti-discrimination tribunals have increasingly placed obligations on employers to permit new mothers or other employees who have family responsibilities to work part time or on a job-share basis. • Career breaks: This refers to allowing for breaks that are longer periods of unpaid leave from work. Secondment agreements Increasingly, employers want the right to “second” an employee to a different employer. This means that the employee will perform work for another organisation for a short period, during which time the employer remains the same. Secondment agreements may be useful in sharing the skills of an employee among a group of related companies, or training an employee with a client. Secondment arrangements give rise to special issues. Additional agreements are, therefore, required at the time of the secondment between the employee and the employer and the employer and the secondee company. These agreements must deal with the following issues: • whether the secondee company must pay a fee to the employer and the level of that fee • whether the seconded employee will be entitled to any further remuneration while on secondment or reimbursement for additional travel • the secondee company must agree to provide a safe workplace free from unlawful harassment and discrimination • whether the seconded employee will have the right to return to his or her original position with the employer on the termination of the secondment • whether the secondee company will be restricted from offering employment to the seconded employee either during the secondment or after it has ended, and • if the secondment is interstate or overseas, who will be responsible for any relocation costs. The agreements must also make it clear that the seconded employee remains the employee of the first employer and that the secondee company only has the right to exercise a limited range of powers over the seconded employee.

¶5-150 Expatriate agreements Where international employers desire the flexibility to send their employees to overseas locations and work for related entities, expatriate agreements may be used. These agreements must deal with the following terms: • the locations to which the employer may send the employee • the identity of the employer on relocation and the persons to whom the employee will report • the method of calculating the employee’s remuneration at the overseas location and any tax relief granted to the employee • what relocation benefits the employee will receive and which entity will be responsible for these benefits • whether the employee will have a right to return to their original location and position at the end of the placement, and • which jurisdiction governs the law of the contract.

¶5-160 Preparing and presenting a contract Employers must not only ensure that a contract contains appropriate terms and conditions — they must also ensure that it is appropriately presented to an employee and that the employee understands their rights and obligations under that contract. Following are some important tips for employers: • The contract should be prepared in plain English so that an employee is capable of understanding its contents. • The employer should not place too much reliance on pro forma agreements, but should adjust any agreement to ensure it is consistent with the seniority and status of the employee. • The employee should be provided with sufficient time to review the contract and, if necessary, obtain independent legal advice. • An employer must check the provisions of any applicable awards, enterprise agreements, and any other industrial instruments. The employment contract must at least provide the minimum terms set out in these instruments. • The contract should be prepared and provided to the employee before the employment commences. The contract must be negotiated and signed before commencement. • In order to avoid any misunderstanding and subsequent disputes, the employer should discuss “difficult issues” with the employee. For example, if the agreement contains restrictive covenants these should be explained to the employee. • The employer must not misrepresent the terms of the agreement to the employee or make misleading or unsupported representations about matters which are not set out in the contract (eg if you perform well, you will have a job for life). Such representations are actionable under the Competition and Consumer Act 2010 (Cth). • If there is an HR policy in place, this policy should be provided to the employee prior to commencement of employment, and the employee should sign an acknowledgment that they have read and agree to comply with the policy. It is important that such policies are enforced consistently, otherwise an employee may be able to claim unfairness.

¶5-170 Updating the contract Once a contract of employment has been signed, it should not be simply put into the employee’s personnel file and archived. It is essential that the contract itself is reviewed regularly to ensure that it accurately sets out the employee’s current terms and conditions of employment. If an employer fails to update a contract, a court may refuse to enforce it on the grounds that it does not reflect the current arrangement between the parties. Alternatively, the court may take the view that the contract has been varied by the conduct of the parties. For example, if an employee is recruited at a relatively junior level and works for 10 years with the employer and is promoted on various occasions, the original contract of employment (if it is not expressly amended) will become out of date. New or alternative terms may be implied to replace the defunct express contractual terms. The provisions of a contract of employment that are the most likely to alter throughout the course of the employment, and which should be reviewed regularly, are outlined below: • Title and job description: Each time an employee is promoted the employer should issue a new job description and employment contract. The employer must also notify the employee regarding what impact this promotion will have on other terms of employment. If there is no impact, the employer should indicate that all previous terms continue to apply.

• Notice period: Notice periods should reflect not only the changing status of the employee, but also the length of service the employee has accrued. One week’s notice may be reasonable for a junior award employee, but may not be appropriate once that employee has worked with the organisation for several years or has been promoted to a senior executive position. If an employer fails to update an employee’s contract of employment in the face of successive promotions, the employer may not be able to rely on the notice period in the original contract and may be faced with a dispute over reasonable notice. It is, therefore, important that the contract is updated on each promotion or, at the very least, a variation letter is prepared which lists the changes and also adopts all other pre-existing terms. • Salary and benefits: Salary and benefits are likely to increase during the course of an employee’s employment. Each time an employee’s salary and benefits alter, a letter should be sent to the employee informing them of their new entitlements and the contractual conditions attached to the entitlements, if any.

¶5-180 Variation of the contract The requirements for a binding contract are reviewed at the beginning of this chapter. Those requirements also apply to determine when one of the parties wish to vary the employment. There must be an offer of new terms and conditions, acceptance of that offer, and consideration must be provided. An agreement cannot be amended by the employer without the valid consent of the employee and without the employee receiving some benefit. An attempt by an employer to force unilateral amendments to the employment contract on the employee may constitute a serious breach of the employment contract, and give the employee the right to terminate the employment immediately and seek compensation.

¶5-190 Types of employment contracts Employment relationships may take various forms, depending on the contract of employment. Common types of employees are described below: • Permanent employees: These employees are guaranteed full-time or part-time work. Permanent employees must normally work at prescribed times. Sometimes, however, their contract simply specifies the volume of work they must do in any fixed period. Their employment continues indefinitely until it is terminated by the actions of either or both parties. Permanent employees will accumulate continuous service that enables them to accrue service-based benefits such as annual leave, long service leave, severance payments and notice. • Full-time employees: These employees are permanent employees who must devote their full time and attention (during the employer’s normal working hours) to the business of the employer. • Part-time employees: These employees work fewer hours than full-time employees but, unlike casual employees, are employed on a permanent basis. Part-time employment is becoming increasingly common. Part-time workers are usually entitled to the same service-related entitlements as full-time workers, but these entitlements are proportional to the full-time workers’ entitlements, depending on the employee’s hours of work per week. • Casual employees: These employees are not guaranteed ongoing employment. They are engaged irregularly, often on a day-to-day basis and, at the end of each day, there is no obligation on the employer to provide further work, or for the employee to accept further work beyond that day. True casual employees do not accrue continuous service and are usually paid loadings as compensation for this. Loadings are usually a percentage premium payable over and above cash benefits. It is important to note that, in some awards, the term “casual” is sometimes also used to describe an employee who regularly works a few hours a week and for a short term. • Fixed-term or temporary employees: These employees are engaged under contracts that specify the time at which the employment will end. They are not engaged indefinitely.

• Shiftworkers: These workers are employed on a permanent basis but have their working hours determined in accordance with a roster. There are different types of shift rosters, including: – fixed shift — this involves working set hours each day, usually five days per week – rotating shift — this involves working a different set of hours in rotation over a period of time. (For example, this may involve working a morning shift from Monday to Friday one week, an afternoon shift the next week, and night shift on the third week.) – alternating shift — this involves working the same sort of hours each day, but alternating the days worked. (For example, it may involve working Monday to Friday from 3 pm to 11 pm, then Tuesday to Saturday from 3 pm to 11 pm.) – continuous shift — this involves an operation where employees work consecutively without interruption, except for meal breaks, over a 24-hour day, six or seven days a week. Shiftworkers are paid loadings as compensation for working long or unusual hours. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, sections commencing at ¶4-000 and ¶70-000.

6. LAW AND THE EMPLOYMENT RELATIONSHIP Editorial information

Michael Michalandos Partner, Baker & McKenzie

¶6-010 Introduction — the industrial relations system The purpose of this chapter is to give managers an overview of the law and legislation as it impacts on the employment relationship and human resources (HR) issues. Australia has operated one of the most convoluted labour law systems in the world. The term “system” is used with some trepidation — it is probably an inappropriate term to define an overlapping mess of laws, lores, statutes, quasi-statutes, rules, regulations, collective agreements, individual agreements, case law, policies and practice. For good reason, those initiated in the mysteries of the “system” were once referred to as members of the “IR Club”. In this “system”, the resolution of even minor disputes almost inevitably involved the consideration of various (often conflicting) laws and, eventually, solicitors at 12 paces. The “system” is the product of a historical and political fascination with the regulation of labour relations in this country. Workplace issues have always captured the attention of Australia’s media and politicians — from blue-collar strikes to the level of directors’ fees. In this environment, the reformation of industrial and labour laws has formed the main platform for the election of political parties. Successive governments have grafted new and different laws (usually with new and different tribunals and authorities) onto the previous industrial framework. This process has been repeated in almost every jurisdiction — yet with such a multiplicity of results that the rights and obligations of employers and employees have varied significantly from state to state. HR managers should not, therefore, feel embarrassed about a sense of bewilderment or helplessness when first encountering “the system”. This is normal.

¶6-020 A simplified system? More recently, successive federal governments have acted to streamline and simplify the industrial relations system. This process commenced with the introduction of the “Work Choices” amendments to the Workplace Relations Act 1996 (Cth) (WR Act) by the former Coalition Government. These amendments commenced on 27 March 2006 and aimed to create a unified industrial relations system by converting state industrial instruments into federal agreements for most employees and overriding the state legislation dealing with employment and industrial relations laws. Not surprisingly, “WorkChoices” did not survive a subsequent change in government and was soon replaced by the Labour Government’s Fair Work Act 2009 (FW Act). The FW Act commenced operation progressively from 1 July 2009, with new National Employment Standards commencing on 1 January 2010. The FW Act was more “employee-friendly” but progressed the shift to federalism. The introduction of the FW Act from 1 July 2009 by the Labour Government progressed the shift towards federalism. Not surprisingly, given industrial relations history, it also involved the creation of a new authority, optimistically tagged “Fair Work Australia” since renamed the Fair Work Commission (FWC).

The key changes introduced by the FW Act included: • the creation of new modern awards, which commenced from 1 January 2010 • in the place of AWAs, the introduction of the ability for employers to contract out of specified and limited terms of a modern award by entering into individual flexibility agreements with employees or guaranteeing a “high income” • the introduction of a new “Better Off Overall Test” (BOOT) for enterprise agreements from 1 January 2010 • the introduction of good faith bargaining requirements • the expansion of federal minimum employment conditions in the form of the National Employment Standards (NES) (Note: This new standard includes, for the first time, entitlements to minimum redundancy payments, extended parental leave, and the right for employees with dependent children under school age to request flexible working hours). • the introduction of new rights and protections for employees and other industrial parties, including rights of action where “adverse action” is taken because a person has or exercises workplace rights, and • the expansion and clarification of circumstances in which industrial instruments may transmit from one employer to another. These changes are discussed in more detail in the following paragraphs and in other relevant chapters of this Guide. The introduction of modern awards on 1 January 2010 has effectively reduced the number of awards in play for most employers replacing the uncontrolled mass of pre-existing federal and state awards (with some notable exceptions). It should also be noted that state systems and laws have not been completely eliminated. The FW Act does not override state laws dealing with such matters as long service leave, occupational/work health and safety (OHS/WHS), workers compensation, equal employment opportunity and anti-discrimination. Further, a limited class of employees who are not employed by national system employers and are still covered by state industrial relations laws. These are principally made of State and local government employees, but this varies from state to state. For the purposes of this chapter, employees covered by state industrial relations laws will be referred to as “state system employees”.

¶6-030 Sources of employment law Australian employment laws are derived from a number of sources, some of which are peculiar to the system. These sources include the following: • Private employment agreements: These agreements may be formal or informal (eg a letter of offer or a verbal agreement). The terms of private employment contracts are not confined to the express terms agreed between the parties, but also include a number of duties and obligations which are implied into employment contracts by the common law courts (see following). Chapter ¶5 should be referred to for more information. • Awards: Awards are quasi-statutory instruments which set out minimum terms and conditions of employment. They are created by state and federal industrial relations tribunals. In relation to national system employers, since 1 January 2010 new modern awards have replaced most preexisting federal awards. Modern awards deal with a broader range of allowable matters than preexisting federal awards, including minimum rates of pay. An employer cannot avoid or vary award terms by entering into a private employment agreement. There are two key exceptions which apply in

relation to modern awards: (1) where an employee enters into an individual flexibility arrangement in accordance with the terms of a modern award, and (2) where an employer provides an employee with a guarantee of earnings above a high income threshold set by the FW Act, and the employee accepts the guarantee. These exceptions are highly regulated. • Enterprise agreements: These are agreements involving more than one employee and supported by federal and state industrial relations legislation. These instruments are highly regulated and must meet certain tests set out in the supporting legislation. With a few important exceptions, these instruments may override the operation of awards which would otherwise govern the terms and conditions of employment of the employees to whom the enterprise agreement relates. From 1 January 2010, federal enterprise agreements must contain terms and conditions which are “better off overall” when compared with the relevant award. Enterprise agreements are usually in force for at least a nominal period, after which the parties may take industrial action for the purpose of negotiating a new instrument. However, until replaced or terminated by the parties, an enterprise agreement will remain in force after its nominal expiry date. • National Employment Standards (NES): This is a reference to minimum standards which apply to all national system employers and are set out under the FW Act. The NES deal with such matters as annual leave, long service leave, personal/carer’s leave, compassionate leave, minimum notice requirements and redundancy benefits. These are addressed later in this chapter. • State and federal legislation and regulations: These instruments deal with a wide variety of subject matter. Some statutes deal specifically with the regulation of employment and industrial relations. Others indirectly impact on the employment relationship. • The accumulated case law of the common law courts: For example, the common law is the primary source for determining the distinction between employment and independent contractor relationships. • The decisions of federal and state industrial tribunals.

¶6-040 Award and non-award employees When considering Australian employment law, it is important to distinguish between two classes of employees: (1) those who are covered by the award system, and (2) those who fall outside it. For the former class of employees, awards establish a comprehensive set of minimum terms and conditions. It is important to note when distinguishing between the two classes of employees, the award system is not solely the province of blue-collar employees or “clerk”. Awards such as the Banking, Finance and Insurance Award 2010 and the Professional Employees Award 2010 cover white-collar professionals and IT experts, among others. For example, the Banking, Finance and Insurance Award 2010 covers employees engaged in industries across Australia which include “broking, trading, debt recovery” and “financial consulting” and contains classifications for branch managers, financial planners, HR managers, senior analysts and divisional managers. However, it should also be noted that s 143(7) of the FW Act provides that a modern award must not be expressed to cover classes of employees who have not traditionally been regulated by awards because of the nature or seniority of their role or work. Employers must take care in reviewing the award coverage of their employees. Generally speaking, modern awards under the federal system come under three categories, as follows:

(1) The first category is constituted by industry awards. These awards cover employees who fall within a certain defined industry. Examples include the Mining Industry Award, Hospitality Industry Award and General Retail Industry Award. These industry awards form the largest category. (2) The second category is constituted by occupational awards. These awards cover certain employees according to their job description. Examples include the Clerks — Private Sector Award, and the Professional Employees Award. These awards contain provisions relating to their interaction with industry awards. (3) The third category is constituted by a catch-all award, the Miscellaneous Award 2010. This award captures employees who are not covered by any other modern award — except for those classes of employees who have not been traditionally covered by awards, including managerial employees and professional employees, such as accountants, lawyers, information technology, marketing, human resources and public relations specialists. This award also does not cover employees who fall within an industry for which an industry award exists, but do not fall within the classification provisions of that industry award. Employers should note that the fact that an employee is highly paid does not (of itself) result in their exclusion from the award system. Ultimately, if an employee is in an industry and a role which falls within the coverage of an award, that employee is entitled to the benefit of that award. The only exceptions are where the award expressly excludes such an employee or the employer provides the employee with a guarantee of earnings for a set period in excess of the high income threshold set by the FW Act, the employee accepts that guarantee, and all other conditions set by the FW Act are satisfied. Even where an employee is not covered by an award, the employee will still be entitled to the minimum entitlements set out in the NES. These are discussed further in the following paragraphs.

¶6-050 National Employment Standards National system employers must comply with certain standards set by federal law. These standards are governed by the NES. Although there are some notable exceptions, these standards form minima for all national system employees, regardless of whether or not they are covered by an award and regardless of their income levels. An employer cannot “contract out” of these standards by entering into a private agreement. Employers should also note that — where their employees are covered by a pre-existing collective agreement which contains a provision which is more disadvantageous to employees than the NES — the NES will apply to the extent of the disadvantage. However, employers can provide more generous entitlements in enterprise agreements or private contracts. The NES contain minimum standards relating to the following matters. Maximum weekly hours The NES prohibit an employer from requesting or requiring an employee to work more than a maximum of 38 ordinary hours of work for full-time employees unless the additional hours are reasonable. For an employee who is not a full-time employee, the “base hours” are the lesser of 38 hours and the employee’s ordinary hours of work in a week. Whether or not any additional hours are reasonable will depend on circumstances such as the following: • an employee’s health and safety • their personal circumstances (including family responsibilities) • the nature of the business • compensation payable for working extra hours (either extra compensation or a level of remuneration that reflects an expectation of longer hours) • notice of the request

• patterns in the industry, and • the employee’s role or level of responsibility. These maximum weekly hours may be averaged. If an employee is not covered by a modern award or enterprise agreement, then hours can only be averaged over a six-month period. Where an employee is covered by a modern award or enterprise agreement, then averaging may only occur in accordance with that industrial instrument. The NES do not limit the period over which hours may be averaged under such an instrument. Additional weekly hours worked because of an averaging arrangement will be subject to a reasonableness test. Requests for flexible working arrangements Employers should note that, under the NES, employees in certain circumstances will have the right to request flexible working arrangements in writing (s 65 FW Act). This includes: • Employees with a dependent child who is of school age or younger. • Employees that are carers under the Carer Recognition Act 2010. • Employees that have a disability. • Employees that are 55 or older. • Employees that are experiencing family violence, or caring for a member of their household or immediate family who requires support due to family violence. Employees must have worked for the employer for at least 12 months before making such a request, or must be long-term casuals with an expectation of ongoing employment. The employee must make the request, setting out the change sought and the reasons, in writing. Changes in working arrangements may include changes in hours or patterns of work, or changes in the location of the work. They may include requests for part-time work or job-share arrangements. The NES do not limit the types of flexible arrangements which may be requested. The employer must respond in writing within 21 days. If the request is refused, the employer must set out the details of the reasons for refusal. The employer cannot simply refuse without explanation. An employer can only refuse a request on reasonable business grounds. These may include, by way of example, a conflict with the request and the inherent requirements of the position, or the unavailability of alternative staff, or an unacceptable impact in terms of the cost to the employer of making the change. Parental leave and related entitlements The NES provide for unpaid parental leave for full-time employees who have worked for an employer for at least 12 months and for long-term casuals who have worked for an employer for at least 12 months on a regular and systematic basis with an ongoing expectation of employment. The leave is available to employees who will have responsibility for the care of the child. The NES increase the total amount of unpaid parental leave (which includes birth-related leave and adoption-related leave) that an employee can request from 12 to 24 months. However, where the parents are both employed, they can request a combined total of 24 months’ leave shared between them. In each case, the employee does not have a right to take the additional 12-month period of leave. The employee may request the additional parental leave and the employer may either accept or reject the leave on reasonable business grounds. The reasons for any refusal must be set out in the employer’s response and in writing. A response to the request must be made within 21 days of the employer receiving the request. The leave must be taken in a single continuous period. However, an exception to this is an entitlement to a maximum of eight weeks’ concurrent unpaid parental leave for employee couples around the time of a child’s birth/adoption. The NES specifically permit same-sex de facto partners to take parental leave.

Employees must give their employer 10 weeks’ written notice of the proposed parental leave start and end dates. An employee wishing to extend a period of parental leave beyond their planned return to work date must give the employer four weeks’ notice. However, any extension may not extend the total period of leave for both parents beyond a total of 12 (or 24) months. The Paid Parental Leave Act 2010 (Cth), which establishes a paid parental leave scheme, commenced operation on 1 January 2011. Paid parental leave entitlements under the scheme are funded by the federal government. Eligible employees are entitled to payments of an amount up to the national minimum wage for a period of up to 18 weeks. Annual leave Permanent employees are entitled to four weeks’ paid annual leave per year of service. Annual leave accrues from year-to-year, and untaken annual leave is paid out on termination. Annual leave is accrued and paid according to the ordinary hours of work. In relation to “award/agreement-free” employees, an employer may require the employee to take a period of paid annual leave, but only if the requirement is reasonable. The parties can also agree on terms regarding the taking of leave. In relation to award/agreement employees, the award or agreement may deal with the taking of leave, provided that the requirements are reasonable. Employees can cash out annual leave, provided that an accrued balance of at least four weeks’ leave remains. However, in relation to those employees who are covered by an award or enterprise agreement, these instruments must contain provisions permitting cashing out. Where an employee is not covered by an award or agreement, the employer and employee must agree to the cashing out. An employer cannot exert undue influence on an employee to cash out leave. Personal/carer’s leave and compassionate leave Personal leave may be used as sick leave, where the employee is sick and cannot work, or as carer’s leave where the employee has to provide care or support to a member of their immediate family or household who is sick or the subject of an unexpected emergency. Personal/carer’s leave accrues at the rate of 10 days per year of service. The number of days of paid personal/carer’s leave that an employee can use per year is uncapped. Employees are also entitled to two days of paid compassionate leave on each occasion where a member of the employee’s immediate family or household dies or sustains an illness or injury which poses a threat to their life. Casual employees are not entitled to any paid leave but may be entitled to take up to two days’ unpaid personal/carer’s or compassionate leave per occasion. If there is a public holiday while an employee is on leave, the employee is not taken to be on personal/carer’s leave on that day. Employees covered by modern awards or enterprise agreements can cash out leave where the instrument allows cashing out and a minimum accrued balance of 15 days’ leave remains. Employees not covered by such instruments cannot cash out this leave. Community service leave Employers must allow their employees to take unpaid leave for eligible community service activity, such as jury duty or voluntary emergency management. Employers will have to pay full-time and part-time employees undertaking jury duty for a period of up to 10 days. They must be paid at their base rate of pay of ordinary hours of work, less the value of any jury service pay received by the employee. Employees currently rely on a range of state and territory legislation as well as award and agreement provisions for jury make-up pay. Community service leave for other purposes (eg volunteer fire fighting) is unpaid leave under the statute. Long service leave

Although long service leave is incorporated as part of the NES, it continues to reflect pre-existing state and territory long service leave legislation, awards and agreements as the government works towards a national system. There is no common standard for long service leave. Public holidays Under the NES, employees are entitled to be absent from work on a day or part-day that is a public holiday in the place where the employee is based for work purposes. The NES provide for payment when an employee is absent on prescribed public holidays. Under the NES, an employer must pay an employee’s base rate of pay for ordinary hours that would have been worked on that day. An employer can make a reasonable request that an employee work on a public holiday, and an employee can refuse on reasonable grounds. The reasonableness test is similar to the one applied in respect of additional weekly hours of work. The list of prescribed public holidays in the NES now includes the following eight days: • 1 January (New Year) • 26 January (Australia day) • Good Friday • Easter Monday • 25 April (Anzac Day) • Queen’s Birthday (as per state or territory) • 25 December (Christmas), and • 26 December (Boxing Day). In addition, employees receive any other public holiday which is declared in the state, territory or region in which they work. Notice of termination and redundancy pay Under the NES, employers must give employees a minimum period of prior notice in writing before terminating employment. The minimum notice period varies depending on the employee’s period of service (from one week where an employee has up to one year’s continuous service, progressing to four weeks’ notice where an employee has more than five years’ service). An employer must also give an employee who is older than 45 an additional week’s notice if the employee has at least two years continuous service with the employer. These minimum notice requirements are not new, but it should be noted that employers must give notice in writing. Employers must also pay redundancy benefits to employees who are terminated on the grounds of redundancy in accordance with a scale. This scale varies depending on years of service. Under this scale, payments vary from 4–16 weeks. However, service prior to 1 January 2010 will only be taken into account where an employee was entitled to redundancy benefits immediately before the introduction of this NES (eg under an employment contract or collective agreement). There are some exclusions to this obligation, for example, employers with less than 15 employees are excluded, as are employees with less than 12 months’ service. Exclusions also exist where there is a transfer of business or the employer obtains other acceptable employment for the employee (subject to the order of the FWC). These exclusions contain a number of important conditions. The provision of Fair Work Information Statements Employers will have to provide all new employees (but not existing employees) with a Fair Work

Information Statement. The Fair Work Information Statement is published by the FWC and contains information about the NES, modern awards, agreement making, freedom of association and the role of the FWC and the Fair Work Ombudsman. More information on the Fair Work Information Statement is available from: www.fairwork.gov.au/employment/fair-work-information-statement/pages/default.aspx. See also: www.fwc.gov.au.

¶6-060 State system employees and the National Employment Standards State system employees are not covered by the NES. However, the FW Act expressly extends the operation of the NES provisions relating to unpaid parental leave and notice of termination to cover all employees in Australia (including state system employees). State system employees also have rights to annual leave and long service leave under state legislation. State system employees in South Australia, Western Australia, Tasmania and Queensland are also guaranteed minimum sick leave benefits under state legislation.

¶6-070 Superannuation Under the federal Superannuation Guarantee Scheme, all employers are required to make minimum levels of superannuation contributions on behalf of all eligible employees. Superannuation contributions must be made to a complying fund, and failure to do so will attract a tax or charge. The scheme applies to all employees whether they are full-time, part-time, casual or temporary employees. For more information on superannuation, see Chapter ¶44.

¶6-080 Maintenance of records Under the Fair Work Act 2009 and the industrial relations legislation in most jurisdictions, employers are required to maintain certain records in relation to their employees, including remuneration paid, hours worked, leave entitlements, and records relating to other conditions of employment.

¶6-090 Termination of employment Termination of employment is the most litigated area of employment law. It is also in this area of law where all the various sources of law, described earlier in this chapter, merge into a “soup of rights”. An employer who is considering the termination of an employee of medium to low salary/status would have to check notice provisions in the contract of employment, reconcile these provisions with minimum standards in any relevant award or enterprise agreement and under federal legislation, ensure that a fair procedure has been adopted in accordance with state or unfair dismissal legislation, and ensure that the reasons for termination are valid and do not offend anti-discrimination laws. Contractual rights The base instrument for every employment relationship is the employment contract. It is usual for an employment agreement to provide that either party can terminate the employment for any reason by simply giving the other party a specified period of prior notice that the termination is to occur. If an employment agreement does not specify a notice period, the courts will insert or “imply” into the agreement that either party may terminate the employment by giving “reasonable notice”. This implication will not arise in circumstances where the clear intention of the parties is to exclude this right, for example, where the employment is for a fixed term. In determining what periods of notice are reasonable, the courts have not adopted any particular formula but have had regard to the following factors: • the status, seniority and responsibilities of the employee’s position within the organisation

• the length of service of the employee • the qualifications required for the position held by the employee • the level of the employee’s remuneration • the age of the employee, and • the length of time that will probably elapse before the employee obtains equivalent or other suitable employment. If an employer fails to give the appropriate period of notice, then the employee is entitled to sue the employer for breach of the employment contract. Compensation is usually limited to the remuneration which the employee would have received if the employee worked out the full notice period, less any amount that the employee has received elsewhere. There is a duty on the employee to make a reasonable attempt to find work elsewhere and mitigate any loss arising out of the termination of their employment. If the employee fails to do so, a court may reduce the amount of compensation. A practice has developed where employers, who do not wish the employee to work through the period of notice, will terminate the employment immediately and make a lump sum “payment in lieu of notice”. This is based on the remuneration the employee would have received over the notice period. Although technically this may constitute a breach of the contract, the employee is usually regarded as having been fully compensated for the breach. Some contracts actually provide the employer with the right to terminate by making a payment “in lieu” of notice. Awards and enterprise agreements usually specify minimum notice periods for the employees they cover. The NES also prescribe minimum notice requirements. It is also an implied right in every employment contract that one party can terminate the employment without giving notice if the other party seriously breaches the terms of the contract. An employer has the right to summarily dismiss an employee if the employee is guilty of serious misconduct. Serious misconduct may include fraud, dishonesty, assault, repeated and wilful disregard of an employer’s directions, and gross negligence. It will not include poor performance or minor breaches of policy. Legislative rights Motivated largely by the failure of the common law courts to improve the harsher effects of commercially negotiated employment agreements, state and federal parliaments have enacted legislation which regulates an employer’s right to terminate. Fair procedure Certain employees can challenge the termination of their employment under federal and state unfair dismissal laws. In relation to national system employers, unfair dismissal obligations vary depending on whether or not the employer is a small business employer, that is, an employer with less than 15 employees (taking into account also the employees employed in the employer’s corporate group). Employees of a small business employer only have rights of action after completing a period of 12 months’ continuous service. Employees engaged by an employer with 15 or more employees have rights of action after completing a period of six months’ continuous service. Further, an employee of a small business employer cannot proceed on an unfair dismissal claim where the employer has complied with the Small Business Fair Dismissal Code. There are a number of key exclusions in each jurisdiction. These do vary depending on the jurisdiction. Generally speaking, they include exclusions for highly paid employees who are not covered by awardderived conditions, employees who are serving a probationary or qualifying period, fixed-term employees and short-term casual employees. These exclusions are discussed in Chapter ¶63. The primary legislative requirement is that an employer may not terminate the services of an employee in circumstances where the termination is “harsh, unjust or unreasonable”. Tribunals administering this legislation have a broad discretion in determining when a termination is unfair. In relation to termination on the grounds of poor performance or conduct, they will generally have regard to the following factors:

• Was there a valid reason for the termination? • Was the employee provided with specific details of any concerns with their conduct or performance and given an opportunity to respond to these concerns? • Was the employee provided with sufficient warnings that — if their conduct or performance did not improve — their employment might be terminated? • Where appropriate, was the employee counselled or trained in how their conduct or performance could be improved? • Was the employee provided with a final opportunity to respond to any conduct or performance issues before termination? • Was the employee provided the opportunity to bring along a support person to any meeting relating to the termination of their employment? • Did the grounds justify the serious consequences of termination? Under the federal unfair dismissal laws, whether or not the employer “unreasonably” refused to allow the employee to bring along a support person to assist in any discussions relating to dismissal, is also an important factor. Commissions and Tribunals may also take into account any other factors they may consider relevant. The fact that an employer breaches one of these factors does not necessarily mean that the termination is harsh, unjust or unreasonable. Federal unfair dismissal laws prescribe that national system employees cannot challenge a termination which is a case of a “genuine redundancy”. A genuine redundancy will arise where an employee’s employer terminates an employee’s employment because it no longer requires the employee’s job to be performed by anyone due to changes in the operational requirements of the employer’s enterprise. A genuine redundancy will not include circumstances where an employer attempts to mask a termination (eg on grounds of poor performance) as a redundancy. Further, to establish that a redundancy is genuine, an employer must show that it complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy. Finally, a person’s dismissal will not be regarded as a genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or that of an associated entity. It is, therefore, important for employers to consider redeployment opportunities within their corporate group before terminating an employee’s employment on redundancy grounds. In relation to state system unfair dismissal laws there may be broader considerations which may include the following: • Was there a true redundancy or was the employer using this ground as a smokescreen for a termination on other grounds? • Was the employee selected for redundancy in a fair and objective manner, based on the operational requirements of the business? • Was the employee consulted as early as possible after the decision to make his or her position redundant? • Did the employer consider and, if possible, offer the employee re-deployment elsewhere within the organisation? • Was the employee permitted to work out a reasonable period of notice? • Did the employer assist the employee in finding alternative employment elsewhere? Where the relevant industrial tribunal finds that a termination was unfair, they can usually make orders to

reinstate or re-employ the employee, or award compensation (usually capped at six months’ remuneration). Unlawful termination State and federal industrial relations and anti-discrimination legislation also specifically prohibit termination of employment for various reasons, including: • temporary absence from work resulting from illness or injury • trade union membership or non-membership • race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin • absence from work during maternity or parental leave, and • the filing of a complaint or participation in proceedings against an employer involving an alleged violation of laws or regulations, or recourse to competent administrative authorities. These restrictions apply to all employees, irrespective of their income or award coverage. A termination on any of the above grounds is unlawful and the employee may seek reinstatement and/or compensation. Penalties may also be awarded against the employer.

¶6-100 Redundancy Redundancies are generally treated differently from other types of termination. Under Australian law, an employee’s position is considered to be redundant if an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone, and the termination of the employee is not on account of any personal act or default on the part of the employee. Employees are also entitled to redundancy payments when their employment is terminated on the grounds of redundancy. Most industrial instruments provide for redundancy payments on termination that refer to the employee’s length of service. It is also quite common for employers to award redundancy benefits by way of private agreement or HR policies which are sometimes incorporated into the employment contract. Under the NES, from 1 January 2010, employees of national system employers (with 15 or more employees) have a statutory entitlement to redundancy pay if they are terminated by reason of redundancy. The scale of redundancy benefits under the NES ranges from 4–16 weeks (but service prior to 1 January 2010 will only be counted where the employee had an entitlement to redundancy benefits immediately before this date). Redundancy payments are intended to compensate employees for the inconvenience and hardship imposed on them by the termination of their employment and also the loss of accrued credits which are not paid out on termination (eg credits toward sick leave and long service leave). Redundancy payments are separate and additional to the employer’s obligation to give prior notice of termination or a payment in lieu of such notice. Many instruments disentitle employees to redundancy payments where the employer finds the employee acceptable alternative employment elsewhere and continuity of service is preserved (sometimes on the proviso that the employer first obtains an order from an industrial tribunal, such as in the case of entitlements under the NES) or in the event of a transfer of business where the employee is engaged on the same or similar terms and continuity of services is preserved (at least for the purpose of calculating any future redundancy benefits). Federal and state industrial instruments and legislation also impose procedural requirements on employers who are giving effect to redundancies. Redundancy obligations are discussed in greater detail in Chapter ¶61.

¶6-110 Anti-discrimination law

Currently, there are at least 11 different Acts of parliament throughout Australia which deal with antidiscrimination laws. These are supplemented by rights under the FW Act. They set out various prohibitions on discrimination and harassment, possible defences and the various penalties and remedies which may apply. Most anti-discrimination legislation also establishes boards or tribunals to investigate or deal with complaints of discrimination (eg the Australian Human Rights Commission). Employers should note that federal laws do not supplant state rights. As such, employees can access both state and federal anti-discrimination laws, regardless of whether or not they are engaged by a state system or national system employer. The general protections provisions in the FW Act relating to unlawful termination of employment are not limited to employees of national system employers. Many discrimination laws have direct and indirect application to the employment relationship and, in respect of termination of employment, through redundancy or otherwise. Prohibited grounds for discrimination include the following: • age • race, colour, descent, national or ethnic origin and immigration status • sex, sexual characteristics, marital status, family responsibility and pregnancy • sexual orientation • transgender status • religion, political opinion and trade union activity • criminal record, and • physical or mental disability, intellectual or psychiatric disability, medical record or HIV/AIDS status. Generally, this legislation draws a distinction between two types of discrimination: (1) direct discrimination, and (2) indirect discrimination. Direct discrimination occurs when a person with one of the relevant characteristics is treated less favourably than a person without the characteristic would be treated in the same or similar circumstances. Indirect discrimination will occur when an employer attempts to impose an unreasonable condition on the receipt of a benefit or employment opportunity, and the impact of this condition is such that a disproportionate number of persons of one class are unable to comply with the condition. A person who lodges a complaint does not need to establish that the alleged discriminator intended to discriminate. Harassment (sexual or otherwise) is a form of discrimination and is specifically dealt with in some legislation. Harassment is conduct which a reasonable person would find offensive, intimidating or humiliating. Under state and federal anti-discrimination legislation, discrimination or harassment which is committed by an employee is also deemed to have been committed by the employee’s employer, unless certain defences can be established. Under federal anti-discrimination legislation, to avoid liability, an employer must show that they took all reasonable steps to prevent its employees from performing a discriminatory act. The defences are similar under most state legislation. For example, under New South Wales antidiscrimination legislation, the primary defence is that the employer did not authorise the employee to do the unlawful act. An employer will be taken to have authorised the unlawful act if the employer was aware of the act and failed to take effective action when in possession of such knowledge. Both the state and federal anti-discrimination laws effectively impose a duty on the employer to take positive steps to protect its employees from discrimination and harassment. At the very least, this means

preparing, distributing and properly administering an anti-discrimination and anti-sexual harassment policy which provides employees with an avenue to lodge a complaint, and a procedure for the investigation of the complaint. If a complaint is made to an employer or its management, and the employer fails to take obvious steps to prevent the conduct (eg speaking to the person(s) concerned or educating staff as to their obligations with regard to appropriate workplace behaviour), then the employer will most likely be held liable for the discriminatory conduct. It should also be noted that, under the FW Act, national system employees and prospective employees also have rights of action in circumstances where an employer takes “adverse action” against them on the grounds of: • race • colour • sex • sexual orientation • age • physical or mental disability • marital status • family or carer’s responsibilities • pregnancy • religion • political opinion • national extraction, and • social origin. It is also unlawful to dismiss an employee on these grounds.

¶6-120 Occupational/work health and safety law (OHS/WHS) In addition to an employer’s common law duties of care, there is currently OHS/WHS legislation in each state and territory which imposes a number of expansive general obligations on employers. Such obligations include an obligation to: • ensure (or to take reasonably practicable steps to ensure) the health, safety and welfare of their employees, and other workers, while at work, and • ensure (or to take reasonably practicable steps to ensure) that persons other than their employees and other workers are not exposed to risks to their health or safety arising out of the employer’s business. The current statutory obligations are deliberately wide and general, but employers must also be aware of the increasingly complicated web of specific obligations which are provided for by other sources, including: • OHS/WHS regulations • codes of practice

• court decisions • safety alerts, and • Australian Standards. The Commonwealth, states and territories are responsible for making and enforcing their own health and safety laws. Although there are many similarities between the laws there are also some differences that can cause confusion. To address complexities and differences in OHS laws, the Commonwealth, and each state and territory government, agreed to harmonise their WHS laws by enacting the same WHS laws in each jurisdiction. The national WHS laws, which consist of a model WHS Act, model Regulations and model Codes of Practice, were originally expected to have commenced by 1 January 2012 in all states and territories. The new WHS laws have commenced operation in New South Wales, Queensland, the Australian Capital Territory, the Northern Territory, South Australia, Tasmania, and in Commonwealth jurisdictions. However, Western Australia and Victoria are yet to implement the new laws. The process of harmonisation was undertaken in an effort to create a more centralised safety system aimed at reducing the incidence of death, injury and disease across Australia. Safe Work Australia is the independent statutory body responsible for developing model WHS laws. The model WHS laws have resulted in several key changes to OHS legislation in states and territories. These changes include: • new and enhanced duties which broaden an employer’s health and safety obligations • a positive duty on officers to exercise “due diligence” to ensure that their organisation complies with its health and safety obligations • provision for significantly higher monetary penalties and penal sentences for companies and officers of companies • a positive duty on officers to exercise “due diligence” to ensure that their organisation complies with its health and safety obligations, and • statutory definitions of “reasonably practicable” and “due diligence” to assist employers and their officers to better understand the extent of their health and safety obligations. The focus of the OHS/WHS legislation is not on accidents but risks. There does not need to be an accident or injury in order for an offence to be established. There simply needs to be a risk to health and safety. An obvious example involving risks is where an employer allows an employee to use an inadequately guarded piece of machinery, irrespective of whether the employee ultimately injures himself/herself. As discussed earlier, the general obligations which are currently set out in state legislation are similar. These include obligations that all employers must ensure (or must take reasonably practicable steps to ensure) the following: • the employer’s premises (and the means of access to or exit from the premises) are safe and without risks to health • plant or substances provided by employers for use by employees at a workplace are safe and without risks to health when properly used (Note: This includes an obligation on employers to anticipate and circumvent possible misuse.) • there is an absence of risk to health in connection with the use, handling, storage or transport of plant and substances • they have provided all information, instruction, training and supervision (as may be necessary) to protect all persons from risks to their health and safety at work, including information about any research or results from any testing which has been carried out in connection with substances used,

and any conditions necessary to ensure that substances will be safe and without risk to health when properly used, and • systems of work and the working environment of employees are safe and without risk to health, and adequate facilities for their welfare at work are provided. Employers are also required to consult with employees to enable employees and other workers to contribute to the making of decisions affecting their health, safety and welfare at work. Strictly speaking, employers have limited defences to these very broad obligations. For example, under model WHS laws, an employer’s defence to a breach of primary obligations would be confined to circumstances where it was not reasonably practicable for the employer to comply with the relevant provision. The WHS Act provides employers with some insight as to relevant factors which a court or tribunal will take into account in determining what is (or was at a particular time) “reasonably practicable” in relation to ensuring health and safety. These factors include: • the likelihood of the hazard or the risk concerned occurring • the degree of harm that might result from the hazard or the risk • what the person concerned knows, or ought reasonably to know, about the hazard or the risk, and ways of eliminating or minimising the risk • the availability and suitability of ways to eliminate or minimise the risk, and • (after assessing the extent of the risk and the available ways of eliminating or minimising the risk) the cost associated with available ways of eliminating or minimising the risk, including whether the cost is grossly disproportionate to the risk. Another defence in some jurisdictions is that the offence was due to causes over which the employer had no control and against which it was impractical for the employer to make provision. Practically, these defences are difficult to establish and many employers become justifiably frustrated. But employers should not throw caution to the wind, nor should they adopt an attitude that — if they are unlikely to be able to successfully defend a prosecution — then valuable company resources are better applied elsewhere. It is important to bear in mind the following factors. First, accidents by their very nature are preventable. By dedicating appropriate resources to OHS/WHS, employers can work towards eliminating accidents altogether by identifying, minimising and/or eliminating hazards and risk. It is an unfortunate reality that one rarely becomes aware of an accident that was prevented, and it is sometimes difficult to convince those who watch the bottom line of a balance sheet that the money and resources are well spent. The ultimate objective of OHS/WHS legislation is to ensure that all persons return home from work each day in the same condition as when they left in the morning. Second, offences under OHS/WHS legislation are criminal in nature. The relevant authority in each state and territory has the power to prosecute not only companies, but also individuals. Depending on the jurisdiction, this can include officers, directors and people concerned with the management of the companies. For individuals, offences can result in penal sentences as well as significant monetary penalties. Third, if an accident occurs and the employer and/or their officers, directors and managers are prosecuted, steps taken before the accident to ensure the identification, elimination or control of risks may be taken into consideration and contribute towards a reduction in any penalty. WHS is dealt with in greater detail in Chapter ¶12 of this Guide.

¶6-130 Workers compensation

Legislation in each state requires employers to take out workers compensation insurance in respect of their employees and certain contractors. Liability for injury to workers is strict and a failure to take out appropriate insurance constitutes an offence. See Chapter ¶59 for more information on workers compensation.

¶6-140 Trade unions State and federal industrial relations legislation regulates the internal operations of trade unions and provides for a system of registration of unions. This legislation tends to be quite intrusive in the administration of trade union affairs, including use of union funds and election of office holders. Each trade union also has its own detailed set of rules which, among other things, specifies the eligibility requirements for a person to become a member of that organisation. These rules are regulated by statute.

¶6-150 Industrial disputes and negotiation of collective agreements Industrial disputes are also heavily regulated by federal and state legislation. The federal legislation, in particular, sets out a framework for taking protected industrial action in the course of workplace bargaining, and recourse for employers in circumstances where industrial action is not protected. For industrial action to be protected, the federal legislation sets out a number of steps which will need to be taken. A secret ballot must be held and an application made to the FWC to conduct such a ballot. The FWC is able to refuse the application if the applicant has not genuinely tried to reach agreement or is engaging in pattern bargaining. If a union applies for a ballot, then only members of that union who are covered by the proposed enterprise agreement can vote on the ballot and (assuming it is successful) take protected action. To approve the action, 50% of eligible voters must vote and 50% of the votes cast must approve of the action. Industrial action cannot be taken before the nominal expiry date of a relevant enterprise agreement. The FWC is required to hear and determine an application for an order to stop industrial action within 48 hours, failing which it must make an interim order to stop that action. Federal legislation imposes a positive obligation on parties who are negotiating an enterprise agreement to bargain in good faith. The obligation to bargain in good faith may include having to participate in meetings at reasonable times, respond to proposals in a timely fashion, give genuine consideration to the needs of other parties and refrain from capricious or unfair conduct. In the event of a dispute, the FWC will have a right to intervene.

¶6-160 And there’s more law The information provided so far should not, by any means, be regarded as an exhaustive list of all laws and legislation which impact on the employment relationship. There are other general statutes which contain specific provisions relating to employment (eg tax laws, privacy laws, workplace surveillance legislation, laws relating to post-employment restrictions and laws relating to the remuneration of executive directors). Employers also need to have regard to criminal laws/legislation when dealing with employee fraud or embezzlement and their own obligations to report such conduct.

¶6-170 Law plus common sense Lawmakers have always confronted difficulties when attempting to regulate human affairs and personal relationships. The interaction of human affairs at work is inherently unpredictable and cannot be codified conveniently in any statute or employment contract. More importantly, the enforcement of strict legal rights in the context of a continuing personal relationship may be counter-productive as it may seriously damage the working relationship with an employee or a group of employees. Managers will regularly be faced with situations where the law does not provide any guidance or assistance. In these situations, managers may be forced to rely on their own innate common sense and concepts of fairness. Good HR managers should always be able to step out of the emotion of the circumstances and consider the implications of action on the broader relationship with a degree of objectivity. This Guide is intended to assist in honing this skill. If in doubt, seek legal advice.

For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

7. AWARDS, WORKPLACE AGREEMENTS AND ENTERPRISE AGREEMENTS Editorial information

Originally written by Maria Hurley-Smith, Special Counsel, Baker & McKenzie

¶7-010 Introduction The common law generally defines the nature of a working relationship. It performs a number of functions in regulating employment as it is often called on to interpret, define, bridge any gaps or imply terms into a contract of employment. Under the common law, every Australian employee is employed under the terms of a contract of employment whether written, oral, implied or a combination of all three. Contracts may include not only express terms and employment benefits agreed between the parties, but also a number of duties and obligations which are implied into the employment relationship by the courts, or provided in statute. In addition to the common law, terms and conditions of employment are derived from a number of sources. These sources include written or oral employment arrangements, specific terms of a contract of employment and state and federal legislation. Certain terms and conditions of work are also governed by a range of industrial instruments, including: • modern federal awards • federal enterprise agreements • Australian workplace agreements (AWAs) (Note: As of March 2008, employers and individual employees have been unable to make new AWAs.) • Individual Transitional Employment Agreements (ITEAs) • state collective agreements and individual agreements, and • state awards. Enterprise agreements are also commonly referred to as collective workplace agreements or certified agreements. The name used will usually depend on the federal law under which the agreement was created. Agreements made under the Fair Work Act 2009 (Cth) (FW Act) are referred to as enterprise agreements. Generally speaking, employers and employees cannot contract out of the terms and conditions of employment in an industrial instrument. In other words, the terms of awards, enterprise agreements, AWAs, ITEAs or certain legislation cannot be avoided by the formation of a common law employment contract. These instruments have legislative force. Failure to comply may lead to penalties being imposed. This chapter is not intended as a do-it-yourself guide for obtaining an industrial instrument to cover a workplace. The process of drawing up and obtaining approval for an enterprise agreement is usually complex and often requires expert legal advice.

¶7-020 Overview Awards An award is a binding instrument made by an industrial tribunal setting out the terms and conditions of certain employees. Awards covering employees may be state or federal awards. The now abolished Australian Industrial Relations Commission (AIRC) had responsibility for the creation of new modern federal awards. These new modern awards are the result of the modernisation of thousands of awards into industry or occupation-specific awards. Modern awards commenced operating on 1 January 2010, and with only limited exceptions, replaced most existing federal awards and notional agreements preserving state awards (NAPSAs). Notional agreements preserving state awards NAPSAs were transitional federal industrial instruments created by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Work Choices). NAPSAs preserved many of the employment conditions previously provided by state awards and/or state or territory industrial laws. Enterprise agreements Enterprise agreements are agreements between an employer and a class of employees about the terms and conditions of employment in a workplace. When approved, enterprise agreements prevail over the conditions of employment in any applicable award, except for any applicable award base rates of pay. A union that has been a bargaining representative for a particular enterprise agreement may apply to the Fair Work Commission (FWC) to become a party to an enterprise agreement. Australian workplace agreements An AWA was an agreement made directly between an employer and an individual employee that was lodged with and approved by the Workplace Authority. These agreements override the terms and conditions of employment contained in collective workplace agreements or state and federal awards. However, as of 28 March 2008, employers and individual employees have been unable to make new AWAs. Individual transitional employment agreements An ITEA was an agreement that was able (in limited circumstances) to be made between an employer and an individual employee. However, as of 31 December 2009, employers and individual employees can no longer make new ITEAs. These agreements override the terms and conditions of employment contained in collective workplace agreements or state and federal awards. Transitional Workplace Relations Act 1996 (Cth) industrial instruments Industrial instruments created under the Workplace Relations Act 1996 (Cth) (WR Act) continue to exist but, on 1 July 2009, they became “transitional instruments”. These instruments are classified as either award-based or agreement-based transitional instruments. Examples of transitional instruments include pre-reform certified agreements (agreements made prior to 27 March 2006), AWAs and preserved state agreements. Workplace Relations Amendment (Work Choices) Act 2005 (Cth) On 27 March 2006, the Work Choices legislation came into effect. This legislation introduced a new national system of industrial relations into Australia. This is not to say that the state-based industrial relations systems ceased to operate. Rather, their scope, functions and powers were abrogated. While the FW Act significantly amended the federal industrial relations laws, it retained the national industrial relations system. Fair Work Act 2009 (Cth) The FW Act applies to “national system employers” who are, broadly, employers that are constitutional corporations, and other employers that are not constitutional corporations (eg sole traders and partnerships) who fall within the jurisdiction of the FW Act because of state referrals of power. Most state jurisdictions signed an agreement in 2009 to refer their powers to the Commonwealth for the purpose of

creating a truly national industrial relations system. A small number of employees who are employed, for example, by contractors or government bodies in certain states, do not fall within the federal system, and are not national system employers. The FW Act introduced a new industrial relations system into Australia. The FW Act also introduced the National Employment Standards (NES) — a list of 10 minimum terms and conditions of employment. The NES are as follows: (1) maximum weekly hours (2) parental leave (3) personal carer’s leave (4) long service leave (5) notice of termination and redundancy (6) requests for flexible working arrangements (7) annual leave (8) community service leave (9) public holidays, and (10) provision of a Fair Work Information Statement. The NES commenced on 1 January 2010 and apply to all federal system employees, including employees covered by existing collective and individual industrial instruments. The Fair Work Commission The FW Act established Fair Work Australia (FWA) (since renamed the Fair Work Commission (FWC)). The FW Act confers on the FWC a number of functions in relation to matters such as the NES, modern awards, minimum wages and industrial action. The FW Act states that the FWC must perform its functions and exercise its powers in a fair, quick, informal and open manner, which “promotes harmonious and cooperative workplace relations” (s 577 FW Act). Fair Work Ombudsman The FW Act also established the Fair Work Ombudsman (FWO). The FWO has both enforcement and compliance functions. Workplace inspectors from the FWO have the power to investigate and enforce compliance with the FW Act. These workplace inspectors may also seek penalties for any relevant breach, including freedom of association or post-termination entitlements. Wage setting — the Fair Work Commission The FW Act provides for the FWC to take over the wage setting function. This function is performed by the FWC Minimum Wage Panel (the Panel). The Panel handed down its first pay determination in June 2010. The most recent decision was handed down in June 2015 and increased the federal minimum wage and minimum rates of pay in all modern awards. For more information, see www.fwc.gov.au. New institutional framework The FW Act introduced a number of new institutions. On 1 July 2009, the AIRC was replaced by FWA, which has since been renamed the FWC. The Workplace Ombudsman was replaced by the FWO. The FWC has become a “one-stop shop” for employees and employers. It provides advice on all workplace relations issues and the enforcement of legal entitlements.

¶7-030 Awards

What is an award? An award is a binding legal document which outlines minimum conditions of employment for particular types of employees. Awards may be either state or federal instruments. Federal awards Before the commencement of Work Choices, federal awards were made by the AIRC in settlement of an industrial dispute. Under the WR Act, the AIRC could only make new modern awards as part of the award modernisation process. On 1 January 2010, the new modern awards came into operation. The award modernisation process attempted to consolidate over 4,000 awards which operated in Australia. Generally, awards have tended to be lengthy and complicated documents that have caused confusion for both employers and employees regarding applicable terms and conditions of employment. The FW Act states that the objective of modern awards is for the Fair Work Commission (FWC) to ensure that, together with the NES, they “provide a fair and relevant minimum safety net of terms and conditions” taking into account a list of prescribed matters, such as the needs of the low paid, relative living standards and the need to encourage collective bargaining (s 134 FW Act). Award modernisation has standardised and simplified awards into industry- or occupation-specific awards. The finalised modern awards came into effect on or after 1 January 2010. The FWC has made some amendments to these modern awards following their commencement. Copies of current modern awards may be obtained from the FWC website (see www.fwc.gov.au). Federal awards have traditionally bound only employers named as parties to an award, whether directly or as members of federally registered organisations that are party to an award, along with employees of these employers and federally registered unions. Under the FW Act, modern federal awards cover a wider range of employers and employees as their coverage expands to classes of employees or employers by reference to a particular industry or particular kinds of work. Impact of the FW Act on pre-FW Act reform federal awards or “award-based transitional instruments” The changes introduced by the FW Act and the accompanying transitional Acts make a distinction between existing federal awards and new modern awards. Existing federal awards will continue to operate on the commencement of the FW Act and be subject to the same instrument content and interaction rules that applied under the WR Act. These existing federal awards became transitional instruments and are classified as “award-based transitional instruments” for the purposes of the new legislation. Award-based transitional instruments will continue to exist until otherwise terminated or revoked in accordance with the legislation. The awards created by the AIRC are referred to as “modern awards”. If a modern award comes into operation to cover a person, then the award-based transitional instrument will cease to cover that person and may never cover that person again. Allowable award matters — modern awards The FW Act sets out a revised list of “allowable” award matters for modern awards. The list of matters is generally divided into 10 categories of matters. These matters include minimum wages, penalty rates, leave and procedures for consultation, representation and dispute settlement (s 139 FW Act). Although, modern awards may still include ancillary or facilitative provisions that are essential for clauses of the award to operate in a practical way (s 142 FW Act). The FW Act sets out a list of terms which must be included in new modern awards. These include: • the parties covered by the award • a flexibility term enabling an employee and an employer to agree on an individual flexibility arrangement • a dispute settlement procedure for matters arising out of the modern award and the NES • terms specifying or providing for the determination of ordinary hours of work

• provision for pieceworkers (if applicable), and • a term providing for the automatic variation of allowances. A modern award must also not exclude the NES (s 55 FW Act). The NES has effect subject to any terms included in the modern award. A modern award may include terms that are ancillary and supplementary to the NES (s 55(4) FW Act). However, these terms must not be detrimental to an employee when compared with the NES. For example, an employee may be allowed to take twice as much annual leave at half the rate of pay rather than taking paid annual leave at the rate required by s 90 of the FW Act. A term of a modern award that contravenes the NES has no effect. The FW Act also sets out a new list of terms which must not be included in modern awards. These prohibited terms include those that: • are objectionable • are about payments and deductions for the benefit of an employer • deal with long service leave • are about right of entry • are discriminatory, or • contain state-based differences. Individual flexibility arrangements The FW Act allows individual employers and employees to “contract out” of certain clauses in applicable modern awards. The Act prescribes the conditions which need to be met in order to enter into such arrangements. A flexibility term in a modern award must: • identify the terms of the award that may be varied by individual arrangements • require the employer and employee to genuinely agree to the arrangement • require the employer to ensure that any individual arrangement results in the employee being better off overall • set out how any flexibility arrangement may be terminated • require the arrangement to be in writing and signed by both parties, and • require that a copy of the individual flexibility arrangement be provided to the employee (s 144(4) FW Act). Importantly, an employer will need to ensure that any individual arrangement results in the employee being better off overall. The flexibility term must not require the approval or consent of a third party (eg a union) to enter into the individual flexibility arrangement. However, if an individual flexibility arrangement does not meet the requirements of a flexibility term, it will still have effect as such (s 145(2) FW Act). A flexibility term in a modern award will be taken to provide that the arrangement can be terminated by either party giving written notice. The notice required will depend upon when the individual arrangement was made and the underlying industrial instrument. For example, if the individual arrangement was entered into prior to 4 December 2013 it may be terminated by not more than 28 days written notice. For arrangements entered into after this date, modern awards generally provide for termination of these individual arrangements on provision of 13 weeks written notice or at any time by agreement (s 145(4) FW Act). Wage rates Inevitably, the creation of modern awards has meant that the minimum terms and conditions applicable to

individual employers and employees have, in some circumstances, changed. Modern awards contain transitional provisions relating to a number of minimum obligations, such as minimum wages, loadings and penalty rates. However, these transitional provisions only operated up to 1 July 2014. The minimum rates of pay in modern awards will apply — irrespective of whether an employee’s terms and conditions of employment are covered by an existing collective or individual agreement. Consequently, employers will need to check their employees’ wage rates to ensure that they are paying at least the new minimum wage rates contained in the underlying modern award, as amended from time to time. The FW Act sets out the circumstances in which modern awards will not apply to an employer or employee. For example, a modern award will not apply when an enterprise agreement applies or in circumstances where an employee accepts a written “high income guarantee” (ie a guarantee from their employer that their annual income will exceed the prescribed amount, currently $136,700, indexed annually on 1 July). Varying modern awards Under the FW Act, the FWC has the power to vary federal modern awards upon application (s 157 FW Act). However, the FW Act limits the circumstances in which this can occur and who may apply to vary a modern award (s 158 FW Act). Examples of circumstances where the FWC may vary a modern award include to: • remove ambiguity or uncertainty • remove provisions offending the Sex Discrimination Act 1984 (Cth) • bind additional employers, employees or organisations, or • reflect a change in the name of an employer or organisation bound by the award. A Full Bench of the FWC must conduct a four-yearly review of modern awards (s 156(1) FW Act). This process will allow modern awards to be reviewed, varied or revoked, as required by the FWC. The FWC commenced its first review on 1 January 2014, and has made a number of changes to modern awards as a result of this review. Wage setting Historically, the wage-setting function was performed by the AIRC. Following the introduction of Work Choices, this function was given to the Australian Fair Pay Commission (AFPC). The FW Act abolished the AFPC and the wage-setting function was given to the FWA (now known as the FWC). The FWC must exercise its powers in this regard within the prescribed wage setting parameters set out in the legislation. The FWC’s first annual minimum wage review was handed down on 3 June 2010. The most recent wage determination was handed down by the FWC on 31 May 2016. Effective from 1 July 2016: • the national minimum wage was increased to $672.70 per week, and • minimum wages in modern awards were increased by 2.4%. The main power of the FWC to vary modern award minimum wages is in annual wage reviews. The minimum wages set out in modern awards may be varied if the FWC is satisfied that: • the variation is justified by work value reasons • to remove ambiguities or correct errors, or • on referral by the Australian Human Rights Commission (s 135 FW Act). State awards

State awards are made by the relevant State Industrial Commission in each state (except Victoria), generally on application by an employer or a union. In the early 1990s, the Kennett Government in Victoria referred the state’s power to make laws (in relation to industrial relations) to the Commonwealth. In 2003, the Workplace Relations Amendment (Improved Protection for Victorian Workers) Act 2003 (Cth) enabled the AIRC to declare federal awards common rule for Victorian employees. Victoria continues to operate in the federal system. Table 7.1 provides the websites for the relevant industrial relations or employment department in each state. These websites also generally provide access to the most common awards. Table 7.1: Industrial relations/employment department websites State

Website

New South Wales www.industrialrelations.nsw.gov.au Queensland

www.justice.qld.gov.au/fair-and-safe-work/industrial-relations

South Australia

www.industrialcourt.sa.gov.au

Tasmania

www.tic.tas.gov.au

Victoria

www.fairwork.gov.au

Western Australia www.wairc.wa.gov.au Notional agreements preserving state awards When Work Choices commenced, employees whose terms and conditions of employment were formerly regulated by state awards and/or applicable state or territory laws became subject to a NAPSA. This meant that certain provisions in state awards and/or state or territory industrial laws were transferred into new industrial instruments called NAPSAs. NAPSAs continued to exist as transitional instruments (awardbased transitional instruments) on the commencement of the FW Act. In contrast, non-national system employers who are bound by the terms of a state award were not affected by the operation of the FW Act. Put differently, the relevant state award continues to apply and parties continue to have all disputes resolved in the relevant state industrial relations system. Interaction with other instruments An employee of a national system employer who is covered by a federal or state award may be taken outside the operation of that award via the making of a collective enterprise agreement. A federal award or enterprise agreement prevails over a state or territory law, a state award or state employment agreement to the extent of any inconsistency (s 29 FW Act). The FW Act relies on the corporations power of the Constitution to exclude all state and territory industrial laws. However, there are certain laws, such as anti-discrimination and equal opportunity laws, that are not excluded by the operation of the federal legislation. In addition, there are also a number of matters which are not excluded by the legislation such as: • occupational health and safety • workers compensation • training, and • superannuation (s 27(2)(a)–(p) FW Act). On 14 November 2006, the High Court (by a majority of 5-2) dismissed challenges to the validity of Work Choices. The High Court upheld the constitutional validity of the Commonwealth using its corporations power (s 51(20)) to regulate the conditions of those employed by corporations. Interestingly, the FW Act continues to rely on the corporations power of the Constitution in introducing this new system of industrial relations into Australia.

Breach of awards A breach of a federal award term or “applicable provision” is an offence and may give rise to a pecuniary penalty or other order. An eligible court (eg the Federal Court) may impose a penalty for the contravention of an award term. The legislation prescribes the persons who may seek a civil remedy for breach of an award (s 539 FW Act).

¶7-040 Australian workplace agreements An AWA is an individual, written agreement between an individual employee and an employer about the terms and conditions of employment. Since 28 March 2008, the making of new AWAs has been prohibited. However, a significant number of Australian employees still have their terms and conditions of employment set by an AWA. AWAs are written agreements dealing with matters pertaining to the relationship between an employer and employee. Prior to 28 March 2008, AWAs were lodged with the Workplace Authority for approval. The Workplace Authority Director (previously called the Employment Advocate) was a statutory officer appointed by the federal government. If the AWA met the approval requirements, it was deemed to be made and commenced on lodgment with the Workplace Authority. AWAs are written instruments that, when formally approved, prevailed over other industrial instruments. Employers used AWAs to override certain Commonwealth laws or to replace applicable federal or state awards or agreements. Employers who have employees employed pursuant to an expired AWA will need to comply with the NES and ensure that the minimum rates of pay set out in the AWA (or that are actually paid to the individual employee) comply with the employer’s minimum legal obligations. Approval by the Workplace Authority An AWA commenced once it met the approval requirements set out in the legislation at the time, and had been lodged with the Workplace Authority. Importantly, an AWA did not become operative until it and the employer declaration had been lodged with the Workplace Authority. In other words, lodgment with the Workplace Authority triggered the operation of the agreement. Certain prescribed categories of AWAs needed to pass a “fairness test”. An AWA passed the “fairness test” if the Workplace Authority Director was satisfied that the AWA provided “fair compensation” to the employee. Work Choices provided that, in considering whether an AWA provided for fair compensation, the Workplace Authority had to have regard to: • the monetary and non-monetary compensation that the employee would receive under the workplace agreement, and • the work obligations of the employee. The Workplace Authority was also obliged to have regard to the personal circumstances of the employee and, in exceptional circumstances, the industry, location or economic circumstances of the employee. In circumstances where an AWA did not satisfy the “fairness test”, the employer was provided with a period of 14 days in which to either lodge a variation of the AWA or provide to the Workplace Authority written undertakings in relation to the AWA. If the employer did not take any action then, at the conclusion of the 14-day period, the AWA would cease to operate. Breach of an AWA Parties are prohibited from breaching the terms of an AWA. This may include non-payment of amounts under the AWA, such as salary, leave and other employee entitlements. Breach of an AWA may incur a financial penalty. An application may be made by a party to an eligible court in respect of any alleged AWA breach. In addition, a party who suffers loss or damage as a result of any breach may seek to recover the amount of

loss or damage from the court. Any action must be brought within six years of the breach. Terminating an AWA AWAs that were made or were otherwise in place prior to the commencement of the FW Act will continue to apply and operate. AWAs are now referred to in the federal legislation as “individual agreement-based transitional instruments”. The FW Act introduced new provisions regarding the termination of AWAs. The parties to an AWA may make a written agreement to terminate the agreement (in accordance with the requirements of the legislation). The termination agreement will need to be lodged with the FWC within 14 days of being made and formally approved. Importantly, once an AWA has been terminated it ceases to apply and can never operate again. If an AWA has passed its nominal expiry date, a party to the AWA may, with the approval of the FWC, unilaterally terminate the AWA. If approved, the AWA will terminate on the 90th day after the FWC approves the termination. The FW Act also allows parties to an AWA to enter into a “conditional termination” agreement. Such an agreement would only come into effect if a new enterprise agreement that purported to cover the parties was made and commenced operating. Hence, once an enterprise agreement comes into operation, the AWA would automatically terminate. If an employee enters into a conditional termination agreement, they will be able to vote, participate in protected industrial action and generally engage in the bargaining process. Employers should note that there are a number of procedural rules and obligations that will need to be complied with when entering into a conditional termination agreement. Individual Transitional Employment Agreements ITEAs were only available to employers who employed at least one person under an AWA (or certain state individual agreements) as at 1 December 2007. Employers were able to offer ITEAs up to 31 December 2009. The federal legislation prescribed the required content of an ITEA. ITEAs must, as a minimum, include: • a nominal expiry date • a dispute resolution procedure, and • terms and conditions of employment that met the Australian Fair Pay and Conditions Standard. A large number of Australian employees still have their terms and conditions set by an ITEA. Employers who have employees employed pursuant to an expired ITEA will need to comply with the NES and ensure that the minimum rates of pay set out in the ITEA (or that are actually paid to the individual employee) comply with the employer’s minimum legal obligations. Varying or terminating an ITEA The FW Act introduced a number of significant changes regarding the variation and termination of ITEAs. The transitional legislation creates a distinction between the rules applicable to variations or terminations of ITEAs that were approved prior to the repeal of the WR Act and variations or terminations made after 1 July 2009. Variations or terminations to an ITEA made or approved after the commencement of the FW Act An ITEA can only be varied in a limited number of circumstances (eg to remove any uncertainty in the ITEA). In addition, the transitional legislation states that ITEAs can only be terminated under certain prescribed circumstances. For example, prior to the nominal expiry date of an ITEA, the parties may agree to enter into a “conditional termination” agreement. However, after the ITEA has passed its nominal expiry, either party may unilaterally effect a conditional termination agreement. A conditional termination agreement will allow the employee to participate in the bargaining process for a proposed enterprise agreement. If an enterprise agreement then comes into operation, the ITEA will automatically terminate.

¶7-050 Federal collective enterprise agreements

Enterprise agreements The FW Act introduced a number of changes to the way in which collective enterprise agreements are negotiated, made, approved, commence, operate and terminated. One of the central objectives of Pt 2-4 of the FW Act is to “enable the FWC to facilitate good faith bargaining and the making of enterprise agreements” (s 171 FW Act). The FW Act shifts the focus of bargaining in the workplace away from individual agreements towards collective enterprise agreements. It provides for three types of enterprise agreements: (1) single (2) multi-enterprise, and (3) greenfields agreements. Importantly, there is no longer a distinction between union and non-union agreements. Enterprise agreements are made between national system employers and a valid majority of employees about matters that are permitted for the purposes of the legislation (eg matters pertaining to the employment relationship) (s 172 FW Act). An enterprise agreement may cover a single business, part of a single business or involve two or more employers. Union involvement is not required to make a workplace agreement. However, the FW Act introduced new good faith bargaining provisions and entitles eligible union(s) that acted as bargaining representatives for a proposed collective enterprise agreement to notify the FWC that they want to be covered by the enterprise agreement. An employer will need to comply with the good faith bargaining obligations in the legislation in respect of their interaction with bargaining representatives (eg a union). However, if the industry is highly unionised, it is often unrealistic to think that an enterprise agreement can be entered into in the absence of consultation with the union as to its terms. Enterprise agreements can be used to try and overcome restrictive work practices that are sometimes contained in awards. However, in order for an enterprise agreement to have any legal effect, it must be approved and lodged with the FWC. Types of enterprise agreements The FW Act provides for several types of collective enterprise agreements. An employer may make any one of the following agreements: • Single-enterprise collective agreement (s 172(2) FW Act): This is an agreement between the employees who will be covered by the agreement and their employer. • Multi-enterprise agreement (s 172(3) FW Act): This is an agreement that relates to one or more employers who are not single interest employers. • Greenfields agreement (s 172 FW Act): This is an agreement between one or more organisations of employees and an employer (or employers) in respect of a genuine new enterprise that is being established and the employer (or employers) has not employed any persons who will be necessary for the normal conduct of that enterprise. (Note: The definition of “new enterprise” is set out in s 12 of the FW Act to include a new “business, activity, project or undertaking” that an employer is proposing to establish or new activities proposed to be carried out.) • Collective enterprise agreement (single or multi-enterprise agreement): A collective enterprise agreement may be made when an employer has asked the relevant employees to approve the agreement and a majority of the employees have decided that they want to approve the agreement. A multi-enterprise agreement is made when a majority of the employees of at least one of the employers have validly approved the agreement (s 182(2) FW Act). Content of collective enterprise agreements Collective enterprise agreements must contain the following:

• a nominal expiry date of not more than four years after the lodging of the collective enterprise agreement • a flexibility term • a consultation term • a term about settling disputes, and • terms and conditions that meet the NES. Flexibility terms An enterprise agreement must include a term that enables an individual employee and their employer to agree to an individual flexibility arrangement varying the effect of the agreement in relation to that particular employee (s 202 FW Act). Importantly, the arrangement does not change the effect of the enterprise agreement as it relates to the employer and any other employee (s 202(3) FW Act). If an enterprise agreement does not contain a flexibility term, the model flexibility term set out in the regulations is taken to form part of the agreement. A flexibility term must meet the requirements set out in the FW Act. These requirements include: • setting out the specific terms of the agreement that may be varied • requiring the employer to ensure that any flexibility arrangement only be about matters that would otherwise be permitted to be included in the enterprise agreement (eg the arrangement must not include any discriminatory terms) • requiring each individual arrangement to be genuinely agreed to by the parties • ensuring that any individual flexibility arrangement agreed to must result in the employee being better off overall than if no individual arrangement was entered into • a statement that any arrangement does not require the approval or consent of a third person • that any arrangement must be able to be terminated by either party with at least 28 days written notice or at any time by mutual agreement, and • the need for each individual flexibility arrangement to be in writing, signed by both parties and a copy provided to the employee. If an arrangement does not meet the requirements of a flexibility term it will still have effect as if it were an individual flexibility arrangement, but will contravene the FW Act. Consultation term An enterprise agreement must include a consultation term that requires the employer to consult the employees to whom the agreement applies about major workplace changes that are likely to have a significant effect on the employees or about proposed changes to the regular roster or ordinary hours of work of employees, and allows for the representation of those employees for the purposes of that consultation. If an agreement does not contain such a clause, the model consultation clause set out in the regulations will be taken to be a term of the agreement. An enterprise agreement must not contain unlawful terms. It is void to the extent that it contains prohibited content. The FWC may, on application by any person or at its own discretion, elect to remove the prohibited content. Procedure An employer who intends to make a collective enterprise agreement (other than a greenfields agreement) must notify each employee who will be covered by the proposed agreement that they have a right to be represented by a bargaining representative during the bargaining process for any new enterprise

agreement. An employer may request that employees approve a proposed enterprise agreement. However, such a request must not be made until at least 21 days have passed since the last representational rights notice (in relation to the agreement) was issued (s 181 FW Act). An employer must take reasonable steps to ensure that the relevant employee(s) have a copy of the agreement and any other material incorporated by reference in the agreement. Alternatively, employers must ensure that employees have “access” to the material during the seven days prior to when the agreement is formally approved (s 180 FW Act). The federal legislation does not define the term “access” or offer any further explanation of what this obligation involves. However, a failure on the part of an employer to comply with this requirement may result in a fine being incurred. Note the FW Act abolished the ability of an employee to agree in writing to waive the “access” period. An employer must also take all reasonable steps to explain the terms and effect of the proposed agreement to the relevant employees. The FW Act imposes an obligation on employers to take all reasonable steps to notify the relevant employees at least seven days prior to any vote of: • the time and place of the vote, and • the voting method that will be used (eg that an attendance ballot will be held on a particular day (s 180(3) FW Act). Approval A collective enterprise agreement is made if the employer has asked the employees to approve the agreement and a majority of persons employed at the time (whose employment will be subject to the agreement) vote for, and decide they want to approve, the agreement. In the case of a multi-enterprise agreement, an agreement is made if a majority of the employees of at least one of the employers who cast a valid vote, approve the agreement (s 182(2) FW Act). It is an offence for an unapproved agreement to be lodged with the FWC. Once approved, the enterprise agreement must be signed and lodged with the FWC within 14 days. An employer must lodge a declaration with the FWC along with a copy of the enterprise agreement. An agreement is lodged once it and the employer declaration are received by the FWC. Enterprise agreements must pass the “Better Off Overall Test” (BOOT) when lodged with the FWC. Enterprise agreements must also comply with the NES and any restrictions regarding content. After a new enterprise agreement is made, a union or unions that were bargaining representatives to the proposed agreement may give the FWC a written notice stating that the organisation wants to be covered by the enterprise agreement (s 183 FW Act). This is a significant change from Work Choices as it provides a union with an entitlement to be covered by an enterprise agreement (s 183 FW Act). Approval of single or multi-enterprise agreements by the FWC If an application for approval of a single or multi-enterprise agreement is made, the FWC must approve the agreement if the requirements of the legislation have been met (s 186 FW Act). The FWC must be satisfied of such matters as the following: • the agreement has been genuinely agreed to by the parties • no person was coerced or threatened to make the enterprise agreement • the agreement does not exclude or breach the NES • the agreement passes the BOOT (s 186(2) FW Act) • the group of employees covered by the agreement was fairly chosen • the agreement does not include any unlawful terms

• the agreement specifies a nominal expiry date that is not more than four years after the day upon which the FWC approves the agreement • the agreement contains a term about settling disputes about any matters arising under the agreement and the NES • the approval of the agreement would not undermine good faith bargaining. The Better Off Overall Test An enterprise agreement passes the BOOT if the FWC is satisfied that each of the relevant employees would be better off overall if the agreement were applied to them as opposed to the relevant underlying modern award (s 193(1) FW Act). Importantly, the FWC must disregard any individual flexibility arrangements that may be in place for the purposes of determining whether a proposed enterprise agreement passes the BOOT. In exceptional circumstances, the FWC may approve an enterprise agreement that does not pass the BOOT if it is satisfied it would not be contrary to the public interest to do so (s 189(2) FW Act). For example, this might occur if the FWC is satisfied that the agreement is part of a reasonable strategy to deal with a short-term crisis in, and to assist in the revival of, the employer’s business. However, such an agreement may not have a nominal expiry date of more than two years. If an agreement fails the BOOT the employer may be given an opportunity to vary the agreement. The FWC may request an employer to provide undertakings to address any of their concerns (s 190 FW Act). Importantly, the FWC must not accept an undertaking from an employer unless the FWC has sought the views of each person whom the FWC knows is a bargaining representative to the enterprise agreement. The issue of undertakings was considered in a full bench decision of the FWC in The Australian Workers’ Union v Roadworx Surfacing Pty Ltd [2011] FWAFB 1759. The full bench confirmed that undertakings: • cannot be given in circumstances where they result in substantial changes to the agreement for the purposes of s 190(3)(b) of the FW Act • cannot be accepted if the views of all bargaining representatives have not been sought, and • must comply with the signatory requirements prescribed by the regulations to the FW Act. Once an undertaking is accepted by the FWC, it is taken to be a term of the enterprise agreement. In addition to the BOOT, the enterprise agreement must not undermine the NES. As a result, enterprise agreements cannot be used to “bargain away” the application of the NES. Greenfields agreements The FW Act introduced a number of important changes regarding the making and operation of greenfields agreements. The most significant departure from Work Choices is that greenfields agreements can no longer be made by an employer alone. A greenfields agreement must be made with a relevant union. Following are some of the key obligations on employers in making these types of agreements. An employer must take all reasonable steps to give notice of their intention to make the agreement to the relevant employee organisation in relation to the enterprise agreement. The relevant employee organisation will be one that is entitled to represent the industrial interests of one or more of the employees who will be covered by the agreement and with which the employer agrees to bargain for the agreement (s 177 FW Act). The effect of this provision is to extend obligations and rights of bargaining representatives to parties negotiating single-enterprise greenfields agreements. The FW Act provides for a notified negotiation period for a proposed single-enterprise agreement that is a greenfields agreement (s 178B FW Act). The FW Act allows an employer to give written notice to each employee organisation that is a bargaining representative for the agreement stating that the period of six months “notified negotiation period” for the agreement has commenced. If there are multiple employers the notice has no effect unless the other employer(s) agrees to the giving of the notice. A greenfields agreement (single or multi-enterprise) is made when it has been signed by each employer

and each relevant employee organisation that will be covered by the enterprise agreement. If the proposed greenfields enterprise agreement has not been made and any notified negotiation period has ended the employer(s) may apply to the FWC to have the agreement approved. This can only occur if the employer(s) have given each of the employee organisations that were bargaining representatives a reasonable opportunity to sign the agreement (182(4)(a)–(e) FW Act). In these circumstances, the agreement is taken to have “been made” when the application is lodged in the FWC for approval of the enterprise agreement. An application must be lodged with the FWC to have the greenfields agreement approved within 14 days of the agreement “being made” (s 185(4) FW Act). The application for approval must be accompanied by a copy of the agreement and any other declarations that are required by the rules (s 185A FW Act). The FWC will need to assess whether it is in the public interest to approve the enterprise agreement. If the greenfields agreement is a single-enterprise agreement, the FWC must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work (s 187(5) FW Act). In considering the prevailing pay and conditions within the relevant industry, the FWC may have regard to the prevailing pay and conditions in a specific geographical area. The FWC will also need to assess whether the agreement passes the BOOT. A greenfields agreement passes the BOOT if the FWC is satisfied that the prospective award covered employees covered by the agreement would be better off overall if the agreement applied, than if the relevant modern award applied (s 193(3) FW Act). A greenfields agreement may be jointly terminated by the employer and employee if one or more of the persons who will be necessary for the normal conduct of the enterprise concerned have been employed (s 219(3) FW Act). Operation of enterprise agreements Enterprise agreements come into operation seven days after the enterprise agreement is approved by the FWC (s 54(1) FW Act). The FW Act provides that — when an enterprise agreement has ceased operating in accordance with provisions of the legislation — it can never operate again (s 54(3) FW Act). However, note the specific provisions dealing with circumstances where there has been a transmission of business at ¶7-090. The process for making a new enterprise agreement is shown at Figure 7.2 (see appendix to this chapter). Varying enterprise agreements An application to vary an enterprise agreement may be made by a party to the agreement. A variation of an enterprise agreement has no effect unless it is approved by the FWC (s 207(3) FW Act). A variation of a single-enterprise agreement is made when a majority of the employees who vote approve the variation (s 209 FW Act). In contrast, a variation to a multi-enterprise agreement is made when a majority of the employees of each individual employer who vote have approved the variation. When a variation is approved, it needs to be lodged with the FWC. The variation to the written enterprise agreement must be submitted to the FWC with the enterprise agreement and the required declarations specified by the FWC. An application to approve a variation must be made to the FWC within 14 days. The FWC must approve the variation if satisfied the requirements of the legislation have been met. For example, the FWC will need to take into account matters such as the views of any unions covered by the agreement, and whether the pre-approval steps and the BOOT have been satisfied. If the variation to a collective enterprise agreement does not pass the BOOT, an employer will need to lodge a further variation of the enterprise agreement or provide the FWC with appropriate undertakings. Termination of enterprise agreements Employers and employees may agree to terminate an enterprise agreement (s 219 FW Act). An enterprise agreement may not be terminated unless approved by the FWC. An employer may request its employees to approve the termination of the agreement by voting on it (s 220 FW Act). Before making such a request the employer must take all reasonable steps to notify the employees of the voting method, the time and place of the vote, and give the employees a reasonable opportunity to decide whether they want to approve the termination of the agreement.

If a valid majority of the employees vote to approve the termination of the enterprise agreement, the termination must be lodged with the FWC. An application for approval of the termination of the instrument must be made within 14 days and accompanied by the appropriate documentation (s 222 FW Act). However, if an agreement has passed its nominal expiry date any party to the agreement may apply to the FWC for the termination of the agreement. If an application is made to terminate an expired enterprise agreement, the FWC must terminate the agreement if it is in the public interest to do so and the FWC considers it appropriate to do so, taking into account the views of the parties to the agreement and the effect of the termination on the parties. Breach of an enterprise agreement Parties are prohibited from breaching the terms of a collective enterprise agreement. Breach of an enterprise agreement may result in a pecuniary penalty. Transitional arrangements for collective agreements Existing federal agreements, such as collective agreements, pre-reform certified agreements or old industrial relations agreements became “transitional instruments” on the commencement of the FW Act. Subject to some minor exceptions, these instruments will continue in force as if the WR Act had not been repealed. These existing agreements will continue to operate past their nominal expiry dates until they are either terminated or replaced. Importantly, existing collective agreements will prevail over the terms contained in modern awards. However, all employees (irrespective of the instrument which sets their minimum terms and conditions of employment) must be paid at least the national minimum rate of pay or the minimum modern award rate of pay (as applicable). In addition, the NES applies as a minimum standard to all employees. This will mean that, irrespective of any term contained in a transitional instrument, to the extent that a particular term is detrimental to an employee when compared with the NES, that term will have no effect.

¶7-060 Bargaining Bargaining for a single or multi-enterprise agreement An employer must take all reasonable steps to give notice of the right to be represented by a bargaining representative to each employee who will be covered by the proposed enterprise agreement (s 173 FW Act). The notification time is the date when: • the employer agrees to bargain or initiates bargaining for the proposed enterprise agreement • a majority support determination comes into operation • a scope order comes into operation, or • a low-paid authorisation comes into operation. The FW Act sets out a number of matters that must be contained in the notice provided to the employees (s 174 FW Act). The notice must explain to employees that they are entitled to appoint a bargaining representative. The notice must also explain that, if the employee is a member of a union that is entitled to represent their industrial interests, and the employee does not appoint another person as their bargaining representative, the union will be the default bargaining representative of the employee (s 174(3) FW Act) in the negotiation of the proposed enterprise agreement. Good faith bargaining is a central feature of the agreement-making framework under the FW Act. The FW Act introduced good faith bargaining requirements and gives the FWC the power to make orders to ensure compliance with those requirements. The requirements which apply to bargaining representatives include attending meetings, disclosing relevant information, responding to proposals in a timely manner and giving genuine consideration to proposals and the reasons behind any responses (s 228 FW Act). The good faith bargaining requirements do not apply if a notified negotiation period for a single-enterprise or multiple-enterprise greenfields agreement has ended. Importantly, the FW Act does not require bargaining representatives to make concessions during

bargaining, or to reach agreement on proposed terms. Under the FW Act, bargaining representatives are required to attend and participate at meetings at reasonable times. It would appear that simply turning up at a meeting will not be enough. Arguably, there is now a positive obligation to genuinely engage in the bargaining process. A bargaining representative for a proposed enterprise agreement may apply to the FWC for a bargaining order in relation to the proposed agreement (s 229 FW Act). A bargaining representative may only apply for the bargaining order if the representative has given written notice of their concerns that the good faith bargaining requirements are not being met or the bargaining process is not proceeding efficiently or fairly. Prior to an application being made, the bargaining representative will need to have given the relevant bargaining representatives reasonable time to respond and consider that the response is not appropriate (s 229(4) FW Act). The role of the Fair Work Commission The FW Act gives the FWC power to make a number of specific orders during the bargaining process for a new enterprise agreement. These orders include: • bargaining orders (eg an order excluding a bargaining representative from bargaining) • serious breach declarations (eg a declaration may be made if a bargaining order has been contravened and the contravention is serious, sustained and has significantly undermined bargaining) • majority support determinations (eg a determination that a majority of the employees who will be covered by the proposed agreement want to bargain with the employer(s) to be covered by the agreement), or • scope orders (eg a bargaining representative may apply to the FWC if they have concerns that bargaining is not proceeding efficiently or fairly and the reason for this is that they consider that the agreement will not cover appropriate employees). Each of these orders has a number of procedural steps and requirements that must be satisfied before the FWC can issue the individual order or declaration. Of note is that both bargaining and scope orders cease to operate when: • the order is revoked • the proposed agreement is approved by the FWC • a workplace determination comes into operation, or • the bargaining representatives agree that bargaining has ceased.

¶7-070 State agreements and workplace agreements Prior to Work Choices, industrial legislation in each state of Australia (except Victoria) allowed for agreements to be made between employers and employees. In addition, legislation in Queensland and Western Australia provided for the making of individual state workplace agreements. However, in respect of national system employers, the making of industrial instruments, such as collective enterprise agreements, is now governed by the FW Act. The process for making a collective enterprise agreement is shown at Figure 7.2 (see appendix to this chapter).

¶7-080 Prohibited conduct A person must not engage in, organise, take, or threaten to organise or take any industrial action or other action with the intent to “coerce” another person to engage in industrial activity, or to exercise or not

exercise a workplace right (s 343 and 348 FW Act). Industrial action Industrial action is regulated by the terms of the federal FW Act. These terms place restrictions on the times when industrial action may be taken and the notification requirements that must be undertaken to allow a party to participate in such action. Prior to the introduction of the FW Act, when an employer, union or employees wished to negotiate a collective agreement (other than a multiple-enterprise agreement) they initiated a “bargaining period” for negotiating the proposed agreement. During a bargaining period, the parties were able to engage in industrial action, such as strikes or lockouts, on a “protected” basis. That is, there was no civil liability for the protected industrial action that occurred during a bargaining period. While the FW Act retains the concept of protected industrial action, there is no formal procedure by which bargaining is commenced for a new enterprise agreement. Bargaining simply commences when the employer decides or agrees to bargain. If an employer refuses to bargain, the legislation enables an employee bargaining representative (ie a union) to seek a majority support determination indicating that a majority of the workers who would be covered by the proposed agreement want to bargain with the employer (s 236 FW Act). This has significant implications for employers as an employer may be forced to the bargaining table. While the FW Act does not compel an employer to make an enterprise agreement, nor to make concessions during the bargaining process it does, however, impose potentially onerous good faith bargaining obligations on an employer. The term “industrial action” is defined in s 19 of the FW Act. The definition is similar to the definition previously set out in the WR Act and includes a ban, limitation and lockout. Of note are the provisions contained in s 19(2) of the FW Act. These provisions exclude any action by an employee that is based on a reasonable concern regarding an imminent risk to health or safety, if the employee has not unreasonably failed to comply with a direction by the employer to perform safe work. Interestingly, the onus is on the individual employee to demonstrate that there was such a risk and that any action was based on that concern. The FW Act retains the requirement for a secret ballot to take place before any party participates in protected industrial action. The FW Act provides that protected industrial action cannot take place unless an application is made to the FWC for an order allowing a secret ballot. Such an application will not be granted unless certain conditions are met (eg the parties must have made genuine attempts to reach agreement). Once the application has been granted by the FWC, in order for protected industrial action to occur, 50% of eligible employees must vote, and 50% of the votes that are cast must validly approve the proposed industrial action. An application for a protected action ballot order is not able to be made if the proposed enterprise agreement is a greenfields agreement, a multi-enterprise agreement or if a notice of representational rights letter has not been issued. Protected industrial action cannot be taken until after bargaining has commenced (including where the scope of the proposed enterprise agreement is the only matter in dispute). This process, which was initially introduced by Work Choices, has significantly impacted on the ability of unions/employees to take protected industrial action. This has created an enhanced ability for an employer to seek remedies against any unprotected industrial action that occurs. The FW Act allows employers to apply to seek an order to stop or prevent unprotected industrial action. The FW Act provides for fines to be imposed upon both individuals and organisations that engage in unprotected action. In addition, there are also provisions allowing the Federal Court or Federal Circuit Court to grant an injunction in circumstances where pattern bargaining is taking place.

¶7-090 Transfer of business Under the FW Act, a “transfer of business” occurs if: • the employment of an employee of the old employer has been terminated • the employee is employed by the new employer within three months of the termination date

• the work the employee performs is “the same, or substantially the same”, as the work they previously performed, and • there is a “connection” between the old and new employing entity within the meaning of the FW Act (eg there is a transfer of assets from the old employer to the new employer) (s 311 FW Act). Where these provisions apply, and an employee transfers to a new employer to perform “transferring” work, s 312 and 313 of the FW Act operate such that applicable industrial instruments applying to transferring employees at their old employer may travel with and apply to the employees at their new employer. Transferrable instruments include approved enterprise agreements, workplace determinations and/or a named employer award. A new employer has limited rights to seek variation or non-application of a transferring instrument, upon application to the FWC, under s 318, 319 and 320 of the FW Act. Transfer of employees is covered in more details in Chapters ¶27 and ¶62. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶17-000. Appendix Figure 7.1: Model dispute resolution process Model term If a dispute relates to: 1) a matter arising under the Agreement, or 2) the National Employment Standards, t his term sets out procedures to settle the dispute. A party to the dispute may appoint another person, organisation or association (including but not limited to a legal representative) to accompany or represent them in relation to the dispute. In the first instance, the parties to the dispute must try to resolve the dispute at the workplace level, by discussions between the employee or employees and relevant supervisors and/or management. If discussions at the workplace level do not resolve the dispute, a party to the dispute may refer the matter to the Fair Work Commission. The Fair Work Commission may deal with the dispute in two stages: 1) the Fair Work Commission will first attempt to resolve the dispute as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation, and 2) if the Fair Work Commission is unable to resolve the dispute at the first stage, the Fair Work Commission may then: a) arbitrate the dispute, and b) make a determination that is binding on the parties. Note: If the Fair Work Commission arbitrates the dispute, it may also use the powers that are available to it under the Fair Work Act 2009 (Cth). A decision that the Fair Work Commission makes when arbitrating a dispute is a decision for the purpose of Div 3 of Pt 5.1 of the Fair Work Act 2009 (Cth). Therefore, an appeal may be made against the decision. While the parties are trying to resolve the dispute using the procedures in this term: 1) an employee must continue to perform his/her work as he/she would normally unless he/she has a reasonable concern about an imminent risk to his/her health or safety, and

2) an employee must comply with a direction given by the employer to perform other available work at the same workplace, or at another workplace, unless: a) the work is not safe, or b) applicable occupational health and safety legislation would not permit the work to be performed, or c) the work is not appropriate for the employee to perform, or d) there are other reasonable grounds for the employee to refuse to comply with the direction. The parties to the dispute agree to be bound by a decision made by the Fair Work Commission in accordance with this term. Flexibility term 1) An employer and employee covered by this Enterprise Agreement may agree to make an individual flexibility arrangement to vary the effect of terms of the Agreement if: a) the Agreement deals with 1 or more of the following matters: i) arrangements about when work is performed ii) overtime rates iii) penalty rates iv) allowances v) leave loading, and b) the arrangement meets the genuine needs of the employer and employee in relation to one or more of the matters mentioned in paragraph (a), and c) the arrangement is genuinely agreed to by the employer and employee. 2) The employer must ensure that the terms of the individual flexibility arrangement: a) are about permitted matters under s 172 of the Fair Work Act 2009 b) are not unlawful terms under s 194 of the Fair Work Act 2009, and c) result in the employee being better off overall than the employee would be if no arrangement was made. 3) The employer must ensure that the individual flexibility arrangement: a) is in writing, and b) includes the name of the employer and employee, and c) is signed by the employer and employee and if the employee is under 18 years of age, signed by a parent or guardian of the employee, and d) includes details of: i) the terms of the Enterprise Agreement that will be varied by the arrangement, and ii) how the arrangement will vary the effect of the terms, and iii) how the employee will be better off overall in relation to the terms and conditions of his/her employment as a result of the arrangement, and

e) states the day on which the arrangement commences. 4) The employer must give the employee a copy of the individual flexibility arrangement within 14 days after it is agreed to. 5) The employer or employee may terminate the individual flexibility arrangement: a) by giving no more than 28 days written notice to the other party to the arrangement, or b) if the employer and employee agree in writing — at any time. Consultation procedure 1) This term applies if the employer: a) has made a definite decision to introduce a major change to production, program, organisation, structure or technology in relation to its enterprise that is likely to have a significant effect on the employees, or b) proposes to introduce a change to the regular roster or ordinary hours of work of employees. Major change 2) For a major change referred to in paragraph (1)(a): a) the employer must notify the relevant employees of the decision to introduce the major change, and b) subclauses (3) to (9) apply. 3) The relevant employees may appoint a representative for the purposes of the procedures in this term. 4) If: a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation, and b) the employee or employees advise the employer of the identity of the representative, the employer must recognise the representative. 5) As soon as practicable after making its decision, the employer must: a) discuss with the relevant employees: i) the introduction of the change ii) the effect the change is likely to have on the employees iii) measures the employer is taking to avert or mitigate the adverse effect of the change on the employees, and b) for the purposes of the discussion — provide, in writing, to the relevant employees: i) all relevant information about the change including the nature of the change proposed, and ii) information about the expected effects of the change on the employees, and iii) any other matters likely to affect the employees. 6) However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees.

7) The employer must give prompt and genuine consideration to matters raised about the major change by the relevant employees. 8) If a term in this agreement provides for a major change to production, program, organisation, structure or technology in relation to the enterprise of the employer, the requirements set out in paragraph (2)(a) and subclauses (3) and (5) are taken not to apply. 9) In this term, a major change is likely to have a significant effect on employees if it results in: a) the termination of the employment of employees, or b) major change to the composition, operation or size of the employer’s workforce or to the skills required of employees, or c) the elimination or diminution of job opportunities (including opportunities for promotion or tenure), or d) the alteration of hours of work, or e) the need to retrain employees, or f) the need to relocate employees to another workplace, or g) the restructuring of jobs. Change to regular roster or ordinary hours of work 10) For a change referred to in paragraph (1)(b): a) the employer must notify the relevant employees of the proposed change, and b) subclauses (11) to (15) apply. 11) The relevant employees may appoint a representative for the purposes of the procedures in this term. 12) If: a) a relevant employee appoints, or relevant employees appoint, a representative for the purposes of consultation, and b) the employee or employees advise the employer of the identity of the representative, the employer must recognise the representative. 13) As soon as practicable after proposing to introduce the change, the employer must: a) discuss with the relevant employees the introduction of the change b) for the purposes of the discussion — provide to the relevant employees: i) all relevant information about the change, including the nature of the change, and ii) information about what the employer reasonably believes will be the effects of the change on the employees, and iii) information about any other matters that the employer reasonably believes are likely to affect the employees, and c) invite the relevant employees to give their views about the impact of the change (including any impact in relation to their family or caring responsibilities).

14) However, the employer is not required to disclose confidential or commercially sensitive information to the relevant employees. 15) The employer must give prompt and genuine consideration to matters raised about the change by the relevant employees. 16) In this term: relevant employees means the employees who may be affected by a change referred to in subclause (1). Figure 7.2: Process for making an enterprise agreement

8. THE ROLE OF UNIONS — RIGHT OF ENTRY AND INDUSTRIAL ACTION Editorial information

Originally written by Nicole Van de Gard, Annelies Herrmann, Chris Taylor, Belinda Sundaraj (Wolters Kluwer senior writers) and Manoj Dias Abey (Wolters Kluwer Writer) Updated in 2016 by Annelies Herrmann, Wolters Kluwer, senior writer

¶8-010 Introduction to the role of unions under the Fair Work Act Union activity and its influence have continued largely unchanged since the Fair Work Act 2009 (Cth) (FW Act) commenced. Under the FW Act, unions have broader grounds to enter workplaces and new rights available to exercise upon entry (¶8-020) when compared to the Workplace Relations Act 1996 (WR Act) previously in force. In addition, amendments to the FW Act have introduced: • the right for union permit holders to hold discussions in meal or break rooms if the parties cannot agree on a room (¶8-080), and • requirements on occupiers in remote locations to arrange travel and accommodation for permit holders in certain circumstances (¶8-080). However, most of the restrictions introduced under the previous legislation WR Act were retained in relation to: • the right of unions to enter employers’ premises to investigate suspected non-compliance (¶8-020, ¶8030 and ¶8-050), and • the regulation of industrial action (from ¶8-100). The Fair Work Commission (FWC) assumed many of the functions previously held by the Australian Industrial Relations Commission (AIRC) to stamp out unprotected industrial action. Similar powers are also vested in the relevant minister (¶8-130).

¶8-020 Broader entry rights for union officials The FW Act regulates the right of unions to enter employer premises (Pt 3-4). Under these provisions, union officials who have a right of entry permit (¶8-030) are permitted to enter workplaces for the following reasons: • to investigate suspected breaches of the FW Act, or a fair work instrument that relates to or affects union members working on the premises (s 481, ¶8-030) • to hold discussions with employees who are, or are eligible to be, members of the union and who wish to participate in those discussions (s 484, ¶8-040), or

• to investigate breaches of state occupational health and safety (OHS) laws (s 494, ¶8-050). The FW Act sets out requirements and protections concerning rights of entry (eg relating to misuse of rights of entry: ¶8-060, ¶8-090). However, these do not apply to a person who does not exercise (or purport to exercise) a right of entry under the FW Act. This highlights that an occupier should be careful not to allow entry if a person is not purporting to exercise rights of entry as demonstrated in this case example. Union officials were not exercising entry rights Two union officials who had federal right of entry permits entered a site at Sydney airport in New South Wales (NSW). The two also had Queensland work health safety entry permits, but they did not have NSW work health safety entry permits. They asked to enter to “look at” the site. They were advised to wear protective gear, but refused to. They talked about health and safety matters while they were there. But when asked, they refused to produce entry permits. One of the officials lied about who he was, saying that he was crocodile hunter “Steve Irwin”. In earlier proceedings, the court held that the officials had purported to exercise a right under the NSW work health safety legislation. The Fair Work Building Industry Inspectorate secured penalties of over $350,000 against the officials and the union for failing to produce their notices of rights of entry, hindering workers and acting improperly, and acting in a manner which gave the impression they could authorise workers to stop work. However, on appeal the Full Court of the Federal Court of Australia found that since the pair had not said they were exercising rights of entry under the NSW work health safety legislation and they did not have permits under that legislation, they were not exercising or purporting to exercise rights of entry. Because of this, the right of entry restrictions of the FW Act did not apply to them and they could not be prosecuted under the civil remedy provisions even though the conduct was disruptive and abusive. The full court noted that the company could have refused the officials entry and asked them to leave. Had the union officials refused to comply with a request to leave, this would have amounted to a trespass or criminal conduct which could have been prosecuted: see Bragdon v Director of the Fair Work Building Industry Inspectorate [2016] FCAFC 64.

Two significant changes under FW Act While the circumstances in which a union official may enter a workplace are similar to those that existed under the WR Act, the FW Act represents a departure from the previous legislation in two significant aspects: (1) the rights that may be exercised upon entry to investigate suspected breaches, such as inspecting records (s 482, 483 and 483AA, ¶8-030), and (2) the right of entry for discussion purposes (s 484, ¶8-040).

¶8-030 Right of entry to investigate suspected breaches of the FW Act To enter the employer’s premises on the ground of investigating suspected breaches of the FW Act, a permit holder must have a reasonable suspicion that a contravention has occurred or is occurring. The permit holder bears the burden of proving that the suspicion is reasonable (s 481). A statutory note to the provision clarifies that a permit holder who seeks to exercise rights of entry to investigate suspected breaches is liable to be penalised (under s 503(1), which deals with misrepresentations) if they do not reasonably believe that such a breach has occurred. Union can access documents related to suspected breach An employer airline announced that it was seeking to consolidate its engineering crews. It consulted with the employees about the change, and a number of changes were made to the employer’s proposal. However, the employer did not consult with the relevant union. The union was particularly concerned with how the consolidation would affect the supervisory opportunities for Licenced Aircraft Engineers in the consolidated crews. Suspecting a breach of the consultation requirements in the relevant enterprise agreement, the union sought production by the employer of a number of types of documents. These included notification and consultation documents about the crew consolidation proposal; rosters and hours of work of affected employees; documents considering any risks associated with the proposal; and documents relating to any incidents resulting from decreased supervision by Licenced Aircraft Engineers. The union argued that the documents it sought directly related to the suspected breach of the enterprise agreement. The FWC agreed and ordered the employer to produce the documents, making some restrictions that some of the types of requested documents relate only to members who were affected by the consolidation: ALAEA v Qantas Airways Ltd (2014) 66 AILR ¶102-111; [2014] FWC 358.

What can a permit holder do upon entry to investigate? FW Act introduced new rights that a permit holder may exercise while on premises to investigate a suspected breach (s 482). The permit holder may: • inspect work, processes or objects relevant to the suspected breach • interview any person whose industrial interests the union is entitled to represent and who agrees to be interviewed about the suspected breach • require the occupier or an affected employer to allow the permit holder to inspect and make copies of any record or document directly relevant to the suspected breach that is kept on, or accessible from, the premises. However, a permit holder may only have access to non-union members’ records if those non-members give written consent or by order of the FWC. The permit holder may apply to the FWC for an order requiring an occupier or affected employer to permit entry onto premises to inspect and copy non-member records or documents necessary for the investigation of a suspected contravention and/or an order compelling an affected employer to produce or provide access to such records or documents (s 483AA). The FWC may make such an order where satisfied that the records or documents are necessary to investigate the suspected contravention. FWC grants order to inspect non-member documents A union suspected that an employer had breached various adverse action provisions of the FW Act in relation to how it offered Individual Flexibility Agreements to union member and non-union member employees. It applied to the FWC for access to nonmember records. The FWC held that the material lodged to support the application provided a reasonable basis to suspect that the FW Act had been contravened, and issued the non-member record access order: TWU v Arkwood (Gloucester) Pty Ltd [2012] FWA 8247.

The FW Act also introduced a new prohibition against using or disclosing employee records obtained by a permit holder for a purpose that is not related to the investigation or rectifying the suspected contravention (s 504). There are some exceptions, including circumstances where the permit holder reasonably believes that the use or disclosure of the record is necessary to lessen or prevent a serious threat to public health or public safety. Civil remedies apply (up to 300 penalty units ($54,000) for unions and 60 penalty units ($10,800) for individuals) and the permit holder may face suspension or revocation of their entry permit in certain circumstances (s 510).

¶8-040 Right of entry for discussion purposes Under the FW Act, a permit holder may enter a workplace to hold discussions with employees who work at the premises, if the workplace has at least one employee whose industrial interests the union is entitled to represent, and the employees wish to participate in those discussions (s 484). Link between coverage rules and entry for discussion purposes The Transport Workers’ Union failed to establish a right of entry for discussion purposes at a major distribution centre because it was not entitled to represent the workers there (although it had been recruiting members). The Fair Work Commission (FWC) rejected the union’s submissions that the centre’s activities were within the transport industry or in connection with that industry, finding that it did not carry or convey any people/goods/wares/merchandise to or from the site: Transport Workers’ Union of Australia, New South Wales Branch v Queensland Properties Investment Pty Limited; [2011] FWA 285.

The current position represents a significant relaxation of the restrictions under the WR Act. Previously, right of entry for “discussion” purposes: • was not allowed if all employees at a workplace were covered by Australian Workplace Agreements or a non-union collective agreement • required that the employees be covered by an award or enterprise agreement that was binding on the permit holder’s organisation, and

• included an employer’s ability to obtain a “conscientious objection” certificate exempting them from any union right of entry for discussion purposes. The FW Act provision generated some controversy among employer groups. They argued that — rather than creating certainty and stability in workplaces — the more liberal entry provisions for discussion purposes create uncertainty in the workplace and lead to disputed interpretations of right of entry for discussion between employers and unions. Proposed legislative change The Coalition Government responded to these concerns by introducing legislation to impose further restrictions on the right to enter to hold discussions. • If the permit holder’s organisation is covered by an enterprise agreement applying to work carried out at the premises, then the current requirements under the FW Act apply. • If the permit holder’s organisation is not so covered or if there is no enterprise agreement which applies, a permit holder may only enter to hold discussions if invited to do so by a member or prospective member. The member or prospective member must perform work on the premises and be a person whose interests the organisation is entitled to represent (s 484 of the Fair Work Amendment (Remaining 2014 Measures) Bill 2015) (the Bill). Under the Bill, an organisation may apply to the FWC for an “invitation certificate” (s 520A). The FWC would be required to issue the certificate if satisfied that employees work at the premises whose interests the organisation is entitled to represent, and that the employees invited the organisation to send a representative for discussion purposes. The Coalition Government was unable to pass the proposed changes in the Bill and when both houses of parliament were dissolved on 8 May 2016, the Bill lapsed. Whether the proposed changes become law will largely depend on the outcome of the federal election on 2 July 2016. What can the permit holder do upon entry for discussion purposes? The power to enter must be used “bona fide” for the purposes for which it was conferred — ie to hold discussions — and its exercise must not be excessive: Application by the AMIEU [2015] FWCFB 5228. The word “discussions” is given its ordinary meaning, so that verbal discussions are permitted under s 484 and also discussions conducted in writing. This means that a permit holder can distribute written materials upon entry, but only for the purposes of holding discussions with workers. There is no right to distribute materials which are “not connected” to such discussions under s 484. Also, employees have a right under s 480 to receive “information” from officials or organisations at work. Permit holder allowed to distribute written material A workplace relations manager at an abattoir tried to stop a union permit holder distributing a union newsletter and media reports to workers upon entry. He threatened to confiscate the material and also instructed a security guard to stop the union officials from bringing written materials into the site. The material explained a judgment which rejected the employer’s challenge to an earlier finding. The union had previously indicated its intention to circulate the newsletter and media reports. The FWC held that the permit holder could enter with written material which he intended to use and distribute during the discussions: Application by AMIEU [2015] FWCFB 5228.

¶8-050 Right of entry to investigate OHS breaches Legislation in the states and territories provide rights of entry to union officials to investigate breaches of OHS standards. These laws can provide the basis for right of entry under the FW Act, and the right of entry granted under a state or territory OHS law can only be exercised by a person holding a permit under the FW Act (see s 494 and Fair Work Regulations 2009, reg 3.25 for a list of prescribed laws). Once the procedural requirements of the FW Act are met, the relevant state or territory OHS law governs the right of entry.

FW Act regulates state/territory right of entry Permit holders entered a site to investigate breaches of state/territory work health and safety (WHS) laws. The permit holders had permits under both the state/territory legislation and the FW Act. The officials claimed they were refused entry and later hindered and harassed upon entry. They alleged that the construction company had breached s 501 and 502 of the FW Act. The company maintained that the only source of rights of the permit holders was the state/territory WHS legislation, so that they could not rely on the protections of the FW Act at s 501 and 502. The Federal Court rejected the company’s argument, finding that the FW Act regulated the state/territory legislative right of entry, because the officials could not enter without obtaining a federal permit. Sections 501 and 502 related to permit holders under the FW Act and therefore applied. There was no clash in the legislation. Rather, the FW Act simply added procedure to the state/territory legislation without otherwise affecting it: Ramsay v Sunbuild Pty Ltd [2014] FCA 54 (Sunbuild).

Federal WHS right of entry provisions apply to unharmonised WA The CEPU (WA Division) claimed that Fortescue Metals Group (FMG) unduly and unreasonably delayed a permit holders right of entry to investigate a fatality at its Christmas Creek site: see s 501 of the FW Act. FMG had delayed entry for four days and did not allow entry until after the site was cleaned. The CEPU argued that because of the delay it was impossible to establish whether a breach of the Occupational Safety and Health Act 1984 (WA) had occurred. FMG countered that the application had no reasonable prospect of success and sought its summary disposal under the Federal Circuit Court Rules (r 13.10(a)). It argued among other things that: • The CEPU official had attempted to enter using an OHS right under the WA industrial legislation, and the federal parliament had not intended for the federal right of entry to provide an alternative or additional remedy. • While the federal and state and territory laws for OHS right of entry were held to overlap and interact in Sunbuild, this was distinguishable because WA has not harmonised its OHS laws. The Federal Circuit Court held that “In the Court’s view s 501 of the FW Act, read in conjunction with s 494 of the FW Act, creates a separate and enforceable (albeit limited) obligation, consistent with the objects of Part 3-4 of the FW Act, which under the FW Act distinguishes, and imposes additional conditions upon, the requirements for right of entry, under State or Territory OHS laws.” The court dismissed FMG’s argument — finding that the legislation did not support that Sunbuild was distinguishable. It does not cover only harmonised state or territory OHS laws: CEPU (WA) v Fortescue Metals Group Ltd [2016] FCCA 1227.

Model WHS legislation and rights of entry For those states and territories which have adopted the Commonwealth’s model WHS laws, the rights of permit holders are regulated by the adopting legislation. This relates to all the states and territories except Victoria and Western Australia. The model Work Health and Safety Act 2011 (Cth) (WHS Act) sets out the rights of permit holders to enter workplaces and the specific powers of investigation or inspection upon entry. WHS permit holders may enter a workplace (Pt 7). These include: • to investigate suspected breaches of the WHS Act which affects a worker at the workplace whose industrial interests the permit holder’s organisation is entitled to represent (“relevant workers”) (s 117), and • to consult on health and safety matters with, and provide advice on those matters to, one or more relevant workers who wish to participate in the discussions (s 121). What can a permit holder do upon entry to investigate WHS breaches? Investigative powers include inspecting the relevant plants and systems related to the suspected contravention, making copies of relevant documents and conducting consultations relevant to the suspected contravention (see s 118 of the WHS Act for the full list of powers of inspection). The legislation also includes notice requirements and other obligations on permit holders (such as not intentionally and unreasonably delaying, hindering or obstructing work in the workplace). Federal Court allows entry but no cameras The Federal Court granted an interlocutory injunction to stop an employer from refusing entry to three union officials. The employer had refused entry on eight separate occasions even though each union official held a valid right of entry permit. However, the court did not allow the union officials to record their investigations with cameras or video recordings, saying that Pt 7 of the WHS Act was highly prescriptive and did not expressly include the right to enter with cameras. Also, at this interlocutory stage, the court was not able to consider the merits of whether s 499 of the FW Act (reasonable requests to comply with OHS requirements) was an exhaustive list of requests which employers could make of entry permit holders: Kirby v JKC Australia LNG Pty Ltd [2015] FCA 1070.

¶8-060 Requirements for union right of entry The FW Act largely retains the requirements in the WR Act which restrict union right of entry. The key elements are described below. Fit and proper person test The FWC must be satisfied that the union official is a “fit and proper person” before issuing an entry permit (s 512). The FWC makes this determination according to strict “permit qualification matters”, which include (among other things) whether the official: • has received appropriate training about the rights and responsibilities of being a permit holder • has ever been convicted of an offence against an industrial law (or a range of other laws), and • has had a permit revoked, suspended, or made subject to conditions (see s 513 for a full list). The FWC may impose conditions on an entry permit when taking the permit qualification matters into account (s 515). Imposing conditions may allow someone who might not otherwise meet the description a “fit and proper person” to hold a permit: Maritime Union of Australia v Fair Work Commission [2015] FCAFC 56. FWC refuses entry permits The FWC refused to issue an entry permit to a CFMEU official who disrupted major Queensland construction projects when he visited them without authorisation. He was not a “fit and proper person” because of his failure to comply with the law: CFMEU — Construction and General Division, Queensland Northern Territory Divisional Branch (2015) 67 AILR ¶102-485(21); [2015] FWC 6708. The FWC refused to issue an entry permit to an AMWU Victorian organiser involved in the notorious Westgate Bridge dispute with John Holland Pty Ltd in 2009. The FWC found that the organiser had engaged in egregious behaviour and demonstrated “contempt for the law” in the past (and encouraged others to do the same). The FWC found that no conditions could reasonably be imposed to address its concerns or satisfy the “fit and proper” person test: “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) — Victorian Branch [2016] FWC 21.

Misuse of rights of entry If the FWC is satisfied that a union or a permit holder has misused rights under the right of entry provisions, it may: • impose conditions on rights of entry • revoke and suspend an entry permit • impose conditions on all permits relating to a particular union, and • refuse to issue permits in respect of a particular union for a specified period (s 508). It is a misuse of entry rights if a permit holder repeatedly enters premises with the intention or effect of harassing or obstructing an employer or occupier of premises (s 508(4)). The FWC must revoke or suspend a permit holder’s entry permit in certain circumstances, which include unauthorised use or disclosure of employee records, and misrepresentations made by the permit holder (see s 510 for a full list of circumstances). Unauthorised access With respect to entry to investigate breaches of the FW Act or to hold discussions, entry is not “authorised” unless a permit holder complies with a number of requirements (s 486): • The permit holder must give the occupier and any affected employer (if present) an entry notice for the entry either before or as soon as practicable upon entry. Notice is described further at ¶8-070. There

are lesser requirements if the entry is to investigate suspected breaches in relation to outworkers in the textile, clothing and footwear industry, in which case notice may be given to a person who apparently represents the occupier (s 487). • If requested, or if they wish to access employee records and other documents, the permit holder must produce authority documents (including an entry permit, and a copy of a notice for the entry or an FWC exemption certificate for the entry) (s 489). • The permit holder may only exercise rights of entry during working hours and on the day specified in the entry notice or exemption certificate (s 490). With respect to holding discussions with employees, this may only occur during mealtimes or other breaks. • The permit holder must comply with reasonable requests of the occupier: – to comply with OHS requirements (s 491 and 499), and – to take a particular route to reach a room or area where discussions will occur (and, a route is not unreasonable only because it is not the route the permit holder would have chosen) (s 492A). • The permit holder must conduct discussions in locations agreed with the occupier. If they cannot agree to a location, the permit holder may conduct the discussions in meal or break rooms (s 492 and ¶8-080). (The Coalition Government’s Bill (now lapsed with the dissolution of parliament) proposed changes with respect to the location of discussions. See commentary about the Bill under the heading “Proposed legislative change” at ¶8-040.)

¶8-070 Notice of entry: what must the permit holder do? In addition to the restrictions described at ¶8-060, before entering an employer’s premises, a permit holder intending to hold discussions or investigate suspect FW Act breaches must give the occupier of the premises notice of the proposed entry. This must be given during working hours and at least 24 hours (but not more than 14 days) before the proposed entry (s 487(3) of the FW Act Act). An entry notice must specify the premises to be entered, the date of entry and the name of the union that the permit holder represents (s 518). Notice of entry to investigate FW Act breaches Where entry is for the purpose of investigating an alleged breach of the FW Act or a fair work instrument, the notice must also be given to any affected employer. The notice must include additional information, namely: • the section of the Act authorising the entry • particulars of the alleged breach, and • a declaration that the permit holder’s union is entitled to represent the industrial interests of an affected member (including the provision of the union’s rules that creates this entitlement). For entry to be authorised, the permit holder must “reasonably suspect” that the alleged contraventions have occurred or continue to occur (s 481(3) and 483A). Notice of entry to hold discussions Where entry is for the purpose of holding discussions with employers, the notice must also contain a declaration that the permit holder’s union is entitled to represent the industrial interests of a person who performs work on the premises (including the provision of the union’s rules that creates this entitlement). Notice of entry to investigate OHS breaches For entry to investigate breaches of state or federal OHS law, the permit holder must give written notice to the occupier and any affected employer of the intention to exercise the right and the reasons why at least 24 hours before exercising it (s 495). The permit holder must produce their entry permit for inspection on

request. It is also necessary to look at the notice provisions of the relevant state or federal law. For example, under the federal uniform WHS legislation, notice must be provided unless doing so would defeat the purpose of the entry or unreasonably delay the entry permit holder in an urgent case (s 119 of the WHS Act). The notice must be given at least 24 hours before exercising it, but no longer than 14 days beforehand (s 120).

¶8-080 Responding to union right of entry: what is the employer’s role? Educate employees on employer/occupier responsibilities The cases indicate that it is important for employers to educate their employees about union right of entry. For example, employees must ensure the relevant notice requirements have been met and authority documents produced (see ¶8-060 for a list of unauthorised entry). However, employees must also be aware of the occupier’s responsibilities, including that a person must not: • refuse or unduly delay entry onto premises by a permit holder who is entitled to enter the premises in accordance with the FW Act (s 501), and • intentionally hinder or obstruct a permit holder exercising rights in accordance with this Part (s 502).

Two employees denied union officials entry because they misunderstood the legal situation. The court found that their ignorance about OHS entry was “pervasive” among the employer’s managers. The employer’s inadequate knowledge about OHS right of entry was unreasonable and inexcusable. The court imposed penalties at the lower end of the range — with the employer paying $10,000 and employees each paying $1,000: Hogan v Riley and Ors (No 2) [2010] FMCA 760.

By contrast, if there is a safety concern, conditionally refusing to allow a safety walk to continue until police attend the site may not be hindering, refusing or unduly delaying a permit holder. Conditional refusal of entry allowed Permit holders had commenced a safety walk but left the site to inspect a pump in a car park on adjoining land (which was not covered by the permit). While they were on the adjoining land, an altercation occurred between the permit holders and some subcontractors working on the site. The police were called. The site manager refused to allow the permit holders to continue the safety walk until the police were present about 15 to 30 minutes later. The court held that the permit holders were not refused entry as it was clear they would be permitted to enter with a police escort. The delay was not an undue delay as the site manager had a legitimate concern about safety: CFMEU v Hume Highway Constructions Pty Ltd & Anor [2013] FMCA 154, upheld on appeal in CFMEU v Gittany (2014) 66 AILR ¶102-140; [2014] FCA 164.

Provide rooms to permit holders for discussion purposes Note: This section is subject to the passage of the Bill introduced by the Coalition Government on 3 December 2015 (see Sch 1, Pt 5). While this Bill lapsed with the dissolution of parliament on 8 May 2016, the future of the proposed changes in the Bill largely depends on the outcome of the federal election on 2 July 2016. (See commentary under “Proposed legislative change” below and at ¶8-040 in relation to the Bill more generally.) Changes introduced by the Rudd/Gillard Government with respect to the location of discussions upon entry commenced on 1 January 2014. Since that date, if the permit holder and the occupier of the premises cannot agree on a location for interviews and discussions, the permit holder may conduct such meetings in the room or area where the workers involved normally eat their meals or have their breaks (s 492). It is not necessary that taking meals or breaks is the only purpose for the room.

An occupier denied a permit holder entry to a mining site. The occupier argued that the area where meals were taken was not fit for purpose. It argued that this was a narrow space (roughly 1 m by 4 m) behind dragline operators’ cabs, which was primarily a

functional work area, although it had a kitchenette. At first instance, the FWC found that the primary purpose of the space as a work area and the functional difficulties meant the area was unsuitable for conducting discussions. However, a full bench overturned that finding, concluding that the words of the FW Act do not require a sole purpose or a sole use, and that there would be few areas of any workplace that could fit such a description: CFMEU v Central Queensland Services Pty Ltd [2016] FWCFB 288.

The occupier can make a reasonable request that the permit holder take a particular route to the location for interviews and discussions and the permit holder must comply with such a request (s 492A). A request is not unreasonable just because it is not the route the permit holder would have chosen. Proposed legislative change The Bill sought to reintroduce some control to the occupier over the location of discussions. It repeals the current provisions and reintroduces the approach in place before the 2014 amendments. Under the proposed s 492, the permit holder must comply with any reasonable request by the occupier: • to conduct interviews of hold discussions in a particular room or area of the premises, or • to take a particular route to reach a particular room or area of the premises. A request may be unreasonable, if the room provided is not fit for the purpose of holding such meetings or discourages employees from participating, among other things. It is likely that the decisions considering the pre-2014 provisions will be relevant in interpreting the proposed changes if they are passed. Training room near management was reasonable location An employer requested that meetings between union permit holders and workers occur in a training room located near management offices, rather than the meal room which the union requested. The full bench held that the request was reasonable. A meeting in the meal room was likely to affect employees who did not wish to participate in the discussion. There was no other suitable area, the training room was fit for purpose, and blinds could be drawn for privacy from management: Somerville Retail Services Pty Ltd v Australasian Meat Industry Employees’ Union [2011] FWAFB 120, upheld in Australasian Meat Industry Employees’ Union v Fair Work Australia [2012] FCAFC 85.

Despite the wording that the permit holder must comply with the occupier’s reasonable request to hold discussions in a particular room, there was some judicial opinion that it was implicit that an occupier ought to respond positively to a permit holder’s reasonable request to hold a meeting in a particular room. To do otherwise could be considered to be hindering entry: eg see CFMEU v Safety Glass Pty Ltd [2010] FCA 989. Facilitate accommodation and transport arrangements in remote areas Accommodation Since 1 January 2014, accommodation provisions apply if premises are located in a place where accommodation is not reasonably available to the permit holder (s 521C). If the parties cannot agree on an arrangement, the occupier must provide (or assist in providing) accommodation for right of entry purposes if: • providing accommodation would not cause undue inconvenience • the permit holder or their organisation requests accommodation • the request is made within a reasonable period before the accommodation is required, and • the parties have been unable to enter into an arrangement by consent. Transport From 1 January 2014, transport provisions apply if entry rights relate to premises not reasonably accessible to the permit holder unless the occupier provides the transport or assists in its provision (s 521D). If the parties cannot agree on an arrangement, the occupier must provide transport for right of entry

purposes where: • providing transport would not cause undue inconvenience • the permit holder or their organisation requests transport • the request is made within a reasonable period before the transport is required, and • the parties have been unable to enter into an arrangement by consent. Costs and conduct If an arrangement for transport or accommodation is entered into, the occupier must not charge a fee that is more than necessary to cover the cost to the occupier. Conduct of the permit holder while in the provided accommodation or transport may be treated by the FWC as conduct engaged in as part of the exercise of right of entry. Proposed legislative change The Bill sought to repeal these requirements (see Sch 1, Pt 5, Item 35) to reduce the burden placed on employers.

¶8-090 Role of the Fair Work Commission concerning right of entry Sanctions for breaching right of entry provisions In addition to issuing entry permits (¶8-060), the FWC has the role of assessing breaches of right of entry laws under the FW Act. The FWC can revoke or suspend an entry permit issued to a permit holder who does not follow the rules. It can also impose limiting conditions on a right of entry permit (s 507). The FWC can restrict the rights of unions and union officials where misuse of right of entry has been established (s 508). Misuse of right of entry includes repeatedly exercising rights with the “intention or with the effect of hindering, obstructing or otherwise harassing an occupier or employer” or encouraging a person to become a member of an organisation in a way that is “unduly disruptive” (s 508(4)). The FWC may: • impose conditions on entry permits • suspend or revoke entry permits • specify that entry permits issued to a union in the future are subject to certain conditions • ban the issue of entry permits for a specified period of time in relation to a union generally or to a permit holder • make any other order it considers appropriate. FWC revokes permit for a time A union representative acted improperly and aggressively with verbal and racial abuse when exercising his right of entry. He held a meeting in an unauthorised area, trespassed on premises and failed to comply with the strict conditions of his right of entry permit. The FWC therefore ordered that the union representative was not permitted to exercise a right of entry permit for the remainder of the calendar year: Bechtel (Western Australia) Pty Ltd v CFMEU — WA Branch [2013] FWC 2498.

The FWC must revoke or suspend entry permits when it is established that the permit holder (s 510): • made misrepresentations as to their powers or authority • made unauthorised use or disclosure of employee records

• breached privacy legislation in respect of records or documents accessed under the Act • has been ordered to pay a pecuniary penalty in relation to a contravention • has been disqualified from being a permit holder or had a right of entry cancelled or suspended under state industrial law • took unauthorised action when exercising a right of entry under state OHS law. Monetary penalties apply in certain circumstances. Maximum civil penalties for contravening right of entry provisions remain the same as those under the WR Act, although the value of a penalty unit has increased from $110 to $180 over recent years. The maximum penalty is 300 penalty units ($54,000) for a union and 60 penalty units ($10,800) for individuals. Penalty for conduct beyond scope of right of entry The FWC has stated that the right to entry does not equate to the right to interfere with work on-site. It fined a union official $4,500 and his employer union $16,500 for disrupting work and swearing on-site. While the union official had a right to enter the site, having responded to a member’s concern about health and safety issues, his conduct in disrupting a concrete pour (which led to project delay and increased costs) and swearing went beyond the scope of his right of entry: Lovewell v Pearson and Anor [2011] FMCA 102.

Dealing with disputes about entry Since 1 January 2014, the FWC has additional powers to deal with disputes relating to right of entry, eg disputes about: • whether requests to comply with an OHS requirement or to follow a particular route to the location of interviews or discussions are reasonable • whether accommodation in remote areas is reasonably available or the premises reasonably accessible • when a right to enter may be exercised in remote locations • whether providing accommodation or transport, or causing accommodation or transport to be provided, would cause the occupier of premises undue inconvenience • whether a request to provide accommodation or transport is made within a reasonable period • the frequency of entry to hold discussions (see s 505 and 505A). FWC recommends timing of right of entry to regulate frequency In a dispute about frequency of entry, the FWC issued recommendations that a right of entry be exercised on a monthly basis for a three-month trial period, combining proposals put forward by both parties: Greenmountain Food Processing Pty Ltd v AMIEU [2014] FWC 3169.

¶8-100 Restrictions on industrial action (or the right to strike) The FW Act sets out requirements for taking protected industrial action, which retain most of the restrictions introduced by the WR Act (Ch 3 Pt 3-3 of the FW Act). These include that: • protected industrial action is only permissible in support of enterprise bargaining agreement negotiations • a mandatory secret ballot supporting industrial action must be held and approved by the workforce, and

• payment to employees taking industrial action (or strike pay) must not be made. Important differences include that: • employers can only take protected action in response to industrial action taken by employees. They can no longer engage in unprovoked lockouts to advance their interests (see ¶8-130), and • arbitration of intractable disputes can take place in a wider range of circumstances (beyond simply “emergency services” disputes).

¶8-110 Protecting freedom of association The FW Act retains the principles of freedom of association introduced by the WR Act under Work Choices. This means that employees are free to either join, or not join, a trade union. When negotiating a collective agreement, employees can be represented by a trade union. It is unlawful for anyone to try to stop an employee from exercising free choice by threats, pressure, discrimination or victimisation. The FWC has the power to make orders to ensure freedom of association is protected.

¶8-120 Protected industrial action means civil immunity Many of the industrial action provisions in the FW Act are concerned with specifying the exact circumstances and requirements under which certain industrial action can be considered “protected” (s 408–416 of the FW Act). An important difference between protected and unprotected industrial action is that only those engaged in protected industrial action can get immunity from civil proceedings. However, this immunity does not extend to actions involving personal injury, property damage or unlawful use of property. The FWC is also able to order those engaged in unprotected industrial action to stop.

¶8-130 Protected industrial action For industrial action to be protected under the FW Act, a stringent list of conditions known as “common requirements” must be satisfied. Chief among those requirements, the action must: • be taken in the context of legitimate collective bargaining, and • not be organised or taken before an existing enterprise agreement or workplace order has expired. This is the case even if the enterprise agreement on foot only relates to some of the employees (see Power Projects International Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU) & Anor [2011] FWAFB 1327). Protected industrial action for an agreement takes one of the following three forms: (1) an employee claim action (2) an employer response action, or (3) an employee response action. Common requirements All three types of industrial action must satisfy the following common requirements in order to be considered protected: • The action must not relate to a greenfields agreement or multi-enterprise agreement.

• Those engaging in the action “must be genuinely trying to reach an agreement” (see ¶8-140). • The party engaging in industrial action must satisfy written notice requirements — ie at least three working days in the case of an employee action claim, or longer if specified in a protected ballot order. Employers taking response action must take steps to notify all bargaining representatives and employees covered by the relevant agreement. Notice must specify the nature of the action and the day it will start. Employees taking response action must give written notice to the employer prior to commencing action. • Bargaining representatives and employees concerned must not have contravened any orders that apply to them in relation to the action or agreement. • The action must not be organised or engaged in before the nominal expiry date in an enterprise agreement passes. • There can be no suspension or termination order in operation for that industrial action. • A serious breach declaration in relation to the agreement must not have been made. Employee claim action An employee claim action can only be taken for the purpose of supporting or advancing claims in relation to the relevant agreement concerning permitted matters and must be organised against an employer who will be covered by the agreement. It can only be engaged in by bargaining representatives of employees covered by the agreement or by an employee included in a protected action ballot order for the industrial action. In addition to the common requirements, the industrial action must: • be authorised by a protected action ballot (see ¶8-140) • not be in support of, or to advance claims to include unlawful terms in, the agreement • not be part of pattern bargaining • not relate to a demarcation dispute, and • meet any notice requirements following a suspension order. Employer response action A protected employer response action is one that is organised in response to industrial action by employees who are covered by the agreement in question. This means that, under the FW Act, an employer is unable to engage in unprovoked lockouts of employees. Along with meeting the common requirements, it also must not affect the continuity of the employees’ employment. An employer may choose to refuse to make payments to employees for the period of the employer response action. Employee response action An employee response action is one that is organised in response to industrial action by an employer covered by a proposed agreement. In addition to meeting the common requirements, it must not relate to a demarcation dispute.

¶8-140 Protected action ballots As under the previous workplace relations regime, employees must authorise the taking of protected industrial action by secret ballot — except if taken in response to industrial action by the employer (s 435– 469 of the FW Act). Applying for protected action ballot orders Under the FW Act, the process begins through an application by an employee bargaining representative

to the FWC for the holding of a protected action ballot. Where an enterprise agreement is already in place, an application for the ballot can only be made from up to 30 days before the nominal expiry date of the existing enterprise agreement. The employer concerned must also receive a copy of the application within 24 hours of it being made. If those conditions have been satisfied, the FWC must (as far as practicable) determine the application for protected action ballot orders (PABOs) within two days. What does the FWC consider when determining PABO applications? One matter which the FWC considers when determining a PABO application is whether the content of the application meets the content requirements (see s 437). One content requirement is the question to be put to the employees, which must include the nature of the proposed industrial action. The questions must be clearly expressed, allow the employees to make an informed decision and should identify the nature of the action and the proposed location (see National Union of Workers — New South Wales Branch v Fresh Exchange Pty Ltd [2009] FWA 221). A “rolled up question” — a question where employees are asked to support one or more of several types of proposed industrial action — is usually permissible (see John Holland v “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) [2010] FWAFB 526). Another more contentious issue in considering an application is assessing whether the applicant has made a genuine attempt to reach an agreement with the relevant employer. What does “genuinely trying to reach agreement” mean? A number of key principles can be gleaned from the decisions which have considered the meaning of the phrase “genuinely trying to reach agreement”: • The FWC has held that the “genuinely trying” test is not a “moral” code and has granted a union PABOs despite accepting that an employer was “rightly aggrieved” by its bargaining conduct (see Maritime Union of Australia v Tidewater Marine Australia Pty Ltd [2014] FWC 1733). • Whether or not a party has been bargaining in good faith will have some bearing on whether a party has been genuinely trying to reach agreement; however, this will not be conclusive (see The Maritime Union of Australia v Total Marine Services Pty Ltd [2009] FWA 187). • Withholding a bargaining position will generally demonstrate an absence of a desire to genuinely reach agreement (see Total Marine Services Pty Ltd v MUA [2009] FWAFB 368). • Parties can engage in “hard bargaining” and still demonstrate that they are genuinely trying to reach agreement (see National Union of Workers — New South Wales Branch v ACCO Australia Pty Ltd [2009] FWA 226; Australian Municipal, Administrative, Clerical and Services Union v Pelican Point Power Limited [2010] FWA 7739). • If a union pursues non-permitted matters in a proposed enterprise agreement, this is relevant to whether it is genuinely trying to reach agreement. However, it is not determinative of the issue. In the circumstances of one case, where the unions had not adopted a rigid position in relation to the nonpermitted claims and the claims had not featured prominently in the negotiations, the Full Bench of FWC upheld PABOs (see Esso Australia Pty Ltd v AMWU & Ors [2015] FWCFB 210). • Although the onus rests with the party seeking a PABO to show that it is genuinely trying to reach agreement, a party alleging pattern bargaining will have to clearly demonstrate how this resulted in the other party not genuinely trying to reach agreement. For example, FWC found that evidence of the union seeking an industry wage result was more a matter of establishing a negotiating benchmark and using comparative material to support its claims than a lack of genuinely trying to reach agreement (see Construction, Forestry, Mining and Energy Union v Mitolo Constructions Pty Ltd [2010] FWA 4232). What process applies after FWC issues PABOs?

If the FWC determines that a ballot should be held, it will be conducted by the Australian Electoral Commission (AEC) unless another FWC approved ballot agent has been specified. Once the secret ballot has been held, the proposed industrial action is deemed to be authorised if: • the proposed action relates to the questions put in the ballot • at least 50% of the employees on the roll of voters for the ballot voted • more than 50% of those votes validly cast approved the action, and • it commences within 30 days of the declaration of the result of the ballot.

Application for extension after 30 days allowed: An application to extend the period for protected action can be made after the initial 30-day period has expired. It is likely the FWC will grant the extension if it is plain that the majority of employees support for taking industrial action continued beyond the 30-day period: EnergyAustralia Yallourn Pty Ltd v CFMEU [2014] FCAFC 8.

Industrial action is not protected if it occurs in the period in between the 30-day period and an application for extension. A ballot may be conducted by attendance voting, electronic voting and postal voting. A ballot may not be conducted by a show of hands (s 450 and 451). The AEC or the appointed ballot agent must inform the applicant, the employer and the FWC in writing of the result of the protected action ballot as soon as possible. The FWC must then publish the result of the ballot, either on its website or through another medium of its choosing. When are protected action ballot orders not available? PABOs are not available for greenfields or multiple-enterprise agreements. Further, for applications for a PABO made after 27 November 2015, the FWC will not make orders unless there has been a “notification time” (defined in s 173(2)) in relation to the proposed enterprise agreement (s 437(2A)). A statutory note clarifies the effect of this — protected industrial action cannot be taken until after bargaining has commenced (including where the scope of the proposed enterprise agreement is the only matter in dispute). This new amendment reverses the decision in JJ Richards & Sons Pty Ltd v Fair Work Australia [2012] FCAFC 53. (See the Fair Work Amendment Act 2015 (Cth), Sch 1 Pt 10, and Sch 2.) The practical effect of this amendment is that if an employer does not agree to a union request to commence collective bargaining and has not issued a notice of representational rights, the union must obtain a majority support determination from the FWC instead of beginning the process for taking protected action.

¶8-150 Industrial action and payments The FW Act stipulates rules on payments relating to both protected and unprotected industrial action (s 470–474 of the FW Act). In general, employers are prohibited from paying employees who have failed or refused to attend work for the total duration of any protected industrial action. In relation to industrial action that is not protected, if the amount of time the employee was engaged in industrial action was less than four hours, the employee cannot get paid for four hours of that day. If the unprotected action lasts for more than four hours, the employee cannot get paid for a period equivalent to the period of the industrial action (even if the employee did some work). What “payments” are prohibited? To determine whether a payment is prohibited, it is necessary to examine the enterprise agreement or relevant source of legal obligations carefully and work out what the payment is for. If the payment is for work which would have been performed if the employee did not engage in industrial action, it must not be

paid. If it is not connected to work the employee would have performed, then it must still be paid to the employee. Accommodation was not a payment to withhold The High Court considered whether the meaning of “payment” included accommodation and lodgings provided to fly-in fly-out employees under an enterprise agreement. The employer was required to provide accommodation to employees under a standalone clause. Because it was not linked to wages or payment for time worked, the accommodation was not a prohibited payment and had to be provided: CFMEU v Mammoet Australia Pty Ltd [2013] HCA 36. See also Thiess Pty Ltd; Mt Owen Pty Ltd v CFMEU [2015] FWCFB 5530, where an employer was required to pay an allowance which was not connected with the performance of work.

Partial work bans The general prohibition on strike pay does not apply to partial work bans (other than overtime bans) that are protected industrial action. In this case, employers can: • choose to accept partial performance and pay in full • issue a partial work notice and reduce payments accordingly • issue a notice rejecting partial performance and withhold payments altogether for the industrial action period, subject to notice requirements. If an employer intends to provide partial payment, the quantum of any payment must be calculated in accordance with the Regulations (s 471(3)). Regulation 3.21 provides that the proportion of payment must be calculated by identifying the work subject to the ban, estimating the amount of time the employee would usually spend each day performing that work and then establishing what percentage of a normal working day that amount of time represents. This forms the proportion by which the employee’s payment will need to be reduced. Notify employees If the employer intends to either make partial payment or no payment at all, it will need to provide notice of this fact (s 471(1)(c) and (4)(c)). Where this notice is not provided, an employee is entitled to be paid their wages in the ordinary manner (s 471(8)). Notice must be given to each employee, must be specific to each employee’s circumstances, and must outline the proportion reduction under any relevant agreement, modern award or contract of employment (see The Australian Workers’ Union and others v Alcoa Australia Rolled Products Pty Limited [2010] FWA 5674). Sanctions Accepting or seeking strike pay is unlawful and subject to significant penalty (up to 60 penalty units per offence; equivalent to $54,000 for a corporation and $10,800 for an individual).

¶8-160 The FWC and industrial action Stopping unprotected action The FWC is charged with preventing or stopping any industrial action — by employees or employers — that it considers will not be protected industrial action. Such action can be occurring, impending or in the process of being organised (s 418–421). The FWC will then make an order that the action, which does not have to be specified, stop for a stated period of time. It can make the order on its own initiative, or following an application from one of the affected parties. As far as is practicable, the FWC is to determine an application for a stop order within two days of the application being made. For a discussion of injunctions in unprotected action matters see United Group Resources Pty Ltd ABN 17 114 888 201 v Calabro [2010] FCA 22.

Stopping protected action The FWC also has the power to suspend or terminate protected industrial action on a number of grounds. The circumstances under which the FWC will suspend or stop protected action include: • where the action is causing “significant economic harm” to the employer and/or employees • where the action has been engaged in for a protracted period of time and the dispute is not likely to be resolved in the reasonably foreseeable future • where the action is endangering, or threatening to endanger, life, personal safety or health of the population, or causing significant damage to the economy • where it is necessary to provide for a cooling-off period for agreement bargaining, and • where the action is adversely affecting the employer and its employees, and threatening to cause significant harm to a third party. The FWC has dealt with a number of applications where an employer sought to have protected industrial action terminated. The cases reveal that the FWC will take a cautious approach to terminating or suspending protected industrial action. If a party seeks to have protected industrial action terminated or suspended on the basis that it is causing significant economic harm, it must demonstrate that the harm is exceptional (see Construction, Forestry, Mining and Energy Union v Woodside Birrup Pty Ltd & Anor [2010] FWAFB 6021, upheld in Prysmian Power Cables and Systems Australia Pty Ltd v National Union of Workers & Ors [2010] FWA 9402). The FWC has also terminated or suspended protected industrial action on “essential service” grounds in a number of matters (see Tyco Australia Pty Limited t/a Wormald v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2010] FWA 8050; Ambulance Victoria v Liquor, Hospitality and Miscellaneous Union [2009] FWA 44; Austin Health v Health Services Union [2012] FWA 7098). If the FWC suspends protected industrial action, it must specify the period of suspension. It also has the power to extend suspension periods and can also extend the required notice period for further industrial action up to seven days if it sees fit. If a protected employee claim action is suspended, there is no requirement to obtain another protected ballot authorisation to continue the action once the suspension ends. However, the employer must be given at least three working days’ written notice before that action is resumed. Ministerial declarations The FW Act also empowers the relevant government minister to make a declaration terminating protected industrial action that is deemed to be a threat to the life, personal safety or health, or welfare of the population, or that could cause significant damage to the Australian economy (s 431–434 of the FW Act). Such declarations come into effect on the day they are made. Ministers may be reluctant to use this power. (See Minister for Tertiary Education, Skills, Jobs and Workplace Relations [2011] FWAFB 7444 where the minister instead exercised his right to apply to FWC to suspend industrial action which had ground Qantas planes (see s 424 of the FW Act). This had the effect of the industrial action being suspended by decision of FWC following a hearing, rather than solely at the behest of the minister. This resulted in an arbitrated outcome on the issues where the parties could not agree during bargaining.

¶8-170 Conclusion: Union right of entry, industrial action and what’s next Right of entry The Gillard/Rudd Government retained key features of the Howard Government’s legislation which limited the ability of employee organisations to enter employers’ premises. However, there are some important differences under the FW Act:

• Right of entry is possible if the union’s eligibility rules simply cover the type of work performed by employees at the workplace. • There is a new right of entry scheme covering outworkers in the textile, clothing and footwear industries. • If the parties cannot agree on a venue for a permit holder to hold discussions with employees, the occupier must provide the meal or break room (¶8-080). • Occupiers in remote locations are also subject to obligations concerning accommodation and travel arrangements for permit holders (¶8-080). The Coalition Government has sought to introduce an invitation regime if there are no union members at a site, and repeal the provisions concerning the location of discussions and accommodation and travel obligations. See the commentary about the Bill at ¶8-040 and ¶8-080. Industrial action The FW Act similarly retains many restrictions to industrial action which were set out in previous legislation. Important differences include that employers can no longer take industrial action unless it is in response to employee action, and that arbitration of intractable disputes is available in more circumstances (¶8-100). At the end of 2015, the Turnbull Government was able to achieve a small but significant change to the industrial action provisions. As a result, it is now clear that PABOs are not available until after bargaining has commenced (¶8-140). Are more changes expected? As the federal election approaches on 2 July 2016, it is important to watch the political parties for any proposed amendments to the right of entry and industrial action regimes in their election policies. In its Final Report into Workplace Relations Framework (30 November 2015), the Productivity Commission observed the adversarial context of the exercise of the right of entry. To limit disruptive conduct, it recommended that there is a strong case for modifying the threshold for the FWC to deal with disputes about the frequency of entry by employee representatives. Also, it saw merit in a return to a more flexible, principles-based approach to regulating disputes about discussion locations. With respect to industrial action, the PC recommended: • reducing the complexity of employee ballots to authorise protected industrial action • modifying the threshold for FWC intervention in some disputes (eg the level of harm required before FWC terminates industrial action) • deterring the use of aborted strikes and brief stoppages that impose disproportionate transaction costs on employers, and • allowing more graduated options for employers to respond to employee industrial action. Political expediency, especially in an election year, will likely determine whether such recommendations are proposed or passed.

9. WORKFORCE PLANNING Editorial information

Michael Toten Human Resources Writer and Consultant

¶9-010 Introduction This chapter analyses the uses of workforce planning, job analysis and job design, how they interact with each other and their roles in human resources (HR) management. It describes the stages and steps of workforce planning, and reviews the factors that are critical to its success. A wide range of job analysis and job design methods are evaluated, and guidance on selecting appropriate methods is given. The chapter provides a cautionary note on the potential shortcomings of all three processes, and discusses recent trends in each.

WORKFORCE PLANNING ¶9-020 What is workforce planning? Organisations have to cope with more complex and turbulent operating environments than ever before. Economic, social, legislative (and many other) changes impact on this. The so-called “global financial crisis” that first emerged in mid-2008 and the subsequent economic turmoil of 2011 and 2012 are examples. The initial crisis led to a major and sudden economic downturn that few people had predicted. In 2012, Australian financial markets took great interest in the results of an election in Greece, an event that even a few years ago would have had very little significance for Australia. Other recent examples of changes that are having significant effects include the following: • Volatility of the price of oil: A spectacular increase to record levels by mid-2008 was followed by an even more spectacular fall by the end of the same year. In 2011 and 2012, price fluctuations have again been volatile. • Online shopping: The rapid growth of online shopping has had a major impact on the domestic retail industry. • Price on carbon: On 1 July 2012, the so-called “carbon tax” was introduced in Australia and, at the time of writing, the extent of its economic and social impacts were far from becoming obvious. In general, economic developments over the past five or so years have proved that planning for the future has become more difficult than ever before, because of the increased uncertainty. Trends such as these mean that it is imperative for organisations to develop business plans that both anticipate and cope with rapid change. For the HR function, this means predicting, planning, procuring and retaining the organisation’s future workforce needs. This process is referred to as workforce planning or HR planning. Workforce planning differs from other forms of business planning in that it is based around people rather

than material resources. As such, it is a much less predictable process than most other forms of planning. Workforce planning can be broadly defined as involving the preparation of policies and plans to ensure that the organisation maintains an adequate and suitably trained workforce to enable it to achieve its goals/objectives. Planning involves: • analysing the organisation’s current position • maintaining the information that is necessary to predict its future position • forecasting the numbers and types of workers required to meet future requirements, and • attracting, developing, engaging and retaining those workers. Plans need to operate within broad parameters in order to remain flexible enough to adjust to changing events and circumstances. The worldwide economic volatility referred to previously is a circumstance that most businesses have had to respond to.

¶9-030 Why use workforce planning? For organisations, workforce planning has several advantages. It is possible to make more efficient use of resources by planning ahead as overall stability has improved and organisations are in a better position to capitalise on opportunities that arise. Sudden changes are less likely to cause major disruption, particularly if their likelihood can be forecasted. The rate and scope of change (generally) are both increasing, which makes it imperative to undertake forecasting and planning. Many commentators refer to the concept of “knowledge management”, combined with the increasing complexity of organisations. One of the consequences of both trends is that employees are, on average, becoming harder to replace (because they have more specialised skills and knowledge), and replacement employees require greater investment in training and development to enable them to become productive in their new role. It is important to identify areas where shortages are likely to occur and take action to reduce or prevent their impact. For the HR function itself, workforce planning is an opportunity to move away from the reactive “firefighter” response to people-related issues and becoming involved in longer term strategic planning that has a more positive focus. The basic goal of workforce planning is to allow the organisation to take advantage of potential opportunities once it has the type of workforce that enables it to do so.

¶9-040 How workforce planning interacts with other HR practices Job analysis and design, covered later in this chapter, are the starting points for workforce planning. They must be accurate and kept up to date in order to assess the current workforce situation and to forecast future needs. Workforce planning also acts as a starting point for many of the other HR functions discussed in this Guide, including: • recruitment — obtaining the right numbers and types of employees • retention — analysing and predicting turnover and the reasons for it, identifying highly valued employees (key talent), and implementing strategies to retain key talent • performance assessment and management — ensuring the continued availability of suitable employees, and identifying further actions to develop or improve their contribution • identifying employee potential — allowing both the organisation and employees to capitalise on opportunities • training and development — identifying training and development needs of employees that this

function can help to address • workplace relations — including issues concerning employee contracts, remuneration and rewards, and issues that may arise in relation to change management through expansion/downsizing (eg from mergers and acquisitions), or technological change within the organisation • career development programs and succession planning — maintaining the supply of suitable employees and putting in place strategies in the event that key employees leave the organisation, and • work/life balance issues — ensuring that employees remain able to make a valuable contribution to the organisation while managing their own personal commitments (eg through flexible work arrangements).

¶9-050 Stages of the process A leading American HR academic, Dr John Sullivan, recommends that workforce planning should “start simple”. He suggests initially using a basic model that is easy to understand and does not require a lot of work, and is therefore appealing to the managers who need to be involved in the process. The basic system should be trialled and modified if necessary before adding additional features. Sullivan (2003a) suggests a six-step basic workforce planning model, an adapted account of which is outlined below: (1) Forecast the need for talent • Forecast variations in the organisation’s market. Identify and monitor the key factors likely to change. • Select a planning time frame. Start small (eg one to two years) then extend this once you are confident the system is working well. Note: Long-term forecasts tend to be a lot less accurate. • Predict your organisation’s growth rate. Other documents (eg sales forecasts and budgets) should be available within the organisation to assist with this step. • Review existing management processes. Sullivan suggests that — if the organisation’s growth or shrinkage rate is likely to exceed 5% in the chosen time frame — many existing management processes may require modification. • Forecast the need for employees. Estimate the number of new positions needed and possible redundancies. (2) Prioritise positions • Prioritise key jobs and key people. Identify those roles which are critical to the organisation’s mission and focus on them. (3) Predict potential turnover • Identify trends in the current turnover rate. Prepare a risk assessment of the likelihood of key employees leaving and those likely to retire. (4) Identify and develop internal replacements • Develop a succession planning process for key roles. • Combine succession planning with a management development program identifying key future positions and “growth areas”. • Develop an internal employee redeployment plan, involving transferring existing employees from areas that are shrinking to new or expanding jobs/areas.

(5) Identify and obtain external replacements • Using various recruitment strategies, it may be possible to prepare a “just-in-time” pool of external candidates to save time when vacancies arise. (6) Improve ability to manage employment costs • “Over-hiring” can be a problem for many organisations, particularly if a downturn occurs at a later date. Sullivan recommends maintaining a “contingent workforce” of contractors, casual employees and fixed-term/fixed-project employees in addition to the workforce of permanent employees. • Some organisations have a “redundancy plan”: that is, they identify in advance the jobs that would go if redundancies actually became necessary. Contingent positions can then focus on these areas.

¶9-060 Critical issues for successful planning In another article, Sullivan (2003b) identified a list of almost 30 critical success factors for workforce planning. He noted that many workforce planning attempts have failed in the past because they were inflexible and unable to cope with environmental and other changes. Sullivan’s critical success factors are summarised below and split into six category areas. Category 1: Integrate workforce planning with business processes (1) “It’s not a document, it’s a way of thinking”. Managers need to be aware of the need to plan, and should constantly be forecasting and planning for changes. Workforce planning should, therefore, be added to performance and reward assessment criteria. Category 2: Workforce planning design rules (2) Managers must own the process, not the HR function. It is not a case of “leave that to HR to fix”. (3) Prioritise jobs and business units, focusing on areas with the greatest business impact. (4) “Bottom-up” planning. Knowledge/input of line managers, who make many day-to-day decisions, are essential. (5) Focus on the future, not day-to-day and short-term issues, or politics. (6) Integrate with other business plans. Forecasting, planning, budgeting and resource allocation must be coordinated with workforce planning. (7) Integrate with other HR plans. Ensure workforce plans are coordinated with and supported by HR activities focused on the attraction of talent (eg through branding), recruitment, remuneration, performance management, learning and development, and retention. (8) Support plans with incentives, measurement feedback, rewards and sanctions. (9) Workforce planning must be a “decision filter”. No major business decision or project should be approved unless the HR component of it is properly addressed. Category 3: Strategies to improve success (10) Demonstrate immediate results. Focus initially on smaller areas where you can achieve a shortterm impact and use these to gain broader support and buy-in. (11) Over-prepare for downturns. Downsizing decisions often happen suddenly, and are more difficult to implement than decisions associated with organisational growth.

(12) Optimism must be supported by data. Plans should cover areas such as possible downsizing, performance management, the contingent workforce and redundancies. (13) Use a range of targets. Precision forecasting is difficult in today’s business environment, and failure to achieve a precise target may undermine planning’s credibility. (14) Realistic planning time frames. Sullivan recommends no more than 18 months to three years. Conditions such as the worldwide economic volatility of the past five years make planning over any period longer than this very difficult and unpredictable. (15) Allow for local variations. The same targets and processes may not be appropriate throughout the organisation. Provide some flexibility (eg a range of variations) to individual managers and business units. (16) Allow for cultural fit. Organisational culture can vary over time (eg following a merger, acquisition or downsizing exercise resulting in redundancies) and short-term thinking may result. Also, customising, rather than simply copying or benchmarking practices, is recommended. Category 4: Build and demonstrate the business case (17) Use quantifiable measures to demonstrate the benefits of workforce planning. When starting the process in your own organisation, perhaps consider data from other high-performing organisations that use workforce planning and customise to suit the organisation (as suggested in Category 3). (18) Ensure plans have “face validity”. For example, if those who manage workforce planning have previous financial/accounting experience, they are likely to have greater credibility. Also, it is important to allow managers to check and approve initial forecasts and targets before making them final. Category 5: The components of planning to emphasise (19) Maintain a contingent workforce. (20) Practise developing possible scenarios (ie both best and worst-case, as well as “what if” scenarios). (21) Review and upgrade recruitment strategies. A strong employment “brand” will still attract employees even when things become tough. (22) Actively encourage internal mobility/transfers. This involves drawing employees’ attention to new areas where their skills are in need, and providing incentives for them to redeploy. Category 6: Implications for HR’s role (23) Avoid “learning on the job”. Most HR practitioners lack experience in forecasting, business planning and so on, so choose people from other parts of the business who have that expertise. (24) Share data/information. Ask managers to notify HR of any changes that affect their area of business. (25) Integrate internal and external databases (eg actions of competitors, social and economic trends and so on). (26) Avoid statistical complexity in information that is provided to managers so that they may easily understand and use the information appropriately. Plans and other communications should, wherever possible, use the same formats and language that are used across other areas of the business. (27) Review plans periodically. It is recommended that this occur at least half-yearly, preferably quarterly. Plans should be easy to access and scan to facilitate reviews.

(28) Ensure planning processes have adequate and dedicated resources, including an independent budget. (29) Involve employee representatives. For example, where unions operate at a workplace, it is better to consult and keep them informed, rather than take them by surprise if redundancies are planned later on. (30) Ensure easy (online) access to planning documents and distribute widely.

¶9-070 Other issues to consider Workforce planning needs to become a pattern of thinking and acting. Sullivan recommends that workforce planning includes the use of some measurements which can be used as an early warning system for potential and/or emerging problems. In general, there should be measurements for each of the following categories: • business results • operational aspects of the plans themselves • recruitment • turnover/retention • redundancies • replacements • redeployment/transfers • the contingent workforce (Note: Ensure that workforce plans accommodate these people appropriately and that they are not merely considered as “disposable” resources.) • management development, and • equal opportunity and diversity. To be effective, measurements must be able to inspire changes in management behaviour when necessary.

¶9-080 Problems with workforce planning Research studies indicate that organisational restructures are becoming more frequent and the turnover rate of chief executive officers has increased. This means that organisations are having to change at a more rapid rate so that they may adapt and survive. Workforce planning faces two main hurdles: (1) the increasing difficulty of predicting the future, and (2) the fact that it involves planning around people (who tend to be somewhat less predictable than material resources). Many of the large-scale workforce planning projects of the 1970s through to the 1990s floundered because they were too big and cumbersome to cope with the rapid changes. Workforce planning must be integrated with other business plans. These may have a much longer time frame (eg because of the levels of investment or development time required). The accuracy of forecasting is a big problem. Many events, whether local, regional or international, can

have a significant impact on forecasting, but be beyond an organisation’s control. One possible approach to coping with this unpredictability is to develop plans that use a range of forecasts and targets, which can be fine-tuned as developments become more certain. The use of “what if” scenarios may also be helpful. Other problems that workforce planning has encountered include the following: • difficulty obtaining support from line managers • management over-emphasising short-term issues and results • managers resisting involvement due to time constraints • management finding the “possibility” of downturns in business and downsizing to be a difficult threat to get their head around, and • dehumanising employees (ie as mentioned earlier, it is important to ensure they are not treated solely as expendable resources). In addition, Sullivan cautions against spending too much time on the following planning activities: • assessing the labour market supply of employees (If there are shortages or surpluses, employees who work in the relevant area are likely to know about them before anyone else.) • using increased remuneration as a retention strategy for individuals (This generally has only shortterm effects and other issues, such as working arrangements, will require attention as well.), and • determining and documenting key competencies for all employees. (This is often too time-consuming and focuses on the key employees and jobs only.)

¶9-090 Trends in workforce planning Research demonstrates that linking formal and informal workforce planning with the organisation’s corporate and business plans is associated with improved business performance. Planning processes themselves have seen a move away from the “one size fits all” approach towards more flexible and customised plans that suit each particular section of the business. In large organisations, each business unit may require its own customised plan with a separate set of HR strategies to support it. Another issue is the emphasis on a more flexible workforce and greater mobility of employees. This is shown by the frequent references in HR literature to “life-long learning”, the widely expressed view that employees are more employable if they move from job to job rather than spending lengthy periods with a single employer, and that most employees will have several different “careers” during their working lives. These trends have two implications for workforce planning: (1) employees will move more often within the same organisation, and (2) employees will (on average) change employers more often. Many larger organisations are moving away from the “replacement planning” approach to a “succession planning” approach, that is, nominating specific employees to succeed someone when they leave the organisation, being potential replacements for specific roles. The “talent pool” approach is also gaining popularity. Selection criteria that considers potential, performance and “commitment” or “values” can be used to identify employees who are to be prepared/groomed for a range of possible positions (sometimes described as “strategic management” roles). However, there is no guarantee of subsequent appointment to these roles. A range of commercially available software packages is available that can assist with the various administrative aspects of the workforce planning process. Although these packages can save time and

money, it is important to ensure that they can be customised to suit the organisation’s needs. Other notable trends affecting the approaches to workforce planning include: • line managers becoming more involved in HR activities (eg the planning process) • more emphasis on building and reshaping corporate culture (eg through the use of various incentives) • greater emphasis on interventions to shape employee behaviour • an emphasis (by some organisations) on recruiting new employees based on the “values” they appear to have, rather than recruiting them for their current skills and previous work experience • separating the responsibility for key sectors of the workforce, such as senior managers and graduate recruits (Procurement and management of such employees may be handled by corporate HR, with line management responsible for other employees.) • managers spending some time working in an HR role as part of their professional development • the need to understand and respond to differences between different generations within the workforce • more emphasis on availability forecasting, prompted by worsening skills shortages in many areas • more attention to the needs and aspirations of mature age employees, with the intention of retaining their knowledge and skills in the workforce for a longer time • the effects of globalisation and greater mobility of employees from country to country (This makes the working environment more complex and unpredictable. It is important to integrate overseas assignments with career planning. A particular problem area is managing an employee’s career while on an assignment as well as when they return to their home country after an assignment. Employers need to ensure that there is suitable career progression and practical assistance available to them (and, in some cases, their families) in both locations to help them adjust when they go away, as well as when they return to the home country. Adequate preparation in this area ensures that the overseas assignment itself is beneficial to the employee’s career and contributes to a longer career plan. Many organisations have experienced high turnover through a failure to consider the needs of assignees while away and when they return. Many assignees will comment that minimal contact with them or their families while they are overseas feels like they are “out of sight, out of mind”.) • planning around career breaks (eg raising children, overseas travel, tertiary study, secondments, voluntary work, sabbaticals and so on), and • the more strategic positioning of the central HR function, with greater involvement in overall business planning.

JOB ANALYSIS ¶9-100 What is job analysis? Job analysis (also referred to as job profiling) is the process of obtaining valid and relevant information about jobs to assist in management planning (including workforce planning) and decision-making. It affects a wide range of HR management activities, such as setting remuneration policies and establishing pay levels. Job analysis collects comprehensive information on: • the actual work content of jobs • the skills, knowledge and abilities required to perform them

• conditions and constraints under which employees perform the work • resources required • outcomes required from performance, and • the methods and measures used to assess achievement of such outcomes. Two important documents usually result from the process: (1) a job description — covering tasks, duties, responsibilities and the working environment, and (2) a person specification — covering knowledge, skills and abilities required to do the job. The use of these documents is discussed in Chapter ¶32. A more holistic approach to job analysis is gradually evolving. Rather than looking at the content of individual jobs in relative isolation, emphasis is shifting towards work analysis: that is, looking at the work and requirements of the overall team and section, then analysing individual roles within it.

¶9-110 Role of job analysis The role of job analysis is to answer the following basic questions: • Why does the job exist? • Is the job actually necessary? • What is done on the job? What are the physical and intellectual activities? • Why is it done? • How is it done? • Where is it done? • When is it done? • What skills, knowledge and abilities are needed to do it? • What resources and work equipment does it require? • What are the features of the working environment it is in? • In what context is the job performed (eg reporting relationships, levels of authority and responsibility, contact with others, level of autonomy, travel, workload, work pressure and so on)? • How does this job interact with other jobs and roles? • What constitutes effective job performance? How is this measured? • What problems have previous and current job holders encountered on the job? • How can the job be changed so as to: – improve job performance? – improve efficiency and productivity? – make it easier to attract and retain employees?

– make it more interesting or satisfying?

¶9-120 How job analysis interacts with other HR practices Job analysis is a fundamental part (often a starting point) of many other HR management functions, which are set out below. Human resources planning Job descriptions and person specifications are a starting point for forecasting HR needs and for projecting labour supply (see Chapter ¶32). Recruitment and selection Job analysis information describes what the organisation is looking for when it recruits new employees and is helpful when matching the job description to the applicant’s skills, knowledge and abilities. If using an external recruitment service, the provision of job analysis information can improve the services they offer. For more information on recruitment and selection see Chapter ¶10. Induction and onboarding Effective induction and onboarding of employees require HR to have a clear understanding of the work to be performed, ensure that tasks and responsibilities are clearly defined and organisational policies are appropriately communicated. For more information on induction see Chapter ¶36. Training and development The ability to identify training and development needs requires a knowledge of what is actually done on the job so as to evaluate the effectiveness of current and future training needs. Performance assessment Job analysis identifies the key activities, outcomes and behaviours required to carry out a particular job. This enables clear-cut performance standards and result indicators to be set so that performance can be objectively evaluated. The person specification helps to assess whether an employee possesses the right characteristics needed to do the job effectively. Job content and requirements may change frequently and rapidly. Job analysis needs to be an ongoing process to keep up with developments and assess the competency of employees as their roles change. Remuneration planning Job analysis information provides a base from which to set appropriate remuneration rates and compare the relative worth of different jobs. Job analysis data can also assist in determining where an employee’s remuneration should fit within the range or band of pay that applies to the job (eg according to the employee’s experience, qualifications or length of time in the job). For more information on remuneration see Chapter ¶11. Work health and safety Job analysis provides an opportunity to identify particular conditions on the job that may affect health and safety, such as hazardous conditions or processes, unpleasant working environments (eg due to heat, noise and so on), and sources of workplace stress (eg extensive travel, physical activity, excessive workloads and so on). The information enables corrective or risk management action to take place. For more information on work health and safety see Chapters ¶12 and ¶57. Equal opportunity Job analysis may reveal ways in which discrimination against some employees is occurring, either directly or indirectly. Indirect discrimination involves setting job requirements that unintentionally discriminate against a group of people. Any discriminatory provisions found in job descriptions or person specifications should be checked to see whether they are essential (eg for reasons of authenticity or safety) and, if not, removed or modified.

If this process occurs, the organisation is likely to be better equipped to defend itself against legal action. For more information on equal opportunity see Chapter ¶13. HR research and evaluation Job analysis information is a starting point to research and evaluate HR management practices. Validation of employee selection practices, or comparisons of different selection methods, are examples of using job analysis data for evaluative purposes. Organisational structure Job analysis can clarify the relationships between different jobs and identify overlaps, duplication and omissions within an organisation’s structure, thus improving efficiency. Career development programs and succession planning Both managers and employees benefit from having a thorough understanding of the range of jobs available within the organisation and how to move from one role to another. Such knowledge can assist managers to offer career advice to employees on progression options and to provide coaching and other assistance where needed. Employees benefit by having a better understanding of their career options within the organisation while knowing that they are being supported by management. For more information on career development see Chapter ¶21. Information on coaching and mentoring is presented in Chapter ¶47.

¶9-130 When should a job be analysed? Job analysis should be an ongoing process and be conducted: • when a vacancy arises that needs to be filled and the job itself has not been evaluated for some time • when there are significant changes to the job caused by technology, new work methods or procedures • during an organisational restructuring or downsizing exercise where existing jobs change, new jobs are created or other related jobs are removed • where there is a dispute between the employee and their manager over job content or performance • when there are frequent employee complaints regarding job content, workload, working conditions and so on • before reviews of remuneration occur, and • if employee turnover is high or increasing.

¶9-140 Methods of job analysis There are a variety of techniques for job analysis, including interviewing employees and their managers, observation of employees on the job, questionnaires, conferences/focus groups, record/diary-keeping and reference sources, such as the Australian and New Zealand Standard Classification of Occupations (ANZSCO: see www.abs.gov.au, Catalogue No 1220.0). The main techniques are described below. Information may be collected either internally or by external consultants or through a combination of the two. Observation of employees Direct observation of employees may provide information about physical tasks, work methods, equipment/resources used, hazards, and working conditions, but it cannot take account of employees’ knowledge, value judgments and decision-making processes. Some tips to follow include:

• observing more than one employee in instances where jobs are similar • advising employees in advance that they will be observed, as well as why and how it will happen, and • avoiding on-the-spot comments about inefficient methods, unsafe practices and so on. Interviews A popular technique is to interview employees, either individually or in groups. Some tips include: • becoming familiar with each job before the interview • constructing a patterned interview questionnaire to obtain specific information • encouraging each employee to think in a logical order (eg describe the most important activity, followed by the second and so on, and include infrequent (but not emergency) duties that are required) • after the interview, verifying the findings with the employee’s manager to determine if there are differences in perceptions • taking notes during the interview and explaining to the employee why you are doing so, and • asking structured questions to identify all the tasks, then attempting to place them in chronological order. Conferences/focus groups This technique involves small groups of stakeholders, which may include employees, managers, union representatives and, possibly, outside consultants. It can be used either to gather information in the first place or to review and clarify the findings of other methods, such as interviews and questionnaires. Questionnaires Questionnaires may be structured or unstructured. They may be created internally or custom-designed for the organisation by an outside organisation (eg by a specialist consultancy) in the form of a standardised questionnaire. Although questionnaires are usually less time-consuming than interviews and enable all employees to be asked the same questions, they are more open to interpretation and require more skill to analyse. Variations in interpretation are a particular problem with open-ended questionnaires. Questionnaires often need to be combined with other techniques, such as follow-up interviews, audits or conferences/focus groups. Diary/record-keeping A diary is a structured recording sheet (or recording device if this is easier) on which employees list each task as it is completed, including start and finish times and other relevant information, typically over one week. The main advantage of this approach is that it can provide more precise information than other methods. Diaries are better suited to analysing managerial and professional jobs which are difficult to observe, but may be unsuitable for certain types of work, such as assembly lines. (Note: It does, however, rely on accurate information being recorded, so this may not be the best method if dealing with a disgruntled employee.) A truly representative recording period needs to be used, with allowances for seasonal variations and peak/off-peak times. Critical incidents Records of employee behaviours that are “critical” as indicators of either very good or very poor performance are compiled, with the involvement of the employee. The method suits jobs where it is important that certain events elicit appropriate responses, such as customer complaints or production

breakdowns. This method is behaviour-based so should be credible to employees and is useful in the employee performance appraisal process. Functional job analysis methods Functional job analysis (FJA) methods use standardised statements and terminology to describe the nature of jobs. For example, the original FJA system developed by the United States Department of Labor, Employment and Training Administration uses a compiled inventory of the various types of functions or work activities that can comprise any job. The inventory contains three categories: (1) Data: This refers to mental functions such as analysing, coordinating, compiling or computing. (2) People: This refers to interpersonal functions such as instructing, supervising, negotiating, serving or persuading. (3) Things: This refers to the use of physical functions such as operating, controlling, handling or constructing. A related system is the Hay Guide Chart Profile System, commercially available through the Hay Group. This system uses three key job evaluation factors: (1) Know-how: This is defined as the sum total of every kind of skill (however acquired) required for acceptable job performance. (2) Problem-solving: This is defined as the amount of original and “self-starting” thinking required to analyse, evaluate, create, reason, arrive at and make conclusions. (3) Accountability: This is defined as the level of “answerability” or “responsibility” for decisions made and actions carried out, and their respective consequences (ie the measured effect of the job on end results). For the purposes of salary-setting, the Hay method uses a points system for each factor, and applies weightings to each one to reflect its level of importance for each particular job. It does not measure factors such as workload, working hours, working conditions, individual job performance or personal effort. Many of the commercially available questionnaires also use variations of the FJA principles. In general, FJA approaches are intuitively logical, based on standardised formats and take into account a range of factors; however, they may be too rigid for particular applications. Other techniques Other possible approaches to job analysis include: • work sampling techniques • studying available records, such as production or maintenance data • recording job activities (eg on a video or film, such as in the case of bus drivers, or “black box” data, in the case of pilots and so on), and • using external databases, such as ANZSCO. Use of combined methods The advantages and limitations of each method mean that it is usually preferable to use a combination of methods of job analysis to obtain more valid results.

¶9-150 Competency profiling

Competency profiling is a technique of job analysis that is able to be linked to organisational goals and objectives. A competency can be defined as an underlying characteristic of a person that results in effective or superior performance on the job. It refers to the application of skills and knowledge rather than the actual possession of them. Competency profiling is, therefore, a technique to determine a set of competencies associated with effectiveness in a particular job or organisation. It seeks to provide a picture of the characteristics that employees need to display (the aim being to have competent employees who can contribute to the overall success of the organisation). Competency profiling can assist with HR functions such as employee selection and identification of high-potential employees. Types of competencies Competencies are typically divided into two categories: (1) generic, and (2) technical. Generic competencies Generic competencies are those which apply to a wide range of jobs or to the organisation in general. They are sometimes organised into “job families”: that is, a range of jobs within a particular occupation, group or location. Generic competencies may be further subdivided into the categories of cognitive and non-cognitive. Broadly speaking, cognitive competencies are similar to the “knowledge” category of person specifications. They include writing, keyboard knowledge, reading and so on. Non-cognitive competencies are personal characteristics required to perform the job effectively, such as interpersonal skills or teamwork. Technical competencies Technical competencies are those required to perform specific jobs and are broadly similar to the “skills” and “abilities” categories of person specifications. Various developments indicate that generic competencies are gaining in importance compared with technical competencies. These developments include the accelerating pace of change in work environments, the shift in job analysis towards a holistic “work team” approach, and the growing emphasis on “knowledge workers” rather than people with specific skills. An alternative approach is the “attributes model”, which comprises three key elements: (1) underlying characteristics — an integral part of the employee’s personality (2) causal link — the competency predicts or directly causes job behaviour, and (3) performance — the competency predicts effective or superior job performance as measured against specific standards. Conducting competency profiling There are several methods of conducting competency profiling. One popular approach follows the sequence outlined below: • Determine the organisation’s key objectives and goals. • Determine the key factors for success in both the short-term and long-term. • Conduct a series of interviews with job holders, managers and other stakeholders to draw up preliminary sets of dimensions for competencies. • Use the interview data to prepare detailed descriptions of the types of behaviour associated with each competency.

• Review the competencies to ensure that they are clearly understood, that they reflect the most important behavioural characteristics for effectiveness, that they are readily measurable and that they are future-oriented. From the above process, prepare lists of job competencies using the guidelines outlined below: • Provide clear definitions of both the positive and negative behaviours associated with each competency. • Present the information in narrative form (eg up to one paragraph for effective behaviour and one for ineffective behaviour) for each competency. • State what the competency means in its specific context. For example, a “decision-making” competency could range from “makes timely decisions based on whatever information is available” to “only makes decisions when all information has been rigorously evaluated and at least two alternative strategies have been considered”. • Make the lists widely available to users, including the current job holders. Competencies generally contain the following components: • performance element — the action(s) that employees must demonstrate (eg typing speed) • performance criteria — the standard of performance required for competence (eg maximum rate of errors), and • performance conditions — the conditions under which behaviour occurs (eg the equipment and resources used) and the range of variables that may affect performance. Although some organisations prefer longer lists, recommended practice is to use a maximum of 10 to 12 generic competencies. Organisations usually develop their own competency lists, but generic lists for various types of jobs are available from commercial providers and from organisations such as training.gov.au (TGA), which has replaced the National Training Information Service. TGA is the official National Register of information on training packages, qualifications, courses, units of competency and registered training organisations. Advantages and disadvantages Following are some advantages and disadvantages of competency profiling. Advantages: • Employees obtain a better understanding of the skills required for effective job performance. • There is a stronger link between organisational goals and individual job performance (ie a stronger “business focus” is achievable). • Focusing on competencies can help to maintain an organisational culture or change it to a more appropriate one. • It provides greater clarity in career development programs and succession planning. • Competencies can be made “future-oriented” more easily. If business practices need to change, it is easier to identify competencies that need to change or be replaced, or new competencies that need to be acquired. Disadvantages: • Ambiguity over what is a “competency” may arise. • The focus is on what has worked in the past, or what works at present, rather than what the future

requires. • There may be an over-emphasis on technical competencies, because they are easier to measure. • There may be an over-reliance on off-the-shelf products and programs to try to save time and cost (customisation will usually be necessary). • The process may identify certain competencies as effective, but the behaviour may be inappropriate in some other way. For example, it may perpetuate discriminatory practices or support bullying behaviour. Most of these problems are less likely to occur if the process begins by clarifying the organisation’s higher level values and strategic objectives.

¶9-160 Problems with job analysis Job analysis and its outcomes have attracted much criticism over the years. Some organisations actually avoid the use of job descriptions and may instead rely on lists of goals and outcomes that are regularly reviewed. The biggest criticism appears to be that job analysis documents are static whereas jobs are often dynamic — changing quickly as circumstances and characteristics of the job holder change. This is particularly true of management jobs, where the incumbent has considerable influence on what is done and how it is done, and much of the work is difficult to quantify. Another issue is the changing structure of jobs, particularly in ways that give employees greater autonomy in how to do the job (eg the increase in “project” type jobs and fixed-term contracts). The rather complex and time-consuming nature of job analysis is a further disincentive. Other criticisms made of job analysis include the following: • It can be vague and unspecific (eg when phrases such as “other duties as required” are used). • Some employees may perceive job analysis to be a threat and a suggestion of a possible looming redundancy, so they may exaggerate or conceal information to distort the findings in their favour. • Lack of participant training and consultation is often a problem where no incentive is offered. • Traditional job analysis methods are best suited to repetitive types of jobs, and these are declining in incidence. • Job descriptions may encourage an inflexible response from some employees (ie “I’m not doing that, it’s not in my job description”). One response to these criticisms is to shift the focus towards “work analysis” rather than job analysis, in order to avoid rigidities caused by perceived job boundaries.

¶9-170 Trends in job analysis Organisations are now focusing on the outcomes and results of work rather than the processes, with employees having greater autonomy in how they achieve these. Similarly, employees tend to have “roles” rather than jobs. Another trend is for job descriptions to be incorporated into contracts of employment and agreed to between the parties before the employee commences the job. It is important for the contract to make provision for accommodating changes that may occur later with the job, such as promotion, transfer or relocation. Laws covering termination of employment have probably stimulated the use of job analysis. It is less difficult to defend a claim of unfair dismissal if the organisation can demonstrate that the requirements of

a job were clearly explained to and understood by the employee, and also that adequate training was provided in how to perform the job. Although it remains a relatively labour-intensive process, job analysis has benefited from the development of a wide range of software packages which, as long as they are flexible to the organisation’s needs, can remove much of the menial work from the process and provide standardised approaches and “solutions”, such as generating job descriptions once data is entered. Other management trends that are challenging the relevance of job analysis include: • fragmenting pay structures • an emphasis on efficiency rather than bureaucracy • flatter organisational structures • greater emphasis on project involvement and teamwork • the removal of many mundane and routine tasks from work through the use of technology • multiple reporting relationships (a consequence of projects and teamwork) • emphasis on communicating the values and goals of the organisation and gaining employee commitment towards them (Job analysis documents need to be aligned with the values and goals.) • devolving of many day-to-day HR activities to line managers so that they may become more directly involved in job analysis and maintain consistency, and • a focus on knowledge management (much of what is defined as “knowledge” cannot be recorded in a formal document, although it may be extremely important for effective job performance). Workplace analysis is a response to the need to adapt to broad-based and more flexible roles, rather than reinforcing past rigidities.

JOB DESIGN ¶9-180 Role of job design Job design examines the employee’s needs. The challenge for the HR function is to ensure that the needs of both the employee and employer are met. Job design takes account of three major factors: (1) technological and engineering factors, such as processes, work equipment, work methods, safety issues and financial constraints (2) human factors, such as human capabilities and limitations, ergonomics, ability to control the work, variety of work, and intellectual challenges presented by the work, and (3) quality of work/life factors, such as the physical and social working environments, equal opportunity, rewards/remuneration, working hours, and work/life balance or flexibility. It includes different types of work arrangements, such as full-time, part-time, casual, job sharing and contract work.

¶9-190 Methods of job design Job rotation This approach does not change jobs, but moves employees from one job to another on a rotational basis. The jobs must offer similar levels of content and require similar levels of skills. The potential advantages of this approach include:

• increased employee flexibility and skills • absence/lateness issues being more easily addressed • greater variety for employees (as opposed to the work offered by a single job), and • periods of relief from unavoidably unpleasant conditions, such as particular physical working conditions. Job rotation needs to be combined with a review of job content to ensure improvement in motivation/job satisfaction and identify resulting increases in employees’ skills. Job enlargement Job enlargement aims to increase the level of variety and challenge in a job by adding other tasks to it. These tasks are at a similar level to the existing ones. The potential advantages here are that the employee finds the job more interesting, they can be more involved and/or the job is considered to be more meaningful/fulfilling. The shortcomings are similar to those for job rotation. For example, the employee could simply end up with a larger range of boring tasks. As with job rotation, it is best used in conjunction with other types of job redesign. Job specialisation Job specialisation involves employees using standardised work methods and performing single repetitive tasks. All planning, organising and control functions are performed by management. The theoretical advantages of this approach include greater efficiency, fewer errors, reduced labour costs and greater ease of control. However, the repetitive nature of the job, the non-involvement of employees (in terms of being able to use initiative, contribute ideas and deal with contingencies), and lack of job satisfaction all mean that other job design approaches are generally preferred to job specialisation. Job enrichment Job enrichment seeks to make jobs more interesting and challenging by increasing the amounts of responsibility, autonomy and decision-making required, as well as offering increased recognition. In other words, the job is a “promotion” from its predecessor. Typical enrichments may include: • extra supervisory tasks (eg planning, checking and organising work) • adding related tasks (eg maintenance or following up) • greater contact or involvement with customers or people involved with the final stage of the product or service, and • eliminating mundane or repetitive tasks by rearranging the job. Note that it is not job enrichment on its own that employees want: they want to make the best use of their skills, abilities and interests as well. Job specialisation and job enrichment can sometimes be successfully combined. For example, a financial planner in a bank might prefer to specialise in a particular subject area, such as superannuation or salary packaging, or might only deal with the needs of a few very high-level clients. They might find this work more interesting and challenging than, for example, promotion to a managerial role in general financial planning. Similar examples apply to other professions, such as law and accountancy. Autonomous work groups Autonomous work groups are small groups of employees, comprising about six to 20 members with complementary skills who are responsible for an entire work process or segment. Group members are mutually accountable, and share a common purpose and performance goals. It is up to the group to

organise how to achieve the work, without direct supervision and with few constraints on flexibility, although management may set targets or goals for it. Whether a job is better suited to individual or group work depends on: • interdependence between workers — technological advances have tended to bring jobs together, but some still require highly individualised work • employees’ social needs — whether they prefer to work in groups, and the effect of jobs on existing social relationships, and • the job’s motivation potential — in general, it is higher as a group task. New or “greenfields” workplaces are often suited to job design based on work groups, as there is usually no entrenched culture to overcome. The potential advantages of autonomous work groups include: • greater variety of work tasks and participation in decision-making which can lead to higher job satisfaction • improved cooperation and teamwork among employees • better use of individual skills, plus opportunities for multiskilling • better decision-making and problem-solving, due to group collaboration and consensus, and • a mutually supportive work environment. On the other hand, groups will tend to develop their own norms and standards, which may become counterproductive in the following ways: • pressures towards group conformity may discourage individual initiatives • “group think” (ie maintaining the group’s cohesion and power takes precedence over impartial evaluation) • conflicts within the group may develop (eg personality clashes) • failure to effectively coordinate with other groups or work sections, and • group decisions may set goals that conflict with management objectives (eg fixed targets that are too low). Flexible work practices Another strategy for achieving a better fit between the needs of employees and the needs of the organisation is to redesign the job to accommodate more flexible working arrangements. Such arrangements may help employees to balance their work and non-work responsibilities more effectively. Research suggests that providing flexible work arrangements is also an effective strategy to retain employees. Flexible work practices are discussed further in Chapter ¶25. Critical psychological states Some commentators refer to “critical psychological states” as essential components of job design. When taken into account, the following states will benefit productivity, motivation and job satisfaction: • Meaning: The employee needs to perceive the job as important, valuable and worthwhile — providing them with a sense of belonging to the organisation. At its highest level, the employee will regard the job as “a calling”. The employee may reach a state of high engagement sometimes referred to as being in “flow”. • Responsible: The employee must feel personally responsible and in control of the results of his or her

work, and • Knowledge of results: The employee must be able to understand how well they are performing.

¶9-200 The job redesign process The following points provide general guidelines for selecting jobs for redesign, assessing their readiness for change, and implementing the redesign process. Analyse existing work situation When analysing a work situation, the following guidelines may assist: • Examine the present work situation, through job descriptions, interviews, employee attitude surveys or climate surveys, meetings and so on. • Identify problem areas from results, statistics, comments and so on. Danger signs may include absenteeism, uncooperative attitudes, communication channels being bypassed, low productivity and quality control problems. • Isolate causes of problems, as distinct from symptoms. Determine whether they are inherent in the job. • Assess the needs and aspirations of employees and relate them to the current job design. • Determine whether job redesign is feasible in terms of technology, organisational structure, job components, workflow, attitudes and social relationships. It may be that it is not possible to improve the job. • Consult with employees, managers and, where applicable, union representatives. • If redesign is feasible and necessary, determine the most appropriate type(s) and technique(s) to be used. • Foster an organisational climate that is likely to be receptive to and ready for job redesign. Implementing changes When implementing changes, the following guidelines may assist: • Determine the most appropriate method of introducing change (eg through project teams, steering committees, pilot projects and/or outside consultants). • Frequent consultation, particularly with supervisors/line managers, should occur during the change periods (eg by setting up discussion groups). • There should be an overall education program which aims to sell the advantages of the changes to those concerned, and also ensures that those involved in implementing changes have the necessary information, training and facilities to do so. • Consider factors such as pay/reward differences, performance appraisal, social work relationships and the effects of changes on any other jobs. • Either a gradual (ie confined to one section) or full (ie all at once) introduction of changes may be attempted. For the gradual approach, start with an area with a high probability of initial success. • Proceed slowly, to reduce the chances of strong resistance (eg through insecurity) and to give employees time to become accustomed to new methods, structures and layouts. • Try to think ahead, and have alternative strategies ready if problems begin to arise (eg demarcation issues or technical problems).

• Do not raise employees’ hopes unduly through the use of fancy but meaningless job titles or excessive publicity. • Include procedures for continuing assessment and review of progress (eg discussing improvements needed after initial implementation). Principles for work improvement No matter what forms of job improvement techniques are considered, principles such as those listed below are likely to apply. If followed, there is more chance of gaining employee support and commitment for better results. • It is both undesirable and economically unwise to use people to do the work of machines or computers. • People need to fully understand their tasks. • The more discretion exercised by employees in performing the work, the more likely they are to assume responsibility for it. • Employees do not resist change — they resist being changed. • It is the responsibility of employees to self-regulate. It is the responsibility of management to provide the information to enable employees to do so. • The people doing the jobs are the best people to improve them in the first instance. • People need training to help them improve their own jobs and the manager’s role is to coordinate their efforts and help where required. • Management should add dimensions to jobs by giving people true discretion; use the natural module of work wherever possible. • Remove the verification procedures and most of the errors will be removed, provided that people agree with the changes. • Divide and distribute work logically into units or modules to give it more meaning by including as many as possible of the work tasks that make up one assignment. • Build elements of discretion and planning into the job. • Include enough activity and challenge to hold the employee’s attention. • The advantages of combining tasks are extra meaning given to the work (by following a job through to completion) and the use of a greater variety of skills to complete the job. • Include client relationships wherever possible. Contact with/feedback from the user of the work output can make the work more meaningful. • Ensure that a manager’s or supervisor’s job is not all about managing and supervising. Include some planning and coordination work as well, but not to the extent that the employee is constantly organising and attending meetings and cannot get anything else done. • Avoid excessive travel. Apart from consuming time in and around normal work hours, it can be tiring, costly and can also potentially disrupt an employee’s family life. • Receiving feedback assists learning and personal growth as employees are made aware of their progress and work quality, and any trends (positive and negative) in it.

¶9-210 Problems with job design Research suggests that most job design or redesign programs that fail, do so because of the way they are implemented, rather than the intrinsic merit of the proposed changes. The most common reasons for failure appear to be: • inadequate diagnosis of the problem (eg the causes may be interpersonal, rather than related to job content) • inadequate knowledge by job evaluators of the jobs, and the reasons why certain tasks are performed • failure to consult with stakeholders (eg this may lead to fears of hidden agendas, such as cutting jobs or increasing workloads) • inability to achieve cultural change, leading to opposition to changes (eg from vested interests) • excessive emphasis on short-term results • failure to provide adequate resources to implement changes (eg training, technology and time) • failure to address support issues, such as performance appraisal and feedback, and remuneration/rewards, and • disruption to employees’ networks and social relationships at work.

¶9-220 Trends in job design Many of the issues discussed under “Trends in job analysis” also affect job design. Flatter organisational structures, project/team-based work, technology advances that make job content more complex and harder to define, emphasis on knowledge management, devolution of HR functions to line managers and the shift towards work analysis rather than job analysis all have implications for job design. Most importantly, the emphasis on outcomes and results, rather than processes, and the focus on roles rather than jobs, have made job design a more dynamic process. Job content and requirements are changing far more rapidly than before in most organisations, and so opportunities for job redesign now occur more frequently. Other trends which are affecting job design are described below: • Workplace relations legislation has twice changed significantly in Australia in recent years. The “Work Choices” amendments by the previous federal government encouraged the spread of bargaining at the individual employee/employer level, and reduced the role and scope of award provisions. Individual employment contracts became more common. However, the “Fair Work” amendments introduced by the current government intended to reverse this trend to some extent, placing emphasis back on the use of collective agreements, although individual contracts remain an option for higher paid employees. • Surveys suggest that working hours for most full-time employees are increasing. The downsizing and restructuring programs of many organisations in the 1990s have contributed to this situation as organisations have attempted to achieve more with less. While the trend has no doubt added to the content of jobs and made them more demanding, it has also led to the demands for more flexible work practices, such as flexible working hours and telecommuting. • Developments in communication (eg the internet, email, smartphones and other types of mobile communication devices) mean that employees can easily communicate with each other without having to be in the same location. • Globalisation means that job designers should no longer confine themselves to studying what is happening locally. The need to be competitive in a wide range of markets requires awareness of and learning from what happens worldwide.

For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References CCH Australia Limited 2003, “Human resources management practices 2003”, Human Resources Management, Sydney. Sullivan, J, 2003a, “The simplest and easiest to use workforce planning model”, IHRIM Journal, May– June, pp 5–9. —— 2003b, “Critical success factors and effectiveness measures for workforce planning”, IHRIM Journal, May–June, pp 11–17.

10. RECRUITMENT AND SELECTION Editorial information

Peter McGraw, PhD Associate Professor and Director EMBA Program, Faculty of Business University of Technology Sydney

¶10-010 Introduction Attracting and selecting the right employees is a critical strategic human resources management (HRM) decision and is connected with many other facets of managing human resources (HR). The words of the many great business leaders support this view. As Steve Jobs once famously noted, “The secret of my success is that we have gone to exceptional lengths to hire the best people in the world.” Jobs lived by these words in leading Apple and involved himself centrally in hiring decisions for key staff. Jobs’ advice is particularly appropriate in times when there is high demand for skilled employees, yet many organisations find it difficult to source appropriately talented and motivated people. Recruitment and selection are core elements of an organisation’s talent management system, and have a major impact on organisational culture. As Jobs again commented, “I’ve learned over the years that, when you have really good people, you don’t have to baby them. By expecting them to do great things, you can get them to do great things. The original Mac team taught me that A-plus players like to work together, and they don’t like it if you tolerate B-grade work.” (Isaacson 2011, 187) Good policies and practices for attracting and selecting the right employees are crucial for building and maintaining a successful organisation and updating overall skills and capabilities. The actions of people are at the heart of all organisational, technological, financial and managerial processes, and the amount of skill and discretionary effort they put into making those processes operate effectively can determine the success or failure of an organisation. It is not uncommon to have good technology and systems, but poor organisational performance because the systems are not operated with the right level of proficiency and effort from the staff. Consequently, an organisation’s success is highly correlated with the quality of its employees. Several research studies strongly support this proposition. For example, studies on the productivity and effectiveness of workers in self-paced jobs have found that the gap between the best and worst performers varies on average by factors of up to three (Arvey and Faley 1988; Goleman 1998). In one study, high-performing employees were found to outperform a control group by 129% on average (Boyatzis 1999). Such findings indicate that attracting and selecting the right people is perhaps the most important part of the entire HRM process, along with motivating and retaining them after they have been recruited. Hiring decisions also have a major impact on the “climate” of organisations. The culture and values of an organisation are both influenced by selection decisions (whether new people are the right fit) and the attractiveness of the organisation to potential new employees. Research (Judge and Cable 1997) reveals that potential employees seek to match their values with the reputation of an organisation’s culture. For example, research by Aon Hewitt in 2013 found that the best Australian and New Zealand employers not only had much higher levels of engagement and commitment from their employees, but that a key factor in enabling the success of these organisations was their ability to attract and retain the most talented

people. Today, successful organisations are defined more and more by service quality indicators and not just their ability to develop innovative products and services. For example, much of the value of a service is determined at the point of delivery in the relationship between the employee and the customer. In this environment, discretionary effort on the part of employees is a vital factor in customer satisfaction. Thus, getting the right people becomes even more important. Talented and high-quality employees are so scarce that the term “the war for talent” is often used to describe the recruitment and selection of these individuals. Analysing the costs associated with poor hiring decisions also provides compelling reasons to recruit and select carefully. Hiring the wrong person can result in severe disruption to an organisation in terms of reduced productivity, poor interpersonal relationships and team morale, reduced customer service levels and high associated costs. In fact, incorrect selection decisions have been estimated to cost between 40% and 60% of the total annual compensation for the position in direct costs alone (Byham 2001). In larger organisations, the recruitment and selection process tends to be managed by the HR department together with line management. In small- to medium-size organisations, it tends to be devolved to the line managers. This chapter will outline good practice in both circumstances and look at the principles and practices of effective recruitment and selection. It should be read in conjunction with other material in this Guide. Selection interviewing, a significant topic in its own right, is dealt with in Chapter ¶35. Other relevant topics covered in this Guide include strategic HRM (see Chapter ¶2), succession planning, workforce planning and job analysis (see Chapter ¶9).

¶10-020 Definitions “Recruitment” and “selection” are words that tend to be used as synonyms for each other. In reality, they are quite different processes. Recruitment refers to the activities that an organisation undertakes to define its staffing needs and attract the right number and type of candidates to fill defined job vacancies. Selection refers to the activities concerned with collecting and evaluating information from all applicants, following a selection process and choosing the most appropriate applicant(s) for the particular position(s) that need to be filled.

¶10-030 Purposes of recruitment and selection The purpose of recruitment is to generate an appropriately sized pool of qualified job candidates from which to select the best person(s) in a cost-efficient manner. More specifically, recruitment may involve: • analysing future staffing needs for the organisation, taking account of anticipated growth • clearly defining job specifications so as to attract only qualified candidates • making sure that the organisation stays within the law and acceptable social norms in relation to recruitment and selection processes • ensuring the process of attracting candidates is transparent and viewed as fair by all, and • ensuring that the practices used support the organisation’s strategic goals and are consistent across the organisation. Models and the recruitment process Breaugh (2008) suggests a step model as a useful approach for organisations’ thinking about the recruitment process. This model involves four steps as follows: (1) Step 1 involves working out recruitment objectives in terms of the numbers, skills and demographic profile of the job applicants they want to attract. (2) Step 2 concerns the need to define a recruitment strategy in terms of actual activities (ie What will be done? (eg online recruiting vs recruitment agency)); When will these activities be undertaken?;

How will they be done? (3) Step 3 involves defining recruitment sources, activities and different methods for reaching potential candidates, determining who will actually do the recruiting, clarifying what content/information will be presented to potential candidates, and ensuring that the administration of the management process runs smoothly. (4) Step 4 relates to reviewing the results of recruitment processes in terms of the numbers, skills, and diversity of applicants, as well as the actual number who join the organisation and the cost efficiency of the process. The purpose of selection is, quite simply, to match the right candidate to the right job. The requirements for successful performance in a job can be classified into four categories: (1) knowledge (2) skills and abilities (3) attitudes and motivation, and (4) values. The recruitment and selection process involves defining the job in terms of the right balance of these requirements and carrying out the right selection procedures to ensure the selected candidate possesses these requirements. There needs to be a balance between the processes used in collecting and evaluating candidate information and the time and cost of ensuring (through the appropriate use of multiple selection methods) that the right match or outcome has been achieved. Overall, recruitment and selection consist of three main activities: (1) Defining needs: This can involve elements of HR planning, as well as drawing up job descriptions/specifications or competency profiles and determining the terms and conditions of employment. (2) Attracting candidates: This involves assessing potential sources of candidates, confirming who will be involved in the process, and determining whether external agencies will be used. (3) Selecting candidates: This involves choosing and implementing appropriate assessment and selection methods, and following up with job offers and contracts. A schematic overview of the recruitment and selection process is outlined in Figure 10.1. Figure 10.1: Overview of the recruitment and selection process

Defining needs At some point, all organisations will need to replace employees who leave and fill new jobs as the need arises. Some of the more systematic work in defining the HR needs of large organisations is done via the HR workforce planning process (see Chapter ¶9) and through job analysis activities. Alternatively, in smaller organisations where there is limited formal HR planning, defining needs may be more ad hoc. In whatever way the need arises, it is useful for organisations to have an authorisation check when a request to recruit for a new position arises. Large organisations tend to use an employee requisition form for this purpose. This is often accessed from a web-based HR administration system or intranet. A simple example of this type of form is provided in Figure 10.2. The employee requisition process can fulfil a number of purposes. It can help to: • provide an opportunity to confirm if a job is absolutely necessary • decide if a simple replacement is needed or whether the job now requires different skills • serve as a basis for drafting the recruitment materials (eg a job advertisement), and • start the process of profiling the ideal candidate in terms of knowledge, skills, abilities, attitudes and values. Figure 10.2: Employee requisition form Requisition form To:

From:

Dept:

Date:

Newly created position:        ☐ Yes        ☐ No When required: Reason for new position:

Job title: Salary grade: Benefits: Permanent   ☐

Temporary   ☐

Contract   ☐

PT   ☐ FT   ☐

From: To:

Duration:

Hours per week:

Qualifications required: Special skills/training: Aptitudes: Years of experience: To be completed for replacement Replacement for: Job title: Salary: Leaving date: Smaller organisations might have more informal authorisation procedures. Nonetheless, they may still find it useful to employ a similar form to help define the profile of the person required for the position, as well as any special requirements. For example, things that may need to be clarified include whether a criminal history check is required or what probationary period might be appropriate. Alternatively, a person specification may be prepared that more systematically defines the qualifications, experience and skills required by the job holder, as well as other important information such as the special demands of the job. As indicated in Chapter ¶9 (on workforce planning), the behavioural and work-based competencies that are crucial to a particular job should be identified. Competencies can be simple and easy to specify (and measure), for example, a role might require intermediate-level skills in software such as Word or Excel. Alternatively, competencies may be more complex, for example, requiring an ability to lead and motivate others. A listing of competencies should be as definitive as possible. This will not only help to define the specification of the job, but will also help the organisation to decide what type of selection methods are most appropriate for evaluating candidates. Job specification details can either be included on a staff requisition form (eg see Figure 10.2) or listed on a separate document. The current trend in HR, especially for larger organisations, is to use competency frameworks to define jobs. An example of a generic managerial competency framework is provided in Table 10.1. Table 10.1: Generic managerial competency frameworks Intellectual

• Strategic perspective • Analytical power • Commercial judgment • Planning ability

Interpersonal

• Persuasiveness • Managing employees • Assertiveness and decisiveness • Communication skills

• Interpersonal/Cultural sensitivity Achievement orientation • Personal drive/Results orientation • Initiative/Capacity for innovation • Organising capability • Impact Adaptability

• Flexibility • Resilience

The most common method of using competency frameworks is to define different behavioural levels of achievement for each competence. This can be done by drawing up behavioural statements corresponding to each level of achievement or, alternatively, drawing up a list of positive and negative indicators for each competence. An example of the latter method is provided in Table 10.2. Table 10.2: Positive and negative indicators of strategic perspective competence Definition: Competence here refers to an individual being able to take an imaginative and insightful approach to the development of strategy while being able to identify key issues and relationships that are relevant to the achievement of long-term goals or the overall vision. Positives • Can go beyond the detail to see the broader issues

Negatives • Loses sight of goals to be achieved • Is preoccupied with the immediate

• Takes account of wide-ranging sources of information and influences • Has the ability to logically assess the impact of different influences • Has the ability to maintain a clear vision of longterm objectives and goals

• Takes a limited and short-term view of future developments and possibilities • Has an inability to prioritise short- and long-term objectives adequately • Is expedient and loses sight of values and the organisation’s vision in the pursuit of objectives

• Builds organisational resources, constraints and values into long-term direction setting A simpler and older method of defining the characteristics of the preferred job holder (previously referred to as a person specification) is to define the job in terms of the knowledge, skills and abilities required to perform the job at an optimal level. Defining factors may include the following: • physical make up — health, appearance, bearing and speech or specific characteristics (eg good eyesight, hearing and so on. Note: These must be relevant to the role.) • knowledge and attainments — education and/or work-based and specialised training levels — often specified at minimum and desirable levels • intelligence — overall intellectual capacity • specific aptitudes/abilities — such as verbal, abstract or numerical reasoning, mechanical dexterity or spatial ability • interests — intellectual, artistic, recreational and social pursuits, as relevant to the role • personality factors — such as extraversion, openness, self-reliance, influence over others and dependability

• personal circumstances — such as having the ability to travel or work long hours. The drive to introduce flexibility into work practices has seen some organisations replace mechanistic methods of defining jobs with performance contracts. Performance contracts contain information about goals that the job holder agrees to achieve over a period of time along with some behavioural standards. Typically, performance contracts will contain a clause which allows the goals to be adjusted by agreement between the job holder and the organisation, thereby signalling to the new recruit the expectation that his or her job may be redefined as circumstances change. Attracting candidates The first issue to consider is what approach the organisation will take to attract the right candidates. Recent thinking on HR suggests that organisations should market themselves as a “brand” (Minchington 2010) in the sense that, as a desirable place to work (and displaying certain characteristics), the organisation can attract the best high-potential job applicants. With “brand awareness” in mind, a good starting point is then to analyse the strengths and weaknesses of the organisation as a whole, and in relation to the specific job under consideration. This analysis might cover issues such as the organisation’s reputation, the intrinsic interest of the work on offer, role autonomy, pay rates, fringe benefits, career prospects, training and development opportunities, and the location of the workplace. The next step is to consider how these strengths and weaknesses compare with those of competitor organisations (this exercise is often referred to as “benchmarking”) and where that “positions” the organisation against the other organisations and hopefully identifies what differentiates them from the rest. The outcome of the exercise might initially result in a focus on specific positive aspects of the organisation in organisational recruitment/advertising materials, while it works on the areas where it needs to improve as an employer. The need to be more attractive to employees has led many organisations to seek to increase the value of their employment “brand” by becoming an “employer of choice”. Employers of choice are usually designated as such by virtue of awards received in annual competitions, such as those run by Aon Hewitt (Best Employers), the Australian Human Resources Institute (AHRI Diversity Awards) or the Workplace Gender Equality Agency (WGEA Employer of Choice for Women Awards). However, organisations which self-promote as employers of choice need to be mindful that they will have to live up to the designation on an ongoing basis. Some employee surveys indicate a growing level of cynicism relating to this practice. Another major issue is whether an organisation prefers to recruit internally or externally. As Table 10.3 indicates, there are pronounced advantages and disadvantages associated with each option. Table 10.3: Advantages and disadvantages of recruiting internal and external job candidates Internal candidates

External candidates Advantages

• Increased knowledge of the candidate’s abilities is available

• Larger pool of candidates • New skills and ideas brought into the organisation

• Candidate has knowledge of job requirements and the organisation

• Can be cheaper than training internal candidates

• Good for employee morale

• Reduces possibility of favouritism

• Organisation needs to hire only at base level

• Encourages existing employees to stay competitive in terms of skills development

• Lower cost • Can address diversity considerations • Provides a demonstrated reward for good performance

Disadvantages • Can lead to insularity

• Increased difficulty and risk associated with recruitment and selection process

• Can encourage infighting for promotions • Longer training and induction periods needed • Requires effective training and appraisal systems • Internal candidates might feel overlooked • Unsuccessful candidates can become discontented

• New candidate might not “fit” culture • Higher cost

When an organisation is recruiting internally, options around which methods should be used for attracting candidates to roles are typically restricted to an internal database search, general advertising via a newsletter, an email alert, or a notice posted on the HR intranet. Effective use of an internal database is dependent on the organisation maintaining a comprehensive HR information system with an up-to-date skills database. Options for external recruitment are listed below: • Employee referral: This is where existing employees refer new people to the organisation. It is common with referral systems for the referring employee to be paid a fee for this service once the new employee has served a satisfactory probation period (usually a minimum of six months). • Advertising: This is the most common and traditional method of publicising job vacancies to large numbers of people. Advertising should target the most suitable medium for particular jobs. This might include: – online jobs boards such as Seek, CareerOne, and industry or profession-specific recruitment websites – national, state and local newspapers, depending on the location of the role(s) – professional and technical magazines (eg for general, skilled, professional and managerial jobs). When writing advertising copy, it is appropriate to use the job description and person specification or competency profiles to guide the wording. It is also useful to think about what will make the advertisement attractive to the type of candidates that are sought (although this should be balanced against research findings which show that job hunters prefer hard facts to hyperbole). • Educational institutions: These can be a good source of applicants (whether first time students or mature students who have had a career but who may be retraining in another area) with formal training but limited experience. Most educational institutions have liaison staff for linking likely employers with graduates. • Professional associations: These represent the interests of different professions and typically have a job placements function with associated advertising or relevant vacancies. • Employment agencies: In Australia, employment agencies are mainly private companies, although some retain levels of government support. Agencies usually respond to a client brief and then refer qualified candidates to the organisation if they believe them to be suitable. Therefore, a thorough briefing session with the client at the start of the process is essential to minimise the risk of unsuitable candidates being referred. Some agencies take a generalist focus, whereas others specialise in recruitment for a specific professional area (eg accountancy, engineering, environment and so on). At the agency level, the Australian recruiting market tends to be segmented into three levels: (1) labour hire organisations, such as Manpower and Drake, which provide services for the administrative and support sector as well as traditional blue-collar jobs (they also provide other

more general recruitment services) (2) middle-level managerial agencies, which typically cover positions in the $70,000–$200,000 per annum salary range, and (3) executive search firms, such as Korn Ferry or Heidrick and Struggles, which tend to cover higher salary positions. Agencies will generally specialise by these levels and by industry, and there is a proliferation of smaller, more specialised organisations. In addition, there are many online job market/job board websites (eg Seek) that agencies can tap into to advertise or search for candidates. Seek claims to be Australia’s largest online job site, has 150,000 jobs online at any given time and receives nearly 15 million visits per month. Recruitment via an agency is a relatively simple process for both the client and the prospective candidate, with the agency essentially providing an online matching service with a host of ancillary benefits for both job seekers and employers. Ancillary services include career and resume advice, salary survey data and articles on trends in various job markets. • Recruitment consultants: Consultants often provide a more extensive service than others. They will often profile the position requirements, advertise, interview and provide a short list of candidates, some of whom will be in the consultant’s placement system. In this sense, some consultants act as brokers or agents. Armstrong (1996, p 457) recommends the following steps when using consultants: – agree on the terms of reference up front – brief the consultant on the organisation, where the job fits in, why the appointment is to be made and any special requirements – help the consultant to define the job clearly and the person most likely to fit the job (person specification) – check the proposed program as well as the text of any advertisements – clarify the basis on which fees and expenses will be charged, and – ensure that arrangements are made to deal directly with the consultant who will handle the assignment. • Executive search firms: These organisations are usually used for very senior jobs. Unlike consultants, they do not find positions for job seekers but tend to seek out candidates who fit the specific requirements of a particular job. They tend not to advertise but rely instead on their own research, networks and databases to find candidates. Typically, these “head hunters” (as executive search firms are colloquially known) are expensive and can charge up to 50% of the first year’s salary for a successful placement. • Networking: Networking has always played a significant role in recruiting but has seen a large increase recently with the growth of large-scale web-based professional networks such as LinkedIn. Traditional networking involves a more or less constant search for top quality candidates. Existing organisational staff will regularly spread word-of-mouth information about available positions and look for superior candidates within their networks of friends and associates. Other elements that can contribute to networking efforts involve the use of trade shows, customer contacts, academic connections and alumni networks, professional associations, recruiters and executive search firms. Specific initiatives might include sending current staff to industry professional associations and to conferences where they are likely to meet potential candidates. Professional association websites and magazines have also been used to advertise for professional staff. • E-recruitment or online recruitment: Recruitment using online resources, is now becoming the most

important component of the recruitment strategy for a wide range of organisations worldwide, as well as an increasingly popular method for job seekers in searching and applying for jobs. The internet can be used to facilitate any or all of the main processes of attraction (advertising/recruiting), selection (web-based screening) and assessment (online interviews and testing). In addition, erecruitment can be used in parallel to support applicant tracking and workflow systems. E-recruitment has been enthusiastically adopted by existing recruitment and advertising agencies and the explosive growth of LinkedIn and other web-based networks has seen major shifts in recruitment practices and the emergence specialists in the area. LinkedIn claimed to have almost 300 million professional profiles at the end of 2015. The major benefits of using the internet and webbased professional networks for recruitment purposes include: – ease of use and direct access to candidates – amount of coverage, both geographical (worldwide) and in terms of target audience (all candidates looking for jobs in certain fields can be automatically notified of vacancies) – reduced costs per hire when compared with traditional methods – shorter hiring cycles – improved quality and frequency of candidate responses – recruitment can be tailored more precisely to required job/candidate profiles, and – facilitates the use “big data” tools and technologies to build profiles of high performing staff and use this to screen candidates. However, internet-based recruitment does come with some disadvantages. Front-end efficiencies may be counteracted by inefficiencies at the back end related to filtering the good applications from the hundreds or thousands of bad or irrelevant ones. This highlights the need to use effective filtering software or services which can be sensitive to well-defined criteria relating to candidates who may fit the job profile. Other challenges encountered by organisations in implementing e-recruitment have included problems with technology and difficulties in tailoring e-recruitment systems to meet specific needs in a recruitment process. • Social media: Social media platforms such as Facebook, Twitter and Google+ provide powerful platforms for organisations to connect with potential job candidates. By the end of 2015, Facebook had over one billion members with many people visiting the site on a daily basis. Employers have been quick to embrace these new platforms and the majority of large organisations have their own Facebook page through which to connect with stakeholders, including dedicated careers tabs. In summary, there is no one best method of attracting candidates that will suit all circumstances. The choice of method will be determined by many factors. For example, in a tight labour market where good candidates are scarce, agencies and the use of personal/professional networks are likely to be more costeffective than general advertising. Alternatively, filling a low-level job quickly might dictate the use of a labour hire agency. Where a strategically sensitive appointment is necessary, the use of an executive search firm may be justified. Evaluation and selection process The process of evaluating job applicants can be thought of as passing people through a funnel, with candidates being filtered out as they progress. At the end of the funnel the organisation is left with only the qualified candidate(s) to whom they can offer the job. The process often begins by requiring applicants to fill in an application form. Increasingly, these are webbased. They may form part of the original application, requiring basic contact details about the applicant

and perhaps answers to specific selection criteria in lieu of a cover letter. These forms will then be attached to the curriculum vitae or resume. An initial application form has the advantages of: • allowing the applications to be compared with one another in the same format and on the same basis • enabling the organisation to determine what information should be sought, and • specifying information that will be useful as a basis for later interview questions. Once a candidate has completed an application form, a decision needs to be made either to reject it immediately, or to progress the application to the next stage of the process. A standard response should be sent out to each candidate at this stage indicating receipt of the application and, unless rejected immediately, a note that further advice on the selection process will be sent. When evaluating candidates at this stage, reference should be made to how the candidates match key criteria of the job and the person specification or competency profile of the job, as well as other relevant criteria. Applications can be sorted into possible, marginal and unacceptable groups. An alternative or supplement to the process outlined above is to screen applicants over the telephone or using web-based technologies such as Skype. This may be particularly useful in situations where there are a large number of possible or marginal candidates, or where applicants are geographically distant. Where telephone screening is employed, questions should be designed carefully around the essential job and person criteria, and notes taken indicating the reasons for rejection or progression to the next stage. Around this point, a decision is required about how many applicants to take to the final stage of the selection process. There are no hard and fast rules for this — calling in a large number of applicants has the advantage of allowing a large range of qualities to be assessed, which can be especially appropriate in situations where personal qualities are important for the position: but has the obvious disadvantage of being time-consuming. As a general rule, however, it is useful to try to draw up a short list of between four and six candidates for final selection, but it must be remembered that the number of applicants shortlisted should be dependent on the quality of applications. Another option in the short-listing process is to arrange for candidates to undertake basic testing to determine their suitability. This is discussed further in the next section.

¶10-040 Selection techniques Various techniques can be employed in selecting and assessing candidates. Some of the more common ones are presented in Table 10.4, along with some indicators of the cost and validity associated with each technique. As can be seen from Table 10.4, some techniques have more validity than others, but choosing the right technique or combination of techniques varies according to each selection scenario. The advantages and disadvantages associated with these techniques, and the situations in which each one is most appropriate, are discussed in the following section. For a detailed discussion of selection interviewing see Chapter ¶35. Table 10.4: Common selection methods, cost and validities Selection technique

Cost

Reliability

Validity

Behaviourally based interview

Low

High

High

Unstructured 1:1 interview

Low

Low

Low

Structured Panel interview

Low – Medium Medium – High Low – Medium

Assessment centre

High

Cognitive ability test

Medium – Low High

High

High Medium – High

Work sample test

Low

High

High

Aptitude test

Medium – Low High

High

Personality test

High

Low – Medium Low – Medium

When discussing selection techniques, the reliability and validity of each technique should be taken into account. Reliability refers to the extent to which a measurement device produces a consistent result over multiple uses. Research on selection reveals that easily observable characteristics (eg verbal fluency and sociability) can be more reliably measured using an interview than, for example, emotional stability, which is more deeply embedded in the personality and is, therefore, not easily observable. Validity refers to how well a measure assesses a fundamental attribute that is a predictor of job performance. Accordingly, while verbal fluency may be measured reasonably reliably in an interview, it does not necessarily mean that verbal fluency is a good predictor of performance for a given job. Different jobs may require different techniques to be used for reasons of validity, even if the actual technique has a lower reliability score. Perhaps the best example of this is the unstructured one-to-one interview. It has a low reliability score, but is considered essential in most selection procedures because of the need to judge a candidate’s sociability and other attributes that can be reliably observed in an interview (Gatewood et al 2008). Assessment centres Assessment centres take a comprehensive approach to selection, and are usually used for management candidates. These centres incorporate a range of techniques typically based on behaviour assessment. Some very large organisations run their own assessment centres, but it is more common for smaller organisations to use the assessment centre services of HR consulting firms. Candidates in an assessment centre will normally undertake a range of observed group-based and individual problemsolving exercises that simulate real managerial tasks. In addition, candidates may also be required to complete psychological and cognitive ability tests and interviews. The elements of assessment centre activities are usually evaluated by multiple raters who are professionally trained in the type of assessment being used. Candidate performance is usually measured using competency frameworks, such as those discussed earlier and illustrated in Tables 10.1 and 10.2. In some cases, target levels of demonstrable competence are established for different levels or for different organisations. The assessment of values can also be covered by assessment centres, providing good opportunities for determining whether or not a candidate will fit in with the prevailing culture of an organisation (motivational fit). Overall, assessment centres provide a well-rounded view of a candidate’s abilities. They also have a high level of reliability and a high validity for managerial jobs and executive appointments, particularly those with complex competency profiles. The major drawbacks of assessment centres relate to the costs and time involved. Cognitive ability tests Cognitive ability tests typically involve tests of verbal comprehension, numerical ability, abstract reasoning, inductive reasoning, pattern recognition and memory. These tests have been used in AngloSaxon countries since the early 1900s, are reliable and have good validity. They are typically used for middle to senior level positions and are often used as part of the “multiple hurdles” approach. That is to say, passing such a test does not qualify a candidate for the job, but failing one may legitimately be used as a basis for eliminating a candidate from further selection procedures. Work sample tests As the name implies, work sample tests require candidates either to provide samples of their work (eg a portfolio) or to complete verbal or physical activities that are closely related to real work tasks. As a result, work sample tests have a high reliability and validity. The major problem associated with these tests is the possibility of less than optimum performance due to anxiety in the testing environment. Aptitude tests Aptitude tests attempt to simulate work sampling tests in conditions where the candidate has not worked in the job before. The key issue with these is the validation of the test as a good predictor of success in

relation to the actual job. Tests can be purchased to cover a range of areas, with the most common relating to clerical and numerical aptitude and mechanical or physical dexterity tests. An example would be using tests relating to fine motor dexterity (carving) as an entry test for students wishing to study dentistry. Cognitive ability, work sample and aptitude tests can sometimes be obtained from HR consultancy firms as well as directly from organisations such as the Australian Council for Educational Research. This review of the most commonly used selection techniques has briefly outlined some of the advantages and disadvantages associated with them as well as their differing validities. No one method will be right for all situations and, thus, the choice of technique should be considered in relation to the circumstances of each selection decision. Equally, no technique is without the possibility of error. Uncertainty in selection can best be reduced by using multiple techniques, but the drawback of doing this is the amount of time and cost involved. Follow up At the conclusion of the selection process, a provisional offer can be made to the preferred candidate over the phone. In many cases, this is subject to satisfactory references being provided, as well as any negotiation concerning the remuneration package. Written references should be treated with a degree of caution by employing organisations for a number of reasons. First, if the references are provided by the candidate, they are likely to be only positive. Second, in the current climate of litigation, many employers are wary about saying anything even vaguely negative about a candidate. Third, even if well meant, opinions about character and suitability can be very subjective. In the face of these obstacles, many organisations now refuse to provide written references and will provide only a simple statement of employment. Verbal (telephone) references can be more useful because people are likely to be more candid when their comments are not in writing. These also have the advantage of being quick to obtain, questions can be targeted to the specific job requirements, and can be sourced from a wider group of people. On the whole, references of any sort should be treated with caution by potential employers. The final stage in the recruitment and selection process is to detail the offer in writing, confirm acceptance and prepare the contract of employment. Until confirmation of acceptance has been received from the preferred candidate, it is useful to maintain an active list of other candidates who qualified for the position as a back-up. However, all unsuccessful applicants should be treated in a professional, tactful and courteous manner and be notified as soon as possible. Anti-discrimination/equal opportunity law Anti-discrimination/equal opportunity legislation is referred to in Chapter ¶4 and discussed extensively in Chapter ¶13. Readers should consult those chapters for more information on the concepts and legal obligations that employers are expected to be aware of, and comply with. Briefly, though, it is worth noting that the law requires fair treatment for all members of the community, and for recruitment and selection to be based on merit. This means merit selection, or selecting the best person for the job on the basis of only their job-related skills. Candidates must not be discriminated against on the basis of race, sex, sexual orientation, religion, nationality or other non-work-related factors. This should be reflected in all recruitment and selection processes.

¶10-050 Conclusion This chapter provides an overview of the process of recruitment and selection and a consideration of the major choices that an organisation faces at different stages of that process. The advantages and disadvantages of various options have been outlined. Each recruitment and selection process is likely to be different and must be geared to the unique organisational circumstances and the amount of time and resources the organisation is prepared to use in order to reduce uncertainty. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References and further reading

Aon Hewitt 2013, 2013 Best Employers in Australia and New Zealand, accessed 11 January 2016, see www.aonhewitt.com.au/Document-files/Aon-Hewitt-Best-Employer/Publications/2013-Best-Employersinsights-presentation.pdf. Armstrong M 1996, A Handbook of Personnel Management Practice, 6th edn, Kogan Page, London. Arvey RD and Faley RH 1988, Fairness in Selecting Employees, Addison-Wesley, Reading, MA. Boyatzis R 1999, “The financial impact of competencies in leadership and management of consulting firms”, Working Paper, Department of Organizational Behavior, Case Western Reserve University, Cleveland, OH. Breaugh JA 2008, “Employee recruitment: Current knowledge and important areas for future research”, Human Resource Management Review, vol 18, pp 103–118. Byham W 2001, Targeted Selection, Development Dimensions International Inc, Pittsburgh, PA. Goleman D 1998, Working with Emotional Intelligence, Bantam, New York. Gatewood RD, Field HS and Barrick MR 2008, Human Resource Selection, 6th edn, South-Western, Cengage, Mason, OH. Gratton L 1991, “Job hunters want facts not hype”, HR Monthly, May, p 25. Isaacson W 2011, Steve Jobs, New York; Simon & Schuster. Judge TA and Cable DM 1997, “Applicant personality, organizational culture and organization attraction”, Personnel Psychology, vol 50, pp 359–394. Kramar R, McGraw P and Schuler R 1997, Human Resource Management in Australia, 3rd edn, Longman, Melbourne. Minchington B 2010, Employer Brand Leadership — A Global Perspective, Collective Learning Australia.

11. REMUNERATION MANAGEMENT Editorial information

Chris Westacott Managing Director, Realise Performance

¶11-010 Introduction Remuneration is one of the central factors in the engagement of employees. Accordingly, designing a structure of salaries, wages, conditions and benefits as a total package for employees in an organisation is complex, with constraints such as the requirements of workplace legislation, National Employment Standards, modern awards and enterprise agreements, and the organisation’s financial capacity and location driving many key strategic and tactical decisions. This chapter has been designed to guide managers who are already working in a human resources (HR) practitioner role. It is also aimed at senior line managers or functional managers with responsibility for (or an interest in) the basic principles of remuneration management and the strategic approaches by which remuneration can be used to enhance organisational performance and competitiveness.

¶11-020 Pay The aims of pay The payment of salaries and wages is intended to achieve the following basic aims: • to attract and retain suitably qualified employees to the organisation to perform the work required • to motivate employees to perform competently to the level of work required to perform their role • to encourage employees to improve their skills, abilities and knowledge so as to improve job performance and go beyond what is required of them, and finally • to ensure that people who are aligned with organisational objectives receive appropriate recognition and reward to acknowledge this alignment. Factors which affect pay rates A number of factors will influence the setting of individual pay rates. The relative importance of each factor will vary according to the size and type of organisation. Table 11.1 lists the key factors requiring consideration when setting pay rates. Table 11.1: Key factors Marketplace •

labour supply and demand (locally, regionally and nationally) is becoming increasingly important as Australia’s population ages and skills become more scarce



the introduction of minimum rates of pay in modern awards and enhanced employment conditions in employment legislation



the expansion of enterprise-based agreements with specific provisions that benefit employees in that organisation only and which that may not be an industry norm



rates paid by competitive and/or local employers to buy in skills they need



cost of living fluctuations, and



technological change.

Organisation •

capacity to pay



job classification and value



workforce planning issues (eg ageing workforce, specific skill needs)



public image or “branding”, and



structure.

Individual •

skills and competencies (the more scarce the skills the higher the premium to attract and retain that skill)



job performance



individual potential



overall compensation package



performance reviews and assessments, and



equity (eg gender equity).

Wages or salary? Generally, a wage is a payment made on an hourly basis, so an employee’s wage is directly related to the number of hours worked. Fluctuations may occur each week according to variations in the number of hours worked during that pay period, overtime rates, and shift and other loadings will also apply. Employees who receive a wage are generally employed under the provision of a modern award and/or an enterprise agreement. Wages are normally paid on a weekly or fortnightly basis. Salary is a uniform payment which remains the same each pay period regardless of the number of hours worked. Although a salary may not be affected by overtime rates, shift or special loadings, it may be part of a remuneration package which includes fringe benefits. Generally salaries are paid to employees on an individual basis and not reflected in either modern awards or enterprise agreements. Salaries are normally paid on a fortnightly or monthly basis. Principles of wage and salary administration Regardless of organisational size, the setting of wages and salaries requires observation of three basic principles: (1) equity or fairness (2) marketplace competitiveness, and (3) motivation of the individual. These principles are described in the following paragraphs. Equity or fairness Equity or fairness is based on relativities within the organisation. Factors to take into account include skills and qualifications required, experience, working conditions, degree of supervision or responsibility, job performance, location and, finally, type of work performed. The

degree to which equity or fairness is achieved and maintained depends on the success and accuracy of job analysis. Job analysis is the process used to compare jobs. It ensures that jobs requiring the same level of competence and skill are positioned and compared against other jobs that are at the same level. It is essential to not only apply equity or fairness in wage and salary administration, but also for employees to know that these principles are encouraged and carried out. Knowledge among employees that certain other employees or employee groups are being treated more favourably in similar jobs can have disastrous effects on morale and, ultimately, labour turnover and costs. Equity will also be affected by outside influences. In particular, many employees have their wages and conditions influenced by a modern award covering their industry or occupation. Many multi-enterprise or industry enterprise agreements also incorporate award provisions as a base minimum. Other external factors include availability of prospective employees (eg a shortage of employees in a particular category will tend to push wage rates upwards relative to other categories) and the influence of non-monetary aspects involved in compensation (particularly where variable benefits are allowed under total cost concepts of compensation). The result of these influences will be that inequities in wages and salaries will inevitably occur, with limited means available to control or correct them. However, a sound and consistent remuneration policy will at least reduce the chances that these situations will occur. Marketplace competitiveness People are not going to work for an organisation if its rates of pay are substantially lower than other organisations in the same industry or geographical area. If an organisation allows its rates to fall behind market rates, employees may leave to seek employment elsewhere. Various means (eg surveys, monitoring job advertisements, conferences and phone enquiries) are used by employers to maintain their knowledge of market rates and developments. The “marketplace” may be defined as: • the community — general economic and labour market conditions • the industry — the industry group in which the firm operates (eg retail trade, manufacturing) • functional — job categories, such as computer programmers, registered nurses, electricians, or • geographic — other firms operating in the same suburb or city. Rates tend to vary among different locations according to travel distances and other factors (eg country versus city, or outer suburbs versus inner city). Executive salaries may be influenced by the global marketplace, either through organisations wanting to develop consistent salary policies at all their multinational sites, or by the marketplace itself which now operates globally at the senior executive level. All of these variables are also affected by labour supply and demand factors and fringe benefits offered. Another factor which has to be taken into account is the organisation’s own financial position and its capacity to pay. Motivation of the individual The relationship between pay and motivation is very complex. It is based on employees’ perception of what their pay level should be. Such perception is influenced by comparison with others and by assessment by the employee of the value of the work. The outcomes of work must be valued by the employee before they become useful as a motivational tool. The theory covering this relationship is often referred to as the expectancy theory. Employees behave in such a way as to achieve a desired outcome, such as rewards or social approval. Wage and salary setting is likely to have the greatest impact on people with a strong need for money. Expectancy theory assumes that the reward structure in an organisation is directly related to work performance. If employees perceive that this is the case, and if pay is of sufficient importance to them, it is likely that they will try harder to gain the extra reward. In such cases, the reward would need to closely follow the action. Another aspect of the expectancy theory is that if employees think a set goal is unattainable, or if the

reward is not worth the effort, then they may not be motivated to lift performance in the hope of achieving the reward. When setting bonuses, piece rates, incentives and other potential increases, this attitude should be considered. Goals should be realistically and achievable. Motivation may also be affected by the level of job satisfaction an employee experiences. Job satisfaction is the sense of gratification that a person derives from the job they are performing. It usually arises from the person’s relationship to their work, supervisors, and/or the general work environment. Pay is an integral component of all three relationships. An employee has expectations as to what the level of pay should be, based on job values, psychological needs, economic needs, amount of effort involved and working conditions. Employees evaluate their individual situation and compare it with other jobs and other individuals. If a gap is perceived between what the individual feels is a “fair rate” and what is actually received or what others appear to be receiving, then dissatisfaction will result and motivation will probably also suffer. Generally, the actual level or amount of pay will not be as important as its comparative level with other employees’ pay. Thus, dissatisfaction is more likely to arise over perceived inequity rather than actual amount. Unlike most motivators, money is a precise measurement and, therefore, is considered by many employees to be an ideal basis for comparison. Other factors Other factors which may affect job satisfaction and its correlation to pay levels are general economic needs (eg dependants, cost of living and inflation rates), the method of determining pay (eg performance appraisals and length of service), education level, compensatory factors (eg hours, fringe benefits, working conditions and location of workplace) and the influence of group pressures and the socialisation process. Developing and implementing a remuneration strategy The major steps involved in the process of developing and implementing a remuneration strategy are as follows: • Linking remuneration to the organisation and its people: The organisational context will drive decisions around employees’ pay. When developing a remuneration strategy, it is important to fully understand the organisation’s objectives and environment, including external and internal influences, and how these impact on the design and implementation of the remuneration system. • Internal analysis: The internal analysis processes determine how the organisation wishes to define the positions and roles within the organisational structure and how internal equity between the roles/positions is assessed. It includes job analysis to document the roles/positions and job evaluation or position matching to determine their relative importance, which is often translated into a grading or banding structure. • Market comparisons: The organisation uses information from remuneration surveys to establish external equity. These comparisons may be carried out by individuals within the organisation itself using external surveys from consultancies, government agencies or employer groups. Alternatively, the market review may be outsourced to a consultancy/professional services firm. Position matching or job evaluation may be used as the basis for assessing the relative remuneration practices of a position compared with a nominated external market. • Remuneration range and reward mix: This step involves deciding on the definition of remuneration that best applies to the organisation, the mix of components to be used and the remuneration range for each role or grade/level. It will also establish how individuals will move through the remuneration range (eg based on performance or other criteria, such as competencies). • Communicate and implement the remuneration strategy: Establishing the credibility of the remuneration strategy and systems will depend on effective implementation and the quality of communications. • Evaluate the strategy: The rate of change affecting all organisations ensures that it is critical to

regularly review the remuneration strategy. The challenge for organisations is to ensure that the organisation is maximising the return from its remuneration investments. Communication and implementation Effective communication and implementation are the key elements in the alignment of remuneration to business strategy. One of the most obvious objectives of any remuneration strategy is to attract, motivate and retain employees. Therefore, employees need to have a complete understanding of the total rewards available to them and how their performance is intrinsically linked to these rewards. Communications programs should address the variety of audiences that comprise an organisation. To be most effective, communications programs should be tailored to the different employee groups. Many communication efforts fail because insufficient management buy-in has occurred before the announcements go out to employees. It is critical, therefore, for there to be communication with managers at all levels. Employers can gain an enormous benefit by offering managers a preview of the reward offering and asking for their support, since front-line managers often have the strongest influence on employees. Operational/administrative staff (eg payroll or HR) are often responsible for the day-to-day administration of remuneration and reward programs. As such, they need the most detailed information and training. Their support and understanding of each remuneration project are critical to creating the initial and strongest impression with staff when the program is being delivered. A variety of communication materials will help engage employees and generate interest in the rewards program. The use of print media, the intranet, group meetings and team meetings can all enhance an employee’s understanding of the organisation’s rewards. Having the materials readily available will make the program more relevant and memorable, particularly to those employees who may not have needed the benefit at the time it was first announced (and so didn’t pay attention, or have since forgotten about it), but who may need it now. Finally, all materials should have a uniform image. From individual statements to plan descriptions, the material presented should use shared graphics, words and writing styles. When an employee looks at an element separate from the whole, they should immediately know that it is part of the total rewards strategy. Evaluation An important but often overlooked step in establishing a remuneration strategy is to regularly measure and evaluate the effectiveness of the remuneration strategy. This includes questioning whether the remuneration strategy and its implementation are delivering the expected outcomes. If this is not the case, then the strategy needs to be modified. Effective remuneration management is about ensuring that the remuneration strategy remains current and relevant. Pay and performance Performance pay schemes provide pay increases to employees where specified, quantifiable results have been achieved. Pay progression reflects the success that individuals have in achieving their targets. The trend towards rewarding performance is about rewarding output rather than input. Linking pay and performance ensures that both management and employees alike understand and take objectives seriously, and this shared understanding helps to create a performance-focused work culture. The incidence of performance pay schemes has increased over recent years. This is attributed to: • the value of concentrating on future performance, rather than past performance, being realised • the need to reward “good performers” when specific skills are in limited supply (retention of highperforming staff is important to organisations to ensure sustainability) • organisations taking more of an interest in having a “performance culture”, which emphasises organisational results and improved business outcomes • systems of total quality management emphasising the need for high quality performance of individuals

and the organisation as a whole, and • employers focusing on productivity improvements and accepting that the gains delivered by these improvements need to be shared if more improvements are to be realised.

¶11-030 Salaries A salary is a regular and fixed rate of payment which does not vary according to hours worked. Payment by salary enables greater flexibility with respect to hours worked. The flexibility inherent in salaries offers several advantages for both the employee and employer. These advantages include: • the ability for an employer and employee to negotiate the salary amount in addition to conditions of employment (which may be different from other employees) • merit being used more readily when making pay decisions • employers having the freedom to respond to pay fluctuations caused by the labour market, and • fringe benefits and incentive payments potentially being used and individualised, thereby increasing their effectiveness as a motivational tool. As a very general guideline, employees on salaries have typically been managers, executives, professional, technical or graduate employees. Essentially, they have been people holding roles identified as having the potential to progress within the organisation. However, in recent times, salary structures have also been used to attract and retain certain individuals with unique skills that are in short supply. Salary structure The first step involved in deciding on a salary structure within an organisation is to formulate an overall salary and compensation policy. A number of different types of salary structures are available for use. When evaluating them, a number of factors will need to be taken into account, such as the: • legislative framework in place at the time • capacity for the organisation to effectively analyse and evaluate jobs • psychological and personal factors affecting employee work performance and motivation • actual level of job performance and the ability of managers and the organisation (as a whole) to measure this performance objectively • overall relationships between pay, job satisfaction, motivation and job performance, and the use of pay as an incentive • nature and usage of the overall remuneration packaging in the organisation • relationship of remuneration to the organisation’s overall HR plan • organisational constraints (eg budgetary/financial), and (most importantly) • need to observe the three fundamental principles of equity, marketplace competitiveness and employee motivation.

¶11-040 Techniques of salary administration A number of techniques are used in the administration of salary. These are covered in the following paragraphs. Job evaluation Job evaluation is the most widely used means of determining the relative value of one job in the

organisation with respect to others. It consists of two components, usually referred to as a “job description” and “job specification”. A job description refers to the actual features of the job, namely its purpose, type of work performed, responsibility and accountability (and in some cases hours, location, and so on). Job specification refers to the qualities required of the employee to perform the job successfully, and covers aspects such as skills and competencies, level of education, physical requirements and personality traits (if appropriate). When compiling a job specification, distinction should be made between what is desirable to carry out the job and what is essential. Various methods can be used to compile information about different jobs. Work study methods, observation, statistics, personal interview and questionnaires, or a combination of several of these, have all been used. However, to set appropriate salary/wage levels for each job, it is necessary to find some means of using this information as a form of comparison between different jobs. The comparisons will need to differentiate between jobs in terms of the skills and competencies required, areas and level of responsibility, level of supervision required, prestige, importance, degree of difficulty, degree of variety, location, working conditions, quantity and quality of work required, equipment used, unpleasant features and any other factors used as distinguishing features. The methods of job evaluation may be either analytical (where jobs are examined and compared by reference to individual criteria and components) or non-analytical (where entire jobs are examined and compared without being broken down into individual criteria or components). The most common basic techniques of job evaluation and comparison are: • ranking • grading • direct market pricing • the points system • factor comparison, and • competency-based systems. These techniques are discussed in the following sections. The main disadvantage of a system based purely on job evaluation is that, on its own, it does not allow for differences between individuals in quality of job performance. This aspect can, however, be catered for by having salary/wage grades and ranges which allow for variations in pay between jobs of similar value and/or by including a performance-based pay element as part of the system. A purely job-based pay system may encourage employees to focus on behaviour which will gain them promotion or increased remuneration rather than effective job performance. See ¶11-050 for more information. Example of job evaluation-based system: the Hay system The Hay system is possibly the best-known job evaluation system. Others have been developed over recent times which are derivatives of this system and designed to enhance the system’s reliability. The Hay system uses three key job evaluation factors: (1) know-how — defined as the sum total of every kind of skill (however acquired) that is required for acceptable job performance (2) problem solving — defined as the amount of original “self-starting” thinking required to analyse, evaluate, create, reason, arrive at and make conclusions, and (3) accountability — defined as the answerability for decisions and actions and for their consequences (ie the measured effect of the job on end results). A points system applies to each factor, and weightings can be applied to each factor to reflect levels of importance for different types of jobs. For example, “know-how” factors may be much more important than “problem solving” ones in a particular job, but in another job the situation may be reversed.

The system focuses on relative rather than absolute measures. It does not measure factors such as working hours, work load, working conditions, individual job performance, personal effort or on-the-job behaviour. Once the job evaluation process has been completed, other factors such as job performance, merit, market rates and salary ranges can be taken into account. Ranking Ranking is a simple and expedient technique. Each job is considered as a totality, and then listed in order of its total value. This may be done firstly within individual sections, which are then merged to form an overall rank order for all jobs in the organisation. New jobs are slotted in later by comparison with existing ones. A variation of ranking is the paired comparison method (sometimes also referred to as the direct consensus method), under which each job in a group is compared with each other one, and rated either above or below it until a final order is formed. Limitations of ranking are as follows: • It does not measure the “distance” between different jobs and the differences in their pay rates. • It considers jobs as a “whole” only, not their individual components. • The employee currently performing the job may have undue influence over its ranking. Grading This is also referred to as job classification. Under this method, jobs are graded or classed according to factors such as levels of duties, skills and responsibilities. To do this, jobs are divided into groups or families and appropriate measurement yardsticks chosen for each group. Differences in the factors imply differences in pay. The method is widely used in the public sector, social welfare and occupational modern awards, such as the Clerks Modern Award. Its main advantage is that it is readily understood by employees and accepted by them as a valid means of measuring jobs. It suits situations where there are a large number of similar jobs in the organisation. However, it can become rather rigid in its approach and may also become inadequate for groups of jobs containing complex or intangible factors, or complex organisations with diverse jobs. Direct market pricing Direct market pricing is a technique by which salary and wage grades and ranges are set almost entirely according to the results of salary and wage surveys (see ¶11-130) instead of job content. Job descriptions are prepared and the going “market rate” obtained for as many jobs as possible. Benchmark jobs are identified from these results and used as the basis for construction of grades and ranges, according to the range of market rates obtained. Those jobs for which market rates cannot be obtained are then positioned according to how they compare on job content. Direct market pricing has the potential to offer greater external equity than other salary- and wage-setting techniques, but also suffers from the following drawbacks: • the surveys conducted must be very detailed and cover as many jobs as possible • the comparisons with other companies will only be as valid as to the extent to which jobs can be matched to those in other organisations • internal equity may be more difficult to maintain, as the importance of job content in rate-setting has been reduced, and • care needs to be taken that anti-discrimination legislation is not breached when two jobs of similar content level are “priced” at markedly different rates. The points system

Under this system, certain standardised factors of jobs are isolated and given a value or weighting (ie a percentage of a total possible score). The higher the total score, the greater the job value. In each case, the job description is compared with the subsections and an appropriate points allocation made. These points are totalled to give an overall score for each job, which may then be used for ranking or grading purposes. Points progression is usually arithmetical (eg 10, 20, 30, 40, 50), but can also be based on percentages (eg where each number increases by 10% over the previous one). The main advantage of the points system is stability, as the system can be used for a wide variety of positions and accommodate new positions provided measurement criteria are kept up to date. It is probably the most objective system available and can be carried out independently of money values. The system has some limitations. The importance of individual factors varies widely between jobs. For example, the level of interpersonal relations skills will be far more important for a salesperson or HR practitioner than, say, a mining engineer where they may require a greater weighting to be attached to certain factors (eg education or technical skills). In many cases, factors will also tend to overlap. Both weightings and choice of factors are arbitrary decisions, which may be subjective and difficult to communicate to others. It is fairly time consuming and involves much clerical detail. It works best if all jobs have at least some features in common. Factor comparison Factor comparison is basically a more sophisticated method of ranking. It could be seen as a “bridge” between ranking and the points system. Each position in a group is ranked according to a number of different factors within the job, which are common to all other jobs, and the rankings of each factor totalled to form an overall ranking order for each job. In other words, instead of a total points score, a total ranking score is the end result. Descriptions are prepared for “key” (or “benchmark”) positions representing the complete range of jobs within the organisation. Generally, there are between 15 and 30 “key” jobs to assess in a large organisation and proportionally fewer in a smaller one. The advantages of this method are that it: • can be custom-tailored to suit a particular organisation • adapts well to computerised systems, and • is the most effective system at measuring differences between jobs. There are several drawbacks however: • Large amounts of time and clerical efforts are required. • “Key” jobs can be difficult to identify. • The best jobs are usually those which exist in many other organisations. • It may be hard to find factors which influence a wide variety of types and levels of jobs, restricting use of the system. • Finally, due to the complexities associated with this system, organisations need to have access to professional consulting support. Competency-based systems A competency-based system links pay to employee attainment of defined skills and abilities. As employees acquire extra skills and abilities and are able to use these in their work, they can progress to “higher level jobs” and, by definition, higher pay rates. A competency standard is a statement of the level of skills, knowledge and attitudes required of a person in a particular job. Competency standards can be organisation-based or curriculum-based. The preferred approach is to have the standards make sense to employees in the organisation, but directly linked to

industry standards, thereby facilitating effective comparisons that can be drawn across an industry. The advantages of competency-based systems are that: • they are regarded as fair and highly objective (either you have the competency or you don’t) • they encourage employees to acquire extra skills and knowledge to progress to higher “steps” with higher pay levels, and • the system is easily understood, with clear links between acquisition and demonstration of competencies and higher pay. Employees know what is required of them before they can progress to the next level. The disadvantages are that: • on their own, they cannot cater for differences in the quality of performance between employees, only whether or not they have particular competencies, and • competencies can be very time-consuming and tedious to identify, define and measure. As such, organisations may need to engage professional support to ensure the system developed is appropriate for their organisation. If a competency-based system is used, it is very important that the organisation’s training and development function supports it, giving employees ready access to opportunities to develop competencies and acquire new ones. Practices such as study leave and payment of educational expenses should also be considered to help facilitate this process.

¶11-050 Establishing grades and ranges Once jobs are evaluated and adequate information is obtained, it is necessary to determine the relationship between differences in the value of each job and variations in each pay rate. In many cases, a compromise will have to be made between market value and job value, as in many skilled job areas the two will not coincide. Frequent adjustments to values may need to be made in such areas. Grades The need to move to a formal grading structure will depend on the sophistication of the job evaluation technique used. While most organisations have grading mechanisms, the advent of flexible remuneration arrangements means there is now no longer the same pressure to “classify” at a higher level of precision. Organisations are tending to review existing grading structures and either “broadband” where appropriate or, in some cases, move to different classification approaches which are more complementary to, say, total cost concepts of compensation. A larger organisation, with more specialist areas and a generally more complex structure, usually has a much larger range of grades than a smaller one. A large number of grades will be more difficult to administer and tends to institutionalise job demarcations: hence, the move to broadbanding. Care is needed to avoid placing boundaries between jobs traditionally dominated by males and jobs traditionally dominated by females when job evaluation results are close together. This could lead to allegations of discrimination being made. Salary ranges The concept of a salary range based on variations according to merit, age, experience, length of service, qualifications, and so on, is still widely used. Within reason, the wider the range for each job or grade, the more flexibility the system will have, although practicable upper and lower limits will need to be set. A single, flat “rate for the job” offers the employee a certain amount of security and protection. However, it also implies that there will be little variation in performance away from a certain “average level”. There is little opportunity to offer incentive or motivation to employees to improve job performance.

On the other hand, a relatively wide range for each wage/salary job grade offers the following potential advantages, because of greater flexibility: • distinctions can be made between good, average and poor job performance, with employees rewarded accordingly • rewards for seniority, length of service or loyalty can be made without deviating from the basic principle of payment according to merit • there is more scope to make periodic pay adjustments (eg as a motivational tool) • problems arising out of job gradings (eg unique features of certain jobs) can be more easily absorbed • variations due to outside factors, for instance market rate movements, can be catered for without causing major distortions or disruptions to the basic system • the speed at which individual pay rates increase can be varied according to merit and market demand, and • some opportunity is available for “compensation” of an individual (due to lack of a higher available vacancy for some time and a desire not to lose that individual). A flexible salary range system will usually have areas of overlap between different grades (ie the upper levels of a high grade will be similar to the below-average levels of higher grades). This does not matter — the grade is based on the job itself, but the position in the range depends on the individual in that job. It is feasible that an above-average performer in a low-level job can be paid more than a mediocre performer in a higher rated job. When setting a minimum rate, care must be taken to ensure that it is not below the rate prescribed by a Modern Award which could apply to that job. In general, an “average” rate for the job will be decided upon first (assuming the job has an average employee performing it in an average fashion). Upper and lower ranges will be worked out from that point. It is estimated that the overall range will vary by between 30% and 50% around the midpoint (ie 15%– 25% either side), although the range used tends to increase as jobs move further up the scale in importance. Establishing a range is shown by the example presented in Figure 11.1, where job performance is used as the criterion for positioning within the range. The range established will become directly related to the performance appraisal process. Figure 11.1: Establishing a range Upper limit, say $57,500 Commendable performance of job

} 10%

Acceptable performance of job

} 5% } 5%

Less than acceptable/provisional } 10% performance of job

Midpoint value of job, say $50,000 Lower limit, say $42,500

The midpoint will need to be adjusted from time-to-time to preserve equity and allow for market adjustments. Other steps or “zones” of performance within the range may be created, although this is not essential and could lead to unnecessary rigidity in some cases. Size of the range will be influenced by a number of factors, such as anticipated tenure in job, availability of promotional opportunities, frequency of pay reviews, size of pay increments, likely variation in performance level between employees (generally, ranges tend to be wider for more senior jobs), assessment system used and the values placed on non-merit factors such as seniority, past performance

or length of service. Usually, ranges vary by about 20%–50% around the midpoint value. Movement within ranges Several types of salary/wage increments are used, such as those based on age, length of service, skills or economic factors. However, the most effective types of increments are those based upon job performance. Where an employee is performing to expectations they receive an increment based upon market movement. If they are not performing to expectations their salary/wage is frozen until such time as they perform to the expectations required from the role. It is important to note that non-performance does not equate to a reduction in salary/wage. Legally, once an employee is being paid at a particular level, this level can only be changed with the consent of the employee. Care is needed to avoid employees reaching the upper limits in their grades too early as this will leave them nowhere to go and may result in them becoming demotivated. It is also important to remember that — for employees whose wage rate is linked to a Modern Award — the bottom of the wage range must be equal to or in excess of the rates outlined for the employee’s job classification in the Modern Award. Relationship of ranges to grades The overall salary/wage structure in an organisation will consist of a number of overlapping grades and ranges.

¶11-060 HR’s role in salary administration and checklist Typically, the organisations HR function establishes a set of guidelines for salary reviews and line managers recommend salary increases within these guidelines and within the salaries and wages budget. The following checklist activities give line managers input into salary determination as well as enabling HR staff to set the parameters for line managers’ decision-making.

HR CHECKLIST: EFFECTIVE SALARY ADMINISTRATION □ Establish salary ranges and guidelines for merit increases. □ Provide guidelines for rates of pay for each position using job evaluation. □ Allow managers the authority to set individual pay rates within the range specified in the guidelines. □ Monitor how each business unit is paying its staff in relation to the guidelines. □ Consult with managers about the ongoing appropriateness of the salary ranges. □ Monitor each business unit’s payroll costs and include these as part of the regular management reporting. □ Provide accurate information, support and assistance to line managers.

¶11-070 Performance pay and incentive plans Performance or “at risk” pay Performance pay is a system of remuneration whereby pay rises are contingent on meeting certain targets in relation to productivity and profitability. Employee remuneration may consist of a base component and an “at risk” component which is conditional on the employee meeting given performance targets. The system may be used for every type of employee, from senior executives to non-managerial

workers. Performance pay aims to reward output rather than input and to increase the emphasis on business performance. It is generally based on key performance indicators (KPIs) which may be individually based (eg a bonus for a salesperson who reaches a certain sales target), or collectively determined (eg an incentive payment for all workers if there are no industrial disputes in the workplace for six months). Performance pay is not always paid for what can be termed “hard” targets, such as volume of production per employee or reduced production costs. Performance-related pay may also be based on certain “soft” targets which are more difficult to measure, such as improvements in industrial relations performance, lost time due to absenteeism/turnover, quality, employee work performance/time schedules, vehicle delivery/supply time schedules, workplace safety performance, customer satisfaction levels, or the achievement of organisational or departmental objectives. The development of a scheme for performance-related pay must take account of the particular features of the organisation. There is no “blueprint” and performance-related pay is not necessarily suitable for all organisations. Introducing performance-related pay requires consideration of: • the groups of employees who will participate • the relationship of performance-related pay to the current system of pay • the intervals at which performance-related pay should be paid to be most effective • whether the achievement of targets assists organisational objectives and whether targets are achievable, and • whether payment is to be dependent on 100% achievement or if there are to be gradations of achievements. Incentive schemes Incentive schemes overlap with performance-based pay. Performance-based pay refers to the basis of ongoing remuneration. Incentives are more often linked to specific work performance. Incentives can differ from performance-based pay in two respects: (1) time frame — incentives are often linked to a specific project and the achievement of project goals, and (2) types of reward — incentives need not be financial: they may be in the form of goods, prizes, awards and benefits (eg additional holidays). Both performance-based pay and incentives are used to reinforce the key factors in the organisation’s success and the standards that are expected. Incentive schemes can be part of a culture of recognition and reward which, if developed and implemented well, can create a high performing culture in an organisation. However, if implemented incorrectly, they can become a major organisation liability. Other potential advantages of incentive schemes include: • increased team/work group motivation • the opportunity for employees to earn more money linked directly to their individual performance, potentially increasing their level of motivation • increased job satisfaction (eg due to recognition for improved performance and the chance for employees to gain greater control over their work performance), and • improved employee retention through greater job satisfaction. The need for incentives — basic principles The first principle of performance-based pay and incentive schemes is that they should address

organisational issues. They should not be introduced without an investigation of the need for them and information that indicates they will serve a worthwhile purpose. Incentive schemes can be introduced in response to many different situations. Employee disengagement is another driver for incentive schemes. Employees who are actively disengaged are less productive, less loyal and less likely to provide excellent customer service. Sales staff are more likely than other employees to be participants in incentive schemes involving financial and non-financial rewards. However, the impending skills shortages and the ageing of the workforce are both forcing attention on tailoring incentives more to the individual motivational needs as one way of fostering retention. How incentives work Effective incentive schemes need to be based on more than a superficial understanding of employees and the work situation. Incentives must be seen as part of the larger picture of the relationships between performance and reward, and this relationship can in fact be quite complex. The task is not a simple matter of identifying the right rewards: it is about creating a system of people initiatives that focus on the individual and, in turn, feed organisational performance. To achieve this more complex dynamic, managers have to ask more incisive questions. For example, if performance is below expectations: • What are the possible causes? • Is it a lack in skill or knowledge? • Do workplace systems create obstacles? or • Are existing incentives out of touch with employee needs and motivations? Two aspects are considered: (1) the work situation, and (2) employees. The work situation The work situation includes the structure of jobs and systems, including work processes and remuneration. Changes may need to be made in these areas. Employees’ perception and understanding of these factors are the starting point for designing incentive schemes. An effective incentive scheme is grounded in the employees’ understanding of the organisation and how it works. Employees should know how their actions affect the organisation’s performance and, in particular, long-term sustainability. They should also be aware of costs and customer satisfaction. In short, everyone should understand what makes the organisation a success. This exercise results in a dual focus on: (1) building the expectation that improvement will occur, and (2) recognising that improvements will require things to be done differently (ie doing the same things and expecting a different result is flawed as it is more likely to lead to the same results). The principle underlying the focus on the work situation is that the intention of an incentive is to ensure that employees receive a reward for delivering the improved performance. Conversely, a virtuous system of incentives seeks to avoid failure. Failure to reach goals is demoralising and can lead to mutual accusations between workers and managers of lack of integrity, capacity or commitment. Employees Managers also need to respond to fundamental human needs. If the daily experience of employees is unsatisfying, then an “Employee of the Month” program or any other program that is seen as a gimmick will not “fix the problem”. The penetrating question that managers have to ask is — does the work

situation address the employees’ human needs?, the principal needs being that: • the work undertaken has meaning, and • the employee understands how their role and performance fits together with the organisation’s goals and objectives. Managers often make the mistake of thinking the answer to performance issues lies in offering more money, either by lifting base rates of pay or through conditional increases (ie financial incentives for higher performance). A wide range of research exists that indicates that the relationship between money and performance is not so simple. First, there are individual differences between people in the importance they assign to money as a motivator. For some, it is important as an indicator of status or achievement. Second, money can be seen as satisfying a basic need, but may not be sufficient to motivate a person to higher performance. Money in this sense is a threshold factor and extrinsic to the job. The drivers for high performance, in contrast, need to be intrinsic to the job and the work environment. This perspective recognises that a single initiative is seldom sufficient to achieve workplace results. Incentives alone will not ensure the achievement of performance goals. The strategy may need to also involve training and work practice changes. Employees must value the incentive; therefore, the most effective incentive may include bonuses, increases in status, forms of public recognition, or selection to work on a special project. Pitfalls of performance-reward schemes Broadly, incentives are aimed at keeping employees engaged, improving performance (individual and organisational), and fostering morale and employee satisfaction. Often, however, employees become dissatisfied with the incentive scheme itself. A number of common reasons have been identified for the failure of incentive schemes, as follows: • Schemes did not pay off for employees: Performance targets were not met because the targets were either unrealistic or unachievable due to changes in market conditions. • Employees said they could not influence the outcomes: In seeking to balance increased remuneration against increased revenue, the organisation errs on the side of proving the incentives “add value to the business”, so the measures become too broad. For example, production employees object that achievement of the targets relies on actions by others (eg sales or marketing) over which they have no control. • Complexity: The attempt to target different groups of employees leads to a complex “portfolio” of measures and goals. Workers then select those that are easiest to achieve and neglect other measures that may be just as important to the overall organisation performance. • Boosting base pay instead: The company shifts away from at-risk incentives and pours its budget into across-the-board increases in base pay, which erodes the development of links between individual rewards and organisational performance. Schemes may fail to achieve their objectives for a variety of reasons. Sometimes schemes fail because the targets unintentionally reward inappropriate behaviour. For example, in a call centre, linking performance pay to measurements, such as volume of calls processed, without considering the quality of the call and the ability of the person to satisfy the callers needs, may result in the caller feeling that the organisation is not interested in them, resulting in a loss of a customer. Further problems can occur when employee targets are constantly changed or targets are set from above without consultation with employees who know and understand the market. Other potential pitfalls to be considered are as follows: • safety risks increase due to the organisation striving for higher output (eg lack of machine maintenance and care of operation)

• high taxation of extra payments may be a disincentive • linking rewards to goals which may not be measurable (eg team spirit — can this really be objectively measured?) • schemes may create feelings of inadequacy in those who cannot keep up • quality control may suffer, particularly if inequities result for those employees not under a scheme • schemes may leave employees feeling disappointed and/or frustrated if incentive rewards are overlooked or presented badly (eg the promised reward is never delivered or is simply left on the employee’s desk) • if the incentive is awarded too long after the work is performed, the link between performance and reward will not be reinforced • schemes restricting eligibility may have the effect of reducing motivation • schemes that aim to demonstrate any degree of accuracy may do so only at the far extremes — excellent or very poor performance • a numerically-based scheme may not be able to adequately describe the subtle but important differences and gradations in people’s work, and • performance schemes may capture behaviour that is more a reflection of how the individual was managed than of the individual’s effort or potential. Types of schemes A variety of performance-based pay schemes exist. A brief description of some of these follows. Team-based pay and total remuneration Not all work can easily be subdivided into individual, measurable targets for employees and it may be appropriate for results to be team-based, or a combination of team-based and individually-based. Table 11.2 shows some of the advantages and disadvantages of individual and team schemes. Table 11.2: Advantages and disadvantages of two schemes

Individual

Team

Advantages

Disadvantages

Pay is directly dependent on individual’s performance

Performance may be affected by factors outside individual’s control

High motivation if objectives are achievable and relevant

Costly to operate

May be simple to measure

May generate divisive earnings differentials

Develops team spirit

Pay may be regarded as remote from individual’s effort

“Peer pressure” may enhance performance

Good performers may feel “held back” by others and become demotivated

Stability of earnings

Needs organisational culture to be team oriented

Common objectives Traditional approaches to pay have focused on fixed pay for individuals, based on individual jobs. Team-

based performance reward programs are differentiated from other reward programs by the types of goals which are set (eg team-based) and by the interdependence of the team members’ activities. Team-based pay can operate as an “add-on” to individual remuneration — as shown in Figure 11.2. Figure 11.2: Fixed and variable pay

Possible models “Profit sharing” involves the allocation of a percentage of a defined profit figure distributed equally among individuals who participated in activities that delivered the profit. It is often defined by a percentage of fixed remuneration. Such schemes may also require individuals to achieve their own objectives to be eligible — so there is an interaction between individual and team performance. “Gainsharing” is an organisation-wide system which links monetary reward to the achievement of an agreed productivity or financial goal. The whole team is rewarded when goals are achieved. Typically, a gainsharing plan pays out on three to five productivity indicators. The payout is usually in the form of a lump sum bonus. Gainsharing schemes link cash rewards with the achievement of agreed productivity or financial goals. When introducing gainsharing, a reduction in salary is demotivating. An alternative is to retain a salary percentage increase and then pay it as a bonus at the end of the year, contingent on performance. The following issues must be considered when establishing a team-based performance plan: • Is there a team? • Will creating a team ensure better performance and still be cost-effective? • What are the measures that are to be assessed and are they in line with the corporate objectives? • Is the plan flexible enough to accommodate change and allow input from all the team members? Team-based pay systems are not the answer for all organisations. They must be reviewed in relation to cost versus benefit and must link with the organisation’s priorities and current culture. Gainsharing In some gainsharing plans, a percentage of the employees’ share of the bonus (usually 25%–30%) is held in reserve to act as a buffer against times when performance targets are unable to be met due to unforeseen circumstances. Another typical gainsharing system is to share the results of some productivity improvements between management and employees (eg cost and waste reduction), whereas quality improvements accrue totally to employees. An example of components of a typical plan is presented in Table 11.3. Table 11.3: Components of a typical plan

Indicator

Measure

Outcome

Productivity

Each 1% improvement

1% of base pay available for bonus payments

Quality

Each 1% improvement

1% of base pay available for bonus payments

Customer satisfaction

Each 1% increase

1% of base pay available for bonus payments

Safety

Each period without lost-time/accidents

1% of base pay available for bonus payments

The major problem with gainsharing is finding performance indicators which can be clearly linked to pay. Gainsharing does not work well in a poor industrial relations environment, nor in organisations which are not in sound financial health to begin with. To be effective, it also needs to be supported by employee training and retraining. Pay-at-risk (or variable pay) Pay-at-risk schemes are gaining in popularity. In such schemes, base pay is (frequently) reduced and further pay is earned through a performance-reward scheme. This sends a clear message that high performance is crucial. Employees share with the company both the risks and rewards of business. The main attraction of variable pay to employers is that employees are rewarded for high performance but the reward does not become an ongoing cost by being incorporated into base pay. The potential reduction of current remuneration by placing it at risk is likely to be demotivating. Placing future increases at risk can strongly tie performance to desired goals however. Goals should be easy for employees to understand and control. The aim of such a scheme is to reward results rather than efforts. Variable pay is that part of wages or salary which is always “at risk” (eg individual bonuses, team incentives, gainsharing plans, share schemes, profit-sharing and recognition awards). Common performance measures for different levels include the following: • Middle and senior management — profitability and revenue or income generation • Clerical and supervisory staff — quality and timeliness, and • Production staff — production volume and quality. Different kinds of variable pay schemes are effective in different situations. See Table 11.4. Table 11.4: Desired outcome versus variable pay system used Desired outcome

Variable pay system used

Link pay closely to performance

Individual bonuses, recognition awards, team incentives

Encourage participation

Recognition awards, team incentives, profitsharing schemes

Retain employees

Cash, profit-sharing, discretionary share options, restricted share schemes

Communicate business objectives

Individual bonuses, skill/competency-based pay, discretionary share options

Note: Some of the rewards in the table are non-cash. Planning and implementation Studies into incentive schemes have returned varying conclusions. A study in 2008 by Condly, Clark and

Stolovitch concluded that incentives made a positive difference to performance. Their study consisted of a meta-analysis of a large number of existing studies as well as their own surveys and interviews. The overall evidence indicated to them that carefully designed incentive systems increased the value that employees assign to important work goals, and significantly improved the level of performance. Schemes based over longer periods were more effective than short-term schemes — the data from their study showed that schemes with a one-week horizon resulted in a 20% gain in performance, while schemes with a six-month horizon resulted in a 44% gain. Team-based incentives resulted in a higher increase (45%) than individually-based incentives (27%). Incentives improved both quality and quantity of performance, and monetary rewards were preferred to rewards-in-kind (eg gifts, travel). Money delivered a 27% increase in performance compared with a 13% increase for rewards-in-kind. Over half of the respondents to the survey reported that incentives had resulted in the achievement of company objectives, and only 8% said they would have achieved the objectives without incentives. Moreover, the study concluded that incentives did not destroy personal, intrinsic interest in work. Rather, rewarding people for exceeding goals causes them to value work more, and increases their selfconfidence and their loyalty to the organisation. Faith in incentive schemes has also been expressed by employees. In a 2005 poll by Maritz Incentives: • 66% of employees felt that an incentive award program either strongly or somewhat affected their future/continued employment at a company. There was a stronger showing from younger employees (74% of 18–34-years old and 57% of 45–54-years old), and • 68% agreed that additional reward opportunities would motivate them to be more productive at their jobs. Again, there was a stronger level of agreement from the younger employees (79% of 18–34years old and 60% of 45–54-years old).

¶11-080 Designing and implementing incentive- or performance-based pay schemes — checklist The following checklist presents factors that should be considered when designing and implementing an incentive- or performance-based pay scheme. Schemes can be complex and must be implemented very carefully. If care is not taken, they can be hard to dismantle once established.

FACTORS FOR CONSIDERATION — CHECKLIST (1) Types of incentives Incentives may be financial or non-financial. It is important to distinguish what kind of reward will be offered. A cash bonus tied to increased production levels alone is a relatively unsophisticated incentive. A more effective incentive scheme may also incorporate the following elements: • a commemorative item (eg a plaque or certificate) which reinforces the incentive long after any cash has been spent, and • a presentation in front of work colleagues. Non-financial incentives can be relatively inexpensive. They may include the following: • a letter of appreciation • a plaque • a service pin • a gift of the employee’s choice from within a specified range of goods, or

• travel (Note: As this is more expensive, it is usually tied to specific incentive projects.) (2) Suitability To be effective, the reward must benefit the employee. If employees are already highly paid, a financial bonus for attendance may have limited effect. An incentive scheme must be custom-tailored as much as possible to suit employees’ varying needs. (3) Budgeting Organisations should make an estimate of the likely benefits (eg increased output or sales) compared with the estimated costs of running and setting up a scheme. Budgeting should be linked to the organisation’s annual budget process. It is recommended that business units have the ability to set their own budgets and manage these within the context of the organisation-wide scheme. Reward levels should be set by line managers based on each individual’s performance and its impact on overall results. For example, in a financialincentive scheme, a junior office clerk performing at the same level as an office manager would expect to be rewarded in a manner consistent with his/her relative contribution (eg the same percentage of salary). The implications of financial incentives and reward schemes should be assessed for individual employees as well as for the organisation. Payments may affect an individual’s taxation levels and/or the organisation’s fringe benefits liability. (4) Coverage As many employees as possible in the organisation should be able to participate in the scheme. Confinement to a small area of employees can create equity problems with other staff. When an incentive scheme is linked to an organisation-wide strategy, such as high-level customer service, all employees — both full-time and part-time — should be included. Some organisations even include temporary and trainee employees so as to extend the positive aspects of a scheme as far as possible. Objectives are then consistent across the organisation. Note: it is important that pay equity is not disturbed. (5) Realistic targets Targets must be realistic otherwise employees will not bother aiming for them. Employees must also be aware of what is expected of them. Setting realistic targets is closely connected with consultation (see point 7). (6) Measurement Equitable standards are needed so as to measure performance. Quantitative measures should be used wherever possible: but qualitative standards can be just as effective. For example, when measuring customer service (an area which is traditionally harder to measure than, say, manufacturing processes) the following standards could be used: • knowledge of customer needs • initiative • accessibility • responsiveness • enthusiasm, and • teamwork. Measurement against standards can be a result of feedback from various sources: • production and sales figures (where able to be directly linked to the individual or group)

• customers, and • line managers, other line managers and employees (ie internal customers). (7) Consultation Consultation with line managers and employees and their representatives is essential. Effective incentive schemes are designed so that line managers can tailor them to business unit objectives. To do this, line managers and employees must define tasks and activities which can contribute to these objectives. Employees are more likely to support an incentive scheme when they have been directly involved in planning the scheme. Where an incentive scheme is linked directly to customer satisfaction, customers can also be included in the consultation process. Customers may not only give feedback on an employee’s performance, but can be involved in the initial phases of the scheme (eg an outline of the scheme can improve their understanding of how employees are trying to serve their needs). (8) Motivation Incentive schemes aim to motivate or move employees’ behaviour towards positive outcomes. It is essential to be specific when describing a desired behaviour. Simply expressing appreciation in broad terms does not communicate what the employee has done well (eg in a tenure-based scheme employees need an incentive which shows the organisation’s appreciation of their contribution, not just their years of service). The method of presenting the award is also important (see points 12–14). (9) Administration and review A scheme should be easy to operate and understand. It should also be evaluated periodically so as to maintain its relevance and interest with employees. An annual review is suggested (even if no changes are made to the scheme) as part of the annual strategic planning process. However, it is important to ensure that employees know that the scheme is subject to regular review. Communication should be made to employees each time a review occurs to explain that the scheme is either still meeting the desired needs of the organisation, or has been modified to meet those needs. (10) Communication It is essential to “sell” the scheme to employees initially. It is also essential to keep employees informed of their progress (and the progress of others) to maintain motivation. Methods of communicating with employees include: • a “special event” initiation, which introduces the scheme, ensures high visibility and reinforces the importance which management attaches to the scheme • organisation bulletin boards (both physical and electronic) • organisation newsletter • personal letters/memo • supervisors’ guides (these are important in helping line managers administer the scheme on a day-to-day basis) • public recognition of recipients (The importance attached to public recognition relates to it emphasising that the scheme works, while providing an example to fellow employees.) • policy statement/employee handbooks (ie written rules for the scheme are essential). What should be said Features of the scheme which must be communicated include the following:

• program objectives • symbolism of awards (if applicable) • the connection between the scheme and organisational values, and • how the scheme works. (11) Suitable conditions In the past, incentive schemes were only thought to be suitable for rewarding individual workers, and where speed and output were more important than quality. However, schemes have been successfully implemented as part of broader initiatives and to reward work teams. In both cases, consultation with employees is an important aspect of success, as is a clear connection with overall organisational goals. (12) When to present rewards Many conventional incentive schemes provide for annual bonuses. However, the gap between performance and when the reward is presented reduces the scheme’s effectiveness. It is generally accepted that — whatever the type of scheme — the reward (incentive) should quickly follow the act (work). Line managers should have the ability to recognise excellent performance when it occurs. The budget should also allow for ongoing rewards for day-to-day activities. These can be either cash or non-cash. Larger rewards for more complicated projects can be presented as part of a regular recognition program (eg at monthly meetings, annual dinners, or at the completion of a project). (13) How to present rewards One of the most important rules for incentive schemes is that careful planning of how the reward will be presented, and by whom, can increase the motivational value of the reward by many times its monetary value. Some common presentation practices used to make the occasion more meaningful include: • presentation by the managing director to increase the status of the occasion • wherever possible, the presentation should be in front of co-workers and also family members, and • presentation at a conference centre, possibly involving a trip away from the workplace. (14) Presenting tenure awards As with performance-based incentive rewards, the occasion for marking an employee’s service to the organisation should occur in the presence of co-workers. The occasion should be personal and, as such, the person who presents the award should be carefully selected. (Note, however, that the status of the occasion is raised if high-level management participate. Several presenters may be appropriate.) The following aspects should be publicly recognised: • the employee’s anniversary date • the length of the employee’s service • the employee’s personal contributions, and • the link between the company’s culture and the reward.

¶11-090 Problems in implementation Most complaints about incentive schemes relate to their implementation rather than the design of the scheme. In the Stolovitch study (see ¶11-070) employees expressed dissatisfaction with the equity of the scheme in practice, and often they did not know what the incentives were for. Over half the recipients of incentives reported that they were not exerting much more energy under the incentive scheme than before. Where incentives were offered on a team basis, many recipients did not understand the connections between individual roles and benefits. A survey by Maritz Incentives (see also ¶11-070) found that 55% of employees were not happy with their organisation’s incentive program.

¶11-100 Legal aspects of incentives Incentive schemes can lead to disputes between employers and employees if employees consider the terms of the scheme are unclear or unfair, or if employees consider that payments under the scheme are being withheld capriciously by the employer. The following guidelines are advisable: • employers should not assume that if incentives are “discretionary” that they can withhold the payment or entitlement unreasonably • the criteria for incentive payments should be explained to employees prior to their commencing work • employees should be aware of what will happen to incentive payments or entitlements if their employment ceases (eg by resignation, dismissal or redundancy), and • pro rata payments should be considered in some circumstances as a way of avoiding litigation or creating the perception among employees of unfairness or capriciousness.

¶11-110 Reward and recognition systems One of the main aims of any reward strategy is to maximise return on the reward dollar. Many aspects of performance can be celebrated most effectively through the use of non-financial rewards. These often have a direct cost, but the focus is on recognition rather than remuneration, and they can be used by organisations as a low-cost/high-value form of recognising high-performing employees. The rationale for offering non-financial rewards is based on the assumption that recognition for a job well done will have a positive influence on employee morale, commitment, performance and retention. The three most common types of non-financial rewards are covered in the following paragraphs. Personal or public praise This can be something as simple as a manager saying “thank you” or it could be acknowledging higher levels of work performance delivered by a specific employee and/or team. It tends to be informal and delivered on an ad hoc basis. Practical examples of such praise include line management sharing details of customer feedback, a handwritten note thanking an employee for their performance, taking time in regular meetings to recognise the work of employees, having a morning tea or lunchtime BBQ to celebrate the completion of a specific project, presenting employees with formal letters, plaques or certificates that recognise their efforts and formally acknowledge their contributions. It should be noted, however, that these activities are only of real value if they are undertaken in a genuine manner. Employees need to feel that they are respected by their manager and that personal recognition and praise provided to them is an acknowledgment of that respect. Material rewards These rewards are of a monetary nature, and should be a relatively low cost to the organisation and, when kept below certain monetary thresholds, are exempt from fringe benefits tax (FBT).

Practical examples of material rewards include dinner vouchers, flowers, movie and/or sporting event tickets or even shopping vouchers. At the higher end, material rewards can also include local and international holidays, although care must be taken as some higher end awards (eg international holidays) are subject to FBT. A number of organisations have developed programs in conjunction with outsourced reward providers who make available a range of material rewards at different levels. This enables the reward to be more closely linked to the individual’s specific motivation and, in turn, enhances the motivational outcome. Career rewards These rewards involve recognising performance with a reward that is related to the employee’s career or professional development, such as the opportunity to attend conferences interstate or overseas, receive specific training, or undertake interesting or development projects. Rather than being presented as an immediate reward for performance, career rewards usually have a longer term attached to them. They are also more likely to have ongoing motivational effects — contributing to the individual’s level of focus, professional development and career prospects and/or progression within the organisation.

¶11-120 Remuneration and salary packaging Integrated reward models In recent years, there has been a strong trend among organisations in Australia to adopt an integrated reward model, which incorporates the Total Target Reward (TTR) concept. This concept incorporates total fixed remuneration as well as identifying target levels of variable rewards, plus non-financial rewards. The benefits of applying this holistic approach include: • improving cost management (TTR encompasses the sum of all remuneration components, including employment costs, short-term incentives and long-term incentives) • more accurately communicating the value of total rewards with the board and other stakeholders, including existing and potential employees • providing an explicit link between remuneration and performance • driving a balanced focus on both short-term and long-term objectives, and • ensuring optimum returns on investments in people and their retention. An integrated reward model incorporates: • employment cost — comprising base salary, car cost, superannuation, FBT and non-FBT benefits, allowances and packaging options, and should represent the basic pay required to attract and retain employees • short-term incentives — which are at risk, performance-based pay where the performance period is one year or less (Short-term incentives focus on the achievement of annual operational performance goals, whether at the individual, group or organisational level.) • long-term incentives — which are at risk, performance-based pay for which the performance period is greater than one year (Long-term incentives are implemented to align executives and employees with stakeholder value and encourage longer-term retention.), and • non-financial rewards — such as recognition programs, development opportunities, career opportunities and work environment. Organisations can use an appropriate mix of rewards within the integrated reward model to attract, retain and motivate employees and realise the business objectives.

Total Employment Cost Total Employment Cost (TEC) (also known as Total Remuneration Cost) refers to the total value of cash and non-cash remuneration received by an employee, plus costs paid by the employer, including FBT, leave loadings and Superannuation Guarantee scheme contributions. It does not include workers compensation premiums, payroll tax or payment of the Superannuation Guarantee Charge. The TEC of an individual benefit is its direct cost plus FBT. The comparative ease of administration of TEC means that it is gaining in popularity. Bonuses A bonus tends to be a one-off payment independent of normal wages and salary, and has come into relatively widespread use over the years. Many organisations offer an annual bonus, often calculated by a formula. Other bonuses could be for some special service to the organisation, for outstanding performance over a certain period, or for “continued good service”. The latter may be used as an alternative to a salary increment, say for employees at or near the top of their grades who require some motivation to continue to perform well. Note: A bonus is still taxable and may, therefore, have the effect of putting the employee into a higher tax bracket. A bonus can be seen as a form of extra remuneration, which avoids the possible distortions that may result from a permanent pay increment. It has the advantage of rewarding a “good act” by an employee much sooner after the act than a salary review, thereby reinforcing desired behaviours more effectively. However, it may also have only short-term effects. If a bonus system becomes institutionalised and employees come to expect a regular bonus as part of their remuneration, the motivational effect of bonuses may be lost. Ill-feeling and possibly staff turnover may result if bonus amounts are lower than expected. Avoid discrimination in awarding of bonuses An employer should carefully consider the basis on which they decide to grant employees a bonus, to ensure that there is no discrimination between workers simply on the basis of the method by which their conditions of employment are regulated. Salary packaging Salary packaging is the term used where employees receive their remuneration as a combination of cash payment (ie salary/wages) and benefits and facilities. This allows for some flexibility and the customtailoring of the package to each employee’s own personal needs. The advantage of a flexible approach for employees is that all elements of the package will be valued by employees if it is structured carefully.

¶11-130 Administration of pay and use of salary surveys Salary and wage surveys are used to provide information on current market rates for jobs. There are two basic types of surveys: (1) local surveys, and (2) outside surveys. These will be described in the following paragraphs. Local surveys A group of organisations agree to exchange information about their rates among each other. Usually one firm will contact several others to determine an average or market rate for a particular job or group of jobs. By conducting this same survey at regular intervals, it is possible to determine movements and trends in rates. Each organisation is expected to reciprocate by participating in other firms’ surveys. These types of surveys tend to be informal and random, and designed according to individual needs. They can be used for collecting specific information, such as the provision of particular employee benefits, or for total compensation levels and trends. They are frequently used in preparation for enterprise

bargaining negotiations. Increasingly, management consulting firms are responding to local needs and either segmenting data or providing regional salary survey products. Matching survey positions with your positions One idea is to base the survey around a few “key” jobs (ie jobs which are important, relatively stable and used in most organisations). Salary surveys are only of value if the positions being compared are as similar as possible. It is advisable to consult with the managers of the areas in which salaries are surveyed and ask them to review the benchmark positions and match them to their own staff positions. A general rule of thumb is that — if a job does not match at least 60% of the benchmark position — it is not an adequate match. Surveys should be updated at intervals, such as a comprehensive update every couple of years combined with smaller interim surveys. To ensure a valid comparison, the same companies should be contacted each time the survey is carried out. The results should be assessed in terms of the organisation’s own wages and salary policy, say, “to pay at the average rate for the area”. Outside surveys A number of major surveys are conducted by professional organisations in Australia. Probably the best known of these are: • Management Remuneration Report (Hay Management Consultants) • National Salary Survey and Small Business Salary Survey (Australian Institute of Management), and • Mercer Cullen Egan Dell industry sector remuneration studies. In addition, a number of organisations conduct specific surveys for organisations operating in specific industries or sectors. Of particular note is the Realise Performance Aged Care and Community Services Remuneration Survey. This survey focuses on remuneration practices and trends in the Aged Care and Community Services Sectors, sectors that have a high demand for staff with unique skills and experience who are in very short supply. Surveys such as the ones identified above are sent out to a large number of organisations. The participating firms complete the written survey and return the data to the organising body, which processes the information and circulates it back to those who participated. In some cases, limited information, such as data on particular jobs or articles on remuneration trends, and so on, is accessible via the companies’ websites. Many survey reports are now also available online to registered customers. The following summary provides an indication of the type of information that these surveys provide: • an analysis of salary increases for each work function and position level • a summary of general salary trends • salary statistics and trends based on company size, turnover and industry • information on bonuses, allowances and incidence of employee benefits • the mean, median, upper and lower quartiles of each position surveyed for both salary and total compensation, and • a typical job description of each position surveyed. When selecting a survey, look for the following features: • the number of incumbents and companies surveyed for each job should be listed • experienced survey professionals should design the survey, and

• part-time, casual, temporary and contracted employees should be specifically excluded, or surveyed separately. These surveys are standardised and give an idea of major trends in wages and salaries, but most organisations will need to supplement this information with local surveys. Wherever possible, more accurate results will be obtained if two or three surveys are used. Also, many of the classifications used will not be appropriate to individual organisations. The reliability of the results will depend on the participating companies’ interpretations of the job descriptions provided, and how accurately those descriptions match the jobs in each company. Employers’ associations, management consultants and professional HR organisations may also be able to assist with wage and salary survey information. Potential bias Although salary surveys are often the only tool which HR professionals have available to them to assess the salary market, users should be aware of potential bias in surveys which often assess salaries at a higher level than reality. FW Cook (1994) has explored the common causes of upward bias and some of these are listed below: • Sample bias: Survey designers often approach high-paying companies when selecting a sample because they recognise that companies want to compare themselves with the market leaders in their industry. This has the effect of artificially inflating the salary ranges with the possibility that lowerpaying companies will use the information to justify pay increases. Users need to recognise that market leaders have a higher level of performance as well as pay, the former justifying the latter. Lower pay may be quite appropriate for lower performance. • Survey selectivity: Where more than one survey is used, it is common for those which do not show your organisation in the preferred light to be disregarded or downplayed. • Size bias: The size of an organisation influences its pay levels, but size can be measured in many different ways (eg revenue, equity, assets, market capitalisation or net income). It is possible for every organisation to use a different measure of size when comparing its performance and to select the one which shows that it is paying below the market to justify increases. • Remuneration selectivity: Surveys may not measure total remuneration, including benefits, shares and retirement packages. Concentrating only on salary and bonuses will give wrong information which, if relied on, may result in organisations with broader remuneration packages increasing their total remuneration above the marketplace. • Benchmark bias: When matching your own positions to the survey benchmark positions, the temptation is to match with positions which have higher responsibilities and higher remuneration, thus justifying a pay increase. • Statistical bias: With the availability of reasonably priced statistical software, more complex statistical techniques are being used more frequently. It is possible, using these techniques, to manipulate data to show your organisation in whatever light you wish to present it. • Target and actual bonuses: Mistakes in completing the survey data form in relation to bonuses are common. Most surveys measure the actual bonus a person received, not the target bonus. If the target were higher than the actual bonus and the former is mistakenly reported, it will have the effect of raising perceived total remuneration in the marketplace. • Pay for performance: If a performance pay scheme is in place and little or no bonus is achieved, it may be that this is related to poor organisational performance. The relative performance of other organisations which do report payouts should be assessed, rather than assuming that your own performance pay scheme is inadequate. • One-off payments: Organisations may make one-off payments for various reasons. The survey

compiler may make the assumption that such payments are a regular event and include them in the survey averages, thus raising the level of remuneration across the whole survey population. • Average performance: Surveys sometimes do not distinguish between the high and low performers in a job category. • Bias towards increasing pay: Despite across-the-board retrenchments and early retirements of higherpaid employees, surveys tend to report salary increases. Surveys may have an inbuilt conceptual bias towards salary increases, not decreases, as this is what their clients have been conditioned to accept. The solutions to the above problems include: • acknowledging the above biases and correcting them wherever possible • using surveys to back-up and verify your policies, rather than using them as the sole guide, and • being consistent with the comparisons which are made, and being able to justify why that particular comparison group is used. Maintenance and review Due to continual changes in market rates, job design and labour supply, it is necessary to constantly review the salary and wage system and keep it up to date. Timing of a review is important. For ease of administration, many organisations choose a fixed period, such as a review of all employees on an annual basis (at the same date), immediately following a National Wage decision, or upon each employee’s birthday or anniversary of service. Reviews may also occur in response to promotions, salary and wage surveys, or by responding to trade union pressures. The guidelines set out in Figure 11.3 (following) are suggested for a large organisation conducting a review on a set date. At all stages of the review, great care should be taken to ensure that confidentiality and security are strictly maintained. Smaller firms may require fewer procedures. Figure 11.3: Guidelines for reviews

(1) COLLECT UP-TO-DATE INFORMATION: This may come from surveys, government statistics, job analysis, company staff and payroll budgets, and so on. (2) PREPARE SALARY/WAGE REVIEW SHEETS: This information should be forwarded to each manager and should show each person’s current salary, grade and range plus relevant past information (eg dates and amounts from the last few increases). (3) TOTAL AMOUNTS OF CURRENT PAY RATES: Compare these amounts against the budget for each department. (4) SEND INFORMATION TO MANAGERS: This will usually be in the form of a covering letter. Information should include: • an explanation of the purpose of the review • due date • an explanation of ranges/grades • an indication of what factors to take into account, and • instructions on how to complete and return review sheets.

Managers should also be provided with additional information, such as cost-of-living increases since the last review, market fluctuations, job changes and guidelines for determining merit increases. (5) MANAGERS COMPLETE REVIEW SHEETS: These advise proposed new salaries, total up costs and compare with the allocated budget. Individual exceptional cases should be discussed with senior management. Proposed new rates are recorded on review sheets and returned. (6) REVIEW RECOMMENDATIONS: Managers’ suggested increases are reviewed by senior management for approval. Any major variations (eg changed grades or classifications) are referred back to managers before final approval is granted. (7) PROCESS NEW PAY RATES: Record new rates, advise the pay office and managers and send individual advices to each employee. New rates should be noted on the review sheets, which should be kept by HR in a secure location.

¶11-140 Statistics In recent years, there has been a growing trend to review rates of pay based on statistical movements. Organisations often use one or a combination of the following: • Consumer Price Index (CPI), and/or • Average Weekly Earnings (AWE). These are discussed in the following paragraphs. Consumer Price Index The CPI measures quarterly changes in the price of a “basket” of goods and services which account for a high proportion of expenditure by a defined population group (ie metropolitan households). Full details of the CPI figures can be found on the Australian Bureau of Statistics (ABS) website — www.abs.gov.au. Average Weekly Earnings (AWE — seasonally adjusted) The AWE for full-time adults is adjusted and reported quarterly and shows the average movement in salaries and wages. For example, at May 2015, the AWE were shown as $1,483.10, which represented an increase of 2% over the previous 12 months. From May 2014 to May 2015, the ABS Trend series full-time adult AWE increased by 2% to $1,484.50. Details of the AWE statistics can be found in the ABS publication — Catalogue No 6302.0 (see ABS 2014 and ABS 2015 references at the end of this chapter for details).

¶11-150 Remuneration, social and workforce trends Despite growing evidence that the traditional and conformist model for remuneration of senior executives may not be effective, there have been only minimal changes in remuneration design over recent years. Some remuneration committees have questioned the basis of valuing long-term incentives and, in particular, whether the accounting value continues to be the most appropriate value to use when determining the number of long-term incentive instruments to allocate. Performance-based pay There is a trend to link higher proportions of pay directly to job performance. As mentioned at ¶11-070, this is sometimes referred to as “at risk” compensation. When considering this approach, it is important to ensure that rewards reinforce desired behaviours by employees. For example, it is counterproductive to base remuneration heavily on sales volume only, as employees may be tempted to adopt a “sale at any

cost” approach and resort to unethical or short-sighted methods to meet their targets. The move towards a “balanced scorecard” approach to measuring organisational performance has increased over recent years. This approach links remuneration and rewards directly to a broad range of performance indicators which cover both short- and long-term issues. Team-based pay structures As organisations introduce flatter structures and form semi- or fully-autonomous teams to achieve multiskilled tasks, team-based rather than individual pay structures have become more popular. Gainsharing is one approach which suits this system. Team-based measures can also be used in a “balanced scorecard” approach. Globalisation Issues affected by globalisation include the need for equity in remuneration for expatriate (compared with local) employees and flexibility in remuneration packages to reflect different countries and changing circumstances. Work and family issues, with a desire for greater flexibility in working conditions and “family-oriented” benefits (eg education assistance) also assume greater importance. Competency-based training Competency-based training establishes learning objectives for each competency (ie the ability to do something) with a detailed specification of the learning required to achieve it and the minimum standards required for success. The results must be both observable and measurable. In terms of pay, employees are rewarded for skill — as reflected in the achievement of standardised competencies. Casual work While casual work is less secure than permanent employment, its greater flexibility is preferred by an increasing number of employees for “lifestyle” reasons. Over recent years, the federal government has imposed on employers a number of conditions to make casual employment less attractive, with an expectation that, by doing so, this will encourage employers to increase permanent full-time or part-time employment opportunities. At this time, there is no definitive research to support whether these actions have led to the government’s desired outcome; however, what is known is that industries where casual employment is the norm (eg hospitality and other service industries) it is becoming increasingly difficult to attract and retain staff and, from an employer’s perspective, more costly to employ staff. Part-time work While casual work provides less security and greater flexibility for employees, there is a growing trend for an increase in permanent part-time working arrangements. This, from an employee perspective, provides the best of both worlds — the flexibility to work the hours that suit the employee — with the security of permanent employment arrangements. It is felt that — as the population continues to age — this type of employment will become more prominent as organisations attempt to retain skilled staff.

¶11-160 Conclusion This chapter has been designed to provide managers with insights into how organisations can develop and implement an effective remuneration strategy and policy. If carried out well, it can have direct links to organisational performance, both in terms of bottom line performance and (more importantly) individual performance. It is, therefore, important that organisations view remuneration as a strategic performance improvement initiative. While this chapter provides an insight into remuneration from the basic role of paying people for services rendered, it also provides insights into the more strategic aspects of people and performance. The following additional articles also provide readers with additional information to enhance understanding of the strategic value of effective remuneration strategy and how this directly links to enhanced HR practices, as well as higher levels of individual and organisational performance. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

References and further reading Australian Bureau of Statistics 2015, Average Weekly Earnings, Australia, May, cat no 6302.0, ABS, Canberra. See www.abs.gov.au. ABS 2015, Average Weekly Earnings, Australia, November, cat no 6302.0, ABS, Canberra. See www.abs.gov.au. Condly SJ, Clark RE and Stolovitch HD 2008, “The Effects of Incentives on Workplace Performance: A Meta-analytic Review of Research Studies 1”, Performance Improvement Quarterly, vol 16(3), pp 46–63. First published online on 22 October, Wiley Online Library. See onlinelibrary.wiley.com/doi/10.1111/j.1937-8327.2003.tb00287.x/abstract. Cook FW 1994, “Compensation surveys are biased”, Compensation and Benefits Review, September– October, pp 19–22. Eckersley D and Conroy D 2011, “Blip or turning point — How can reward support sustainable growth?”, Executive Remuneration Fifth edition, March, PricewaterhouseCoopers. Gibbs M 2012, “Designing incentive plans: new insights from academic research”, World at Work Journal, Fourth quarter. Maritz 2013, “Improving legacy incentives leads to better engagement”, Maritz Travel Executive Summary, January. See www.maritztravel.com/~/media/Files/MaritzDotCom/White%20Papers/Travel/LIMRA_Executive_Summary.pdf Maritz 2005, “Bosses Not ‘On the Same Page’ as Employees Regarding Recognition”, Poll, October. Stolovitch HD, Clark RE and Condly SJ 2002, “Incentives, motivation and workplace performance: Research & Best Practices”, Report, The International Society for Performance Improvement and The Incentive Research Foundation, Spring. See www.loyaltyworks.com/incentive-program-researcharticles/ispifullpdf.pdf.

12. WORK HEALTH AND SAFETY Editorial information

Ben Burke Partner, Baker & McKenzie Kellie-Ann McDade Senior Associate, Baker & McKenzie

¶12-010 Introduction This chapter discusses the various legal obligations imposed on employers, managers and workers to ensure the health and safety of workplaces and people engaged in work. The goal of work health and safety (WHS) laws is to minimise workplace risks, ensuring that workplaces are free from risks to health and safety as far as is reasonably practicable. To achieve this goal, all states and territories in Australia have implemented WHS legislation which imposes statutory obligations in addition to an employer’s common law duties. The WHS legislation focusses on elimination of risks. There is no need for an accident or injury to occur for an offence to be established. WHS legislation is quasi-criminal in nature, imposing criminal penalties and convictions for offences. Obligations are imposed on organisations under WHS legislation. Individual managers, officers of organisations and workers also have personal legal obligations to ensure health and safety. Therefore, it is important that all parties in a workplace are aware of and comply with their legal obligations in relation to WHS. This chapter provides an overview of the sources of WHS duties and the legal duties imposed. However, a number of additional regulations and codes of practice may impose additional safety obligations which are specific to particular industries or occupations. In addition to the WHS issues discussed in this chapter, employers have separate and concurrent obligations under workers compensation legislation. These are to: • take out and maintain current workers compensation insurance coverage in each state in which the employer operates • comply with return to work obligations under relevant workers compensation legislation, and • provide notice of workers compensation claims to relevant insurers in accordance with legislative timelines. See Chapter ¶59 for more information on workers compensation.

¶12-020 Common law Under the common law of torts, all persons owe a duty of care to others. “Tort” is a term used to describe a civil wrong. For example, the driver of a motor vehicle has a civil duty to ensure that they drive the vehicle in a manner that is safe and does not create risks or cause damage or loss to other people or property. The driver must take reasonable care to avoid reasonably foreseeable risks to other persons who are affected by the driver’s acts (eg other drivers, passengers and pedestrians).

If the driver has an accident, subject to any legislation which may apply to the circumstances, any person who is injured or suffers loss or damage may be entitled to sue the driver for negligence. Employers’ duty to employees All employers have a general duty at common law to implement and maintain a safe system of work for both their employees and others. In relation to the employer’s employees, this duty is to take reasonable care to avoid exposing employees to reasonably foreseeable risks of injury. A term is also implied into contracts of employment requiring the employer to take reasonable care for the safety of employees (eg Goldman Sachs JB Were Services Pty Limited v Nikolich [2007] FCAFC 120 [at 31]; (2007) 163 FCR 62). In assessing whether or not an employer has breached their duty of care to an employee, a court will generally consider a number of factors, including whether: • the employer was aware of the risk of injury and, if not, would a reasonably prudent employer have been aware of such a risk? • the employer took all reasonable steps to avoid or reduce the risk, and • the injury would have been prevented or minimised had the reasonable steps been taken. The question of what is reasonable is determined by reference to community standards and expectations. However, the common law does not require an employer to safeguard their employees from all risks. The duty is to take reasonable care for their safety. Therefore, at common law, the risk of injury must be real and not fanciful. Further, for an employer to be liable to pay damages, the employer must have failed to take reasonable steps for the safety of employees. This requires the consideration of issues such as: • the magnitude of the risk • the degree of probability of occurrence of the risk, and • any other conflicting responsibilities that the employer may have. Employers’ duty to other persons Employers also owe a common law duty of care to persons other than their employees (ie in relation to their business activities and undertakings). As noted in the following paragraphs, employers are also vicariously liable for the actions of their employees. An example of an employer’s common law duty arises where the employer is an occupier of premises. An occupier of premises has a common law duty to avoid exposing persons who work in, or visit, or who are otherwise affected by activities carried on at premises, to reasonably foreseeable risks of injury or illness. Employers’ liability for actions of employee In addition to the general duty of care, an employer is vicariously liable for injuries, loss or damage caused by the negligence of an employee, if the employee’s conduct was in the course of, or reasonably incidental to, the employee’s employment. An act will generally be in the course of employment if it is authorised by the employer, even if the employee performs the act in a negligent or unlawful way. At common law, where an employer is vicariously liable to pay damages as a result of the negligence of an employee, the employer may be able to recover the damages from the negligent employee. However, legislation in some states and territories limits the right of an employer to recover damages from a negligent employee. An employer who fails to take reasonable care for the safety of employees, or who is vicariously liable for the conduct of a negligent employee, is liable to pay damages for loss or damage caused by the negligence, including any injury or disease suffered by the injured employee. Damages are assessed with a view to compensating the injured employee for their loss. In each state and territory, an employer’s common law liability must be considered in conjunction with the relevant workers compensation legislation (see Chapter ¶59).

¶12-030 Work health and safety regulatory framework There are various legislative instruments relevant to WHS in Australia. In the federal system (the Commonwealth) and each state and territory in Australia, legislative instruments relating to WHS include: • the principal WHS legislation • regulations and other regulations which address WHS matters (eg hazardous substances), and • approved codes of practice. In addition to WHS legislation, regulations and approved codes of practice, there are many guidance documents published by regulatory authorities, industry codes of practice and standards (eg Australian Standards) which are also relevant. Work health and safety legislation There is separate WHS legislation in each state and territory and the Commonwealth (referred to collectively as “WHS legislation” in this section). The current WHS legislation in each state and territory and the Commonwealth is based on the same principles and includes many similar provisions. All states and territories, other than Victoria and Western Australia, have now enacted largely uniform legislation which replicates model WHS legislation. The model legislation is discussed further in ¶12-040. WHS legislation imposes many obligations which are similar to common law duties, but common law duties are separate to obligations under legislation. An employer may be prosecuted for breach of an obligation under WHS legislation and liable to pay a fine, and separately sued by an injured person and liable to pay damages to the injured person for breach of common law duties. WHS legislation in each state and territory and the Commonwealth imposes general obligations on employers, persons who manage or control workplaces, designers of buildings and equipment, manufacturers and suppliers of equipment and substances, employees, officers and other persons who are involved in work activities. Essentially, any person who is involved in work activities has obligations under WHS legislation and regulations, although the obligations differ somewhat in each jurisdiction. Each employer is required under WHS legislation to ensure the health and safety of employees at work and ensure that persons are not exposed to risks associated with their business activities and undertakings. Employers and other persons who control and manage workplaces must also ensure the safety of workplaces and the ways of entering and leaving workplaces. Each employer and other person who has a general obligation under WHS legislation is required to identify and assess risks associated with work activities and implement appropriate measures to eliminate or minimise the risks. WHS legislation in each state and territory and the Commonwealth requires consultation between employers and workers in relation to WHS issues and risks. WHS legislation also provides for inspectors employed or engaged by regulatory authorities to exercise wide powers to investigate WHS matters (including powers to enter and inspect premises and workplaces, seize things for examination, and require persons to produce documents and answer questions). Each state and territory and the Commonwealth has a separate regulatory authority which administers the WHS legislation. A summary of the legislation in each state and territory is provided in ¶12-050. Regulations There are regulations relating to WHS in each state and territory and the Commonwealth. Most WHS regulations are based on the same general principles that apply to WHS legislation.

These regulations impose general obligations (similar to the general obligations under legislation) and detailed obligations specifying requirements and procedures in particular areas. Some regulations apply to all workplaces, while others apply only to particular industries. Approved codes of practice Codes of practice are not laws but are approved by government (usually the relevant Minister) and act as guides. There is no legal obligation for an employer to comply with approved codes of practice, but evidence that an employer has complied with an approved code of practice can be relied on to establish that the employer has taken “reasonable steps” to ensure health and safety so far as is practicable, in compliance with their obligations under legislation. Industry codes of practice In addition to approved codes of practice, there are many industry codes of practice. Industry codes of practice are not laws and are not approved by government. There is no legal obligation for an employer to comply with industry codes of practice. However, evidence of compliance with an industry code of practice may assist the employer to establish compliance with WHS obligations (although evidence of compliance with the code of practice will not by itself provide a defence to a prosecution). Standards Industry standards and Australian Standards are not laws. However, many Australian Standards are incorporated into legislation. Where an Act or regulation requires a person to comply with an Australian Standard, there is a legal obligation to comply with the Australian Standard (but the legal obligation to comply does not arise from the Australian Standard itself). Where no Act or regulation requires an employer to comply with an Australian Standard, there is no legal obligation for the employer to comply with the Australian Standard. However, evidence that the employer has complied with the Australian Standard may assist the employer to establish compliance with WHS obligations (although evidence of compliance will not by itself provide a defence to a prosecution). Australian Standards are published by Standards Australia (see www.standards.org.au) after consultation with interested parties. These are accepted as authoritative guides to good practice. The responsibility of developing national standards relating to WHS lies with Safe Work Australia (see www.safeworkaustralia.gov.au). Workplace systems and procedures An employer must develop and implement systems and procedures which enable it to comply with its obligations under WHS legislation. WHS systems and procedures must provide for identification and assessment of risks arising from work activities and implementation of measures to eliminate or minimise the relevant risks. They should also be developed in consultation with workers and may be based on approved codes of practice, industry codes, standards or guidelines published by health and safety authorities to ensure compliance with the law. Finally, industrial awards and agreements are made pursuant to federal or state industrial legislation and are enforceable at law. These often contain provisions relating to WHS (eg protective clothing, first aid facilities and regular rest breaks).

¶12-040 Work health and safety law harmonisation — uniform legislation (model Work Health and Safety Act) National review A national OHS review panel was set up in 2008 to investigate the best way to achieve uniform OHS laws in Australia. The National Occupational Health and Safety Review published two reports:

(1) National Review into Model Occupational Health and Safety Laws (First Report), which was published in October 2008 and addressed OHS obligations. (2) National Review into Model Occupational Health and Safety Laws (Second Report), which was published in January 2009 and addressed the enforcement of OHS obligations. Both reports included a substantial number of recommendations. Safe Work Australia was established by the Commonwealth Government under the Safe Work Australia Act 2008 (Cth) to: • develop a national policy relating to OHS and workers compensation, and • prepare a model Act, model regulations and model codes of practice relating to OHS for approval by the Workplace Relations Ministers’ Council and adoption as laws and codes of practice of the Commonwealth and each state and territory. Safe Work Australia replaced the former Australian Safety and Compensation Council (ASCC) and has continued the work previously carried on by the ASCC. The Workplace Relations Ministers’ Council reviewed the recommendations made by the National Occupational Health and Safety Review and provided Safe Work Australia with directions on the scope and content of the Model WHS legislation (known as the Model Work Health and Safety Act (Model WHS Act)) in April 2009. The Workplace Relations Ministers’ Council endorsed the Model WHS Act in December 2009. The Model WHS Act was subsequently amended and the final version of the Model WHS Act was issued by Safe Work Australia on 23 June 2011. The current version (revised 23 June 2011) of the Model WHS Act incorporates technical amendments made since November 2010. The Commonwealth has no express power under the Constitution to regulate WHS matters. Therefore, each state and territory (except Western Australia) initially agreed to enact “mirror” legislation to give effect to the Model WHS Act, so far as was possible, by 1 January 2012. Each of the Commonwealth, the Australian Capital Territory, New South Wales, the Northern Territory and Queensland enacted mirror WHS legislation consistent with the Model WHS Act, which commenced on 1 January 2012. South Australia and Tasmania enacted mirror legislation consistent with the Model WHS Act, which commenced on 1 January 2013. However, Victoria and Western Australia have not enacted mirror legislation to give effect to the Model WHS Act. In 2014, the Western Australian Government introduced a draft Work Health and Safety Bill 2011 (WA) (WHS Bill) to parliament and commenced a period of public consultation. The WHS Bill included most provisions of the Model WHS Act, but excluded the provisions in the Model WHS Act relating to rights of entry to workplaces for union representatives, the right of SHRs to direct that work at a workplace cease and the reverse onus of proof in discrimination matters. However, the Western Australian Government indicated that introduction of the WHS Bill was subject to it conducting a business impact review of the legislation (ie how the legislation will impact businesses, workers, government and the economy in Western Australia). The introduction of the WHS Bill was also subject to introduction of a corresponding Bill for the mining industry. The public comment period of three months for the WHS Bill concluded on 30 January 2015. However, the WHS Bill has not yet been passed by the Western Australia Parliament. In December 2015, WorkSafe WA announced that it would review the WHS Bill having regard to the 50 submissions it received. On 1 June 2016, WorkSafe WA released a discussion paper outlining recommended amendments to the WHS Bill. The discussion paper is open for public comment and consultation until 31 August 2016. For more information on what is happening in Western Australia, see

www.commerce.wa.gov.au/worksafe/developments-osh-western-australia. A Victorian Labour Government initially indicated it would enact the uniform WHS legislation. However, in 2010 a new Victorian Liberal Government called for a further review of the impact of the WHS legislation on business. Then, in May 2012, a new Victorian Labour Government announced that it had decided not to enact the Model WHS Act to replace the Occupational Health and Safety Act 2004 (Vic) (Vic OHS Act). Then, in early 2016, the Victorian Labour Government appointed an expert panel to review the compliance and enforcement activities of WorkSafe Victoria. The expert panel released a discussion paper on 20 June 2016. Further, in early 2016, the Victorian Government tabled draft legislation to increase the maximum penalty for breach of the reckless conduct provisions in the Vic OHS Act. The proposed new maximum penalty is aligned with the maximum penalty which can be imposed for category 1 offences involving reckless conduct under the WHS legislation in other states and territories (except Western Australia). A summary of the current WHS legislation in each state and territory and the Commonwealth is set out in the following section.

¶12-050 Summary of WHS legislation The following information provides an overview of the principal WHS legislation in each jurisdiction. There are also other pieces of legislation which relate to health and safety at work (eg dangerous goods legislation and mines legislation), but these will not be discussed here as they are beyond the scope of this book. The principal Acts do not provide prescriptive specifications for employers to follow. As discussed previously, each state and territory has an Act which imposes general obligations on employers and other persons. Regulations and codes of practice set out more specific requirements. Breach of WHS legislation or regulations is a criminal offence in each state and territory. Inspectors are authorised under WHS legislation to prosecute employers and other persons who do not comply with their legal obligations. As not all states and territories have enacted legislation which is similar to the Model WHS Act, there are differences in the obligations imposed in some states and territories. However, the main obligations in each state and territory Act which have enacted mirror legislation are the same. Further, the obligations imposed in each state and territory are based on the same broad principles. A summary of the relevant WHS legislation, including commencement dates, is set out in Table 12.1. Table 12.1: Summary of relevant WHS legislation Jurisdiction

Act

Regulations

Commencement date

Commonwealth

Work Health and Safety Act 2011

Work Health and Safety Regulations 2011

1 January 2012

Australian Capital Territory

Work Health and Safety Act 2011

Work Health and Safety Regulations 2011

1 January 2012

New South Wales

Work Health and Safety Act 2011

Work Health and Safety Regulation 2011

1 January 2012 (Note: Laws relating to officers’ due diligence duties took effect in June 2011.)

Northern Territory

Work Health and Safety (National Uniform Legislation) Act 2011

Work Health and Safety 1 January 2012 (National Uniform Legislation) Regulations

2011 Queensland

Work Health and Safety Act 2011

Work Health and Safety Regulation 2011

1 January 2012

South Australia

Work Health and Safety Act 2012

Work Health and Safety Regulations 2012

1 January 2013

Tasmania

Work Health and Safety Act 2012

Work Health and Safety Regulations 2012

1 January 2013

Victoria

Occupational Health and Occupational Health and Act: 1 July 2005 Safety Act 2004 Safety Regulations 2007 Regs: 1 July 2007

Western Australia

Occupational Safety and Occupational Safety and Act: 4 April 1985 Health Act 1984 Health Regulations 1996 Regs: 1 October 1996

States and territories with enacted WHS legislation The Australian Capital Territory, New South Wales, the Northern Territory, Queensland, South Australia and Tasmania have all enacted legislation which mirrors the model Act. While there are some procedural and other minor differences between the WHS legislation of each state and territory, the obligations imposed on duty holders are the same. Each of these states and territories have also enacted WHS regulations which deal with matters such as: • representation and participation • managing risks to health and safety and general workplace management • hazardous work involving noise, hazardous manual tasks, confined spaces, falls, demolition work, electrical safety and energised electrical work, diving work, licensing of high risk work and accreditation of assessors of competency • plant and structures • construction work • hazardous chemicals, including lead • asbestos • major hazard facilities • mines, and • a review of decisions, exemptions and prescribed serious illnesses. The general obligations for safety under the model Act are imposed on a person who conducts a business or undertaking (PCBU) to ensure, so far as is reasonably practicable, the health and safety of: • workers engaged, or caused to be engaged, by the person, and • workers whose activities in carrying out work are influenced or directed by the person (s 19 of each of the WHS Acts). General obligations are also imposed on a PCBU which involve the management or control of a workplace to ensure, so far as is reasonably practicable, the means of entering and exiting the workplace, and anything arising from the workplace, are without risks to the health and safety of any person (see s 20). The WHS Acts also impose general obligations on a person who conducts a business or undertaking that

manufactures, designs, imports, supplies, constructs or installs plant, substances or structures (see s 22– 26). The WHS Acts impose an obligation on each officer of a PCBU to exercise due diligence to ensure that the person conducting the business or undertaking complies with its obligations under the Act (see s 27). These and other key provisions contained in the WHS Acts are summarised in Table 12.2. Table 12.2: Obligations and key provisions Primary duty Section 19

A PCBU alone or with others, and whether or not for profit or not for gain, must ensure, so far as is reasonably practicable the health and safety of: • workers engaged, or caused to be engaged by the person, and • workers whose activities in carrying out the work are influenced or directed by the person, while the workers are at work in the business or undertaking. A PCBU must also ensure, so far as is reasonably practicable, that the health and safety of other persons is not put at risk from work carried out as part of the conduct of the business or undertaking.

• PCBUs extend beyond the relationship of employer and employee. • “Worker” is defined broadly (see below). • The term “reasonably practicable” is determined objectively based on the standards of a reasonable person. • Matters to be taken into account in assessing whether a risk has been controlled as far as is “reasonably practicable” include:  – the likelihood of the hazard or risk occurring  – the degree of harm that might result  – whether the person knows or ought to have known about the risk and ways to eliminate or minimise it  – the availability and suitability of ways to eliminate/minimise the risk, and  – the costs associated with elimination/minimisation of the risk, including whether the cost is grossly disproportionate to the risk.

Further duties Section 20

The person with management or control of a • “Person with management or control of a workplace must ensure, so far as is workplace” means a PCBU which involves reasonably practicable, that the workplace, the management or control of a workplace. the means of entering and exiting the workplace and anything arising from the workplace are without risks to the health and safety of any person.

Section 21

The person with management or control of fixtures, fittings or plant at a workplace must ensure, so far as is reasonably practicable, that the fixtures, fittings and plant are without risks to the health and safety of any person.

Sections 22–26

PCBUs that design, manufacture, import, supply, install, construct or commission plant, substances or structures must ensure, so far as is reasonably practicable, that the plant, substance or structure is without risks to the health and safety of certain persons.

• “Person with management or control of fixtures, fittings or plant at a workplace” means a PCBU which involves the management or control of fixtures, fittings or plant at a workplace.

Definition of “worker” Section 7

A person is a worker if he or she carried out work for a PCBU in any capacity including as: • an employee • a contractor or subcontractor • an employee of a contractor or subcontractor • an employee of a labour hire company • an outworker • an apprentice or trainee • a work experience student, or • a volunteer.

• The definition of worker is broad-ranging and will impact on a PCBU’s consultation and victimisation obligations. • “Workplace” is defined (s 8) as any place where a worker goes, or is likely to be, while at work. • Workers also have health and safety duties.

Duties of “officers” to exercise “due diligence” Section 27

Officers of a PCBU who have a duty or obligation under the model Act must exercise due diligence to ensure that the PCBU complies with that duty or obligation. Due diligence includes taking reasonable steps to: • acquire and keep up-to-date knowledge of WHS matters • gain an understanding of the nature of the operations of the business or undertaking of the PCBU and generally of the hazards and risks associated with those operations • ensure that the PCBU has available for use, and uses, appropriate resources and processes to eliminate or minimise risks to health and safety from work carried out as part of the conduct of the business or undertaking • ensure that the PCBU has appropriate processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely way to that information, and • ensure that the PCBU has, and implements, processes for complying with any duty or obligation of the PCBU under the model Act.

“Officers” are defined in accordance with s 9 of the Corporations Act 2001 (Cth) to include: • a director or secretary of the company, and • a person:  – who makes or participates in making decisions that affect the whole or a substantial part of the business of the company  – who has the capacity to significantly affect the company’s financial standing, and  – in accordance with whose instructions the directors of the company are accustomed to act. It is not necessary for a PCBU to have breached the provisions of the model Act (or to have been charged for failing to comply with obligations under the model Act) for an officer to be held liable for breach of their duties and obligations under this provision.

Consultation obligations Sections 47–49

PCBUs must, so far as is reasonably practicable, consult with workers who carry out work for the business or undertaking who are, or are likely to be, directly affected by a matter relating to health and safety at work. Consultation means:  • sharing relevant information  • giving workers a reasonable opportunity to express views, raise issues and contribute to decision-making

• Consultation obligations extend beyond employees of the PCBU to contractors, subcontractors, employees of contractors or subcontractors and others. • Consultation must be in accordance with any procedures agreed between the PCBU and the workers. • The level of consultation should be proportionate to the circumstances. • All relevant factors must be considered in determining the scope of consultation

 • taking workers’ views into account, and  • advising workers of the outcome of consultation. Consultation is required when:  • identifying hazards and assessing risks from work  • making decisions about ways to eliminate risks  • making decisions about the adequacy of facilities for the welfare of workers  • proposing changes that may affect health and safety, and  • making decisions about procedures for resolving health and safety issues, monitoring health of workers or workplace conditions, information and training or consultation with workers.

including the:  – seriousness of the matter  – number of affected workers, and  – how the matter affects individual workers. • More serious health and safety matters will attract more extensive consultation requirements.

Discrimination Sections 104–115

It is an offence for any person to engage in discriminatory conduct for prohibited reasons. These reasons include discrimination against a person because the person has exercised or proposes to exercise powers or functions under the model Act.

• These provisions overlap with the general protection provisions of the Fair Work Act 2009 (Cth). • The model Act also prohibits a person from:  – authorising or assisting discriminatory conduct  – coercing or inducing another person to exercise or not to exercise a power under the model Act, and  – making false or misleading representations about another person’s rights or obligations under the model Act.

Powers of inspectors Sections 160–175

Workplace inspectors have the power to: • enter, inspect and examine workplaces • require production of documents and answers to questions • copy and retain documents • seize evidence • seize dangerous workplaces and things, and • issue improvement, prohibition and nondisturbance notices.

• There are limitations on and conditions to the exercise of these inspector powers. • The relevant regulator also has the power to obtain information under s 155.

Health and safety representatives Sections 68–69

Health and safety representatives (HSRs) have the power to: • represent the workers in the work group in matters relating to WHS • monitor the measures taken by the relevant PCBU or that person’s representative in compliance with this Act in relation to workers in the work group • investigate complaints from members of

The limitations and conditions to the exercise of these powers by a HSR include the following: • powers must only be exercised and functions performed in relation to matters that affect, or may affect, the workers they represent, and • no entitlement to access personal or medical information about a worker, except

the work group relating to WHS, and • inquire into anything that appears to be a risk to the health or safety of workers in the work group, arising from the conduct of the business or undertaking.

where the information could not reasonably be expected to lead to identification of the worker.

In exercising a power or performing a function, a HSR may: • inspect the workplace or any part thereof • accompany an inspector during an inspection of the workplace • with the consent of a worker or group of workers, be present at an interview between that worker or workers and an inspector or PCBU regarding WHS • request the establishment of a health and safety committee • receive information concerning WHS of workers, and • request assistance where necessary. Penalties Sections 30–33

Three categories of penalties apply to breaches of the WHS duties:  • Category 1 — for reckless conduct that exposes an individual to a risk of death or serious injury or illness and is engaged in without reasonable excuse.  • Category 2 — failure to comply with a health and safety duty and exposing an individual to a risk of death or serious injury or illness.  • Category 3 — failure to comply with a health and safety duty. Maximum penalties are set according to the category of offence and type of duty holder (ie individual, officer or body corporate).

• Maximum penalties are set out below. • The maximum penalties for each category of offence represent significant increases for most state jurisdictions. • No reverse onus — prosecutors must prove all matters relating to non-compliance with duties of care.

Category

Description

Maximum Penalty

Category 1 — Reckless about risk of death or serious harm

Section 31(1) — A person commits a Category 1 offence if: (a) the person has a health and safety duty, and (b) the person, without reasonable excuse, engages in conduct that exposes an individual to whom that duty is owed to a risk of death or serious injury or illness, and (c) the person is reckless as to the risk to an individual of death or serious injury or illness. Prosecution bears burden of proving conduct was engaged in without reasonable excuse.

Company — maximum penalty of $3m. Officers — maximum penalty of $600,000 or five years imprisonment or both. Workers and others — maximum penalty of $300,000 or five years imprisonment or both.

Category 2 — Breach causes risk of death or serious harm

Section 32 — A person commits a Category 2 offence if: (a) the person has a health and safety duty, and (b) the person fails to comply with that duty, and (c) the failure exposes an individual to a risk of death or serious injury or illness.

Company — maximum penalty of $1.5m. Officers — maximum penalty of $300,000. Workers and others — maximum penalty of $150,000.

Category 3 — Simple breach (no harm)

Section 33 — A person commits a Category 3 offence if: (a) the person has a health and safety duty, and (b) the person fails to comply with that duty.

Company — maximum penalty of $500,000. Officers — maximum penalty of $100,000. Workers and others — maximum penalty of $50,000.

The relevant WHS Acts are administered by the following authorities: • Australian Capital Territory: WorkSafe ACT • New South Wales: SafeWork NSW • Northern Territory: NT WorkSafe • Queensland: Workplace Health and Safety Queensland, Department of Justice and Attorney-General • South Australia: SafeWork SA, and • Tasmania: Workplace Standards Tasmania. Commonwealth The Work Health and Safety Act 2011 (Cth) commenced on 1 January 2012. It regulates the health and safety of people employed by the Commonwealth government and Commonwealth government organisations and organisations in the private sector which are self-insured under the Comcare scheme. The Act places general obligations on persons conducting businesses or undertakings in the same way as the state and territory WHS Acts discussed previously. The Commonwealth Act differs from the model Act in respect of the following: • extension of the definition of “worker” to apply to particular government entities (eg members of the Australian Federal Police (AFP) and Australian Defence Force) • provision for sharing of information between regulatory authorities in the states and territories • provision for recognition of entry permits granted in each state and territory, and • provision for suspension of certain provisions in the interests of national security, defence or operations by the AFP. The Commonwealth also enacted the Work Health and Safety Regulations 2011, which commenced on 1 January 2012. These mirror the model WHS regulations. Victoria The Vic OHS Act is the principal WHS legislation in Victoria. The Act is administered by the Victorian WorkCover Authority (WorkSafe Victoria). The objects of the Act are to secure the health and safety of employees; eliminate, at the source, risks to health and safety; ensure the health and safety of the public; and provide a consultative framework for managing workplace health and safety.

The Act establishes various general duties of care, including the duty of: • employers to provide and maintain a safe working environment for employees (s 21) • employers to monitor health and safety conditions, as well as provide employees with information concerning workplace health and safety (s 22) • employers to ensure that others are not exposed to risks from their undertaking (s 23) • self-employed persons to ensure others are not exposed to risk from their undertaking (s 24) • employees to take care of their own safety and the safety of others at the workplace (s 25) • persons who manage or control workplaces to ensure the workplace, and access to the workplace, is safe (s 26), and • designers, manufacturers and suppliers of plant and substances, as well as those installing, erecting or commissioning plant, to ensure that they do not pose a risk in the workplace (s 27–31). The Vic OHS Act imposes a general obligation on an employer to, so far as is reasonably practicable, provide and maintain for employees a working environment that is safe and without risks to health. The reference to an “employee” includes a reference to an independent contractor and any employees of the independent contractor. The general obligation of an employer to provide and maintain a safe working environment extends to an independent contractor engaged by the employer, and to any employees of the independent contractor in relation to matters over which the employer has control (or would have control if not for any agreement which limits or removes the control). The Act also imposes a general obligation on an employer to ensure, so far as is reasonably practicable, that persons other than employees of the employer are not exposed to risks to their health and safety arising from the conduct of the employer. The Act also imposes a general obligation on a person who (whether as an owner or otherwise) has, to any extent, the management or control of a workplace to ensure, so far as is reasonably practicable that the workplace and the means of entering and leaving it are safe and without risks to health. The general obligation applies to a company or individual who has, to any extent, the management or control of a workplace. The Act also provides that a person who, without lawful excuse, recklessly engages in conduct that places or may place another person who is at a workplace in danger of serious injury, is guilty of an offence which carries a maximum penalty of five years prison. The Act requires employers to consult with employees during the risk assessment process and when making decisions about workplace safety (Pt 4). This would involve sharing information with employees and then giving them the opportunity to express their views (s 36). The Act deals with the election of HSRs (s 54) and establishment of health and safety committees (s 72). There are also provisions authorising HSRs to issue provisional improvement notices (s 60). An inspector appointed by WorkSafe Victoria has the power to enter and inspect any workplace (s 98– 99), require the production of documents (s 100) and take samples (s 101). The Act also contains provisions granting an authorised representative of a registered employee organisation the right to enter a workplace if the authorised representative suspects a breach of WHS laws (s 87). Certain procedures must be followed (s 88) and authorised representatives have limited powers (s 89–90). The Occupational Health and Safety Regulations 2007 (Vic) cover matters such as manual handling, noise, falls, confined spaces, working with plant, high-risk work, hazardous substances, asbestos, lead, major hazard facilities and mines. WorkSafe Victoria has developed eight compliance codes to complement the Act and regulations. The compliance codes cover:

(1) communicating health and safety across languages (2) workplace amenities and work environment (3) confined spaces (4) first aid in the workplace (5) prevention of falls in general construction (6) foundries (7) the management of asbestos in workplaces, and (8) the removal of asbestos in workplaces. The maximum penalty which can be imposed on a company for breach of the Act is a fine of $1,365,030. In early 2016, the Victorian Parliament tabled the Treasury and Finance Amendment Bill 2016, which proposes to increases the maximum penalty for breach of the duty not to recklessly endanger persons at a workplace to a fine of $3,033,400. The proposed new maximum penalty is consistent with the maximum penalty imposed for a category 1 offence under the WHS legislation in all other states and territories, except WA. The maximum penalty which can be imposed on an individual officer, manager or employee for breach of the Act is a fine of $273,006. An individual officer, manager or employee can also be sentenced to five years prison for reckless conduct at a workplace that places or may place another person in danger of serious injury. Other sentencing options include safety improvement programs (s 136), enforceable undertakings (s 137), and adverse publicity orders (s 135). If a body corporate breaches the Act and the breach is attributable to an officer of the body corporate failing to take reasonable care, the officer is guilty of an offence (s 144). In May 2012, the Victorian Government announced that it had decided not to enact legislation mirroring the model Act and replacing the Vic OHS Act. However, it committed to continuing to work towards best practice legislation. Also in May 2012 (in dismissing appeals against sentences imposed for breach of the reckless conduct and officer liability provisions in the Vic OHS Act (s 32, 144 and 21(2)(a))), the Supreme Court (Court of Appeal), in the decision of Orbit Drilling Pty Ltd v The Queen; Smith v The Queen [2012] VSCA 82, recommended that the adequacy of maximum penalties under the Act be examined as a matter of urgency, given the higher maximum penalties which now exist under the WHS Act on other states and territories. In 2014, amendments were made to the Occupational Health and Safety Regulations 2007 (Vic) which intended to reduce the costs of compliance with the Victorian OHS regime. The Victorian OHS Regulations are due to expire in June 2017, by which date WorkSafe Victoria is required to review and remake the Regulations. A comprehensive review of the regulations is currently underway. WorkSafe Victoria expects to publish new draft regulations and a Regulatory Impact Statement for public comment in mid-2016. Western Australia The Occupational Safety and Health Act 1984 (WA) (OSH Act) is the principal WHS legislation in Western Australia. The OSH Act establishes the WorkSafe Western Australia Commission, which is part of the Department of Commerce. The objects of the Act are to: • promote and secure the safety and health of persons at work • protect persons at work against hazards

• reduce, eliminate and control workplace hazards • assist in securing safe and hygienic work environments, and • foster cooperation and consultation in relation to workplace safety and health issues. The OSH Act imposes a general obligation on an employer to, so far as is practicable, provide and maintain a working environment in which employees are not exposed to hazards (s 19). This general obligation includes: • providing and maintaining safe workplaces, plant and systems of work • providing information, instruction and training to enable employees to carry out their work safely • consulting and cooperating with safety and health representatives (SHRs). An employee is a person by whom work is done under a contract of employment. A contractor engaged by an employer to carry out or assist in carrying out work is deemed to be an employee in relation to matters over which the employer has the capacity to exercise control (s 23D). The OSH Act imposes a general obligation on an employer or self-employed person to, so far as is practicable, ensure that the safety or health of a person who is not an employee of the employer, is not adversely affected wholly or in part as a result of work that has been or is being undertaken by the employer or any employee of the employer or the self-employed person (s 21). The OSH Act imposes a general obligation on a person who has, to any extent, control of a workplace where persons (who are not employees of the person) work, or are likely to be in the course of their work, or has control of the means of access to, and egress from, a workplace. The person must take such measures as are practicable to ensure that the workplace and the means of access to or egress from the workplace are such that persons who are at the workplace or use the means of access to and egress from the workplace are not exposed to hazards (s 22). The OSH Act imposes general obligations on manufacturers and suppliers of plant (s 23). The OSH Act also imposes obligations on employees to take reasonable care for their own safety and health at work and to avoid adversely affecting the safety or health of any other person through any act or omission at work. An employee must also cooperate with their employer in carrying out obligations imposed under the Act on the employer (s 20). The OSH Act provides for the election of SHRs and, in certain circumstances, for the establishment of safety and health committees (Pt IV). The Act also provides that SHRs consult with their employer on matters relating to safety and health at the workplace. If a safety and health committee exists in a workplace, part of its role is to facilitate consultation and cooperation between the employer and employees on issues relating to workplace safety (s 40). An inspector appointed under the Act has power to enter and inspect any workplace, examine any plant or thing at the workplace, take samples, and interview persons at a workplace (s 43). An inspector can require a person to answer questions, produce documents or assist the inspector. An inspector also has power to issue improvement notices (s 48) or prohibition notices (s 49). Such notices may include directions as to the measures an employer must take, and failure to comply with a notice is an offence. The Occupational Safety and Health Regulations 1996 (WA) cover a wide range of matters, including noise protection, workplace amenities, fire safety equipment, use of plant, first aid facilities and hazardous substances. The Act also provides for the Minister to approve codes of practice for “the purpose of providing practical guidance to employers, self-employed persons [and] employees” (s 57). Compliance with an approved code of practice can be relied on as evidence in proceedings to demonstrate that a person has complied with the Act and regulations. The maximum penalty which can be imposed on a company for breach of the Act is a fine of $500,000 for a first offence and $625,000 for a subsequent offence. The maximum penalty which can be imposed on

an individual director, officer or manager for breach of the Act is a fine of $250,000 for a first offence or $312,500 for a subsequent offence and two years prison. Where a body corporate is guilty of an offence against the Act and it is proved that the offence occurred with the consent or connivance of, or was attributable to any neglect on the part of an officer, the officer as well as the body corporate is guilty of the offence (s 55). In 2014, the Western Australian Government introduced the draft WHS Bill to parliament and commenced a period of public consultation. The WHS Bill includes most provisions of the Model WHS Act, but excludes the provisions in the Model WHS Act relating to rights of entry to workplaces for union representatives, the right of SHRs to direct that work at a workplace cease and the reverse onus of proof in discrimination matters. However, the Western Australian Government has indicated that introduction of the WHS Bill was subject to it conducting a business impact review of the legislation (ie how the legislation will impact on businesses, workers, government and the economy in Western Australia). The introduction of the WHS Bill was also subject to introduction of a corresponding Bill for the mining industry. The public comment period of three months for the WHS Bill concluded on 30 January 2015. WorkSafe WA is currently reviewing the WHS Bill. On 1 June 2016, WorkSafe WA released a discussion paper outlining recommended amendments to the WHS Bill. The discussion paper is open for public comment and consultation until 31 August 2016. For more information on what is happening in Western Australia, see www.commerce.wa.gov.au/worksafe/developments-osh-western-australia.

¶12-060 Workplace consultation Workplace consultation is a basic requirement of effective health and safety management in the workplace. Consultation is important because it: • is an effective means of feedback and information gathering in order to identify hazards and WHS issues • acknowledges that everyone in a workplace has a role to play in identifying and resolving health and safety problems — often leading to higher workplace morale • involves management and employee representatives working together to ensure that their workplace is healthy and safe • improves decision-making regarding health and safety issues, and • supports the concept of self-regulation, where the legislation sets broad parameters of what is to be achieved, and people at the workplace formulate the means of achieving these. Consultation and risk management obligations are linked. The general principle is that — whenever an employer identifies or assesses hazards or risks to health or safety at a workplace, makes decisions about measures to control risks, resolves health or safety issues, introduces or changes work procedures, or proposes changes to a workplace or equipment used at a workplace which may affect the health and safety of employees — the employer must consult with its employees. An employer’s obligation to consult with their employees goes beyond having HSRs and a committee. Benefits of consultation The practical benefits of consultation for both employers and employees are based on two premises: (1) the people doing the work and directly exposed to WHS issues are often the best source of solutions, and (2) by participating in solving WHS problems and having part ownership of the process, employees will

have a greater commitment to supporting change. By implementing effective consultation, employers ensure health and safety measures in the workplace are appropriate, understood and complied with. The legal obligation for employers to take a consultative approach to WHS is achieved through a formal system of employee representation either through individual HSRs or a committee system. The formal system, which is provided for in WHS legislation in each state and territory, should be supplemented by informal meetings, workshops, suggestion boxes and surveys. Legislative provisions The WHS legislation in each state and territory provides a framework for consultation. The frameworks and administrative arrangements for consultation vary between the jurisdictions. Legislation in each state and territory provides for employees to act as HSRs and/or committee members at the workplace level. The WHS Acts place an obligation on a PCBU to consult with workers (and their representatives) who are, or are likely to be, directly affected by a matter relating to WHS. Consultation obligations also extend to other duty holders, such as contractors, subcontractors, employees of contractors or subcontractors and others. The WHS Acts also provide for workers to act as HSRs and/or committee members at the workplace. Parties to consultation To be effective, consultation should involve workers (including contractors, subcontractors, labour hire workers, students and volunteers) at all levels of the organisation and senior management of the employer. Consultation should also involve those: • who have information about health and safety at the workplace • with an ability to have a significant impact on health and safety, and • those who are affected by health and safety. Generally, any person or organisation that can contribute significantly and positively to the furthering of workplace health and safety should be involved in any related consultation. Health and safety representatives HSRs are employees who are elected by fellow employees in their work group to represent them for the purposes of WHS. These duties are in addition to their normal work responsibilities. The role of an HSR is to represent employees in consultation with the employer, and to investigate and resolve WHS incidents or issues. Representatives are a conduit for the flow of information between management and employees. HSRs (and/or committee members — see following) are not personally liable under WHS legislation for their acts or omissions. HSRs have the power to: • represent workers in their work group • monitor employer control measures • investigate complaints and make enquiries • inspect workplaces • request health and safety information and the assistance of a relevant union • (in some circumstances) direct workers to cease unsafe work, and

• issue provisional improvement notices where they reasonably believe an employer is breaching its WHS obligations under the legislation. An employer has an obligation to properly train WHS representatives or HSRs to perform their role. WHS representatives, HSRs and other employees who raise complaints in relation to health or safety, are protected from discrimination or dismissal arising from their activities as representatives or committee members. WHS committees While the role of WHS representatives is immediate and local, dealing promptly with WHS issues affecting their part of the workforce, a WHS committee plays a more strategic and broader long-term role, providing assistance with planning and process development across the business. Committees can assist management to inform employees and contractors of hazards and risks associated with work activities and systems, procedures and approaches for eliminating or minimising risks. Committee members may be able to pave the way for change by disseminating information to employees, explaining the rationale behind an initiative or giving it credibility by supporting it. Under the WHS Acts, a PCBU at a workplace must establish a health and safety committee for the business or undertaking within two months of being requested to do so by an HSR or by five or more workers at that workplace, or otherwise if required by the regulations to do so. The WHS Acts provide that the functions of a WHS committee are to facilitate cooperation and to assist in developing standards, rules and procedures. Unions Authorised union representatives have the power to enter a workplace to inquire into a suspected breach of WHS legislation and advise and consult with workers in relation to health and safety matters. Employers should ensure that their policies and procedures require that unions comply with the procedural requirements set out in WHS legislation before allowing entry to a workplace. Elements of good consultation A number of elements are said to contribute to “good consultation”. These are listed as follows: • There needs to be a clear understanding of each participant’s role and the intended objectives. Where there are specific legal requirements, they should be known and adhered to by all parties. • The roles, views and interests of all stakeholders must be respected. Everyone must be provided with the opportunity to raise and discuss sensitive or controversial matters. Opposing views should be respected and considered. • HSRs and committee members should be willing, if not passionate, and appropriately trained. Information should be shared. • Adequate resources should be provided to enable HSRs, management representatives and committee members to properly perform their functions. • WHS consultation should always have the intention (and be seen to have this intention) of producing solutions or improvements — that is, it should be a means to a positive end, rather than simply a process. • Consultation should not be used for purposes unrelated to WHS, as this could compromise the integrity of the process and the trust and respect necessary for it to be effective. • The roles of HSRs and WHS committees should be promoted in a positive manner throughout the organisation. Participants in the consultation process must understand where each fits into the overall picture, as must the employees. In this way, employees will have confidence that safety is

being properly dealt with in a consultative manner. • Committees should be well run, not overly burdened by administration or formality, but have clear objectives, accountabilities and time lines. Otherwise they risk becoming “talkfests” which achieve nothing. • There should be appropriate representation on a WHS committee for workers who are regularly affected by, or involved in, WHS matters. Management representatives should be sufficiently and broadly informed of the employer’s objectives and initiatives, and have sufficient authority to reasonably assess the acceptability of proposed measures.

¶12-070 Incident notification There are legislative requirements in each state and territory in relation to incident reporting and notification. Employers are required to report certain types of incidents to their local WHS authority. The types of incidents which must be reported are usually: • incidents resulting in loss of life (which must be reported immediately) • incidents resulting in serious injury (including incidents that result in a person requiring medical treatment within 48 hours of exposure to a substance, immediate treatment as an in-patient in a hospital or immediate medical treatment for amputation, serious head injury, serious eye injury, scalping, electric shock, spinal injury, loss of bodily function or serious lacerations) • incidents that expose a person in the immediate vicinity to an immediate health or safety risk • incidents resulting in workers taking a number of days off work due to injury, and • incidents involving damage or potential damage to dangerous items of plant (eg boilers). More information on workplace incident notification can be found in Chapter ¶56. Contractors At common law, an employer is not generally liable for the acts of a genuine independent contractor or the contractor’s employees or subcontractors. However, under WHS legislation each person’s liability is independent. In other words, each person who has an obligation under WHS legislation must comply with their obligations, regardless of what other persons do or do not do. A breach by one person does not preclude the same circumstances constituting a breach by another person. WHS obligations cannot be delegated or transferred to other persons. Therefore, an employer cannot “contract out” of its WHS obligations. Although contractors are generally required to provide their own tools of trade, including safety equipment, an employer may breach its WHS obligations if it fails to ensure that a contractor, or the contractor’s employees, have appropriate experience and qualifications, have received appropriate training, are provided with and use appropriate safety equipment, and comply with appropriate safety management systems and procedures. An employer must consider WHS issues as part of its general due diligence when engaging contractors. This will usually include obtaining from the contractor: • precise details of the work to be undertaken • the time within which the work will be done • the number and identity of all persons performing work for the contractor • a warranty that the contractor will obtain or provide all materials, equipment, plant or substances to perform the work, and that the contractor will ensure that all such materials, equipment, plant or

substances do not create risks and are safe • a warranty and details of all required qualifications, certificates of competency and skills to perform the work (employers should be aware of the formal qualifications prescribed to perform certain tasks and operate some machinery) • details of the systems which will be implemented for adequate supervision, and • details of any possible risks or inherent dangers arising out of the work and appropriate systems to eliminate or control these risks. The due diligence process should also include providing the contractor with: • adequate information regarding the responsibilities and obligations of the contractor and the contractor’s employees • adequate information regarding the presence of risks or hazards arising out of the workplace and the appropriate systems to eliminate or control these risks • appropriate site induction training • appropriate first-aid facilities • procedures for gaining access to the workplace • the documentation required to establish and record the handover of completed work, and • details of the limits of any authority provided to the contractor. It is particularly important that an employer ensures that each contractor and the contractor’s employees and subcontractors comply at all times with appropriate WHS systems and procedures and carry out risk assessments in relation to all work activities.

¶12-080 Officers’ and managers’ liability Because a company is a separate legal entity which is able to sue and be sued in its own name, at common law, the directors and other officers of the company are not generally liable for the company’s actions. This protection applies to both the civil and criminal liability of the company. However, WHS legislation in each state and territory empowers courts to prosecute individuals behind a company. In most circumstances, this is not limited to the company’s officers and extends to managers. Each jurisdiction imposes separate penalties for breaches by individual officers and managers. A breach of these provisions is criminal in nature and is not covered by directors’ and officers’ insurance policies. In all states and territories which have enacted the Model WHS Act, an officer of a PCBU (ie each officer of a company which conducts a business or undertaking) has a positive obligation to exercise due diligence to ensure that the person conducting the business or undertaking complies with their duties and obligations. The current position in each state and territory is set out in Table 12.3. Table 12.3: Individuals in a company who can be prosecuted for a breach of WHS legislation Jurisdiction

Person liable

Nature of liability

Australian Capital Territory

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

New South Wales

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

Northern Territory

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

Queensland

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

South Australia

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

Tasmania

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Positive obligation for officer to exercise due diligence to ensure that the company complies with its obligations. The onus is on the prosecution to establish that an officer has failed to exercise due diligence.

Victoria

An officer of the body corporate, where “officer” has the meaning given by s 9 of the Corporations Act 2001 (Cth).

Officer responsible for the company’s breach of its obligations if the breach is attributable to an officer of the body corporate failing to take reasonable care. The onus is on the prosecution to establish that the officer has failed to take reasonable care.

Western Australia

Any director, manager, secretary or other officer of the body, or any person who was purporting to act in any such capacity or: “Where the affairs of a body corporate are managed by its members … a member … [where the member performs functions] … as if he were a director of the body corporate”.

Officer responsible for the company’s breach of its obligation if it is proven that the offence occurred with the consent or connivance of, or was attributable to any neglect on the part of an officer. The onus is on the prosecution to establish that an offence occurred with the consent or connivance of the officer or that the offence is attributable to neglect by the officer.

¶12-090 Dealing with prosecutions The actions of an employer and their employees following a workplace incident can have critical consequences on its ability to defend a criminal prosecution under the relevant WHS legislation. Investigation Following an incident, an inspector from the relevant statutory authority will often attend the site within a relatively short period of time to conduct an investigation. Where a serious incident occurs in which a person dies or is seriously injured, an inspector will usually attend a site within a few hours of the incident.

The inspector will make preliminary enquiries when attending a site, including speaking with key managers and persons who witnessed the incident, taking photographs and measurements, and collecting key documents. The inspector may issue directions in relation to work activities or the use, inspection or removal of equipment, vehicles or other plant which were involved in the incident. The inspector will then decide whether to conduct a formal investigation. A formal investigation usually involves interviews with all relevant managers and witnesses and a review of all relevant documents. The inspector may also engage an expert to inspect and assess the site and relevant equipment. In most cases, when the inspector arrives on-site, the employer will not have had enough time to do anything other than conduct a preliminary investigation and carry out basic remedial work to eliminate or minimise the immediate risk to health and safety. For this reason, many of the substantive actions taken in response to a workplace accident often occur after an inspector’s initial visit. At the end of the initial attendance, the inspector may give the employer an indication as to how the matter will progress. An inspector may: • require additional information, the production of documents and/or answers to questions • issue an improvement or prohibition notice, and/or a penalty notice • commence proceedings, or • take no further action. Commencing a prosecution Given the wide obligations of employers under WHS legislation, an employer should assume that a prosecution will follow all but minor workplace incidents. Although an inspector’s investigation will generally occur shortly after the incident, a formal prosecution may be commenced at any time within a statutory period (two years in New South Wales and Victoria, three years in Western Australia). This can create obvious evidentiary problems for an employer. Prosecutions are commenced by WHS authorities and involve the following steps: • Charge and summons: A prosecutor commences a WHS prosecution by serving the employer with a charge and summons. The charge specifies the basis on which the charge is brought, including a full description (particulars) of the alleged offence. The summons will provide notice of the time, date and location of the employer’s required attendance at court to answer the charge. • Prosecution brief: After the charge and summons have been received, a copy of the prosecution brief should be obtained. The prosecution brief contains the information which is relied on by the prosecutor when commencing the prosecution. This usually includes a factual inspection report, copies of statements from employees and witnesses, photographs, reports from experts and other documents provided by the employer or relevant to the prosecution. • Guilty or not guilty?: After obtaining the prosecution brief, the employer’s solicitor will identify the basis upon which the prosecution is brought (the pleadings) and discuss whether a plea of guilty or not guilty should be entered. As the prosecution brief may not yet have been received or the employer may not have had sufficient time to consider an appropriate plea prior to the date listed in the summons, it is common for the matter to be adjourned for a short period (usually four weeks or so) to enable advice to be obtained. If the employer decides to enter a “not guilty” plea the matter is listed for a “contest” hearing before the court. A contest hearing is a full trial and requires each party to prepare and present evidence on the issues in dispute. If the employer decides to enter a “guilty” plea, the matter is listed for a plea hearing before the court. At the plea hearing the employer submits to the court all matters which are relevant to assessment of an

appropriate penalty. These matters usually include: • the employer’s past WHS record • the nature and gravity of the offence (including the foreseeability of the risk) • the degree of culpability of the employer • the remedial actions that have been taken • the employer’s general attitude towards WHS (both before and since the incident) • the severity of the incident and injuries • the employer’s contrition • the steps taken by the employer to assist the employee • the employer’s cooperation with the relevant state or territory administrator of the legislation, and • the employer’s decision to enter a plea of guilty at an early stage. Considering actions Because an employer’s actions following a serious incident can have a critical impact on their ability to defend a prosecution or their plea in mitigation, employers should ensure that they undertake the following steps: • Investigate accurately: While a post-incident investigation is generally critical to begin understanding the causes of an incident (and therefore preventing a recurrence), employers should accept that all incidents have multiple causes and no one factor will be definitive. In accepting this, employers should investigate incidents accurately, avoid the natural temptation to make assumptions, and avoid making guesses or identifying a single cause. • Gather evidence immediately: Given the usual delay which occurs between an incident and the commencement of a prosecution, obtaining detailed evidence two years after the incident increases the risk that the witnesses’ recollections will only be partial or that they have been influenced by intervening actions or assumptions. It is essential therefore that detailed statements are obtained from witnesses as soon as possible after the incident has occurred. While the investigating inspector will also obtain statements from witnesses, the practical realities of limited resources and time for an inspector may ultimately result in only a superficial picture being obtained. • Legal professional privilege: Where an incident occurs which may result in a prosecution, consideration should be given as to whether documents created as part of any investigation or advice will be subject to legal professional privilege. When external investigations or reports are required, it may be best to have this material obtained by your legal representatives. This should be discussed with your legal representatives in advance. Prevention is always better than cure While an employer’s conduct after an incident can have significant ongoing consequences for the conduct of a prosecution, this should not distract the employer from the primary objective of preventing incidents. Employers who implement safe systems of work and are vigilant towards workplace risks are always better placed to deal with the consequences of incidents when they arise.

¶12-100 Conclusion This chapter has provided an overview of the relevant WHS laws which apply in Australia. While some

states continue to decide not to opt in to national harmonisation of state WHS legislation (specifically Victoria and Western Australia), it is necessary for an employer to have regard to the relevant obligations applying in each state or territory it operates. WHS laws set out minimum standards with which employers, managers and workers must comply. However, best practice organisations focus not just on legal compliance. They also focus on risk prevention and organisation-wide continual improvement of WHS practices, systems and procedures. In doing so, these organisations benefit from many advantages, including increased workplace morale, improved reputation and staff retention — saving significant costs involved in dealing with workplace safety incidents and/or prosecutions. For more information on topics covered in this chapter, refer to the CCH Australian Work Health and Safety Law Reporter.

13. EQUAL EMPLOYMENT OPPORTUNITY: DISCRIMINATION, HARASSMENT AND OTHER UNLAWFUL BEHAVIOUR Editorial information

Bryony Binns Partner, Baker & McKenzie

¶13-010 Introduction This chapter discusses the operation of anti-discrimination legislation in Australia. The term “Equal Employment Opportunity” and the acronym “EEO” are generally taken to refer to the application of antidiscrimination legislation in the workplace. The focus of this chapter will be on the workplace. However, it is important to remember that anti-discrimination laws also apply to other areas of life including, but not limited to, the provision of goods and services, and access to and egress from buildings. Anti-discrimination legislation aims to ensure that all persons have an opportunity to participate in the workforce, and that persons are not subject to detrimental treatment due to arbitrary or irrelevant characteristics. These objectives are achieved through: • prohibitions against discriminating on the basis of characteristics that are irrelevant to employment opportunities, such as sex, age, marital status or carers’ responsibilities • prohibitions against certain forms of harassment and vilification, and • at the federal level, a requirement for public sector and large private sector employers to report on programs and practices allowing women and minority groups equitable access to the workplace.

¶13-020 Discrimination and equal employment opportunity legislation Anti-discrimination legislation exists at both the federal and state levels in Australia, as follows: Table 13.1: Legislation Jurisdiction

Legislation

Commonwealth

• Racial Discrimination Act 1975 • Sex Discrimination Act 1984 • Disability Discrimination Act 1992 • Age Discrimination Act 2004 • Workplace Gender Equality Act 2012 • Australian Human Rights Commission Act 1986 • Fair Work Act 2009

Australian Capital Territory

• Discrimination Act 1991 • Human Rights Act 2004

New South Wales

• Anti-Discrimination Act 1977 • Criminal Records Act 1991

Northern Territory

• Anti-Discrimination Act 1992

Queensland

• Anti-Discrimination Act 1991

South Australia

• Equal Opportunity Act 1984 • Racial Vilification Act 1996 • Civil Liability Act 1936

Tasmania

• Anti-Discrimination Act 1998

Victoria

• Equal Opportunity Act 2010 • Racial and Religious Tolerance Act 2001

Western Australia

• Equal Opportunity Act 1984 • Criminal Code (Chapter XI) • Spent Convictions Act 1988

This chapter focuses on the above legislation insofar as it prohibits certain types of unlawful behaviour, such as unlawful discrimination, harassment, victimisation and vilification. This chapter does not consider employers’ obligations in relation to reporting and other requirements in the absence of unlawful conduct, such as is required under the Workplace Gender Equality Act 2012 (Cth).

¶13-030 Scope of legislation Interaction between federal and state legislation Australia’s federal structure operates on the basis of a complex interaction between federal and state “powers”. The source of federal powers is s 51 of the Commonwealth of Australia Constitution Act 1900 (Cth) (the Constitution). Section 51 sets out a number of specific areas in which the Commonwealth (as opposed to individual states) has the exclusive right to make laws. States are generally left with the power to make decisions over matters not included in s 51 of the Constitution. Discrimination and equal opportunity are not one of the s 51 powers. However, past federal governments have used the “foreign affairs” power to enter into international treaties governing human rights that include principles of antidiscrimination laws. Where the Commonwealth exercises a federal power to legislate on a matter not specifically reserved under s 51 of the Constitution, the federal law will prevail over any state law in the following instances: • where there is a direct or indirect inconsistency between the federal and state laws, so that it is impossible to comply with both at the same time, or • where the federal law evinces an intent of parliament to “cover the field” of the relevant subject matter. The Commonwealth and state laws referred to in Table 13.1 require similar standards of behaviour, and as such, are generally not perceived to give rise to inconsistency. However, the various federal acts referred to above could be said to operate so as to “cover the field” in relation to certain types of discrimination. In order to overcome the “cover the field” test and preserve the effect of state laws, federal antidiscrimination laws contain a common sustaining provision to the effect that Commonwealth parliament did not, and never intended to exclude or limit the operation of state legislation with a like purpose. As a result, where an act of discrimination is covered by both federal and state laws, an individual with a valid complaint will be able to choose the jurisdiction in which to file such complaint. Such a decision may depend on: • the tests and/or exceptions which apply under each piece of legislation • the type of remedies available for the conduct complained of (For example, in New South Wales, the

amount of damages that may be awarded for an act of discrimination or harassment is capped at $100,000 per breach of the relevant legislation.), or • exclusions on future actions in a different forum. If a person lodges a complaint under state law and he or she also has a valid complaint under federal law, then the person is no longer entitled to bring a complaint under the federal law. The reverse, however, is not true. Industrial instruments Where a federal award is inconsistent with state legislation, similar principles will apply. However, it is possible for state legislation to continue to apply despite the application of a federal award, if the federal award does not, because of the generality of its terms, fully cover the field (see Ansett Transport Industries (Operations) Pty Ltd v Wardley (1984) EOC ¶92-003; (1980) 142 CLR 237; [1980] HCA 8). It should be noted, however, that industrial instruments made under the Fair Work Act 2009 (Cth) (FW Act), or under the Workplace Relations Act 1996 (Cth) following changes to that act in 2006 must not contain discriminatory terms, and to the extent that such terms exist they are unenforceable (see Australian Catholic University Limited [2011] FWA 3693 (10 June 2011)). As such, employers should be careful to rely upon potentially discriminatory terms in collective agreements, where such terms may be subject to challenge. Extent of operation To the extent that the abovementioned legislation prohibits certain types of behaviour, it is confined in its operation in that anti-discrimination legislation: • generally only applies to certain “areas of life”, such as work, the provision of goods and services, access to education, and access to and egress from buildings, and • only prohibits discrimination and other specified behaviours on the basis of certain “prohibited grounds”, such as sex, age and race. It is possible for discrimination to occur without the occurrence of “unlawful” conduct, as can be demonstrated in the following two examples: (1) A Catholic family, inviting only Catholic friends, to a baptism of a child in a Catholic church — while discriminatory, is not conduct falling within one of the “areas of life” covered by anti-discrimination legislation. This type of behaviour is not considered “unlawful”. (2) If an organisation discriminates against employees to award an achievement prize which is based on performance, this will not generally amount to unlawful discrimination. Areas of life — work This chapter is concerned with discrimination and other behaviours in the area of life that is termed “work”. It is important to note that “work” does not simply mean “employment”. The above legislation applies to the treatment of persons in connection with: • recruitment (including advertising) and selection for employment • conditions of employment • termination of employment • commission agents • contract workers (including labour hire employees) • partnerships • qualifying bodies • trade union and employer agencies (and, in some cases, associations), and

• employment agencies. The legislation listed in Table 13.1 also regulates the conduct of persons at work, or in connection with work (eg in relation to unlawful harassment). Anti-discrimination legislation has been read broadly to find that a person’s conduct may be in the course of employment or connected with work even if after-hours and outside the normal working environment. Examples of unlawful discrimination in the area of work are discussed in more detail at ¶13-050. Prohibited grounds The prohibited grounds of discrimination are largely the same under state legislation, and are reflected in federal legislation. However, some prohibited grounds are peculiar to individual states. For example, the prohibited ground of “physical features” exists only under Victorian legislation. Table 13.2 summarises the prohibited grounds of discrimination under both federal and state law. Table 13.2: Summary of prohibited grounds Sex or gender

Homosexuality, sexual orientation, lawful sexual activity

Transgender status, gender identity, gender history, transsexuality, intersex status

Pregnancy or potential pregnancy

Breastfeeding which may include Family responsibilities, status as expressing milk (eg Cth and a parent or carer NSW)

Marital status, domestic status or Race, colour, descent, national relationship status or ethnic origin, immigration status

Religious belief, affiliation, or activity, ethno-religious status, or religious appearance

Physical features (Vic)

Disability, impairment, (physical or mental, and which may extend to past, current or potential disability or impairment)

Age

Union membership, participation Political belief, affiliation or in union activities (Cth, ACT, NT, activity (Cth, Qld, Vic) Qld, Tas, Vic), employment activity (Vic)

Profession, trade, occupation or calling (ACT), social origin (Cth)

Irrelevant medical record (Cth, NT, Tas)

Irrelevant criminal record (Cth, NT, Tas)

Spent convictions (ACT, WA)

Discrimination can occur on more than one of the above grounds simultaneously. Further, in all jurisdictions, it is unlawful to discriminate against a person in the area of work not only because they themselves may fall into one of the above prohibited grounds. It is also unlawful to discriminate against persons on the basis of a close relationship with a person who falls into one of the above grounds. As set out above, in order for conduct to be unlawfully discriminatory, the purpose of that conduct must be related to one or more of the above prohibited grounds. However, if conduct has more than one purpose, it is generally enough that a purpose (and not necessarily the dominant purpose) of the conduct is related to a prohibited ground. Under Victorian, Queensland and South Australian legislation, the reason for the discriminatory conduct must be a “substantial” reason. Discriminating on prohibited grounds in practice — characteristics attributable to prohibited grounds When people and organisations discriminate in practice, it is rare that such discrimination occurs consciously in connection with one of the above prohibited grounds. Rather, as a society, we tend to discriminate on the basis of characteristics that are attributable to persons falling within those grounds. This practice may result from “stereotyping” groups of people. For example, discriminating against a woman on the basis that she “might” have children in the future (because of her child-bearing capacity)

may amount to unlawful discrimination on the basis of sex.

¶13-040 What is discrimination? Discrimination defined Discrimination occurs when a person or group is disadvantaged on the basis of an identifiable characteristic where persons without that characteristic are not disadvantaged. However, discrimination will only be unlawful where: (1) it occurs in an “area of life” that is regulated by anti-discrimination legislation, such as “work”, and (2) it relates to a prohibited ground. Direct and indirect discrimination are discussed in further detail in the following paragraphs. There is no requirement to show “intent” or “motive” to prove that unlawful discrimination has occurred. Discrimination does not have to be conscious or calculated in order to be unlawful. There are two forms of discrimination under the relevant legislation: (1) direct discrimination, and (2) indirect discrimination. Direct discrimination Generally, direct discrimination occurs when a person or group of people is treated less favourably because of a particular attribute where persons without that attribute are or would be treated more favourably in the same or similar circumstances. Proving unlawful discrimination often requires a consideration of how a hypothetical person or group without a particular characteristic would be treated in the same or similar circumstances. There are three important elements to direct discrimination: (1) Less favourable treatment: Generally, all anti-discrimination legislation incorporates the concept of “less favourable” or “unfavourable” treatment. To establish less favourable or unfavourable treatment, a person must demonstrate that he or she has been subject to some detriment as the result of the conduct in question. The underlying concept of this requirement is that the complainant must suffer loss or disadvantage as a result of the unfavourable or less favourable treatment. Detriment in the area of work might be non-appointment to a position, termination of employment, or denial of a benefit to which others might be entitled. (2) Treatment based on attribute or characteristic: As noted earlier, discrimination will only be unlawful if it is based on a prohibited ground, such as sex or race. There must be a causal link between the conduct complained of and the prohibited ground. As indicated above, even if there are several reasons for the conduct, if one of them is discriminatory, then this will be sufficient to give rise to a complaint (except in relation to age at the federal level, where age must be the dominant purpose of the conduct). (3) Treatment occurs in circumstances which are the same or not materially different: Finally, in order to establish direct discrimination, it is necessary to show that the less favourable treatment of the complainant has occurred in circumstances that are the same as, or not materially different to, the circumstances of the hypothetical non-discriminatory situation. However, there are no express “comparator” provisions under legislation in Victoria, South Australia or the Australian Capital Territory. In these jurisdictions, direct discrimination will occur simply if it can be shown that a person with a particular attribute has been treated unfavourably because of that attribute. This is also the case under the Racial Discrimination Act 1975 (Cth). In addition to these requirements, it is necessary to keep in mind that:

• the test of direct discrimination is an objective test, not a subjective test, and • “reasonable conduct” on the part of the discriminator is irrelevant and cannot form the basis for a valid defence in the case of direct discrimination (although it is a relevant consideration in the case of indirect discrimination). Indirect discrimination Indirect discrimination is subtle, and often hard to identify in practice. Indirect discrimination in the area of work refers to practices, conditions or policies which, while appearing to treat everyone equally, actually operate indirectly to disadvantage one group of persons over another. There are specific provisions prohibiting indirect discrimination in all jurisdictions in Australia, except the Northern Territory. The Northern Territory legislation, nevertheless, is intended to extend to the concept of indirect discrimination generally. Industrial legislation has historically tended to extend only to the concept of direct discrimination referred to above. However, discrimination provisions under the FW Act relating to adverse action on discriminatory grounds (see s 340 and 351) may be open to broader interpretation than the fairly limited “unlawful termination” provisions available under prior industrial legislation (see Stephens v Australian Postal Corporation [2011] FMCA 448 (8 July 2011)). For indirect discrimination to be unlawful, it must relate to a prohibited ground and occur in an area of life regulated by anti-discrimination legislation (eg work). The definition of indirect discrimination varies across the legislation referred to in Table 13.1. Generally, indirect discrimination will occur when a requirement, policy or practice is difficult for a group of persons to meet because of common characteristics attributable to a prohibited ground, where persons without that characteristic are more likely to be able to meet the requirement in the same or similar circumstances. Further, in order for indirect discrimination to be unlawful, the requirement policy or practice must be unreasonable in all the circumstances. Tests for indirect discrimination differ between state and federal legislation. However, the indirect discrimination tests in the legislation at Table 13.1 can generally be said to be based on two models: (1) the disadvantage model, which focuses on the likelihood that a disadvantage to a particular group will flow from a condition, requirement or practice, and (2) the proportionality model, which focuses on the likelihood that a group of persons is unlikely to be able to meet a particular requirement, or comply with a particular policy or practice because of a particular attribute. The disadvantage model is used in the Sex Discrimination Act 1984 (Cth) and Age Discrimination Act 2004 (Cth), and in anti-discrimination legislation in Victoria, the Australian Capital Territory, and Tasmania. The proportionality model is used in other federal legislation, and anti-discrimination legislation in the remaining states. While the definition varies from legislation to legislation, the predominant test for indirect discrimination, the proportionality test, is, in general terms very similar. In each jurisdiction, to establish whether a complainant has been subject to indirect discrimination, four elements must be present: (1) the complainant is required to comply with a requirement or condition, and (2) a substantially higher proportion of people without the relevant attribute or characteristic comply, or are able to comply, with the condition or requirement, as compared with those of the same status as the complainant, and/or (3) the complainant does not or cannot comply with that requirement or condition, and (4) the requirement or condition is not “reasonable” having regard to all the relevant circumstances of the case. Where a disadvantage test applies, a complainant must show the first and last elements set out above,

and must also show that the requirement, condition or policy in question is likely to disadvantage a group of persons who are protected under the legislation. The elements set out above in relation to the proportionality test are discussed in more detail in the following paragraphs. Imposition of a requirement or condition There must be a condition, requirement or practice in order for indirect discrimination to occur. However, this condition, requirement or practice does not have to be a formal policy. For example, an unspoken but commonly understood requirement that employees have a certain number of years’ service before being considered for a promotion might be sufficient. In the employment context, a requirement or condition could potentially be: • a physical requirement or condition (ie the ability of a person to access a workplace that does not have disabled access points) • the requirement for a formal qualification or years’ experience • the structure of a job (eg a full-time position “requires” a person to work full time) • the tasks that must be undertaken in a job (eg physical tasks) • the nature of certain rights to accruing benefits on termination of employment (eg access to prorated bonus plans and unvested stock or stock options), and • the selection criteria for terminating the employment of persons from a pool of positions where only some positions are to be made redundant. Substantially higher proportion The relevant requirement or condition must be one with which a “substantially higher proportion” of persons of a different status to that of a complainant can comply. In order to assess the “proportion”, it is necessary to first establish two groups or “pools”, and then to consider the proportion of the complainant’s “pool” that is disadvantaged by the requirement or condition, when compared with the proportion of the rest of the “pool” of those who are not disadvantaged. Complainant does not, or cannot, comply This element will be satisfied if a complainant shows that he or she is unable to comply in practice, even if the complainant is able to comply physically with the requirement. For example, if an employer has a dress code which is inconsistent with the cultural dress of a Muslim, the fact that the employee is physically capable of complying with the employer’s dress code will not mean that the employee “can comply” for the purposes of the legislation. Condition is not “reasonable” in the circumstances A requirement, condition or policy will only be unlawful if it is unreasonable in all the circumstances. Unfortunately, the relevant legislation does not provide a definition of “reasonableness”. Reasonableness is a question of fact to be determined on a case-by-case basis. However, the following factors might be taken into account in assessing reasonableness in an employment context: • the disadvantage likely to be suffered by the group who will be discriminated against because of a requirement, condition or policy • the inherent requirements of the job in question • whether the object of the requirement could be achieved by an alternative means • the difficulty and cost of implementing alternative measures, and • whether the disadvantage in question is disproportionate to the result sought by the person who imposes or proposes to impose the condition, requirement or practice.

The onus is generally on a complainant to show that an indirectly discriminatory act was unreasonable. However, the respondent bears the onus of showing reasonableness where a complaint is brought under any of the following Acts: • Sex Discrimination Act 1998 (Cth) • Discrimination Act 1991 (ACT) • Anti-discrimination Act 1991 (Qld).

Case examples The following types of practices within the area of work have been found to have been indirectly discriminatory in the past: • a “last on, first off” selection policy for terminating employment for redundancy, where female employees were more likely to have shorter periods of service because of a prior discriminatory practice of giving preference to male job applicants (see Australian Iron and Steel Pty Ltd v Banovic (1989) EOC ¶92-271; (1989) 168 CLR 165; [1989] HCA 56) • a requirement to work at a particular pace indirectly discriminated against a woman with a fingerjoint disorder (see Deckert v Department of Primary Industries (2006) EOC ¶93-418; [2005] VCAT 2138) • a retrenchment strategy that required existing employees to apply for positions within a short period of time, and to be able to commence in those positions within four weeks of application, was indirectly discriminatory to women on maternity leave (see Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission and Anor (1998) EOC ¶92-908; [1997] FCA 1311), and • an employer’s failure to consider a request for part-time work following a return from maternity leave was indirectly discriminatory as this policy was more likely to disadvantage women who were, in the main, the primary carers of children (see Escobar v Rainbow Printing Pty Limited (2002) EOC ¶93-229; (No 2) [2002] FMCA 122).

¶13-050 When is discrimination in employment unlawful? Areas and aspects of work that may be affected by unlawful discrimination are set out in ¶13-030. Some of these areas are discussed below in more detail in relation to employment. All anti-discrimination legislation operates by identifying characteristics in respect of which discrimination is unlawful, and then defining certain “areas” in which discriminatory actions of the kind identified are prohibited (eg employment and the provision of goods and services). In this section, the various types of unlawful discriminatory action in the area of employment are outlined, as well as some relevant exceptions. Conditions of employment It is unlawful for an employer to discriminate on the basis of a prohibited ground in relation to terms and conditions of employment. Discrimination in relation to conditions may include discrimination that relates to: • terms and conditions of employment, such as: – structure of the position

– the level of an employee’s salary and other benefits – access to bonus and share plans and other benefits – the hours, including any requirements to work extended hours, and – requirements to travel for work • access to promotion or other benefits (eg training), and • subjecting an employee to less favourable working conditions (eg “hostile working environment” resulting from harassment). Disability discrimination regimes in some jurisdictions now expressly prohibit refusal to make reasonable adjustments to accommodate a person with a disability (see eg s 5(2) of the Disability Discrimination Act 1992 (Cth)), subject to a defence of unjustifiable hardship. Similarly, pursuant to the Victorian Equal Opportunity Act 2010 (Vic), an employer must not, in relation to the work arrangements of an employee, unreasonably refuse to accommodate the responsibilities that the employee has as a parent or carer. Termination of employment A person’s employment may not be terminated on the basis of one of the prohibited grounds of discrimination. In this context, “termination” will include dismissal, retirement and redundancy, and may also include the expiration and subsequent non-renewal of a fixed-term agreement. Exemptions in the area of employment Anti-discrimination laws in all jurisdictions contain specific and general exemptions. A number of employment-specific exemptions can be found in most jurisdictions. These exemptions are discussed in the following paragraphs. A number of other broader exemptions, which apply to all areas and grounds and may be of relevance in the employment area, are discussed under the heading “General exemptions”. Genuine occupational qualification Under most of the anti-discrimination legislation, a limited exemption exists where there is a “genuine occupational requirement” for a person to have a particular attribute in order to perform a particular role. This limited exemption will generally only apply to stated types of occupation, for example: • for reasons of authenticity in relation to theatrical performances and, in some jurisdictions, in relation to food outlets selling food of a particular nationality, and • for reasons of personal decency in relation to change-room attendants, or other persons required to work in areas where persons of a particular sex may be in a state of undress. This exemption generally only applies to sex, race and disability. Inability to perform the inherent requirements of the role in question Anti-discrimination legislation recognises that it may sometimes be difficult to accommodate an individual at a workplace due to disability or impairment. It is generally not unlawful for an employer to discriminate on the grounds of disability or impairment if: • as a result of the disability, the employee cannot perform the inherent requirements of the position, or • in order to carry out the inherent requirements of the position, the employee will require services or facilities which are not required by a person without the disability, and the provision of such services or facilities will impose an unjustifiable hardship on the employer. It is worth noting (as mentioned previously) that federal disability discrimination expressly includes failure to provide reasonable adjustments to accommodate a person with a disability in the definition of “direct

disability discrimination”, rather than simply including the concept of reasonable adjustments (and unjustifiable hardship in providing such adjustments) within an exception to the prohibition on disability discrimination. The Disability Discrimination Act 1991 (Cth) does, however, continue to include an “unjustifiable hardship” exemption. This exemption generally relates only to the hiring of a job applicant or the termination of an existing employee’s employment where he or she has become unable to perform his or her role. This exemption also applies, in a slightly altered form, to the grounds of carers’ responsibilities (New South Wales), age (Northern Territory, South Australia) and pregnancy (South Australia). The “inherent requirements” of the position are the fundamental aspects of the job that a person must be able to perform in order to meet the needs of the position. The “inherent requirements” of a job are not usually based on the employer’s operational requirements, although these may be taken into consideration. The “unjustifiable hardship” exemption is difficult to establish. Whether unjustifiable hardship exists depends on all the circumstances of the case, including: • cost and financial impact on the employer • the likely impact on the workplace, and • the impact on other employees weighed against the benefit that will accrue to the disabled employee. The “inherent requirements” exemption also exists in slightly altered form in the Age Discrimination Act 2004 (Cth). The exemption will apply in this instance where, because of a person’s age, the person cannot carry out the inherent requirements of the job in question. In considering whether a person is capable of carrying out inherent requirements, the following factors must be considered: • the person’s past training, qualifications and experience relevant to particular employment • if a person is already employed, their performance in that capacity, and • all other factors that are reasonable to take into account. An “inherent requirements” exemption is also applied to the discrimination provisions of the FW Act insofar as those provisions prohibit an employer from taking adverse action against an employee on the basis of the employee’s race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin. Superannuation and insurance Under the federal legislation, discrimination in the provision of superannuation or insurance is not unlawful in employment or the provision of goods and services in certain circumstances. In the case of sex discrimination, the exemption only applies where the discrimination is supported by actuarial data. In the case of disability discrimination, the exemption will apply only if the discrimination is supported by actuarial data or, if that is not available, other relevant factors. State and territory legislation contains an exemption for discrimination in superannuation in relation to sex, marital status, age or disability, with the exception of South Australia. Pregnancy or childbirth Most legislation provides an exemption whereby an employer can grant women privileges or rights connected with pregnancy or the birth of a child. For example, an employer may provide female employees with paid leave leading up to and shortly after the birth of a child. Although, providing paid parental leave on the basis of a female employee being a primary caregiver may be unlawfully discriminatory where a male employee can also be a primary caregiver (see Chapter ¶41). Religious bodies Most legislation allows religious bodies to discriminate on the ground of race, sex, marital status,

impairment or sexuality in relation to the ordination of ministers or members of a religious order. This includes the provision of training for such ordination, the appointment of a person to propagate religion, and relates to any other act or practice that conforms to religious beliefs, or that is necessary to avoid injury to the religious susceptibilities of followers of a particular religion. Political belief The legislation in Victoria and the Australian Capital Territory contains an exemption on the ground of political conviction or political belief in relation to employment or work: • as an adviser to or a member of the staff of a government minister, the speaker of the legislative assembly or a member of the legislative assembly • as an officer or employee of, or a worker for, a political party • as a member of the electoral staff of a person, or • in any other similar employment or work. Sport In relation to participation in competition sport, there are exemptions related to sex and age. These exemptions do not, however, apply to employment in a coaching or administrative role which is related to a sport. Care of children In the Northern Territory and Queensland, it is lawful to discriminate in the area of work on the ground of sexuality (and in Queensland, gender identity) where the work involves the care, instruction or supervision of children, and discrimination is necessary to protect the wellbeing of children. This exemption applies in Victoria in relation to any prohibited ground of discrimination. It is lawful to discriminate against persons in relation to employment in positions for the residential care of children on the basis of sex in Western Australia, and any prohibited ground in the Australian Capital Territory. Accommodation All relevant discrimination legislation contains some limited exemptions in relation to discrimination where there is work-related accommodation. In general, the exemptions relate to domestic employment, to enterprises with small numbers of employees and to private educational authorities. Combat duties and peacekeeping services Sex Discrimination Act 1984 (Cth) and Disability Discrimination Act 1995 (Cth) contain exemptions in relation to combat-related duties. General exemptions All equal opportunity and anti-discrimination legislation contains a limited number of exemptions which are general in their application, and apply regardless of ground or area. These are discussed directly below. Special measures All anti-discrimination legislation contains provisions that allow “special measures”, which are directed at achieving equality. The object of such “special measures” is to ensure that persons or groups within the recognised grounds of discrimination are not prejudiced by the view being taken that the positive measure is discriminatory. Charities and testamentary dispositions Most of the relevant legislation exempts instruments (including wills) which confer a gift or a charitable benefit on a person or groups of people. The exemption extends to any acts done to give effect to such a disposition. Health and safety In Victoria and Queensland, a general exemption applies whereby a person may discriminate against another on the basis of impairment or physical features if the discrimination is reasonably necessary to

protect the health and safety of any person (including the potential claimant) and the public generally. Public health In some jurisdictions, disability discrimination, which is reasonably necessary to protect public health (eg in relation to the spread of infectious diseases), is exempt. Compliance with statutory requirements, court orders and industrial instruments As a general rule, where a piece of legislation is passed, it will generally prevail over any earlier legislation. To address this, most anti-discrimination legislation contains provisions which exempt: • the effect of other legislation • actions taken under such other legislation, or • compliance with court orders. Voluntary bodies or voluntary work Most discrimination laws contain exemptions for voluntary bodies and the activities undertaken on their behalf in relation to their membership and the benefits they provide to their members. Tribunal-granted temporary exemptions Most anti-discrimination legislation also allows the relevant tribunal or commission to grant specific exemptions from the operation of the legislation for limited periods (usually three or five years). In the federal sphere, tribunal-granted exemptions are not available in respect of racial discrimination or sexual harassment. Similarly, in the Australian Capital Territory, no exemption may be granted in respect of racial, sexuality and HIV/AIDS vilification. Where there is a power to grant such exemptions, it is subject to review by the relevant appeals tribunal or court.

¶13-060 Unlawful harassment The term harassment generally refers to unwelcome or unsolicited conduct that intimidates, humiliates or offends the person at whom it is directed. However, not all forms of harassment will be unlawful. Antidiscrimination legislation contains specific anti-harassment provisions in relation to: • sexual harassment • racial harassment (Western Australia only), and • disability harassment (federal level only). Anti-discrimination legislation also prohibits acts of vilification in relation to race, religion, disability, sexuality, gender identity and HIV/AIDS status. Vilification is discussed separately later in this section. Despite the absence of specific provisions relating to harassment on other prohibited grounds of discrimination, an act which would otherwise be described as harassment may give rise to unlawful discrimination where the impugned conduct relates to a prohibited ground. This is because an act of harassment generally involves a potential complainant being subject to “less favourable treatment”. Sexual harassment Sexual harassment is, essentially, unwelcome conduct of a sexual nature. The definition of sexual harassment differs from jurisdiction to jurisdiction, but the types of conduct which amount to sexual harassment in each jurisdiction are broadly similar. The Sex Discrimination Act 1984 (Cth) provides that a person sexually harasses another if: • the person: – makes an unwelcome sexual advance, or an unwelcome request for sexual favours, to the person harassed, or

– engages in other unwelcome conduct of a sexual nature in relation to the person harassed, and • in the situation, a reasonable person, having regard to all the circumstances, would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated. “Conduct of a sexual nature” could include making a statement of a sexual nature to a person, or in their presence, or displaying sexually-charged material. There are many different types of conduct which could amount to sexual harassment. The underlying requirement, however, is that the conduct is unwelcome. Sexual conduct is unwelcome when: • it is not invited or solicited by the person on the receiving end of the conduct, and • that person regards the conduct as undesirable or offensive (this introduces a subjective element to the test). Unwelcome conduct Under the Sex Discrimination Act 1984 (Cth), a person need not actually intend to offend for his or her conduct to amount to sexual harassment. It is sufficient that a reasonable person would have anticipated the possibility that the person harassed would be offended, humiliated or intimidated. As such, a failure to display offence at a pattern of conduct will not render that conduct lawful.

Case example Aldridge v Booth & Ors In Aldridge v Booth & Ors (1986) EOC ¶92-177, a 17-year-old employee succumbed to sexual overtures made by one of her employers, including sexual intercourse, because she believed that she would be dismissed if she did not relent. Notwithstanding this, the sexual conduct was found to have been unwelcome and unlawful.

Likely to offend, humiliate or intimidate Unwelcome conduct of a sexual nature will be unlawful where it occurs in circumstances in which a reasonable person would have anticipated that the person at whom the conduct is directed would feel offended, humiliated or intimidated. It is also possible to demonstrate unlawful harassment where a perpetrator’s intent to humiliate, intimidate or offend is shown as an alternative to this requirement in Queensland and the Northern Territory. Generally, the legislation requires that all relevant circumstances are taken into account when considering what a reasonable person might feel about a particular type of behaviour. A person’s age, race, religion, sex and any other relevant attributes should be taken into account in considering the required “reasonableness” test. Conduct constituting sexual harassment Sexual harassment can involve physical, visual, verbal or non-verbal conduct. It can take various forms and can involve: • behaviour which is accompanied by a direct or implied threat or promise of a benefit, the acceptance or rejection of which is used, or is threatened to be used, to make an employment decision (eg in relation to hiring, promotion, work assignments or pay increases) which will directly impact on the person alleging harassment • behaviour which creates a sexually permeated or hostile working environment, and • behaviour which can also constitute criminal conduct (eg indecent exposure, physical assault or

sexual assault). A single act of harassment is sufficient to give rise to a complaint. However, conduct which may not amount to unlawful harassment at first instance may amount to sexual harassment if it is repeated. For example, an initial request to ask a person out on a date may not be likely to intimidate, but further repeated requests may be likely to intimidate. Likewise, conduct which is mutually acceptable, such as mutual flirtation, can deteriorate into unlawful harassment. Repeated or severe incidents will have an obvious impact on the amount of any award of damages made by a tribunal. Disability harassment The Disability Discrimination Act 1992 (Cth) prohibits harassment against a person with a disability, and/or his or her associate, in a similar way to the sexual harassment provisions in the Sex Discrimination Act 1984 (Cth). Racial hatred and vilification Harassment on the basis of race is often more readily described as racial hatred and vilification, which is covered under legislation in all states and territories except the Northern Territory. Such legislation, in general terms, makes it unlawful for a person, by a public “act”, to incite hatred, serious contempt or severe ridicule of a person or group of persons on the ground of their race. An “act” includes any form of written or verbal communication, the distribution of offensive or vilifying material, the wearing or display of such material in public, and threatening (or inciting others to threaten) physical harm towards people or property. In addition to racial vilification, anti-vilification provisions also prohibit public acts to incite hatred on the basis of homosexuality (New South Wales), sexuality (Australian Capital Territory, New South Wales, Tasmania, and Queensland), HIV/AIDS status (New South Wales and Australian Capital Territory), religion (Queensland and Tasmania), gender identity/transgender status (Queensland, New South Wales), disability, or lawful sexual activity (Tasmania). Victimisation The relevant anti-discrimination legislation, at both the federal and state levels, prohibits the victimisation of a person who makes a complaint, or intends to make a complaint, of either discrimination or harassment under the legislation. “Victimisation” occurs where a person subjects, or threatens to subject, another person to detriment on the basis that the person: • has made, or proposes to make, a complaint under the relevant legislation • has brought, or proposes to bring, proceedings under the relevant legislation • has provided, or proposes to provide, information or documents in relation to a complaint under the legislation • has attended, or proposes to attend, a preliminary conference • has appeared, or proposes to appear, as a witness in a hearing, or • has made an allegation that a person has done an act that is unlawful under the legislation. Such provisions are intended to ensure that those who are entitled to invoke the legislation are not prevented from doing so by the fear of further reprisals. A complaint of victimisation will form a separate complaint to the original complaint of discrimination or harassment. The success or otherwise of the victimisation complaint does not depend on the outcome of the original complaint of discrimination or harassment. As a result, it is conceivable that an employer could avoid liability in respect of the original complaint (eg because the employer has established a valid defence), but be found liable in respect of a subsequent victimisation complaint.

¶13-070 Legal liability for unlawful conduct Types of legal liability There are three different types of liability for discriminatory acts: (1) primary liability (2) vicarious liability, and (3) accessory liability. Information on these different types of liability is presented in the following paragraphs. Primary liability Primary liability is based on the principle that an individual or corporate employer (acting through its directors and senior managers) will be held responsible for acts of discrimination. Employees will be held liable for their own acts of discrimination, harassment or victimisation. However, the burden for providing compensation to complainants may fall on employers where vicarious liability is shown. Where an employer has no vicarious liability (see following), an employee will be solely liable for his or her unlawful conduct. Vicarious liability An employer may be vicariously liable for the acts of its employees or agents. Tests for vicarious liability under discrimination legislation differ to tests of vicarious liability at common law in relation to: • the type or standard of connection between an employee’s conduct and his or her employment, and • the availability of a “reasonable steps” argument to show absence of liability. Connection with employment The statutory tests for vicarious liability are wider than common law tests for vicarious liability that rest on showing that an employee has engaged in conduct in the course of his or her employment. Some tests for vicarious liability under anti-discrimination legislation rely on showing only that conduct was “in connection with” employment. Alternatively, where an employee’s act must be “in the course of employment” to enliven vicarious liability, the courts have been willing to give this concept a wider reading than at common law, to give effect to the social purpose underlying anti-discrimination legislation. The rationale for this wide reading is that employers have the capacity to effect the conduct of their employees for the better.

Case examples In Australia, employers have been vicariously liable for sexual harassment perpetrated by employees or officers: • at an after-hours staff Christmas party (see Shellharbour Golf Club v Wheeler [1999] NSWSC 224) • at a work-funded conference in accommodation organised and paid for by the employer (see Leslie v Graham [2002] FCA 32) • after-hours in living quarters provided by the employer (see South Pacific Resort Hotels Pty Ltd v Trainor [2005] FCAFC 130), and • after-hours at an employee’s residence, and after an informal gathering of colleagues, where it was alleged an employee raped a colleague (see Lee v Smith & Or (No 1) [2007] FMCA 59).

Reasonable steps The statutory tests are not strict. In other words, an employer will not be automatically liable for the act of an employee or agent where it is found to be in connection, or in the course of employment. An employer has a defence where it has taken “reasonable steps” to ensure that its employees and agents do not engage in unlawful conduct. In New South Wales, an employer must demonstrate that it has not authorised particular conduct. However, showing that “reasonable steps” have been taken to prevent unlawful conduct is tantamount to showing that such conduct is not authorised. Just what will constitute “reasonable steps” is a matter of fact to be determined on a case-by-case basis. However, reasonable steps will, in the least, include: • putting in place a written policy prohibiting workplace discrimination and harassment. An employer should have a discernible method of disseminating a policy (see Aleksovski v AAA Pty Ltd (2002) EOC ¶93-219; [2002] FMCA 81) • ensuring that written policies effectively address the issue of discrimination, possibly by including examples of prohibited conduct, and include clear steps that an individual should take if he or she is subject to unlawful conduct. Merely having a policy will not meet “reasonable steps” requirements (see Styles v Murray Meats Pty Ltd (Anti-Discrimination) [2005] VCAT 914) • ensuring that employees are properly trained about discrimination and harassment, its prevention and the employer’s internal grievance procedures. Training should occur regularly, not just at induction, and the employer must ensure that all employees receive training. All employees should be treated equally for contravention of policy or unlawful behaviour (see Dee v Commissioner of Police; NSW Police & Anor (2004) EOC ¶93-346; [2004] NSWADT 168) • senior personnel not being immune from discipline because of their seniority • quickly identifying problem behaviour and preventing further problem behaviour from occurring • providing appropriate training to, and appointing “contact officers” to discuss matters of potential discrimination with employees (These contact officers will not be involved in complaints investigation and resolution processes.) • establishing effective complaint procedures • treating all complaints seriously and investigating them promptly • ensuring that appropriate action is taken to address and resolve complaints, and • reviewing the workplace environment and culture to monitor recurrence of issues. Accessory liability In most cases, the legislation also provides that, where a person causes, instructs, aids, permits or incites another person to commit an unlawful act, then that person will be legally liable as an accessory. Again, the accessory provisions do not prevent the individual or corporate employer from being held liable under the principle of primary liability. Of most concern to employers, an organisation or manager or supervisor may be taken to “permit” another person to engage in unlawful conduct by simply turning a blind eye to unacceptable behaviour. It has been held that, in considering whether a person permits or incites another person to commit an act, it is necessary to consider whether the alleged accessory: • knew or ought to have known or suspected that the particular conduct was likely to be engaged in • had the power to prevent the conduct from occurring

• was in default of some duty of control arising from that position of power, and • failed to prevent the conduct from occurring (see Dixon v RNJ Sicame Pty Ltd & Anor; Sims v RNJ Sicame & Anor [2002] NSWADT 154).

¶13-080 Procedure for making complaints It is preferable that any issue relating to unlawful discrimination, harassment, or victimisation is resolved within the workplace using an employer’s internal complaint-handling mechanism. However, this may not always be possible, and/or a complainant may not always be satisfied with the outcome of any internal investigation and procedure. Preliminary steps: complaints to administering bodies Where an individual is the subject of unlawful discrimination or other unlawful conduct, he or she may make a complaint to the body administering the legislation in the relevant jurisdiction. Anti-discrimination legislation in each state and territory and at the federal level is administered by various decision-making bodies that are responsible for the handling and resolution of complaints as follows. Table 13.3: Decision-making bodies responsible for the handling and resolution of complaints Jurisdiction

Administering body

Federal

Australian Human Rights Commission

Australian Capital Territory ACT Human Rights Commission New South Wales

Anti-Discrimination Board of New South Wales

Northern Territory

Northern Territory civil and Administrative Tribunal

Queensland

Anti-Discrimination Commission of Queensland

South Australia

South Australian Equal Opportunity Commission

Tasmania

Equal Opportunity Tasmania

Victoria

Victorian Equal Opportunity and Human Rights Commission

Western Australia

Western Australian Equal Opportunity Commission

Complainants will have a choice as to whether to bring claims on the basis of certain grounds under either state or territory, or federal law. Whether a complainant opts for federal, as opposed to state law, may depend on a number of factors such as the types of remedy available under each piece of applicable legislation, or the elements of unlawful conduct that must be proved. As noted earlier, if a person commences an action under a state or territory law, he or she will not be able to later move his or her claim to the federal jurisdiction. However, the reverse is not true. Time frames Complaints must be brought within the time frames set out in the following table. However, administering bodies are generally empowered to accept complaints after the expiration of the following time limits where there are compelling reasons to do so. Table 13.4: Time frames Jurisdiction

Time after conduct complained of in which complaint must be commenced

Federal

12 months

Australian Capital Territory

2 years

New South Wales

12 months

Northern Territory

12 months

Queensland

12 months

South Australia

12 months

Tasmania

12 months

Victoria

12 months

Western Australia

12 months

Complaint resolution by the administering body Once a complaint is received by the relevant board or commission, a copy is normally sent to the respondent, and the respondent is given a time frame in which to provide a written response (usually 14 days). The relevant board or commission can then make its own independent enquiries in respect of the complaint. It can conduct conferences with the parties and it can inspect any relevant documents. The relevant body will then determine whether or not the complaint falls within the scope of the relevant legislation. If it determines that it does, the complaint will then proceed to compulsory conciliation, with the aim of reaching a mutually agreed resolution between the parties. If the matter cannot be resolved through conciliation, the complaint may then be referred to the relevant tribunal or court for hearing. If the relevant board or commission determines that a person’s complaint does not fall within the scope of the legislation, that person may still proceed to commence proceedings in a relevant court or tribunal. Commencement of formal proceedings Where a complaint is not resolved by an administering body, the complaint may be referred to a tribunal or court for hearing. Generally, the hearing of a complaint by a tribunal or court will involve similar procedures as any other public hearing of a civil case. The parties to a complaint will be given an opportunity to prepare and submit evidence, orders for discovery may be made, and any evidence will be able to be scrutinised at a hearing in which the parties may have legal representation. Generally, the onus of proof in proving a complaint rests with the complainant. The standard of proof which is required is “the balance of probabilities” — that is, the complainant is required to prove that it is more probable than not that the alleged conduct was committed on a discriminatory ground. As indicated earlier, the ground of alleged discrimination does not have to be the sole cause of the act complained of, and nor does it have to be done intentionally. Where a party seeks to rely on one of the exemptions, however, the onus will be on them to prove that the exemption applies. Notably, under the FW Act, where an employee makes a claim of adverse action by discrimination, the onus will be on the employer to show that the reason for the relevant action was not a prohibited ground. Interim relief Tribunals and courts empowered to determine anti-discrimination matters have the power to make orders for interim relief in most jurisdictions. Interim relief is generally only available to maintain the status quo in a particular situation, or to preserve the rights of a party until a final determination is made about the lawfulness of the conduct in question. In the past, orders for interim relief have been granted to prevent employers from terminating the employment of employees until after the determination of a complaint (see eg Beck v Leichhardt Municipal Council [2002] FMCA 331). Final relief If a tribunal or court finds a complaint substantiated, it may make a variety of orders or declarations, including: • issuing an injunction prohibiting the respondent from continuing or repeating the act or conduct complained of • making an order that the respondent pay the complainant an amount in damages to compensate for loss or damage suffered. The detriment suffered may be either financial, such as economic loss, or non-financial, such as embarrassment, hurt and humiliation. As previously indicated, some states

have a cap on the amount of damages that may be awarded • making an order that the respondent perform any act or conduct to redress the loss or damage suffered by the complainant, including reinstatement, re-employment, back-dating a promotion, offering an alternative benefit, back-dating lost wages, and • amending a contract or agreement which contravenes relevant legislation. Monetary compensation for breach of anti-discrimination legislation is limited to $100,000 in New South Wales and $40,000 in Western Australia in respect of a respondent’s unlawful conduct. Investigations In most jurisdictions, independent bodies do not have the power to investigate alleged breaches of antidiscrimination legislation in the absence of a complaint from an individual or affected group of persons, where such persons have “standing” to make a complaint under the relevant legislation. However, in Victoria, the Victorian Equal Opportunity and Human Rights Commission (VEOHRC) now has the power to independently commence an investigation where it has reasonable grounds to suspect that a contravention of the Equal Opportunity Act 2010 (Vic) has occurred. For example, if the VEOHRC is aware of a pattern of employees complaining about discrimination against a particular employer, but the employer is successful in settling matters at the complaints stage so that the complaints are never publicly scrutinised (and so that there is evidence of a continuing practice of unlawful discrimination), the VEOHRC may nonetheless seek to investigate a pattern of conduct of its own initiative. The VEOHRC has the power to seek any information reasonably necessary for the purpose of conducting an investigation, and can seek orders from the Victorian Civil and Administrative Tribunal (VCAT) compelling production of materials. Following an investigation, the VEOHRC may, among other things, make a report to parliament, or refer an investigation to the VCAT. The VCAT may, following further inquiries, make orders against a party to refrain from engaging in discriminatory conduct or redressing circumstances that have arisen from discriminatory conduct (which may potentially include monetary orders). In addition to the powers of the VCAT, the Office of the Fair Work Ombudsman also has powers to independently investigate and prosecute breaches of industrial legislation which relate to discrimination, as referred to above. Costs Anti-discrimination legislation does not create an automatic right to costs for a successful party to litigation. Parties are generally required to bear their own costs of participating in a hearing. However, the various pieces of legislation do give tribunals and courts the power to award costs in certain circumstances. For example, in New South Wales, costs may be awarded against a complainant where his or her complaint has been dismissed, and in South Australia, costs may be awarded against vexatious or frivolous litigants, or litigants who have engaged in delay or obstruction in the course of proceedings.

¶13-090 Conclusion Anti-discrimination legislation sets out minimum standards of behaviour that are designed to allow all persons equitable access to the Australian workforce. However, employers should remember that legislative requirements act as minima only. Employers must look beyond the legislation to create positive, fair, but functional workplaces. In doing so, employers are not only ensuring compliance with legislation, but are also likely to reap additional benefits, such as a reputation as an employer of choice, and a productive, content, loyal workforce. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶13-010.

14. BUSINESS IN THE DIGITAL AGE Editorial information

Paul L Nesbit Macquarie Graduate School of Management

¶14-010 Introduction A central feature of the contemporary environment facing business is the increasing use of information and communication technologies (ICT). The two technologies most associated with it are computers and the internet, although it also relies on innovative software that supports sophisticated approaches to the creation, storage, processing and communication of information. Information and communication technologies have combined to produce a “digital revolution” (Negroponte 1995), where traditional analogue- and mechanical-based technologies for information storage and communication are replaced by advanced ICT that processes and communicates digital-based information with great speed, accuracy, and with little cost (Ohmae 1990). The significance of ICT on society and business has been further impacted in recent years by advances in mobile technologies (ITU 2012), such as smartphones and tablets, which essentially allow people to carry computers connected to the internet with them wherever they are. This interconnected and mobile environment is having profound significance for the world of work — both for business organisations and employees. Jack Welch, the ex-CEO of General Electric, once described the internet as presenting the greatest opportunity in the history of his company, claiming that “the excitement is like nothing we’ve ever experienced” (cited in Nesbit and Burton 2003). ICT generates excitement because it challenges the old models of business and offers the potential for significant benefits to organisations. It provides a new channel for business as it facilitates information exchange within the organisation and to external stakeholders, allowing the provision of information and sending of mass or personalised messages to staff, suppliers, and current or potential customers outside the organisation. These effects can lead to significant improvements in efficiency of operations and in the provision of customer service. The work experiences of employees are also changing in response to the widespread integration of ICT into organisations. The digital age is associated with profound changes to the world of work, contributing to the collapse and birth of industries, the transformation of work structures within existing firms, creation of new occupations and work roles, as well as profoundly changing existing roles (O’Connor 2012). This chapter examines some of the terrain of the impact of advances in ICT on organisational structures and processes, and the way that work is being transformed as the digital age unfolds. To appreciate the impact of ICT on organisations, one needs to first reflect on the rapid adoption of these technologies by business and to understand why it is so significant. Thus, the chapter begins with a brief overview of the extent of the use of ICT by organisations and is followed by a discussion of why ICT is so significant to their operation. The nature of transformations attributed to ICT is then discussed with particular attention to changes to work arrangements that increase labour flexibility, the increasing use of collaborative work across the internet (eg virtual teams), the impact of technologies on human resource management (HRM), and the growing importance of social media for business.

¶14-020 Adoption of ICT by business

Computers have been incorporated into business systems since the late 1950s. Starting with large mainframes, which allowed corporations to centralise large computational tasks such as salary and accounts processing, the evolution of computers moved rapidly to the ubiquitous desktop computer. According to technology research firm Gartner, in 2008 the estimated number of computers in use topped one billion and it is expected that this will rise to two billion by 2014 (Virki 2008). In addition to the widespread use of computers, there were also nearly six billion mobile-cellular subscriptions for phones in the world by the end of 2011 (ITU 2012), highlighting the growing significance of mobile technologies. The advent of user-friendly browser software in the early 1990s stimulated the rapid adoption of the internet. As at the middle of 2012, it was estimated that there were 2,405 billion users of the internet (IWS 2012), which represents approximately 35% of the world’s population. This figure indicates more than a doubling of users in less than five years. China, in particular, has seen substantial increases in the use of ICT, and currently has 25% of the world’s internet users (IWS 2012). Australia has been a quick and substantial adopter of computers and the internet and has a welldeveloped ICT infrastructure. According to the International Telecommunication Union (ITU 2012), which calculates a measure of access and use of ICT for 181 economies, Australia is ranked in the top 20 countries (ITU 2012) worldwide. Data collected by the Australian Bureau of Statistics (ABS) shows that ICT use by business has been high since the late 1990s. The latest ABS data shows that over 97% of businesses have internet access and broadband as their main type of connection compared with 29% in 1997–98 (ABS 2011a). These technological developments are then reflected in the opportunity for more commercial interactions using ICT. For example, ABS data on e-commerce shows that, in 2010, 46.5% of businesses placed orders via the internet and 24.8% received orders via the internet (ABS 2010). Australian consumers have also been enthusiastic about the use of ICTs. Regular internet use is reported by 88.8% of the population (IWS 2012). The percentage of households with access to the internet at home has increased from 60% in 2005–06 to 79% in 2010–11. Furthermore, access speeds have gone up considerably as the number of households with broadband internet connection has climbed from 2.3 million households in 2005–06 to 6.2 million in 2010–11 (ABS 2011b). In 2011, the proportion of Australian internet users who purchased or ordered goods or services over the internet was 68%, up from 64% in 2008–09, supporting a strong trend for e-commerce practices (ABS 2011b). Another aspect of ICT for individuals that has developed in the last few years is the increasing adoption of smartphones within the domain of mobile technologies. In 2011, it was estimated that the number of smartphones exceeded the number of PCs sold for the first time. While globally there are seven times as many feature phones as smartphones, in 2011, the Australian experience was very different, with smartphones representing about 65% of the total mobile phone market (Bhatt 2012). A study of over 5,000 smartphone users (18–64 years of age) in the United States found that — in a typical week in 2010 — 81% of owners used their smartphones regularly throughout the day to browse the internet, 77% used a search engine, 68% used an “App” and 48% watched videos. Searching for local information was one of the most common smartphone activities, and is often followed by purchasing behaviour (77%) (Voskresensky 2011). Consumers also have access to new forms of information, such as blogs, which are user-generated websites. Many blogs now provide commentary about the operations, products and services of organisations, giving consumers additional sources of information to compare and contrast the products and services of firms. The growth in blogs is phenomenal with over 181 million blogs at the end of 2011, up from 36 million in 2006 (NM Incite 2012). In addition, social media uptake has been substantial, with over 11 million Facebook users in Australia (Socialbakers 2013). One of the most significant developments for Australian businesses and individuals relates to the current roll-out of the National Broadband Network (NBN). The NBN seeks to provide high-speed broadband access to the majority of Australian homes and businesses — principally using optic fibre, but also including fixed wireless and satellites (DBCDE 2013). As the speed of internet communication increases, more information and types of communication formats (eg text, voice, graphical, video) can be communicated, and it is likely to enhance the current trend for e-commerce and interactions with business. Thus, the NBN presents an important dimension for the utility of ICT for business.

¶14-030 The significance of ICT for business

The rapid uptake of ICT by business underscores its importance to the operations of organisations. However, technology’s impact on work is not only confined to its direct impact on structures and processes within the organisation: ICT indirectly influences the actions of business leaders by contributing towards a growing competitiveness in the external environment (see Figure 14.1). Figure 14.1: ICT’s impact on organisations

Canadian academic and social commentator, Marshall McLuhan, coined the term “the global village” in the 1960s to reflect the growing recognition of the linkages that were developing between countries. These linkages have increased the economic integration and interdependence between countries and regions of the globe (Bartlett and Ghoshal 2000; Tuller 1991) and it has been argued that globalisation pressures will lead eventually to the creation of a single global economy transcending and integrating the world’s major economic regions (Ohmae 1990). ICT reinforces the effects of globalisation. Transnational organisations rely on ICT to aid the coordination and exchange of information required to engage in geographically dispersed businesses. ICT allows organisations to also operate their production chains across countries (Aggarwal 1999). At the same time, globalisation encourages the dissemination of innovations in ICT. Thus, a cycle exists of technological change impacting globalisation, which in turn increases the value of technology. The dynamic interchange between ICT and globalisation has contributed to an organisational environment of rapid innovation and change which, as both academics and business leaders have noted, has increased the scope and scale of competition facing organisations (Bartlett and Ghoshal 2000; Daft 2000). Global markets increase competition by extending the number and variety of firms that are seeking to service customers and expose firms to pressure in underlying costs of production. In a survey of over 1,300 Chief Executive Officers (CEOs) from around the world, competition was identified as a major focus of concern in the business environment (PricewaterhouseCoopers 2005). Similar findings were expressed in a survey of 3,000 executives across 31 countries in 2012 by KPMG. In this survey, which was impacted also by the global financial crisis, CEOs identified the need for increased efficiency, such as creating leaner supply chains, as a major business concern. Another finding of the study was the growing attention to the role of social media as a mainstream marketing challenge (KPMG 2012). Thus, technological innovations and globalising markets are combining to produce a dynamic cycle of change, increasing the competitive forces operating within business environments (see Figure 14.1). These escalating competitive forces require organisations to continually maintain and enhance the efficiency of operations in producing products and services while also ensuring high-quality innovation in response to changing customer needs. Given the need to operate more efficiently, organisations have sought to use ICT directly in reconfiguring operations and processes. Technology enables organisations to carry out activities differently, as well as engage in activities that were not possible previously. The enabling nature of ICT is associated with its capacity to communicate and process digital information rapidly and cheaply. Evans and Wurster (2000), in their book Blown to Bits, discuss the differences between internet and traditional communication technologies. They focus on the two dimensions of communication media, namely, reach and richness. Reach refers to the geographical extent and/or

numbers of people able to be communicated with using a particular medium. Richness refers to the qualitative nature of the communication that is allowed by the medium, such as its bandwidth (the amount of information that can be transmitted, eg text and audio have relatively low bandwidth, while visual data and video are high bandwidth communication methods), the level of interaction between sender and receiver, and the degree that the communication can be customised to the needs/interest of the receiver. Evans and Wurster (2000) argue that traditional communication media always have a trade-off between these two dimensions. For example, if you want your communication to reach a lot of people or across large geographical distances then you have to reduce the richness of what is communicated. Thus, one can communicate via phone internationally, but only in audio (or communicate text using a fax machine). Traditionally, if one wanted to communicate with greater richness (eg via video, with higher interaction or higher customisation), then one had to accept a limit on the number of people one could communicate with or by limiting the geographical scale of the communication. Thus, television communicates the richness in terms of bandwidth, but has limited interaction, customisation and geographical scale. Evans and Wurster (2000) argue that computers networked through the internet break away from this trade-off. This technology allows firms to communicate over distances and time boundaries to suppliers and customers as well as between employees, provided they are connected to the internet. It also allows firms to communicate media rich messages since information can be communicated with high bandwidth, and permits interaction between sender and receiver, as well as allowing customisation of messages. The linkage between the internet and the power of computer processing means that digitised data and information not only breaks the trade-off between reach and richness, but also does it cheaply. ICT represents a relatively new medium of communication that has enabled innovative business models, represented by the advent of dot-com start up companies in the 1990s. While many of these firms ultimately failed, many new and existing firms have used ICT to completely transform production and distribution structures and processes. Firms such as Amazon, eBay, Facebook, Flickr, Google, Twitter and so on, have transformed the business environment in the last decade, and the continual birth of new start-ups is endemic to the contemporary business environment. The importance of information to changes in existing organisational structures and processes is highlighted in lean manufacturing and just-in-time processing. In these advanced manufacturing operations, materials required in the production process are received from external and internal suppliers as they are needed, usually after an order and payment has been made. Understandably, the successful use of these lean production systems requires efficient communication between suppliers, producers and distribution channels. It is only through the use of advanced ICT that the required communication and processing of necessary information are possible. Successful examples of companies that use just-intime manufacturing include Dell, Harley Davidson and Toyota. The significance of these just-in-time systems is also reflected in a Spanish clothing manufacturer’s (Zara) approach to designing, manufacturing, distribution and inventory control phases that have been described as creating a revolution in the clothing retail industry. Zara imitates and sells the latest trends in high-end fashion at bargain prices. Given its strategic aim to be fresh and innovative, it relies on ICT to allow it to turn over its range of products every few weeks, which is much faster than the traditional seasonal turnover associated with fashion retailing (Petro 2012). While the importance of information is not always visible in manufacturing processes, it is much more evident in processes dealing with information and services. For example, credit card purchases do not involve the exchange of currency in a physical form but rely on the communication of data about the exchange. Banks, such as UBank and ING DIRECT have been able to carry out their operations in a totally paperless fashion due to their embracing of ICT into their operations. In summary, ICT has enabled organisations to transform the way they deal with information and, consequently, it has transformed the structures, processes and procedures of organisations. Additionally, ICT enables new business opportunities as entrepreneurs explore innovative ways to exploit the features of information and communication technology. New businesses that deal with online selling, auction sites, and navigation of the internet and so on, have been developed to take advantage of the reach and richness of the internet and the power of networked computers. Despite the media attention given to these new business forms, it is the impact of ICT on traditional organisations that has highlighted their revolutionary potential for organisations. IBM coined the term “e-

business” to refer to the widespread integration of ICT into the operations of organisations. The transformational nature of organisational change associated with integrating ICT into organisations is evident in the reflections of the founder and CEO of Oracle in discussing the company’s transformation into an e-business in 2000 (Ellison 2001). “Having all [Oracle’s] customers, suppliers and employees online made it more responsive and efficient, but the huge productivity gains it wanted somehow eluded it. To move its business processes to the Internet and its information to a global database, and to use the Internet to pursue new opportunities, Oracle not only had to globalise its computer systems and business, it also had to change the way it was organised and managed.” Thus, e-business represents a transformation of the entire business as internal structures and processes are re-engineered to develop a seamless electronic movement of information throughout the value chain of activities associated with the supply, transformation and distribution of goods and services. As organisations move further towards e-business models, the work carried out by employees and the conditions of employment are also changing. In the remainder of this chapter, some of the changes in work are discussed. Other chapters in this edition of the Guide, such as Chapter ¶28 on human resources outsourcing and Chapter ¶30 on managing knowledge and intangible assets, also address these changes. This chapter will now address issues associated with the changing nature of work arrangements, especially the increase in non-standard work and in the value of HR in contemporary firms, and the use of virtual work structures. Additionally, the role of social media business will be examined.

¶14-040 Changes in nature of work — flexibility in work hours and duties Academic researchers have drawn attention to the changing nature of work arrangements over the past few decades and have identified characteristics of these changes (Boswell 2001; Mir et al 2002; Roehling et al 2000). These changes include: • greater attention to employees’ psychological needs • more involvement or empowerment in decision-making • greater autonomy in work (especially in the operation of teamwork) • enhancement of training and development opportunities • greater two-way communication between management and employees, and • the use of performance-based pay and profit-sharing compensation schemes (see Chapter ¶11). Employers, in return, expect greater commitment to the organisation and its goals, development of multiskilling and flexibility in task operations. However, in parallel with these developments, work has also been characterised by a decline in worker employment security, extensive organisational downsizings that involve mass redundancies, greater use of outsourcing and contract labour, movement of manufacturing jobs to overseas locations to access cheaper labour and more benign labour laws, and the intensification of work hours and work productivity through just-in-time manufacturing and lean production methods (Bacon and Blyton 2001), and the 24/7 nature of contemporary work life. The use of non-standard work arrangements, such as part-time work, temporary and casual work, and fixed-term contracts, is generally seen to reflect a desire on behalf of management to increase the alignment of labour resources to the needs of the organisation (Valverde et al 2000). In highly competitive and volatile environments, where there are often fluctuations in demand for products and services and short life cycles of products and services, managers seek “numeric flexibility” to manage labour costs by better matching employee numbers to changes in demand (Grenier et al 1997; Valverde et al 2000). Of course these non-standard work arrangements can also be beneficial to employees who seek limited engagement in their relationship with organisations, and desire the ability to pick and choose hours of work that most suit their lifestyles. Nevertheless, it is generally argued that the major driver of nonstandard employment arrangements stem from economic advantages for organisations as they struggle

to more efficiently deal with changing business and market conditions (Dastmalchian and Blyton 2001). This trend towards non-standard work arrangements is expected to continue as the developments in ICT and its reciprocal influences with globalisation continue to accelerate the competitive pressures facing organisations. For example, data on the use of part-time work (typically referring to employment that is less than 30 hours of work in a week in one’s main job) shows that across the Organisation for Economic Cooperation and Development (OECD) countries there is an increase in its use. The overall trend for the OECD was an increase of 3.7% of total employment during the period 1990–2003, which represents an extra 43 million people in part-time work across the countries of the OECD. This period represents the start of the Internet Age, the period in which the use of the internet became widespread in societies and in the conduct of business. The trend for use of part-time work is similar in Australia. Over the same period in Australia, part-time work increased from 22.6% of total employment to 27.9% (OECD 2004). The trend continues with part-time work in Australia in 2012 now accounting for 29.3% of the workforce (ABS 2012). Over a quarter of part-time workers would prefer to work more hours. While these changes in part-time work are related to ICT (due to its role in increasing the competitive environment facing organisations), the use of non-standard work arrangements is also being directly influenced by ICT because it increases the utility and attractiveness of contingent work arrangements through its impact on the costs of administration and monitoring of contract workers (Klaff 2003). Research on non-standard work arrangements suggests that contracts for freelance and temporary work are often poorly specified and monitored, resulting in higher costs and low productivity of these workers (Klaff 2003; Mallon and Duberley 1999). Web-based applications help to overcome these problems by integrating the administration of contract work in centralised databases that aid in the coordination of contractors, as well as helping in the overseeing and monitoring of contractor performance and contract arrangements (Klaff 2003). Thus, ICT plays an enabling role in the move towards greater use of these non-standard employment arrangements. However, the trend to use non-standard work arrangements is being offset by the need for more flexibility in tasks and functional activity of employees, which tends to be associated with core permanent employees (Dastmalchian and Blyton 2001; Tsui et al 1997). While, traditionally, full-time and permanent employment arrangements did not stress task flexibility (Smith 1999), in the new competitive climate, core employees have been subjected to considerable efforts to make them more flexible. Multiskilling, teambased work groups, quality circles and process improvement teams of cross-functional employees are some of the initiatives introduced to increase task flexibility of labour (Dastmalchian and Blyton 2001; Kallenberg 2001; Valverde et al 2000).

¶14-050 ICT and virtual work — virtual teams, teleworking and leveraging knowledge The capability of ICTs to communicate and process contextually rich information between people using networked computers wherever they are in the world has enabled organisations to engage in work structures that are less dependent on proximity to the firm’s physical structures. Instead, employees interact “virtually” using electronic communication to mediate the distance between them, and workers can engage with each other “virtually” (Martins et al 2004; Nesbit 2002; Rutkowski et al 2002). This has allowed the development of new work arrangements, such as virtual teams, where geographically dispersed members form teams to work on projects without the necessity to meet face-to-face (Townsend et al 1998). Additionally, ICT adds impetus to the increased use of teleworking arrangements, such as mobile workers and home-based workers (Alkadi et al 2003; Nesbit 2002). Further development of virtual work arrangements comes from the rapid take-up of mobile technologies, especially the use of smartphones and tablet computers. The increasing use of smartphones allows mobile workers to maintain contact with their organisation and its stored data, irrespective of location and time. Virtual teams are teams whose members are geographically dispersed. They coordinate their work predominantly with electronic information and communication technologies, such as email, online videoconferencing, Skype and so on. They may be set up as temporary structures to work on a specific project and then disband, or exist as permanent collaborative arrangements used to address ongoing issues such as strategic planning. Using the internet, groups can shrink time zones and distance and join

decision-makers from around the world to make important decisions (Martins et al 2004). Membership of virtual teams is often fluid, with members joining temporarily to make their contribution as task demands require (Townsend et al 1998). Many firms have embraced virtual teams in response to the globalisation pressures on their businesses as a way of keeping travel costs under control and maximising their staff resources. While larger companies (eg BP and Nokia) that do business internationally have a greater need for virtual teams, many smaller and localised firms may also use them, either to align their interactions with larger firms or respond to the increasingly mobile nature of their workforces that reduces the capacity for local meetings. Typically, teams use collaborative e-rooms that focus on providing the tools team members need to share information, capture and preserve knowledge, discuss ideas, resolve issues and ensure that projects are completed on time, with maximum efficiency and minimal effort. E-room functions include team calendars to help coordinate activities, polling and decision-making applications, project status display to provide feedback and so on. Video conferences are also held on team members’ desktop computers, using electronic meeting systems, such as NetMeeting (another similar program is Global Meet), to allow members to talk to each other, use video to see others, share documents, draw with others on a shared whiteboard and send files to each other. Hewlett-Packard, the multinational technology company, has established “Halo Rooms” throughout the organisation that use sophisticated video-conferencing equipment and software to mimic real life meetings. Team members speak directly to life-size projections, which convey body language and other real-life cues. Cameras located about the displays help to mimic proper eye-to-eye contact. Participants are able to link their computers to separate screens to share content in the meetings (Kavur 2009). Using virtual teams helps increase the skills and knowledge that can be drawn on to assist in the creation of solutions to clients’ problems. This is particularly important as skills and knowledge are evolving with advances in technology. In addition to the new collaborative arrangements of virtual teams, the internet enhances existing work arrangements that allow individuals to accomplish tasks at remote locations that traditionally have been performed within the organisation’s physical premises. Many employees are now taking advantage of this way of working, known as “teleworking”. Teleworking refers to work arrangements that replace or supplement physical travel to the office by using modern telecommunications equipment that bring office resources to the employee (Bailey and Kurland 2002). While many people telecommuted prior to the widespread use of the internet, the reach, richness and interactivity of the internet increased the efficiency and effectiveness of these work arrangements. Home-based work is not the only form of teleworking that can occur (Bailey and Kurland 2002). Workers can link into the operations of the firm using satellite centres where employees from the same company are colocated in temporary arrangements, or in neighbourhood work centres where employees from different organisations or mobile workers who have no designated location outside the main office come to use common resources. The defining aspect is that these arrangements make use of technology to link the activities of these employees with the operations of the firm. Teleworking is particularly attractive to people wishing to balance work and family pressures as it is a more flexible work arrangement (Golden and Veiga 2005). Society, too, benefits from reduced traffic congestion and pollution. Organisations benefit from reduced costs through better use of office space, and are able to use teleworking flexibility as a tool to attract and retain personnel, and to increase productivity. A characteristic of contemporary work is the high value associated with information and knowledge of employees. ICT also helps to better use the knowledge and skills of employees. This approach, often referred to as knowledge management (KM), is being driven by the need to capture competitive advantage from people, as well as the technological advances that make storage and retrieval and database management more practical (Roberts 2001). For example, an organisation’s sales representatives often possess important client information. By contributing that information to corporate databases, organisations can develop more effective client service strategies. This knowledge base and the capacity to distribute information quickly to representatives can have substantial benefits to the organisation. For example, the Australian subsidiary of a global pharmaceutical company was able to use their knowledge system to counter a story, critical of one of the company’s top selling drugs, that was covered on a top rating TV national news/magazine

show. Many patients who saw the program went off their medication and asked their doctors to prescribe alternatives. The company was able to download relevant background materials and safety data to their medical representatives that enabled them to get the information out to doctors the next day and answer their questions. The internet provided quick and readily available access to information.

¶14-060 ICT and the work of HRM The focus on people as a source of competitive advantage in more competitive work environments has stimulated an increasingly vital role for HRM since it is the management discipline associated with attracting, motivating and retaining highly skilled and committed employees. This is important because people who are highly skilled and committed are able to be more productive and contribute higher quality work than lower skilled and lower committed employees (Huselid 1995; Ulrich 1998). Also underlying the greater attention to HRM within organisations is the view that the economic value of human resources (ie employees) depends on the way they are treated. High commitment and productivity are not assured simply by the possession of high ability, but are dependent on how people are treated and the nature of the work environment. In addition to the strategic partnering role of HRM in the new work environment, HRM is itself impacted by ICT. HRM is a broad concept that involves a range of areas dealing with the firm’s employees. The significance of ICT for HRM resides in the impact of this technology on the flow of information within these processes and activities. Indeed, all HRM activities are essentially about communication and processing of information. For example, recruitment and selection processes are about providing information to candidates about job opportunities and criteria for appointment. The candidates in turn provide information about their characteristics and skills and so on, that is stored, retrieved and analysed in organisational decisions, initially about filtering candidates and ultimately in selection. In training and development, information is provided about opportunities for training, and information is distributed in the form of ideas, knowledge and so on. Learning is evaluated in terms of ability to express information and use information that learners once did not possess. Thus, HR practices are extensively imbued with the need for, and provision, distribution, use, and processing of, information. Given this central focus on information communication and processing, it is understandable that ICT should be incorporated into the operation of HRM. While HRM has always involved substantial amounts of information, the movement from paper-based to digitally-based information has had a profound impact on the amount and type of data available for collection and storage in HR information systems (HRIS). These HRIS refer to the information and communication technologies and associated software that are used in the acquisition, storage, manipulation, analysis, retrieval and distribution of information about the human capital of organisations. As organisations have sought to use their human resources in a more strategic fashion, the use of HRIS has come to play a more significant role. The networking effect of the internet (see the information on social media in ¶14-070) has increased the integrative nature of HR data as well as the variety of information available for decision-making. Thus, web-based HR information systems can provide detailed information which can have implications for a range of workforce planning decisions, such as understanding the human capital aspects of a change in strategy, new product development innovations, etc. For example, many Australian organisations use data from the recruitment process, including the results of online psychological testing and recruitment interview reports, to input data into development plans for new recruits. Development programs are then interrelated with the recruitment process to provide an integrated HR strategy to help provide “high potential” human capital. Social media sites such as LinkedIn are changing the way that firms engage with the recruitment process. In a move away from traditional print-based recruitment, firms are now able to search LinkedIn to scan the work experiences and qualifications of LinkedIn members. Another aspect of HRIS that has evolved along with the increased integration of ICT into the HRM function has been the advent of self-service by managers and employees of HR information. Since internet communication allows two-way interaction, web-based HR services mean that employees can download and gain access to important information as required. Information that was once communicated via manuals and handbooks can be communicated more efficiently via the organisational intranet. Intranets allow for electronic storage and automatic updating of a wide range of company information, and

play an important role in an organisation’s HRIS. For example, job descriptions, policies on equal employment opportunity, work health and safety, operational procedures, training and development programs, and available job positions can be put on web pages and updated as required. Intranets eliminate much of the costs associated with the production, distribution and maintenance of paper-based systems. Intranets also enhance access to the most current version of policies and so on, since updates can be posted to the website and are available instantly to employees no matter where they are located.

¶14-070 Social media and business As discussed earlier in the chapter, senior managers are giving greater attention to the role social media can play in their communication and operations, and see its effective use as an important business challenge (KPMG 2012). Social media refers to the use of applications developed for the internet by individuals and organisations that assist in the creation, sharing and exchange of information within highly interactive networks (O’Connor 2012). While social media incorporates blogs, wikis and the like, it is increasingly associated with well-known sites like Facebook, Twitter, Instagram and so on. It is the networking aspects of social media applications, in particular, that give rise to the “social” dimension of social media, as these applications allow people to connect and exchange communication with others within their primary network, as well as the contact networks of their immediate network. This networking characteristic of social media is being leveraged even more by the rapid adoption of smartphones and other mobile technologies that add the dimension of location to the nature of communications. Consequently, while social media offers potential benefits to all organisations, clearly for smaller businesses located within local markets, the location linked communication of social media offers distinct advantages. Research on the use of mobile technology has highlighted the extensive use of smartphones in local shopping (Voskresensky 2011). Firms today have a myriad of social media applications to use in their networking and communication strategies with stakeholders. Indeed, there are few organisations with a website that are not also using applications such as Facebook, Twitter, LinkedIn, Instagram, GooglePlus and so on.

Coca-Cola, Dell and Qantas and the use of Facebook, Twitter and Instagram Coca-Cola uses Facebook to interact, promote and listen to consumers about products and marketing campaigns. Facebook has been a very successful communication tool for Coca-Cola with over 54 million fans. Thus, Coca-Cola is able to use Facebook to test possible product and marketing ideas, and observe what customers say (Posse Social Media 2012). Dell uses Twitter to quickly share information with broad and geographically dispersed followers who are interested in their products and services. They gather real-time feedback and build relationships with customers, partners and other influential people. They regularly send sales alerts to followers about discounted products that are available on the company’s home outlet store. Followers can click to purchase or forward the information to others. Twitter has been very effective, generating a total of $6.5m in revenue and 1.5 million followers (Miller 2009). Another innovative use of social media is evident in Qantas’ use of Instagram (the photo sharing site). On the Qantas Instagram site, customers are able to load pictures and accompanying comments related to their experiences of flying with the airline. Qantas also promotes its activities through posting pictures to the site and gets feedback and reactions from its customers.

Given the ease and low cost of membership set up with such sites, firms typically use a number of social media applications. However, presence on these sites is no guarantee of business advantage with many firms struggling to effectively use social media in their operations (Kaplan and Haenlein 2010). Traditionally organisations, through advertisements, press releases and public relations efforts, had considerable control over how they have been portrayed in the media. However, the open nature and

networking capacity of social media limits this degree of control. Indeed, disgruntled and activist social groups have used social media to marshal support to undermine the marketing and business practices that firms have (Kim 2013). Despite the problems, the potential value for presence on the internet and interaction with customers is too great to ignore, so organisations continue to explore how best to use the medium. Organisations as diverse as multi-national enterprises to local cafes have their own Facebook sites where customers can sign up as followers and leave comments and interact with the organisation as they would with any personal contact. Part of the difficulty for organisations to use social media is that most social media applications were not set up with commercial organisations in mind. Firms must, therefore, adjust their traditional media mindsets and expertise when working with social media. One exception is the social media application LinkedIn, which was designed especially for people in professional occupations and to promote workrelated networking. Members are able to put their professional qualifications and experiences online and allow others to view it. LinkedIn provides a giant database of potential employees for firms to explore and, therefore, has had significant impact on the HR functions of recruitment and selection. For example, organisations can use the networks of their own employees to investigate potential candidates for openings, in much the same way they traditionally used employee “word of mouth” or “referral” approaches for recruitment. People can also proactively search positions listed on LinkedIn by organisations, see details of the role, see similar jobs, show networks related to the organisation, see other jobs and sites on LinkedIn that others have also linked to. Firms can also leverage LinkedIn analytic tools to improve the effectiveness of communication. They can adapt the social media strategy as required, tracking page views, visitors and the number of followers.

Coca-Cola’s use of LinkedIn Coca-Cola’s LinkedIn profile is used to build presence within the network, raise the company profile, promote the business, and enhance their employer of choice status. Indeed, Coca-Cola uses LinkedIn as a main channel to recruit and promote working in the business. They advertise positions and then drive people to their external recruitment site.

¶14-080 Conclusion Information and communication technology has become a central feature within the environment facing contemporary organisations. ICT is important for organisations because of the significant role that information has in their operations. One of the effects of ICT on organisations has been an increase in the competitive nature of the business environment being confronted. This has required organisations to enhance their efficiency and operations as well as increase the effectiveness in satisfying customer needs. The indirect effects of ICT on the employment relationship have been discussed. In this regard, it was noted that the use of non-standard work has increased, as well as the value associated directly with employees’ knowledge and skills. Additionally, the internet (in particular) has had a profound impact on the development of HRIS and in the advent of self-service HR functions. ICT has also had a direct effect on organisations by enabling new approaches to work that take advantage of virtual communication. Virtual teams, teleworking and processes to leverage employee knowledge are just some of the ways that work has been changed to accommodate this new technology in business operations. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, sections commencing at ¶38-000. References Australian Bureau of Statistics 2012, Underemployed Workers, Australia, September, cat no 6265.0, ABS, Canberra.

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15. EMPLOYEE CONSULTATION AND INVOLVEMENT STRATEGIES AT THE WORKPLACE Editorial information

Paul J Gollan Professor of Management and Associate Dean (Research), Faculty of Business and Economics, Macquarie University; Visiting Professor, Department of Management, London School of Economics; and Adjunct Professor, Macquarie Graduate School of Management

This chapter is drawn from research undertaken in the author’s capacity as a staff member of the Faculty of Business and Economics, Macquarie University.

¶15-010 Introduction Organisational and workplace reform in Australia has resulted in a greater focus on relations between management and employees. The stimulus has been the search for greater efficiency, flexibility and productivity. Leaders in government and business have agreed that improved human resource management (HRM) is pivotal; but such views have not necessarily been matched by the commitment of management attention, time and resources to HRM at the workplace. The purpose of this chapter is to present evidence that high quality communication and consultation between management and employees at the workplace constitute a high involvement management (HIM) approach, leading to greater organisational productivity and effectiveness. It explores the issues involved in moving towards greater employee participation and HIM, and the extent to which enterprises seek more cooperative and collaborative styles of management and initiatives for increased levels of productivity and effectiveness through employee satisfaction and commitment. This chapter identifies effective consultation and participation arrangements and comments on their role in organisational change and workplace reform. There is increasing recognition of a strong link between workplace consultation involving managers and their workforce, and successful organisational change. Evidence suggests that strategies that enable and encourage managers and employees to meet regularly, discuss problems and issues and work out solutions have grown in popularity. A Department of Industrial Relations (DIR) briefing paper in 1995 argued, “employees who work under such arrangements appear to be more inclined to become involved in efforts to improve their own jobs and the operating efficiency of the enterprise, and to feel a greater commitment to the goals of the organisation. This in turn leads to creation of a more cooperative working environment based on mutual trust, greater job satisfaction and improved efficiency and productivity” (DIR 1995, p 1). General survey evidence suggests there is much employee involvement and participation taking place in Australian workplaces (Morehead et al 1997, p 244). However, other research has found little real evidence of comprehensive employee involvement in organisational decision-making, suggesting that the

rhetoric of greater empowerment of the workforce has not been matched by the experience (ACIRRT 1996, 1997). Research suggests that empowerment is often an illusion used by management solely as a tool for cost-cutting purposes. While current evidence suggests that little attempt has been made to introduce an integrated employee participation and involvement approach in Australian workplaces, these case studies demonstrate that such an approach can achieve higher levels of performance. At the same time as the policy debate over the degree of collective bargaining and decentralisation has taken place, considerable discussion has occurred in Australian academic circles about the impact of unions on the pattern of industrial relations in the workplace. These debates suggest possible ways to observe different industrial relations structures and processes in union and non-union workplaces. However, less attention has been given to the way in which different levels of employee involvement and consultation affect workplace relations and, in particular, the degree of involvement and participation employees have over the decision-making processes in new environments. The shift towards greater non-union employee relations in Australia has also meant that — if employees are to have a “voice” in the workplace — there needs to be alternative institutional arrangements. Some employers have always viewed the removal of trade unions as a prerequisite for successful performance in increasingly competitive domestic and international markets. However, the demise of trade unions has left a void in terms of “voice mechanisms” available to employees. Some Australian managers have adopted the non-union employee relations participation models developed by companies such as Hewlett-Packard, IBM and Proctor & Gamble. “Individualism” and “direct communication” between management and employees are the hallmarks of these non-union organisations. It is the expectation of many managers that this “voice” will provide suggestions and solutions to increase productivity in the workplace. As David Packard, founder of Hewlett-Packard, has argued: “If an organisation is to work effectively, the communication should be through the most effective channel regardless of the organisation chart.” Evidence from a study of non-union and lightly unionised workplaces by Campling and Gollan (1999) suggests there is improved satisfaction with management and increased employee commitment if greater participation and involvement of employees are sought. However, the research noted that the lack of a readily defined “collective” structure in non-unionised and lightly unionised workplaces puts a greater focus on management’s ability to implement change processes. This may involve a considerable investment of management time and resources to create and develop an organisational culture that provides a foundation for positive organisational change. This section of the Guide explores the issues involved and considers the extent to which enterprises seek more cooperative and collaborative styles of management. Improved performance has commonly been linked with more flexible working practices and greater employee participation and consultation. Various forms of employee participation have been used, such as works councils, joint consultative committees (JCCs), quality circles, various contingent remuneration systems and other forms of co-determination (Gollan and Davis 1997). This chapter explores developments in consultation and participation, and comments on their role in workplace reform and organisational effectiveness and productivity.

¶15-020 Participation and consultation Participation is regarded as encompassing the range of mechanisms used to involve the workforce in decision-making at all levels of the organisation. It can be direct or indirect, that is, conducted with employees directly or through their representatives. Information and consultation refer to part of this process. Information in this context means the provision of business data on workplace issues or more strategic matters to employees or their representatives, which enables workers to participate in dialogue with employers. Consultation is concerned with the exchange of views between employers and employees or their representatives, but stops short of bargaining so that responsibility for decision-making remains with management. Several studies have indicated a rise in the use of some participative practices (Bryson 2000; Cully et al 1999; Millward et al 2000). These have taken a variety of forms, such as direct and indirect employee participation at a workplace, or at a higher level in the organisation. Direct methods tend to be oriented to

an employee’s individual work performance and are characterised by individualised reward structures, appraisal systems linked to individual performance and quality circles. Research in the United Kingdom would suggest that direct methods have replaced more indirect methods conducted through employee representatives (Millward et al 2000). Other studies have emphasised the mutual reinforcement of direct and representative forms of participation (Gollan 2000a; Gollan 2001; Gollan and Markey 2001; Sako 1998). There is also evidence to suggest that some organisations have retained primarily collective mechanisms such as unions and works councils to achieve their objectives, though these would seem to be in decline (Cully et al 1999). The growth of direct participation suggests a global convergence of management practices. On the other hand, this growth has intensified the level of diversity within countries as new forms of employee consultation challenge and accommodate more traditional forms (Fenton-O’Creevey et al 1998; Geary and Sisson 1994; Gollan and Markey 2001; Kessler et al 2000). A number of studies indicate that many new initiatives lack a structured approach to consultation (Markey et al 2001; Kessler et al 2000). There is considerable evidence to suggest that an integrated approach to employee participation can achieve higher levels of performance than a non-integrated one (EPOC Research Group 1997; Fernie and Metcalf 1995; Gollan and Davis 1997; Guest and Peccei 1998; Knell 1999). This integrated approach is sometimes known as “high involvement management” or “high commitment management” (Wood and Albanese 1995; Wood and De Menezes 1998). It is designed to improve employee relations and increase organisational performance and profitability through quality communication and consultation between management and employees. As part of this strategy, jobs are designed to be broader and to combine planning and implementation. Individual responsibilities are expected to change as conditions change, and teams, rather than individuals, are the organisational unit accountable for performance. In addition, differences in status are minimised, with control and lateral coordination based on shared goals and understanding. There is thus an alignment of interests with expertise, rather than formal position or title, determining influence and power. These practices have been commonly referred to as part of a strategic approach to HRM, though there is some debate over how this compares with traditional industrial relations approaches to people management. Nevertheless, a high degree of consensus exists on the need for cooperation between management and employees for the success of HRM strategies. Research also suggests that this cooperation relies on building employee satisfaction and commitment through effective employee participation processes (Guest and Peccei 1998). Another theme that has emerged from recent changes in the workplace is the importance of employee consultation and involvement in achieving successful organisational change. Creating and developing an organisational culture that provides a foundation for positive organisational change may involve a considerable investment of management time and resources. The link between such change and employee involvement is clear from a number of studies (Fernie and Metcalf 1995; Geary and Sisson 1994; Gollan and Davis 1997). Where there is a lack of participation structures, especially in the growing non-unionised sector, a greater emphasis is placed on management’s ability to implement change processes. When companies adopt more organic and flexible forms of organisation in response to shifts in environmental conditions, there is a risk that changes in process and culture may be misunderstood. For example, employees may see new processes as simply an intensification of their workload rather than an enhancement of their skills and experiences. It is essential for organisations to allay employees’ fears and anxiety by developing a set of policies and procedures to manage change. Research shows that many organisations do not formally involve employees until the later stages of change, once management has clearly established how the new initiatives will be implemented (Gollan 2000a; Millward et al 2000; Terry 1999). A more integrated consultative and participative approach would demand that employees be involved in organisational change from the outset, rather than just during implementation. Some studies have also identified managerial attitudes as the key to highly developed employee involvement practices (Fenton-O’Creevey et al 1998; Kessler et al 2000; Millward et al 2000; Wood and Albanese 1995; Wood and De Menezes 1998). They suggest that such practices are underpinned by a relationship based on a high level of trust between management and employees. It is assumed that employees can be trusted to make important workplace decisions that will result in greater productivity

and effectiveness. Employees are therefore given the opportunity to develop their knowledge and skills so that they can make these decisions. Such an integrated approach incorporates employee consultation and involvement into all aspects of the organisation’s planning and implementation processes. Research shows that comprehensive consultation and employee relations policies and practices have the potential to make an important contribution to organisational competitiveness. Freeman (2001) suggests that information and consultation mechanisms are more likely to exist in organisations with profit-sharing and share option plans. His research shows that joint consultative committees, quality circles and company-level information and consultation processes with workers are much more widespread among organisations with shared compensation systems (ie any form of variable pay such as performance-related pay and share ownership schemes) than they are in other organisations. Freeman (2001, p 27) argues that: “This robust relationship fits well with economic logic. If an employer pays workers in ways that depend on business performance, it should benefit from communicating about that performance and should offer workers ways to contribute to improving performance. Conversely, firms that give workers greater decision-making authority at their workplace should also want to give them incentives to make decisions in the interests of the business.” It is clear that such integrated approaches need to be embedded in the workplace culture of an enterprise, and that this culture dictates the way that employees are consulted (Gollan and Markey 2001). Overall, the evidence suggests that management should equip employees to make decisions through the provision of information and training, and share ownership in the outcomes of those decisions for the organisation. This has been reflected in those successful organisations investing in a skilled and flexible workforce through self-directed teams, multiskilling, and skill-based pay to reward skill acquisition. Research by West and Patterson (1998) into employee satisfaction and productivity indicates that encouraging know-how and locating information at the lowest levels of the organisation give employees the expertise to manage their work, recognise problems and generate solutions. To reinforce these developments, organisations need to create a culture of information sharing, consultation and greater organisational knowledge. Employee participation has also been defined in terms of HR sustainability as the capacity of organisations to create and regenerate value through the sustained application of participative policies and practices (Dunphy and Griffiths 1998; Gollan 2000b). This entails investment in human knowledge through continuous learning, and the application and development of such knowledge through employee information and consultation processes. People management and development policies and practices need to be integrated for sustained business performance and positive employee outcomes of equity, personal development and wellbeing.

¶15-030 High involvement and high performance There have been significant changes in employment relations within and outside the workplace in Australia. This has been part of a wider phenomenon with a number of other industrialised countries also experiencing challenges and changes to their traditional practices in personnel management and industrial relations. These changes include the effects of microeconomic reform on the organisation of work, policies to engender both greater productivity and employee commitment, changes in wider labour market policy and national wage determinations. As a means to confront these challenges, a greater focus has been placed on management strategies to increase organisational productivity and efficiency at the workplace. These strategies have been labelled high performance workplaces, high commitment management (HCM) and, more recently, HIM. It has been argued that many of these strategies derive from the human relations movement of the 1930s (Cully 1998, p 69). However, what can be identified in these strategies is the adoption of an integrated approach of innovative work practices and high employee involvement, encouraging higher commitment and increased organisational and workplace performance. Common to all approaches is the heavy emphasis on integration of business and employee relations strategy, and employee and management cooperation for the achievement of organisational goals. Two models have been apparent: (1) “normative”, and

(2) “descriptive” or “functional”. “Normative” models have stressed integration and cooperation through employee involvement and participation, recognising the needs of the individual as a means to achieve increased productivity. Alternatively, “descriptive” or “functional” models have used HRM as a management tool or strategy in the pursuit of organisational aims, with the main function of HRM being to ensure the efficient allocation of resources. The HCM approach was developed in the 1980s and 1990s. Under this approach, jobs are designed to be broader, combining planning and implementation. Individual responsibilities are expected to change as conditions change and teams, not individuals, are often the organisational unit accountable for performance. In addition, with management hierarchies relatively flat and the differences in status minimised, control and lateral coordination depend on shared goals and understandings or, in other words, there is an alignment of interests with expertise rather than a formal position or title determining influence and power. Equally important is guaranteeing employees access to due process and providing a means to be heard (Walton 1985, pp 79–80). Above all, the HCM strategy involves policies that promote mutual influence, mutual respect and mutual responsibility (Wood 1996, p 514). In addition to the HCM approach, a plethora of terminology has been created to refer to more highly developed HRM approaches. Lately, a growing focus has been placed on HIM (Lawler et al 1995; Wood 1998). High involvement management is premised on the belief that it will have positive effects on key performance variables: increased labour productivity, lower labour turnover and less absenteeism, greater output and a generally improved and flexible workplace culture. Wood suggests a contingency hypothesis stating that environmental and strategic factors will moderate the relationships between a system of HIM and performance variables (Wood 1998). The other important aspect of this relationship is strategic integration of work practices and HIM, and a strategic alignment with total quality management (TQM) (Beaumont 1993, p 40; Kochan and Osterman 1994). In essence, the HIM approach involves an examination of the extent to which high involvement practices tend to coexist and the managerial attitudes that are associated with their application. It also emphasises high trust relations between management and employees. In particular, it is based on the assumption that employees can be trusted to make important decisions about the management of their work activities, through developing their knowledge and skills, resulting in greater productivity and effectiveness (Wood 1998; Lawler et al 1995; Osterman 1994). The HIM approach can be seen as a management initiative based on employee involvement and participation, with the objective of increasing organisation performance, cost effectiveness and profitability. This approach raises a number of questions: namely, what are the main determinants of HIM, and what is the relationship between HIM and various management practices (Wood 1998). A comprehensive study by the Chartered Institute of Personnel and Development (CIPD) in the United Kingdom reconfirms the importance and linkage of good people management practices to productivity and profits. In essence, the research contains evidence that most companies fail to recognise the link between good people management practices and business success. The researchers argue: “separation in the minds of senior managers between business and people management indicated that, for most, the rhetoric of employees being the most valuable resource, was often simply rhetoric” (Patterson et al 1997). The report showed that the management of people had a greater effect on business performance than strategy, quality, manufacturing technology, and research and development put together. In relation to job satisfaction and organisational commitment, the researchers believe that such factors explain up to 5% of the difference between the profitability of companies. When it comes to productivity, it is suggested that the results explain 16% of the variations, while organisational commitment explains around 7%. These results demonstrate the relationship between employee attitudes and company performance. This indicates that the more satisfied workers are with their jobs, the better the company is likely to perform in terms of profitability and particularly productivity (Patterson et al 1997). However, the study’s most important finding was the link between “good” HRM practices and profitability and productivity. The report suggested that overall, HRM practices (ie appraisals, training and development, employee involvement and team working) explain 19% of the variations in profitability and 18% of the differences in productivity between companies and, over time, within organisations. The

results reveal job design and the acquisition and development of skills (that is, selection, induction, training and appraisal) are the most significant factors. As the researchers state, this is the most convincing demonstration in the research literature of the “link between the management of people and the performance of companies” (Patterson et al 1997). Figure 15.1 presents an integrated model of the HIM process, emphasising the influence of organisational culture and the impact of the external environment on organisational outcomes. The model shows that improved performance and productivity are predicated on the need for managers to use situationallyattuned approaches to ensure that the potential of the organisation is contributing to desired organisational aims. Thus, there is no one best way, only organic processes based on situational characteristics that satisfy the aims and objectives of the organisation and its employees (Gollan and Davis 1997; Campling and Gollan 1999). Figure 15.1: An integrated model of the HIM process

Related to this debate is whether there is a best HRM system with universal applicability, or whether the strategic impact of HRM is contingent on the fit between the HRM system and corporate strategy, organisational culture and the external environment (Becker and Huselid 1998, p 58). In rapidly changing environments, organisations require flexibility and employees are encouraged to apply the knowledge and skills required and “fit” into dynamic work patterns in a way that adds value to organisational experience and aims. Modern organisational theorists describe these organisations as organic because, like other living things, they adapt flexibly to changing circumstances (Morgan 1998; Campling and Gollan 1999). Organic organisations have less specialisation and are less formalised and hierarchical than more “mechanistic” organisations in stable environments. Therefore, they require more lateral communication and involvement. The evidence suggests that many organisations have introduced or shifted to more organic forms of organisation in order to respond to a real or perceived shift to unstable environmental conditions. The danger for such organisations is that a movement to more organic forms of organisation, with their emphasis on flexibility, is often viewed by employees as simply an intensification of workload rather than the enhancement of skills and experiences (Campling and Gollan 1999). It is essential that organisations allay fears and anxiety about the introduction of any new process by developing a set of principles in conjunction with employees (Curtain and Mortensen 1994, p 10) through consultation and involvement at the embryonic stage of the project. While the case studies suggest some organisations do this, other survey and enterprise bargaining evidence indicates that many organisations do not involve employees until the later stages, after management has already clearly established how the new flexible workplaces and initiatives should be implemented (Campling and Gollan 1999). Workplaces may also suffer where there is a perception that employees have not been treated fairly. Again, relevant and timely communication is crucial. Overall, the studies suggest that in organisations where greater employee participation has been introduced, it has been good for business in terms of improved performance and productivity, and the effectiveness of organisational change. The research also indicates that a lack of employee involvement, especially representative participation or worker “voice”, could help to explain low levels of commitment among workers. So, if employee information and consultation are positive and worthwhile endeavours, why do more companies not embrace them more readily? This raises a number of issues: • it can sometimes be difficult to prove the link between good employee involvement and consultation practices and organisational performance • the time period can be an important dimension with employee consultation normally requiring shortterm costs for achieving long-term rewards, and • perhaps the most difficult obstacle is that effective employee consultation requires a change in culture for managers and employees, which may involve considerable leadership skills, vision, time and resources.

¶15-040 The development of consultation and employee involvement in Australia From the mid-1980s, a dramatic shift towards decentralised arrangements took place under wage-fixing principles determined by the Australian Industrial Relations Commission (AIRC). The rationale was that Australia needed to improve its productivity and efficiency to respond to increased international competition in trade and financial markets. As a result, increasing focus has been directed towards enterprise negotiations. The AIRC required enterprises to establish appropriate consultative mechanisms for consultation and negotiation on matters affecting the organisation’s efficiency and productivity. Gardner and Palmer (1995, p 342) suggested that the concept of employee participation in decisionmaking arose as a way of supporting the national restructuring policies of the Accord which was endorsed by the Confederation of Australian Industry in 1988. Employee participation was reflected by increased interest in joint consultative committees in the workplace. As part of this process, the Keating Government introduced further reforms to extend enterprise

bargaining, through the introduction of the Industrial Relations Reform Act 1993 (Cth). The Act gave effect to a series of International Labour Organization and United Nations Conventions and recommendations on minimum entitlements in wages, equal pay for work of equal value, rights to redundancy pay and protection against unfair dismissals. However, like earlier anti-discrimination and equal employment opportunity initiatives, these new legal rights could be enforced by individual employees without union involvement in a range of courts and specialised tribunals (Bamber and Lansbury 1998). The 1993 legislation also included for the first time provisions that facilitated bargaining and the certification of agreements that did not require unions to represent workers. This was seen by unions as providing encouragement for employers who wished to avoid unions and move towards enterprise regimes based on individual contracts of employment. Indeed, such fears were subsequently realised in a major dispute in 1995 between a large mining firm, CRA, and unions at Weipa in the north of Australia (Bamber and Lansbury 1998). This, in effect, gave a renewed focus on workplace relations, in particular the nature and extent of workplace decision-making outside the centralised industrial relations framework, including the influence and role of employee participation and consultation. In 1997, a new phase of industrial reform began with the introduction of the Workplace Relations Act 1996 (Cth). The new conservative government sought to move the system away from a collectivist approach, in which there was a strong role for unions and tribunals, to a more fragmented system of individual bargaining between employees and employers. Indeed, for the first time in Australian industrial relations history, registration of individual employment agreements was permitted to prevail over awards and certified agreements (CAs). Calls have been made for consideration of the mandatory introduction of alternative forms of employee representation (McCallum 1997; Gollan 1998; Gollan 2000b) to enforce the inclusion of employees’ views in the decision-making process. It could be suggested that the low involvement of any alternative collective-representative structures in the workplace reflects the absence of organisational structures for workplace and industrial democracy in Australia. Such structures require political support. Within Australia, with strong trade union and collective bargaining institutions, political interest in such structures has been low compared with some European countries. Employers’ opposition to both workplace and industrial democracy, and to state intervention to promote it, has become very apparent, and trade union support for such structures was not coherently behind particular proposals (Gardner and Palmer 1995). Enterprise bargaining allowed for the devolution of wage-setting and some other aspects of employment relations to a firm level but minimum standards were available except during the “Work Choices” era of the Howard Government. The introduction of the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Work Choices Act) abolished the century-old framework of dispute notification and conciliation/arbitration of industrial disputes by the AIRC; repealed the no-disadvantage test, and allowed workplace agreements to totally displace the operation of awards (Forsyth 2007). The Work Choices Act also allowed an employer to offer and enter into individual agreements with employees, even when a collective agreement was in place. Employers could refuse to recognise a union seeking to negotiate a collective agreement on behalf of employees, or ignore the preference of employees to engage in collective bargaining in any other non-union forms (Forsyth 2007). The Labor Government of 2007 introduced the Fair Work Act 2009 (Cth) (FW Act) and also established Fair Work Australia (FWA) (since renamed the Fair Work Commission from 1 January 2013) as the new employment regulator to replace a number of bodies, including the AIRC. This new labour law encourages collective bargaining and employee representation through a pluralistic approach — enterprise agreements under Pt 2-4 of the FW Act can be negotiated between various types of bargaining representatives of employers and employees, for which unions have automatic bargaining representative status if any of their members employed in the organisation will be covered by the agreement unless they appoint someone else in writing to act as their bargaining representative (Forsyth 2012). This provision has also opened up opportunities for non-union employee representation in collective bargaining. Consultation forms part of the FW Act and is incorporated into agreements. An employer is required to discuss with its employees and their representatives, if any, the effects major organisational changes are likely to have on them, as well as give prompt consideration to matters raised in these discussions. The discussions have to take place as soon as reasonably practicable once a definite decision has been made (Marchington 2012). If an enterprise agreement does not include a consultation term, then a model

term is taken to be a condition of the agreement (see Fair Work Regulations 2009 (Cth) Sch 2.3). The model consultation term for enterprise agreements is prescribed in the Regulations, which require consultation of relevant employees and appointment of employee representatives. Nevertheless, as Gollan and Patmore (2012) have pointed out, the model term is limited in the scope of topics when compared with that of the European laws, such as the EU Directive mentioned earlier. Another limitation they identified is that the FW Act does not provide structure for ongoing consultation. For instance, there is no reference to a committee structure, such as those provided for by the European Works Councils Directive (Gollan and Patmore 2012). In non-union representation literature, considerable evidence suggests that joint consultation and/or works councils enhance productivity outcomes (Wilkinson et al 2010; Wood 2010). There are also considerable scholarly research and government reports chronicling the need and the benefits of an effective information and consultation procedure for Australian employees. Therefore, Gollan and Patmore (2012), in their submission to the Fair Work Act Review Panel, proposed to revise the model term to more effectively implement the objects of the FW Act, which can subsequently assist skill development of the workforce and enhance their employability through improved consultation mechanisms. Drawing on the notable enhancement underpinning the policies of EU directives regarding informing and consulting employees, Gollan and Patmore (2012) have argued that effective consultation mechanisms will also help to address global competitive pressures faced by Australian businesses through enhancing productivity and flexibility.

¶15-050 Survey evidence — general trends in employee consultation and involvement Research into non- and lightly-unionised workplaces suggests greater worker satisfaction with management and lower job stress where managers seek greater participation and involvement from employees. This may involve a considerable investment of management time and resources as a means to create and develop an organisational culture providing a foundation for positive organisational change. The research noted that this is especially acute in non-unionised workplaces. The lack of a readily defined collective organisation to provide a structure of workplace implementation places greater focus on management’s ability to implement change processes. This often involves a process of training and information for both employees and their managers and/or radically different perspectives of management thinking, culture and role (Campling et al 1995). Survey evidence from the Australian Workplace Industrial Relations Survey in 1995 (AWIRS95) (Morehead et al 1997) provides an overall picture of employee consultation and involvement in non-union and unionised workplaces. Overall, the evidence suggests the method of communication can vary widely (see Table 15.1). Table 15.1: Methods of communication by workplace, 1995 (percentages) No union %

Union, no delegate %

Union and delegate %

Daily “walk around” by senior management

86

90

85

Suggestion schemes

28

30

30

Regular newsletter/staff bulletins

38

52

66

Surveys/ballots of employees’ views and opinions

14

18

30

Electronic mail

17

19

22

Regular formal meetings between managers and/or supervisors and employees

69

81

89

Regular social functions

49

45

43

Table 15.1 reproduced with permission from Changes at Work: The 1995 Australian Workplace Industrial Relations Survey , A Morehead, M Steele, M Alexander, K Stephen and L Duffin, 1997, Longman, Melbourne, © Commonwealth of Australia.

Interestingly, regular newsletters, staff bulletins and regular formal meetings between managers and employees were more likely to be found in active unionised workplaces (ie unionised workplaces with the presence of a delegate). However, regular social functions were likely to be found in non-union workplaces. It would seem from the evidence that more sophisticated and individualistic forms of communication have not evolved in non-union workplaces, with the daily “walk around” in the workplace by senior management just as likely in unionised workplaces, and electronic mail communication more likely in unionised workplaces. The AWIRS95 survey also found differences between unionised and non-unionised workplaces in the methods of employee involvement. In particular, unionised workplaces (especially those with a delegate present) were significantly more likely to involve employees through joint consultative committees, task forces, working parties and team building. Those workplaces with union delegates were also more likely to have employee representation on the board of management or directors. These figures would suggest a more collective approach to employee involvement than in non-union workplaces (see Table 15.2). Table 15.2: Methods of employee involvement by workplace, 1995 (percentages) No union %

Union, no delegate %

Union and delegate %

Quality circles

12

12

14

Joint consultative committee

13

23

48

Task forces or ad hoc joint committee

24

28

50

Employee representatives on board of management/directors

15

11

18

Team building

38

48

51

Total quality management

33

37

38

Semi- or fully-autonomous work groups (ie selfsupervising)

40

41

45

Table 15.2 reproduced with permission from Changes at Work: The 1995 Australian Workplace Industrial Relations Survey , A Morehead, M Steele, M Alexander, K Stephen and L Duffin, 1997, Longman, Melbourne, © Commonwealth of Australia.

In the AWIRS95 survey, employees were asked about changes in their workplaces over the last 12 months. The data shows that 94% of all employees identified at least one change in their workplace. However, only 61% of these employees reported they had actually been consulted over changes that occurred in the year prior to the survey (Morehead et al 1997, pp 277–278). More disturbing was the finding from the study indicating that overall, only 54% believed they were given a fair chance to have a say about changes at their workplace (Morehead et al 1997, p 279). Union delegates (where present) indicated that only 32% of workplaces provided them with information on future staffing plans and only 8% of workplaces provided information on future investment plans (Morehead et al 1997, p 186). In contrast, 70% of managers reported that affected employees were either consulted or informed about all workplace changes, while 18% suggested employees had significant input and 2% said employees had actually made the decisions on workplace change. According to these figures, only 10% of managers stated employees were not involved at all (Morehead et al 1997, p 244). Overall, these figures would suggest that employees are sceptical of the level of consultation and employee involvement claimed by management. A study in the United Kingdom that indicated a similar discrepancy suggested that it could be explained by employee discontent over the true extent of their involvement in decision-making (Cully 1998, p 72). Further lessons were to be found for Australian employers when the AWIRS95 survey compared whether employees thought they were better or worse off as a result of changes at the workplace in the year prior to the survey, with whether they thought they were given a fair chance to have a say (Morehead et al 1997, p 281). It could be argued that this is a leading indicator of general employee satisfaction and commitment to organisational and workplace change. The findings suggested that those employees who

believed they had a fair chance to have a say were also more likely to report that they were better off as a result of workplace change. Some 46% of employees who reported that they were given a fair chance to have a say claimed that they were better off, compared with only 15% of those indicating that they were not given a fair chance to have a say. Only 12% of those employees having a fair say indicated that they were worse off compared with 39% of those employees not given a fair say in workplace changes (Morehead et al 1997, p 281). Research by Pyman et al (2005a) draws on responses to the Australian Worker Representation and Participation Survey (AWRPS) 2004. This was a national random survey of 1,000 Australian workers’ responses and attitudes to workplace participation and representation, unions and union-management relations. Table 15.3 summarises the different voice arrangements from the Pyman et al (2005a) study. As indicated, the majority of employees are located in workplaces where all three voice mechanisms are present (37.2% unweighted, 29% weighted). Direct voice arrangements were also common, as a single channel and in combination with other forms. Interestingly, only 5.8% of respondents (5.5% weighted) reported their workplace to have union-only voice. Voicelessness (no voice) was present in 10.2% of cases (14.1% weighted), and the majority of these workplaces were organisations with fewer than 20 employees (46.1% unweighted, 50.3% weighted). It should also be noted that in 11.4% of cases, no accurate voice mechanism could be identified due to missing data on one or more of the measures of union and non-union voice. Table 15.3: Summary of voice arrangements (percentages) Type of voice arrangement

Unweighted % Weighted %

Union only

5.8

5.5

Union and direct

15.6

13.4

Union and non-union representative

3.3

3.4

Union, direct and non-union representative

37.2

29.0

Direct only

14.4

18.2

Direct and non-union representative

11.9

14.3

Non-union representative

1.7

2.1

No voice

10.2

14.1

Note : N = 886. Excludes 11.4% of the sample who had missing data.

Further analysis of the data by Pyman et al (2005a) indicates that a majority of Australian employees report access to one or more decision-making procedures and/or methods of dispute resolution in their workplace. A large majority have access to an open door policy to discuss problems with their supervisors/senior management (83.4%). A smaller number of workers report the incidence of regular staff meetings (64.7%), and the presence of a personnel/HR department/person (51.8%). These findings contrast strongly with the AWIRS95 results, where only 19% of workplaces reported the presence of an HR manager (Morehead et al 1997). As the researchers point out (Pyman et al 2005a, p 10): “What is interesting however is the fact that a greater number of employees reported regular, formal meetings between managers/supervisors and employees in the AWIRS 1995 survey than in the 2003 AWRPS survey. In 1995, 82% of employees reported such meetings with 48% also reporting formal, monthly group meetings with supervisors concerning work tasks. This compares to 65.7% of employees in the current survey who reported regular staff meetings. This lower incidence of formal regular meetings may be related to an increase in managerial prerogative, particularly since 1996, following the enactment of the Workplace Relations Act 1996 (Cth).” The survey results also indicate that the least common decision-making procedures were committees of employees (44.4%) and employee involvement programs (40.4%). Again, these figures significantly diverge from the AWIRS95 findings, with 13% of workplaces reporting the presence of quality circles.

Pyman et al (2005a, p 11) argue that “this growth in decision-making procedures in the workplace over the past decade is consistent with the growth and dominance of the human resource management paradigm and its unitarist underpinnings”. In relation to the incidence and nature of joint consultation, the Pyman et al survey (2005a) indicates that 41.6% to 52.8% of employees are in workplaces with consultative committees that meet regularly with management to discuss workplace issues. The incidence of consultative committees reported by employees in the AWRPS is much greater than the incidence of consultation reported under the AWIRS95 survey. In this survey, only 33% of employees reported the incidence of joint consultative committees (JCCs) (Morehead et al 1997). As in other surveys, the union presence at the workplace was strongly related to the incidence of consultative committees. Those with a union at the workplace were overwhelmingly more likely to report the presence of a consultative committee. Where consultative committees are in place in Australian workplaces, the two most common methods of appointing employees are election by coworkers (29.2%) or self-selection (volunteering) (29.4%). The AWRPS also asked employees about their level of influence over various elements of work, and the level of influence they would like to have over these elements. A large majority of workers (85.7%) reported that they have “a lot” or “some” influence over how they do their job and the organisation of their work, followed by the pace at which they work (73.3%). A smaller proportion of employees reported having an influence over how they work with new equipment and software (64.5%), and setting their working hours, breaks, overtime and time off (61.8%) (Pyman et al 2005a). Overall, when Pyman et al (2005b) compared union, non-union representative and direct voice arrangements, the results revealed that the majority of employees have multiple channels of voice, and that employee voice is most effective when a combination of different forms is present. This is especially true in relation to perceived managerial responsiveness to employee needs, perceived job control and perceived influence over job rewards. Moreover, the researchers found that while direct-only voice was found to have an influence on perceptions of managerial responsiveness and job control, stronger effects were observed when this form of voice interacted with union and non-union representative voice. Pyman et al (2005b) suggested that the interaction and coexistence of multiple channels of voice is consistent with findings of earlier studies in Europe (eg Bryson 2004; Sako 1998), and challenges common assumptions that non-union representative voice and direct employee involvement act as substitutes for union voice. They conclude that (Pyman 2005b): “In a practical sense, the findings suggest that employers and employees may benefit from implementing an integrated approach to employee voice that is characterised by multiple, mutually reinforcing channels.” They also state (Pyman et al 2005b): “In the Australian context, the operation and interaction of multiple voice channels transcends the unitarism versus pluralism dichotomy and underscores the rationale for a plurality of interests and cooperative relations in the employment relationship. For unions and employers, the findings lean toward the implementation of an incorporated, mutually reinforcing approach to employee voice in practice, predicated on multiple and inclusive channels of employee voice, collaboration and cooperation.” Research by Gahan et al (2004) into the content of union and non-union certified agreements found that around 30% of union agreements contained no provisions for any consultation between the employer and other parties at the workplace. However, they also found 74% of non-union agreements and over 81% of Australian workplace agreements contained no consultation clause. Moreover, the researchers found that in many agreements where there was an obligation to consult in the agreement, it was frequently referred to as an obligation to “advise” of workplace change rather than “an obligation to engage in deliberative discussions with either employees or trade unions” (Gahan et al 2004, p 19). Further research by Gahan et al (2004) indicated that around one-third of all certified agreements (38% of union agreements and 30% of non-union agreements) contained clauses on consultative committees, although the researchers acknowledge that “it might be reasonable to expect far more than one-third of unionised agreements would contain formal provisions for consultative committees” and “the powers of,

and the scope of matters considered by, joint committees vary enormously from agreement to agreement” (Gahan et al 2004, p 19). They also suggested that in non-union agreements “a substantial proportion of formal joint consultative committee structures exist only for dealing with matters which are the subject of the enterprise agreement, rather than any broader issues of workplace regulation” (Gahan et al 2004, p 19) (see Table 15.4). Table 15.4: The level of employee employment in agreement making (percentages) Provision

Union certified agreement %

Non-certified agreement %

AWAs %

30

74

81.5

• advises employees of workplace change

14

14

3.5

• engages in informal consultation with employees before introducing workplace change

28

12

11.5

• engages in formal consultation with employees before introducing workplace change

12



3.5

• does not consult at all

2

n/a

n/a

• advises unions of workplace change

13

2

n/a

• engages in informal consultation with unions before introducing workplace change

29

4

n/a

• engages in formal consultation with unions before introducing workplace change

11



n/a

• does not consult at all

3

20

n/a

Agreements providing for joint consultative committee(s):

38

30

n/a

• consultative committees that involve union representatives

24

9

n/a

• committees with terms of reference limited to the operation of the CAs

8

n/a

n/a

Agreements containing no consultation clause Agreements containing a requirement that the company:

Agreements containing a requirement that the company:

Source: Gahan et al 2004, p 20.

Regarding non-union workplaces, an important question is: to what extent do non-union workplaces allow for an employee voice mechanism in the workplace? Significantly, workplace surveys have indicated an increase in both direct and indirect forms of employee participation and involvement in Australian workplaces. An analysis by Campling and Gollan (1999) indicates that around one-half of the managers in non-union workplaces and about one-third of the managers in lightly unionised workplaces negotiated workplace change directly with employees. Whether these negotiations constitute genuine employee involvement (or “voice”) depends on the degree to which the processes adopted allowed employees to be genuinely “heard” and to influence the change process. Studies have shown that employees have taken on increased responsibility at work, but that this has not resulted in a greater willingness by employers to trust employees or give them more participation and involvement in organisational decision-making processes. Other findings suggest that negotiations in nonunionised workplaces are less likely than negotiations in highly unionised workplaces to make use of collective structures but are more likely to involve “employees acting on their own behalf”. That is,

negotiations in non-unionised environments appear to make less use of formalised consultative mechanisms and more use of informal methods of communicating employee concerns to management. As one senior manager of a large communications company stated in the Campling and Gollan (1999) study: “If you predicate your communication on the basis that all managers should be communicating to all staff, what we don’t want is to inadvertently exclude people from that communications process. As far as we are concerned, representation-type structures do exclude people. It is naive to think the person that is so-called representing the group is going to be representing everyone in the group because by definition not everyone is going to have the same opinion.” However, this would indicate that employee involvement in the non-union workplace is often structured in a way that minimises the ability of employees to exert a significant influence on organisational decisionmaking and broader managerial decisions regarding the introduction of change. That is, employee “voice” in non-unionised organisations tends not to function as an exact equivalent of employee “voice” in unionised companies. These mixed trends suggest that management should use a wide range of forms of employee participation to facilitate organisational change effectively, rather than rely on one particular form over another.

¶15-060 Lessons for managers in implementing HIM Midgley indicates that there is little point enhancing managers’ people management skills if there is no commitment on the part of employers to provide the environment in which greater involvement and participation skills can be used. Thus, Midgley suggests that senior managers first need to assess the future skills they need in their workers and managers, as well as the cultures and systems they will need to develop these skills (Midgley 1995, pp 1,431–1,432). “At present, it seems to us that management development is largely uncoupled from corporate strategy and, as a consequence, receives little sustained effort or priority within a great number of companies … Those that master the process are more likely to prosper in the next century and it is time more Australian corporate leaders grasped this nettle. … ” (Midgley 1995, p 1,432) Second, there is the issue of employee involvement and participation in workplace decision-making. Case studies undertaken by Gollan and Davis suggest that management should inform, train and equip shopfloor employees to make decisions at their workplace and share ownership in the process (Gollan and Davis 1997). All four organisations in the case studies invested in a skilled and flexible workforce through self-directed teams, multiskilling and skill-based pay to reward skill acquisition. Patterson and West’s (1998) research into satisfaction and productivity suggests that encouraging know-how and locating information at the lowest levels of the hierarchy give employees the expertise to manage their own work, recognise problems and generate solutions (Patterson and West 1998). Third, the process of organisational change requires extensive consultation and other supporting arrangements, such as training, otherwise the shop floor could see the exercise merely as an intensification of workload rather than the enhancement of skills and experiences. As stated earlier, it would be advantageous to allay fears and anxiety about the introduction of any new process by developing a set of guiding principles in conjunction with a group of employees (Curtain and Mortensen 1994, p 10) through consultation and involvement at the embryonic stage of the project. The cases also demonstrate that involvement of trade unions at an early stage of the change process facilitates greater communication and employee involvement. In support of these points, a survey in the United Kingdom into the quality of working life for managers suggested that when respondents were asked about the one piece of advice they would give to the board or top team of their organisation, the vast majority of comments referred to the “poverty” of organisational communication and consultation strategies. The authors argue that this evidence reaffirms the fundamental importance of effective communication strategies that can help ease organisational change, generate commitment and ensure corporate coherence (Worrall and Cooper 1998, p 3).

The introduction of the FW Act by the Labor Government has also highlighted the need for a greater focus on employee consultation in the enterprise agreement process. As stated in s 205 of the FW Act, extensive consultation will be required within the enterprise agreement process. In particular, all enterprise agreements approved under the FW Act will require a “consultation term”, as follows:

Consultation term must be included in an enterprise agreement (1) An enterprise agreement must include a term (a consultation term) that: (a) requires the employer or employers to which the agreement applies to consult the employees to whom the agreement applies about major workplace changes that are likely to have a significant effect on the employees, and (b) allows for the representation of those employees for the purposes of that consultation. Model consultation term (2) If an enterprise agreement does not include a consultation term, the model consultation term is taken to be a term of the agreement. (3) The regulations must prescribe the model consultation term for enterprise agreements. (Source: FW Act, s 205.)

As explained in the Fair Work Bill 2008 (Explanatory Memorandum), in essence, a consultation term under this Bill must require the employer(s) to which the agreement applies to consult the employees to whom the agreement applies about major workplace changes that are likely to have a significant effect on those employees. The term must also allow for the representation of those employees during consultation. A person representing the employees could be an elected employee or a representative from an employee organisation. As such, an employee representative need not be from a union. (Source: Fair Work Bill 2008 (Explanatory Memorandum, p 139.)

Significantly, where an enterprise agreement does not include such a consultation term, the model consultation term will be taken to be a term of the agreement. If Fair Work Australia (FWA) approves an enterprise agreement and the model consultation term is taken to be a term of the agreement, FWA must note in its decision to approve the agreement that the model consultation term is included in the agreement. According to the Fair Work Bill 2008 (Explanatory Memorandum) the regulations may set out the model consultation term for enterprise agreements. This clause will be based on the consultation term developed by the AIRC for inclusion in modern awards. (Source: Fair Work Bill 2008 (Explanatory Memorandum, p 139. Note: FWA is now the FWC.)

¶15-070 Conclusion This chapter suggests that the implementation of employee involvement and participation programs can be linked to improved organisational performance and address legal requirements under future workplace legislation. Company performance will usually benefit from the integration of HR management and product and market strategies, improved understanding of the needs of employees at the workplace, and better use of their skill and ingenuity. Strategies designed to achieve a more comprehensive use of employees’ human potential, desire to learn, flexibility and personal responsibility would appear capable of delivering higher levels of performance. This evidence demonstrates that only by establishing mechanisms that allow employees to have a legitimate voice and allow differences to emerge will managers be able to channel such differences into more productive outcomes. The clear message from the research is that high quality communication and consultation between management and employees at the workplace is essential for achieving

performance and employee commitment. This is at the heart of the argument for more attention to HIM. Other things being equal, it will improve the organisation’s profitability by changing employee attitudes, overcoming resistance to change, and increasing commitment. Moreover, there will be the experience of mutual advantage. Management will benefit from improved performance and, for instance, reduced levels of turnover and absenteeism. Employees will enjoy more secure employment, upgraded tasks, a large degree of workplace autonomy and incentives to take responsibility for a quality product. Evidence from West and Patterson reinforces these points. In particular, they argue, “attitudes of the people in the organisation … seem to account for the largest part of the variation in company productivity and thereby profitability. Indeed, people and their attitudes to their jobs are the most important company assets” (West and Patterson 1998, p 5). In summary, there is evidence which suggests that there is a great deal of employee involvement and participation taking place in Australian workplaces (Morehead et al 1997, p 244). However, other findings have suggested that the amount of employee participation might well be exaggerated and the quality of many schemes may be limited (ACIRRT 1996). Too little attention has been paid in practice to the implementation of integrated HIM approaches. The evidence demonstrates that where such approaches are adopted they can assist in the pursuit of organisational goals. Overall, what can be drawn from the literature, existing data sources and the case study research is that high quality communication and consultation between management and employees at the workplace is essential in achieving HIM and improved organisational performance and addressing future legal requirements on employee consultation. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References and further reading Australian Centre for Industrial Relations Research and Training 1997, Agreements Database and Monitor, No 15, ACIRRT, Sydney. —— 1996, Agreements Database and Monitor, No 11, ACIRRT, Sydney. —— 1994, Agreements Database and Monitor, No 4, ACIRRT, Sydney. Australian Labor Party — Australian Council of Trade Unions 1983, Statement of Accord by ALP and ACTU Regarding Economic Policy, ALP-ACTU — Melbourne. Australian Manufacturing Council Secretariat 1995, “Lessons from Best Practice Practitioners”, Best Practice Program, AMCS, Australian Government Publishing Service, Canberra. —— 1993, “Interim Evaluation of the Australian Best Practice Demonstration Program”, Best Practice Program, AMCS, Australian Government Publishing Service, Canberra. Bamber GJ and Lansbury RR 1998, International and Comparative Industrial Relations, Sage, London. Beaumont P 1993, Human Resource Management: Key Concepts and Skills, Sage, London. Becker BE and Huselid MA 1998, “High performance work systems and firm performance: A synthesis of resource and management implications”, in GR Ferris, Research in Personnel and Human Resources Management, vol 16, JAI Press Inc, Stanford, CT. Brewer AM 1994, The Responsive Employee: The Road Toward Organisational Citizenship in the Workplace, Allen and Unwin, Sydney. Bryson A 2004, “Managerial responsiveness to union and nonunion worker voice in Britain”, Industrial Relations, vol 43(1), pp 213–241. —— 2000, Have British Workers Lost Their Voice, Or Have They Gained a New One?, PSI mimeo, July. Campling J, Gollan P, Pickersgill R, Short M and Watson I 1995, “The Role of Enterprise Agreements in Lightly Unionised and Non-Unionised Workplaces”, Unpublished research report, Prepared for the Australian Commonwealth Department of Industrial Relations, Australian Centre for Industrial Relations Research and Training, University of Sydney. Campling J and Gollan P 1999, Bargained Out: Negotiating Without Unions in Australia, Australian Centre

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Gollan P 1998, “Having a Voice — Non-Union Forms of Employee Representation in the United Kingdom and Australia”, British Universities Industrial Relations Association (BUIRA) Conference document, Keele University, July. —— 1995, “Globalisation and Its Impact on the World of Work”, Australian Centre for Industrial Relations Research and Training (ACIRRT) Working Paper No 38, University of Sydney, Sydney. —— 1994, “Enterprise Bargaining in Australia: Is It the Answer?”, Unpublished MSc thesis, London School of Economics. Gollan P and Davis E 1997, The Implementation of HRM Best Practice: Beyond Rhetoric, Unpublished document, Labour-Management Foundation, Macquarie Graduate School of Management, Sydney. Gollan PJ and Markey R 2001, “Conclusions: Models of diversity and interaction”, in R Markey, PJ Gollan, A Chouraqui, A Hodgkinson and V Veersma, Models of Employee Participation in a Changing Global Environment: Diversity and Interaction, Ashgate, Aldershot. Gollan PJ and Patmore G 2012, Submission to the Fair Work Act 2009 (Cth) Review Panel. Available at: home.deewr.gov.au/submissions/FairWorkActReview/Initial.htm. Gollan P, Pickersgill R and Sullivan G 1996, “Future of Work: Likely Long Term Developments in the Restructuring of Australian Industrial Relations”, Australian Centre for Industrial Relations Research and Training (ACIRRT) Working Paper No 43, Sydney. Guest D and Peccei R 1998, The Partnership Company: Benchmarks for the Future, Involvement and Participation Association, London. House of Representatives 2009, Fair Work Act 2009, The Parliament of the Commonwealth of Australia, Canberra. House of Representatives 2008, Fair Work Bill 2008, The Parliament of the Commonwealth of Australia, Canberra. House of Representatives 2008, Fair Work Bill 2008 (Explanatory Memorandum), The Parliament of the Commonwealth of Australia, Canberra. Kessler I, Jennings R and Undy R 2000, A Comparative Study of Employee Communication and Consultation in Private Sector Companies: Final Report, Templeton College, University of Oxford. Knell J 1999, “Partnership at Work”, DTI Employment Relations Research Series No 7, Department of Trade and Industry. Kochan T and Osterman P 1994, The Mutual Gains Enterprise: Forging a Winning Partnership among Labor, Management, and Government, Harvard Business School Press, Boston, MA. Lawler EE, Mohrman SA and Ledford GE Jr 1995, Creating High Performance Organisations, JosseyBass, San Francisco. Macneil J, Rimmer M and Watts L 1996, “Does Best Practice Work?”, in R Fells and T Todd, Current Research in Industrial Relations: Proceedings of the 10th AIRAANZ Conference, February, Perth. Macneil J, Testi J, Cupples J and Rimmer M 1994, Benchmarking Australia: Linking Enterprises to World Best Practice, Longman Business and Professional, Melbourne. Marchington M 2012, “The dynamics of employee involvement and participation during turbulent times: Australia”, Leverhulme Report. Markey R, Gollan P, Hodgkinson A, Chouraqui A and Veersma U 2001, Models of Employee Participation in a Changing Global Environment: Diversity and Interaction, Ashgate, Aldershot. McCallum R 1997, “Crafting a New Collective Labour Law for Australia”, The Third Whitlam Lecture, Trade Union Education Foundation, 14 May, Newcastle, New South Wales. Midgley D 1995, “How can Australia improve? Overall conclusions”, Enterprising Nation: Renewing Australia’s Managers to Meet the Challenges of the Asia-Pacific Century, Report of the Industry Task Force on Leadership and Management Skills, Australian Government Publishing Service, Canberra. Millward N, Bryson A and Forth J 2000, All Change at Work?, Routledge, London.

Morehead A, Steele M, Alexander M, Stephen K and Duffin L 1997, Change at Work: The 1995 Australian Workplace Industrial Relations Survey, Longman, Melbourne. Morgan G 1998, Images of Organisation, Sage, Newberry Park. Osterman P 1994, “How common is workplace transformation and who adopts it?”, Industrial and Labour Relations Review, vol 47(2), pp 173–88. Patterson M and West M 1998, “People power: The link between job satisfaction and productivity”, in CentrePiece, vol 3(3), Autumn, Centre for Economic Performance, London School of Economics. Patterson M, West M, Lawthom R and Nickell S 1997, “Impact of People Management Practices on Business Performance”, Issues in People Management No 22, Institute of Personnel and Development, London. Pyman A, Cooper B, Teicher J, Holland P 2005a, “The Australian Worker Representation and Participation Survey: An Overview”, Research Report, Department of Management, Monash University. —— 2005b, “A Comparison of the Effectiveness of Employee Voice Arrangements in Australia”, Working Paper, Department of Management, Monash University. Report of the Industry Task Force on Leadership and Management Skills 1995, Enterprising Nation: Renewing Australia’s Managers to Meet the Challenges of the Asia-Pacific Century, ITFLMS, Australian Government Publishing Service, Canberra. Sako M 1998, “The nature and impact of employee ‘voice’ in the European car components industry”, Human Resource Management Journal, vol 8(2), pp 5–13. Schuler RS 1992, “Strategic human resource management: Linking people with the needs of the business”, Organisational Dynamics, vol 21(1), pp 18–32. Storey J 1995, Human Resource Management: A Critical Text, Routledge, London. —— 1989, New Perspectives on Human Resource Management, Routledge, London. Terry M 1999, “Systems of collective representation in non-union firms in the UK”, Industrial Relations Journal, vol 30(1), pp 16–30. Walton RE 1985, “From control to commitment in the workplace”, Harvard Business Review, March–April, vol 64(2), pp 77–84. West M and Patterson M 1998, “People power: The link between job satisfaction and productivity”, CentrePiece, vol 3(3), Autumn, Centre for Economic Performance, London School of Economics, pp 2–5. Wilkinson A, Gollan PJ, Marchington M and Lewin D 2010, “Conceptualizing employee participation in organizations”, in A Wilkinson, PJ Gollan, M Marchington and D Lewin (eds), The Oxford Handbook of Participation in Organisations, Oxford University Press, Oxford, pp 3–25. Wood S 1998, “Human Resource Management”, LSE Research Seminar, 3 November, London. —— 1996, “High commitment management and payment systems”, Journal of Management Studies, vol 33(1). Wood S and Albanese M 1995, “Can we speak of high commitment management on the shop floor?”, Journal of Management Studies, vol 36(2), pp 215–247. Wood S and De Menezes L 1998, “High commitment in the UK: Evidence from the Workplace Industrial Relations Survey, and Employees’ Manpower and Skills Practices Survey”, Human Relations, vol 512(4), pp 485–515. Worrall L and Cooper C 1998, The Quality of Working Life — The 1998 Survey of Managers’ Changing Experiences, Institute of Management, London.

16. IMPLEMENTING CHANGE Editorial information

This chapter has been rewritten in 2015 by Jeanetta Munro (Director JJ People) providing human resources and change consulting to business across Asia Pacific.

¶16-010 Introduction In the 21st century, all organisations face change, whether through increasing competition, market forces, globalisation, advances in technology, social changes, or political uncertainty (to name a few examples). As such, some changes are forced on an organisation, while others are carefully planned — enabling the organisation to evolve in response to these internal or external forces for change. The ability to manage and, in many cases, embrace and adapt to change often determines an organisation’s competitive advantage and sometimes their ability to survive. A key difference between the organisations that succeed and those that fail is “the ability to respond to the pace of change” (Ulrich 1997, p 151). The list of companies that no longer exist because they were unable to adapt and change includes many former household names. Successful organisations are those which are able to adapt to changing circumstances. Successful managers are those individuals who can steer their organisations through the organisational change and adaptation required. Managers who are change leaders are proactive, not reactive. Managers who are change leaders set their organisation up for success by dealing proactively with changes, rather than setting it up for failure through reactive or passive organisational strategies. Managing successful change is never easy. The Hard Facts of Change Success Change management is challenging and often intense. In fact, research reveals that 70% of all change initiatives fail (Kotter 1995). Failure rates are so high that most organisational change initiatives are doomed to failure from the very beginning. This statistic of failure of change efforts has remained relatively constant in organisations since the 1970s (Ashkenas 2013). Recent literature indicates that there are three main reasons contributing to the high failure rate in all organisational change initiatives. These are: (1) an unrealistic vision, which leads to gaps in implementation of organisational change (2) unexpected people resistance to change and an inability to engage people in change (3) management’s failure to adequately understand or plan for the impact of change on people, and (4) organisations which are designed for stability not adaption. Successfully managing organisational change is probably the most important and most challenging issue facing human resources (HR) practitioners and leaders in today’s business. The management of organisational change has been a growing field of research over the past six decades with study evolving from a range of thought leaders. Change management has been in existence for over half a century as a recognised discipline (Ashkenas 2013). During that time there have been many models developed and research undertaken. This chapter

covers current practices and models in the area of managing change, and provides practical advice on how the HR practitioner can apply this information to their organisation (and, indeed, themselves). It also provides readers with further resources to explore research-derived organisational change concepts and emerging concepts on managing change.

¶16-020 Implementing change Organisational change can be messy and complex to implement. Many things can (and often do) go wrong in the implementation of change. A good grasp of the multitude of factors and critical issues to consider in implementing change is assisted by the use of a formal change “process” or “model”. Change models provide a structured focus and framework for the implementation of change. Within organisations, individuals carry around in their heads their own implicit models of “how things work” and “how things should work”. In the absence of use of an explicit model (such as the examples outlined in the following paragraphs), implicit models are likely to be relied on. Research findings indicate that using a model and structured approach to change contributes to successful outcomes of change. Indeed, the use of models in organisational change has been embraced by the organisational change community. However, no single change model is perfect, nor is any one change model mutually exclusive. The optimal use of change models is to adopt the one (or mixture of some) which is best suited to the organisation’s culture, vision and change implementation. A “one-size-fits-all” approach to managing change is ineffective. Change management strategies and plans should be adapted based on the consideration of two things: (1) the specific characteristics of the change (ie type, breadth, size and so on), and (2) the organisations that are being impacted by the change (history, culture and so on). It is important that the change management model and approaches match the actual initiative that is being managed. Change models Kotter’s Model for Change Probably the most influential change step model is that presented by John Kotter. In 1995, Kotter published an article in the Harvard Business Review (HBR) outlining an eight-step model of change, commonly referred to as Kotter’s Model for Change. This article, which he subsequently expanded into a book in 1996, was the most requested article published by the HBR (Kotter 1996). Kotter outlines his eight-step model for successfully implementing change in his iconic article published in the Harvard Business Review — Leading Change: Why Transformation Efforts Fail (Kotter 1995). Kotter states that, by understanding the stages of change (Eight-Step Model of Change), you then increase your chances of implementing successful change. Each stage is structured to ensure that fundamental errors which lead to change failures are not experienced. The first four steps assist in creating reasons for the change effort (ie the reason for changing the status quo). Steps five to seven assist in developing success for the changes made, and the last step ensures that the changes are embedded and become the new norm. Following is a summary of Kotter’s model. Figure 16.1: Kotter’s eight steps of change (1)

Establish a sense of urgency to dislodge people from their comfort zone and make them aware that change is needed.

(2)

Form a powerful guiding coalition to ensure that people take notice of the change and help to drive it through the organisation.

(3)

Create a vision to focus the change effort, and identify strategies for achieving the desired change.

(4)

Communicate the vision using multiple leverage points, including leading by example, to

achieve the required new behaviours. (5)

Empower employees to act on the vision, including identifying and eradicating barriers to achieving the desired behaviours, whether they are to do with the structure, HR policies, reward systems and so on.

(6)

Plan and create short-term wins to highlight to employees early on the personal and organisational benefits that can flow from the change.

(7)

Consolidate the change through recognition and promotion of people executing the desired behaviours, continuous review of policies and processes which do not facilitate the change process, and identification of new projects and actions to continue to reinvigorate the change process.

(8)

Institutionalise the change by embedding it in the corporate culture, modelling it through leadership and publicly identifying how organisational success follows from the change.

Kotter recognises that his framework simplifies the change process and that “even successful change efforts are messy and full of surprises” (Kotter 1995, p 67). However, he maintains that the eight steps outlined are important in achieving successful change and that: “Skipping steps creates only the illusion of speed and never produces a satisfying result” (Kotter 1995, p 59). In 2008, Kotter published a follow-up article to Leading Change: Why Transformational Efforts Fail, titled A Sense of Urgency. This expanded (in detail) how organisations could develop a sense of urgency — the first step of Kotter’s change model — which was considered to be the toughest step to achieve. A range of alternative models is available for change managers to draw on, including a 10-step process outlined by Kanter et al (1992) and (different) 12-step processes outlined by Ghoshal and Bartlett (1996) and Morris and Raben (1995). These and other models differ in terms of the number of steps, whether all steps need to be followed (and in sequence) for all organisational changes, and whether they are in need of adaptation (Palmer and Hardy 2000). Commercial Change Models There are a number of commercial project models available for use in managing change. One of the more popular models is Prosci’s ADKAR model for change management, which was first published in 1998 and is still in widespread use today. The ADKAR model provides a process to manage the business and people phases of organisational change. Application of the model can be useful to: • diagnose employee resistance to change • help employees transition through the change process • create a successful action plan for personal and professional advancement during change, and • develop a change management plan for employees. Further information on Prosci’s change management model is available on the Change Management Learning Centre website. See www.change-management.com. Kubler-Ross Change Model No summary of organisational change models would be complete without inclusion of the Kubler-Ross model of change. The Kubler-Ross model describes typical responses to grief which have been applied to understanding change on an individual level and in the workplace. This model was introduced by Elisabeth Kubler-Ross in a book called “Death and Dying” which was published in 1969. The Kubler-Ross model is still a trusted, and frequently used tool. It enables people to understand which stage they are in, when experiencing a major or significant change in life, either personal or in business. It is a useful tool to discuss with the stages of change with staff, and their place in it, when they are experiencing organisational change. Organisational Development Change Models (Appreciative Inquiry) One of the most often referred to change approaches is “organisational development” (OD). This is based

on a set of underlying values which recognise the importance of managing change by focusing on formal organisational structures and processes, and developing the individuals who work in organisations. The typical approach of the OD consultant is to structure activities to help organisational members solve their own problems, and generally learn to do problem-solving better (French and Bell 1995, p 4). An OD approach that has gained widespread support in recent years is Appreciative Inquiry (AI). Born out of positive psychology, the AI approach focuses on increasing what an organisation does well, rather than assuming problem-based approaches to change that focus on eliminating what the organisation does badly. Through an inquiry which appreciates the positive, evaluates possibilities and engages all levels of an organisation, AI seeks to renew, develop and build on what is truly working for the organisation. Attention is focused on “the best of what has been, what is, and what might be” (Whitney and Trosten-Bloom 2003, p 15). An AI intervention begins with the selection of the “affirmative topic”. The process of topic selection, as with all AI activities, is critical and inclusive — reflecting the whole-system philosophy — and must be phrased positively (eg “improving speed of response”). AI is based on the proposition that organisations “move in the direction that they consistently ask questions about” (Whitney and Trosten-Bloom 2003, p 112). An underlying assumption of AI is that setting up an organisation-wide “conversation” on a topic has real effects on what gets done in that organisation. Once the topic has been selected, a cycle, known as “the 4-D cycle” follows. This comprises the following four actions: (1) Discovery — producing a shared knowledge of the organisation’s positive attributes (2) Dream — articulating desired future states for the organisation (3) Design — identifying the practices that will bring about the desired future state, and (4) Destiny — identifying practices for sustaining the change. Lewin’s Change Model Writers and consultants who are not so wedded to the concept of OD focus on process. In particular, they place emphasis on breadth of inclusion of organisational members and the role of the consultant as a process facilitator, rather than as a subject expert. They have built on the idea of Lewin (1947) that managing change can be broken down into three different steps: (1) Unfreeze (2) Change, and (3) Refreeze. Not all of the writers agree, however, with the steps that the Lewin model suggested. For example, Moss Kanter argues that the Lewin model is a far too simplistic presentation of the complexities of change. Kanter argues that it fails to appreciate that organisations are fluid rather than static, that change can be multidirectional and that the stages of change are often not clear-cut (Kanter et al 1992). Lessons from neuroscience There is an emerging view that the current models and approaches to change would benefit from further insight about how the brain and mind interact to influence thinking and performance. Through the emerging field of neuroscience we can see how our brain functions in our world. Using functional magnetic resonance imaging (fMRI) technology, neurofeedback and electroencephalograph (EEG) machines, researchers are discovering how we function and respond to different situations, such as change. One of the positive findings from the field of neuroscience regarding change is that our brain can change at any stage of life and we can self-direct our neuroplasticity (Schwartz 2009). Gone are the old theories that our brains cells die and we cannot regenerate our brain. So, you can teach old dogs new

tricks. The challenge with change is that it creates conflict within our brain’s two main systems. Our nonconscious brain system, commonly known as the “X” system, prefers to operate on set patterns and habits. This allows it to operate automatically, faster and with less energy. Our conscious brain system, known as the “C” system, enjoys novelty, learning new things, being flexible and adapting to the environment. It is our C system that we use when paying attention to new information, planning ahead, solving problems, actively listening, and when we consciously engage with others in the present moment (Saunders 2013). Integrate model A simple way to understand the brain is through Evian Gordon’s “integrate model” (Gordon 2000). The integrate model shows us that our core motivation to “minimise danger-maximise reward” is the principle that underlies the essential organisation of the brain. It drives our emotion, thinking, feeling and selfregulation processes. It is this core principle which non-consciously influences us to perceive change as a threat. The neuroscience research gives us physical scientific evidence of the resistance people have to change, as put forward in previous change models. The neuroscience research suggests that — to minimise our negative threat response to change — we need to use a top-down approach when implementing change. A top-down approach is where we ensure we activate a person’s C system: in other words, grab their attention, trigger their curiosity, and involve their cognitive thinking processes to help make the change happen. With our C system activated, we can influence down into our non-conscious regions, such as our emotions and motivational drivers. Neuroscience research is paving the way for a greater understanding of how to manage the human side of change another avenue of emerging research is ensuring that people in organisations are change ready and as leaders we understand the reasons for resistance and lead people through the changes.

¶16-030 Change Readiness and Resistance It is widely accepted that one of the greatest challenges to implementing successful change is overcoming people’