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

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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’s resistance to change. In fact, much of the research on managing change over the past 60 years has been focused on rational linear processes rather than people transitions, and this may be why so many change efforts have failed. As mentioned in ¶16-010, over 70% of change management efforts fail, and this has been strongly attributed to the focus being put on organisational structures, processes and change programs, when the real key to success is changing people’s mindsets (Bucknall and Ohtaki 2005, p 207). The following information provides an overview of the key approaches and considerations on reducing resistance to change. However, there is no panacea and widely differing views are held as to why people resist, as well as how to best overcome such resistance. The people side of change is an evolving area of organisational change thinking and practice. Recent thinking suggests that a successful change effort manages not only the organisational change (rational) but the people transition (non-rational) aspects of change. According to Kotter, the most successful organisational changes involve 60% emotional change processes and 40% process changes (2012). Assessing peoples readiness for change While not all change is dependent on the support and agreement of those affected, in most cases it is helpful if key players are “ready for change”. In this regard, it is important not to assume that the only ones who need to recognise the need for change are “the managed” and not the managers. This requires a slight shift in the way that change is normally thought about, that is, as something that managers have to do in the face of varying degrees of resistance from non-management employees. While the latter certainly occurs in many instances, it is important to recognise that the managers in an organisation are not necessarily always “gung ho” about change. As Peter Drucker (1994) and others (eg Pickens and Dess 1998) have noted, managers are likely to have particular beliefs as to the nature of the business that they are in, who the key competitors are, and where future threats are most likely to come from, and that these beliefs become cognitive maps which act as filters through which the plausibility/desirability of possible changes are assessed. For this reason, a

number of high-profile commentators on strategic change, including Gary Hamel (1996) and Kathleen Eisenhardt (Eisenhardt et al 1997) are arguing strongly for heterogeneous top management teams in order that there is a greater “diversity of voices” in the “strategy conversations” within organisations. Because of the significance of cognitive maps, a highly desirable first step in determining readiness for change is for the management of an organisation to “look in a mirror”, that is, to ask the question of readiness of themselves before expanding the question to the organisation as a whole. Managing people transitions through change Most change models have been based on a rational approach to managing change; however, more recent research and approaches to change indicate that — by focusing on the people side of change — it is likely that the change efforts will be more successful. One such model is provided by the Heath brothers who bring both emotional and rational perspectives to managing change into the one change process (Heath and Heath 2010). The Heath brothers assert that successful changes share a common pattern. They require the leader of the change to do three things: (1) change the person’s situation (2) engage their heart and mind, and (3) provide clarity. Switch: How to Change Things When Change is Hard (Heath and Heath 2010) is drawn from an analogy from the University of Virginia psychologist Jonathan Haidt (2005). When trying to get people to change, think of them as made up of two parts: elephant and the rider. Haidt said that our emotional side is an elephant, and our rational side is a rider. The rider, perched atop the elephant, holds the reins and seems to be the leader. However, the rider’s control is precarious, because he is so tiny in relation to the elephant. Any time that the six-tonne elephant disagrees with the direction, the rider is going to lose. The rider (rational side) is completely overmatched by the elephant (emotional side). Far too often, the elephant runs off with the rider. Based on this analogy, the Heath brothers provide the following steps to ensure that, when implementing change, the resistance for people to change is reduced. (1) Direct the rider: What looks like resistance is often a lack of clarity. Provide crystal-clear direction. (2) Motivate the elephant: What looks like laziness is often exhaustion. The rider cannot get his way by force for very long. It is critical that you engage people’s emotional side — get their elephants on the path and cooperative. (3) Shape the Path: What looks like a “people problem” is often a “situation problem”. We call the situation (including the surrounding environment) the “Path”. When you shape the Path, you make change more likely, no matter what is happening with the rider and elephant. Thus, to change behaviour, you have to direct the rider, motivate the elephant, and shape the Path. If you can do all three at once, dramatic change can happen, even if you do not have lots of power or resources behind you. All the models and practices for managing change successfully will tell you that communication is important, and that you should develop a communication plan which is two-way, provides feedback, and where information is provided in a variety of ways a number of times. The ability of employees to be able to express their ideas, views and feelings to develop a relationship built on trust is critical to acceptance of change. For more information on leading people through change, refer to Kotter’s book The Heart of Change: real life stories of how people change their organisations (2012) where he provides thoughts on practical people change. Perhaps the first major contribution on managing the people side of change is William Bridges’ research into people transitions, presented in his book Managing Transitions, Making the Most of Change which is

now considered a key contribution to managing organisational change. Bridges’ research shows that — whenever people are faced with change — there is a natural personal and emotional response. Whether people believe the change is positive or negative, they will always experience a transition process. Resistance to change may come from people’s fear of the change (the unknown), whether they perceive the change as positive or negative (loss) and how they transition through change (adaptation). Bridges holds that people transition through three phases of change: (1) an ending/losing/letting go of the current position (2) a disorienting neutral zone, and (3) a new beginning. If people do not deal with each of these phases, the change will be just a rearrangement of the current status quo. Bridges provides a framework to assist leaders and change agents to transition their people through organisational change and reduce resistance (Bridges 2003, p 3): “It’s not the changes that do you in, it’s the transitions. Change is not the same as transition. Change is situational: the new site, the new boss, the new team roles, and the new policy. Transition is the psychological process people go through to come to terms with the new situation. Change is external; transition is internal.” Bridges suggests the use of a transition management plan, which should include actions designed to achieve the following: • Identify key transition points in the change. • Identify employees’ “losses”, mitigate them where possible, and encourage them to let go of the old ways. • Use events and symbols which mark the end of old systems and so on in a positive way. • Manage and capitalise on opportunities created by the “neutral zone”. • Facilitate the “new beginning”. In large organisations, or for large-scale change, it may be advisable to form a “transition monitoring team” to ensure that all the above steps are implemented. More recent contribution to managing resistance to change comes from David Rock (2008) who developed the SCARF (Status — Certainty — Autonomy — Relatedness — Fairness) model as a method of explaining the five key motivational drivers of our non-conscious social brain. When planning change it is important to positively engage these five factors. If not, then these motivational drivers will trigger resistance to the change. This reinforces the need for leaders to consider the personal impact of change. The focus of neuroscience towards human performance, change, business and leadership is an emerging science with much potential. The “boiled frog” phenomenon and “the Icarus paradox” In some instances, managers may feel themselves ready for change but miss the signs that it is needed. The process whereby this can occur has been called the “boiled frog” phenomenon as it is seen as analogous to a classic experiment involving the physiological response of frogs (Tichy and Devanna 1990). In the experiment, a frog is put into a pan of water which is then slowly heated. As long as the water temperature increases slowly, the frog will stay in the pan until it boils to death, even though there is nothing preventing it jumping out at any point. However, if a frog is put into a pan of already boiling water it will quickly jump out and survive. Organisations become the equivalent of the boiled frog if they fail to respond to a series of changes, each of which may be small, but which cumulatively comprise a situation where the organisation is placed in peril. It is often when organisations are at their most successful that they are most vulnerable to this phenomenon, because success, interpreted as the proof that they are doing the right thing, predisposes

them to be less receptive to cues that change is needed. The very characteristics that have led to success become, over time, the basis for an organisation’s downfall. Information that should set off warning bells is either ignored or interpreted in such a way that it is seen as confirming rather than questioning existing “strategic frames” (Sull 1999). This phenomenon has been popularised as “the Icarus paradox” by Danny Miller (1990). This is an allusion to the Icarus of Greek mythology whose wax wings gave him the power to fly high, so high that he got too close to the sun, whereupon his wings melted and he fell to his death. Several high-profile international organisations, including IBM, General Motors, Laura Ashley, Polaroid, Apple, McDonalds and Xerox, have been identified as being affected by this phenomenon (Sull 1999). Understanding employee’s resistance to change Resistance to change is common and natural. However, successful implementation of change requires the change leader to overcome resistance. The best tool for leaders is to understand what it is generating people to resist the change and then develop a strategy to overcome the real barriers causing the resistance. Resistance may also provide an opportunity to change leaders to re-evaluate the change program and implementation strategy. The most commons reasons for people to resist change include (Moss Kanter 2012): • loss of control • uncertainty and anxiety about the change • surprise and shock • change being implemented without reason (ie change for change’s sake) • loss of face • concerns about ability to cope with the changes • negative impact of changes (eg increased workloads as a result of change) • lack of trust with leaders implementing change, and • past resentments. Diagnosing the sources of people’s resistance to change is the first step towards good solutions and then the change leader can plan how to deal with the source of resistance. Feedback from people who are resisting the changes is helpful in identifying and overcoming resistance perceptions, while effective communication can reduce fear of the unknown and anxiety associated with proposed changes. Organisations to be change ready Organisational effectiveness experts Edward Lawler and Christopher Worley propose that it is not necessarily the people in an organisation that need to be “change ready” but it is the organisations which need to be structured to be “change ready”. That is, our organisations are traditionally built for “stability” and therefore are change resistant but that they can be “built to change” and become change ready. Lawler and Worley propose that the obstacles to change in traditional organisations built for stability are so great that no change models can overcome the emphasis these organisations put on stability, practicability and execution. Lawler and Worley argue organisations need to be designed in ways that stimulate and facilitate change. Built to Change focuses on identifying practices and designs that organisations can adopt so that they are able to change. Lawler and Worley propose that to create a change ready organisation we first need to build and design our organisations that are accepting of change and ready to change. Organisations which are built for change have the following characteristics: • conceptualise strategy for change • are closely connected to their environments

• reward experimentation • learn about new practices and technologies • commit to continuously improving performance • seek temporary competitive advantages. For more information on building a change ready organisation refer Organizational Dynamics, Vol 38, No 4, pp 245–251, 2009. Role of Leadership in successful change For many years, so-called organisational change “experts” have developed models which view change as a process that is linear and sequential. There is an emerging school of thought that change is neither predictable, nor sequential; therefore, it cannot be successfully managed by applying a process. The chaos theory model does not view change as linear, passing through a series of stages. As an alternative model to change, chaos theory proposes that change occurs through having to deal simultaneously with forces which push the organisation to both change (disorder) and stability (order) at the same time. This includes, managing for both the short- and long-term, focusing on both products and processes, and dealing with both conflict and consensus. The disorder which results from these paradoxical pressures may lead to actions which are not aligned with organisational objectives. However, these actions might also give rise to new, unanticipated forms of organisational order. In addition, chaos theory points out that even small changes introduced into an organisation can have large impacts in ways not expected (Lichtenstein 2000; Thietart and Forgues 1995). In this view, managers do not direct change per se, but act more as organisational navigators. In this capacity, they adopt change management roles which include: • helping to manage transitions (by getting people involved in decision-making and problem-solving) • building resilience (by helping people to absorb changes) • destabilising organisational processes (to nurture creativity) • managing order and disorder (by seeking a balance between the two), and • fostering a learning organisation (to facilitate continuous learning) (Tetenbaum 1998). This has led to the importance of change leadership and the role of effective change leadership in implementing change. This has also led to the emergence of the Transformational Leader. Transformational leadership is defined as a style of leadership where the leader collaborates with employees to identify the necessary change, create a vision to guide the change through inspiration, and executing the change in tandem with committed members of the group (Business Dictionary 2015).

¶16-050 Emerging directions in change In this section, consideration will be given the emerging area in managing change. Most notably, is that change management needs to change! According to McKinsey & Company (2015), “Change management as it is traditionally applied is outdated. We know, for example, that 70 percent of change programs fail to achieve their goals, largely due to employee resistance and lack of management support. We also know that when people are truly invested in change it is 30 percent more likely to stick.” Another view is that the basics of change management models as we know them are accurate, that it is “The content of change management is reasonably correct, but the managerial capacity to implement it has been woefully underdeveloped.” Harvard Business Review (Ashkenas 2013). The most recent thinking on how our paradigm of change management needs to adapt considers theory and learnings from neuroscience (as emerging sources of insight), and how it will assist in understanding

how to manage successful change. It is fair to say that a large volume of research and resources has been dedicated to understanding how to manage change successfully. The field of organisational change is an evolving (and dynamic) area for the HR practitioner.

¶16-060 Conclusion In this chapter, best practice and current approaches to managing change have been outlined, and current tools, techniques and methodologies have been provided. Two emerging areas in the management of change (chaos models and lessons from neuroscience) have been introduced. There are different approaches to changing an organisation. Being a good change manager involves artistry in being able to: • sketch out (in advance of a change) the likely issues that will need to be dealt with • be open to modifying these issues once the change takes shape on the canvass of the organisation, and • realise that the final picture may look different from the one that was initially anticipated. As Jean Bartunek (2003, p xi) suggests: “The ability to discern between competing approaches to change and their likely value may be one of the most important skills for managers to learn.” For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶60-000. References and further reading Ash-Quarry Productions 1990, Vision for Change, Melbourne. Ashkanas R 2013, “Change Management Needs to Change”, Harvard Business Review, accessed 2015. See www.hbr.org/2013/04/change-management-needs-to-cha. Bartunek JM 2003, “Foreword”, in J Helms Mills, Making sense of organizational change, Routledge, London, pp ix–xi. Beer and Nohria N 2000, “Purpose of change: Economic value or organizational capability?”, in M Beer and N Nohria, Breaking the Code of Change, Harvard Business School, Boston, MA, pp 35–36. Bass BM and Avolio BJ 1994, “Improving Organisational Effectiveness through Transformational Leadership”, Sage. Bass B 1985, “Leadership: Good, Better, Best’’, Organisational Dynamics, Winter, pp 26–40. Bennis W 1991, “Leading Followers, Following Leaders’’, Executive Excellence, USA, June. Bennis W 1991, “Creative Leadership’’, Executive Excellence, USA, August. Bridges W 2003, Managing Transitions: Making the Most of Change, Perseus Books, London. Bucknall H and Ohtak R 2005, Mastering Business In Asia: human resource management, John Wiley & Sons, Singapore. Bunker BB and Alban BT 1997, Large Group Interventions: Engaging the Whole System for Rapid Change, Jossey-Bass, San Francisco, CA. Dawson P 2003, Understanding Organizational Change: The Contemporary Experience of People at Work, Sage, London. Drucker P 1994, “The theory of the business”, Harvard Business Review, September–October, pp 95– 110. Dunphy D and Stace D 1994, Beyond the Boundaries: Leading and Re-creating the Successful Enterprise, McGraw-Hill, Sydney.

—— 1990, Under New Management: Australian Organizations in Transition, McGraw-Hill, Sydney. Eisenhardt KM, Kahwajy JL and Bourgeoise LJ 1997, “How management teams can have a good fight”, Harvard Business Review, July–August, pp 77–85. Ewenstein B, Smith W and Sologar, A 2015, “Changing Change Management”, Mckinsey & Company Insights and Publications, accessed 2015. See www.mckinsey.com/insights/leading_in_the_21st_century/changing_change_management. French WL and Bell CH 1995, Organization Development: Behavioral Science Interventions for Organization Improvement, Prentice Hall, Englewood Cliffs, NJ. Ghoshal S and Bartlett CA 1996, “Rebuilding behavioural context: A blueprint for corporate renewal”, Sloan Management Review, vol 37(2), pp 23–36. Gordon E 2000, “Integrative neuroscience: the big picture”, Integrative Neuroscience: Bringing Together Biological, Psychological and Clinical Models of the Human Brain, Harwood Academic Publishers, The Netherlands, pp 1–35. Haidt J 2005, The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom, Basic Books, NY. Hamel G 1996, “Strategy as revolution”, Harvard Business Review, July–August, pp 69–82. Heath C and Heath D 2010, Switch: How to Change Things When Change is Hard, Random House, Inc, NY. Holman P and Devane T 1999, The Change Handbook: Group Methods for Shaping the Future, BerrettKoehler, San Francisco, CA. Kanter RM, Stein BA and Jick TD 1992, The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It, Free Press, New York. Kotter J 2012, The heart of change: real life stories of how people change their organisations, Harvard Business Review Press. —— 2008, A Sense of Urgency, Harvard Business School Publishing, Boston, MA. —— 1995, “Leading Change: Why Transformation Efforts Fail”, Harvard Business Review, March–April. Kubler-Ross 2007, On Grief and Grieving: Finding the Meaning of Grief Through the Five Stages of Loss, paperback. Lalwer E and Worley C 2006, “Built to Change: How to Achieve Sustained Organisational Effectiveness”, viewed from Kantola Productions. Lawler E and Worley C 2009, “Building Change Capability at Capital One Financial”, Organizational Dynamics, vol 38, No 4, pp 245–251, ISSN 0090-2616/$ — see front matter, Elsevier Inc, doi:10.1016/j.orgdyn.2009.02.004, www.elsevier.com/locate/orgdyn. Lewin K 1947, “Frontiers in group dynamics”, Human Relations, vol 1, pp 5–41. Lichtenstein BB 2000, “Self-organized transitions: A pattern amid the chaos of transformative change”, Academy of Management Executive, vol 14(4), pp 128–141. Manning MR and Binzagr GF 1996, “Methods, values, and assumptions underlying large group interventions intended to change whole systems”, International Journal of Organizational Analysis, vol 4(3), pp 268–284. Maurer R 1996, Beyond the Walls of Resistance, Bard Books, Austin, TX. Miller D 1990, The Icarus Paradox, Harper Collins, New York. Morris KF and Raben CS 1995, “The fundamentals of change management”, in DA Nadler, RB Shaw, AE Walton and Associates, Discontinuous Change: Leading Organizational Transformation, Jossey-Bass, San Francisco, pp 47–65. Moss Kanter E 2012, “Ten Reasons People Resist Change”, HBR Blog Network, accessed January 2013. See blogs.hbr.org/kanter/2012/09/ten-reasons-people-resist-chang.html.

Palmer I and Hardy C 2000, Thinking about Management: Implications of Organizational Debates for Practice, Sage, London. Paton RA and McCalman J 2000, Change Management: A Guide to Effective Implementation, 2nd edn, Sage, London. Pickens JC and Dess GG 1998, “Right strategy — wrong problem”, Organizational Dynamics, Summer, pp 35–49. Prosci 2012, “Best Practices in Change Management”, Report. See Change Management Learning Center at www.change-management.com, www.prosci.com. Rock D 2008, “SCARF: A brain based model for collaborating with and influencing others”, Neuroleadership Journal, Issue One. Saunders P 2013, For further information on Lessons From Neuroscience contact Paul Saunders, a performance psychologist who specialises in neurocoaching, leadership and change. For further information you can email him at [email protected] or visit his website at www.psychbusiness.com.au. Schwartz JM and Begley S 2009, The mind and the brain: neuroplasticity and the power of mental force, ReganBooks, Harper Collins Publishers, NY. Stace D and Dunphy D 2001, Beyond the Boundaries: Leading and Recreating the Successful Enterprise, 2nd edn, McGraw-Hill, Sydney. Sull DN 1999, “Why good companies go bad”, Harvard Business Review, July–August, pp 42–52. Tetenbaum TJ 1998, “Shifting paradigms: From Newton to chaos”, Organizational Dynamics, Spring, pp 21–32. Thietart RA and Forgues B 1995, “Chaos in the theory and organization”, Organisation Science, vol 6(1), January–February, pp 19–31. Tichy N and Devanna M 1990, The Transformational Leader, John Wiley and Sons, New York. Ulrich D 1997, Human Resource Champions, Harvard Business School Press, Boston, MA. Whitney D and Trosten-Bloom A 2003, The Power of Appreciative Inquiry, Berrett-Koehler, San Francisco. Wind JW and Main J 1999, Driving Change: How the Best Companies Are Preparing for the 21st Century, Kogan Page, London.

17. ETHICS, CORPORATE SOCIAL RESPONSIBILITY AND HUMAN RESOURCE MANAGEMENT Editorial information

Professor Robin Kramar Australian Catholic University Glenn Martin Writer and Consultant on HR, Training and Ethics

¶17-010 Introduction The human resources (HR) role can cover an extremely wide range of issues, spanning from fulfilment of functions relating to people (eg recruitment and performance management) and ensuring compliance with a variety of legal obligations, to devising and carrying out organisational development programs and initiatives. This chapter looks at the HR role from an ethics perspective. The organisational environments in which HR staff carry out their diverse functions can vary enormously in how they regard ethics. The purpose of this chapter is to explore the varying stances organisations take towards ethics. This includes the influences, both internal and external, that come into play when ethics issues arise, and the measures by which HR staff might monitor and foster ethically and socially responsible behaviour in their organisation. The chapter begins by describing the current business context for ethics and social responsibility, and offering a framework for the discussion of ethics in organisations. It then turns to the question of the relevance of ethics to business and the strategies HR can employ to foster ethical conduct. Talking about ethics in business contexts evokes a variety of responses. Some of the spectacular collapses of corporations in the last 15 years may be cited (eg Enron in the United States (2001) and HIH Insurance in Australia (also 2001)). The conduct of existing organisations is also subject to critique; for instance, James Hardie’s treatment of asbestos victims has been widely criticised (Haigh 2006; Peacock 2009). Beyond talk of the conduct of individual companies, discussion of ethics in business extends to the general business climate for ethics. The global financial crisis has been blamed on a number of ethical shortcomings of the business world, such as the greed of executives and the narrow focus of commercial companies on profit (Sims and Brinkman 2003; Frederick 2006; Jennings 2006), and the cavalier conduct of agents in the financial sector. Further, the crisis has been blamed on the failure of business schools to promote socially responsible conduct when teaching their students (Ghoshal 2005; Frederick 2006; Giacalone and Wargo 2009), and at the broadest level, some critics have argued that modern capitalism is failing to ensure, or even allow, a stable and fair society (Posner 2009). The greater pressures many organisations are experiencing as a result of a more difficult economic environment could create the temptation for them to shelve any commitment towards social or environmental goals, and interpret their ethical obligations in a minimalist way. However, organisations

can also take the view that it is more important than ever to maintain ethically and socially responsible values and behaviours, in the belief that it is these values that will see their business through the difficult times, and that it is important to restore the public’s faith in the integrity of business. In the midst of the economic turmoil, a survey of Australian employees reported overwhelmingly that they expected organisations to operate ethically (St James Ethics Centre and Beaton Consulting 2009) with over 90% agreeing with the statement, “Organisations have an obligation to act ethically, even if it occasionally harms their profits”. Reasons to be ethical Debate will continue on whether businesses generally are ethical, and whether they are becoming more or less ethical. Of more relevance to HR practitioners is the stance their own organisation takes towards ethics, and what part they should play in enhancing ethics in their organisation. A good starting point is to consider the reasons an organisation might have to act ethically. The reasons can be grouped into the following five categories (Martin 1998): (1) Legal reasons: These are based on the threat of legal action against the organisation, including prosecutions, law suits, complaints and unfair dismissal claims. These actions might lead to fines, orders for compensation and damages, injunctions and other orders to comply with regulations or make restitution, and loss of licences to operate. (2) Public image reasons: These include the threats of adverse publicity and loss of reputation (which might also follow from legal actions), the need to maintain trust in the organisation and its products and services, and the positive business value of being recognised as ethically, socially and environmentally responsible, and a good corporate citizen. (3) Pragmatic reasons: These are based on the truth that — much of the time — acting ethically coincides with what is best for business success (eg maintaining product safety and quality is instrumental in the retention of customers). This is the argument that “good ethics equals good business”. (4) Moral reasons: Organisations act ethically simply because it is the right thing to do; it is the right way to treat people, and this stance is not dependent on any financial gain that is likely to result. (5) Explicitly ethical reasons: These take moral reasons a step further by publicly committing the organisation to uphold high human values. This account provides organisations with a way of analysing their current behaviour, subject to the observation that, in business, decisions are seldom taken for purely ethical reasons. They are generally undertaken for complex reasons, not simply because they are legal, good for public relations or ethical. Moral advocates often disparage such mixed motives. However, organisational decisions always take place in a complex environment, and mixed motives are inescapable. Moreover, if there is an underlying connection between the different factors, then it is often impossible to disentangle them. Whether it is the case that an organisation has a commitment to operate ethically is something that may only be evident over a period of time, as the organisation exhibits consistent ethical conduct. An increasing number of organisations are giving consideration to these reasons, and have developed stances towards ethics and social responsibility that some writers have called “responsible capitalism”. This is discussed at ¶17-030. Compliance and ethics Compliance has emerged and established itself as a discrete function in many organisations. This is pertinent to HR managers because many of the areas of compliance, such as equal employment opportunity (EEO), work health and safety (WHS) and employment relations, fall into the province of HR. Compliance is an expression of the community expectation that every aspect of an organisation’s activities, and the conduct of its members, should be in accordance with the law while, for many organisations, it is a risk management strategy. The value of compliance is that it brings all matters which have a compliance aspect into view, and

ensures that organisations do not neglect them. For example, in organisations where the compliance role exists, it generally means that employees receive appropriate training about sexual harassment and that policies exist and are adhered to. But there is a danger in institutionalising compliance in this way. Issues which are essentially about ethics are considered to have been “dealt with”, and the focus is on obeying rules (the letter of the law) rather than building a positive climate (the spirit of the law) which would more effectively reduce the possibility of inappropriate behaviour occurring. It should be noted that Enron had a well-developed ethics compliance department, an exemplary code of ethics, and had been publicly recognised for the quality of its ethics program (Koehn 2005). Knowledge of legal obligations is necessary, but fostering positive ethical conduct creates a supportive culture where employees are less likely to contravene laws and policies. For this reason it is important that HR is involved in compliance, but also that it ensures there is an agenda of positive culture-building (Cameron 2006). The latter approach also ties in with increasing consumer expectations about the social and environmental responsibilities of business. Numerous studies (eg see Paine 2003) have found organisations that foster ethics and social responsibility in the workplace tend to have a better reputation for business conduct and for social and environmental achievements, while maintaining a strong financial performance. The business world is also seeing a rapid shift in community opinion about the environment. The view that it is critical for the business world to do all that it can to minimise and reverse environmental impacts is rapidly becoming accepted. This adds to the importance of HR recognising social, environmental and ethical issues, and being involved in creating solutions within their organisation.

¶17-020 Integrating ethics and values People do not usually argue about how to define ethics. The argument is usually more about whether or not particular conduct is ethical, and what the extent of a person’s or organisation’s ethical responsibility is in particular situations. However, it is worth giving a definition to frame the discussion that follows. Albert Schweitzer, winner of the Nobel Peace Prize in 1952, offered the following definition for ethics (Hill 1976, p 4): “In a general sense, ethics is the name we give to our concern for good behaviour. We feel an obligation to consider not only our own personal wellbeing, but also that of others, and society as a whole.” To this we would want to add a further aspect (of which Schweitzer would have approved): ethics is also about having consideration for the natural world — the environment. Schweitzer’s simple definition embodies a number of important aspects of ethics: • Ethics is about valuing conduct as right or wrong, good or bad: that is, ethics is different from merely liking and disliking things. • Ethics is not simply “what people think” (relativism). At an individual level, it is the individual’s personal measure of what is right and wrong and, at a collective level, it expresses a consensus (an agreement) about what is right and wrong. • The essence of ethics is consideration of, and caring for, other people and society as a whole, in contrast to acting out of selfish interests (although oneself is also valued!). • Ethics is a set of principles (an obligation to consider others), not just a set of rules made by governments, societies or organisations. This understanding of ethics can be employed to frame discussion of ethical issues. It is useful to bring values into the conversation at this point. Ethics provide the foundation for ethical (or moral) values, which are the medium through which ethics are expressed in particular contexts. Values are of interest for another reason too — it is increasingly being accepted that the work of managers and organisations is not value-free; it is inherently value-laden, as it affects people and the relationships between them. In recognition of this, the concept of values-based management is becoming well-known.

There is a pragmatic side to values-based management. Values are being recognised as a key driver of behaviour, and offer the promise of generating significant improvements in business performance (Fairholm 2003; Lennick and Kiel 2008; Paine 2003; Blanchard and O’Connor 1997). Organisations and researchers have examined issues, such as identifying an organisation’s current and desired values, and the relationship between the personal values of employees and those of the organisation. Within the broad framework of values-based management, the question arises about the place that ethical values hold in the work of managers. One aspect of this question relates to the role commercial corporations are deemed to play in society. If this role is conceived narrowly as the maximisation of profits for shareholders, then the list of ethical values that apply to managers may be limited. The question of the role of corporations in society is discussed at ¶17-040. The second aspect relates to the ethics of managers’ actions. Managers are still individual humans, and the tensions between the rough rules of unbridled capitalism and the human values Schweitzer’s definition of ethics educes may be exquisite. Mele (2005) distinguishes ethical (or moral) values from other values in this way: values in general arise out of the definition of value, that is, they relate to anything that a person might consider worth having, getting or doing. This could be fame, success, competence, achievement, humour, music and so on. In contrast, ethical values are those which contribute to the good of the person and society. Sissela Bok (2002) defines ethical values as those necessary for the survival of human societies (eg duties to refrain from harmful actions against others); beyond this, ethical values are those needed to live a good life, for being in full touch with one’s humanity, and to ensure a thriving family or community. A great deal of research has been carried out to identify lists of values and ethical values (eg Rokeach 1973; Hall 1986; Schwartz 1992, 1994). Van Hooft (2006) presents lists of virtues from Aristotle and from Peterson and Seligman (2004), and he discusses key virtues that illustrate the workings of virtues in general. Sarros et al (2006) examined the character attributes of Australian leaders, identifying 15 aspects of character, such as respectfulness, fairness and integrity. The most useful approach is to acknowledge that there are values about which we have a generally shared understanding. How do we know that our understanding of many values is shared? One occasion is when corporate scandals occur. It does not seem difficult for people to reach agreement that, for example, executives who appropriate millions of dollars in company funds for their own purposes are demonstrating greed and dishonesty. And, when business schools are accused of not doing enough to promote ethical values that would discourage new managers from acting selfishly and having no sense of responsibility towards society or the environment, we all understand the argument, whether or not we agree with it. Some commentators consider that discussing ethics solely in terms of values is deficient. They hold that we need to have a clear distinction between right and wrong, and values do not give us this. Values suggest instead a spectrum that consists of many shades of grey. The commentators argue that there needs to be a clear set of standards to which organisations and their executives can be held accountable. The reason for this stance is well-known: that is, whenever a company does something that many people consider to be unethical, the company argues that what it did was legal, and any other judgments are subjective. Gellermann et al (1990, p 42) maintain that the ethical conduct of professionals and managers requires a framework that embraces two measures: (1) ethics as ethical rules and reasons for rejecting unethical behaviour, and (2) personal development of the whole person, the aspect that is addressed by values. The first measure gives us laws, regulations, codes and policies. This proposal creates difficulties for some commentators, who would prefer to have the certainty of just one set of standards. However, what this quandary points to is that people do not operate at the same level when it comes to ethics (Martin 2012). Some people set high ethical standards for themselves, while others resist any constraints at all, even the law. It is helpful to recognise the range of stances that individuals and organisations have towards ethics. The behaviour of organisations covers a wide spectrum, from resistance to any regulation at one end and, at the other end, a desire to further “higher” human purposes in society. The spectrum can be divided into three stages (Martin 2007, 2010), which illustrate an expansion of perspective, as described below.

Stages of ethics As mentioned above, three stages of ethical perspective can be described. These are: (1) law (2) relationships, and (3) identity. Each stage comprises a set of concepts about ethical issues. When matters of right and wrong arise, people make judgments in terms of their prevailing set of concepts. The three stages are evolutionary in the sense that each successive stage is broader than the one before it. They are also evolutionary in the sense that people (and organisations) generally progress through these stages in order. Note that there are two orientations within each stage: (1) emergence, and (2) fulfilment. For both orientations within each stage, the decision-making concepts are the same. Law The organisation that sees ethics as law looks no further than people being required to obey legal injunctions. Concern for the wellbeing of other people is not considered. Ethics is reduced to what has been prescribed by society, organisations and social groups as obligatory or prohibited. In this stage, the emergence orientation means that the organisation has the concept of legality, but it resists it; it only complies with laws when it is forced to. The fulfilment orientation means that the organisation willingly complies with laws, but its consideration for people goes no further than what the law demands. Relationships In the relationships stage, organisations understand that ethics are essentially about how we treat other people. Empathy is the core theme, with the organisation’s commitment to ethics focusing on the cultivation and preservation of high-quality relationships between people and groups. This stage accepts and extends the previously mentioned law stage. It sees law as the formalisation of necessary rules that enable a basic, functional level of relationships in society. It also takes the law stage further, accepting a positive responsibility to care for others (in a broad sense) that goes beyond not causing harm. It squarely accepts the thrust of our definition of ethics — concern for the wellbeing of others. In the relationships stage, the emergence orientation means that the organisation recognises employees’ human concerns, but it interprets these in socially conventional terms. Note that employment laws require organisations to have regard to human concerns beyond mere adherence to rules. Safety laws require organisations to actively devise their own safety procedures that ensure health and safety as an outcome. Complaints relating to EEO examine whether a person has been treated fairly and decently. The National Employment Standards require employers to have regard to employees’ need to work flexible hours. The fulfilment orientation in the relationships stage means that the organisation actively works to build high-quality relationships based on trust and respect. Such organisations understand that good (ethical) relationships lead to engaged employees, high performance and innovation. Identity The third stage evolves out of the relationships stage and concerns identity. It results when organisations act ethically, not just to achieve high-trust, productive relationships, but also because acting ethically (and with social and environmental responsibility) is part of who they want to be and the values they want to be known for. The identity stage involves an explicit commitment to ethics as a way of being. At this stage organisations continuously develop on this capacity. Emergence and fulfilment simply mean that organisations evolve

gradually, moving from insight to growth. The values have to spread throughout the organisation, and be continually reinterpreted as the organisation faces new business situations. The three stages of law, relationships and identity show how organisations differ in their views of the world and how this is manifested in their attitudes towards law and social responsibility. At one end, organisations are self-absorbed and fearful about their survival, which persists even when they are very wealthy. At the other end, they are committed to serving the world and improving it. Many organisations exhibit elements of all three stages: it is a model that is intended to be applied flexibly. Few organisations consistently address the issue of their identity as an ethically, socially and environmentally responsible entity. The situation can be compared with the research of Collins and Porras (1994) on organisations that are “built to last”. They found that few organisations actively examine and clarify their values and purpose. We can explore this developmental perspective on organisational ethics by examining how organisations conduct themselves towards various groups of stakeholders. Although it might be expected that organisations would act in a similar manner towards different stakeholders, in practice, organisations may operate at different levels. They may show great clarity and commitment towards the wellbeing of one group of stakeholders but exhibit “blind spots” towards others. The “stages of ethics” analysis can be combined with the “Triple Bottom Line” approach discussed in ¶17-070.

¶17-030 Reasons for organisations to be ethically and socially responsible The concept of “responsible capitalism” challenges the existing dominant economic paradigm and the conventional view of organisations. The dominant notion of economics, proposed by Adam Smith in a time before globalisation, argued that an uncontrolled market provides the most efficient mechanism for running an economy and for arbitrating values (Shaw 2009). This view was interpreted by many to mean a more limited role for government in business affairs and the deregulation of economic institutions. However, capitalism operating in this environment has not always produced economic or social justice. Instead, it can produce large oligopolies and even monopolies, with a focus on short-term quarterly profits and expectations of continued profit growth (eg consider the airlines, communications, media, banking and other industrial sectors). In addition, developments, such as the transfer of wealth and power from employees to shareholders and senior managers in many industries, and the consequences of corporate collapses, indicate that an economy based on a “free market” is clearly not value-neutral or consistent. Further, it does not act as effectively and efficiently as Smith assumed it would. This economic model makes a number of assumptions that are unrealistic, such as “everyone in the market has perfect knowledge”, and also fails to take into account an adequate understanding of the nature of people and institutions. Nobel prize-winning economist Douglas North argues that economic theory does not include an “understanding of human coordination and cooperation” (North 1990). Empirical evidence shows that intangible factors are important influences on the market. For instance, decision-making is not rational, as assumed by the traditional economic paradigm, and values and emotional factors have been shown to influence decision-making behaviour (Landes 1998). In addition to economic measures of growth, other indicators have been developed to take into account the broader interests of society. These indicators incorporate some intangible factors such as human capital and intellectual capital, and also take into account some of the environmental and social costs of development, such as pollution. Therefore, they measure a wider range of outcomes from an economic system. Examples of these models include the Clavert-Henderson Quality of Life Indicator, which incorporates cultural values and activities of recreation into the model, and the Gross National Happiness (GNH) concept — developed as a tool for policy-making in Bhutan. The British Government is committed to developing a model which includes indicators such as wellbeing. The model will have a greater focus on outcomes than existing models. In Australia, the Australian Unity Well-Being Index (Index) has been undertaken every six months since 2001. This Index includes 10 indicators on personal wellbeing (eg standard of living, health, achieving and personal relationships) and 10 national indicators (eg economic, environment, social conditions and national security). The personal wellbeing indicators have been remarkably stable since 2001 (Cummins et al 2012). Gittins (2005) maintains that economic indicators such as GDP are a poor reflection of national wellbeing

and claims that they need to be supplemented by a regularly published “national well-being index”. Diener and Seligman (2004) proposed conducting regular national surveys of people’s life satisfaction, focusing on aspects such as job satisfaction, physical health, mental disorders and social relationships. The aim would be for this information to be then used by policy-makers and politicians as a basis for policy decisions. The above developments indicate attempts to work towards an alternative view of the economy and its relationship with society. They recognise the broader impacts of organisations, particularly on social and environmental factors. Organisations that seek to operate according to these principles display the features of the stages described in ¶17-020. To operate at these later stages, organisations need to see themselves as networks of people operating in social and political systems, rather than primarily machines designed to maximise profit. The idea of conceptualising organisations as living organisms has been around for many years. It was made popular by Senge (1990) and Arie de Geus (1997). When organisations are viewed as organisms, the people doing the work are viewed in a different way. Collins and Porras (1994) argue that successful companies will be built by “social visionaries” — those who see their company as part of society and how it operates as their creation, and who invent entirely new ways of organising human effort and creativity. These visionaries take into account the needs of a variety of stakeholders and the impact of decisions on social and environmental outcomes. Organisations are, therefore, considered to be part of an open system with feedback mechanisms, rather than a closed system. Feedback mechanisms are already evident in modern economies. For instance, recent corporate collapses have encouraged some investment analysts to pay greater attention to corporate governance issues and executive pay, and global warming has encouraged the trading of carbon dioxide emission rights. This view would be characterised by companies behaving in a socially and environmentally responsible way. It has been shown that — when organisations do behave in a socially and environmentally responsible way — there are positive effects on financial outcomes (Walsh et al 2003; Orlitzky et al 2003; Branco and Rodrigues 2006). It has also been shown that — when companies are involved in ethical investments — they have better financial outcomes than other companies (Collison et al 2008). The concept of corporate social responsibility (CSR) has been developed to capture the broader responsibilities of organisations at an individual organisational level. It assumes organisations have a responsibility to a variety of stakeholders, not only shareholders, and that they have ecological, environmental and social impacts as well as an economic impact. CSR focuses on the policies and outcomes of individual organisations. CSR has consequences for the performance indicators used by organisations and for the practice and policies of human resource management (HRM). These consequences are discussed in the next sections of this chapter.

¶17-040 Organisational performance: it’s more than money When people believe organisations are vehicles established for narrow purposes, they are adopting the assumptions of Adam Smith. They would argue (with Milton Friedman) that businesses have no social or ethical obligations other than to obey the law. Friedman claims that corporate executives have a direct responsibility to their employers. He has said: “That responsibility is to conduct the business in accordance with their desires, which will generally be to make as much money as possible while conforming to the rules of society”. When this view is adopted, the role of organisations and the performance indicators focus on economic and financial outcomes and benefit a limited number of stakeholders. These indicators include return on investment, share price and market share. As Friedman suggests, these stakeholders (in addition to shareholders and potentially senior executives) are the owners of the organisation. However, the claim is best treated as an ambit claim rather than as a fact or truth. Another view of organisations, which is consistent with the view that they are living systems, is that organisations: • have social responsibilities in proportion to the power and profits they wield (Frederick et al 1992)

• have responsibilities in proportion to the harm they can cause to people and the environment, and • are vehicles licensed by society to exist (via governments, the Australian Securities and Investments Commission and so on) and they must justify their continued licence to exist. What is common to these arguments is the idea that human society precedes economics, and societies have the right and the duty to regulate the functioning of businesses. Unlike Friedman’s view, this second view considers it mistaken to say that corporations have to be left uncontrolled because they produce the wealth on which society depends. This error is fostered by corporations that have a vested interest in the creation of their own wealth. The management thinker, Peter Drucker, articulated this position even earlier than Friedman’s remarks (Drucker 1955). Drucker argued that profit is not the primary purpose of business. He defined the purpose of business as the creation of a customer who sees value in what the business offers. The function of profit is to validate the activities of the enterprise and enable it to continue. When this broader view is adopted, the performance indicators include a much wider range of outcomes. They include two groups of factors on which to focus: (1) environmental and social outcomes, and (2) mediating factors which contribute to environmental and social outcomes. In the first group, environmental outcomes could be usage of energy and disposal of waste, while social outcomes could be employee wellbeing and health. The second group of outcomes could include the following which contribute to social, financial and environmental outcomes: • improving productivity • reducing turnover • the creation of positive social relations • psychological contract • engagement • trust • commitment • morale, and • job satisfaction. Indicators associated with these outcomes would also be a reflection of organisational performance. There is a growing societal expectation that organisations should take a wider view of their role in society, and adopt a socially responsible perspective. This trend recognises that there are organisations operating at each of the stages described above. As global corporations increase in size, power and reach, it is not sustainable for society to have some of those corporations acting without regard for community and environmental welfare. Organisational performance and indicators of organisational performance are, therefore, more complex and have implications for HRM.

¶17-050 Implications for HRM Ethics and CSR pose a number of challenges for HRM. The dominant HR paradigm today is based on a rational strategic management framework. Such a framework is consistent with the traditional economic analysis which views people as a resource to be used in the pursuit of organisational objectives and improved returns to stakeholders. As discussed in Chapter 2, there is currently an emphasis on the role of HR promoting financial outcomes and performance.

It has been argued since the 1990s that HR could promote organisational performance and “add value” by fulfilling particular roles associated with management processes (Ulrich 1997). In 2012 these roles and processes were found to be: • Strategic positioners — who understand evolving business contexts, stakeholder expectations and business requirements, and are able to translate them into talent, culture and leadership actions • Credible activists — who build relationships of trust and have a clear point of view about how to build business performance • Capacity builders — who define, audit and create organisational capabilities required for sustainable organisational success • Change champions — who initiate and sustain change at the individual (ie personal initiative), project and institutional levels • HR innovators and integrators — who look for new ways to carry out HR practices and integrate separate practices to deliver forward-thinking business solutions, and • Technology proponents — who use technology for efficiency to connect employees and to leverage new communication channels, such as social media (Hollon 2012). The growing awareness of the importance of ethics requires a re-examination of this view of HR. The current view of HR is grounded in a framework which reinforces the narrow economic perspective. According to this framework, the outcomes of HR activities should be subject to measurement and quantification. For instance, employee attitude/climate surveys and performance appraisal ratings are based on the view that HR outcomes can be expressed in numerical terms. The claim that HR needs to demonstrate that it adds value to the business is based on a narrow view of the “business” and its objectives. As alluded to earlier, Friedman (1962) expressed this view by arguing that businesses are the property of their shareholders; therefore, the shareholder interests are paramount in terms of the decisions managers and employers (including HR) make. CSR and ethics challenge HR to move beyond this narrow view and the focus on narrow financial outcomes. The challenge is for HR to redefine itself in a number of ways, for example: • Redefining itself as the keeper of an organisation’s values and promoting ethical behaviour by all organisational members in their dealings with stakeholders within and outside the organisation. This could be regarded as HR becoming the heart of the organisation and would require HR to facilitate the development of clear, widely understood values that depict what the organisation stands for in the world. It also requires HR to translate these values into specific behaviours expected of employees and other organisational stakeholders. This has been recognised by the Australian Human Resources Institute (AHRI) in the Awards for Excellence in People Management. One of six criteria for assessment for the award is “Ethical Behaviour”. According to the award’s conditions on ethics, HR practitioners are: – expected to exercise leadership, and demonstrate, communicate and promote ethical standards in line with the organisation’s code of conduct – expected to exercise leadership in policy development, organisational values and ethics in all areas of the business, and – (together with line management) responsible for communicating and ensuring that sound ethical practice underpins, and is intrinsic to, the culture of the organisation. • Redefining itself as a contributor to the outcomes of a wider range of external stakeholders, such as community groups and schools. This could be regarded as HR becoming a community builder and would require HR to identify ways in which employees and other contributors to the organisation can influence and impact these community groups. It would also require HR to specify the nature of the interdependence. For instance, students from a particular school could provide an important

component of an organisation’s part-time workforce and HR could facilitate the integration of the skills learnt on the job into the curriculum studied at school and become partners in the development of education strategies at schools. • Playing an active role in the broader labour market by contributing expertise to the development of economic and social policy. HR professionals have expert knowledge in the attitudes, competencies and skill levels of their workforce and the future labour demands of the organisation. HR also has expert knowledge about the terms and conditions of employment and which arrangements are best suited to the organisation. With this in mind, HR needs to redefine itself as a labour market builder in addition to its narrower role as capability builder within an organisation. • Redefining its role as an educator (in circumstances where HR promotes ethics in an organisation). Progression from early stages of ethics orientation to the later stages requires stakeholders to understand an organisation’s values and the implications for relationships and organisational outcomes. This requires all stakeholders to develop an awareness of this responsibility. Such a role requires an understanding of the disciplines, ways of thinking, outcomes and metrics valued by a variety of stakeholders. This is a difficult task because the language that expresses the later stages of orientation to ethics does not resonate with the current language of business and economics. • Assuming a broader role to manage developments appropriately. HR needs to be more than the “handmaiden” to finance managers and a keeper of legal compliance requirements. It will need to assume the broader role of culture builder. Senge (1990), Collins and Porras (1994), Pfeffer (1998), O’Reilly and Pfeffer (2000) and Michaels et al (1997) have all demonstrated that organisations with a culture built on behaviours valuing human creativity, contribution and learning typically perform better in the marketplace. However, HR is currently operating in an environment dominated by the traditional economic paradigm. The transition from one paradigm to another is difficult, especially when the transition requires moving to a different level of consciousness. Nevertheless, we are already seeing some attempts to do this at the organisational level. For instance, in some organisations, HR is: • being involved in the development of policies that espouse cultural values which contribute to a virtuous circle of innovation, protection and enhancement of ecological and social resources, and the sharing of gains between a variety of stakeholders • acknowledging that HRM policies should assist an organisation to move beyond a short-term financial focus • developing codes of conduct for organisational members • developing processes of policy implementation that reflect the values associated with responsible capitalism, and • explicitly developing diversity management initiatives as part of the social component of its CSR initiatives. It is fundamentally important to recognise that CSR is not just a public relations exercise. It is about the development of a genuine culture backed up by policies and practices that permeate the business in all its activities to ensure that this culture is realised. Business is recognising that CSR will be beneficial to their bottom line.

¶17-060 Implications for leadership Ethics and CSR have implications for leadership in organisations. Ethics and behaviour based on the stated values of the organisation are an essential aspect of leadership — a “process of influencing the activities of an organised group in its efforts toward goal-setting and goal achievement” (Stogdill 1950). Leadership can, therefore, influence the goals an organisation establishes, and the processes that are

used to influence groups to achieve these goals. As mentioned earlier, ethics in organisations can be considered in terms of three stages of awareness, combined with the orientation that organisations take to various stakeholders. Leaders in organisations play a decisive role in determining whether organisations operate at a legal compliance stage, a quality of relationships stage or a stage at which the organisation is fulfilling its own identity and potential. Leaders are able to shape an organisation’s purpose and identity. As Zaleznik (1977, p 71) states, leaders “change the way people think about what is desirable, possible and necessary”. Leadership at the later phase requires a different way of thinking. It requires a shift from a mechanistic way of thinking and linear logic, to a mindset that acknowledges that organisations are part of a much broader environment and that the actions they take have wide-ranging implications. This new way of thinking also acknowledges that leaders and individuals are able to shape the future of not only their organisation, but also the wider society. This way of thinking or knowing requires three types of intelligence: (1) intellectual or rational intelligence (IQ) (2) emotional intelligence (EQ; also known as EI), and (3) spiritual intelligence (SQ). IQ refers to the skills of cognitive thinking that enable managers to plan, strategise and solve logical problems. EQ refers to an individual’s awareness of their own and other people’s feelings and was popularised in the mid-1990s by Daniel Goleman (1996). SQ has been defined as the intelligence with which individuals solve problems of meaning and value. It gives individuals their moral sense (Zohar and Marshall 2001). According to this view, leaders who wish to lead in a “socially responsible” way will need to have all three types of intelligence. Leaders with EQ are able to work within existing boundaries and parameters, while those with SQ are able to alter the boundaries and foster broader aspirations. SQ enables leaders to challenge the prevailing economic paradigm and the focus on shareholder interests. This requirement has implications for the selection criteria, development and assessment of leaders. A number of processes have been identified with this type of leadership. These include: • systemic thinking • critical reflection and thinking • partnerships with a variety of stakeholders, and • the involvement of stakeholders in decision-making (Hunting and Tilbury 2006). This form of leadership also requires individuals to be self-aware, particularly of the way their past experiences influence their involvement in decision-making, and it also requires an ability to critique the power and social structures that impact on prevailing values and mindsets (Taylor 2007; Sinclair 2006). The skills required of this form of leadership enable the assumptions that underpin decisions, power structures and the purposes of organisations to be made explicit and to be evaluated. The skills also enable the organisation to be seen as part of a system involving a variety of stakeholders and producing outcomes which impact on these stakeholders. Consequently, these skills enable leaders to avoid the narrow view of the purpose of organisations proposed by Friedman (1962) and develop a broader understanding of the purpose and impact of organisational activities. The Chairman of Starbucks Coffee Company, Howard Schultz, recognised this and the skills of the leadership team when he accepted the FIRST Award for Responsible Capitalism in 2007. Schultz stated “… Starbucks is committed to doing business responsibly and ethically, and it is an honor to be recognized in this way as a socially responsible company, both in the communities where we have retail locations and the countries where our coffee is grown. I couldn’t be more proud of the passion and commitment the leadership team and all our partners show in ensuring that this approach is adopted

throughout the business at every level” (Starbucks 2007).

¶17-070 Furthering ethically and socially responsible management The concepts of sustainable development and CSR are becoming more prominent in global business. They are, however, still the subject of controversy and, in many areas, are strongly resistant. At one level, the indicators used to measure CSR are a topic of debate. At another level, CSR (as practised by multinational corporations) is regarded by some as a “red herring”. The critics wonder whether CSR detracts from a major transformation of the capitalist business model and instead advocates a narrower focus on the goals of the business. Despite this controversy, and the differences of opinion about which indicators should be used to measure CSR, most people subscribe to the notion of responsibility, and this includes responsibility for people in both an individual and collective sense (eg communities). A number of rating, index and measurement systems exist to measure CSR. These include: • Global Reporting Initiative (GRI) • Triple Bottom Line • Reputex Social Responsibility Ratings • Balanced Scorecard, and • Dow Jones Sustainability Index. One rating system that focuses on the business risks and opportunities resulting from climate change and greenhouse gas emissions is the Climate Disclosure Leadership Index (CDLI). Global Reporting Initiative The GRI was convened by the Coalition for Environmentally Responsible Economies (CERES) in partnership with the United Nations Environment Programme (UNEP). It uses three dimensions: (1) economic (2) environmental, and (3) social. The economic dimension concerns the organisation’s impacts on the economic conditions of its stakeholders. The environmental dimension addresses environmental performance using specific criteria on aspects such as energy, biodiversity and emissions. The social dimension specifies the following categories — labour practices and decent work, human rights, society and product responsibility. Aspects of these categories include training and education, health and safety, diversity and opportunity, freedom of association and collective bargaining, and labour/management relations. Triple Bottom Line Triple Bottom Line or “Triple P” thinking seeks to promote sustainable development. Sustainable development is defined as “… development that meets the needs of the present without compromising the ability of future generations to meet their own needs …” (IISD 2013). Sustainable development creates more value over the long term and encounters fewer risks than focusing purely on the P of profit (Smith and Kroon 2004), because it takes environmental issues (the P of planet) and social issues (the P of people) into account. This form of reporting has gained acceptance in the business community with more than 3,000 companies around the world voluntarily reporting on their Triple Bottom Line performance. In 2002, 45% of Fortune Global Top 250 companies were reporting on their environmental and social performance (Smith and Kroon 2004). Despite this advance internationally, a review of reporting by Australian companies found a much lower rate of reporting on social and environmental

issues (Macintosh and Wilkinson 2006). Reputex Social Responsibility Ratings An Australian measurement process, known as the Reputex Social Responsibility Ratings, is a system that measures business performance on four scales: (1) environmental impact (2) corporate governance (3) social impact, and (4) workplace practices. Environmental impact considers factors such as the company’s greenhouse gas emissions and water and energy consumption. Corporate governance considers aspects such as the constitution and functioning of the board, the number of women on the board, and whether there is an ethics policy in place. The last two scales, social impact and workplace practices, overlap to some extent with the social dimension specified in the GRI guidelines. The Reputex workplace practices scale includes additional aspects, such as a positive culture for employees, work/life balance and industrial relations policies founded on mutual respect. It specifies that a high-performing culture has high levels of employee involvement, communication and loyalty. HR practices of a high standard include a remuneration system that is fair and reflects a concern for internal stakeholders, an independently verifiable performance measurement and evaluation system, and a commitment to workforce diversity. According to the Reputex rating scales, the characteristics of a high-performing culture will be perceived as open, fair and attractive to potential and existing employees. The Triple Bottom Line and the Reputex Social Responsibility Ratings are regarded by some as limited because they focus on only three or four measures and, consequently, fail to acknowledge the importance of a variety of stakeholders. Balanced Scorecard The Balanced Scorecard is another process that can be used to measure the performance of organisations across a range of indicators. This methodology views organisational performance from a variety of perspectives, such as financial, learning, customer and internal processes (Kaplan and Norton 1996), and recognises the importance of reconciling short-term outcomes (eg financial results) and longer term outcomes (eg employee learning and development). Dow Jones Sustainability Index The Dow Jones Sustainability Index (DJSI) is a widely used index which also assesses performance along environmental, social and economic performance lines. Australian banks, in particular Westpac and ANZ, have rated very well on this index. From 2002 to 2006, and again in 2011, Westpac was rated on the DJSI as the leading bank globally. ANZ was named as the global sector leader from 2007 to 2010 and again in 2012.

Example — Westpac Westpac serves as an outstanding example of a company that turned its early 1990s negative image around by embracing a genuine CSR culture. Such a culture is an integral part of the way Westpac does its business, and it is regarded as essential for building long-term value (Morgan 2006). In addition to being included in the DJSI, Westpac is only one of four companies, and the only bank in the Global FT500 list, to be given a 100-point AAA rating. Westpac seeks to become a great Australian company by building a culture in which community involvement is an integral part. It seeks to: • gain approval from its stakeholders for intentions in this area, as well as results

• encourage staff to be proud to work for an organisation that cares about the world beyond banking • build a respectable brand and reputation through worthwhile community activity, and • deliver sustainable results for shareholders. Westpac is involved in the community in a number of ways, including: • Community investment: It is involved in community partnerships to address a range of social issues critical to the interests of the communities it serves, and enhance its reputation as a responsible citizen. • Commercial initiatives in the community: Sponsorship activities are undertaken in the community to directly support the success of the company by promoting its corporate brand and its policies. These are undertaken in partnership with charities and community-based organisations. • Business basics: It seeks to undertake its business activities so that they meet society’s needs for cost-effective banking products and services in a manner which is ethically, socially and environmentally responsible. • Charitable gifts: It supports a wide range of good causes in response to the needs and appeals of charitable and community organisations through partnerships between the company, employees, customers and suppliers. Westpac’s involvement in the Indigenous Enterprise Partnerships in Cape York is a prime example of an initiative/project designed to have a positive impact on the community through staff involvement, partnership management and capacity building. This initiative aims to facilitate the creation of a real economy in Cape York. Westpac is involved at the board level as well as on the ground, with an extensive skills transfer program. It has one full-time project manager, three 12-month fellowships and around 50 staff seconded to Cape York for one month each year. Staff are working with the local indigenous communities in Cape York on two initiatives designed to build financial independence: • Family Income Management — helping individuals, households and extended families develop budgets to establish savings for short- and long-term goals, and • Business Hubs — developing business plans and training existing/aspiring indigenous entrepreneurs. The desire to build a culture in which community involvement is an integral part has implications for HRM. For instance, participation in the skills transfer project in Cape York requires staff to develop additional skills so they can train indigenous members of the community to manage their finances and businesses. The selection of staff for these projects also needs to be undertaken with a view to the staff member’s ability to live in an isolated community. Consideration also needs to be given to remuneration, working conditions and career prospects following the placement.

¶17-080 Conclusion In today’s environment, the challenges for HRM are great. The evolution of HRM to a process that fosters responsible capitalism and CSR will have numerous benefits for many stakeholders. These benefits will be improved employee morale, motivation, commitment, loyalty, training, recruitment and turnover. These benefits have been found to improve the bottom line. In addition, it has been found that enhanced company reputation can assist in the recruitment and retention of key talent. Responsible capitalism, CSR and a clear statement of ethics can contribute to the development of companies into employers of choice.

HRM has a role in demonstrating the benefits of workplace practices that both reflect CSR and contribute to organisational efficiency and sustainability. It also has a role as an organisational advocate in the community, engaging with external stakeholders. The challenges over the next 10 years provide HRM with further opportunities to contribute to business success, employee satisfaction and community wellbeing. The emergence of the concept of CSR clearly has implications for HRM. It has implications for the: • scope of HRM • role of HRM within and outside of the organisation • relationship of HRM with a range of organisational stakeholders • knowledge base of HRM, which will need to become even broader than an understanding of people, business, legal and change issues — to also include knowledge of social, labour market, community, environment and education issues • practice of HRM, including issues of implementation of policies so they reflect the values of the organisation • “heart” of HRM — HRM will play a clear role in the specification of the values and ethics underpinning an organisation and, in this regard, will become the key builder of an organisation • language of HRM — HRM will need to become multilingual and understand the language of business, the environment, social and activist groups, and • skills of HRM — HRM will need to manage extreme ambiguity of concepts associated with making the transition from focusing on managing people issues to becoming a true business partner and promoting values that foster CSR. This challenge provides HR with the opportunity to further develop its contribution, not only to organisations, but also to the broader society. It gives HR the opportunity to play a role in shaping future business and society. For more information on this topic, refer to the CCH Human Resources Management subscription information service. References Blanchard K and O’Connor M 1997, Managing by values, Berrett-Koehler, San Francisco. Bok S 2002, Common Values, University of Missouri Press, Columbia, MI. Branco M and Rodrigues L 2006, “Corporate Social Responsibility and Resource-Based Perspectives”, Journal of Business Ethics, vol 69(2), pp 111–132. Cameron K 2006, “Good or not bad: standards and ethics in managing change”, Academy of Management Learning & Education, vol 5(3), pp 317–323. Collins J and Porras J 1994, Built to Last, HarperCollins, New York. Collison D, Cobb G, Power D and Stevenson L 2008, “The Financial Performance of the FTSE4 Good Indices”, Corporate Social Responsibility and Environmental Management, vol 15(1), pp 14–28. Cummins R, Woerner J, Weinberg M, Collard J, Hartley-Clark L, Perera C and Hofiniak K 2012, “The Australian Unity Well-Being Survey 28.0”, Report 28.0, September, accessed 10 February 2013. de Geus A 1997, The Living Company, Harvard Business School Press, Boston, MA. Diener E and Seligman M 2004, “Beyond money: Toward an economy of well-being”, Psychological Science in the Public Interest, vol 5, pp 1–31. Drucker P 1955, The practice of management, William Heinemann, London.

Fairholm, G 2003, The techniques of inner leadership: Making leadership work, Praeger, Westport, CT. Frederick WC 2006, Corporation, be good! The story of corporate social responsibility, Dog Ear Publishing, Indianapolis, IN. Frederick W, Post J and Davis K 1992, Business and Society: Corporate Strategy, Public Policy, Ethics, 7th edn, McGraw-Hill, New York. Friedman M 1962, Capitalism and freedom, University of Chicago Press, Chicago. Gellermann W, Frankel M and Ladenson R 1990, Values and Ethics in Organization and Human Systems Development: Responding to dilemmas in professional life, Jossey-Bass, San Francisco, CA. Ghoshal S 2005, “Bad management theories are destroying good management practices”, Academy of Management Learning & Education, vol 4(1), p 75. Giacalone RA and Wargo DT 2009, “The roots of the global financial crisis are in our business schools”, Journal of Business Ethics Education, vol 6, pp 147–168. Gittins R 2005, “A measure but not of wellbeing”, The Sydney Morning Herald, 7 September, p 13. Goleman D 1996, Emotional Intelligence, Bloomsbury, London. Haigh, G 2006, Asbestos house: The secret history of James Hardie Industries, Scribe, Melbourne. Hall, B 1986, The genesis effect: Personal and organizational transformations, Paulist Press, New York. Hill I 1976, “The meaning of ethics and freedom”, in I Hill (ed), The ethical basis of economic freedom, American Viewpoint, Chapel Hill, NC, pp 3–20. Hollon J 2012, “Ulrich Group Study Points to 6 ‘Must Have’ Competencies for HR Success”, HR News & Trends — TLNT, see www.eremedia.com/tlnt/ulrich-group-study-points-to-6-must-have-competencies-forhr-success. Hunting SA and Tilbury D 2006, Shifting toward sustainability: Six insights into successful organisational change for sustainability, Australian Research Institute in Education for Sustainability (ARIES), Australian Government Department of the Environment and Heritage, Sydney. IISD 2013, What is Sustainable Development?. See the International Institute for Sustainable Development website at www.iisd.org/sd/. Jennings, M 2006, The seven signs of ethical collapse, St Martin’s Press, New York. Kaplan RS and Norton DP 1996, “Using the Balanced Scorecard as a strategic management system”, Harvard Business Review, January–February, pp 75–85. Koehn D 2005, “Transforming Our Students: teaching business ethics post-Enron”, Business Ethics Quarterly, vol 15(1), pp 137–151. Landes D 1998, The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, WW Norton, New York. Lennick D and Kiel F 2008, Moral Intelligence, Wharton School Publishing, Upper Saddle River, NJ. Macintosh A and Wilkinson D 2006, Which Direction? A review of monitoring and reporting in Australia, The Australian Collaboration, Sydney. Martin G 2012, “A values framework for ethical business”, Australian Journal of Professional and Applied Ethics, vol 14(1), pp 63–77. Martin G 2010, Human Values and Ethics in the Workplace, GP Martin Publishing, Sydney. See www.ethicsandvalues.com.au. Martin G 2007, “A values framework connecting ethics and aspiration in organisations”, Australian Journal of Professional and Applied Ethics, vol 9(2), pp 56–65. Martin G 1998, “Once again: why should business be ethical?”, Business & Professional Ethics Journal, vol 17(4), pp 39–60. Mele D 2005, “Ethical Education in Accounting: Integrating rules, values and virtues”, Journal of Business

Ethics, vol 57, pp 97–109. Michaels E, Handfield-Jones H and Axelrod B 1997, The War for Talent, Harvard Business School Press, Boston, MA. Morgan D 2006, “Westpac Banking Corporation Sustainability Market Briefing”, Presentation, Sydney, 12 April. North D 1990, Institutions, Institutional Change and Economic Performance, Cambridge University Press, Cambridge. O’Reilly C and Pfeffer J 2000, “Southwest Airlines: If Success Is So Simple, Why Is It So Hard to Imitate?”, in Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People, Harvard Business School Press, Boston, MA. Orlitzky M, Schmidt F and Rynes S 2003, “Corporate Social Financial Performance: A Meta-Analysis”, Organizational Studies, vol 24(3), pp 403–441. Paine L 2003, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance, McGraw-Hill, New York. Peacock M 2009, Killer company, ABC Books, Sydney. Peterson C and Seligman M 2004, Character Strengths and Virtues: A handbook classification, Oxford University Press, Oxford, United Kingdom, Pfeffer J 1998, The Human Equation, Harvard Business School Press, Boston, MA. Posner R 2009, A failure of capitalism: The crisis of ‘08 and the descent into depression, Harvard University Press, Boston, MA. Rokeach M 1973, The Nature of Human Values, Free Press, New York. Sarros JC, Cooper BK, Hartican AM and Barker CJ 2006, The Character of Leadership, Brisbane, John Wiley. Schwartz S 1992, “Universals in the Content and Structure of Values: Theoretical advances and empirical tests in twenty countries”, Advances in Experimental Psychology, vol 25, pp 1–65. Schwartz S 1994, “Are There Universal Aspects in the Structure and Contents of Human Values?”, Journal of Social Issues, vol 50(4), pp 19–45. Senge P 1990, The Fifth Discipline, Random House, London. Shaw W 2009, “Beyond the invisible hand: Self-interest, profit maximization, and the social good”, in J Friedland (ed), Doing Well and Good: The human face of the new capitalism, Information Age Publishing, Charlotte, NC, pp 113–130. Sims R and Brinkman J 2003, “Enron ethics (or: culture matters more than codes)”, Journal of Business Ethics, vol 45, pp 243–256. Sinclair A 2006, Leadership for the Disillusioned, Allen & Unwin, Crows Nest, Sydney, New South Wales. Smith C and Kroon P 2004, “Instilling moral competence in a multinational: A technical issue”, in GG Brenkert (ed), Corporate Integrity & Accountability, Sage Publications, Thousand Oaks, CA, pp 253–266. St James Ethics Centre and Beaton Consulting 2009, The 2009 Annual Business and Professions Study: Business Ethics Study, St James Ethics Centre, Sydney. Starbucks 2007, “Starbucks Chairman Receives First Magazine Award for Responsible Capitalism”, News, November 20, http://news.starbucks.com/news/starbucks-chairman-receives-first-magazineaward-for-responsible-capitalism. Stogdill RM 1950, “Leadership, membership and organization”, Psychological Bulletin, vol 47, pp 1–14. Taylor B 2007, Learning for Tomorrow: Whole Person Learning, Oasis Press, West Yorkshire. Ulrich D 1997, Employee Champions, Harvard Business School Press, Boston, MA. Van Hooft S 2006, Understanding Virtue Ethics, Acumen, Chesham, England.

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18. LEADERSHIP Editorial information

Shaun McCarthy Chairman, Human Synergistics Australia and New Zealand

¶18-010 Introduction In 2013, leadership genuinely is top of the page for every organisation. The evidence to support the notion that leadership is the single biggest issue facing most organisations today is very strong indeed. Since the Karpin Report in 1995 put leadership firmly on the agenda in Australia, the emphasis within this report has been replicated in a number of subsequent reports, conferences and surveys: • The Australian Institute of Management (AIM) 2002/03 study of issues impacting on management development practices identified “developing leadership skills” as the primary issue (AIM 2003). • The American Human Resource Institute (HRI) 2004 survey of major issues impacting people management in North America and Europe identified that, among 120 different issues noted, leadership was viewed as the single most important one in terms of its impact on workforce management. Among European companies, it was ranked third (HRI 2004). • Again in the United States, Training magazine’s 2005 survey of senior training professionals indicated that leadership and management development were the top training priorities for 2005 (Hall 2005). • The 2005 Australian Business Leadership Survey #3 (ABLS3) presents compelling data illustrating the links between leadership, organisational culture and innovation (Sarros et al 2005). • The Management Matters studies undertaken in both Australia (2009) and New Zealand (2010) by the University of Technology Sydney and funded (respectively) by the Australian and New Zealand Governments, clearly showed the important role of leadership in enterprise and national productivity levels (Green 2009). • The 2011 Australian School of Business/Society for Knowledge Economics report on Leadership, Culture and Management Practices of High Performing Workplaces in Australia clearly shows a fundamental relationship between leadership and high performance (Boedker et al 2011). So what is driving this current interest in leadership? As always, interest in leadership is a convergence of many trends: • Uncertainty: The world of business and organisational management is becoming more complex. Economic uncertainty, global political changes, a changing employment landscape and many other factors all add up to more complex decision-making, often with inadequate information. • Globalisation: Increased global competition has focused attention on leaders — both good and bad — and highlighted the influence of those in leadership positions. • Accelerating pace of change and innovation: The exponential rate at which technology change is

impacting on business, and the need to be in a constant state of adaptation, has led to the recognition of the role that leadership plays in adapting and responding to such shifts. • Greater demands for performance: Whether from shareholder associations, larger investment houses or media analysts, the expectations for performance have never been greater. Such pressures focus attention on operational excellence, strategic execution and accountability. This in turn leads to an emphasis on organisational culture and human productivity, which emphasises motivation, which in turn leads to the importance of leadership. • Commoditisation and consumer power leading to an emphasis on people as a genuine source of competitive advantage: As consumers become more sophisticated and technology provides more information and choice-making ability to consumers, the search for competitive advantage becomes paramount. Put this together with the commoditisation of business (as a result of consumer access to information), and organisations quickly realise that the only true source of competitive advantage lies with people. From the talent that deals directly with customers, to the talent that creates new and innovative ways of meeting customer needs and ensuring high quality and reliability of customer experience — they all require talented leadership. • Organisational transformation/change: As organisations change over time, the demands for leadership grow with this. Flatter structures leading to less managers and more direct reports, greater delegation throughout the organisation, increased organisational networking and the changing demographics of the workforce, all cause us to look at the way we lead, at all levels of the organisation. What do we mean by leadership? First, let’s establish that leadership and management are not two separate roles. Many writers have compared and contrasted the two. For example, Zaleznik (1977, republished in 1992) proposed that leaders are those who energise a system, as they operate in an environment that is chaotic. Managers, on the other hand, act to ensure the stability of the system. While this is clearly a well-regarded contribution, the risk with such an approach is that it may suggest that leaders and managers are different roles and different people. Bennis and Nanus (1985) on the other hand focused more on what leaders do that distinguish them from managers. Their notions, that leaders do the right thing, whereas managers do things right; leaders see people as assets, whereas managers see people as liabilities; leaders focus on commitment, whereas managers focus on control; leaders see what and why things could be done, whereas managers see how things should be done; leaders share information, while managers emphasise secrecy; and leaders rely on networks, whereas managers rely on formal authority/hierarchy, helped create a view on what it is that managers do that make them leaders. Kouzes and Posner (1995) proposed that leaders focus their energies on challenging the process, inspiring a shared vision, enabling others to act, modelling the way and encouraging the heart. Maccoby (2000) to some extent took a similar view when he suggested that leadership is about relationships, while management is about functions. The transformational versus transactional debate has also offered much — seeing leadership as being more concerned with transforming or changing the organisational environment, whereas traditional management is more about a transactional relationship wherein the leader provides rewards in return for effort. Again, the risk here is that we see leadership and management as separate concepts. This was well addressed by Mintzberg’s 1994 article, “Rounding out the Manager’s Job”. As the writer who defined the managerial role (Mintzberg 1973), Mintzberg observed in this article that the literature was focusing on individual aspects of the managerial job (eg leadership), whereas the management role needed to be seen in a more integrated fashion. The concept of “charismatic leadership”, while anecdotally popular, gets little support in the literature. The notion that “leaders are born and not made” flies in the face of all research on learning, and many writers simply dismiss this. Both Kouzes and Posner (1995) and Jacques and Clement (1991) relegate this to the realm of cultism.

What has clearly emerged in later writings is the idea that leadership is part of the broader management role. What is also clear is that terms are often used to compare more current notions (leadership) with more traditional approaches (management). Whereas traditional management has been seen in terms of control and leadership, and seen as being more enabling, current writers see leadership more as a way of thinking about how people should be managed. This was addressed by Richard Farson in Management of the Absurd (Farson 1996, p 38): “If, in all of life, paradox is the rule and not the exception, as I believe it is, then the popular view of management as essentially a matter of gaining and exercising control is badly in need of correction. Management based on techniques of control and manipulation cannot succeed in matters of the absurd. But that hardly means that the manager is lost. Only those who rely mainly on control are lost.” For the purposes of this chapter, leadership will be viewed in terms of being part of the managerial role — in particular, how the individual manager “leads” (ie guides, directs, controls, urges, manipulates, restricts and so on) others in their efforts to achieve high levels of performance through people. More specifically, this chapter will view leadership in terms of how the leader impacts on others — how the leader causes others to behave, what behaviours the leader encourages others to use in achieving their goals, fitting in and interacting with others. This is in line with more current writers on leadership.

¶18-020 Understanding leadership through the impact leaders have on those they lead Dr Robert A Cooke’s (Associate Professor Emeritus of Management Studies, University of Illinois, Chicago and now CEO, Human Synergistics International) research on culture and its relationship with leadership led him to develop a new model of leadership based on organisational behavioural principles. Driving this was the notion that leaders influence their organisations’ cultures through reinforcing and encouraging certain behaviours among those they lead. This is the concept of leadership impact. Dr Cooke’s research ultimately led him to identifying a defining core concept (Cooke 1997, p 4): “Managers cannot be considered to ‘lead’ (ie, to guide or direct) unless they in some way transform, shape, or influence the organisational context of members and the ways in which they approach their work and interact with one another. The effectiveness of a leader, therefore, depends on the magnitude and direction of — as well as the strategies used to achieve — this impact.” Dr Cooke’s research on leadership and the identifying characteristics that differentiate effectiveness in the leadership role led him to focus on the strategies, skills and behaviours that have been shown to be related to measures of leadership performance. His research demonstrated that at least two important sets of factors determine leadership effectiveness: (1) Leadership Strategies, and (2) Impact on Others (see Figure 18.1). Figure 18.1: Leadership/Impact model

Human Synergistics/Center for Applied Research Inc. Copyright © 1997 All rights reserved

At the most general level, individuals are likely to exhibit a combination of two different Leadership Strategies:

(1) prescriptive, and (2) restrictive. Prescriptive strategies are techniques that guide or direct the activities and behaviours of others toward goals, opportunities and methods for task accomplishment. Restrictive strategies constrain or prohibit activities and behaviours with respect to goals, opportunities and methods. Prescriptive strategies are generally more effective than restrictive strategies. This is partly because the former serve to define a direction for the system, establish structures for organisational learning and adaptation, and support processes for problem solving and the integration of organisational components. Most importantly though, prescriptive strategies on the part of leaders create and reinforce an organisational culture that communicates constructive norms and expectations to members. Though concepts such as “culture” and constructive “norms” are somewhat abstract, they translate into more tangible things, such as the leader’s impact on the behaviour and performance of organisational or sub-unit members. Impact on Others can be either constructive or defensive. Leaders with a constructive impact motivate people to think and behave in achievement-oriented and cooperative ways that emphasise growth and development. In contrast, leaders with a defensive impact drive people to think and behave in either aggressive or passive ways to protect their status and position. Constructive behaviours not only lead to better performance than do defensive behaviours, they also result in higher levels of personal satisfaction and lower levels of stress. Dr Cooke’s studies of leaders have shown that those who emphasise prescriptive strategies have a constructive impact and those who emphasise restrictive strategies have a defensive impact. Thus, given that the performance of leaders ultimately depends on the quality of the performance of the people around them, prescriptive leaders are more effective than those who are restrictive. The relationships between Leadership Strategies, Impact on Others, and personal and organisational effectiveness, are illustrated in Figure 18.2. Figure 18.2: Leadership/Impact model (extended version)

Human Synergistics/Center for Applied Research Inc. Copyright © 1997 All rights reserved

Thus, an individual can improve their leadership effectiveness by having a more constructive, and less defensive, impact on the behaviour of others. In turn, that leader can achieve a more constructive and less defensive impact by emphasising prescriptive over restrictive leadership strategies.

Most leaders, however, do not fully understand the impact they currently have on others. Similarly, it is difficult for many to differentiate between prescriptive and restrictive strategies, and to estimate the degree to which they rely on these alternative approaches. This is where Leadership/Impact® provides otherwise unavailable insights into the individual leader’s impact on people and the strategies that account for that impact. Leadership/Impact® was developed by Dr Cooke and based on his research — the goal being to create an academically robust measurement tool that measured these concepts of strategies, impact and effectiveness, and provided feedback to individuals in leadership positions in a way that identified strengths and development opportunities, helping these individuals improve their leadership effectiveness. Later in this chapter we will explore some of the local data from using Leadership/Impact® with executives in both Australia and New Zealand, and comment on what this tells us about leadership in this part of the world.

¶18-030 The impact of leaders on those they lead By definition, a leader has a significant impact on the thinking, behaviour and performance of the people around them. Whether intentionally or unintentionally, directly or indirectly, leaders motivate or drive people to behave in certain ways. This impact, either positive or negative, is typically sufficiently strong to be discernible and measurable. Leadership/Impact® measures the influence of leaders with respect to Constructive behaviours and two types of Defensive behaviours.

Constructive behaviours: A leader can encourage and motivate others to relate to people and approach their work in ways that help them to personally meet their higher-order needs for growth and satisfaction. The specific Constructive behaviours that can be promoted by leaders are Achievement, Self-Actualising, Humanistic/Encouraging and Affiliative. See Figure 18.3. Passive/Defensive behaviours: A leader can drive and reinforce others to interact with the people around them in self-protective ways that will not threaten their own security. The specific Passive/Defensive behaviours that can be attributed to leaders are Approval, Conventional, Dependent, and Avoidance. See Figure 18.4. Aggressive/Defensive behaviours: A leader can drive and motivate others to approach their taskrelated activities in forceful ways to protect their status and security. The specific Aggressive/Defensive behaviours that can be promoted by leaders are Oppositional, Power, Competitive, and Perfectionistic. See Figure 18.5. Human Synergistics/Center for Applied Research Inc. Copyright © 1997 All rights reserved

Similarly, behaviours that are associated with the fulfilment of higher-order growth and satisfaction needs are placed near the top of the circumplex; behaviours that are associated with the maintenance of lowerorder security needs are placed near the bottom. Figure 18.3: Constructive styles Constructive Impact The impact of certain leaders on others is primarily Constructive. Their leadership strategies do not unnecessarily threaten the security of others, create ambiguity or anxiety, nor provoke defensiveness or forceful reactions.

Instead, they create an environment which stimulates people’s needs for growth and achievement and encourages them to think and behave in ways that will enable them to satisfy those needs. These behaviours reflect a balanced concern for people and tasks, an orientation toward the attainment of personal and organisational goals, and a commitment to reaching those goals through cooperative efforts.

The specific behaviours associated with a Constructive impact, therefore, enable people to meet their satisfaction needs through both the way they approach their tasks and their interactions with people. Achievement: The leader motivates and encourages others to set challenging but realistic goals, to establish plans to reach those goals, and to pursue them with enthusiasm. The leader encourages others to take “ownership” over decisions and actions and take initiative when opportunities arise. Self-Actualising: The leader motivates and encourages others to gain enjoyment from their work, develop themselves professionally, and approach problems with interest, creativity and integrity. The leader encourages others to accept mistakes and learn from them, and experiment with innovative solutions to problems. Humanistic/Encouraging: The leader motivates and encourages others to be supportive of people, help those around them to grow and develop, and provide others with positive feedback. The leader encourages others to show trust and confidence in those around them and to share ideas and discuss decisions with those who will be affected by them. Affiliative: The leader motivates and encourages others to treat people as members of the team, be sensitive to the needs of others, and interact in friendly and cooperative ways. The leader encourages others to respect peoples’ diverse backgrounds and viewpoints and build good relationships with others within the organisation.

Circumplex: Research and development by: Robert A Cooke PhD and J Clayton Lafferty PhD ©Copyright Human Synergistics International Ltd Leadership/Impact ©1997 Human Synergistics/Center for Applied Research Inc

Figure 18.4: Passive/Defensive styles Passive/Defensive Impact The impact of leaders on people is predominantly Passive/Defensive. Possibly inadvertently, these leaders adopt strategies that lead others to feel insecure or apprehensive, controlled and constrained, and uneasy about interpersonal relations within the organisation. In the extreme, such leaders create an environment that accentuates people’s needs for security and induces them to satisfy these needs by relating to others in cautious and guarded ways. These behaviours reflect a concern for people rather than tasks, a tendency to subordinate oneself to the organisation and, paradoxically, the feeling that

it is more appropriate to “play it safe” rather than take reasonable risks that are in the best interest of the organisation. The specific behaviours associated with a Passive/Defensive impact, therefore, require people to meet their security needs through their interactions with others. Approval: The leader motivates and requires others to gain the approval of those around them, “go along” with people, and maintain (superficially) pleasant interpersonal relationships. The leader encourages others to put forth ideas and suggestions that are likely to please others and withhold even constructive criticism. Conventional: The leader motivates and requires others to conform, fit into the “mould”, and follow rules, policies, and standard operating procedures. The leader encourages others to do things the way they have always been done and refer to rules and procedures to justify actions and decisions. Dependent: The leader motivates and requires others to do only what they are told, clear all decisions with superiors, and please those in positions of authority. The leader encourages others to be reactive rather than proactive and follow orders, even if they have a better idea. Avoidance: The leader motivates and requires others to avoid any possibility of being blamed for a mistake, shift responsibilities to others, and maintain a low profile. The leader encourages others to feel apprehensive and insecure about their position and authority and play it safe and wait for others to act first.

Circumplex: Research and development by: Robert A Cooke PhD and J Clayton Lafferty PhD ©Copyright Human Synergistics International Ltd Leadership/Impact ©1997 Human Synergistics/Center for Applied Research Inc

Figure 18.5: Aggressive/Defensive styles Aggressive/Defensive Impact The impact of yet another leader is mainly Aggressive/Defensive. Directly or indirectly, these leaders exhibit strategies that lead others to feel anxious about their status and influence, worry about how they look relative to others, and fixate on short-term (and sometimes irrelevant) performance criteria. In the extreme, such leaders create an environment that accentuates people’s needs to enhance their status and security and drives them to meet those needs by approaching their activities in aggressive and forceful ways. These behaviours reflect a concern for tasks at the expense of people, a tendency to place one’s own needs over those of the organisation, and an aggressive pursuit of one’s own objectives versus those of other members and units. The specific behaviours associated with an Aggressive/Defensive impact, therefore, require people to protect their status and security needs through the way they approach their tasks: Oppositional: The leader motivates and drives others to point out mistakes, gain status by being critical, and dismiss even good ideas due to minor flaws. The leader encourages others to blame performance problems on other people or work groups and focus on the negative (eg mistakes) rather than the positive (successes). Power: The leader motivates and drives others to act forcefully and aggressively, control the people

around them, and build up their power base. The leader encourages others to play politics to gain influence and provide information to others on a “need to know” basis only. Competitive: The leader motivates and drives others to operate in a “win/lose” framework, outperform their peers, and do anything necessary to look good. The leader encourages others to manipulate situations to enhance their own position and exaggerate their performance and accomplishments. Perfectionistic: The leader motivates and drives others to set unrealistically high goals, stay on top of every detail, and work long hours to attain narrowly-defined objectives. The leader encourages others to give the impression that they always have to have the answer or necessary information, and feel they always have to prove themselves.

Circumplex: Research and development by: Robert A Cooke PhD and J Clayton Lafferty PhD ©Copyright Human Synergistics International Ltd Leadership/Impact ©1997 Human Synergistics/Center for Applied Research Inc

¶18-040 Ideal Impact — what impact do local leaders want to have on others? In the Self Description version of the Leadership/Impact® Inventory, the leader is not asked what impact they believe they have on others. Rather, for development purposes, they are asked to describe what impact they would like to have on others — their “Ideal Impact”. The Ideal Impact profiles generally show major extensions along the Constructive behaviours, with leaders wanting to lead people in such a manner that they behave in Achievement, Self-Actualising, Humanistic-Encouraging and Affiliative ways. At the same time, the Ideal Impact profiles show minimal extensions in the Passive/Defensive and Aggressive/Defensive styles. These Ideal Impact profiles, with primary extensions along the Constructive behaviours, are logical and consistent with research on human motivation. First, the Constructive behaviours are consistent with our cultural values of independence, equality, and our desire to fulfil higher-order needs of learning, growth and meaning. Given their consistency with these needs and values, the Constructive behaviours have far greater motivational potential than do the Defensive behaviours. Second, research has shown that, at the individual level, Constructive thinking and behavioural styles are positively associated with outcomes, such as personal wellbeing, assessments of performance and quality of interpersonal relationships. In contrast, Passive/Defensive behaviours are associated with lower effectiveness and Aggressive/Defensive behaviours with strain and less adequate work relationships. Third, research on organisational culture has shown that norms and expectations for Constructive behaviours are related to cooperation and teamwork, effective problem-solving and high quality service. As such, it is reasonable that leaders emphasise the Constructive behaviours in describing the impact they ideally would like to have on the people around them. See Figure 18.6 (¶18-050) for a comparison of the overall Australian and New Zealand dataset between Ideal Impact and Actual Impact.

¶18-050 Actual Impact — what others report as the actual impact these leaders have on others The overall average of the Australian and New Zealand data shows that, on average, leaders are seen by others as not having anything like the Constructive impact they desire, but instead they impact on others in such a way that they primarily use Conventional (Passive/Defensive) and Competitive (Aggressive/Defensive) behaviours (see Figure 18.6). Thus, where leaders want to lead people to strive to achieve and pursue excellence (Achievement), they instead limit this by leading them to focus on procedures rather than outcomes and to refer to rules and procedures to justify their actions (Conventional).

Where leaders want to lead people to be supportive and show trust in their colleagues (Humanistic/Encouraging), they limit this by leading them to gain status by being critical of others, finding fault and opposing others’ ideas (Oppositional). Where leaders want to motivate people to pursue interesting opportunities (Self-Actualising), they limit this by motivating them to pursue narrowly defined objectives, with unreasonably high goals that require them to believe that they must stay on top of everything and prove themselves (Perfectionistic). Where leaders want to motivate people to build strong relationships and teamwork (Affiliative), they instead lead people to strive to compete with their colleagues and manipulate situations to enhance their own positions (Competitive). Figure 18.6: Comparing Ideal and Actual Impact

Circumplex: Research and development by: Robert A Cooke PhD and J Clayton Lafferty PhD ©Copyright Human Synergistics International Ltd Leadership/Impact ©1997 Human Synergistics/Center for Applied Research Inc

¶18-060 The relationship between impact on others and effectiveness Since Leadership/Impact® incorporates a number of effectiveness ratings, the top and bottom 10% of the Australian and New Zealand dataset based on these ratings can be reviewed to illustrate the differences between those that are seen as being the most effective leaders versus those rated as the least effective — see Figure 18.7. The obvious conclusion from the profiles is that the more effective leaders actually impact their people in much the same way as they would like to. They motivate people to use primarily Constructive behaviours, with both the Passive/Defensive and Aggressive/Defensive impacts being minimal. Figure 18.7: Contrasting impact of most effective and least effective leaders

Circumplex: Research and development by: Robert A Cooke PhD and J Clayton Lafferty PhD ©Copyright Human Synergistics International Ltd Leadership/Impact ©1997 Human Synergistics/Center for Applied Research Inc

The least effective leaders (ie the bottom 10%) on the other hand create an environment in which people’s needs for security are accentuated to the extent that organisational members are concerned with “playing it safe”, being cautious and guarded in their dealings with others and yet, on the other hand, “enhancing their status” at the expense of others and approaching tasks in aggressive and forceful ways. The net result of this, which is so common in many organisations, is a lack of cooperation, “silo-mentality”, poor problem-solving, poor relationships and restricted performance. It is worth noting that the Ideal Impact profiles for both the top and bottom 10% are almost identical. The difference is that — while the most effective have an Actual Impact that is very similar to their Ideal Impact — the least effective have virtually the opposite impact to what they desire.

¶18-070 How we compare on the global stage Comparing the descriptions of Ideal Impact of Australian and New Zealand leaders with “the rest of the world” provides possible insight into the very assumptions that local leaders have towards what constitutes great leadership. (Note: While all of the differences referred to in the following comments may be quite small, they are statistically significant.) The Australian leaders in the dataset want their people to use less Affiliative (Constructive) behaviours, which is interesting in that this style facilitates relationship building. They also want their people to use less Passive/Defensive behaviours (ie less Conventional, less Dependent), a desirable difference, as these styles are statistically related to lower performance. These leaders also, however, want people to use more Oppositional and Competitive (Aggressive/Defensive) behaviours, which is less than desirable as these styles are related to volatile performance and poor relationships, high stress and poor time management. In the Aggressive/Defensive cluster, however, they want people to use less Power and Perfectionistic. The New Zealand leaders in the dataset want their people to use more of the Passive/Defensive behaviours of Conventional (ie conform to fit in, strictly follow standard procedures), a less desirable option as this style reduces initiative and creativity. They also want people to use more Oppositional (ie be critical and fault-finding), Competitive (ie compete with peers and do things to be seen and noticed) and Perfectionistic (ie work long hours, de-emphasise feelings and feel they have to prove themselves) behaviours — all Aggressive/Defensive styles. Again, this is less than desirable as these styles are related to volatile performance, poor relationships, high stress and poor time management. Still within the Aggressive/Defensive cluster, they do, however, want people to use less Power behaviours.

The common theme here is the apparent desirability of both the Oppositional and Competitive styles. This represents a challenge to us all, as this is reflective of some misplaced assumptions about how to lead people towards high performance. The pattern is that leaders in this part of the world seem to believe that — if we encourage people to compete against each other (ie internal competition — it does not measure external competition) and to be critical of each other this will build performance. This is contrary to a considerable body of research on these two styles. Reviewing the data on Actual Impact among the Australian leaders indicates that, in comparison with leaders in other countries, these leaders actually encourage people to use a little more of the Constructive behaviours of Achievement (ie strive for excellence, set goals, use initiative and take ownership), and Humanistic-Encouraging (ie be supportive of others, trust others and involve others), but less Affiliative (ie build relationships, cooperate and emphasise the team). As these behaviours are associated with effectiveness, this is good news, but the lower Affiliative style is less than optimal. Among the Passive/Defensive styles, these leaders do encourage people to use more Conventional (ie conform, fit into the “mould” and simply follow procedures) and Dependent behaviours (ie clear all decisions with superiors and please those in position of authority). In the Aggressive/Defensive styles, consistent with their Ideal Impact, they do encourage more Oppositional and Competitive behaviours and less Aggressive/Defensive Power behaviours. Among the New Zealand leaders, like the Australians, they also end up encouraging people to use more of the Constructive behaviours of Achievement and Humanistic-Encouraging, but less Affiliative. The New Zealand leaders end up leading people to use even more Passive/Defensive behaviours of Conventional and, in common with their Australian colleagues, they also lead people to use more Aggressive/Defensive behaviours of Oppositional and Competitive and less Aggressive/Defensive Power behaviours. The old adage of “beware what you wish for” applies here. By seeking comparatively more Oppositional and Competitive behaviours in their Ideal Impact, they not only get these in their Actual Impact, but they also get less of the Constructive behaviours. It is rather difficult to encourage people to compete against each other and find fault with others (Aggressive/Defensive), and at the same time encourage people to be supportive of each other and build relationships (Constructive behaviours).

¶18-080 Strategies leaders use to impact others As mentioned earlier, strategies leaders used can be either prescriptive or restrictive (see ¶18-020). Prescriptive leadership strategies are those which guide or direct the activities and behaviours of others toward goals, opportunities and methods. Prescriptive leadership provides people with: • a direction to channel their efforts • models regarding how things should be done • positive reinforcement to encourage the repetition of desired behaviours, and • a set of parameters specifying their sphere of influence. Restrictive strategies, on the other hand, are those which constrain or prohibit activities and behaviours with respect to goals, opportunities and methods. Restrictive leadership provides people with: • directions that should not be pursued • models regarding behaviours they should avoid • negative feedback to discourage the repetition of undesired behaviours, and • a set of parameters restricting their sphere of influence. Most leaders, including those who might implicitly prefer prescriptive over restrictive strategies, tend to

use both approaches. Restrictive strategies are adopted for a number of reasons, including their ease of implementation, time pressures, and the capabilities and dispositions of those being led. Nevertheless, prescriptive strategies are generally more functional. In particular, prescriptive strategies tend to promote Constructive behaviours; restrictive strategies do not promote Constructive behaviours and can lead to Defensive behaviours on the part of those influenced by the leader. Thus, leaders who have a Constructive impact are those whose prescriptive tendencies are stronger than their restrictive tendencies. The following excerpts from the Leadership/Impact Feedback Report present a summarised version of the strategies leaders use.

“Envisioning: those leadership activities associated with identifying and sharing a vision for the organisation. • Prescriptive Envisioning — Defining — involves communicating a desired state of future affairs encouraging people to use constructive behaviours (impact). • Restrictive Envisioning — Delimiting — involves the leader focusing more on what they do not want. Whilst prescriptive envisioning creates a constructive impact, restrictive envisioning has a neutral to possibly defensive impact.”

Whereas Defining is looking ahead and being clear about a desirable future state, Delimiting is more about putting restrictions on what the leader considers to be undesirable. When leaders rely more on the former than the latter, they are more likely to be viewed by others as being effective in their leadership role.

“Role Modelling: this represents the extent to which the leader exhibits behaviours that others believe serve as a ‘role model’ for those around them. • Prescriptive Role Modelling — Exemplifying — involves displaying a set of behaviours that reflect the values and standards the leader wishes to develop throughout the organisation. This then encourages people to use constructive behaviours (impact). • Restrictive Role Modelling — Circumscribing — involves ‘drawing a line around’ those behaviours the leader sees as undesirable. Like restrictive envisioning, restrictive role modelling has a neutral to possibly defensive impact.”

Leaders must set the example of the behaviours they want to see. Like it or not, the leader is always “on the stage” and people will look to the leader to determine how they themselves should behave. Effective leaders recognise this reality and actively model the behaviours they want to encourage in others.

“Mentoring: those leadership activities associated with developing people and building capability amongst those being led. • Prescriptive Mentoring — Active Mentoring — involves approaches to mentoring that provide direction, guidance and the creation of an environment where it is ‘safe’ to learn. This then encourages people to use constructive behaviours (impact).

• Restrictive Mentoring — Passive Mentoring — involves a more ‘hands off’ approach where the leader expects people to ‘sink or swim’ and learn things the hard way through experience. This then leads to people relying on defensive behaviours (impact).”

While restrictive mentoring might be helpful in that it gives people opportunities to learn from experience, the frustration associated with the sense of not being supported and helped can be quite significant. Mentoring offers a valuable opportunity for leaders to spend quality time with their people.

“Stimulating Thinking: those leadership activities associated with encouraging the generation of ideas, the challenging of existing assumptions and creative ‘thinking outside of the box’ thinking. • Prescriptive approaches focus on Lateral Thinking — looking at things in new ways and encouraging people to be creative. This then leads people to use constructive behaviours (impact). • Restrictive approaches focus more on Vertical Thinking — emphasising more traditional ways of solving problems. This then leads to people relying on defensive behaviours (impact).”

The difference lies between creative versus practical, insight versus experience, creating opportunities versus analysing problems and intuitive versus logical. The more the leader encourages creative thinking, they “give permission” to people to be able to experiment and try different ways of doing things.

“Referring: those leadership activities associated with the ‘stories’ that leaders use to illustrate points and establish benchmarks of desired behaviour. • Prescriptive Referring — using Positive Referents — involves telling stories about successes and people’s strengths. This then encourages people to use constructive behaviours (impact). • Restrictive Referring — using Negative Referents — involves telling stories about failures and mistakes. This then leads to people relying on defensive behaviours (impact).”

Although on the face of it, this might sound a little conceptual, the reality is that we often refer to people and incidents when we talk with people — particularly when we are trying to illustrate the message we give to others in a leadership capacity. “Storytelling” has been a key learning process since the beginning of time. Every story the leader tells will have symbolic meaning placed on it by those hearing the story. Leaders need to be aware of what message they are giving through the stories they tell.

“Monitoring: those leadership activities associated with gathering information about the work effectiveness of others. • Prescriptive Monitoring — Managing by Excellence — involves the leader focusing on what is being done right, encouraging people to use constructive behaviours (impact). • Restrictive Monitoring — Managing by Exception — involves the leader focusing on what is

not being done well. This then leads to people relying on defensive behaviours (impact).”

Whereas Managing by Excellence is about emphasising attraction towards success, Managing by Exception is about getting people to avoid failure. One focuses on the positive, the other on the negative. Our data on the cultures within Australian and New Zealand organisations very clearly illustrates that “avoidance of blame” is a very strong style. Somehow leaders seem to have it in their heads that they are there to find fault rather than “catching someone doing things well”.

“Providing Feedback: those leadership activities associated with the leader commenting on what they observe in the performance of others. • Prescriptive Feedback — Positive — involves the communication of positive evaluations of people’s activities and performance. This then encourages people to use constructive behaviours (impact). • Restrictive Feedback — Negative — involves becoming impatient or annoyed when things are not as you would like. This then leads to people relying on defensive behaviours (impact).”

In many ways, this strategy is similar to that of Monitoring. Just as Monitoring is about whether the leader’s focus, in terms of measuring performance, is on what is going well versus what is going wrong, then leaders, in giving feedback to people, can also shape their feedback in terms of emphasising what is going well versus what is going wrong. The more the leader concentrates on positive feedback, the more their people will gain confidence, try new things and take on more responsibility.

“Reinforcing: those leadership activities associated with the leader rewarding and/or punishing others. • Prescriptive Reinforcing — Use of Rewards — includes recognising desired behaviours and making an effort to increase their frequency. This then encourages people to use constructive behaviours (impact). • Restrictive Reinforcing — Use of Punishment — includes administering negatively valued outcomes such as excluding individuals, or actually penalising people for mistakes. This then leads to people relying on defensive behaviours (impact).”

Dr Cooke’s research into leadership and culture suggests that the use of rewards and punishment is one of the most powerful levers available to leaders to create a culture — whether Constructive or Defensive. Effective leaders concentrate on using rewards much more than punishment. Using rewards leads to attraction and success. Using punishment leads to avoidance of failure.

“Influencing: those leadership activities associated with how the leader uses their ‘power’ towards others. The ‘bases of power’ the leader relies upon in many ways reflects just how much ‘power’ that leader really has.

• Prescriptive Influencing — Reciprocal — involves the leader using participative methods, whereby they gain the cooperation of others. This then encourages people to use constructive behaviours (impact). • Restrictive Influencing — Unilateral — involves the leader relying upon his or her position for power and making decisions unilaterally. This then leads to people relying on defensive behaviours (impact).”

Power is all too often seen by leaders within organisations as something quite finite — “if I give some away I will have less”. In reality, power is not like this and there is considerable literature supporting the notion that in fact the more power a leader “gives away” the more he or she has. This is the concept of reciprocal power. When leaders use reciprocal influence they empower people. When they use unilateral power they disempower people.

“Creating a Setting: those leadership activities associated with how the leader goes about developing the environment within which people work. • Prescriptive approaches to creating a setting — Facilitating — involves the leader working to grow and develop the people around them. This then encourages people to use constructive behaviours (impact). • Restrictive approaches to creating a setting — Constraining — involves the leader creating a work environment that constrains people. This then leads to people relying on defensive behaviours (impact).”

Effective leadership is all about maximising the capabilities of those being led. When leaders create opportunities for people to learn, grow, be empowered and take responsibility for themselves, then the manager has truly become a leader.

¶18-090 How do leaders in Australia and New Zealand rate? Analysis of our local Leadership/Impact® data tells us the following information: • Generally, leaders (in the dataset) rate themselves as using more prescriptive strategies than their direct reports observe. This reflects our experience with other measurement tools — individual managers and leaders tend to overrate the extent to which they use effective leadership strategies. • Leaders see themselves (and are described by others) as relying more on prescriptive strategies than restrictive ones. The catch here, however, is that it takes literally three prescriptive strategies to compensate for one restrictive strategy. A reality of leadership is that people expect leaders to use positive practices, so often these will go somewhat unnoticed. When the leader unfortunately slips into using a negative practice, everyone notices this! • While leaders tend to rate themselves higher than others do for relying on the relatively neutral impact strategies of restrictive envisioning and role modelling, others report more reliance on the strongly defensive impact strategies of restrictive influencing and creating a setting. • The strongest prescriptive strategy (comparing them with each other and based on the “others” ratings) is Providing Feedback. The weakest is Referring. While executives seem to be comparatively strong on providing positive feedback on performance, they do not seem to build into their dialogue

stories about successful staff, talking about people’s strengths and competencies. Perhaps while we are reasonably comfortable giving direct feedback to staff, we are less comfortable talking about “heroes” and how great people are in a public setting. • The most used restrictive strategy is Envisioning — using restrictive strategies of delimiting — highlighting what should not be done, rather than focusing on what should be done. As leaders, we still feel compelled to refer to what we don’t want, lacking the confidence in people needed to primarily refer to what we do want. • When comparing the most effective and least effective leaders (top and bottom 10% based on the effectiveness measures within the Leadership/Impact® instrument) those rated as being the most effective were reported as relying significantly more on prescriptive and significantly less on restrictive strategies than those rated at the lower end of the effectiveness scales (consistent with Dr Cooke’s original research and the model illustrated in Figure 18.2). The impact of these prescriptive versus restrictive strategies is reflected in the strongly constructive impact of the most effective and the strongly defensive impact of the least effective (see Figure 18.7). • When comparing the Australian dataset with sample groups from other countries, local leaders are described as using less prescriptive strategies of: – role modelling (ie setting an example through their own behaviour) – active mentoring (ie coaching and helping people learn) – stimulating creative thinking (ie encouraging people to challenge assumptions and solve problems creatively) – managing by excellence (ie noticing when things are done exceptionally well and focusing on how things get done, not just what gets done) – providing positive feedback (ie focusing on positive feedback) – reinforcing through rewards (ie rewarding excellence, celebrating success) – reciprocal influencing (ie allowing others to influence and be involved/empowered, participative decision-making) – creating a setting through facilitating (ie empowering people through the provision of information and autonomy), and more restrictive strategies of: – negative referring (ie talking about negative examples to make a point) – managing by exception (ie emphasising what people do wrong, practising close supervision) – reinforcing through punishment (ie punishment rather than positive rewards) – unilateral influencing (ie controlling, limiting and unilateral decision-making), and – creating a setting through constraining (ie limiting people through emphasising rules and restrictions). • For the New Zealand leaders in our dataset, they are described as using less prescriptive strategies of: – envisioning (ie communicating a clear vision of how things should be) – role modelling (ie setting an example through their own behaviour)

– active mentoring (ie coaching and helping people learn) – stimulating creative thinking (ie encouraging people to challenge assumptions and solve problems creatively) – managing by excellence (ie noticing when things are done exceptionally well and focusing on how things get done, not just what gets done) – reinforcing through rewards (ie rewarding excellence, celebrating success) – reciprocal influencing (ie allowing others to influence and be involved/empowered, participative decision-making) – creating a setting through facilitating (ie empowering people through the provision of information and autonomy), and more restrictive strategies of: – stimulating linear thinking (ie sticking to tried and true solutions, rather than creative ones, sticking with conventional proven solutions) – unilateral influencing (ie controlling, limiting and unilateral decision-making) – creating a setting through constraining (ie limiting people through emphasising rules and restrictions). Note: While all of the differences referred to in these comments may be quite small, they are statistically significant. For each of the two countries, these underused prescriptive strategies and overused restrictive strategies are clearly development needs, assuming we (at the very minimum) want our leaders to be on equal footing with leaders in countries such as the United States, Canada, the United Kingdom and Europe.

¶18-100 The role of HR Leadership throughout the organisation represents a key strategic platform for HR’s role within the organisation. Establishing the organisation’s leadership requirements, setting performance expectations, developing current and future leadership talent, defining the relationship between leadership and managerial functions at the various levels throughout the organisation and constantly keeping abreast of international issues and trends in this topic, are all essential elements of the way in which HR can assist in steering the strategic direction of the organisation. HR should make the vision for leadership become a reality within the organisation. HR must champion leadership development within their organisation. This means actively offering leadership development opportunities at all levels of leadership — from team leaders to the Chief Executive Officer. Foster the process of continual learning. Since leadership is not just a list of techniques, HR should foster the use of behavioural feedback tools for those in leadership positions. The average leader is often totally unaware of the impact they are having on those around them. Once “teamwork” or “commitment” (or similar) issues can be seen as an outcome of how the leader leads, not just with those being lead, then real change can occur. Training and development without robust measurement and feedback is always limited in its effectiveness. What’s more, the act of measuring provides an operational definition of rather abstract concepts for the practical manger/leader to identify exactly what he or she needs to focus on to build genuine effectiveness. HR people need to be constructive themselves. Senior HR people need to model the desired behaviours, styles and strategies as they are the emotional gatekeeper of human leadership. Line managers always look to how HR people lead to determine what is really important.

HR needs to understand and foster the leadership-culture-performance connection. Leadership drives culture and culture drives leadership. The two are related in systems terms. Both combine to enable performance. Building constructive leadership requires a constructive culture. Building a constructive culture requires constructive leadership. Genuine high performance cannot happen if the organisational system is not functioning well (constructively). HR professionals must familiarise themselves with the research linking culture and performance and leadership and performance, rather than reacting defensively when an aggressive senior executive plays the overused card of “show me the link to the bottom line!”. It is essential that HR people are able to easily build the business case for leadership development. While we might, within ourselves, inherently believe that developing leadership is good for people (ie so it is something that should be done), we must view this as something that will bring genuine business returns to the organisation — be it financial in the commercial sector or functional effectiveness in the government sector. HR needs to keep on top of the research in this field and constantly support the business case for leadership development in ways that ingrain it as an essential part of the organisation’s strategic framework.

¶18-110 Conclusion This chapter has explored the increasing level of interest by organisations in leadership. It has looked at the key drivers of this current interest in leadership and has also delved into a view of leadership as a part of (rather than separate to) the managerial role. This chapter has also considered leadership in terms of how the leader impacts on others. Finally, the chapter has touched on the role of HR. It has looked at how HR can assist in steering the strategic direction of the organisation, how important it is for HR to champion leadership development, how it needs to be able to build and business case for it and remain “on top of” the related research. For more information on topics covered in this chapter, refer to the CCH 2011 book by Abi O’Neill — Manager to Leader: Skills and insights for a successful transition References Australian Institute of Management (AIM) 2003, “Management development practice in Australia”, Management Research Series, no 1/2003, Australian Institute of Management, Sydney. Bennis W and Nanus B 1985, Leaders: The Strategies for Taking Charge, Harper & Row, New York. Boedker C, Vidgen R, Meagher K, Cogin J, Mouritsen J and Runnalls M 2011, Leadership, Culture and Management Practices of High Performing Workplaces in Australia: The High Performing Workplaces Index, Society for Knowledge Economics, Sydney. Cooke RA 1997, Leadership/Impact Report, Human Synergistics/Center for Applied Research Inc. Farson R 1996, Management of the Absurd, Simon & Schuster, New York. Green R 2009, Management Matters in Australia: Just how productive are we? Australian Government Department of Innovation, Industry, Science and Research, Sydney. Hall B 2005, “The top training priorities for 2005”, Training, February 2005, pp 22–29. Human Resource Institute (HRI) 2004, Major Issues Impacting People Management Survey: North America vs Europe, Human Resource Institute, St Petersburg, Fl. Jacques E and Clement SD 1991, Executive Leadership, Cason Hall & Company, Arlington, VA. Karpin D 1995, Enterprising Nation: Renewing Australia’s Managers to Meet the Challenges of the AsiaPacific Century, Report of the Industry Task Force on Leadership and Management Skills (The Karpin Report), Australian Government Publishing Service, Canberra. Kouzes JM and Posner BZ 1995, The Leadership Challenge, 2nd edn, Jossey-Bass, San Francisco, CA. Maccoby M 2000, “Understanding the difference between management and leadership”, Research Technology Management, January/February, vol 43(1), pp 57–59.

Mintzberg H 1973, The Nature of Managerial Work, Harper & Row, New York. —— 1994, “Rounding out the manager’s job”, MIT Sloan Management Review, vol 36(1), pp 11–25. Sarros JC, Gray J, Densten I, Parry K, Hartican A and Cooper B 2005, The Australian Business Leadership Survey #3: Leadership, Organizational Culture, and Innovation of Australian Enterprises, Australian Institute of Management. Zaleznik A 1992/1977, “Managers and leaders: Are they different?”, Harvard Business Review, March/April 1992, vol 70(2), pp 126–135, first published May/June 1977, vol 55(3), pp 67–76.

19. EDUCATION AND PROFESSIONAL DEVELOPMENT FOR HR PRACTITIONERS Editorial information

Glenn Martin Writer and Consultant on HR, Training and Ethics

¶19-010 Introduction The human resources (HR) role presumes knowledge, understanding and skills across a number of disparate fields, and this has changed over time. In addition, organisations that employ people for HR roles generally have the expectation that the person will hold a formal qualification in the HR field. Accordingly, to talk about education and professional development (PD) for HR practitioners, we need to provide a context by summarising the main facets of the HR role as it is generally conceived in contemporary organisations. The HR role, over the 20th century, evolved from personnel officer, welfare officer, and industrial relations mediator to that of expert in various HR functions, and strategic business partner. The skills of HR have also been affected by shifts in responsibility for HR functions. On one hand, some functions that were traditionally carried out by HR staff, such as recruitment and counselling employees, have been devolved to line managers and, on the other hand, many organisations have outsourced some HR functions. These changes have, in some cases, led to the HR department being downsized, as well as skewing the remaining HR roles in a different direction, for example, towards managing contracts and playing the role of internal consultant to line managers and other departments. The scope of the HR role is wide-ranging, even as it differs in how it is practised in particular organisations. HR staff may be required to fulfil administrative maintenance roles (eg maintaining HR systems), ensure compliance with laws and policies, and interpret employment relations law; yet they may also be expected to play a strategic role, such as instituting initiatives which impact extensively on organisational change. Accordingly, the HR role may include: • managing specific HR functions (eg recruitment, payroll, remuneration policy, performance management and so on) • ensuring work health and safety in the workplace • planning and implementing training and development programs • establishing leadership development programs • facilitating the process of workforce planning • designing and implementing talent management systems and strategies • building workforce capability, and • creating a workplace culture where employees are engaged, productive and innovative.

The fact that these roles require some quite different skill sets drives the conclusion that HR leaders need a deep understanding of people, organisational dynamics and business processes, in addition to having technical proficiency in specific HR functions. Indeed, HR practitioners have a unique role to play as facilitators of constructive organisational values and culture.

¶19-020 The scope of the HR role Professional and educational bodies for HR around the world have conducted studies on the HR role, the skills required for HR, and education for HR roles. The Australian Human Resources Institute (AHRI), the Chartered Institute of Personnel and Development (CIPD) in the United Kingdom and the New Talent Management Network have each conducted studies of interest. Sheehan and De Cieri (2012) maintain that the nature and role of the HR function in Australia have changed dramatically over the last 50 years, and this has been mirrored by developments in the United States and United Kingdom. They say the most significant change for the HR profession has been the shift from a reactive to a strategic focus. Nevertheless, they conclude that, while the strategic importance of HR has increasingly been recognised, it has likewise led to increasing complexity in the HR role, with the potential for role tensions. The demands of a career in the HR field have evolved dramatically. The duties of clerical employees in “personnel”, handling payroll and benefits administration, and the arranging of Christmas parties, are far different from those of a top HR professional who engages in discussions of HR strategies with the organisation’s executives. As Esdaille (2004) notes, HR leaders are expected to have highly developed strategic, financial, analytical and technical skills, and be able to manage human capital through economic booms and busts. They must also produce metrics demonstrating the bottom-line impact of HR initiatives and, increasingly, differentiate themselves by acquiring advanced degrees and certification that attest to their functional competency (Esdaille 2004, p 85). This challenge is not new. The report of a seminar held by CCH Australia in 1979 recognised the same issues — the distinction “between the personnel specialist in a ‘maintenance’ role and one in a dynamic role concerned with the problems of organisation behaviour”. Participants in the seminar also struggled with the issue of “to what extent can there be or should there be integration of personnel related topics such as industrial relations, organisational development, training, and remuneration administration?” (CCH 1979). The CIPD’s vision of the HR role identified similar distinctions. The Next Generation HR report (Goodge 2011) modelled HR as “an applied business discipline first and a people discipline second”. It proposed a transformation for HR, requiring two journeys. First there is an “efficiency” journey, which rationalises and modernises HR’s processes, with service centres, business partners and so on. However, the second, the “next generation” journey, is completely different. It enables HR to deliver strategic interventions and commercial results. Dainty (2011) asks the question: Can HR rise to the challenge of being a strategic business partner? He says HR professionals have been encouraged to make a greater strategic contribution to their organisation for many years. However, the evidence is that progress has, in general, been limited, not only in Australia, but internationally. The central issue seems to be whether HR professionals have the range of skills needed to be effective in a strategic role and what these skills are. Dainty’s position is supported by a 2013 survey by the New Talent Management Network (NTMN). It concluded that its findings raised critical questions about the ability of HR practitioners to set a business agenda for HR and talent management, or to advance on that agenda and deliver business results. One reason for the NTMN’s conclusion was that the major reasons for HR practitioners being attracted to HR were humanistic rather than business-oriented. The survey found that a primary reason for 77% of practitioners being attracted to the HR profession was their interest in helping people grow and develop. Helping a company to maximise its profitability was nominated by a smaller percentage of respondents — 58% of practitioners, while 51% wanted to help balance the needs of the organisation with those of employees. Wanting to represent the needs of employees was a secondary reason for 50% of employees. Overall, the emphasis was on humanistic motivations.

While this emphasis may be considered to be understandable and even healthy for HR practitioners, another finding indicates the absence of a strategic orientation for most HR practitioners. The vast majority of respondents had no ambitions beyond the HR function. Of those currently in an HR business partner role, only 10% aspired to be a business unit head or Chief Executive Officer. Around 60% of practitioners in all types of HR roles (eg talent management, learning and development) aspired to be head of their own team, but no more than 10% had aspirations beyond that. The report observes that — without experience as HR business partners and in other technical and business disciplines — HR practitioners “will lack the context to design holistic and realistic HR solutions” (NTMN 2013, p 9).

¶19-030 Models of the HR role This discourse on the dimensions of the HR role has led to the development of various models for HR competencies. A discussion of models of HR should be preceded by an observation about the use of the term “competency”. Debate still surrounds the concept of competencies (Burns 2002; Managing Training & Development, ¶28-200). On one hand, the vocational training system in Australia, as expressed in the Australian Qualifications Framework (AQF), analyses occupations into sets of competencies. On the other hand, universities champion the idea of professions, based on knowledge of a domain that is buttressed by theory and research. Burns (2002) describes competency as the ability to perform a particular set of tasks or operations. Focusing on observable behaviour under specified conditions, tasks are broken down into components that are easy to assess. Burns maintains that this approach has benefits for training and assessment, but says it becomes less useful as the job role becomes more complex and strategic. The aspects which then become more significant include: • connections between discrete tasks • potential transformations that could occur if tasks are integrated • underlying personal attributes and thinking processes • group dynamics and processes, and • professional judgment. One approach to making sense of the scope of the HR role is to posit a continuum from competencies (ie specific, skill-based tasks) to professional expertise (accommodating the features above). Table 19.1 (adapted from Stolovitch and Keeps 1988) illustrates this continuum. The continuum concept fits well with the HR field, where it is possible for a practitioner to fulfil an administrative support role which may be largely routine, and then to develop the knowledge and skills to play an influential role in high-level organisational strategy and policy. However, the term “competency” has been adopted widely and tends to be used in an elastic sense that embraces the whole breadth of the continuum. See the following discussion. Table 19.1: Continuum from competency to professionalism Aspect of work and learning

Continuum from … to … Competency-based skills

Professional expertise

Knowledge

Technical knowledge and skills

Broad and theoretical knowledge

Tasks

Routine, discrete

Non-routine, complex and integrated, requiring problemsolving

Decision-making

Based on rules and procedures

Based on judgement

Authority

Acts in accordance with authority Uses initiative

Identity

Limited to workplace

Allied with other professionals

Education

Achievement of required qualification; single hurdle — competent/not yet competent

Qualification obtained, but professional education ongoing

Evolving models of the HR role A model of the HR role has been developed by AHRI, through a process which involved consultations and surveys with practitioners and collaboration with HR writers Dave Ulrich and Wayne Brockbank (both from the United States). Called the “AHRI Model of Excellence”, it sees the HR role as a contributor to business performance through people: “people leading business”. It describes a number of objectives for the HR role, and a number of capabilities (Dainty 2007). The objectives are broad statements of the desired outcomes of HR practice and include the following: • contribute to a profitable and sustainable organisation • increase workforce competency and engagement • develop excellence in people management, and • create a dynamic and productive work environment. The AHRI model arose out of a review of HR courses at Australian universities (AHRI 2003a). This study identified six areas of HR capability: (1) Business outcome focus — possessing a broad knowledge and understanding of the organisation’s whole business, in order to create people management systems and structures that support improvements in business performance (2) Strategic thinking — grasping core business objectives and people management so as to have input into strategic decision-making (3) Communicating and influencing — having the ability to influence and communicate change effectively, negotiate outcomes with senior executives and drive corporate culture, and motivate employees (4) Customer and stakeholder focus — having the ability to focus on agendas of senior executives and line managers, and provide solutions for the business (5) Application of professional HR knowledge — having the ability to apply knowledge of HR functions (eg remuneration, recruitment and industrial relations) and knowledge of how they interact; ability to manage their impact and improve productivity and other business outcomes, and (6) Ethical behaviour — demonstrating leadership in policy development on organisational values and ethics in all areas of the business, to ensure that sound ethical practice underpins the culture of the organisation. The subsequent AHRI study (Dainty 2007), involving Ulrich and Brockbank, identified six core capabilities. Ulrich and Brockbank (Ulrich, Younger, Brockbank and Ulrich M 2012) also undertook a global project to examine the HR role, and the framework they developed is similar, consisting of six HR competencies, which can be seen as an evolution of the competencies captured in the AHRI model. They are: (1) Credible activist — able to influence others, knowledgeable about business demands as well as HR activities, able to build trust, self-aware and committed to building professionalism (2) Capability builder — the focus is on building organisational capability, understood in terms of the organisation’s culture, identity and business needs; it may include customer service, speed, quality, efficiency, innovation, and meaningful work (3) Change champion — able to implement disciplined change processes to enable the organisation to

respond to its environment; change includes systemic changes, initiative, building commitment to change and change at the level of individuals (4) HR innovator and integrator — able to create unified solutions that meet business problems, with insights into human capital, performance, organisational design, communication and leadership (5) Technology proponent — harness emerging technologies to efficiently deliver HR administrative systems and keep people connected, and (6) Strategic positioner — able to think from a strategic perspective and translate business conditions into internal decisions for HR; able to think from a customer perspective and contribute to organisational strategic choices. While broadly agreeing with the Ulrich et al model, Sheehan and De Cieri (2012) observe that the model does not sufficiently highlight the tensions and conflicts in the HR role. Their research revealed role tensions between functional expert, employee advocacy and strategic partner roles. HR plays a balancing act between being too aligned with management (with the result that there is cynicism among employees about HR) and being too aligned with employees (with the result that there is a drop in respect for the business capability of HR). Another source of tension arises out of the devolution to line managers of functions that have been seen historically as the responsibility of HR (Kulik and Bainbridge 2005). Line managers have exhibited resistance to activities, such as coaching and performance management, and HR practitioners have to manage this tension creatively. Sheehan and De Cieri (2012) conclude that the existence of the tensions in the HR role makes it critical for HR practitioners to have the capacity to build credibility and generate confidence throughout the organisation, and that they can deliver expected outcomes. They note that the tensions were more likely to be experienced by HR professionals who were less senior and had narrower HR training. Their research also discovered a contextual element to HR performance: the nature of HR differs between industries (eg between the mining and finance sectors) and practitioners need to have acumen in the key skills for that sector (eg employment relations, financial literacy, employee development and so on). The AHRI Model of Excellence was revised and relaunched in 2015. The model (which is presented graphically in five concentric circles) highlights organisational capability, and asserts that the three key roles of HR leaders are: 1. workforce and workplace designer 2. culture and change leader 3. stakeholder mentor and coach. These are very broad categories, of contestable definition. Beyond, this, the model offers 14 descriptors of HR practitioners, which are of the nature of employability qualities, eg professional, credible, courageous. The model may not be of much help in giving intending HR practitioners a clear idea of the specific knowledge bases which are necessary as a foundation of HR competency. The HR role continues to evolve as the business environment throws up issues ranging from the global financial crisis, responses to climate change, talent shortages and diversity issues. These situations can be seen as opportunities for the HR professional to add value to their organisations, by providing expert advice and innovative HR options during periods of organisational stress. The next section will consider the effects of this perspective on the HR role, on HR education and professional development.

¶19-040 Avenues for HR education The two main channels for obtaining a qualification for HR in Australia are the vocational education stream (Certificate IV and Diplomas) and tertiary education stream (Bachelor and Masters degrees majoring in HR). For the vocational education stream, under the AQF, a set of competencies and qualifications for HR have been devised as part of the Business Services Training Package. Courses framed around these competencies are offered through TAFE institutes and registered training

organisations (RTOs) in all states and territories, from Certificate IV (also referred to as Cert IV) level through to advanced diplomas. At the higher education level, most Australian universities offer awards for HR, from diploma and graduate certificate level through to postgraduate degrees; there are over 90 courses available which have been accredited by AHRI. There is increasing interest in HR as a career entry point, with younger HR professionals entering the HR function directly, rather than through administrative positions or other areas. Vocational qualifications in HR The HR qualifications in the Business Services Training Package are: • BSB41015 Certificate IV in Human Resources (targeted roles: human resources assistant, human resources officer, payroll officer) • BSB50615 Diploma of Human Resource Management (targeted roles: human resources adviser, human resources and change manager, human resources consultant, human resources manager, senior human resources officer), and • BSB60915 Advanced Diploma of Management (Human Resources) (targeted roles: as for diploma). The description of these qualification levels is given by Innovation and Business Skills Australia (IBSA), the industry training council responsible for the development of these training packages. It countenances a development in the person’s ability to deal with complexity and exercise independent judgement in nonroutine situations. At Cert IV level the person is expected to demonstrate understanding of a broad knowledge base. This should incorporate some theoretical concepts, the application of solutions to a defined range of unpredictable problems, and the identification and application of knowledge and skill areas to a wide variety of contexts. At Diploma level, persons are expected to transfer and apply theoretical concepts and/or technical or creative skills to a range of situations (IBSA 2013, p 33). At Advanced Diploma level, students are expected to be able to devise and implement strategic plans. This does not necessarily equate to being able to operate strategically in the HR role. However, Sheehan and De Cieri (2012, p 158) observe that the “functional expert role is a very important ‘table stake’. Delivering HRM knowledge and developing HRM choices emerged [in their survey] as a minimum entry requirement to a seat at the executive table”. The core requirements for the three vocational qualifications are as follows. Cert IV in Business (HR) The Cert IV requires completion of six core units plus four electives. The core units are: (1) BSBHRM404 Review human resources functions (2) BSBHRM405 Support the recruitment, selection and induction of staff (3) BSBHRM403 Support performance management processes (4) BSBWRK411 Support employee and industrial relations procedures (5) BSBLDR402 Lead effective workplace relationships (6) BSBWHS401 Implement and monitor WHS policies, procedures and programs to meet legislative requirements. A range of HR elective units is offered. Students must select at least two from this list and the remainder of the units may come from elsewhere in the Business Services Training Package or from another Training Package.

Diploma of HR Management The Diploma requires completion of six core units plus three elective units. A range of HR elective units is offered. Students must select at least two from this list and the remainder of the units may come from elsewhere in the Business Services Training Package or from another training package. Advanced Diploma of Management (HR) The Advanced Diploma requires completion of six core units plus two elective units. The core units address strategic planning, organisational change, leadership, and developing and implementing strategic plans and diversity policies. Details of courses There are no entry requirements for any of these qualifications. Details about the competencies required for these qualifications are obtainable at www.training.gov.au. Tertiary undergraduate degrees in HR Tertiary-level undergraduate degrees majoring in HR are offered by most Australian universities, and AHRI accredits courses that align with its framework for the HR role. Assessment of academic courses is based on two criteria: (1) the institution implements internal quality assurance processes for planning courses, seeking and demonstrating stakeholder input, monitoring outcomes, evaluating feedback, implementing changes and seeking continuous improvement, and (2) the course will equip a graduate to meet the desired accredited HR course outcomes. Accreditation means that graduates are eligible for AHRI’s professional grading system. Undergraduate degrees majoring in HR are most often located in business courses, but some universities locate HR in their commerce, social sciences or arts courses. The AHRI accreditation system enables intending HR students to assess the recognition of courses (see “Centre of Excellence/AHRI accredited courses” at www.ahri.com.au). It should be noted that HR majors occur within the wider context of other business, commerce or labour law subjects. In obtaining a degree, students will generally acquire knowledge of other management activities, such as accounting and financial management, marketing, and legal areas, such as contract law, industrial relations and discrimination. Universities differ in the amount of emphasis they give to the different areas. Some universities emphasise legal subjects, so that discrimination law and health and safety law might be stand-alone subjects. Some universities place more emphasis on the interpersonal skills that are required of HR managers. Postgraduate courses Many Australian universities and other tertiary education institutions offer postgraduate courses in HR management. Some examples are: • Monash University — Graduate Diploma in HRM; Master of HRM • University of South Australia — Graduate Certificate in HRM; Graduate Diploma in HRM • University of Wollongong — Master of Strategic HRM, and • Edith Cowan University — Graduate Certificate of Business (HRM), Graduate Diploma of Business (HRM), Master of HRM. Postgraduate courses are open to people who have completed a Bachelor degree or higher level undergraduate degree or who have at least five years of professional experience relevant to the course. An increasing number of HR practitioners in Australia have obtained a postgraduate qualification in HR.

Sheehan and De Cieri (2012) cite research indicating this increase. For example, a 2006 survey where 46% of respondents had completed some form of graduate degree compared with 23% in 1995 and 9% in 1985. AHRI courses AHRI itself offers courses in HR. From 2014, it has increased its emphasis on certification of HR professionals. Its offerings include its versions of the Certificate IV in HRM and the Diploma in Management, which are complemented by the AHRI Practising Certification Program (APCP) for practitioners with at least five years’ experience. Practitioners study three core units focused on what they need to know. Those units are followed by a fourth “capstone” unit that tests, in the workplace, what they are able to do. The three core units are: The strategic HR professional, The HR organisational environment, and Workforce design, development and performance; the capstone unit is an applied project in organisational capability.

¶19-050 Professional development The complementary aspect of education for HR roles is professional development (PD). The trajectory of an HR practitioner’s career is generally from a functional, operational role to a management and leadership role in HR. Along the way, the practitioner may gain experience in a range of HR functions, and may play an internal consultant role for business units within the organisation. The HR practitioner who progresses in their career needs to undergo the transition discussed above, from a functional expert to a strategic player and influential agent in the development and implementation of the organisation’s business strategies. The question is how HR practitioners can build their knowledge and skills to make the transitions necessary to be able to handle more senior roles. Formal education is one aspect of development. HR covers such a wide range of knowledge and skills that formal education is a necessary component in the move towards becoming a professional. The complementary aspect is engaging in forms of PD, which requires constant renewal of knowledge of current issues affecting HR, networking with other professionals, and developing personal practices that facilitate continuing growth. PD can be defined as the systematic maintenance, improvement and broadening of knowledge and the development of qualities necessary for the person to sustain their relevance and effectiveness at work throughout their working life (adapted from Kennie 2000). Frequently changing job roles and challenges mean that HR practitioners must learn continually, and simply performing a job efficiently is not sufficient to stay abreast of change. A study in the United Kingdom (Rothwell and Arnold 2005) found that HR practitioners valued PD because of the changing nature of their work. PD enabled them to enhance their employability and job prospects, and improve their job performance. Rothwell and Arnold’s study found that the HR practitioners who valued PD the most were motivated by commitment to the HR profession more than a need to remain employable. They found no significant correlation (positive or negative) between practitioners’ level of education and their attitude towards PD. Rather, they concluded that “interest in PD is likely to be an expression of a person’s positive and involved approach to professional work rather than a deficit-driven way of catching up”. Their findings also suggest that many HR practitioners have not embraced the call to take charge of their own career development. In Rothwell and Arnold’s study, the most favoured PD activities were informal and were concerned with the person’s current job and organisation. Such activities included reading journals, sharing knowledge and discussing with colleagues, spontaneous learning arising from work activities and action learning from projects. Formal activities, such as participation in training courses, membership of project committees, attendance at PD events and undertaking qualification-based study rated lower. Given that HR practitioners participate in PD for a variety of reasons, Rothwell and Arnold argue that PD should explore broader options, addressing individual needs and catering more for informal learning approaches. The potential of online and mobile learning, and social media, should be explored. Mentoring is becoming increasingly recognised as having a significant influence on developing

professionals, and is being actively encouraged by AHRI as well as major corporations. Sheehan and De Cieri’s study (2012) also highlighted the need for younger HR professionals to have greater field experience. Traditionally, HR career paths were quite attenuated and people spent a long time in operational roles; but now many young practitioners, particularly graduates, are moving straight into the corporate HR roles, before having developed a thorough understanding of the dynamics of the business and the organisation. Effective PD, according to Kennie (2000), has to consider more than completion of a given number of hours at courses and seminars. These are input measures, whereas the ultimate measure of effective PD is its output, which can be summed up as performance improvement and personal growth. The role of reflection in professional practice is being given more attention (Boud et al 1985; Mezirow 2000; Moon 2004; Bolton 2005). Reflection is necessary in order to give context and meaning to experience. The capable practitioner will have developed a mental framework that makes sense of work situations and enables the person to generalise from their experiences. This is an ongoing process.

¶19-060 Conclusion The credibility of HR practitioners, both in functional HR roles and as contributors to the organisation’s business strategy, is growing and developing. However, the perception of HR varies widely across industries and even within particular organisations. Dainty (2011, p 66) says that personal credibility is important for HR practitioners, but so too are “the broader skills of being able to manage culture, IT, key talent, change processes and share knowledge and integrate different functions”. Although discussion of whether or not HR is a profession has receded to the background, the qualities of professionals remain relevant. A professional, according to Gold et al (2002), has mastery of a body of knowledge, along with the mental framework to make sense of it and apply it in a variety of circumstances. The professional has acquired the situational knowledge to be an expert, and their expertise is more than what can be replicated by following a manual. There is also a social dimension to professions. Clients trust professionals to adhere to standards of competency, quality and ethics, and to exercise independence from their organisation and discretion in addressing clients’ issues. And the credibility of professionals is dynamic. In a changing environment, particularly with the vastly increased availability of information through the internet, professionals need to maintain their knowledge in order to sustain their relevance. PD is the key to consolidating the basis for the HR practitioner’s credibility. But, to be effective, PD has to combine two types of learning. One type concerns technical information (eg employment laws, information systems, recruitment practices) and problem-solving, while the other concerns a widerranging skill — “problem-setting” (Schon 1983). The latter skill is the ability to immerse oneself in a complex situation and determine what is important, and how to frame it and generate constructive outcomes. To consolidate their credibility, HR practitioners need to have a grasp of the range of experiences that can foster learning and look for the learning possibilities in all experiences. This includes activities that are individual and collective, formal and informal, work-based and off-site. It also includes the use of computer technologies (Cheetham and Chivers 2001). Underpinning these activities should be knowledge of techniques to get the most learning out of experiences. Professionals should be autonomous, self-directed learners, with skills such as selfassessment of learning needs, observation, ability to reflect constructively, awareness of their learning style, mind-mapping and ability to adopt different perspectives. Learning how to network and collaborate with others to learn and share is a significant skill in PD, as well as the ability to articulate lessons learned. Finally, professionals should see it as their obligation to facilitate the learning of other professionals and to act as a worthy role model. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶45-000. References Australian Human Resources Institute 2003a, HR: Creating Business Outcomes, AHRI, Melbourne.

Bolton G 2005, Reflective practice: Writing and professional development, 2nd edn, Sage, London. Boud E, Keogh R and Walker D (ed) 1985, Reflection: Turning experience into learning, Kogan Page, London. Burns R 2002, The Adult Learner at Work, 2nd, Business + Publishing, Sydney. CCH Australia Limited 2012, “Perspectives on competency-based training and assessment”, Managing Training & Development, ¶28-200. —— 1979, “Whither goest?”, Personnel Management News, issue 22, 9 April, p 1. Cheetham G and Chivers G 2001, “How professionals learn in practice: an investigation of informal learning amongst people working in professions”, Journal of European Industrial Training, vol 25(5), pp 250–292. Dainty P 2011, “The strategic HR role: Do Australian HR professionals have the required skills?”, Asia Pacific Journal of Human Resources, vol 49(1), pp 55–70. —— 2007, “Model achievement”, HRMonthly, September, pp 34–35. Esdaille M 2004, HR growth, Black Enterprise, vol 34(11), pp 85–87. Gold J, Rodgers H and Smith V 2002, “The future of the professions: Are they up for it?”, Foresight, vol 4.2, pp 46–53. Goodge P 2011, “Transform HR”, Strategic HR Review, vol 10(2), pp 40–41. IBSA 2013, BSB07 Business Services Training Package (Revision 7.0), Innovation and Business Skills Australia. Kennie T 2000, The growing importance of continuing professional development, see www.cipd.co.uk. Kulik C and Bainbridge H 2006, “HR and the line: The distribution of HR activities in Australian organisations”, Asia-Pacific Journal of Human Resources, vol 44(2), pp 240–256. Mezirow J (and associates) 2000, Learning as transformation: Critical perspectives on a work in progress, Jossey-Bass, San Francisco. Moon J 2004, A handbook of reflective and experiential learning: Theory and practice, Routledge Falmer, London. NTMN 2013, State of talent managers report, New Talent Management Network, see www.newtmn.com. Rothwell A and Arnold J 2005, “How HR professionals rate ‘continuing professional development’”, Human Resource Management Journal, vol 15(3), pp 18–32. Schon E 1983, The reflective practitioner, Maurice Temple Smith, London. Sheehan C and De Cieri H 2012, Charting the strategic trajectory of the Australian HR professional, Asia Pacific Journal of Human Resources, vol 50(2), pp 151–168. Stolovitch H and Keeps E 1988, “Curriculum Development for Business and Industry”, see www.hsalps.com. Ulrich D, Younger J, Brockbank W and Ulrich M 2012, “HR talent and the new HR competencies”, Strategic HR Review, vol 11(4), pp 217–222.

20. LEARNING AND DEVELOPMENT Editorial information

Glenn Martin Writer and Consultant on HR, Training and Ethics

¶20-010 Introduction — the business context for learning Learning and development (L&D) functions are a key part of any organisation’s human resources (HR) strategy. Human resources staff are responsible for: (1) managing the flows of people into and out of the organisation (ie recruitment and termination) (2) managing the needs and motivations of people (ie remuneration, conditions of employment, organisational climate, engagement and so on), and (3) managing capability (ie availability of skills, knowledge). The L&D aspect of HR is concerned with the management and development of capability in the organisation. This has become a complex endeavour, and one of growing strategic importance in all sectors and industries. What was once a straightforward function concerned with imparting technical skills to workers now generally involves a wide range of L&D initiatives that include everyone from new recruits to senior managers. The performance and competitiveness of organisations now rely critically on the skills and knowledge of employees, and not just their technical skills. Also important are their skills in interpersonal relationships, decision-making and innovation. Moreover, the business environment continues to change rapidly, so that employees’ skills and knowledge need to be constantly adapted and updated. This is true across all levels in organisations. In previous times, the agenda of training predictably consisted of three areas — technical skills, compliance and management training. The format of training was also predictable: skills and compliance training took place in classrooms onsite, and management training might include off-site programs for periods of three or more days. This pattern has been shaken up by the social, economic and technological drivers of change. L&D practitioners have had to completely rethink the training agenda. When the business, for example, says it cannot afford for managers to be absent on a three-day, off-site training program, the rationale and the need for such a format have to be questioned. Accordingly, L&D practitioners have had to re-examine the very process of learning — how learning occurs and what methods are most expedient in current circumstances. L&D practitioners also have to relate their programs and initiatives rigorously to the strategies of the organisation, incorporate new technologies into their repertoire of learning methodologies, and develop ways of measuring the outcomes of L&D initiatives and communicating these to the organisation. To fulfil this more strategic role, L&D practitioners need to operate from a comprehensive and robust L&D framework, such as talent management. If this challenge is taken on, the L&D role shifts from being a minor maintenance function to being an integral and essential part of the organisation’s ongoing success and a defining characteristic of the organisation’s culture.

¶20-020 Learning and development and the organisation’s business

It is common for executives to place the emphasis in their activities on execution — the efficient, timely, consistent production and delivery of goods and services — as the path to business success (Edmondson 2008). However, this mindset may come at the expense of innovation, ability to adapt to change, and employee commitment. This phenomenon is compounded when the organisation is also trying to cut costs. Where employees are asked to be more productive with fewer resources, it is easy for morale to fall and performance to actually decline. Edmondson (2008) cited the contrast between General Motors and GE in the years preceding 2007. General Motors, with a focus on management as execution, went from being a highly successful company prior to 2000, to facing bankruptcy in 2007. GE, in contrast, put the emphasis in those years on reinvention and renewal, and posted a profit of over US$22b in 2007. Edmondson pointed to GE’s attitude to learning in the workplace — the expectation that learning was part of work, processes were continually evolving, and management supported change. Edmondson argued that the current environment is characterised by rapid change, and this requires a different way of managing people. The traditional management style of command and control is no longer effective. When systems were static, that style worked, but when the environment is constantly changing, people need to use their initiative. Managers need to operate differently, encourage innovation and experimentation in their teams, and allow time for learning in the course of work. An effective L&D regime in an organisation consists of two parts: work-integrated learning (or informal learning) complemented by the formal programs and learning initiatives offered by the L&D team (and external providers). At the broadest level, the goal of L&D is to improve the performance and productivity of the organisation. This may encompass several types of L&D activities, as follows: • Improving employees’ skills and knowledge for their current job role: basic skills training, including induction for new employees, technical training for newly introduced processes and technologies, apprenticeships and traineeships, upgrading of skills and refresher training • Increasing employees’ generic skills (or “employability” skills or key competencies): the development of problem-solving, communication and teamwork skills • Compliance training: training that ensures the organisation and its employees comply with legal requirements, including discrimination and work health and safety (WHS) • Organisational development (OD): training and development initiatives focused on the broader functioning of the organisation as a system or community, including the fostering of shared attitudes and values, change management, collective learning and development of organisational culture • Talent management programs: programs that develop the capability of the organisation for the future, and including succession planning • Career development: enabling employees to develop their potential and seek greater opportunities. The key to the business-oriented approach to L&D is that all activities are examined in the light of how they contribute (directly or in an extended sense) to the organisation’s ability to fulfil its business strategies. It would be counter-productive to take a narrow outlook on this question. Some skills are easily seen to be contributing to business goals, such as training for salespeople which directly increases revenues. But training serves other goals as well. One goal is to reduce risks to the organisation (eg providing training on “bullying” aims to reduce the risk of the occurrence of bullying, which can lead to legal disputes and associated costs, and loss of employee morale and the organisation’s reputation). It also needs to be recognised that the provision of training and development opportunities is regarded as a benefit by employees and potential employees (job applicants). This is acknowledged to be an important factor in people’s job search and, once employed, it is an important element in creating higher levels of engagement. The objectives of L&D initiatives should be understood clearly so that they can be evaluated appropriately.

¶20-030 Investment in training

Comprehensive current data on Australian employers’ expenditure on training is not available, but there are surveys that provide an indication of trends. A survey by the Australian Chamber of Commerce and Industry (ACCI 2011) found that 44% of employers spent $500 or more on training per employee, while 22% spent more than $1,000. Around 90% of employers said their expenditure would either stay the same or increase over the next year. This suggests a relatively stable commitment to training among Australian employers. A survey of employers in the United States (Bersin by Deloitte 2013) reported that employers’ expenditure on training had increased by 12% on average in 2012. The report interpreted this to be the result of organisations reskilling their workforces in the light of improving stability in the economy. The Bersin survey explored the differences between organisations that had “mature, effective L&D functions” (ie learning-mature organisations) and those that did not. It found that the learning-mature organisations spent 34% more on training than organisations at the lowest maturity level. The report said that the learning-mature organisations were focused on improving performance through training and other talent initiatives: “These L&D functions help to build the required human capabilities within their organizations to meet business goals and respond to change”. Other trends were observed as well. “Social learning” has made an appearance, and the learning-mature organisations were spending three times as much on it as other organisations. They are becoming effective at creating employee networks, connecting novices to experts through expertise directories, and sharing knowledge through communities of practice. The report says social learning is transforming traditional approaches to training: “combined with formal programs, experiential learning and ongoing support and reinforcement, [social learning] is facilitating a shift from blended training programs to continuous learning environments”. Organisations purchased around 12%–15% of their L&D services externally. The types of services purchased have changed, with more money going to off-the-shelf content and less going to custom instructor-led training, as many companies turn to less costly and more time-efficient learning solutions. The research shows a different trend, however, among high-impact L&D organisations, which spend less on off-the-shelf content and more on instructor-led content development and delivery services. They also invest more in assessment services, which help them to develop skills where needed. Many training organisations start with standardised content, and then recognise the need for a more customised learning approach as they mature.

¶20-040 Frameworks for organisational learning L&D needs to address practical matters such as ensuring employees have the skills they need to carry out their functions. It should also aim at equipping people with the capacity to cope with and manage change. Baker (2010, p 12) argues that: “in a climate of rapid change and uncertainty, equipping people with the skills to critically reflect and problem-solve is a far more practical approach to help them cope with the increasing uncertain demands of their work” (Baker 2010, p 12). Baker’s perspective indicates that L&D practitioners should develop their own framework to map the different types of L&D they provide. There is a spectrum from reactive-type training (ie responding to requests by managers for training on particular topics) to a strategic approach. The range of types of L&D will be a reflection of the organisation’s level of maturity in L&D Bersin (see ¶20-030) depicted five stages of organisational learning maturity: (1) Reactive training: Training is ad hoc and its agenda is determined by requests from managers and by what has been done in the past. (2) Targeted training: Training is targeted to support specific organisational initiatives and job roles. (3) Strategic L&D: Programs and initiatives are aligned to business objectives and connected to talent management. (4) Integrated L&D: Learning is integrated into work flows, accelerating business impact and

organisational agility. (5) Optimised L&D: Learning adoption is ubiquitous and has become a core organisational advantage. This framework offers a pathway for organisations to develop their L&D programs. It is a question of how ready L&D practitioners and executives are to expand the range of L&D, and their understanding of the strategic import of activities. As Baker says, everyone needs to learn to think differently. It is also a question of having systems and processes in place to follow through on the chosen L&D agenda. A systems model of L&D Organisations can start to move towards a more mature stage of L&D activity by taking on a systems view. A systems view identifies the elements required to achieve L&D objectives in the organisation and the links between these elements. Figure 20.1 shows the elements and their relationships. People in the L&D function and people interact with the rest of the organisation, that is, senior managers and line managers, and (probably) with external providers of training. The model emphasises the importance of clear communication between all stakeholders involved in building individual and organisational capability and productivity. A key feature of the model is that it shows how L&D objectives must be derived from the organisation’s mission and its business strategies. Figure 20.1: Learning initiatives and corporate strategy

Source: CCH Australia, Managing Training & Development, subscription information service. The talent management model Talent management has been an emerging field ever since McKinsey & Company popularised the idea of a “war for talent” in 1997 (published by Michaels et al 2001). The evolving demographics of the workforce in western countries have fed the fire since then, with skills shortages becoming one of the top concerns of business. Managing talent is also a timely evolution of HR practice, as it provides a more strategic focus for L&D. It enables companies to develop an integrated strategy that will result in a workforce that can fulfil the company’s current performance goals and simultaneously lay the foundation to fulfil future skills requirements. The process of talent management can be described in three main phases: (1) defining talent (2) developing talent, and

(3) systems and structures. The process of talent management also involves many steps, as follows: • identifying current talent needs in relation to business strategy • identifying existing talent • forecasting future talent needs • attracting the right leadership talent • attracting the right key contributor/technical talent • retaining the right leadership talent • retaining the right key contributor/technical talent • developing existing talent through career development plans and learning initiatives • deploying existing talent (ie moving talent across functions, businesses, geographies) • engaging talent (ie enhancing employee focus and performance) • ensuring a diverse talent pool • establishing key measures for tracking the success of efforts, and • establishing the entire process as a sustainable system. Note that some of these actions are also applicable to employees who have not been identified as talent, and it is important for the organisation to demonstrate its support for L&D for all employees, not just those identified as “talent”. Employees will accept that some employees have been selected for talent programs, but they also need to know that the organisation recognises their need to learn too. The talent approach is, above all, an integrated approach to managing talent. Talent management initiatives are created and implemented in the context of the organisation’s overall strategy, culture and leadership. There is always the tendency for new initiatives to gain their own life and become inwardlooking. This is how activities can end up being engaged in for their own sake rather than in service to the greater purpose of the organisation’s success. This integrated approach enables organisations to: • audit and evaluate development initiatives and programs from a single, unified perspective • coordinate development programs (eg executive coaching, leadership development, mentoring, training and so on) and link them to overall business strategy • design development initiatives that add value, and • build strong return-on-investment measures into the design of development programs. Effective utilisation of talent involves two aspects: (1) L&D initiatives based on contemporary understandings of employee learning and behaviour change, plus (2) an understanding of the organisational issues of effective planning and design of talent development initiatives. Talent management has the potential to rejuvenate the training agenda, but if its champions are not clear

about how the desires of individuals and the goals of the organisation are harmonised, it can be counterproductive. As one author on talent management, British writer Eddie Blass (2009) concludes: “it is people who are talent managed at the end of the day, not machines or systems”. She says the most constructive approach to talent management programs is to see employees “less as a malleable resource for the company and more a mobile investor of his or her own intellectual, social and emotional capitals” in the company’s endeavours. Sloan (2003) explains the process of talent management in terms of objectives at each of the following five stages: (1) Clarify the existing value proposition for talent to offer a fair value exchange to employees (ie what you want and what you are offering). (2) Identify the gaps in the talent pipeline (ie assess performance, potential, readiness and fit). (3) Choose the best sourcing solution to fill the gaps (ie outsource, develop, transform and acquire). (4) Align core talent management processes with the talent required to accomplish new strategies (ie attract, retain, select, transition, mobilise and develop). (5) Build organisational support mechanisms (ie governance framework, training, talent reviews, measuring and rewarding progress).

¶20-050 A suitable repertoire of methods The traditional delivery mode for training is via an instructor in a classroom where employees are taken off the job for a period of time. This was the dominant form of employee learning for a generation (ie apart from apprenticeships with their on-the-job component of training). However, research into the effectiveness of this form of training has often arrived at disappointing conclusions. The claim is often made that up to 80% of dollars spent on training are wasted. While it is not reasonable to generalise about this statistic, it does give L&D practitioners cause to reconsider what is the most effective format for L&D. The criticisms made about classroom-based, instructor-led courses (mentioned above) are that: • learners are passive (ie listening to lectures) • there is an artificial divide between theory and practice, which raises the problem of transferring learning to the workplace, and • the subject matter is a generic course, rather than being tailored to the individual’s knowledge needs. The options for L&D programs today are much more diverse. This is for three reasons: (1) some alternative or complementary approaches have gained recognition as being effective (eg coaching, mentoring and flexible learning) (2) self-paced online learning has become an accepted mode of learning (3) the shift in thinking from training to learning has led to a focus on ways of supporting learners’ preferred approaches, including performance support tools and work-based projects. The major options used for L&D today are presented in Table 20.1. The variety of approaches reflects the efforts of L&D practitioners to respond to criticisms of training. It is also significant that trainers are not just using alternative approaches, but that they are adopting blends of these approaches (discussed later in this section). An example of multiple formats is the use of direct instruction followed by individual coaching and mentoring. Numerous studies have found that performance improvements increase significantly when classroom-based instructional training is complemented by post-classroom support such as individual

coaching. Table 20.1: Options for facilitating L&D Learning intervention

Description

Classroom training

The learner acquires skills and knowledge through lessons and activities in a formal class setting away from the workplace.

Role plays

Exercises where the learner acts out a work role are useful where feelings, reactions and responses to work scenarios are integral to effective performance.

Simulations

Learning occurs in an environment designed to simulate the workplace (this could be high tech — as in airline pilot flight simulators, or low tech — as in a kitchen at a TAFE college).

Experiential learning

Workshops address issues in a semi-structured way; learners learn through involvement in an activity and the outcome is not predetermined.

On-the-job training

Learning occurs in the workplace through instruction and supervised tasks (eg apprenticeships).

Self-paced study

Learning is based on the provision of resources to the learner, either text-based or computer-based. Learners acquire skills and knowledge at their own pace.

Coaching and mentoring

The learner is matched with a coach or mentor. Learning is in oneon-one sessions tailored to the individual. The focus is on the concerns of the learner. See Chapter ¶47 for further discussion.

Informal learning

Learning is approached as an aspect of the work itself, through trial and error, experience of consequences, and reflection.

Online learning

Computer-based learning includes self-paced modules, webconferencing, discussion forums, and access to web-based information.

While this table provides a repertoire of approaches, it does not provide any guidance on when to use a particular approach, or what methods to use in combination. The learning-maturity stage model indicates that more effective outcomes occur when “blended learning” solutions are designed. Blended learning Blended learning originally referred to the situation where computer-based learning was used in combination with traditional training methods, such as classroom instruction. The combination was found to be effective and cost-efficient. As adoption of online technologies has progressed, however, blended learning has simply come to mean the use of any combination of learning methods. The term is now media-neutral, although blended learning does generally incorporate online elements. An example of a blended learning offering is a global mentoring program that was offered by IBM to its employees. It consisted of a combination of classroom sessions, self-paced e-learning, and paper materials. Websites, blogs, wikis, web conferences, electronic forums, and teleconferencing were used for collaborative learning. Live e-chat, an advice column, email, expert pairing, one-to-many and one-onone mentoring rounded out the program (Clarey 2010). The social aspect of learning is looming as a significant component of learning methods (Billhardt 2010). The acceleration of online social networking has fuelled interest in this area. Social interactions that support learning can take a variety of forms, such as: • group sessions with cohorts (ie more than 10–15 people) to share job experiences and link them to the learning

• live meetings where learning moments are shared and guests might give lectures • celebrations of joint accomplishments, with awards and recognition, and • interactions through blogs and wikis. These interactions enable the emotional experiences of sharing, being inspired by others, feeling connected with others, exchanging ideas, and being accountable for your behaviour and performance. They bring stories into the learning experience to complement the learning of theory, and they foster the practice of reflecting on experience to deepen and extend learning. Evidence for blended learning effectiveness A study by Michael Leimbach (2008) analysed over 1,000 research and practitioner articles to determine the effectiveness of e-learning for various purposes. It found that effectiveness is being achieved through the use of multiple methods, strategically integrating the various methods. The study concluded that elearning is best utilised for certain types of learning content, as shown in Table 20.2. Table 20.2: Type of content and learning methodologies Type of content

Choice of method

Declarative knowledge (facts)

E-learning is effective and efficient.

Processes and procedures

Both the classroom and e-learning can be effective, but the classroom still seems to have a slight advantage.

Changing or enhancing interpersonal skills

Face-to-face (interpersonal) experience in classrooms, groups and one-on-one situations is both more effective and more efficient than elearning. The return on investment is better for interpersonal methods, even though the cost itself may be higher than e-learning.

The flexibility of e-learning and the utilisation of blended learning are serving to integrate learning more closely with work. For example, with online reference tools, the worker can go through an online module, then go back to work and still have the learning materials at their fingertips. Thus, they can practise and check back until they master the new skill or knowledge. The key to successful learning solutions is focusing on the learner and the instructional design, rather than on the technology. Once organisations can confidently blend the different forms of learning that are available, they can then explore their more innovative possibilities. Added to this, advocates of online learning maintain that it offers learning experiences that are not possible in the classroom. The next step is integrating these learning activities with the organisation’s knowledge management systems. This objective is assuming increasing importance as companies’ administrative systems and the content of those systems become more central to employees’ performance. There is a convergence looming between e-learning and knowledge management.

¶20-060 Understanding the workforce Effective L&D programs and initiatives are appropriate to the needs, attitudes and existing capabilities of employees, so being aware of the characteristics of learners is an essential L&D function. There are some overall workforce factors that L&D practitioners need to be aware of: • The ageing workforce: The average age of the workforce is increasing. This is leading to skills shortages in numerous industries, and difficulty in gaining new young entrants to certain occupations. Mature-aged workers have assumed increasing importance. Employers need to consider the strategic importance of the accumulated knowledge of senior employees. Employers also need to be aware of the presence of stereotypes about the inability of older workers to learn new things.

• Other demographic changes: The proportion of women in the workforce is higher than it ever was, but the representation of women in managerial positions, higher-paid positions and permanent jobs is still disproportionately low. The same is true for people of non-Australian background. • Education levels: Although Australia does not rank highly among Organisation for Economic Cooperation and Development (OECD) countries for the average level of qualifications of the workforce, this is gradually rising. The level of participation of the workforce in further education is about one person in eight, and this is also on the increase. For TAFE courses, around 60% of students are now over the age of 24 years, as workers continue to upgrade and renew their skills. • Forms of employment are changing: Traditional full-time, permanent jobs are no longer the norm. Around 15% of the male workforce and 45% of the female workforce work on a casual and/or parttime basis. In addition, a significant proportion of the workforce is working on a contract basis and, of these, most are “dependent” contractors (doing most of their work for one company). Each one of these factors has implications for L&D planning. Employees are extremely diverse, so L&D practitioners must ensure that basic literacy, numeracy and language issues are addressed, while also ensuring that L&D initiatives address individual needs and interests. The skills, knowledge and attitudes that clients bring to learning are seldom uniform. McKey and Ellis (2007) maintain that L&D practitioners need to know the level of learning maturity of participants. Learning methods need to be adapted accordingly. Not all learners are self-directed and autonomous. Some are passive, while others take a transactional approach to learning. The question for L&D practitioners is how to work with learners at their current stage, and draw them towards a more independent style of learning. In the latter stages, L&D initiatives can be more personalised and less directive. Bradbery (2010) offers a developmental learning framework that sees learners moving through four broad stages, as follows: (1) First they learn to do things (operational learning) (2) they learn about things (conceptual learning) (3) they learn to be someone (humanistic or experiential learning), and (4) they learn to become someone (developmental learning). Bradbery (2010) incorporates the ideas of writers such as Gardner, Kegan, Kolb, Maslow, Piaget and Wilber. He says the corollary of the framework is that we must draw on different learning methods at each stage. Learner attitudes Market research into the attitudes of workers towards learning was carried out by the Australian National Training Authority (ANTA) (prior to its abolition in 2005). The research unearthed a number of groups that have difficulties with training and education (ANTA 2000). Among learners, there is a sizeable group, mostly people aged 16–24 years, who are involved in formal training, but who were described as “might give it away”. These people do not believe that learning will deliver benefits to them, such as a guarantee of a job. They are involved because they feel they have to be, and because other people expect it. They represent 7% of all adults, which is a significant proportion. The research identified three other groups currently involved in training programs or courses. Apart from the predominantly young learners just mentioned, these were described as follows: (1) Learning to earn: Representing 17% of all adults, this group consists of people learning because it offers a qualification needed for work or for promotion. (2) Almost there: Representing 6% of all adults, these learners love learning and believe it is the way to reach their goals; but they experience obstacles and fears about learning.

(3) Passionate learners: Representing 21% of all adults, this group is the largest proportion of those involved in learning. It is strongly represented by females, people over 40 years of age, and people who already have well-paid jobs.

¶20-070 Changing roles of L&D practitioners The traditional role of the trainer has changed and evolved over time. This role has broadened considerably, reflecting the expansion of the range of training methods now used, the role of L&D in the organisation, developments in technology, and an overall greater understanding of the L&D process in organisations. In Australia, the Certificate IV in Training and Assessment has been the benchmark qualification for L&D practitioners for many years. The role of trainer may cover the following fields: • design ― the design of training programs and materials that enable learning • delivery and facilitation ― the delivery and facilitation of learning in various contexts (eg face-to-face, on-the-job, distance and computer-based) • assessment of learning ― the design and application of assessment tools • specialist functions ― specialist and support services for L&D, such as coordination and quality management of L&D functions, and language, literacy and numeracy learning • business and HR-related tasks ― for example, developing teams, promoting L&D services, and building client relationships. Many L&D practitioners now provide internal consulting services in their organisation, consulting with line managers about the appropriate type and format of learning solutions, and designing and delivering those solutions. Exercising the skills of analysis constitutes a major role shift for many trainers. Gannan (2008) noted that the hard part of the consulting model is finding trainers with the analytical skills to uncover systemic problems and identify real performance needs. Figure 20.2 presents a framework for L&D roles across the spectrum of a career, from practitioner roles to management and leadership roles. Figure 20.2: Framework for L&D roles

Source: Glenn Martin. The Association for Talent Development (formerly the American Society for Training & Development) model of practitioner competencies has been updated (Arneson, Rothwell and Naughton 2013). The new Competency Model provides practitioners with a broad inventory of topics that training and development professionals need to know. The model identifies 10 competency areas: (1) Instructional design (2) Training delivery (3) Learning technologies (4) Managing learning programs (5) Integrated talent management (6) Coaching (7) Knowledge management (8) Change management (9) Performance improvement, and (10) Evaluating learning impact.

¶20-080 Factors in the effectiveness of L&D

A systemic approach to L&D requires consideration of the factors in the effectiveness of L&D initiatives. In research conducted by the National Centre of Vocational Education Research (Dawe 2003), the practices of a group of firms that were identified as successful in the L&D area were examined. “Successful training practices” were defined in the report as those that delivered “tangible and intangible benefits for organisations”, including increased skills and knowledge, positive attitudes and values, increased competitiveness, improved employee morale, and more effective manager-employee relations. The research consisted of a meta-analysis of 49 case studies from previous research projects, followed by five case studies which confirmed the findings. The conclusion was that a number of elements contributed to L&D effectiveness. These included: • a culture that supports learning • links between training and business strategy: not just on an ad hoc basis, but through a corporate L&D plan • responsiveness — both to changes inside the organisation and factors outside the organisation • use of a variety of L&D approaches to achieve objectives • responsiveness to needs at an individual level as well as the organisational level, and • evaluation of L&D programs. The report concluded that organisations which give attention to all of these elements are more likely to have a robust L&D function which enhances corporate goals. Each of these elements has implications for L&D practitioners and for the organisation’s leadership. For example, the existence of a culture that supports learning depends significantly on the value that senior management places on learning and how well this is communicated across the organisation. The use of a variety of L&D approaches has been discussed above. Examples found in the study included: • induction programs that involved the new employee working alongside a colleague (a buddy) • mentoring by senior colleagues from other departments • role-playing of critical behaviours by teams and individuals • the use of reflection on critical incidents and experiential learning • team-based approaches for sharing, teaching and learning • reflective learning from workplace practice, and • rotation of tasks or working at higher-level duties. The use of a variety of approaches reflects the impact of a supportive learning culture and the high level of involvement of managers and employees (on an ongoing basis across the organisation) that results from it. The line manager’s role One aspect of strong learning cultures that deserves particular emphasis is the link between L&D programs and the learner’s line manager. A study conducted by Broad and Newstrom (1992) found that the most important factor in the learner’s subsequent performance was not the quality of the trainer, but the attitude of the employee’s manager. Their study found the following factors to be essential to the effective uptake of skills subsequent to training: • Manager’s involvement before the training: If the manager does not show that they support the training and its goals beforehand, the training is less likely to be effective.

• Trainer’s input before the program: If, for example, the goals of the training are not clear to employees before the program, the learning will not be effective. • Manager’s involvement after the program: Next in importance is whether the manager supports and reinforces the training back in the workplace.

¶20-090 Developing a culture that supports learning Market research conducted by ANTA into the attitudes of employers towards L&D (ANTA 2000) found that they could be grouped in the following three classes: (1) “high valuers” — organisations that value all forms of learning, on and off the job, work-related or not (2) “here and now” — those that value learning as long as it can be related directly to performance and productivity, and (3) “not interested” — employers who do not see much value in training their employees. Of employers, about 45% were considered to be high valuers, and about 38% valued learning for its here and now benefits. This generally encouraging picture indicates that the bulk of Australian organisations have a positive attitude towards L&D. The importance of line managers in fostering learning was discussed earlier. There are also other aspects of HR strategy that contribute to an organisational culture which supports learning. The economic returns on investments in structured training can be increased significantly where these aspects are managed effectively. A number of recent studies have highlighted the potential of the workplace as a venue for learning. One such study — Learning-conducive work — published by the European Centre for the Development of Vocational Training (Skule and Reichborn 2002) examined Norwegian workplaces. The concept of “learning-conducive work” has been echoed by studies in Europe, the United Kingdom and the United States. The Norwegian study developed a measure of how learning-intensive a job was, made up of three components: (1) the employee’s perception of the extent of learning on the job (high to low) considered to be the most important factor (2) the durability of learning — indicated by the employee’s estimate of how long one could be away from work and still retain the required skills and knowledge, and (3) job-specific competence — indicated by the length of training it takes to master the job satisfactorily, assuming you have the right educational background on entering the job. As might be expected, differences emerged between industries and occupational groups; but there was no significant difference between the public and private sectors. There was a strong positive correlation between the intensity of competition in the work environment and the learning intensity of jobs. Where employees saw the environment as very keenly competitive, they also saw their jobs as high learningintensive. Conversely, where they saw their business environment as not competitive, they were more inclined to see their jobs as low learning-intensive. There was, however, a significant group of employees in non-competitive organisations who saw their jobs as having a high level of learning intensity. Clearly, some learning-conducive jobs thrive in the absence of competition. Several factors were identified as being associated with work of high learning intensity. They help create the conditions for learning. Workplace learning is enhanced when these factors are improved simultaneously. The factors are as follows: • High degree of exposure to demands from customers or others (eg managers, external authorities), and resulting demand for enhanced skills and knowledge: From these sources, nearly half of the workers reported a very high or moderately high demand for ongoing learning. Proficient colleagues

act as motivators for learning because they communicate professional standards across the workplace. • Technological and organisational changes: The impact of change on the need for learning was indicated in three areas: (1) changes in products and services (2) changes in equipment, and (3) internal changes in the organisation or procedures. • Support from management and external contact: This refers to manager support and encouragement of learning — as perceived by workers. These jobs have a high level of professional contact with others and better opportunities for learning through feedback. (However, 40% of workers in the study experienced little or no encouragement from their managers to learn.) • Responsibility and rewards: Systems of reward are established for proficiency, and responsibilities are delegated to workers. Rewards include career promotion, interesting assignments and salary increases. Workers are able to see the results of their work, and managers give their workers positive feedback. (Note: If feedback only occurs when mistakes are made, little positive learning occurs.) Human capital, technology and informal learning To build an organisational culture that supports learning, L&D practitioners need to persuade executives that learning is a strategic imperative. Executives need to be encouraged to assess the organisation’s efforts in building and developing human capability. Alastair Rylatt (2006) describes a number of dimensions of capability: • Customer capital: This examines the nature of relationships with customers. Customer satisfaction rates, growth of customer learning and involvement in decision-making are common measures in this regard. • Human capital: This identifies the expertise and composition of your people. For example, a high level of enthusiasm, desire and commitment in the workplace would be an indicator that your people are committed to excellence. Other measures include brain drain and investment in training and development. • Intellectual capital: This measures the perceived market value of trademarks, secrets, patents and brands. • Relationship capital: This articulates the nature of collaborative relationships, business partnerships, joint ventures and industry associations that are helping to build the reputation and industry standing of business. • Systems performance: This describes how systems and processes contribute to the competitive advantage of a business. Measures can include investment in digital technology or how practices have been replicated or improved. Here, you will also find common measures of productivity, reduced wastage and efficiency savings. The human capital perspective links into the way the organisational learning landscape is evolving. Recent developments in social software applications are facilitating the creation of communities online. Employees are discovering the ability to share, collaborate, build knowledge, network, and learn in web environments, using what are called “Web 2.0” applications. Consequently, the shift away from knowledge being controlled and delivered in courses and classrooms is accelerating. Social software makes possible self-managed, personalised and informal learning environments. Online social learning is part of the wider movement towards informal learning (Cross 2007). As learners become more self-directed about learning, organisations have to be more aware of what prompts learning. People learn best when they need to know something in order to achieve a goal. It could be an

immediate goal related to a current work task, or it could be a longer-range goal related to their career. These are called “moments of need”. Generally there are five moments of need: (1) when we first encounter a task (2) when we try to remember something or how to apply it (3) when the task changes (4) when an obstacle arises or something goes wrong, and (5) when we want to learn more. In this environment, L&D practitioners must give attention to the supports that are required for learning. There is no single “best way” to go about this. Methods have to be appropriate to the particular learners and their context, and their current skills and readiness.

¶20-100 Return on investment One indicator that L&D practitioners are adopting a more systemic approach to L&D is evidence of their increased concern with evaluation and return on investment (ROI). A study by the National Centre for Vocational Education Research (NCVER) (Maglen et al 2001) concluded that higher productivity was not just the result of higher levels of training for workers. The researchers examined overall HR practices in each company and found that higher productivity tends to occur in organisations where training was an integral part of the organisation’s business strategy. It was not that the organisation simply had a policy of spending a given amount of money on training. In the NCVER study, which looked at specific firms, the return on training for firms in the footwear industry was $58 for every dollar spent. For firms in the wire products industry, the return was $190. The issue for trainers is to establish what is a reasonable benchmark for the L&D initiatives that they plan, and to identify what senior management considers to be a reasonable return. In some industries, and for some types of training, the dollar returns cannot be so easily established. The issue can be made complex for several reasons: • the objective of learning may not be direct skills and productivity improvement, but longer-term development and knowledge • the measures for some learning objectives are often only indirectly related to productivity and profits (eg safety training), and • learning generally occurs in a complex context, where other factors also influence performance outcomes (eg rewards and changes in work practices). Donald Kirkpatrick, the originator of the four levels of evaluation of training, and his son, Jim Kirkpatrick (2005), argue that relying on ROI to justify training may be dangerous. In isolation, ROI does not guarantee that training initiatives will be supported by senior managers, for all the reasons just discussed. Kirkpatrick maintains that the beginning and end-point of training should be the business. Objectives should be grounded in business needs and aspirations, guide the development of training initiatives, and provide the framework for evaluation. Another shortcoming of a narrow focus on ROI is that it does not help in evaluating training processes. If trainers are to improve their craft, then evaluation needs to address a broader range of issues, including: • clarity of the business objective of training • motivation and commitment of the learners to the program objectives • motivation and commitment of the learners’ managers • accuracy of the training needs analysis

• design of the training program and the methods, and • choice of modes of delivery. ROI may often be difficult to define or calculate, but the more important question is: How can trainers maximise the probability that L&D initiatives will contribute to business goals? Peak and Berge (2006) argue that L&D practitioners need to pay more attention to the audience for ROI exercises. The feedback that senior executives want about L&D programs will be different from what line managers want. They also caution that a finance-only evaluation of programs ignores the wider perspective indicated by the Triple Bottom Line approach, where social and environmental outcomes are also considered (see Chapter ¶17 at ¶17-070 for more information on Triple Bottom Line). Evaluation should, likewise, include consideration of individual and organisational capability, which are both thought to determine future performance. While determination of ROI may be useful in anchoring training activities to objectives and outcomes, the value of training cannot be reduced to a simple, monetary measure. The more important outcomes of L&D are the building of the kinds of capital described earlier, such as human capital and relationship capital.

¶20-110 Conclusion The challenge for L&D practitioners is to see how they contribute to the goals and strategies of the organisation, rather than simply pursuing a bigger L&D budget. Other managers in organisations generally view L&D people as focused only on L&D, which often means that they then only consult with L&D practitioners to request training. L&D professionals need to consider these requests more strategically from the organisation’s perspective, and adopt a performance consulting perspective. L&D practitioners need to think innovatively as well as strategically, because big budgets for training are not always available, even in large corporations. Combining multiple methods for training and tapping into the power of informal learning are significant points of leverage: more money is not always the answer. The provision of training to maintain and enhance technical skills and knowledge (eg IT, WHS, new products and so on) will continue to constitute a major part of the training function. There is no doubt that skills maintenance and enhancement are necessary aspects of the training agenda. E-learning is now an accepted part of the L&D repertoire, and it can be an economic way of improving access to standardised training. Information on new products, for example, can be packaged into courses quickly and distributed to thousands of employees simultaneously. This is one direction in which training is moving. However, it should also be remembered that training is one of the factors employees mention most when asked what they look for in an employer. In an economy that has become tighter, retaining high performers is a strategic necessity. For L&D practitioners, this means ensuring that L&D programs and initiatives address employees’ longer-term career aspirations satisfactorily. Finally, OD needs to be given adequate attention as the necessary complement to the L&D agenda. Organisations that develop a culture of learning and a whole-system approach to L&D compete more effectively in the marketplace than those that neglect these qualities. References ACCI 2011, Employers’ Commitment to Training, Australian Chamber of Commerce and Industry. Australian National Training Authority (ANTA) 2000, “Ministers focus marketing effort on industry”, Australian Training Magazine, June, pp 8–9. Arneson J, Rothwell WJ and Naughton J 2013, “Training and development competencies redefined to create competitive edge”, Newsletter, see www.astd.org/Publications/Magazines/TD/TDArchive/2013/01/Training-and-Development-Competencies-Redefined. Baker T 2010, “Does the HRD industry have a future?”, Training and Development in Australia, Australian Institute of Training and Development, vol 37(3), pp 12–14. Bersin by Deloitte 2013, The Corporate Learning Factbook 2013: Benchmarks, Trends, and Analysis of the U.S. Training Market, see www.bersin.com.

Billhardt B 2010, “What does mature e-learning look like?”, Training and Development in Australia, vol 37(3). Blass E 2009, Talent management: Cases and commentary, Palgrave Macmillan, London. Bradbery P 2010, “Learning and development as a spiritual journey”, Conference Proceedings, Spirituality, Leadership and Management: Leadership for the emerging world, Spirituality, Leadership and Management, Sydney, pp 140–152. Broad M and Newstrom J 1992, Transfer of Training, Perseus, Cambridge, MA. Clarey J 2010, “The next level of blended learning”, Training and Development in Australia, vol 37(4), pp 14–15. Cross J 2007, Informal learning, Pfeiffer, San Francisco. Dawe S 2003, Determinants of Successful Training Practices in Large Australian Firms, National Centre of Vocational Education Research, Adelaide. Edmondson AC 2008, “The competitive imperative of learning”, Harvard Business Review, July–August, pp 60–67. Gannan T 2008, “The future of learning and development: leaders’ roundtable”, Training and Development in Australia, vol 35(4), pp 28–29. Kirkpatrick D and Kirkpatrick J 2005, Transferring Learning to Behavior: Using the Four Levels to Improve Performance, Berrett-Koehler, San Francisco, CA. Leimbach M 2008, Trends in workplace learning and performance, Wilson Learning Worldwide, see wilsonlearning.com. Maglen L, Hopkins S and Burke G 2001, Training for Productivity, National Centre for Vocational Education Research, Adelaide. McKey P and Ellis A 2007, A Maturity Model for Corporate Learning Environments, Redbean Learning Solutions. Michaels E, Handfield-Jones H and Axelrod B 2001, The War for Talent, Harvard Business Press, Cambridge, MA. Peak D and Berge Z 2006, “Evaluation and eLearning”, Turkish Journal of Distance Education, vol 7(1), article 11. Rylatt A 2006, “Building workplace innovation: latest trends and thinking”, Training and Development in Australia, December, pp 9–13. Skule S and Reichborn A 2002, “Learning-conducive work: a survey of learning conditions in Norwegian workplaces”, CEDEFOP Panorama Series, no 30, Office for Official Publications of the European Communities, Luxembourg. Sloan EB, Hazucha JF and Van Katwyk PT 2003, “Strategic management of global leadership talent”, Advances in Global Leadership, vol 3, pp 235–274. Woodall D 2012, “A Blueprint for Integrating Learning into the Life of the Enterprise in Five Manageable Stages”, White paper, Skillsoft.

21. CAREER DEVELOPMENT Editorial information

Dr Polly Parker Associate Professor in Leadership and HRM, University of Queensland

Polly Parker’s contribution to this chapter is drawn from research undertaken in her capacity as a staff member at the University of Queensland.

¶21-010 Introduction A “career”, once the preserve of professionals and managers, is now accessible to everyone. Careers link individuals’ expression of interests and values with the society in which those activities are played out. Considering career as a process rather than a product incorporates all activities that contribute over time to a life story, one that is made sense of retrospectively, and constitutes one single career. The process evolves over time and incorporates experiences from many facets of a person’s life. Thus, career can be considered a holistic concept (defined by Arthur et al 1989, p 8) and the “unfolding sequence of a person’s work experiences over time”. The connection between career and the context in which it unfolds is broader today than if we compare it with its historically narrow definition. Traditional norms of career have been inextricably combined with organisations which, in the 20th Century organisation, became a dominant component of contemporary society. The stability and predictability of the environment led to a normative form of career. However, in the 21st Century, career has assumed a broader meaning that reflects the growth and development of a person’s contribution to society throughout the course of his/her life. Careers develop within and across more diverse contexts than the traditional organisation, reflecting a more expansive concept that encompasses more than achievement in paid work, and incorporates other aspects of life. Career development has become more difficult today as the environment is continuously changing. Career actors are now charged with assuming greater responsibility for planning and managing their own careers and for ensuring their own employability in a global economy. However, traditional markers of success are less evident, meaning that there is a greater emphasis on internal measures, known as the “subjective career”, coming into play. The pendulum of responsibility (ie for career planning and development) between organisation and individual has shifted in response to volatile international economic conditions. The challenge for individuals is to engage in work that is personally meaningful. The dual challenge for organisations is to meet performance imperatives to sustain competitive advantage and simultaneously attract, develop and retain necessary talent to support that aim. Thus, there is an ongoing need for organisations to continue to think about the work that they provide to employees. It needs to motivate individuals to achieve their aspirations, yet challenge them enough so that they grow and develop, thereby enacting their careers and enhancing their employability.

The markedly different context in which careers currently unfold is well captured by a new acronym (VUCA) that comes from the United States Army. VUCA refers to the “volatile”, “uncertain”, “complex”, and “ambiguous” backdrop to current organisational operations (Johansen 2012). The VUCA environment has created new employment patterns for individuals as skilled labour becomes a global commodity (Salt 2006). A key aspect of career growth associated with changed employment relationships away from traditional models (Rousseau 2004) invites attention to the foundations of psychological success for individuals as they assume responsibility for career planning and development. The focus has shifted away from “employment” to remaining “employable” (Fugate et al 2004). The implications for career development include the need for a strategic approach to careers on the part of individuals and their employers. The challenge of adapting to a changing world is one that demands a joint effort by both employees and their employers (Arthur 2008). Both parties need to ensure that they can adapt quickly, be resilient to address the inherent ambiguity and learn continuously to respond appropriately to change. Career development must be grounded in ongoing learning. The need to build and maintain a broad range of relationships assumes greater importance. Relationships provide psychological and technical support, access to information and are sites of growth for relational competencies that are required in a VUCA environment. Changes in the last few decades have had a particular impact on women who have always demonstrated greater variation in career patterns than men. Women’s presence in the workplace has increased dramatically since the 1980s, including within traditionally male-dominated domains. Dual career couples are common today. However, in the 21st century, women continue to exhibit unequal outcomes and garner different career capital compared with men (Duberley and Cohen 2009; Tharenou 2001). It appears that — while the new career landscape provides challenges for all workers — the lack of women in senior positions reflects a distinct disadvantage (O’Neil at al 2008), and one that cannot be explained simply by time taken out to have children. This chapter seeks to address several factors that pertain to career development in contemporary Australian organisations. The following topics will, therefore, be discussed: • a brief description of the VUCA environment that provides the backdrop for career development • skills shortages and the psychological contract in today’s context • new models of career that are applicable in a VUCA environment • diversity and the impact on careers • an overview of organisational career development strategies (This seeks to reconcile the needs of individuals and their organisations. Strategies include face-to-face career coaching provided by external specialists, career planning and development workshops, career discussions conducted by line managers and “career fairs” organised by internal human resource (HR) specialists.), and • ways that employees and their line managers can forge partnerships to support both individual goals and needs, and organisational imperatives for retention and skills development. Roles and responsibilities are identified and line managers are encouraged to be “career coaches”. The chapter concludes with a series of questions that will enable career actors to clarify their current situation and identify which career development strategies will best meet their needs.

¶21-020 Career development within a volatile, uncertain, complex, and ambiguous environment The role of “context” in career development has long been recognised. VUCA is an acronym that reflects the external environment in which organisations operate today. Rather than being a predictable and stable context, rapid changes in contextual factors have created conditions that are volatile, uncertain, complex, and ambiguous (Johansen 2012). The volatility is reflected not only

in the speed of change, but also in the dynamism on which it is driven. Globalisation has entered its third wave. The first wave reduced physical connections across the globe, and the second wave modified the effects of physical distance. The third wave has introduced access to digital content through the rise of workflow software (Friedman 2005). Changes in technology have eroded time barriers across the world and have transformed the way work is done. Costs are minimised and the speed to market has increased. International financial and investment markets operate around the clock as well as around the globe because work can now be outsourced and offshored. As skilled workers have become a global commodity (Salt 2006), an international labour market has emerged within a virtual environment, fuelling both international competition and collaboration. These changes raise our awareness of the increased uncertainty in which daily work is conducted and the lack of predictability which underpins the future. These forces together constitute unforseen complexity that creates ambiguity for individuals and organisations alike, and necessitates a shift away from simple connections between career and the environments in which they unfold. Furthermore, the ambiguity confounds sense-making processes and increases the likelihood of mixed messages, especially between employers and employees. Planning and developing careers within a VUCA environment requires different decisions and capabilities. The shift is not only from traditional skills but from outmoded mindsets. People consider what helps and hinders their goal pursuit (Hirschi et al 2013). Career orientations or mindsets assume greater importance than ever before as they inform individual self-efficacy and beliefs about the contexts and the opportunities and constraints they bring. Career development within a VUCA environment requires people to be proactive, to build resilience, to consider and develop a range of networks and relationships, and to anticipate and manage career transitions at several points within a career. The VUCA environment is grounded in a knowledge economy rather than an industrial one. Thus, the predominant outputs are knowledge-based, which require intellectual assets and explicit recognition of shareholder value to underpin business processes. New forms of career have emerged as the “traditional career” (marked by hierarchical structures, promotion based on seniority and longevity) is no longer appropriate. The concept of a traditional career is portrayed less as a norm today than as a metaphor reflecting a “mentality of careers in a particular era” (Baruch and Bozionelos 2010, p 73).

¶21-030 Skills shortages within a VUCA environment Skills shortages, which were a defining feature of the Australian labour markets in the 1990s, have fallen dramatically. In 2012, the number of occupations in short supply was the lowest it has been since 2007, registering 43% compared with 84% in 2007 (Department of Education 2012). Despite these overall figures, a research report published by the Australian Human Resources Institute (AHRI) reveals that 69.8% of respondents reported that their organisation experienced skills shortages (AHRI 2009). One factor that does not appear to change is that the most employable workers have the most choice. Skilled careers practitioners encourage individuals to define their criteria for career success “subjectively” rather than “objectively” (Arthur et al 2005). Career success can be viewed not as a function of organisational title, status, authority, or face-time spent in the office, but rather as an ability to recognise success in terms of one’s own values, chosen lifestyle, goals and beliefs. The point links strongly to the career orientation discussed earlier. The intent of most organisations is to actively enable career development. Therefore, eliciting the subjective career of employees is critical. This requires organisations to pay attention to the emotional aspects of an employee’s career experiences and history. Tapping into possibilities and imagining a desired future draw on different learning styles and contribute to a much fuller career picture than is possible by concentrating on objective success criteria alone. Both the subjective (internally perceived) dimension and the objective (externally prescribed) dimension provide useful material for career discussions. The first opportunity to do this is at the time of recruitment. The timing is critical because it is at the first interaction that the psychological contract between employer and employee is formed (Rousseau 2004). The significance of this is discussed in the following paragraphs.

¶21-040 The psychological contract in a VUCA environment

The relationship between employee and employer, which begins during the recruitment phase, is marked by two contractual agreements: (1) legal contract — which defines the boundaries of the employment relationship, and (2) psychological contract — which is an agreement between both parties to the contract that management will place the worker in situations where their needs can be adequately met (Rousseau 2004). Unstated assumptions and goals mean that much of the psychological agreement is implicit in nature and, therefore, easily violated. In a VUCA environment, building “employability” for employees is an essential strategy as career security shifts from employment to employability (Parker 2008). Competition for high-performing individuals is always high, and a number of employers proactively seek the talent they need rather than passively selecting from applications. Those seeking to excite, develop and retain employees are faced with supporting employee development while integrating employees’ skills and capabilities explicitly with company strategy. Individuals who recognise that challenge seek to know how they learn, how to develop resilience and how to become adaptable in all situations. They may view the organisation as a resource through which they may attain individual career goals. Rather than remaining loyal to one organisation, talented individuals are likely to become career capitalists, continuously scanning the environment for new and better opportunities (Inkson and Arthur 2001). In a VUCA environment, when there is greater ambiguity than ever before, attention to forming an effective employment relationship is paramount. Working together in a dynamic partnership is the key to success in terms of building higher capability, effective performance and employee engagement. The stakes are high, particularly given the cost of replacing key people is reported to be at least 150% of the leaver’s annual salary and benefits (Hudson 2004, p 3). Many organisations see the investment in formal approaches to career development as an optional “nice-to-have” (rather than a core activity), so it is positive to report an increase in career planning methods and policies between 1996 and 2008–09 (Kramer 2012). However a caution emerges from a recent Australian survey in which only 55% of respondents were confident that they could achieve their long-term career objectives in that organisation (Mercer Consulting 2011). These results suggest that building, rather than buying, initiatives in organisations may need rethinking. Work arrangements may need to cross traditional boundaries to support individual growth and enhance lifetime employability, despite the fear that individuals may choose to, or be required to, move to a different employment setting. In sum, the VUCA environment has created a different context in which careers unfold. The following section outlines three models of career that are particularly relevant in the VUCA environment.

¶21-050 New forms of career Three models of career have been identified as being particularly relevant in the VUCA environment. These are: (1) Boundaryless (2) protean, and (3) intelligent career models. Essentially, the models reflect greater mobility, an emphasis on subjective measures of success, and greater individual responsibility for growth and development. Boundaryless model Structurally, careers today are considered “Boundaryless”, reflecting a shift from a linear upward trajectory to movement across boundaries (Arthur and Rousseau 1996). Six boundaries have been identified, one of which is organisational. The Boundaryless concept invites a broader interpretation of career with the explicit naming of a range of boundaries, yet the usual interpretation is narrow (Sullivan and Arthur 2006). Psychological boundaries

are recognised within the model, yet, perhaps surprisingly, the boundary between work and the rest of life was not one specified, let alone discussed, in the original work. The omission is important when consideration of the career development of women is taken into account because of the hope that integrating personal and professional lives would promote women’s career success (Fletcher and Bailyn 1996). There has been a noted lack of empirical support for the innovative concept of Boundaryless careers, despite its predominance in the discourse of career (Lazarova and Taylor 2009). Protean model From an individual perspective, careers have become “protean”, where the process of growth and development is managed by the person not the organisation (Hall 2002; Hall 2004). Protean careers are marked by two significant features. They are: (1) self-directed, and (2) underpinned by individual values rather than external criteria. A protean orientation mirrors Proteus, the God who was able to change at will to adapt to the environment. For individuals, this means demonstrating agency and taking charge of career in a strategic manner, and adapting to the demands of the environment. To achieve such agility, career actors depend on current and relevant knowledge acquisition, which in turn highlights the continuous learning required by both individuals and organisations to respond appropriately in a VUCA environment. Empirical support for protean careers has been more forthcoming and is an ongoing source of research (Briscoe et al 2006). Intelligent career model A third model of career that holds particular relevance in a VUCA era is that of the “intelligent career” (Arthur et al 1995), proposed initially in response to the notion of the “intelligent enterprise” (Quinn 1992), which described the way organisations function in the emerging knowledge economy. In Quinn’s (and other writers’) views, the knowledge-driven organisation conceptualised this functioning through three interdependent areas of competency: (1) organisational culture (2) company know-how, and (3) company networks. The intelligent career enabled individuals working within such organisations to work out how to position themselves to align their strengths to the areas of the firm’s competitive advantage. Three complementary “ways of knowing”: (1) “knowing-why” (2) “knowing-how”, and (3) “knowing-whom”, readily connected the individual and the organisational perspectives. These aspects can be explored separately and then integrated. See Figure 21.1 Ways of knowing Knowing-why involves themes of individual motivation, the construction of personal meaning and identification. Underpinned by personal values, knowing-why further incorporates attitudes to family, community and other non-work aspects of life that affect career choice, adaptability and commitment. Knowing-how reflects an individual’s repertoire of career-relevant skills and expertise available to support current work behaviour. These may include formal qualifications and training as well as informal and tacit knowledge that emerge from work experience. People may have, or may wish to develop, a broader set

of knowing-how skills than their present job demands, and may seek to expand or change their work arrangements, to enhance career opportunities and employability. Also included is the ability to think strategically about one’s career. Knowing-whom includes a person’s work relationships, spanning the set of supplier, customer, industry and internal company connections that can support a person’s unfolding career. Knowing-whom also incorporates personal relationships and broader contacts with family, friends, alumni, and professional and social acquaintances — all of whom can enhance careers in three key ways: (1) by providing support (2) through transmitting reputation, and (3) by giving access to information. The intelligent career offers a distinctive way of seeing the interplay among the three ways of knowing. Such integration is a very practical way to consider careers holistically and to develop action plans to develop in areas of strength, as well as overcoming areas of weakness. The interconnections are continuously played out within an individual’s career and have been supported empirically (Eby et al 2003). Strength in one of the ways of knowing may be leveraged to develop capability in the other two. For example, when a female career actor has clarity about making a contribution to society (knowing-why), this may encourage her to tailor strengths to work in a particular industry (knowing-how) and also develop relationships with others who share her beliefs (knowing-whom). The interplay has been promoted as a process to build “career capital” (Inkson and Arthur 2001) or an overall set of non-financial resources that a person brings to their work. The intelligent career framework allows both employers (represented by line managers or HR specialists) and employees to gain a clear sense of important themes within each of the three ways of knowing and then across the three, informing subsequent career directions emanating from them (see Parker 2002 for more detail of the process). It is a practical model that can be used during recruitment, and again in more depth during career coaching and development planning. The focus is on meaning and interpretation that individuals attribute to areas they identify as important to them. They may arrive at new understandings themselves after following a reflective process that draws on their experiences. Decisions about career direction emerge from action places that are developed in conjunction with external or internal careers consultants. Empirical support provides further evidence of the utility and successful application of the model through interdisciplinary inquiry (Parker et al 2009). Success has been reported in the accumulation of career capital across successive employment situations (Arthur et al 1999), in global careers (Dickmann et al 2008), for MBAs (Sturges et al 2003) and career success (Eby et al 2003). Furthermore, it also stands alone to enable individuals to clarify career aspiration and identify plans for future enactment (Parker 2006; 2011). Figure 21.1: The intelligent career — three ways of knowing

(Source: Parker et al 2009.) The emphasis in the model described in Figure 21.1 shows a trend towards assessing subjectively ascribed measures of career success. The values-driven focus of the protean career, the knowing-why category of the intelligent career, and the psychological mobility of Boundaryless careers all support the fundamental role of personal values to drive career decision-making and career behaviour in a VUCA environment. Alongside a values-driven orientation, a balancing act is needed on the part of individuals to also be fully aware of career opportunities, understanding also that these may not necessarily align well with personal values. In times of skills shortages, employees generally have more freedom to accept positions that do align. However, there is evidence to show that certain groups are differentially disadvantaged in objective career success. The following section focuses on the careers of those who do not fit the traditional norms, including women, Generation (Gen) X and Y, and older workers.

¶21-060 Diversity and careers The demographics in the Australian workforce continue to change, mirroring a global trend. Australia has seen an increasing number of women re-entering the workforce after time away. Seventy-two per cent of these women work on a part-time basis (APESMA 2010) or with flexible hours that help them balance paid employment and family responsibilities (Hall and Harley 2000). One notable advance in Australia has been the increase in development of policies focused on (for example) career planning, career break schemes and targeting women employees in recruitment, training and promotion (Kramer 2012). However, women received less information, assistance and opportunities to manage and develop their careers within organisations as compared with men (Mercer Consulting 2011). A notable feature of career models and patterns is how they serve women and men differently. Women’s career patterns are more heterogeneous than men’s. They are marked by discontinuity and zigzags. Descriptions include women opting out, or taking scenic routes or lacking in ambition. Perhaps the most appropriate explanation comes from Bateson (1990) who says that women “compose a life”. These explanations reveal how their career experiences have been undervalued because they differ from conventional models (Clarke 2010). The paradox is that organisational realities demand the separation of career and life, and families continue to be liabilities to women’s career development in organisations, which are predominantly organised for and reward traditional career paths (O’Neil et al 2008). Women often have to choose between their careers and family relationships (Valcoeur and Talbot 2003). The agency required for the Boundaryless career showed that stress, anxiety and insecurity ensued for male and female workers, but particularly for women (Jordan et al 1991). Women were more likely than men to show extra-organisational mobility by moving employers, while men shifted within an organisation, leading to different effects on objective and subjective career success (Ng et al 2005). The enduring nature of traditional roles in dual career families showed that women’s apparent success in Boundaryless careers came at a cost of earnings. Powell and Eddleston (2008) attributed the difference to the career expectations of men and women and the life domains from which they focused their achievements.

However, women on protean paths registered similar levels of success in terms of career satisfaction and income as others on traditional paths (Reitman and Schneer 2008). A helpful model that women can relate to is that of kaleidoscope careers (Mainiero and Sullivan 2006). The model suggests that women stage priorities and, within a VUCA environment, they craft their careers to lead a holistic life that incorporates competing domains of paid work, family and leisure activities. Mainiero and Sullivan (2006) identify three key stages in women’s careers which predominate at a different life stage: (1) authenticity (2) balance, and (3) challenge. In early career, “challenge” is at the forefront, replaced by “balance” in mid-career and “authenticity” in late career. The kaleidoscope metaphor emphasises the changing foci embedded in a holistic context of a life that has competing demands that change over time. While developed specifically to address the different career outcomes women experience compared with men, the model also has a lot to offer men as they consider career development and make personal adjustments in work and family domains so that paid work doesn’t overtake their lives. Relationships are a feature of women’s career strength, yet these also apply to the careers of men. A relational perspective was initially forwarded to explain differences between women’s and men’s growth and development, using language and concepts from women’s experience (Belenky et al 1986). Relational perspectives emphasise the importance and centrality of relationships in a person’s life for all career actors. Associated with people sustaining human relationships with others, career growth from this perspective reflects interdependence and an ability to work effectively with others in teams — qualities that underpin effectiveness in a VUCA environment. This perspective is gaining prominence in career practice and theory. Individuals require both autonomous skill sets (to enable initiative and independence) and relational competence (the interpersonal processes that connect people and facilitate effective communication). Interdependence acknowledges the mutual influence that arises from interpersonal interactions and gives rise to high quality relationships (Fletcher and Ragins 2007). Career development occurs through a reciprocal process of learning with and through others, and the focus suggests that career development within organisations adopts a broader perspective in policies and practices.

¶21-070 Generational diversity Baby boomers (born 1946–1961), Gen X (born 1961–1976) and Gen Y (born 1976–1991), all coexist and present unique challenges for career development. Motivational drivers and fundamental beliefs about career can vary across these three groups — making it difficult for organisations to reconcile individual and organisational career development initiatives. While individuals’ career goals and life circumstances vary, generational traits and characteristics have been identified (Salt 2006). Baby boomers tend to be career oriented, which leads to concerns dominated by the need for succession planning and flexible work options, such as semi-retirement, contracting and part-time work. There has been a stronger focus on recruitment of older workers (ie those over 50 years of age) in Australia. For example, Kramer (2012) reported a shift in targeting older workers by organisations from 4% in 1996 to 16% in 2008–09. The focus is positive and necessary in light of reports that older employees experience lower rates of satisfaction with organisational efforts to facilitate their career development, and lower confidence in reaching their career goals (Mercer Consulting 2011). Career adaptability, critical to survival in a VUCA environment, is evident in older workers, particularly women, as they experience career transitions in and out of the workforce (McMahon et al 2012). Gen Xers reportedly complain about being held back in their careers and sometimes view organisational career development systems and outcomes cynically. They must deal with the retirement of the baby boomers while many express resentment of the expectations and opportunities afforded to their Gen Y colleagues. Gen Y, known as “helicopter kids”, are technologically savvy and global thinking. They have

grown up in the information age and many are deeply concerned about the state of the natural world and ethical causes. Unlike their baby boomer parents, they are relatively uncommitted to organisational careers, less willing to bide their time climbing a corporate ladder and less fazed by authority. While compromise is an expected aspect of translation of career strategy into practice, for university students career compromise has resulted in career-related distress (Creed and Hughes 2012). Many companies who invest in graduate recruitment struggle with the retention of these young and talented employees, no matter how much they invest in their induction and development programs.

¶21-080 Current career development practices The major strategic aims of organisation-wide career development systems include (CIPD 2003): • growing future leaders • retaining key staff • supporting changes in organisational structure • building organisational capabilities through development, and • aligning individual and organisational goals. Effective career development practice relies on the joint involvement of employees, their line managers, HR practitioners and senior management (Van der Sluis and Poell 2003). In Australia, many large organisations report that career development policies and practices are in place and there has been increased use of formal written strategy for the career management of their employees (Kramer 2012). A strategic approach will integrate different HR and “people management” strategies, including performance management systems, recruitment, reward systems, learning and development, and leadership development (Ulrich and Brockbank 2005). While career development is supported in many different ways, current practice suggests that there are some common approaches implemented by companies across different industry sectors. These practices range from a basic acknowledgment of individual career plans to innovative methods to compete for talented employees and are discussed in the following paragraphs. Practices that focus on basic career development A minimum prerequisite for effectiveness is an acknowledgment of shared responsibility between employees and line managers for employees’ career development. Career goals are often documented following a discussion in performance reviews. Both line managers and HR practitioners provide informal career support to those who request assistance. Employees are expected to have a career development plan, although it is often focused on formal training rather than on-the-job development (Baruch 2004). The company supports all or part of formal studies (eg a Master of Business Administration (MBA)) through sponsorship that may require successful completion of courses. Practices that focus on building individual career awareness and self-reliance When strong links between performance management and career development exist, career conversations are undertaken as part of a performance cycle or annual review. Career development is positioned proactively and employees are expected to discuss career issues with their line manager and/or HR as soon as the need arises, rather than passively waiting for formal reviews. HR specialists who are effective career coaches have an acknowledged role in facilitating increased self-awareness on the part of employees. In well-resourced and forward-thinking organisations, employee self-awareness is further enhanced by sponsored one-on-one career counselling sessions with external career coaches (Bench 2003). Many companies pay for external career counselling support to those employees who are restless and underperforming and, increasingly (in a labour market short on skills), to those individuals at all levels that the company wishes to retain and further develop. Career planning workshops Externally-facilitated career planning workshops are also provided for targeted groups. Such workshops

are often implemented when a work group is experiencing organisational change and restructuring. Organisations who strive to be employers of choice will also offer career planning workshops that have no agendas, other than to provide participants with a “reflective space” in which they can engage in exercises to support career goal-setting and development planning, and use selected assessment instruments to support informed career decision-making. Assessment instruments include the Myers Briggs Type Indicator, Career Anchors Inventory and the Intelligent Career Card Sort (ICCS™) (Parker 2002). Virtual career centres Technology-based systems that support individual self-awareness have been developed to assist employee career self-management. Virtual career centres are available online and provide a menu of selfhelp tools, such as self-assessment and self-scoring instruments, career planning models, checklists and tips for successful career management. Some have tips on writing résumés and preparing for behaviourbased interviews. Capability dictionaries Increasing numbers of organisations are developing capability dictionaries that identify the transferable skills, knowledge and attributes most valued by the company. Line managers who are good career coaches expect self-reliant employees to access these dictionaries and use them to draft professional development plans. Performance feedback from a variety of sources significantly contributes to individual self-awareness (Maylett and Riboldi 2007). In some companies, 360o feedback is a strategy that informs both performance management and career opportunities. Practices that develop a select few Most companies struggle with differentiation among employees in terms of identifying talent (Michaels et al 2001). However, managing the employees who contribute to the competitive advantage of an organisation usually requires special treatment. Particular groups, such as graduates, senior managers and those identified as high potential “talent”, may be singled out for attention, which they may or may not want. High potential schemes are increasingly used as a means of staff development. An Australian survey showed such schemes increasing from 19% of organisations surveyed in 1999 to 55% in 2008–09 (Kramer 2012). Career coaching Externally-provided career coaching (paid for by the organisation) is one practice that is made available to those on talent programs, as well as managers, senior executives and those with specialist technical skills. The career coaching is confidential and may involve one or several sessions. This practice exemplifies the “win-win employment relationship” in that there is no expectation that the employee will be retained, although this is generally the ideal outcome for the organisation. Individuals in “high potential” schemes may be encouraged to undertake some form of development opportunity. Organisational support is more likely to be provided to these workers in the form of travel, conference attendance and tertiary tuition fees and so on. This practice provides explicit reinforcement for career self-management principles aligned with organisational goals and skills needs. Mentoring Formal mentoring schemes link experienced individuals with graduates or high-potential staff. These relationships are encouraged in some organisations to support career development and planning. Ementoring is an option to increase the numbers of women (in particular) to progress their careers (Headlam-Wells et al 2006). Although mentoring schemes have mixed success as a formal strategy, the career sponsorship provided to high-potential individuals by a well-placed mentor should never be underestimated (Ragins and Kram 2007). The most recent aspects of developmental relationships focus on peer coaching as a tool to accelerate career learning. This previously largely overlooked method of learning can support two people of equal status actively participating in a process of helping each other on specific tasks or problems. Attention to establishing effective peer coaching partnerships can pay dividends in terms of employee engagement and performance outcomes (Parker et al 2008; 2012). Career breaks Career break schemes enable employees to be granted leave without pay for a finite time, often for a

specified purpose. These schemes may be available to all employees, but are most likely to be used by those individuals the organisation wants to retain. Some research suggests, however, that — despite the availability of career breaks — individuals who actually take these risk being perceived as less committed to their careers with the organisation. Therefore, taking a career break may constitute a risk to advancement. Given the costs of recruitment and the challenges associated with retaining graduates and others in a lean labour market, more and more companies are using career breaks as a way to meet the needs of employees and potentially retain their experience and skills in the medium to longer term. Building opportunity awareness High levels of self-awareness are a necessary but insufficient condition for career success. Linking selfknowledge with knowledge about career opportunities increases the likelihood of informed decisionmaking and a successful transition to a new role. Organisations that want to encourage both employee self-reliance and a development culture of “growing their own” require a flexible and creative approach to career opportunities (Simonsen 1997). Examples include promoting awareness of internal career options by making information about internal vacancies easily accessible. Even if an internal appointment is not made, the transparency of possibilities ensures employees are informed and able to proactively seek and access job opportunities. Furthermore, many companies will advertise internally before advertising externally to promote internal labour markets. Many companies use intranet sites for online information, vacancy boards and postings. These sites can also include information about how to apply for vacancies, what capabilities are required, whom to contact and so on. Other initiatives include career-planning workshops and self-assessment tools provided by the organisation, which all promote opportunity awareness as well as self-awareness. Job shadowing may be involved to provide specific knowledge about work. Career fairs Innovative organisations are staging “career fairs”. A career fair is usually designed and organised by senior management in partnership with HR staff and external career specialists. The typical career fair is an event that is open to any individual in an organisation and/or is targeted at a particular division. The objective is to provide large numbers of employees with an opportunity to gather information about the variety of roles that exist in the division and to meet face-to-face with managers and others working in selected roles in the division. Career fairs are usually held over three working days. Short seminars, guest speakers and career planning sessions are available to volunteers who register to attend and are given time off to do so. Ensuring flexible internal labour markets A successful internal labour market requires a strategic view that takes into account the long-term strategic needs of the company overall, rather than a short-term gain for any specific department or team. Fear of losing good people can sometimes result in line managers holding on to their capable staff. When a company actively dissuades this behaviour on the part of managers, encouraging them to support the internal career mobility of staff, anecdotal evidence suggests that employees are more likely to stay with the organisation than leave through frustration and lack of job satisfaction. Organisations that are most successful in developing internal labour markets are those that have shaken off traditional concepts of “a job” and realised that modern work opportunities do not revolve around inflexible organisational structures. The focus shifts from rigid job descriptions to work profiles that allow greater flexibility. Furthermore, developing capability ladders rather than job position ladders facilitates a shift in mindset by all workers. Some organisations encourage employees to propose their next role or project. Secondments and projects One way of trying out future roles is by internal secondment and opportunities for cross-company project work. These development opportunities are aimed at both employee advancement and enrichment. The identification and trialling of work in other parts of the organisation, even if it is outside a person’s core functional area of expertise, also demonstrates organisational flexibility and promotes the development of broad transferable capabilities. Promoting innovation Organisations compete for the brightest and the most innovative employees. High-tech companies, in

particular, actively compete with each other to develop new products and intellectual property in high-risk, volatile environments. In some industries, survival depends on attracting and retaining highly creative and entrepreneurial individuals. Today, most of these individuals belong to either of the three generations discussed earlier. As each generation tends to have different motivational drivers and career beliefs, companies are required to identify and satisfy divergent needs that will result in retaining talented employees. Traditionally, larger corporations have found it more difficult than smaller ones to retain talented, innovative leaders — many of whom opt out to start their own companies or join smaller ones where greater rewards and autonomy are possible (Mainiero and Sullivan 2006). Career management strategies to sustain growth and innovation while retaining entrepreneurial and innovative employees include providing innovators with an equity stake in new ventures and products. New ventures that are spun off from the parent company provide hard-to-retain individuals with opportunities to meet needs and interests, such as autonomous research, entrepreneurial drivers, high financial reward, recognition for their ability to generate new ideas, flexibility and freedom. Forging a career coaching partnership When both employee and line manager recognise the shared responsibility for documenting career goals and development strategies, a partnership is developed that is most powerfully experienced through the medium of a quality career discussion (Kidd et al 2004). Peer coaching can be useful as a strategy that is low cost and effective (Parker et al 2008).

¶21-090 Developing the partnership between employee and line manager Line managers have the potential to influence employee perceptions of career opportunities. Career coaching is a model that invites both parties to actively communicate needs and expectations, engage in dialogue about career choices and trade-offs, and articulate the psychological contracts mentioned above. Effective career coaching partnerships need to be supported by appropriate resources, training and a set of explicit organisational career development principles (Younger et al 2007). Career coaching has been defined as “a process that enables an employee to have focused attention on their individual career concerns, leading to increased clarity, personal change and forward action” (CIPD 2003). Career coaching was reportedly undertaken by line managers in 78% of 700 UK-based employers (CIPD 2003). A more recent Australian survey awarded “poor marks” to four HR activities, one of which was coaching. There was a shift in responsibility for the activity away from HR to line managers. Seventy-nine per cent identified coaching as the line managers’ responsibility. The poor marks also come from the decrease in effectiveness, with coaching being rated the least effective. Furthermore, coaching was identified by both HR and line managers as an activity they would like to relinquish responsibility for (Kulik and Bainbridge 2006). Issues typically stem from organisations not providing specific coaching-related training to support the line manager as a career coach. In addition, a lack of senior management commitment and expertise and lack of line manager skills in career coaching have been identified as missing, thereby creating significant barriers to effective organisational career development. An appropriate framework for designing and driving career discussions is that of the intelligent career, described in ¶21-050 (Parker 2002; 2006). Career coaching is viewed as a leadership capability aimed at facilitating the career development of all staff (Van Velsor and McCauley 2004). The purpose of the partnership between the parties involved is to encourage dialogue and exploration of both individual and organisational needs pertaining to individuals and their career development. In working with client organisations, the roles and responsibilities of all parties have been identified with respect to an effective career coaching partnership. The following diagram outlines the model and identifies respective responsibilities. Figure 21.2: Career coaching partnership — roles and responsibilities

(Source: Lesley Armstrong Consulting Ltd.) The career discussion is the most tangible expression of partnership in the career coaching process. When a line manager is an effective career coach they can conduct a quality career discussion that helps employees consider career alternatives and make decisions about future options and current development needs. The line manager is ideally placed to facilitate career discussions because their position enables them to see the organisational perspective as well as the individual’s situation. Working daily alongside team members, they are more likely to be aware of issues beyond the immediate work environment that might impact on an employee’s career decisions. The partnership is strongest when trust and rapport are evident and where the employee feels that their career matters (Amundson 2006) to the line manager and the organisation. A line manager can help the employee draft a concrete action plan so that goals are more likely to be achieved. He or she can prepare people for future opportunities by not only discussing capabilities that the employee can develop, but also by facilitating access to training and development opportunities, both on and off the job. Employee and manager satisfaction with career discussions are also influenced by the extent to which each party is prepared for the discussion (Kidd et al 2004). This is particularly important given that many managers report that they do not have time or the confidence to conduct career coaching. Table 21.1 provides a list of questions that have been effective with client organisations to help managers and staff prepare for quality career discussions. Table 21.1: Career coaching questions The individual employee

The line manager/career coach

What would I like to get out of this career discussion?

What would I like to get out of this career discussion?

What am I interested in?

How can I help the employee align their needs with the organisation’s and the realities of organisational life?

What are my career goals and aspirations?

How can I help this employee clarify his or her values, interests, skills, work styles and preferences?

What do I want from this organisation?

How can we develop this employee’s potential?

What are my strengths and weaknesses?

The costs of employee turnover are high. Can we retain this employee for their own good and the good of the organisation?

What do I need to develop to open up career opportunities?

What is this person’s potential next role?

How can this organisation help me meet my needs What information might I have that can help them and motivators? identify opportunities? How do I best manage the transition from one role to another?

How can I help this person smoothly manage the transition to a new role so that he or she can be more effective as quickly as possible?

How marketable am I if I decide to leave this organisation?

—

How do I talk about balancing work/life demands without appearing to be less committed to my work?

—

Barriers to effective career discussions There are several barriers to effective career discussions. These relate to: • a lack of time • a focus on short-term rather than long-term needs, and • quick fixes or problem-solving. Time, and short-term versus long-term thinking Typically, career discussions are tacked on to the end of performance reviews and do not allow either party to have an in-depth discussion dedicated to career aspirations and development opportunities. The career conversation tends to be about short-term development needs (ie the next role, next project or next promotion), rather than longer term work/life aspirations. Avoiding quick fixes A critical challenge for career coaches is trying to avoid the “quick fix”. Most line managers have been promoted to positions of responsibility because they are good problem solvers and can fix things. Career coaching draws on different skills and attributes. It requires an ability to manage the tensions between hearing another person’s career issues and providing support for the employee to find an appropriate solution. An effective career coach will provide information about possibilities, but will avoid telling direct reports what career decisions they should make. Individual career self-reliance is facilitated when individuals take responsibility for their own behaviours and decisions. Skill requirements in coaching Effective career coaches need a range of experiences and skills, as well as an awareness of what can compromise positive outcomes (Parker et al 2012). A basic knowledge of contemporary career planning models and frameworks is necessary, as well as confidence in their own ability to facilitate another person’s exploration. Furthermore, a reasonable level of competence in micro-communication skills, such

as active listening, reflecting on content and feelings, asking open questions, challenging, paraphrasing and summarising, supports the career coaching process. Individual Career Planning Model Figure 21.3 provides a framework for participants’ own career self-analysis. They are expected to extrapolate this model to their work as a career coach with their team members, as well as with volunteers during a career fair. Figure 21.3: Individual Career Planning Model

(Source: Lesley Armstrong Consulting Ltd.) Career conversations — role play During training sessions with career coaches, participants appreciate the opportunity to role play typical career conversation scenarios — some of which are provided in Figure 21.4. Figure 21.4: Typical career conversation examples I am happy in my role but would like to lead a team in 6–12 months. What do I need to do to move into a team leader role? The project I have been working on finishes in three months and I need to find another role. What do I need to do? I have been in the business unit for several years and want to broaden my experience in another part of the bank. What shall I do? My career is going nowhere! What shall I do?

I’m a technical expert and was told that the only way to progress is to move into a people management role. I don’t like managing people — I don’t think I’d be good at it. What are my options? I think I need to increase my profile in the bank. Other people seem to get opportunities that I don’t. What can I do?

¶21-100 Conclusion Career management has faced challenges in contemporary organisations to meet the diverse needs of employees and employers. In the VUCA environment, individual careers are increasingly self-managed with organisational support. Successful career development programs have increased as their importance as a strategy to attract and retain capable staff. The overall aim for HR practitioners or senior managers is to think strategically about careers so there is alignment between career development practices and the overall strategic direction of the organisation. The process is iterative and begins by selecting the right people and creating a positive, mutually understood psychological contract. Subsequently, success stems from deploying a range of strategies to support employee self-reliance and ongoing employability. Taking responsibility — a reality check In conclusion, the following list of proposed questions may serve as a check to identify the current situation and possible next steps in your organisation: • What career development strategies are in place? (eg career coaching provided by line managers after performance reviews, career break schemes, mentoring, career planning workshops for all staff and online vacancy board) • With regard to performance indicators, how will you know that the career development programs and initiatives you undertake have achieved their objectives? Will you use indicators, such as staff satisfaction surveys, manager feedback, participant feedback, short- to long-term retention, uptake of training and development, staff movements? • What do you expect to achieve through a focus on employee career development — for the organisation itself, individual employees, line managers and other stakeholders? • Who will participate in selected career development initiatives? (ie who is the target audience? Does it include senior managers, all staff, those on “talent” programs, graduates and so on?) • What resources are required to implement selected strategies? (eg budget to design an intranet career site, expertise from HR practitioners or external career specialists, career coach training for line managers, customised career planning workbooks and so on). The answers to these questions should assist in clarifying your current situation in the new VUCA career landscape. HR practitioners and management are encouraged to focus on strategies that will strengthen the partnership between employees and their line managers. For more information on topics covered in this chapter, please refer to the CCH Human Resources Management subscription information service. References AHRI 2009, “Australian experiences with skilled migration”, AHRI HRpulse report, Melbourne. Amundson NE 2006, “Active engagement and the influence of constructivism”, in M McMahon and W Patton (eds), Career Counselling Constructivist Approaches, pp 85–93, Routledge, London. APESMA 2010, “Women in the professions: The state of play 2009–10”, Women in the professions survey report, The Association of Professional Engineers, Scientists and Managers, Melbourne. Arthur MB 2008, “Examining contemporary careers: A call for interdisciplinary inquiry”, Human Relations, vol 61, pp 163–186. Arthur MB, Claman PH and DeFillippi RJ 1995, “Intelligent enterprise, intelligent career”, Academy of

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22. MANAGERIAL SELF-DEVELOPMENT: A SELF-DIRECTED APPROACH TO DEVELOPING MANAGERIAL TALENT Editorial information

Paul L Nesbit Macquarie Graduate School of Management

This chapter is drawn from research undertaken in the author’s capacity as a staff member at Macquarie Graduate School of Management.

¶22-010 Introduction The importance of managers and their development The world of work is being transformed by innovations in digital technologies (computers, internet and so on) and the increasing globalisation of marketplaces (Friedman 2007). Within this new organisational environment there is increased focus on human resources as a source of competitive advantage (Lawler 2008; Pfeffer 1998). Given that organisations depend critically on the quality of their managerial talent, considerable research attention has highlighted the need to develop organisational leaders who are able to exhibit cognitive and behavioural complexity and respond flexibly in the face of dynamic and complex environments (Yukl 2012). In 1995, the federal government released a report on the leadership and management skills of Australian managers (Karpin 1995). This report highlighted the need for greater attention to the development of managers at all levels of the organisation. The taskforce conducted extensive research into the current level of skills of Australian managers and identified eight main areas where managers needed improvement. In particular, the taskforce drew attention to people management skills (eg leadership, communication, negotiation, conflict resolution, creativity and innovation) and managing change as the principal areas in need of development among Australian managers. Subsequent studies, such as the 2003 Australian Institute of Management (AIM) report Management development practice in Australia and a global benchmarking project on Australian management practices conducted for the Department of Innovation, Industry, Science and Research (Green and Argawal 2009), have reiterated the need for continuous development of management skills within changing organisational environments. Thus, in the last two decades there has been a growing realisation that organisational and national prosperity is linked to continuous development of managerial talent. In parallel, with this increasing attention to management development, there have been growing concerns expressed about the appropriateness of formal management development activities, especially the value of Master of Business Administration (MBA) programs. For example, Henry Mintzberg (2004) in Managers not MBAs argues that most MBA programs are simply “training in analytical skills for analytical jobs … like

investment banking and consulting” — whereas the development of managers requires exposure to actual management practice and reflection on those experiences. In their article “The end of business schools: less success than meets the eye”, Jeffrey Pfeffer and Christina Fong (2002) also questioned the appropriateness of formal management education and challenged the relevance of business schools, claiming: “there is little evidence that mastery of the knowledge acquired in business schools enhances people’s careers” (p 80). Such criticisms highlight the fact that management is fundamentally about practice and behaviour within organisational settings and that formal class-based learning, while providing for the learning of facts and theories, is deficient in preparing students for the complexity of demands that they will experience as managers. Lecturing to would-be managers about the research evidence on increasing motivation or providing effective team leadership can only provide a pale reflection of the actual experiences of managers as they actively engage in the process of motivating and leading teams of highly skilled employees. Many organisations, aware of the criticism of formal management education, have structured their internal development programs to make stronger links between theory and the practice of management (Rappe and Zwick 2007). For example, 3M provides an accelerated leadership development program that targets high-potential leaders and uses a combination of lectures, action projects and coaching strategies (Alldredge, Johnson, Stoltzfuz and Vicere 2003). Such programs employ action-learning strategies (Pedler 2008) where managers use their work experiences as stimuli for reflective learning and “experiment” with insights about behaviour so as to refine their understanding and skills. Action learning highlights the role of reflection on managerial experiences as a key driver of learning in the process of managerial development. While these development programs enhance the managerial relevance of the training, their design and operation typically require expensive and extensive effort on behalf of organisations. Consequently, many organisations choose to target these development programs at selected groups of managers. By improving the skills of those destined for leadership in an organisation it is assumed that management within the organisation generally will be improved. However, given that organisations are systems (Baker 1973), the targeted selection and exposure of “fast track” managers may have only limited impact on the overall managerial culture in an organisation. As the previously mentioned reports on Australian managers advise (AIM 2003; Green and Argawal 2009; Karpin 1995), all managers, not just the most talented, need to be stimulated to develop their managerial skills and improve their performance. One solution is to promote self-development efforts by managers to continuously assess their own capabilities and to initiate their own development actions. In addition to the benefits accruing to managers and to organisations of managers enhancing their skills, organisations also benefit through the potential to reduce costs associated with development programs. Indeed, this concern for controlling staff development costs is increasingly relevant in today’s environment of greater career mobility (Nesbit 2012). In summary, managerial self-development (MSD) can and should play a central role in the strategy of management and leadership development within organisations. The remainder of this chapter will focus on the nature of self-development and recommendations to encourage its application.

¶22-020 The nature of managerial self-development MSD focuses on a process of self-initiated and self-directed development of skills and knowledge to enhance managerial performance. It accords with adult learning theory in stressing engagement with experiences as the primary learning strategy, as well as highlighting the responsibility of the learner within the learning environment (Galbraith 1991; Smith and DeFrates-Densch 2008). Furthermore, while selfdevelopment is applicable to all managerial staff within an organisation, MSD can be targeted to the specific individual needs of any particular manager. Formal training programs may be required for teaching the self-development model and its application but, once learned, the process focuses on selfdirected actions on behalf of managers. In a sense, MSD is about “learning to learn” and, once acquired, the skills enable more refined and productive self-development efforts.

¶22-030 The managerial self-development process

MSD focuses on self-directed learning within the organisational environment. In this learning scenario the manager has primary responsibility for the articulation of development needs and the pursuit of corrective action for development of skills and knowledge. The MSD model is presented here as a conceptual guide for the efforts of organisations and managers in promoting and enacting self-development, and highlights a sequence of processes that guide and aid self-directed learning. The MSD process is separated into two phases: (1) Self-understanding phase: This phase deals with self-understanding, especially of one’s performance gap. (2) Self-change phase: This phase focuses on making self-directed change. Key to the MSD process are three interrelated skills: (1) self-awareness (2) self-reflection, and (3) self-regulation. Figure 22.1 highlights the MSD process that draws on the integrated operation of these three skills within the two phases mentioned above (Nesbit 2012). Figure 22.1: An integrated model of managerial self-development

(Source: Adapted from Nesbit 2012.) Managerial development implies a change, an evolution, growth or advancement from a current level of performance to a capacity for more complex and sophisticated leadership action. The degree of development need is reflected in the concept of a “performance gap”. This refers to the difference between current performance and needed or desired performance. Awareness of this gap plays two important roles in self-development: (1) it highlights the direction of development efforts for managers (eg enhancing listening skills) or more broad-based skills (eg team leadership and so on), and (2) having an awareness of one’s “performance gap” stimulates the motivational effort required to engage in actions to close the gap. Motivation is essential in the development process as it provides the energy and drive to persist in change endeavours and to overcome obstacles encountered in

such efforts (Locke and Latham 1990; Zimmerman 2000). The self-understanding phase outlines the processes involved in managers gaining self-awareness of their “performance gap”. Self-awareness is generated from feedback from two primary sources about a manager’s performance: (1) people familiar with the manager’s work (eg one’s direct manager, colleagues, direct reports and customers), and (2) the manager’s own attention to their work experiences. Self-awareness is also developed by reflecting on the information provided by each of these sources. Self-reflection is concerned with deeply thinking about feedback and experiences to learn new insights about one’s actions and thinking that contribute to greater self-awareness (Daudelin 1996; Seibert and Daudelin 1999). The awareness of and reflection on one’s skills, and the identification of one’s “performance gap” are, however, not sufficient for engagement and success with self-development efforts. Many people learn about gaps in their performance but choose either not to deal with them or put relatively little effort into making changes. Even if a person feels compelled to engage in dealing with a development need, it is likely that a person may lose momentum for the change, especially if it relates to changing a deeply ingrained pattern of behaviour (Baumeister, Gaillot, De Wall and Oaten 2006; Polivy and Herman 2002). Thus, self-understanding needs to link with activities associated with the self-change phase. Personal development in the self-change phase is a complex and challenging process. It incorporates the use of a variety of strategies that the manager may draw on in support of their change efforts. The study of these strategies and their impact on change is ultimately related to a manager’s skill in self-regulation (see Figure 22.1). Popular writers on success and achievement provide some useful insights into motivating changes in behaviour, but their advice is typically too broad and simplistic as a self-regulation guide (Nesbit 2007). In particular, their advice tends to under-utilise environmental influences to support change efforts. On the other hand, social cognitive perspectives of self-regulation (Bandura 1982; 1991; Zimmerman 2000) provide a more comprehensive perspective on the self-regulatory process, viewing behaviour as embedded in dynamic systems involving reciprocal deterministic influences related to personal factors, environmental forces and behavioural outcomes. The MSD model incorporates insights from social cognitive theory to inform the nature of strategies that can be employed to support selfdevelopment action plans. In the following sections, the three interrelated skills of self-awareness, self-reflection and self-regulation will be examined in terms of their nature and their relevance to the MSD process. Specific practical steps that managers can use to enhance engagement for their own self-development are also highlighted.

¶22-040 Self-awareness Self-awareness is often considered little more than an increase in self-understanding that comes relatively automatically from thinking about one’s actions. However, for accurate self-awareness it also requires the deliberate and conscious management of perceptual biases and emotional reactions to feedback. While reflecting on work situations can provide managers with insight about their skills, knowledge and performance, it has been found that reflections can also lead to the uncovering of problem areas in performance, which may threaten self-esteem and lead to disengagement with the whole selfdevelopment effort (Trope, Gervey and Bolger 2003). Since people vary in their capability to manage their emotional reactions to critical performance feedback (Kaiser and Kaplan 2006), self-awareness can, therefore, be considered a managerial skill. As with other skills, improvement in self-awareness (accuracy and acceptance of insights) can be developed with attention to the nature of the processes involved and in their training. Research on the alignment of self-rating and the rating of others has demonstrated that many people are not very good at being self-aware (Solansky 2010). This may seem surprising given that each of us is privy to our own thinking about the causes of our behaviour, and is observant of all our behaviour. However, there are two main problems associated with accurate self-awareness:

(1) perceptions of behaviour are often distorted by perceptual biases (Ashford, Blatt and VandeWalle 2003; Willard and Gramzow 2008), and (2) we do not often put ourselves in positions of challenge where we can become more aware of the level of our skill and knowledge competencies (Audia and Locke 2003; Whetton and Cameron 2007). The main reason we distort our perceptions about ourselves and limit exposure to challenging environments is to protect our self-concept (Kaiser and Kaplan 2006), which we do relatively automatically when we are faced with judgments or evaluations about our behaviour. Therefore, to enhance self-awareness, managers need to actively manage their emotional reactions to feedback. The first step is being more attentive to one’s emotions as they arise in the feedback process, and recognising one’s own thoughts of rejection or censorship of feedback. A useful strategy is to reframe criticism as a poorly delivered but a well-intentioned desire to help, or reinterpret problems as opportunities to learn about oneself and acquire new skills (Jackman and Strober 2003). Reframing can also be aided by developing a capacity to respond to criticism with questions aimed at moving the focus from personal issues to behavioural issues (Whetton and Cameron 2007). For example, when being informed that one has been “very poor” at a particular task, a manager might seek more specific details about actual behaviour that underpins the description of being “very poor”. The nature of the information provided in feedback and the characteristics of the person delivering the feedback can also play a role in impacting acceptance. For example, reflecting on feedback is more likely to occur if the information concerns objective evaluations of performance, or if it comes from somebody who is highly regarded by the manager (Jackman and Strober 2003). Feedback derived from 360o evaluations (ie where managers receive information about their performance from superiors, peers, direct reports and sometimes customers) can also have substantial influence on development processes, because multiple perspectives that are consistent are difficult to ignore or rationalise. In addition to information from others about one’s performance, thinking about one’s personal experiences at work provides a particularly important source of information for self-awareness. One benefit of reflecting on personal experiences at work is that it allows managers to control the degree of challenge to their self-concept as they think about their performance. However, just as in the case of feedback from others, thinking about experiences is also subject to perceptual distortions that defend against information, or insights that are critical to one’s self-concept. Thus, the accuracy of selfawareness is ultimately a product of the quality of our skills in thinking about our performance, which relates to our capacity for self-reflection (as explored in the next section). Advice to enhance self-awareness The following points provide some guidance around enhancing self-awareness: • Increase the sources of information one uses for information about managerial strengths and deficits. Ideally, one should include information from: – others familiar with one’s performance – work experiences – psychological inventories, and – self-reporting skills surveys. • Develop trusting relationships with others to aid more open feedback. • Consciously manage emotional reactions and sensitivity to feedback so as to actually “hear” feedback. This can be aided by consciously reframing perceptions and guiding feedback to refocus poorly delivered personal criticism to specifics about behaviour. • Increase self-reflective skills to aid insight into self-awareness of managerial strengths and deficits (see the section following).

¶22-050 Self-reflection Self-reflection is an important skill for managers to develop because it drives the quality of learning and development actions that come from feedback (Schön 1983). In essence, self-reflection is an internal Socratic dialogue where one asks oneself questions to gain a deeper understanding of one’s behaviour in work situations. In addition to gaining insight about their own behaviour, self-reflecting managers should seek to become more cognisant of the impact of their behaviour on those they manage and interact with at work. Self-reflection is a deliberate and directed process of examining one’s assumptions in order to enhance one’s self-understanding (Nesbit 2012). It is not the same thing as rumination (which is related to cyclic thought patterns where experiences are relived but without much insightful learning (Mackoff and Wenet 2001)), nor is self-reflective thinking the same as self-criticism (which leads to negative thoughts about oneself). In contrast to these negative thinking approaches, self-reflection is a process that focuses on what one can learn from experiences and how to improve one’s managerial behaviour in the future. The ultimate aim of self-reflection is learning: producing a capability to act more effectively in the future (Daudelin 1996; Nesbit 2012). Self-reflection requires considerable conscious effort in thinking about experiences. It is not something that is done to a manager but, rather, something the manager does to himself or herself. Thus, organisations can provide environments that stimulate a manager’s self-reflective behaviour, such as providing formal post-action review processes and training on self-reflection. It should be noted, however, that reflection itself cannot be mandated. One of the problems in developing self-reflection skills is that people engage in self-reflection all the time, but rarely examine the quality of their reflections. Consequently, we may mistakenly consider our selfreflection skills as already well developed. However, self-reflection from the perspective of MSD requires more than just introspective thinking. It also requires learning from that thinking and building intentions to develop skills so as to operate more effectively in the future (Kolb 1984; Seibert and Daudelin 1996). To increase the likelihood that self-reflection contributes to one’s development, it needs to move from a relatively casual and informal activity to one that is more habitual (Van Woerkom and Croon 2008) and ideally follow a relatively systematic process. Daudelin (1996) has proposed that the self-reflection process proceeds through four distinct stages. These are: (1) event articulation (2) reflective analysis (3) evaluation, and (4) planning. The first stage of the process focuses on “event articulation”. It entails providing a non-evaluative summary or description of the events, people and actions being reflected on. This stage seeks to produce a relatively objective account of what happened, as well as descriptions of the actions of people involved. The second stage of “reflective analysis” is where one questions why things happened as they did. Specifically, one asks: • “Why did this happen?” • “Why did I do this?” • “Why did I feel this?” An important aspect of this stage is to challenge one’s insights and answers to be sure that one’s answers are not being influenced by efforts to protect one’s self-concept. Through conscious effort and an orientation to learn from insights brought about by our questioning, one can arrive at answers to help explain events, behaviour and underlying feelings.

These answers should be considered hypotheses to explain events, rather than objective truths. Thus, self-reflection is part of an ongoing learning process that seeks to make meaning out of events and actions (Kolb 1984). These evaluative hypotheses form the third “evaluation” stage. In this stage, managers need to judge their willingness to deal with their evaluations. Being an effective manager does not require perfection, but a willingness to work on issues that are important and a desire to make the most impact in their roles. The fourth stage of the reflection process focuses on “planning”. In this stage, the manager is required to consider how they may improve in the future using their insights about the reasons why events occurred as they did. Reflective journals For a manager wishing to institute reflection as part of their self-development, the use of a reflective journal is highly recommended (Brown, McCraken and O’Kane 2011). Writing a journal provides discipline to the process of reflection and offers the following advantages: (1) it helps to distance events and actions, thus reducing biases related to protecting one’s self-concept (2) it provides a record of the outcomes of the reflection process and (over time) provides a rich source of material to use in identifying patterns of behaviour and performance issues that can be dealt with, and (3) writing, and the disciplined self-development process that is developed, help in the production of detailed action plans (Nesbit 2012). The content of the writing within the journal should follow the four stages of the reflection process outlined above. Ideally, it should be carried out regularly, such as part of a review process at the end of each workday, or at the conclusion of specific activities that the manager wishes to develop. It should also occur in a location relatively free from distractions. Executive coaching In addition to keeping a journal, self-reflection can be enhanced through the use of an executive coach (Nesbit 2012). The role of the coach is, in essence, to stimulate reflection on managerial performance to aid development of insights about one’s areas for improvements and to assist in the development of action plans. Rather than using formal coaches, many managers prefer to use other work or non-work relationships, such as a respected colleague or peer, organisational mentor or close friend to stimulate the reflective process. Whatever the approach taken to self-reflection, involvement of others does not substitute for the manager’s own efforts to reflect. Advice to enhance self-reflection The following points provide guidance around enhancing self-reflection: • Use the four formal stages of reflection — event articulation, reflective analysis, evaluation and planning — to structure one’s reflection process. • Use a reflection journal to aid one’s reflections. • Seek out a trusted work colleague, mentor or coach to aid the process of reflection. See Chapter ¶47 for more information on coaching and mentoring.

¶22-060 Self-regulation In the MSD model, the two meta-skills of self-awareness and self-reflection provide awareness of the performance gap of a manager. Generally speaking, becoming aware of a gap between one’s current level of performance and a needed or desired level of performance, and believing that it is important to reduce the gap, typically motivates one to initiate development activity. Psychologists refer to these actions as self-regulatory behaviour (Carver and Scheier 1998): that is, people seek to reach a valued goal by regulating themselves.

Despite the fact that we are capable of profound self-directed changes, we often find ourselves failing in our efforts to change. For many people, the explanation for this failure lies in a lack of willpower. By willpower, we mean determining a course of action and sticking to that course no matter what temptations or obstacles are encountered. Conceptualising self-directed change as a process of setting one’s sights on a goal and simply pressing through with the desired behaviour, is not only a simplification of the complexity of processes of self-regulation, but likely to lead to poor outcomes (McGonigal 2011). The most comprehensive and researched perspective concept of self-regulation is derived from social cognitive theory (Bandura 1991; Baumeister and Tierney 2012; Zimmerman 2000). This theory suggests that behaviour is embedded in a system of interacting influences involving cognitive, emotional and environmental forces (see Figure 22.2). Thus, “triadic” refers to the three aspects of behaviour, cognition and emotions and environment, and “reciprocal deterministic” refers to the two-way influences between each of these aspects. Figure 22.2: The triadic reciprocal deterministic system

In this perspective on behaviour, thinking influences behaviour, but behaviour can also influence thinking. For example, a person who reaches a desired goal will feel good about their achievement and will believe they are capable of reaching that goal and probably a more challenging goal in the future. This belief in one’s ability to reach a goal is referred to as self-efficacy (Bandura 2004). People with high self-efficacy tend to set themselves more challenging goals and be more persistent in actions to reach goals. Selfefficacy can also be influenced by our emotions. People who are feeling optimistic are more likely to think positively about their skills and performance and have higher self-efficacy. On the other hand, negative emotions, such as pessimism, will undermine our performance when we encounter obstacles and reduce our sense of self-efficacy. Behaviour is also influenced by our social and physical environments. Environments cue our behaviour and provide incentives to act in particular ways. Thus, workplace environments use rules, procedures and reward systems to influence the behaviour of employees. We learn appropriate behaviours for particular environments and, in time, these environment-behaviour relationships become automatic so that environments come to strongly influence our behaviour (Duhigg 2012). Of course we can also shape our environments to deliberately influence our behaviour. For example, we might join a gym to support our goal of increasing the amount of exercise we do. In summary, from the perspective of social cognitive theory, people’s actions are conceptualised within a cycle of interactions between environments, cognitive aspects of the person and their behaviour. So, too, one’s self-directed actions for development exist within a system of reciprocal influences. However, while the self-regulation process derived from social cognitive theory is comprehensive in theory, and well supported by research, it is often difficult for managers to know what precisely they should do to maximise their self-regulatory efforts. Some of the main aspects of self-regulatory actions that are relevant for selfdevelopment and consistent with social cognitive theory are discussed later in this chapter. Goals Goals play a substantial role in development because they direct attention and effort to specific behaviours (Locke and Latham 1990). However, it’s not just the existence of goals that is critical to change efforts but, rather, the nature of goals articulated. Indeed, failure of self-regulation efforts often

occurs due to poorly constructed goals: goals that are too broad in nature and do not allow clear evaluation of performance improvements (Goshal and Bruch 2003). Goal-setting research has shown that goals should be specific and challenging so as to stimulate performance (Locke and Latham 1990). Thus, an important self-regulatory action is to convert development aspirations, which are typically broad and abstract in nature, into specific, challenging, action-oriented goals. Analysis of one’s managerial performance gap will aid in the development of specific goals by highlighting the managerial situations where improved skill and knowledge is required. For example, a manager’s development area may be to improve communication. By reflecting on one’s experiences related to this domain, one may decide to focus on speaking up in meetings as a specific communication-related development goal. Development action plans can then be designed to support increased communication at meetings. Another critical component of goal-setting for development is to honestly assess the personal commitment of obtaining a development goal (Nesbit 2012). Given that development and change in behaviour require considerable effort by a person over a long period of time, it is critical to determine whether there is real commitment to the goal. Many people confuse commitment and desire (Goshal and Bruch 2003). For example, many managers desire to be better communicators and may believe this skill is something they need to work on. However, for many managers this goal remains a desired improvement, but not one that is deeply felt or one that they are prepared to put considerable effort into rectifying. The reflection process associated with the self-understanding phase can help managers recognise the significance of an issue for their performance and future careers. Action plans As with the formulation of goals, the process of designing action plans requires considerable care in its construction. One important cognitive aspect in self-regulation concerns manager’s beliefs in their ability to regulate their behaviour. Efficacy or belief in one’s ability to set goals and follow through with appropriate behaviour has been shown to play an important role in actual change processes (Zimmerman 2000). Efficacy can be enhanced by designing action plans that allow one to have “small wins” (Whetton and Cameron 2007) which focus on realistic and obtainable goals. People become more confident of their ability to regulate more and more their behaviour when they actually are successful in doing so (McGonigal 2011) Thus, establishing short-term and achievable goals as part of the goal-setting process will contribute towards more successful self-regulation of action plans. Another important issue to consider in the design of action plans is the existence of supportive environments which enable a desired behaviour to occur or at least increase the likelihood of the behaviour occurring. Indeed a major cause of failure to sustain a newly acquired behaviour is an environment that is not supportive. With this in mind, action plans need to be developed that acknowledge the reality of the physical and social environment confronting managers (Zimmerman 2000). Specifically, managers should identify obstacles to new behaviours and design appropriate actions to nullify or avoid these obstacles, as well as build physical and social support for desired actions. In popular books about personal change and motivation, one recommendation often prescribed is limiting contact with “toxic people” who are not supportive of change efforts. This action is an example of reducing exposure to the non-supportive aspects of social environments (Nesbit 2012). Another example of using the environment to support change is for a manager to develop close relationships with more experienced managers who can mentor and provide support for the attainment of valued development goals. Well-designed action plans should also ensure that goals and plans remain top of mind. Demands on the time and attention of managers can easily distract them from important development actions. Writing down goals, drafting action plans and keeping the information in an easily accessible location for constant referral is another strategy when constructing supporting environments. The use of reminders and other cues within the workplace increases attention to important goals (McGonigal 2011). The complex nature of action plans also raises the need to maintain a flexible approach to their implementation. While action plans should be written down and constructed in a way that allows easy access and reference (as mentioned above), the plan should be a “working document” and open to ongoing refinement, rather than being seen as a fixed construction. Action plans need to be regularly monitored to evaluate the impact and success of plans. This then provides information about any adjustment that may be required in task strategies. Finally, action plans need to detail explicit methods by which development progress is monitored and recorded (Nesbit 2012).

Given the inevitable discrepancy between action plans and behaviour actually carried out, how managers think about their goals and performance can play an important role in determining reactions to obstacles and failures. There are two orientations or mindsets that managers can take when engaged in their action plan. These are referred to as (Dweck 2006): (1) learning mindsets, and (2) performance mindsets. Individuals with a learning mindset are motivated to increase their competence and to master challenging situations. Such people deal with obstacles in reaching goals as opportunities for learning, and a natural and constructive part of the learning process. This behaviour is in contrast to individuals with a performance mindset, who seek to demonstrate task competence for the purpose of gaining favourable judgments from others (Dweck 2006). Consequently, these people tend to avoid situations where they may appear incompetent or inadequate and quickly lose interest in action plans that do not prove successful or are too challenging. Therefore, in the early stages of self-regulatory efforts, managers need to approach their action plans from the perspective of learning and gaining insights about the selfregulatory experience, rather than focusing on performance success. In recent years, a new strategy for enhancing the likelihood of making changes has received increasing attention. This strategy relates to the use of implementation intentions (Gollwitzer, Parks-Stamm, Jaudas and Sheeran 2008), which are smaller plans of actions where specific actions are associated with specific situations likely to be encountered. These implementation intentions are also referred to as “if-then” plans, in that “if” (or when) a particular situation occurs “then” a predetermined action is planned. For example, a manager who is struggling to achieve their long-term goals (eg these may include a project report that needs to be written in the next few weeks) due to the interference of day-to-day operations may decide to work on their project first thing in the morning the next day before they get involved in any other activities. Thus, the manager will set an implementation intention, such as — “when I arrive at work tomorrow morning, I will work on project ‘X’ for 30 minutes before I look at any emails”. The point here is that the situation and the specific behaviour are determined in advance and this produces a greater resolve to do that action in that specific situation. While the process seems simple, considerable research has shown this to be an effective strategy for engaging in new desired actions or in stopping undesired actions (Wieber and Gollwitzer 2010). Action plans may be made up of a great number of implementation intentions that help managers to maintain positive movement in their development. Advice to enhance self-regulation The following points provide guidance around enhancing self-regulation: • Give considerable care and attention to the construction of goals. These need to be actionable and specific in nature and derived from self-awareness of the performance gap. • Give considerable care and attention to the development of an action plan that is linked to goals and that will assist in closing the performance gap. These should be appropriate to the social and physical environment of the manager. • Action plans should consider strategies to develop and use social supports (eg mentors) within the environment to aid performance. • Action plans should consider avoiding or limiting obstacles (eg “toxic people”) to aid performance. • Action plans and goals should be written down and be easily located/accessed to remind managers of their goals and desired behaviours. • Action plans need to incorporate a review and evaluation process to monitor performance of the action plan. • Action plans should be flexible in nature to respond to required changes based on the evaluation process and changing environments.

• A learning mindset should be adopted which sees early stages of the regulatory process as an opportunity for learning about self-regulation of oneself, rather than behaviour change itself. • Implementation intentions should be used throughout action plans to assist with motivation and engagement with development actions.

¶22-070 Conclusion A major concern within contemporary organisations dealing with dynamic and challenging work environments is the development of their managerial and leadership talent. This chapter has focused on presenting a self-development approach to this issue, has highlighted the nature of self-development, and has made a number of recommendations to encourage its adoption and implementation. Selfdevelopment focuses on individual managers taking personal responsibility for identifying their development needs and pursuing development action for enhancing skills and knowledge. It is argued that self-development is dependent on the interrelated operation of three skills: (1) an ability to carry out effective self-reflection (2) monitoring and managing emotional reactions and biases related to the receipt of feedback to enhance self-awareness, and (3) the effective enactment of self-regulatory actions in the development of new skills. The chapter has discussed the operation of each of these skills and their connection to the selfdevelopment process. A set of recommendations to enhance each of these three skills has also been presented. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Australian Institute of Management 2003, Management Development Practice in Australia, AIM. Alldredge M, Johnson C, Stoltzfuz J and Vicere A 2003, “Leadership Development at 3M: New Process, New Techniques, New Growth”, Human Resource Planning, vol 26(3), pp 45–55, Human Resource Planning Society. Ashford SJ, Blatt R and VandeWalle D 2003, “Reflections on the looking glass: A review of research on feedback-seeking behavior in organizations”, Journal of Management, vol 29(6), pp 773–799. Audia PG and Locke EA 2003, “Benefiting from negative feedback”, Human Resource Management Review, vol 13(4), pp 631–646. Baker F (ed) 1973, Organizational systems: general systems approaches to complex organizations, Homewood. Bandura A 2004, Self-efficacy, Palgrave Macmillan. Baumeister RF and Tierney J 2011, Willpower, The Penguin Press, New York. —— 1991, “Social Cognitive Theory of Self-Regulation”, Organizational Behavior and Human Decision Processes, issue 50, pp 248–287. —— 1982, “Self-efficacy mechanism in human agency”, American Psychologist, vol 37(2), 1982, pp 122– 147. —— Gaillot M, De Wall CN and Oaten M 2006, “Self-regulation and personality: How interventions increase regulatory success, and how depletion moderates the effects of traits on behavior”, Journal of Personality, vol 74(6), pp 1–29. Brown T, McCraken M and O’Kane P 2011, “Don’t forget to write: how reflective learning journals can help to facilitate, assess and evaluate training transfer”, Human Resource Development International, vol 14(4), pp 465–481.

Carver CS and Scheier MF 1998, On the self-regulation of behavior, Cambridge University Press, New York. Daudelin MW 1996, “Learning through experience through reflection”, Organizational Dynamics, Autumn, pp 36–48. Duhigg C 2012, The Power of Habit: Why We Do What We Do In Life And Business, Random House, New York. Dweck CS 2006, Mindset, The New Psychology of Success, Random House. Galbraith MW 1991, Facilitating adult learning: a transactional process, Krieger, Malabar, Fla. Ghoshal S and Bruch H 2003, “Going beyond motivation to the power of volition”, MIT Sloan Management Review, Spring, pp 51–57. Gollwitzer PM, Parks-Stamm EJ, Jaudas A and Sheeran P 2008, “Flexible tenacity in goal pursuit”, in J Shah and W Gardner (eds), Handbook of Motivation Science, pp 325–342, Guilford Press, New York. Green R and Agarwal R 2009, Management Matters in Australia, Department of Innovation, Industry, Science and Research, Canberra. Friedman TL 2007, The World in Flat: A Brief History of the Twenty-First Century, Picador/Farrar, Straus and Giroux, New York. Jackman JM and Strober MH 2003, “Fear of Feedback”, Harvard Business Review, vol 81(4), pp 101– 107. Kaiser RB and Kaplan RB 2006, “The deeper work of executive development: Outgrowing sensitivities”, Academy of Management Learning and Education, vol 5(4), pp 463–483. Karpin D 1995, Enterprising Nation, Report of the Industry Task Force on Leadership and Management Skills, AGPS, Canberra. Kolb DA 1984, Experiential Learning: Experience as the source of Learning and Development, Prentice Hall, Englewood Cliffs, NJ. Lawler EE 2008, Talent: Making People Your Competitive Advantage, Jossey-Bass, San Francisco, CA. Locke EA and Latham GP 1990, A Theory of Goal Setting and Task Performance, Prentice Hall, Englewood Cliffs, NJ. Mackoff B and Wenet G 2001, “Reflection: Examining Experience”, Chapter 4 in The Inner Work of Leaders, Amacom, New York, pp 81–102. Mintzberg H 2004, Managers Not MBAs: A Hard Look at the Soft Practice of Managing and Management Development, Berrett-Koehler Publishers Inc, San Francisco, CA. McGonigal K 2011, The Willpower Instinct, Avery, New York. Nesbit PL 2007, “Self-Leadership and Popular Motivational Models”, Proceedings of the Western Decision Science Institute Conference, Denver, US. —— 2012, “The Role of Self-Reflection, Emotional Management of Feedback, and Self-Regulation Processes in Self-Directed Leadership Development”, Human Resource Development Review, vol 11(2), pp 203–226. Pedler M 2008, Action Learning for Managers, Gower Publishing, United Kingdom. Pfeffer J 1998, The human equation: Building profits by putting people first, Harvard Business School Press, Boston. —— and Fong CT 2002, The End of Business Schools? Less Success Than Meets the Eye, Academy of Management Learning & Education, September, vol 1(1), pp 78–95. Polivy J and Herman CP 2002, “If at first you don’t succeed: False hopes of self-change”, American Psychologist, vol 57(9), pp 677–689. Rapp C and Zwick T 2007, “Developing leadership competence of production unit managers”, Journal of

Management Development, vol 26(5), pp 312–330. Schön DA 1983, The Reflective Practitioner, Basic Books, New York. Seibert KW and Daudelin MW 1999, The Role of Reflection in Managerial Learning, Quorum Books, Westport. Smith MC and DeFrates-Densch N 2009, Handbook of Research on Adult Learning and Development, Taylor & Francis Group, New York. Solansky ST 2010, “The evaluation of two key leadership development program components: Leadership skills assessment and leadership mentoring”, The Leadership Quarterly, vol 21(4), pp 675–681. Trope Y, Gervey B and Bolger N 2003, “The role of perceived control in overcoming defensive selfevaluation”, Journal of Experimental Social Psychology, vol 39(5), pp 407–419. Whetton DA and Cameron KS 2007, Developing Management Skills, 7th edn, Pearson Education Ltd, London, United Kingdom. Wieber F and Gollwitzer PM 2010, “Overcoming procrastination through planning”, The thief of time: Philosophical essays on procrastination, (pp 185–205), Oxford University Press, New York. Willard G and Gramzow RH 2008, “Exaggeration in memory: Systematic distortion of self-evaluative information under reduced accessibility”, Journal of Experimental Social Psychology, vol 44(2), pp 246– 259. Van Woerkom M and Croon M 2008, “Operationalising critically reflective work behaviour”, Personnel Review, vol 37(3), pp 317–331. Yukl G 2012, “Effective Leadership Behavior: What We Know and What Questions Need More Attention?”, The Academy of Management Perspectives, November, vol 26(4), pp 66-85. Zimmerman BJ 2000, “Attaining Self-Regulation: A Social Cognitive Perspective”, Chapter 2 in Boekaerts, Pintrich and Zeidner Handbook of Self-Regulation, Academic Press, San Diego, pp 13–39.

23. MANAGING PERFORMANCE: ESSENTIAL AND DIFFICULT Editorial information

Professor Robin Kramar Australian Catholic University

This chapter is drawn from research undertaken by the author in her capacity as staff member of School of Business, Australian Catholic University.

¶23-010 Introduction The management of performance has always been considered important in the majority of organisations. For some (particularly small organisations), this view has not led to the development of formal systems to manage performance. Rather, there has been reliance on the day-to-day interaction of manager and employee as the channel for the communication of expectations and feedback. Such informal channels remain important in all organisations and have the potential to significantly impact the quantity and quality of work performed. The development of formal systems to manage performance can be traced over the past 100 years. Taylor’s 1911 book Principles of Scientific Management sketches out an approach that involves the clear specification of what work needs to be done, and how it is to be done. Interest in formal performance management systems has waxed and waned. However, there was a pronounced revival of interest in the 1990s as organisations in both the public and private sectors reacted to the pressures of global competition and greater scrutiny of all aspects of performance.

¶23-020 The essentials of performance management Performance management refers to processes which facilitate employees undertaking activities and producing outputs that further the organisation’s goals. The first essential aspect of performance management involves identifying what activities and outputs are required. Individuals and teams need to be clear about their responsibilities, the activities and standards they need to undertake, and the results they need to produce. A second essential aspect is ensuring employees have the capabilities to undertake these activities. A third essential aspect of performance management is the identification and removal of obstacles which inhibit required performance. For instance, inadequate computer support can limit an individual’s performance. Performance management can be facilitated by the provision of rewards which support the achievement of required outcomes and contribute to an organisational climate in which employees are engaged and motivated. These rewards need to be perceived as fair and relevant. Performance management can be viewed from two perspectives: (1) as a process of development, two-way communication, encouragement and motivation (ie focusing on employees as people), or

(2) as a process of monitoring and assessing the employee contribution. The latter perspective focuses on employees as resources and processes, and enables them to be used in such a way that the outcome is that they achieve organisational goals. There are also tensions associated with the process of performance appraisals. Managers are often uncomfortable providing feedback and are concerned with managing their relationship with the employee in the future (Longenecker et al 1987). Yet, at the same time, it is in their interest to improve employees’ performance and provide constructive, realistic feedback.

¶23-030 Performance management process and its relationship to strategic HRM The performance management process requires a number of activities to be undertaken. A critical aspect of performance management is ensuring employee activities support and further employee goals and strategy. They are, therefore, a critical aspect of strategic human resource management (HRM). These activities are usually regarded as part of a formal bureaucratic system; however, the principles of performance management can be applied in a less bureaucratic way in small organisations. Performance management systems include a number of components, such as: • job and role specifications • reward structures • selection of employees • induction and training • appraisal and assessment • employee feedback, and • goal setting. A performance management system is a formal and structured process that provides information about employees’ work outputs and behaviours. It is essential to be clear about the purpose of a performance management system and the decisions that will be made using the information. Two goals of performance management can be identified: (1) developing the individual, and (2) evaluating the individual. The overarching goal is to lift the performance of the organisation in a sustained manner. Developing the individual The process for individual development includes the following activities: • Management development and identification of potential: This identifies a framework for future employee development, and involves identifying and preparing individuals for increased responsibilities, including promotion. • Performance improvement: This encourages sustained successful performance and assists employees to overcome performance obstacles. • Feedback: This involves outlining expectations and includes a two-way discussion of performance against goals. • Human resources (HR) planning: An audit of existing staff resources enables the calculation of future needs.

• Communication: This involves a dialogue between the manager and employee to ensure clarity of expectations and build trust. Evaluating the individual The process of individual evaluation includes: • Performance measurement: Here, the relative value of an individual’s contribution to the organisation is established. This activity supports the evaluation of individual achievements. • Remuneration and benefits: Links between performance and pay or bonuses are determined, as and where appropriate (eg they may be provided on an annual, biannual, quarterly or discretionary basis). These points are elaborated in the next section. Figure 23.1: Performance management process — key elements

Performance appraisal is a central part of a performance management system, but it is only one part. Performance appraisal involves measuring and evaluating the performance of individuals and/or teams. It requires making judgments and forming opinions about the standards of performance and the extent to which performance can be improved. It also requires that feedback be given to an individual and/or a team about their performance. An effective performance appraisal relies on clear performance standards being established and discussed with employees. These standards set out the actions or results necessary for satisfactory

performance. Once these standards are set, an appraisal includes: • observing an employee’s work behaviour and outcomes, and comparing them against agreed standards • evaluating job performance and the employee’s development potential using an objective method, and • acting on the results of the process, for example, through promotion, counselling, training, or (in some cases) termination. Because performance appraisal relies on agreed standards, and precipitates change through actions arising from the appraisal’s outcomes, it can be viewed as a cyclic series of steps: • setting appraisal measures and standards • communicating expectations to employees • planning for effective performance • monitoring and assisting in performance • appraising performance (through information gathering, interviews and so on) • giving employees feedback (through an interview) • deciding on action, and • implementing action plans, setting new appraisal measures and standards, and then beginning the cycle again. This is only the final step in a long process. Figure 23.1 (above) presents the key elements of the overall process of establishing organisational standards of performance. The effectiveness of performance management systems will be influenced by the operation of other key HR activities. Some of these activities are discussed in the following paragraphs. Recruitment and selection Recruitment and selection activities are critical and are very much connected with performance management. As discussed in Chapter ¶10, these activities are also central to building a “culture” of performance management within the organisation and contributing to overall organisational performance. Selecting people with the “values” that fit those of the organisation contributes to a successful organisation. Performance assessment results can be used to assess the effectiveness of the recruitment and selection processes. Training, development and learning Performance assessment can contribute to how training, development and learning initiatives are undertaken in an organisation. Assessment provides information that can be used to make training decisions to improve individual or team performance. It can also help formulate development initiatives to ensure the organisation has the appropriate people in the future. It can be used to design career and succession plans and retention programs. Finally, performance appraisal indicators can be used as a way of fostering learning and creating a culture that supports learning and development. Rewards Financial and non-financial rewards are an important part of the performance management process. Rewards signal both desired employee behaviours and organisational outcomes. Performance-based pay, such as incentives and bonuses, can be used to encourage and reinforce certain behavioural outcomes. Employee stock option plans can also be used to achieve these desired outcomes by seeking to align employee interests with those of the organisation. Planning

Planning decisions about future HR needs can take into account performance assessments of existing employees. These assessments can assist in making decisions in relation to employee career, succession and replacement planning.

¶23-040 Performance appraisal and evaluation The enhancement and evaluation of employee performance can be undertaken in a variety of ways. These ways include: • identification of customer requirements and feedback from customers • frequent feedback from supervisors to employees about aspects of their performance, and • performance previews. Performance previews focus on a supervisor and employee working together and identifying the support that is required to enhance performance in the future. Essentially, it is a problem-solving exercise, rather than an evaluation process (Culbert 2012). Formal performance appraisals are, however, the most common process of performance evaluation in Australia. The use of performance appraisals for all employees has increased over the last 20 years, so that more than two-thirds of organisations use performance appraisals for manual employees, 91% of organisations use them for clerical employees and 97% and 98% of organisations use them for professional and managerial employees respectively (Kramar 2012, 1999). Data from performance appraisals were increasingly used to inform decisions about: • pay (79% of organisations) • training and development (92% of organisations) • career planning (84% of organisations), and • workforce planning (67% of organisations) (Kramar 2012). Regular performance appraisal involves managers and their employees meeting at intervals to discuss individual levels of job performance. These levels of performance are considered in relation to the needs of the organisation. An employee’s job performance will be influenced by a variety of factors. These factors can be considered as an equation: Ability + Effort + Opportunity = Job performance The performance appraisal process provides a formal opportunity to review an employee’s: • skills, knowledge and personal attributes • degree of application and desire to perform • supervision requirements, job structure, resources, working environment, equipment and time available, and • behaviours, outputs and results. Performance variables or criteria In order to evaluate performance, it is necessary to establish the level of performance required in a job. These standards need to be set out clearly. There are five criteria that can be used for evaluation in performance management systems and performance appraisals. These are: (1) strategic congruence

(2) validity (3) reliability (4) acceptability, and (5) specificity. Strategic congruence Strategic congruence refers to the extent to which performance appraisals encourage job performance that supports the organisation’s strategy, goals and culture. For instance, when an organisation focuses on customer service, the performance appraisal should assess how well employees are delivering this service. When an organisation’s strategy changes, the behaviour desired of employees will also change and, consequently, the criteria used in the performance appraisal will need to change. The Balanced Scorecard technique is a way of developing and maintaining strategic congruence, and linking an organisation’s long-term strategy to short-term actions. It can also encourage learning in the organisation. The Balanced Scorecard involves linking strategic objectives to a set of financial and operational measures. These measures are used to clarify and communicate the objectives and to evaluate performance. The measures are typically built around a number of perspectives, such as financial, customers, internal processes, and innovation and learning (or improvement). Some of the measures relate to individual and team performance. Within the customer perspective, a measure could be “improved customer service”; while in the innovation and learning perspective, a measure could be “empowered workforce” (Kaplan and Norton 1993). See also Chapter ¶17 at ¶17-070 for more information on the Balanced Scorecard. Validity Validity refers to the extent to which a measure of performance assesses the relevant dimensions of performance. A valid performance measure is one that measures all aspects of job performance and does not measure irrelevant aspects of performance. For instance, valid performance measures for university academics would need to include measures on teaching, research, and contribution to the university and the professional community. However, the levels of performance expected in each of these areas could vary across different faculties and disciplines. Reliability Reliability refers to the consistency of a performance measure. There are a number of types of reliability: • inter-rater reliability — where different people who are evaluating an employee’s performance provide the same or very similar evaluations of the employee’s performance • internal consistency — the extent to which a number of items measuring a particular indicator of performance (eg customer service) correlate with one another, and • test-retest reliability — where any one measure is able to provide a similar rating over a period of time. Any performance measure needs to be accepted and seen to be fair by the people using the performance appraisal process. There are three components of perceived fairness and these have implications for the development, process and use of information for decision-making: (1) procedural fairness — where employees and managers are required to participate in the development of the system (2) interpersonal fairness — this requires complete and timely feedback and the opportunity to challenge the evaluation in an environment of mutual respect, and (3) outcome fairness — this requires clear communication about outcome expectations and the use to

which the performance appraisal information will be put (eg rewards and training) (Gilliland and Langdon 1998). The final criterion is the need for a performance measure to specify clearly what an employee must do to meet expectations and contribute to the achievement of strategy and objectives. Appraisal methods There are a variety of methods of appraisal, varying from highly formal and structured to more informal. An informal appraisal approach relies on impromptu interviews, consultation, coaching, positive reinforcement, reprimands and feedback. A formal appraisal process involves the above, as well as set guidelines, formal interviews, forms, set review times, assessment systems and reporting. The factors that should influence the type of performance appraisal used are: • desired system output • size and type of organisation • employees and job types which are being appraised • training and development policies • availability of in-house appraisal expertise • time management required to make a formal system work, and • adequacy of existing informal systems. Table 23.1 details a number of methods of formal performance appraisal systems. Table 23.1: Appraisal methods Appraisal method

Description

Graphic rating

• A number of attributes are rated on a graphic scale from one to five • Easy to use but can be rigid, subjective and difficult to justify poor ratings

Ranking

• Assessor ranks all employees on job performance and contribution to the organisation • Allows comparison across areas and pooled promotion decisions • A relative measure that disregards the size of differences or specific aspects of behaviour

Forced choice

• Assessor chooses a series of descriptions that most apply to the employee • Results are scored based on a secret method • Hidden scoring reduces bias, but is complex, costly and timeconsuming • Requires expert implementation

Critical incident

• Manager keeps a diary of on-the-job behaviour, which is used as background to other assessments • A factual and objective approach that covers a long work period, but focuses on extremes, depends on manager’s choice of incidents and focuses on records, not performance improvement

Behaviourally-anchored rating scale (BARS)

• Uses a specific rating scale for each job, getting the assessor to identify typical behaviour for different tasks from a menu • Is closely related to what people do, more objective, and avoids number scales

• However, it is complex, time-consuming, job-specific and requires many job scales and experts Behavioural observation scale

• Simplified BARS with more general behaviours and a rating scale • Similar problems and advantages to BARS

Narrative/essay

• Unstructured report from manager on job performance, often answering three or four general questions • Works well with other appraisal methods and fills out background, but can be very subjective and prone to bias

Field review

• HR expert meets with appraisers and discusses the ratings given to employees • Overcomes errors but is very expensive

Assessment centre

• A combination of assessment techniques for groups in large organisations, involving simulations and exercises • Examines potential and current performance, appears more impartial and contributes to training • Expensive, time-consuming, and based on simulations (not real)

Group assessment

• Group of appraisers • More information, bias less likely but more difficult to manage and costly

Management by objectives

• Agreed goals, focusing on results not methods, with regular review • Seems more objective, clear and motivating • Supports short-term goals and achievements over the long-term, can lead to “too-easy” goals, difficulty in comparing performance, discouraging other useful non-goal behaviour, rule following and lack of commitment

Self-assessment

• Self-appraisal followed by joint appraisal • Consultative and good for subsequent goal-setting • Must be coupled with another assessment, is hard to control, open to abuse and rarely matches manager’s assessment

There are a number of advantages and disadvantages associated with formal and informal appraisals. These are set out in Table 23.2. Table 23.2: Formal versus informal appraisal Formal system

Informal system

Advantages • Gives an appearance of being fair and objective

• More intimate and personal contact

• Can provide more comprehensive and accurate information regarding employee performance (and possible potential)

• Immediacy — assessment and feedback generally occur almost simultaneously

• Less subject to personal bias if properly developed and implemented

• Flexibility — not contained by guidelines and procedures • Cheaper and more easily administered

• More regular and predictable and universally applied • Able to provide a systematic and comprehensive review

• In small organisations, it may be possible to maintain sufficient contact with all employees

• Can assist less-skilled or inexperienced managers • Provides better information base for workforce, career and succession planning decisions, as well as promotions/demotion • Suited to larger, more complex organisations (eg at least 150 employees) because of difficulty in maintaining contact and distributing information through correct communication channels • Provides a means of control over an organisation’s activities Disadvantages • May become too cumbersome (eg forms too hard • May be too subjective and biased or take too long to complete) • Too dependent on the individual assessor • May become too formal and bureaucratic • Fewer “checks” to ensure objectivity and honesty • Time delays may occur (eg in follow-up) • May lack comprehensiveness • May be misused (eg treated as something to do quickly, or as a purely record-keeping function) • Assessor may “forget” certain important items without a record of what to do • If it proves unsuitable, it may be difficult to change and adapt it to new circumstances • It is harder to check whether it is being executed properly Information about an employee’s performance can be obtained from a variety of sources. Managers and supervisors are the most frequently used source (Kramar 2012) but, increasingly, information from peers, subordinates, customers and through self-reporting is being used to evaluate performance. Upward feedback involves subordinates providing feedback to their managers and supervisors. Peer review involves appraisal by an employee’s co-workers/peers at a similar level in the organisation. This process is useful when a manager cannot observe work behaviour. Recent research indicates that a number of factors impact on the effectiveness of peer and upward feedback. An effective feedback process needs to: • consider the willingness of managers to participate in the process • seek input into the design of the system from subordinates and peers • ensure information collected is job- and behaviour-related, rather than personality-based • provide feedback to only the manager concerned • provide support to the manager to deal with negative feedback • train managers and appraisers to use the system effectively • allow participation in the system to be voluntary • confine peer and upward appraisals to development issues, not pay-related or promotional ones, and • explain clearly what people will be evaluated on.

The 360o appraisal system involves feedback being provided by a variety of sources, including subordinates, customers, peers, supervisors and managers. There are a number of difficulties associated with this process, including the potential for ill-informed judgments and subjectivity (eg if the rater has insufficient experience with the employee’s performance, has personal dislikes or is competing for advancement). Also, it is claimed that anonymous submissions about co-workers do not create a more open culture. There are, however, a number of benefits with 360o appraisal and these are listed in Table 23.3. Table 23.3: The 360o appraisal system — stakeholder benefits Stakeholder Employees

Benefits • participation in decision-making • a voice in quality control • an opportunity to express perceptions • a chance to influence career development

Managers

• change in role from judge to coach • more information for decision-making • opportunity to examine supervisory skills • stronger, credible information to confront poor performance issues

Teams

• opportunity to assess team development needs • credible information from team leadership • credible information about team member contribution • chance to see how team serves customers

Organisation

• better HR decision-making • increased employee motivation • reinforcement of values of participation, teamwork and empowerment • stronger alignment between performance and vision • opportunity to link performance and rewards

Customer

• a voice in the service process and quality control • opportunity to reward quality • a chance to contribute new ideas

Design of the system A performance appraisal system must be designed to meet the needs of an organisation and the purposes for which it was established. The process can satisfy three purposes: (1) strategic (2) administrative, and (3) developmental. These purposes are described in more detail below. Strategic Performance appraisals can serve this purpose by:

• defining the results, behaviours and employee characteristics required to carry out strategy • providing measurement criteria and systems, and • allowing feedback mechanisms that maximise the extent to which employees exhibit these behaviours and produce required results. Administrative Performance appraisals can satisfy this purpose by: • providing information that can be used to make decisions in a variety of areas, including training, development, learning, reward, promotion, career development and performance improvement. The process of making judgments and providing feedback about performance can be influenced by: • an evaluator’s bias (eg people tend to rate people well who are similar to themselves — known as the “cloning” effect) • an evaluator’s ability to make distinctions between different types of performance (eg some raters will rate overall performance very well, when only one aspect of performance is excellent — known as the “halo” effect) • the way an evaluator uses the rating scale (eg some raters assign high ratings to all employees — known as “leniency”), and • the evaluator distorting a rating on purpose to achieve personal or organisational goals (known as “appraisal politics”). Developmental Performance appraisals can satisfy the purpose of developing employees so they are effective in their jobs. This can be done by the evaluator: • identifying performance deficiencies • identifying the causes of the deficiencies (eg lack of skill, lack of application or insufficient resources), and • developing the skills to deal with unsatisfactory performance. Other considerations When a performance appraisal process is designed, it needs to take into account a number of legal considerations. These include: • documentation of legal protection • the possibility of condoning poor performance by inaction • the employer’s duty to the poor performer • adequate warning before dismissal • effects of equal opportunity and discrimination legislation, and • termination. An accurate assessment of an employee’s performance is an important step in minimising the risk of successful legal action. A dismissed employee can use performance appraisal records to undermine the decision to dismiss. When performance assessment records are complete, honest and accurately record unsatisfactory performance and counselling action, they are less likely to assist in an unfair dismissal

claim. In circumstances where an employer endures an employee performing poorly without taking review action, they run the risk of unfair dismissal action when they finally do act. The employer can be judged to have accepted the performance of an individual as adequate because of lack of action. Employers owe a duty to employees who are not performing adequately to: • institute a review process separate from normal performance appraisal • ensure the review process is formal and documented • give the employee notice that their performance is inadequate, and • focus on improving performance in a specified area within a fixed time frame that is balanced and reasonable (at least three months). There is no standard warning that applies in all cases. However, employers should provide clear, written and recorded notice of deficiencies in performance and give an explicit warning that failure to rectify these deficiencies within a reasonable time will carry the real risk of employer sanctions, including the possibility of termination of employment. Federal and state legislation prohibits discrimination on a number of grounds, including sex and race. To ensure discrimination does not occur in the performance appraisal process, it is essential that: • appraisal criteria are job-related • appraisal criteria have been checked • appraisers are trained, and • there is no direct or indirect use of outlawed grounds of action. As mentioned earlier in this chapter, the performance management process involves a range of activities. The feedback provided through the performance appraisal process is only one part of the performance management process. A critical element in the design of the process is that it is supported by and also supports other people management policies, such as job design, rewards, training, development and learning, and career planning. The effectiveness of a performance appraisal process can be assessed by monitoring its implementation and the extent to which it is consistent with these other HR policies. Issues associated with implementation Even when performance appraisal systems are designed well, they can still fail to achieve their desired purpose if the implementation is handled poorly. Organisations of all sizes have found that there are common pitfalls that have a negative impact on implementation of performance appraisal systems. These are: • inadequate consultation with all stakeholders during the design and implementation • inadequate skills and understanding of the system by the appraisers • inadequate skills and understanding of the system by the appraised • inadequate support from the executive and senior management levels, and • over-emphasis on filling out forms and the bureaucratic part of the process. Any of these issues can result in negative perceptions by employees about the process, and the reactions may range from apathy to fear or even hostility. This can undermine the best designed system. Ways of overcoming difficulties in implementation Many organisations have found that the following strategies work well in ensuring smooth implementation

of performance appraisal systems. Continue consultation with key stakeholders While an organisation may choose to use people with expertise and experience in performance appraisal to design the system, it is important to involve as many people as possible from inside the organisation to act as a “reality check”. This helps the implementation by ensuring that: • the process is practical • interest and a feeling of ownership is spread throughout the organisation, and • many differing perspectives are incorporated into the design, reflecting the heterogeneous nature of most organisations. The involvement of employees in the design and implementation of the system may take many different forms, depending on the type and culture of the organisation. Some common practices are: • a steering committee/group of employees from different parts of the organisation which may meet regularly or at key milestones to review progress and offer advice • a project team that works part-time or full-time on the project and represents employees from different levels • a joint consultative committee involving representatives from the organisation and the associated union(s) • an advisory group who periodically reviews progress (This group may include stakeholders from within the organisation as well as external representatives, such as customers, industry groups, alliances and so on.) • a pilot group, which trials the new system and offers ideas for improvement, and • a post-implementation review group, who evaluates the system 12–18 months after implementation and recommend improvements. Organisations have found that using one, or a combination, of these types of groups markedly increases positive perceptions and support for the system. Position the appraisal system as an ongoing management tool One of the most common complaints managers have about performance appraisal is that it takes too much time. This perception is exacerbated when performance appraisal is seen as a separate process unconnected with the day-to-day work of the manager. Often, when introducing a new system, the emphasis is on the forms and paperwork. The bureaucratic nature of the process transcends the real purpose of the system. Managers and employees can often resent the time taken away from the “real work”. The organisations that have been most successful in dealing with this issue have positioned the performance appraisal system as a management tool to be used in the day-to-day running of the business, rather than as an annual event. They do this in a number of ways: • Giving managers maximum flexibility in how they implement the system: For example, one mediumsized organisation in the financial services sector had success by allowing each manager to select their own timing for appraisals. Some managers with small groups (or groups that worked closely as a team) chose to conduct all appraisals at the same time. Other managers staggered the appraisal discussions with their employees throughout the year to spread the workload. Others timed the discussions around logical milestones, such as the end of projects or financial quarters. The system worked well because each of the areas had the flexibility to implement the process according to their own needs.

• Giving employees responsibility for completing a substantial part of the process: One organisation in the education sector encouraged all of its employees to prepare their own draft objectives and to collect data to demonstrate their progress prior to their performance discussion. After the discussion, employees wrote up the agreements reached and gave their document to the manager for final signoff. This had the dual advantage of giving a greater sense of ownership and control to the employees and cutting down the workload of the managers. • Encouraging informal discussions throughout the year to track progress rather than relying on one formal annual discussion: One large organisation in the information technology sector found that — in its fast-moving environment — frequent discussions were required to ensure objectives were still relevant and aligned with business imperatives. Each team had a short weekly progress update and each individual had a similar monthly update to review progress, discuss feedback and finetune future plans, if needed. Twice a year, the progress discussions were summarised and documented more fully. The managers found that by using this process they spent far less time in day-to-day supervision, meetings and in rework because the employees had a clear understanding of what was required of them and greater independence in achieving their outcomes. Effectively train all the participants Organisations that have successfully implemented performance appraisal systems dedicate a great deal of time and attention to giving appropriate training to everyone involved in the process. Training needs to be provided to: • managers who will conduct performance appraisals • employees who will receive performance appraisals, and • any other stakeholders who will be involved in the process (eg customers who might be asked for feedback). Training should be held: • initially when the system is implemented • on a periodic review basis, particularly if someone needs additional help with the process, and • for all new employees and managers. Training may take the form of: • group workshops • on-the-job coaching • manuals • mentoring, and • interactive computer-based training. The content of the training will differ depending on the type of system that is being introduced. Unfortunately, some organisations tend to concentrate the training on correct completion of forms, which leads to the problems discussed earlier in the chapter. The most successful training tends to focus on the following tasks: • Setting effective objectives: Managers often tend to set vague objectives until they have been skilled in the process. While it may seem an easy option at the time, it causes significant problems when it comes time to review progress and determine the extent to which the objectives have been achieved. Another common tendency is to focus on the objectives that are easy to measure (eg financial measures) and ignore the more subjective areas (eg customer service and people management).

This has the effect of confining the attention of the employee to only part of his or her role. A third trap is that managers often tend to focus on the process or input, rather than on the outcomes to be achieved. For example, the objective that is set may be that the employee is to attend a training course (input), rather than to develop a skill to a particular level (outcome). This has the impact of focusing the employee on the process (attending the course), rather than the desired outcome (demonstrating the new skill). Effective training will enable managers and employees to become skilled at setting clear and specific objectives in all key parts of the role. Many organisations have adopted the SMARTA principle. This ensures that objectives are: S — Specific M — Measurable A — Agreed R — Realistic T — Time framed A — Aligned • Focusing on behaviour: An increasing number of organisations have identified the particular competencies required of their employees to perform in their roles. Performance appraisals often assess the level of skill or competency of the employee in order to identify what development is required. A common pitfall in this process is that managers may tend to focus their feedback on personality attributes, rather than behaviour or skills. For example, the manager may tell the employee that they are not achieving a satisfactory customer service standard because they have a “bad attitude”, or are “stubborn” or are “too shy”. The impact of this is that the employee feels they can do little about the problem as this is “just the way they are”. Effective training teaches all participants to describe (specifically) the behaviour that is observed. In this way, the employee can better understand and change the behaviour that is causing a problem, or keep demonstrating behaviour that is viewed as positive. Alternatively, the employee can clearly describe to the manager any behaviour that they would like to see changed or continued. • Using two-way communication: The essence of successful performance appraisal is effective two-way communication. The most common problems that arise in a performance discussion relate to the manager: – dominating the discussion – criticising in a way that makes the employee defensive, and – becoming defensive about perceived criticisms made by the employee. All of these patterns tend to stifle discussion and reduce the effectiveness of the performance appraisal. Effective training concentrates on raising the awareness of all participants of the importance of using the right communication techniques. It is equally important for both managers and employees to be skilled in: – the importance of language – listening skills – non-verbal communication

– recognition and ways to overcome likely barriers, and – creating a conducive atmosphere. • Adequate preparation: The general finding of managers who have successfully implemented performance appraisal systems is that thorough preparation is paramount. Effective training teaches those giving and receiving appraisals: – how and where to collect data for reviewing objectives and progress – how to plan relevant objectives for the next period, including input from appropriate stakeholders – how to plan for performance discussions, including strategies to overcome potential obstacles, and – how to use the assessment criteria objectively. For example, if a rating is required, how to apply the scale appropriately without the errors discussed earlier in the chapter arising (ie leniency, halo effect, biases and so on). Encourage meaningful support from senior management A common theme among organisations that have successfully implemented performance appraisal systems is the need for enthusiastic support from the top levels of the organisation. Some of the most effective ways of demonstrating this support include: • participating in steering or review committees to assist in the design and implementation of the process • all employees participating in the performance appraisal process, including the chief executive officer (CEO) and senior management • top-level management circulating their own performance objectives, to be used as a basis for other managers to align their own objectives • the CEO or board requiring regular reporting on implementation of the system (eg appraisals completed on time, quality of appraisals and feedback from employees on their perception of the process) • senior management regularly attending training sessions to introduce or close the sessions • senior managers insisting that all managers attend training and develop the requisite skills, and • all managers having an obligatory objective in their own performance appraisal measuring how well they implement the system.

¶23-050 Performance management and teams Teamwork has become more prevalent in the last two decades. It is viewed as a way of leading to better decision-making, achieving more innovative solutions and contributing to employee satisfaction and high performance workplaces (Pfeffer 1998; Batt and Doellgast 2003). Working in teams implies members of the team are dependent on each other for achieving performance outcomes. The interdependence has implications for performance management and rewards. Team structures are not appropriate for all types of work. It is best not to use team work for routine work or work where the performance of the team depends primarily on one or two members of the team (Clegg et al 2005). There are also particular challenges associated with working in teams. These challenges include: • relationship conflict, and

• task conflict. Relationship conflict can involve personal values, tastes, political preferences and interpersonal style; while task conflict can include the distribution of resources, policies, the interpretation of facts, particular judgments and procedures. It has been found that there are strong and negative correlations between task conflict, team performance, and team member satisfaction. In highly complex tasks involving decision-making and project work, conflict had a stronger negative impact on team performance than in less complex tasks, such as production tasks. When relationship conflict and task conflict were weakly, rather than strongly, correlated, team performance was less impacted (De Dreu and Weingart 2003). The performance of teams can be enhanced by: • senior management providing clear support and demonstrating how the activities of the team contribute to the vision and strategy of the organisation • a senior manager or group continually monitoring the actions of each team • rewarding contributions to team performance, efforts of managers to build teams, and the contribution of teams to organisational performance • providing time for team building and assisting people to work together • ensuring teams are clear about their goals and required results, and • members participating in decision-making. Virtual teams Developments in technology and globalisation have fostered the development of virtual teams. These teams are “separated by boundaries of time and/or distance, and leverage technology to conduct discrete interpersonal, social and economic exchanges of value to produce an outcome. Virtual team members have a common purpose, goal and approach to working together that holds them mutually accountable for their performance” (Ireland 2004). Management of virtual team performance is based on team members and leaders giving informal and formal feedback in a way that is culturally sensitive. Team rewards The performance of teams can also be enhanced by team rewards. These rewards include a range of schemes from bonuses to gain-sharing. Team rewards can be useful in promoting a team-based culture. However, there are difficulties associated with team rewards, such as an individual contribution being overlooked and the detrimental impact this can have on individual employees (Ireland 2001). It has also been shown that — when team members share the same mental models (ie similar ways of organising knowledge) — task performance in the team improves. Therefore, it is not just knowledge of tasks, but the organisation of knowledge and similarities of this organisation among team members that contributes to team performance (Mathieu et al 2000).

¶23-060 The future of performance management Performance management is an essential aspect of management in large and small organisations. In Australia, performance appraisals are a very popular tool for managing performance. There are, however, other approaches for performance management which are becoming more prevalent. These include the Balanced Scorecard, “talentship” and using more informal methods of reviewing performance. In addition, the emergence of sustainable HRM has implications for performance management with regard to assessing the employee contribution to organisational outcomes. Balanced Scorecard As indicated earlier, the Balanced Scorecard is an approach to performance management that seeks to

satisfy a variety of stakeholder needs. This management process includes measures of performance that are critical to the short-term and long-term success of the company. The Balanced Scorecard provides employees with a framework that includes strategies, goals and targets that are measured. Organisations need to customise the Balanced Scorecard, but, in all instances, the scorecard includes measures from a number of stakeholder perspectives. These perspectives will always relate to issues associated with HRM, involving people, productivity and process (Kaplan and Norton 1996, 2001). For instance, customer satisfaction is influenced by the performance and behaviour of people doing the work of the organisation. Therefore, a measure associated with customer satisfaction will include people management concerns. The Balanced Scorecard is a broader process than the traditional approaches to performance management discussed earlier in this chapter. It is a useful approach that explicitly details the link between organisational goals specified in the short-term and outcomes necessary to perform and thrive in the future. It can be used to assess the extent to which HR practices are achieving the organisation’s strategic objectives (Ulrich 1997). See also Chapter ¶17. Talentship Another broader approach to performance management is one consistent with “talentship”. Talentship refers to the process of stewardship of an organisation’s talent resource. It includes a structure for improving processes, such as decisions about enhancing individual contributions and individual interactions within the informal and formal structures within organisations (Boudreau and Ramstad 2007). According to this approach, there are pivotal actions (individuals) and interactions (involving two or more people) which contribute to strategic organisational success. This requires identifying how individuals need to behave and cooperate by considering such questions as (Boudreau and Ramstad 2007): • What key constituents will be encountered? • What will be the key role challenges and aligned responses? • What will distinguish effective from ineffective behaviour? Answering these questions requires a deep analysis of the employee behaviours that make the biggest difference to the performance of the organisation (ie a pivotal point). For instance, a pivotal point in a retail store is getting customers into the fitting room, because this influences how much they purchase. A consequence of this approach is that the performance management processes, goals and systems are required to focus on strategic pivotal points, and the actions and interactions required to further these pivotal points (Boudreau and Ramstad 2007). An approach to HRM, known as sustainable HRM, has emerged during the last decade. This approach is discussed in Chapter ¶2. Such an approach has implications for performance management and performance appraisal. When an organisation is concerned with broader social and ecological outcomes, this will necessarily have an impact on the nature of desired behaviours and capabilities required of employees and, consequently, this will influence performance indicators.

¶23-070 Conclusion This chapter has discussed the importance of performance management and the systems necessary to support it. Performance management has the potential to enhance the performance of the organisation and to make it a better place to work. The fundamental elements are the two-way exchange of information between manager and employee, and consultation over the key issues faced at work. When approached with skill and understanding, it can be an empowering, enriching and encouraging experience for both parties. Unfortunately, too many organisations do not gain such benefits from performance management, and there is an abundance of stories about its failure. Pulling the threads of this chapter together, it is vital that: • there is a clear understanding of the place for performance management and that it is seen to be linked to the pursuit of the organisation’s goals • performance management is not experienced as an imposed and cumbersome obligation on

managers and employees: rather, both groups should be involved in the design of the system and see it as valuable • there is strong leadership communicating and reinforcing the value of performance management (ie leaders, at all levels, are involved in performance management and model appropriate behaviour) • there is an appreciation of the hazards involved in designing, implementing and sustaining performance management, thereby giving attention to training managers and employees to equip them with the skills to maintain satisfactory systems • there are audits, surveys and reviews to check that the system is working satisfactorily and identify where it is not working well (Responses are then generated from these actions.), and • there are broader audits to check on the links of performance management to the other elements in the people management chain. Performance management has a most important part to play in many contemporary workplaces. Its effectiveness is linked to an appreciation of its place in the organisation, its thorough and high quality preparation, and a passion to keep the system simple. No organisation can ever expect to implement a system that works perfectly. The more pragmatic goal is that the organisation is better off with a system than without it. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶12-000. References Batt R and Doellgast V 2003, “Organisational performance in services”, in D Holman, T Wall, C Clegg, P Sparrow and A Howard (eds), The New Workplace: A Guide to the Human Impact of Modern Working Practices, Wiley, London. Boudreau JW and Ramstad PM 2007, Beyond HR: The New Science of Human Capital, Harvard Business School Press, Boston. Clegg SR, Kornberger M and Pitsis T 2005, Managing and Organizations: an Introduction to Theory and Practice, Sage, London. De Dreu CKW and Weingart LR 2003, “Task versus relationship conflict, team member satisfaction, and team effectiveness: A meta-analysis”, Journal of Applied Psychology, vol 88, pp 741–749. Gilliland SW and Langdon JC 1998, “Creating performance management systems that promote perceptions of fairness”, in JW Smither (ed), Performance Appraisal: State of the Art in Practice, JosseyBass, San Francisco, CA. Ireland S 2004, “Managing virtual teams”, in D Rees and R McBain (eds), People Management: Challenges and Opportunities, Palgrave Macmillan, London. —— 2001, “Whatever happened to team reward?”, Pay and Benefits Bulletin 524, IRS Employment Review 732b, July. Kaplan RS and Norton DP 2001, The Strategy-focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press, Boston, MA. —— 1996, “Using the balanced scorecard as a strategic management system”, Harvard Business Review, January–February. —— 1993, “Putting the balanced scorecard to work”, Harvard Business Review, September–October. —— 1992, “The balanced scorecard — measures that drive performance”, Harvard Business Review, January–February. Kramar R 2012, “Trends in Australian Human Resource Management: what next?”, Asia Pacific Journal of Human Resources, vol 50(2), pp 24–33. —— 1999, “Policies for managing people in Australia: what has changed in the 1990s?”, Asia Pacific

Journal of Human Resources, vol 37(2), pp 24–33. Longenecker CO, Gioia DA and Sims HP 1987, “Behind the mask: The politics of employee appraisal”, The Academy of Management Executive, vol 1(3), pp 183–193. Mathieu JE, Heffner TS, Goodwin GF, Salas E and Cannon-Bowers JA 2000, “The Influence of Shared Mental Models on Team Process and Performance”, Journal of Applied Psychology, vol 8(2), pp 273– 283. Pfeffer J 1998, The Human Equation: Building Profits by Putting People First, Harvard Business School Press, Boston, MA. Taylor FW 1911, Principles of Scientific Management, HarperCollins, New York. Ulrich D 1997, “Measuring human resources: an overview of practice and a prescription for results”, Human Resource Management, vol 36(3), pp 303–320.

24. SOCIAL MEDIA, NETWORKING AND THE WORKPLACE Editorial information

Dr Lynn Gribble Director, Talking Heads

¶24-010 Introduction While HR managers talk of the differences between generations and their expectations of the workplace, few could argue about the immense changes we have seen across society over the past 10 years. Taboo subjects are now freely discussed in many circles and with these societal changes HR managers have also had to consider the impact of these on communications in general and social media in particular. With technology enabling more flexible work practices, the boundaries between work and social practices have also blurred. Work is no longer a Monday to Friday, nine-to-five proposition. Technology use is no longer contained or controlled by ownership, or by time instead calling upon employers and employees to manage behaviour through a shared meaning or societal norm. The core issues with social media and the workplace becomes one of its ubiquitous nature and the impact of this behaviour on the workplace and its employees even if this behaviour occurs outside of the workplace. Many organisations have managed to understand and harness the use of social media platforms such as Twitter, Facebook, Instagram, and Linkedin for marketing as well as engagement and feedback with clients/customers, suppliers and current and future employees. This is often taken further with internal tools such as Yammer. Other tools such as blogs, Google+ and the continuing emergence of apps to share information and resources has meant there are many ways your employees are communicating both at work and outside as well. While 10 years ago using the company computer for no work related means was considered to some degree incorrect usage of organisational property, today, with the increase in smart phones, many are connected via their social media 24/7. Add to this the emergence of MOOCS (Massive Open On-line Courses) and information is being shared about your organisation, you and the organisational practices in more ways than we can know or control. Social media is here to stay. The likes of Twitter and Facebook™ have meant that thoughts and grievances can be aired instantly and publicly. Such platforms are not new, and yet many managers have not planned to proactively manage its impact at work instead managing by exception or expecting “reasonable behaviour” without providing guidance on both what that might be and how it can be objectively measured. The impacts of what can go wrong are often underestimated. Greater communication options have softened the boundaries between work and social life. As a result, organisations are now faced with discussing personal and organisational boundaries while remaining cognisant of the changing nature of societal acceptance and blurred lines of what constitutes acceptable behaviour. As a potential human resources (HR) issue it should also be recognised that prohibition has failed in most instances, where education and engagement has succeeded. The issue for HR professionals remains one of balancing the care for their employees and their organisation simultaneously while developing practices that reduce the risk and negative impacts. There are a number of issues to be considered and important steps to be taken in order to deal with

social media. In an age where much attention has been given to how to manage across generations and new legislation, it appears few organisations have fully appreciated what the access to social media has meant for their employees — past, present and future. Social media must be embraced and considered — not as emerging technology — but as a reality that must be managed, both inside and outside of the workplace, for the wellbeing of the organisation, its people and for society in general.

¶24-020 The rise of social media Social networking and social media are not new phenomena. Social media sites first launched into public awareness in February 2004 when a group of students used it as an alternative to a student directory (Gabbay 2006). In just 12 years, statistics indicate, that there are now over 1.44 billion active users of Facebook™ per month (www.statista.com/topics/751/facebook). Further, in Australia, 93% of Facebook users spend eight and a half hours per week on the site keeping up to date (Sensis 2015). The ability to email and contact large numbers of friends, find new friends, and just generally keep in touch has never been more prevalent. Instant connectivity is key in today’s society where people work long hours and may live far away from their families. The rise of “friends” vs “Friends” along with FOMO (Fear Of Missing Out) has meant that for many, their virtual worlds are as or more important than any physical world they experience. The rise of instant celebrity is also part of this phenomenon. Real friends (ie those who know you personally, and have shared history, the term is more often known as big “F” Friends) are declining, while virtual friends (little “f” friends) are on the increase. Expanding your network of people and contacts has never been easier. In the past networking was slow and relied upon physical meetings or at least a shared physical contact. Today, you can access just about anyone with very little effort or cost, and very quickly too. Social media seeks to build communities and collaboration, its very nature is UGC (User generated content). Its users know they need to be active, interesting, and there is a lack of formality (Kaplan and Haenlein 2010). Employees (and we hope employers) today want to have conversations and they want to have a voice and be heard at work, about work and beyond work. When managing social media ensure you are listening but understand what drives the participation as that will assist you to understand the subsequent behaviour and risks associated with it. Remember, if you are not listening to what your employees are talking about they will talk to anyone who wants to hear them. The six degrees of separation is more likely to be reduced to about two or three if you think strategically about who you want to reach, and Twitter’s 140 character comment has meant that what might be a quick quip said in person is now shared instantly and widely. If you have something to say, you no longer have to find someone who is interested in listening, because in under 140 characters you can tell the world. And it is instant and there is an expectation that the response will also be instant. The sharing of information and its impact in the workplace is, therefore, the issue for employers and employees to consider and manage. As smart phones provide more connectivity (according to Sensis 2015, 70% of Facebook™ users use mobile devices), simple issues, such as the use of the company provision of internet, are no longer the crux of the issue for employers. Mobile phones provided by employers to employees have long been under scrutiny in terms of usage. What is considered personal and private use has often been left to be deemed as “reasonable use” and often only comes into question when it is suspected or proven that someone has “abused the system”. However with so many mobile plans now unlimited in terms of calls and wireless access broadly available at little to no extra charge. Add to this the view to move to bring your own device, more people working from home, or even providing their own internet access, provision and ownership are now even less clear — paving the way for previous arguments over usage restrictions to become obsolete. As with company-provided personal mobile phone use, using company-provided internet for private use, or using your mobile for non-work purposes, is usually based on “reasonable usage” and is subjective. It is time to move beyond monitoring to education as a means of management. Monitoring is at best difficult but does not address the core of the problem for organisations which is when the use of social media by an employee impacts your work environment, reputation or operations. At the office (or even during defined work time), organisational policies guide behaviour and acceptable standards surrounding the use of technology and most employees are aware of this. However, with the

increase in computer aided communication we have also witnessed a different phenomenon. On line communictaions can be subject to on line disinhibition effect (Hammersely 2012). While most people know what is socially acceptable to say out loud, as opposed to what they think, when a person is typing a response, they may type their inner thoughts rather than a socially moderated response. As words carry so little of the meaning in any communications, and tone and body language are absent, we have seen the rise of emoticons as a means to provide some visual clues as to the tone of the message and are widely used in social media. However even with these messages are easily misconstrued. It is time organisational induction courses provide clear behavioural guidelines. Organisations are often silent about behavioural standards or when they are discussed they can be glossed over. Consider looking at where social media could be problematic for your organisation and other employees. If we consider the learning curve for some organisations in relation to sexual harassment and diversity, then it is easier to understand the road ahead for HR professionals in relation to social media. Additionally, few organisations seek to control their employees outside of traditional work times, however, it is clear that if an outside of work behaviour impacts inside of work, then the organisation has a role to play. With the rise in use of social media, a secondary problem has arisen. The nature of “good consumption” of such resources is also important. What is less clear is who is responsible for providing understanding about what is deemed “appropriate use”. With any new medium it can be a case of trial and error. However, getting it “wrong” within a work context often has a greater impact than on social circles alone. It involves reputation of people and your brand. Being aware of what is civil and acceptable at work then becomes an organisation’s responsibility. Organisations are coming to terms with the fact that they also have to change their behaviour and adapt to the new operational environment. An organisation must be clear — both in terms of input and consequences for their employees who use social media. Informed use leads to fewer problems and clearer outcomes as well as informed policies and processes to deal with issues as they arise. Organisations often provide support for non-work-related issues, but ensuring understanding for newer technologies and their use is often overlooked. Employees’ understanding relative to selectivity, boundaries and consequences must be considered. Further, employees need education about these issues from an informed use context. Perhaps the easiest test an organisation can use is to consider the impact of behaviour (ie the social media use) on others. By asking the questions: • “Is this affecting the work relationship?” • “What impact is this having in the workplace?” • “Is this impacting our brand?” We can begin to unravel what needs to occur. Social media use commences early with children as young as six having access to Moshi Monsters™ which is seen as a child equivalent of Facebook™. The issue of “what is appropriate” is embedded by peers, but where the peers themselves are struggling to define what is appropriate, and authorities are yet to determine what is unlawful, social media is often viewed as self-regulated and community-defined. The challenge then is to educate the community on the “rules of engagement”. The rise of content creation and sharing has also meant that information is less “owned” and social capital is created through the notion of sharing. The rise of the sharing economy has meant that if you have it and can either make money or build your personal brand by sharing it, why wouldn’t you? Given this, it is clear that if your current policies have been formed on the basis of outdated beliefs that all employees are trying to do the least amount of work possible and must be closely supervised in order to achieve any results at all (McGregor 1960) it is time to rethink what management really needs to do today. The debate of academics whom offer self-managed teams and autonomy and empowerment are the ways to ensure employee happiness and sustainability (Zárraga and Bonache 2005) has also meant that organisations must consider how these employees act both inside and outside of work hours. Internal organisational social networks, such as Yammer, provide an opportunity for employees to “vent” their work or organisational concerns while providing insight as to what behaviour may arise outside of work too.

¶24-030 Managing social media While organisations over the past 20 or more years have come to grips with the use and provision of email and internet at work, and that both current and potential employees will have social media accounts. Some organisations have fully or partially embraced what social networking can do for them from recruitment and/or a marketing perspective (Foster 2008). Social networking and social media are pervasive. Trying to prohibit the use of social networking or social media at work or during work will not exclude the workplace from potential problems. In fact, prohibition of use may add to them by leaving the organisation vulnerable and unable to manage or control and measure the impact on workers. Ignorance, as they say, is far from bliss. Instead, taking an informed and proactive stance may be the only approach left open for organisations to employ in their battle to stay current and attract and maintain a sustainable workforce. The secondary problem with managing social networking and social media is that managers may lack general interest, time or resources to become involved with such tools. These reasons will not provide an excuse for failing to manage, inform and educate employees on your organisational views practices around the use of social networking and social media in a manner which is conducive and complementary to organisational activities. Being informed, proactive and involved will lead to social networking and social media with fewer negative impacts and the organisation being able to reap all the rewards that its use (and availability to use) can offer. Commence by considering your philosophical view about what you can or do expect from any employee. A workplace free from harassment, and employees who uphold the mutual trust and fidelity of the organisation, ie not damaging your brand or doing anything that would bring your brand or organisation into disrepute. By taking time to consider what general actions you seek from your employees first, you will be able to define the types of policies and practices that assist your employees in being, great service providers, brand ambassadors and feeling safe and supported while doing so. Going forward, as the boundary between what is deemed “work” and what is deemed “social time” reduces, and personal relationships continue to form within the workplace, the organisation must provide education and an opportunity to provide the tools that form the baseline of maintaining a civil society. Organisational resources must be allocated to enable knowledge on the possibilities of social media practices, thus conceptually contextualising the risks and potential issues.

¶24-040 Engaged and informed employees — the need for clear guidelines People in an organisation will use social media, but what is important for HR to understand is how they can or will use it in their day-to-day life. There is a difference between what is personal and what is professional social media use. Commence by raising this to separate uses as often, this has not been considered by users prior to joining your organisation. Being clear with your employees about this difference can be a great place to start. A quick overview of social media shows that people are quick to share what fits the image they are seeking to portray. Image crafting is a central core of social media and networking. Users work on building large numbers of followers, likes, shares and views as these are the social capital or currency of this interaction. People are using this new currency as a means to creating and maintaining their self esteem and value. It is important for HR to review social media policies and procedures and consider that you cannot stop its use, and it is therefore better to educate and assist your employees to ensure they understand your organisational expectations of them and its use while in your employ. Consider social media both as a standalone policy and as an integrated part of your other policies which guide behaviour too. Your policy needs to provide clarity and form the basis for the process the organisation will use to manage issues as they arise. This also protects both the organisation and its employees should an issue occur (which you should expect, because humans are, after all, human). Employees are difficult to manage during work hours and nearly impossible to control outside of those hours. It needs to be considered that — even if the use of such media is outside of work, but the matter is a work-related issue — then the lines become blurred and the organisation will be left trying to handle it.

Balancing social needs at work is important and if employees are happy, we generally know that they are more productive (Zárraga and Bonache 2005). Productivity could be an issue given that users spend more than a day per week looking at their social media and that an interruption to work flow is already occurring though with other existing technologies. Consider the following: An employee already has email on their computer (which regularly disrupts them). If the job also provides a mobile phone, then their concentration is already split. In our attention deficit economy, multi-tasking is often considered heroic instead of poor form. People are often typing while on the phone, or emailing or texting while walking to lunch. Worse still, some still do this as they drive. It can be argued that no one should do more than one thing at once, but that does not stop its occurrence, particularly when company demands on worker time continues to increase and many organisations have limited physical resources doing “more with less”. Therefore, the task is finding ways to manage and influence the use of social networking and social media, rather than assuming that it can be stopped. Social networking and social media is just another thing that needs to be “built in” to the already fractured time spent at/on actual work. To conceptualise the problems associated with social media use, one needs to consider how it can be used and misused. One issue is the instant ability to post information in haste that is not well thought out or considered. The speed of how a problem arises is as important as the problem itself. As the printed word is not accompanied by clear understanding of tone, the risk of misunderstanding escalates. A quick quip in person is not quite as funny online, and less funny when it goes “viral”. It is also important that organisations think more broadly than employees alone. Clients, contractors and other external providers are all potential risks or areas of risk to be managed. This group is far more difficult to manage, hence you need to consider how you ensure your contractors and clients act in a way that is consistent and congruent with your organisational behavioural standards. For example, organising a series of educational seminars and focus groups will provide the opportunity for the organisation to consult with employees, clients, contractors and other external providers and understand their needs, concerns and overall issues. It also provides the basis for any discussions that may be necessary going forward. Further, it can be an opportunity to brainstorm how issues should be handled. Education is key, but so is engagement. Being informed about responsibilities and having the opportunity to understand the impact of certain behaviour are what alter behaviour. Where social media sites (eg Twitter) are embedded in the organisation along with other forms of “sharing sites”, discussions on email and other forms of technology, they eventually become a part of the organisation. However, organisations may, for example, include social media as part of an organisation’s anti-bullying and anti-discrimination compliance training, but it should also be considered part of your engagement training. By aligning how their actions build and form the brand, you can set boundaries that support that. Your branding strategy might consider that any employee cannot “post” anything that identifies the organisation, its practices or intellectual property (many organisations have commenced this practice with solid success). By asking your employees to uphold professional standards that are clear and align to the business goals makes it clear that the professional/personal boundary is already broad. By starting with the business, it is then easier to ask employees about the nature of what should or should not be shared and why. Then it is easy to explore how any personal behaviour impacts others. Commence by exploring the organisational values, consider how the values can be supported or breached by social media use. Remind your employees about the key differences between work and social interactions including power relations and how the social relationship is ongoing often without the choice as to who we work with or around. These key differences mean that ultimately the work-based friendships are more than “friends” but may not be Friends. Perhaps, more importantly, consider doing some social media profile training or audits with your employees. By educating your employees on the long-term impact of their online presence, you are asking them to take responsibility and enabling them to create an acceptable use view related to work. Talk to them about locking down who can see as well as who can access their information. This may be the most valuable education you provide any employee for their long-term employability. It will also protect other employees and the organisation’s brand. Investing time before you employ a new person to check their online presence can be as important as, or

more important than, reference checking. Past behaviour is typically viewed as a predictor of future success. Therefore, when applied to references and checking of references during recruitment activities, you will rarely be provided with a bad reference. While reference checks can allay or confirm your fears, it is a person’s online presence which provides real insight to their discretion, activities outside of work, the company they keep and their general behaviour. Spend some time looking at what is said online, whom they are linked to, and what likes and dislikes they appear to have. As a practice exercise, spend some time looking at just one person you know and their online presence and analyse this. After doing this exercise, identify where potential issues can arise. This will assist you with your employment practices, but will also provide a compelling case example when you are educating employees about their social media use.

¶24-050 Other areas of consideration Legal issues Checking a potential future employee’s background online has legal and ethical implications that need to be considered. However, once a person is employed, any legal issue that can occur in the workplace can also be replicated online. This means that defamation, bullying and discrimination are all very real issues that need to be considered within the realms of social networking and social media. Even if these issues occur outside of work, there is often a solid audit trail on which to act. This is a very difficult area because it has not occurred at work, yet it is best paralleled to other social work-related mediums. As such, the workplace has an obligation to act and to be “reasonably” informed. As access often occurs outside of work hours, there are other complexities, such as comments fuelled by alcohol or drugs (both prescription and non-prescription types), which you may have to consider when dealing with such issues. Being prepared is important. Consider if the organisational view is zero tolerance, or where that point lays. It just means that — instead of spending precious time trying to work out what to do — the organisation can spend that time managing what is ahead of them. Make sure your policies reflect that any breach of the law or your organisation’s conduct in person or online is an offence that will be handled via disciplinary action or even termination. Recommendations are really references Many online forums ask or enable people to recommend each other and this becomes a type of reference. As such, people must be cautious when providing a recommendation. Caution should be used where organisations expressly prohibit provision of references, as enabling a recommendation or providing comments on current or previous employees can be seen as providing a reference. Be careful, for what appears to be a harmless “I know and trust this person”, can become an endorsement that is unwittingly made on behalf of the employer or organisation. Likes and dislikes, and tweets about issues in the workplace are quickly transmitted and often to broader audiences than intended. Both organisations and employees need to think about the contractual obligations in relation to this behaviour with such social media tools. What you say is there for all to see While many social networking sites control and limit who you can and cannot connect with and who sees what, people need to be personally responsible to ensure these controls are set and used. There may also be times when a profile should be removed. The fun of social networking can become a nightmare when a misdirected or misinterpreted comment becomes worldwide public knowledge in less than a few hours. Many HR practitioners are now using social media as a means of screening potential employees or monitoring existing employees for instances of improper use of sick leave, bullying of others, disparaging comments and general misconduct. This leads to the issue of privacy. Even what might be seen as an email conversation between two friends is there to be uncovered both through social networking and social media and other email servers. Ensure that employees are aware that email and social media conversations can be monitored and recorded. Be clear in what cannot be discussed and remind employees that clients, potential clients and competitors may be able to view conversations. Confidential information

Often employees are not cautious about confidential information, particularly with online information as it can feel like a private conversation. If you want to be sure that confidential information is not discussed and remains confidential, it is important to remind everyone frequently when they are exposed to confidential information and what they can and cannot do with that information. Clear guidelines Put in place clear policies and procedures surrounding social networking and social media. Once a policy is in place, there are clear guidelines addressing acceptable behaviour which ensure procedures are easier to enforce. Misconduct In practice, terminations that occur as a result of employees breaching social media policies come down to a few tests of law. Did they breach their contracts (did you specifically state policies are part of the employment contract?) or terms and conditions of employment? If so, you may or may not be able to terminate. It is important that you seek solid legal advice from an employment lawyer, as most of the time the HR implications are more likely to be in relation to the ability to terminate (or not) under the Fair Work Act 2009 (Cth) and its intersections with other Acts.

¶24-060 Conclusion Where to now? Start with education and communication. When creating policies, it is important to consider the type of employees the organisation wants to attract, and whether forward-thinking social networking and social media policies will be important. It is also important to consider the organisation’s position in relation to what can happen in other social situations or instances of bullying and harassment between employees outside the workplace. Many organisations provide employee education around the Christmas season so as to limit their exposure at the office Christmas party to harassment charges. One of the key issues for the social networking or social media space is the seemingly social aspect of it, which has nothing to do with work. Often people have not had enough experience to understand that their behaviour outside the workplace can have ramifications in the workplace. Issues such as bullying, defamation and harassment are all problematic for an organisation; so it is important to look at putting in place solid guidelines surrounding the use of social media. Remind employees regularly and make it part of your induction on day one of their employment. Managers as online connections may be beneficial on professional networking sites, but may create issues and blur boundaries where they are “friends” on social networking sites. In each situation, education rather than rules can help. Consultation, not confinement is the answer Consider creating a working group to discuss how a social networking and social media policy will be implemented and maintained. Or, consider an ongoing working party of active users who can monitor current issues and who will have a better view of the organisation’s social media situation. Remember that having a working party and consultation group does not mean that all ideas will be used, or implemented: it is simply a way for the organisation to take an informed approach and make the decision-making process easier. Employees and contractors should have an opportunity to communicate their needs and concerns. In formulating policy, it may also be valuable to create an information document or “fact sheet”. Try to take a proactive and positive tone with it. Include what is and isn’t acceptable, and what sanctions will be imposed should the “rules” be breached. Take a guiding philosophical approach whereby etiquette and behavioural standards are clear. Look to link these to codes of conduct or ethical standards, or to other existing organisational policies where key behaviours are already understood. Think about current policies and how they are enacted. If flexibility in interpretation is allowed, then this will flow over to the social networking or social media policy. Providing education on the risks of social networking and social media and offering potential ways to mitigate these issues will assist and support employees in reducing their risks in this environment. Add social media to your anti-harassment and anti-bullying policies and education. Remind employees that — if it is about work or affects work then it is a workplace issue.

Going forward Take a moment to consider the issues surrounding social networking and media: • Remember this is a risk management issue. • Consulting a group does not mean using everyone’s ideas. • Be prepared to regularly update and adjust policies as needed. • Having a philosophy as well as a policy can be helpful in retaining a “moral compass”. • Think broadly about work-related impacts. • Keep the discussion going. • Take time to educate on the importance of reflection and consideration in relation to all actions. A moment in haste can become a lifelong regret. Consider a working party of social media users along with management and non-users so perspective can be gained on what issues are arising. By listening to how and why people are using such sites, this can inform how risks can be managed. As mentioned earlier, the reality of organisations today is that the use of social networking and social media is a risk to be managed. Avoiding social networking is not the answer to becoming a progressive and responsible organisation. The key lies in implementing guiding philosophies, principles and policies to make it easier to manage. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Commonwealth of Australia 2009, Fair Work Act 2009 (Cth), see www.comlaw.gov.au/Series/C2009A00028. Foster D 2008, “Introduction to Facebook for Companies and Organizations”, accessed 27 April 2010 and 8 July 2013, see fastwonderblog.com/2008/09/25/introduction-to-facebook-for-companies-andorganizations. Gabbay N 2006, “Facebook Case Study: Offline behavior drives online usage”, accessed 27 April 2010 and 10 April 2013. Hammersley B 2012, “64 things you need to know for now and then”, Hodder UK. Jackson T, Dawson R and Wilson D 2001, “The cost of email interruption”, Journal of Systems and Information Technology, vol 5(1), pp 81–92. Kaplan A and Haenlein M 2010, “Users of the world, unite! The challenges and opportunities of Social Media”, Business Horizons, vol 53(1), January–February, pp 59–68. McGregor D 1960, The human side of enterprise, McGraw Hill, USA. Social Networks — Statistics & Facts, accessed 6 January 2016, see www.statista.com/topics/1164/social-networks. Sensis 2015, “Social media report, how Australian businesses and people are using social media”, May, accessed 6 January 2016, see www.sensis.com.au/assets/PDFdirectory/Sensis_Social_Media_Report_2015.pdf. Zárraga C and Bonache J 2005, “The Impact of Team Atmosphere on Knowledge Outcomes in Selfmanaged Teams”, Organisation Studies, vol 26(5), pp 661–681. Zephora internet marketing solutions 2015, “The Top 20 Valuable Facebook Statistics” — Updated December 2015, accessed 6 January 2016, see zephoria.com/top-15-valuable-facebook-statistics.

25. WORK/LIFE BALANCE Editorial information

Michael Toten Human Resources Writer and Consultant

¶25-010 Introduction Employees are likely to be more productive and committed to their employers if they can minimise the levels of stress and difficulties involved in meeting the competing demands of their workplace and commitments outside of work. The main source of the latter relates to family responsibilities, but others may include study, travel, carer’s responsibilities, voluntary work and community service activities (eg membership of an emergency services organisation). To enable employees to balance competing responsibilities more effectively, a wide range of flexible working arrangements have evolved. These arrangements continue to expand, and can be described as any work arrangements that vary from the “traditional” Monday-to-Friday, 9 am to 5 pm (or similar) pattern. The most common are discussed in detail later in this chapter. Many trends in workforce demographics (and society in general) have impacted on businesses and the labour market. Businesses now understand that their workplaces must provide flexibility (ie in the workplace itself, in the structure of jobs, and in the way employees perform their work) so as to attract and retain suitable employees. The major trends are as follows: • increased diversity of the workforce, due to demographic trends • a higher proportion of women in the workforce, who tend to adopt a bigger share of parental and carer’s responsibilities than men • increased carer’s responsibilities in general, which encompasses caring for elders (mainly parents) as well as children, with some employees now having responsibility for both • technology, which makes it possible to work at locations away from the employer’s central workplace (Note: Innovations, such as smartphones and other mobile communication devices, are increasingly blurring the distinction between what is “work” and what is “not-work”, with each encroaching on the other.) • changes in customer service availability and expectations (eg demands for “round-the-clock” service) • greater emphasis on further education and “lifelong learning”, which means more employees have to balance work and study demands, and • the ageing workforce (and the ageing population generally) has highlighted the need to keep older employees in the workforce longer, which has the added effect of delaying the costs to society that are associated with early retirement. More recently, due to the global financial downturn of around 2008–09 and ongoing economic problems since then in some European Union countries, the issue has arisen where many older employees have found it necessary to remain in the workforce at a time

when they would prefer to retire, because the value of their superannuation has fallen to the extent that it is no longer adequate to support them. This trend has implications for both work/life balance and employee engagement (not wanting to work but feeling forced to). Earlier commentators used the term “work and family” to refer to the phenomenon, and some legislative provisions still refer to “work and family responsibilities”. As the concept continues to broaden, however, the term “work/life balance” has been widely adopted. The commentary in this chapter also uses that term.

¶25-020 The benefits of work/life balance There are a number of well-documented benefits that arise from implementing work/life balance through flexible work practices. The main ones are: • reduced recruitment and turnover costs • easier attraction and retention of high-quality employees • it can encourage mature age employees to keep working beyond the usual retirement age, which in turn helps to address workforce skills shortages • reduced costs associated with absenteeism, particularly among employees with family responsibilities • higher and earlier return rates from parental leave • increased employee commitment, morale, loyalty and job satisfaction • more efficient use of labour, combined with reduced operating and overtime costs • improved return on training and development investments • improved customer service • development and maintenance of organisational cultures that accept change and creative solutions in order to improve business outcomes, and • it is easier to comply with the demands of equal employment opportunity (EEO) and Fair Work legislation. The evidence Results of the Managing Work/Life Balance 2007 Annual Benchmarking Survey of Work/Life Initiatives, conducted by Managing Work/Life Balance International in conjunction with CCH Australia Limited, provided the following evidence of links between work/life balance initiatives and improved organisational performance: • 76% of “best practice” organisations (ie in terms of their use of flexible work practices) said that, as a result of their work/life strategies, they were able to attract and retain the best possible talent, compared with 61% for all surveyed organisations. • 79% of best practice organisations reported a positive impact on productivity resulting from flexible work arrangements, compared with 50% for all organisations. • The top two reasons for all organisations to implement work/life balance strategies were: – to attract and recruit the best possible talent, and – to retain staff. • 19% of all organisations observed an increase in staff turnover related to lack of flexibility in the

workplace, but only 2% of best practice organisations had suffered increased turnover. • Only 32% of organisations gave a priority to programs to attract and retain mature age employees, although this had increased from 27% in 2006. • 43% of all organisations reported that their work/life strategies had led to a reduction in staff turnover of 7% on average. Best practice organisations that achieved a reduction (54%) reduced it by 15% on average. • In relation to reducing absenteeism, 28% overall recorded a decrease; the average decrease was about 9%; 37% of best practice organisations achieved a decrease of 16% on average. • Rates of return from parental leave increased by 40% in best practice organisations, compared with 30% overall. The results appear to support the view that work/life balance initiatives can be successful in reducing the impact of other “negative” developments within organisations. For example, best practice organisations were less likely to experience increases in turnover or absenteeism as a result of the organisation increasing employees’ working hours or having a “long-working-hours culture”. There is not necessarily a conflict between working harder and/or for longer hours and work/life balance — the latter may make it possible to do so through arrangements where both parties benefit. In the same survey, organisations provided the following reasons for introducing work/life balance strategies (listed in 2006 rank order of frequency): • attract and recruit the best possible talent • retain staff • increase employee productivity • encourage employees to focus on their own health and wellbeing • be an employer of choice • reduce absenteeism • increase employees’ discretionary efforts • comply with legislation • manage an ageing workforce, and • increase return rates from parental leave. (Note: The annual benchmarking survey was conducted over a 10-year period. The last one was run in 2007. For more information on initiatives carried out by Managing Work|Life Balance International since then, such as the 2010 Flexible Work Pulse Survey, see www.worklifebalance.com.au/work-life.html. See also the Flexible Work Practices section in the CCH Human Resources Management subscription information service.)

¶25-030 Impact of legislation on work/life balance issues The Fair Work Act 2009 (FW Act) and the National Employment Standards (NES) have had the following implications on work/life balance issues: • Collective enterprise agreement making was given primacy and the process streamlined. The safeguard for minimum standards is known as the better off overall test (BOOT). That is, to approve an enterprise agreement, the Fair Work Commission (FWC) must be satisfied at the time of the

application that each award covered employee, and each prospective award covered employee, would be better off overall if they were employed under the agreement rather than the relevant modern award. The BOOT is not applied on a line-by-line basis. It is a global test, involving consideration of whether entitlements under an agreement will, on balance, result in a reduction in overall terms and conditions of employment. Where there are specific reductions in terms and conditions, the question is whether these are remedied, in an overall sense, by other more beneficial provisions in the agreement. • Modern awards do not apply to a “high income employee” — whose annual earnings exceed the high income threshold (indexed annually, and currently $138,900 from 1 July 2016), and who has received a formal guarantee of their earnings which remains in force; some managers also fall outside the scope of modern awards. • Modern awards and enterprise agreements must include a flexibility clause or a model flexibility clause will apply which allows the parties to enter individual flexibility arrangements (IFAs). The clause must require that any IFA is genuinely agreed to by the parties and the employee is better off overall than if the IFA were not entered into. Either party must be able to terminate the clause by giving 28 days’ written notice. • All bargaining participants are obliged to bargain in good faith. • The NES contain the following additional work/life balance provisions: – Parental leave: 12 months’ unpaid parental leave for both parents. Where families prefer one parent to take a longer period of leave, that parent may request an additional 12 months’ unpaid leave. An employer must give the employee a reasonable opportunity to discuss their request and may only refuse the request on reasonable business grounds. – Flexible work for employees: employees may request flexible work arrangements if they: • are a parent or care for a child of school age or younger • are a carer under the Carer Recognition Act 2010 (Cth) • have a disability • are age 55 or older • are experiencing violence from a family member • support a family member experiencing domestic violence, or • are a carer of a member of their immediate family or household. Employers may only refuse this request on reasonable business grounds, which are outlined later in this section. – Personal, carer’s and compassionate leave: full-time non-casual employees are entitled to 10 days’ paid personal or carer’s leave per annum (part-time employees are entitled to pro rata personal and carer’s leave). This paid leave is taken when unable to attend work due to illness or injury, or to provide care or support to a member of the immediate family or household who has a personal illness or personal injury, or affected by an unexpected emergency. All employees are entitled to two days’ unpaid personal leave when required for caring purposes or family emergencies. All employees are also entitled to two days’ compassionate leave on the death or serious illness of a family member or household member. For permanent employees, compassionate leave is taken as paid leave, and for casual employees it is taken as unpaid leave. – Community service leave: employees are entitled to take leave for certain community activities

(eg jury service or emergency services work). Paid parental leave Although the NES guarantee only unpaid parental leave, Australia’s first paid parental leave scheme commenced in 2011 under the Paid Parental Leave Act 2010 (Cth). The scheme provides for up to 18 weeks of government-funded parental leave pay at the national minimum wage (reviewed annually and currently $672.70 per week or $17.70 per hour from 1 July 2016). The scheme provides for this leave to be taken in addition to any existing employer-funded entitlements, either at the same time or consecutively. The scheme is available to parents of children, born or adopted from 1 January 2011, who satisfy work, income and residency tests. To be eligible for the payment, the person must be the primary carer (usually the mother) must have: • been engaged in work for a total of at least 10 of the 13 months preceding the expected birth or adoption of the child, with a break of no more than eight weeks between any two consecutive work days • undertaken at least 330 hours of paid work during the 10-month period (an average of one day a week). They must not have returned to work, and must not be entitled to the baby bonus (s 31 of Act, emphasis added). That is, workers may be eligible for both the baby bonus and the PPL. If so, they must choose whether they will receive the baby bonus or the PPL. The government has released an estimator to help workers decide which benefit will be most advantageous to their own financial situation (particularly given that the paid parental leave is taxed) on the website of the Family Assistance Office (FAO): www.familyassist.gov.au. An employee’s adjusted taxable income must not exceed an annual amount of $150,000 (which is indexed in line with the baby bonus). The income is based on the primary carer’s adjusted taxable income in the full financial year before the claim or birth (whichever is earlier). The employee must be living in Australia and be an Australian citizen or resident at the date of birth of the child, and remain so for the parental leave pay period. Full-time and part-time employees, as well as casuals, contractors and the self-employed, may be eligible. Paid parental leave under the scheme must be finished within 12 months of the date of birth or adoption. It will not be available after the parent returns to work. However, if the primary caregiver returns to work early, they may be able to transfer the remainder of the paid parental leave entitlement to another caregiver who is eligible. Alternatively, the parent may be able to be in the workplace while on paid parental leave under “keeping in touch” provisions. The role of employers in providing government-funded parental leave pay was phased in over the first six months of the scheme. Employers became responsible for paying government-funded parental leave pay to their employees from 1 July 2011. From 1 January 2013, fathers and same-sex partners have been entitled to two weeks’ paid leave, payable at the national minimum wage rate. The Abbott/Turnbull Government introduced legislation to limit the amount of paid parental leave available under the scheme in relation to the amount an employee was entitled to from their employer. However, the legislation lapsed on 15 April 2016 and is currently not proceeding. The outcome will largely depend on the outcome of the 2016 federal election. Impact of the Fair Work Act A survey of human resources (HR) practitioners by the Australian Human Resources Institute (AHRI) in 2010 found that about 40% believed that they needed more time to manage flexible work arrangements after the changes implemented by the FW Act were introduced. Similar percentages said that they needed to seek more legal advice than before and also spent more time keeping records related to flexible work arrangements, while about 20% reported that they were spending more time negotiating with unions.

The main types of flexible work arrangement requested by employees were part-time hours, working offsite/from home, variable hours, extension of parental leave and extension of personal/carer’s leave. Overall, 25% believed that the FW Act made flexibility more difficult to achieve, 16% said that it had become easier, which left almost 60% who reported “no change”. Clear procedures needed For dealing with requests for flexible arrangements under the FW Act, the following procedures are recommended: • Have a clear policy that explains what is possible and not possible, and who is eligible and ineligible to make requests. • Set out the criteria for making decisions. • Set out a formal application process (eg with specific forms). • Set out the request assessment process and provide resources and training for those who will be using it. • Make it clear to line managers that the employee must receive a written response within 21 days, including the business reasons if a request is rejected. • Be willing to give any arrangements a trial run of three to six months before making a final decision. • Devise measures for monitoring and evaluating the new arrangement. • Mutual responsibility for the process is recommended. Line managers and HR staff should actively assist employees in preparing requests, and openly discuss any issues with them. For example, they should advise the implications of any request for superannuation and leave entitlements. They should analyse potential problems and seek solutions. A written request could say something such as: “X might be a potential problem, but this is what I can do to make things work”. It is also important to review progress and identify which managers are dealing with the issues proactively and having conversations with employees, and which ones are avoiding them. What are “reasonable business grounds” for refusing an employee’s request? An employer who receives a request for flexible working arrangements may decline such a request on reasonable business grounds. Section 65(5A) of the FW Act contains the following non-exhaustive list of what reasonable business grounds may include: • the excessive cost of accommodating the request • that there is no capacity to reorganise work arrangements of other employees to accommodate the request • the impracticality of any arrangements that would need to be put in place to accommodate the request, including the need to recruit replacement staff • that there would be a significant loss of efficiency or productivity, and • that there would be a significant impact on customer service.

¶25-040 Types of flexible work arrangements The Managing Work/Life Balance 2007 Annual Benchmarking Survey of Work/Life Initiatives obtained data on the extent to which organisations offer various work/life balance strategies. The percentages of respondents using various strategies are listed as follows: • paid parental leave (78%)

• 48/52-week working year (75%) • paid leave for religious holidays (65%) • study leave (55%) • flexi-days or rostered days off (50%) • part-time work (43%) • flexitime or flexible start and finish times (43%) • career breaks (42%) • job-sharing (30%) • compressed working week (22%) • working from home on an ad hoc basis (20%), and • telecommuting (15%). Work/life balance strategies Study leave and assistance Study leave is typically provided to employees to take time off work to attend courses and exams, and to carry out other requirements of courses of study. Most employers require that the course of study be relevant to the employee’s work. Other study assistance may include payment by the employer of expenses, such as course fees and purchase of resources related to study, provision of study scholarships, payment of Higher Education Loan Program (formerly the Higher Education Contributions Scheme) costs, loans to employees to cover expenses, payment of an education allowance, payment of a bonus or salary increase on the successful completion of a course, and sponsoring employees on fulltime courses while providing them with paid employment during course vacations. Organisations offering study leave and assistance usually have a formal policy that sets out the types of assistance available, extent of entitlements, conditions for approval, procedures for applying, administration, and payments offered. Sometimes there will be study leave provisions in collective enterprise agreements and individual employment agreements/contracts. Part-time work Permanent part-time work is very much a “growth area” of the workforce. It is defined as employment for less than the normal full-time number of hours (ie 38 hours per week) on a regular and ongoing basis. The employee accrues the usual entitlements of full-time employment, such as annual, long service, sick and other forms of leave, but on a pro rata basis according to the number of hours worked. Part-time work is adaptable to most types of jobs and employees, but is particularly suited to: • parents who wish to return to the workforce after either a period of parental leave or a longer period of raising children (see the discussion on the legal position regarding this issue below) • mature age employees who wish to phase in retirement by reducing their working hours, and • employees returning to work after prolonged absence through sickness or injury. Various permutations of part-time work are available, such as working normal hours for fewer days each week, working shorter hours each day, or letting the employee vary the pattern of hours each week. Section 65(1B) of the FW Act provides that an employee who is a parent or has responsibility for the care of a child, and who is returning to work after taking leave in connection with the birth or adoption of the child, is entitled to request work on a part-time basis to assist the employee to care for the child.

Paid and unpaid parental leave The NES provide unpaid parental leave for full-time employees who have worked for an employer for at least 12 months and for long-term casuals with an ongoing expectation of employment. The leave is available to employees who will have responsibility for the care of the child. The total amount of unpaid parental leave (which includes birth-related leave and adoption-related leave) that an employee can request is 24 months. Each parent can take up to 12 months’ unpaid leave (to run consecutively) or one parent can request up to 24 months’ leave. Leave has to be taken in a single continuous period. An exception to the requirements that leave be taken in a continuous period, and that parents’ leave periods run consecutively, is an entitlement to a maximum of eight weeks’ concurrent unpaid parental leave around the time of a child’s birth/adoption. The eight weeks’ leave can be taken in separate periods (of at least two weeks or a shorter period, if agreed by the employer) at any time within the first 12 months of the birth or adoption of a child. An employee can request up to an additional 12 months’ leave after the first 12-month period. The employee must give the employer at least four weeks’ notice. The employer must respond to the request within 21 days. An employer can refuse a request for an additional period of parental leave (after the first 12-month period) on reasonable business grounds. The employer must provide the employee with reasons for refusing. Significantly, 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 must give the employer four weeks’ notice. Commonwealth paid parental leave legislation commenced 1 January 2011. Its provisions are discussed earlier in this chapter and also in Chapter ¶41. Many employers now provide paid parental leave in excess of the minimum standards set by this legislation. Typical provisions include “top-up” payments, to ensure employees receive their normal rate of remuneration instead of only the national minimum wage, and extending the period of paid leave beyond the 18-week minimum (payment for a full year is now a common provision). Flexible working hours A wide range of variations to “normal” working hours can be adopted. Hours can be varied within a time period of a day, week or month, and entitlements are sometimes carried forward from one period to the next. Flexibility within a single day includes variable start and finish times, either permanently established (such as 7 am – 3 pm each day instead of 9 am – 5 pm) or varied from day-to-day, with the employee required to work a set number of hours. Usually the employer specifies a “core” time period (such as 10 am – 3 pm) when all employees must be at work. Flexibility within a week requires each employee to work at least the core time each day, but they can vary the hours from day-to-day provided the standard hours per week are achieved. Flexibility within a month follows similar rules to flexibility within a week, but the longer accrual period provides employees with more options to arrange their working time. Some arrangements allow the employee to work fewer or greater than standard hours in a single month (within specified limits) and adjust the work time in subsequent months. In some cases, where the employee accrues extra working hours, time off during core hours may be allowed. For example, an employee may accrue enough extra hours to earn one full day off work per month or fortnight. There are many different flexible working arrangements, and many variations can exist within a single workplace, but the arrangements used must suit both the needs of the employee and the demands of the workplace. Job-sharing Job-sharing involves sharing the duties and responsibilities of a single job between two or more part-time employees of the same level. The arrangement is suitable where a job is full time but employees wish to work part time. Various arrangements are possible, including sharing responsibility for each job task, dividing the

responsibilities between the employees, or having each sharer perform different tasks. Effective communication and compatibility between the job-sharers is crucial to the success of jobsharing. A written agreement setting out the arrangement and procedures for dealing with various issues (eg performance management, promotion and “what happens if one employee leaves?”) is strongly recommended. 48/52 work arrangements/purchased leave A 48/52 arrangement (sometimes called purchased leave) allows employees to take four weeks’ extra annual leave per year in addition to their statutory entitlement, thus providing a total of eight weeks’ leave. Remuneration is calculated using the fraction of 48/52 of normal entitlement. This means that the employee’s remuneration is reduced, but payment is spread over 52 weeks. Other entitlements are generally unaffected, but note that amounts relating to superannuation contributions, leave loading and so on, will be slightly reduced by the lower remuneration base. The amount of purchased leave can be varied, but four weeks appears to be the most common arrangement. The most widespread use is for school holiday coverage and other carer’s responsibilities. Study and/or travel may be another reason for these arrangements. Rostered days off A rostered day off (RDO) is usually an arrangement whereby an employee works a four-and-a-half day week, a nine-day fortnight, or 19 days in four-week periods. Employees generally need to take their RDOs within a specific work period, but some organisations allow days to be accrued up to a specified maximum. It is necessary to check any relevant awards or agreements covering employees for RDO provisions. Some planning is required with RDOs to manage peak workloads and to ensure that employees are available to attend important training sessions and meetings. Customers’ needs also have to be considered and met during the absence of employees. Working from home/teleworking Technological advances in personal computers, email, mobile communication devices (eg smartphones) and the internet have greatly facilitated working-from-home arrangements in recent years. Arrangements can be on a temporary or ad hoc basis, where the employee has an occasional day working at home to cover carer’s responsibilities, oversee household repairs/deliveries, or cope with the unavailability of transport to work. There are also permanent arrangements where all or part of the employee’s work (eg one or two days per week) is performed at home or in other locations (eg a satellite office near the home or in a “mobile office” such as a vehicle). Such permanent arrangements are often referred to as “teleworking” or “telecommuting”. A wide range of jobs can be adapted so that they may be performed from home, and many employees claim that it improves their productivity (due to fewer distractions from core work and a reduction in travel time to and from work). Close attention should be paid to the following issues relating to working from home: • Selecting employees: Not all employees will be suited to the arrangement. Those who have high levels of self-discipline/self-motivation and a strong “results orientation”, who are reliable in meeting deadlines, and who have a low level of need for daily social interaction with work colleagues are more suited to this arrangement. • Managerial attitudes: Managers need to be supportive of the concept of employees working out of the main office, and may need to address their attitudes to supervision. For example, they may need training to manage employees via work outcomes rather than by monitoring their work hours and so on. • WHS/OHS issues: If injured at home, the employee is still “in the course of employment”. A number of health and safety requirements must be met, which may require a formal inspection of the “home work site”.

• Security issues: Again, an inspection may be required. • “Out of sight, out of mind”: There may be a tendency to overlook employees who work at home on issues such as training and development, promotion, career planning and so on, due to their lack of visibility and the difficulty in assessing their work performance. Apart from the cost of not using employee knowledge, skills and potential, EEO issues may arise in some cases. There is also the ethical issue of treating telecommuters as valued employees, not as cheap and disposable labour. • Communication: Telecommuters require access to work-related information to the same extent as other employees. Arrangements should be made to ensure that telecommuters are able to have access to important meetings, team briefings, policies and procedures, training courses and so on. Where an employee changes from a “normal” work arrangement to a teleworking arrangement, a trial period is recommended before making the arrangement permanent. Career breaks Career breaks are lengthy periods of unpaid leave from work to deal with issues such as study, overseas travel or child/elder care. The employee returns to their same job at the end of the specified period, although there may be some temporary “returns” for training courses and so on. This may be combined with phase-in or phase-out arrangements where the employee briefly works part time. Most organisations require a minimum period of service before employees are eligible for career breaks (eg five years). Many organisations have found offering career breaks to be a useful tool for retaining valuable employees who would otherwise be likely to resign. Compressed working week A compressed working week is where an employee works their full-time hours in fewer than five days per week. Typical examples are four 9.5-hour days and three 12-hour days. Issues to consider before adopting this arrangement include the customer service implications of employees being unavailable on certain days (conversely it may suit organisations where workloads fluctuate from day-to-day), and the potential health and safety implications of working longer hours per day. Casual work Casual work is less structured employment than full-time or part-time work. There are many possible arrangements, including: • working short but regular hours each week (eg one night per week) • short periods of full-time employment (eg hiring extra employees during peak work periods or relief workers when permanent employees are absent) • employees who are “on call” when required, and • employees who work irregular hours. Casual employees are paid by the hour, with the rate of pay generally having a loading to compensate for the lack of entitlements ordinarily provided to permanent employees, such as annual, personal and other forms of leave. The employer can generally terminate a casual’s employment with one hour’s notice. However, if casual employees establish a regular and systematic pattern of employment with an employer over an extended period of time (eg 12 months), they may gain access to some entitlements that do not apply to short-term or “irregular” casuals. If employment extends for long enough, an entitlement to long service leave may also accrue. The defining of “regular” and “irregular” casual employees, and what constitutes a “systematic” pattern of employment, has proved to be a very complex area of industrial relations law. Many cases are decided on interpretation of the individual circumstances. Seeking expert advice is recommended before hiring casual

employees, except for obvious short-term, ad hoc work. As the most flexible form of work, casual employment has many attractions for employers, enabling them to maintain and vary their workforce to meet an optimum level, and to avoid the cost and stress of retrenchments when business downturns occur. The high level of flexibility also suits employees who have other substantial non-work commitments (eg full-time study or child care) and who either require a small amount of work to meet financial commitments or have only limited opportunities to work (eg school or university holidays). Often, commitment to a career or an organisation is not an important issue for them. Child care Child care assistance is not a flexible work practice in itself, but there are various ways in which organisations can assist employees who are parents to balance their work and family responsibilities more effectively. Large organisations may find it cost-effective to operate an on-site (or nearby) child care centre, but this will be a substantial undertaking. Other forms of practical assistance include the following: • providing childcare information kits (ie with details of options, local child care centres, government assistance and so on) • supporting existing centres (eg via donations or providing resources) • reserving places in local facilities for employees’ children • sponsoring home care for sick children • supporting after-school programs for children (eg those conducted on school premises), and • providing an on-site “family/carer’s room” (ie if an employee must be at work and cannot arrange suitable child care for the day, he or she can bring the child to work and use the work facilities set up in a separate room). Elder care An ageing population means that an increasing number of employees have responsibility for caring for older people, such as their parents. As with child care, there are a number of ways that organisations can assist employees to balance their work and carer’s responsibilities more effectively. Some options are: • flexible working hours • access to unpaid leave, and more flexible use of other forms of leave (Note: Responsibilities tend to be more difficult to plan for than child care, as they more often involve some form of crisis.) • providing elder care information kits, detailing options for care and assistance, home support, government financial assistance, community facilities and services, availability of local retirement homes/hostels/nursing homes and so on, and • contacts with external resource and referral services. Phased retirement Phased retirement provides an opportunity for older employees to ease into their retirement gradually, so that the change is not so abrupt and traumatic, while at the same time allowing employers to retain their skills and experience and ensure their knowledge is passed on to younger employees. The arrangement involves a reduction in working hours over an agreed period of time, often implemented progressively. For example, the employee may change from five days to three days per week initially. Then they may drop to two days and, perhaps, finally to working one day per week. The process may start far in advance as five or 10 years before the employee’s scheduled retirement date. Mentoring and training roles are also suited to many employees who are phasing into retirement. Current demographic trends suggest that shortages of skilled and experienced employees will become

worse if strategies to encourage older employees to remain in the workforce for longer are not successful. There may also be financial consequences, for example, increased pressure on superannuation funds and the social security system to provide adequate retirement income for a much-increased retirement population. Important issues to consider are maintaining compliance with EEO legislation (particularly regarding age discrimination) and the financial implications of reduced working hours on the employee (eg it may affect the final superannuation payout). For these reasons, participation in a phased retirement arrangement must be voluntary. Annualised hours Annualised hours are, in effect, a “flexible working year”. Employees are required to work a set number of hours per year, rather than per week. The hours worked in a given day, week or longer period are dictated by variations in the demand for labour, which are usually affected by factors such as demand for the organisation’s products and services and seasonal factors. The quota of hours is normally set over a 12-month period, based on previous years’ work requirements, and allowing provision for fluctuations in demand and unexpected events. It is calculated as the number of weeks per year multiplied by the number of working hours per week, minus the number of holidays and public holidays. Annualised hours suit industries, products/services or locations where demand is seasonal, but relatively predictable. It is frequently combined with the payment of annualised salaries. Broadly speaking, the advantages and disadvantages of annualised hours are similar to those for other forms of flexible working hours. Many administrative issues will also be similar: for example, the need to set limits on minimum and maximum hours and the provision of “core” working time. Note that relevant award and agreement provisions must be checked to ensure compliance with matters such as start and finish times, overtime payments, meals and other breaks. If there are many restrictive provisions, annualised hours might not be feasible. Other forms of assistance Other ways in which organisations can assist employees to maintain an appropriate work/life balance include the following: • provision of regular health check facilities and services • provision of access to financial planning/counselling services • access to an employee assistance program or specialised counselling services (see Chapter ¶60) • provision of information and facilities that help employees to maintain their fitness and health (eg subsidising gymnasium or sporting club memberships) • provision of emergency service leave to employees who are members of emergency service organisations (Note: The NES now provide a statutory entitlement to “community service leave” that can include emergency service leave.), and • provision of defence force service leave, which is a statutory entitlement for employees who are members of defence force organisations.

¶25-050 Ageing workforce: implications for work/life balance strategies The Managing Work/Life Balance 2007 Annual Benchmarking Survey of Work/Life Initiatives flagged attracting and retaining mature age employees as an issue that is likely to catch up with organisations. Only 32% of respondents (as compared with 27% in the 2006 survey) were giving priority to programs to attract and retain such employees, and only about one-third were attempting to identify their specific needs. Those strategies have been criticised by research studies for being too “passive” because they assist older employees to retire rather than encourage their retention. For example, financial planning advice

tends to focus mainly on retirement rather than work/life balance. Phased retirement programs, despite their obvious advantages, also have the ultimate goal of retirement. Retirement planning should also focus on the psychological benefits of continuing to work and on a wider range of options to combine partretirement with continuing to work. A survey conducted by Business, Work and Ageing, a research organisation linked with Swinburne University of Technology, found that a large proportion of mature age employees had a desire to keep working — and for reasons other than purely financial ones. However, a supportive organisational environment and culture were needed to encourage them to do so. Over 65% of respondents were interested in a flexible pathway towards retirement. Of these, over 60% would take a flexible option if they could do their existing job for fewer hours. Over half of the respondents planned to work, usually part time or casual, during their retirement. These findings represent a major retention opportunity for employers, but mean that they should focus on issues such as: • learning and development • job content and structures (in particular, emphasising team-based roles) • maintaining levels of engagement and fostering a sense of “belonging” to the organisation • promotion of employee health and wellbeing • supportive leadership styles, and • managers’ awareness of age-related issues. Another study, conducted by the Queensland University of Technology and the National Seniors Productive Ageing Centre, found that actively encouraging mature age employees to remain working has a financial pay-off for business. Many such employees are highly committed and productive, and prefer to keep working even if they do not financially need to. Commitment to the organisation, job satisfaction, and regard for work as a central aspect of their lives were all major incentives not to retire. In turn, these are attributes that businesses really want to retain. The most important reasons people gave for staying were that they: • liked the work • enjoyed the social contact, and • enjoyed passing on skills and knowledge to younger employees. These issues ranked above financial/tax issues. For details of this study, The Process of Participation and Phased Retirement: Evidence from MatureAged Workers in Australia, by Michael and Jacqueline Drew. A third study, released by AHRI in 2012, found a perception by many HR practitioners (at least one-third) that their organisations were biased to some extent against the employment of mature age employees. The report, Mature Age Workforce Participation (see www.ahri.com.au), surveyed over 1,200 practitioners. Other key findings of the AHRI survey included the following: • Almost half of respondents said that the departure of mature age employees during the past year had caused the loss of key knowledge or skills. Almost one-quarter added that it caused their organisations to become less competitive. • Over 80% wanted to see more steps taken to retain mature age employees. Two-thirds believed that retaining them would improve productivity, but one-quarter said that it would make no difference. • Almost two-thirds believed that negative perceptions about mature age employees had some

influence on recruitment decisions. While a majority said that their organisations did not distinguish between older and younger employees when deciding whom to keep on the payroll, almost onequarter said that they preferred to remove older employees. • Over 60% opposed having the government raise the retirement age to retain greater numbers of mature age workers. The main strategies supported were wage subsidies and tax incentives, and subsidised re-skilling or training. • Asked to nominate the best retention strategies, 37% recommended a gradual retirement plan, 20% suggested flexible working hours, 20% suggested improving employee engagement and 10% recommended more part-time work. The above results suggest that there is some degree of negative perception about employing and retaining mature age employees in a significant number of organisations. Even though it may be just undercurrent attitudes rather than blatant and overt expressions and actions, it does appear to influence some recruitment and retention strategies in those organisations. This highlights the need to demonstrate to managers — preferably with some hard data — that every employee’s contribution depends on individual abilities, experience and attitudes, and is seldom, if ever, influenced by their age. As mentioned earlier, a recent trend to emerge, due to the global financial downturn and ongoing economic problems since then, is that many older employees have found it necessary to remain in the workforce at a time when they would prefer to retire, because the value of their superannuation has fallen to the extent that it is no longer adequate to support them. In such cases, retention will not be an issue, but engagement and motivation of employees who may not particularly want to be in the workforce may present challenges for their employers. Evidence suggests that strategies focused on work/life balance rather than the job itself will be more effective.

¶25-060 The implementation process There are 10 identifiable steps towards implementing work/life balance strategies, which are summarised below. Step 1: Identify and quantify the real business and employee needs The challenge here is to sift through various requests and “burning issues” raised by various stakeholders and make an overall assessment of business and employee needs, usually within the context of tight budgets and limited resources. Consider the business objectives, evolving changes in the workforce and the overall HR priorities. You will need sound internal data and external benchmarking data to demonstrate the business case for change. Undertake an in-depth needs assessment that identifies the needs of the various stakeholders, including different demographic groups, and the reasons why flexible work options may assist them. Look for data that identifies: • flexible arrangements that will both improve work/life balance and maintain quality of work • priorities for specific demographic groups (eg gender, age, work location) • employees’ perceptions of how work/life issues affect them (eg stress, workload, work hours, health and wellbeing effects, child care and other family issues and so on) • issues that may either help or hinder implementation of flexible arrangements • the current workplace culture, and • managers’ perceptions of the impact of flexible work arrangements. Communicate the results of this research and use the data as a basis for future focus group discussions.

Consult managers about the steps they may need to progress the issue, including a discussion of issues for specific work groups (eg hours, work structures and workflow). Step 2: Build the business case for change Building the business case requires identifying business needs and what is driving the need for flexibility, and making the connection between business needs and flexible arrangements. A cost/benefit analysis of flexible arrangements is required, preferably using measures already used in the business. Current costs may include high absenteeism rates, overtime, low employee engagement/productivity, higher turnover and non-returns from parental leave, which are all costs of NOT having flexible arrangements. These will be offset against some increased costs of having flexible arrangements (eg higher administration costs, the need to “cover” for employees when they are not physically at the workplace and so on). The benefits of flexible work arrangements are discussed in detail at ¶25-020. The business case should focus on the needs of the target audience: that is, how effective new arrangements will be for the business and return on investment, rather than employees’ work/life balance. Conduct a cost/benefit analysis on each individual option, emphasising its return on investment. Identify specific measures of effectiveness that can be applied to each one. It must be clear that managing flexible arrangements is a business issue because it provides a competitive advantage. Step 3: Build and demonstrate chief executive officer (CEO) and senior executive commitment This can be achieved in the following ways: • Ensure all levels of management are involved in identifying the issues and building the business case. • Reinforce the role of the CEO and senior executives as supporters of flexible arrangements. • Include flexible arrangements among business goals and strategic planning processes. • Regularly communicate the benefits of flexible arrangements. • Encourage senior managers to adopt a flexible approach to their own work. • Identify champions of flexibility among senior managers and publicise their stories. • Prepare a written policy statement on commitment to flexible arrangements, backed by guidelines and examples of practices that can be adopted in the organisation. Step 4: Develop and implement policies and supporting materials/systems Written guidelines are needed to manage flexible arrangements. These documents also form a basis for responding to requests for flexible work arrangements as set out in the NES. The documents may include a policy statement, “How to” guide for managers, a flexible arrangements request form for employees, and information for employees that explains specific arrangements, assists them to prepare their requests and enables them to calculate the impact on them of a flexible arrangement (eg on pay rates, leave entitlements, superannuation and so on). For further discussion of documentation, see ¶25-030. Management training sessions should cover the issue of managing flexible work arrangements, including role plays, case studies and guidance as to how decisions are made. Review organisational policies and practices to ensure that they do not (unintentionally or otherwise) provide barriers to flexible arrangements (eg scheduling regular “breakfast meetings” or supporting a culture of long working hours). “Flexibility” should be defined in terms of work requirements and output rather than formal work schedules and physical presence at the workplace. Step 5: Communicate

Communication involves more than telling employees that flexible work arrangements are available and placing details on an intranet. Extra steps include identifying different demographic groups of employees and customising both the messages and the media to suit them. Also, regularly promote the benefits of flexible work arrangements to managers and supervisors, and provide information that enables them to deal with possible concerns, such as loss of control, meeting internal and client deadlines, coordination of work activities and overcoming communication difficulties (eg because some employees are absent at certain times). Encourage managers to discuss flexible arrangements issues regularly at team meetings and be proactive about tackling any potential problems or conflicts that may arise. Communicating success stories is also important (eg case studies of employees who have successfully adopted flexible arrangements should be widely publicised). Step 6: Educate and coach managers and supervisors Flexible work arrangements represent a significant cultural shift for many managers and supervisors, particularly when it may be perceived as a loss of control over employees or increased effort required to manage them. Empowering employees and acting as a role model for flexible working may also not come naturally to many of them. The following steps are recommended: • Consult with managers/supervisors to understand the skills development required and types of training that best suit them. • Consider using an experienced external facilitator where it is necessary to move many managers outside their comfort zones. • Training should be practical and focus on: – the role managers play in implementing flexible arrangements – the business case for flexible arrangements – rights and responsibilities under legislation (eg discrimination, industrial relations) – understanding organisational policies – responding to flexible work requests – monitoring employees working under flexible arrangements – managing performance issues (eg distinguishing between the flexible arrangement and performance problems, instead of just blaming the former) – dealing with resentment from other team members, and – dealing with requests that could negatively impact the business. Step 7: Monitor implementation of flexible arrangements Steps to take when monitoring the implementation of flexible arrangements include the following: • Monitor trends in absenteeism, absences, employee engagement, customer service quality, labour turnover, return rates from parental leave and so on. • Survey employees to assess how well flexible arrangements are working. Allow opportunities for confidential feedback. • Also survey other stakeholders, such as customers (internal and external) and suppliers.

• Use individual and team review sessions to evaluate performance against previously agreed criteria. • Include questions on flexible work practices in business climate and engagement surveys. • Review performance measures regularly and update as required. A trial period (eg three to six months) of new flexible work arrangements is recommended if there are any doubts about their suitability. Criteria for evaluating results should be agreed on before the trial commences. Step 8: Implement accountability measures Managers and supervisors need to be accountable for the success of flexible work arrangements, the implementation and management. This requires including relevant criteria in their key performance indicators and performance review goals that relate to both achieving flexibility and improving productivity. Rewards should also be linked to success with flexible work arrangements. Other relevant indicators may include employee engagement scores, reduction of labour turnover, retention, diversity management and customer service improvement. Step 9: Ongoing communication A common failing is that the initial communication efforts fade away after six to 12 months. However, it is important to maintain regular communication. Techniques include: • using a branding strategy • publicising successful case studies • publishing regular articles • having regular briefings for managers and supervisors • having information sessions, and • holding an occasional “open day”. Step 10: Evaluate progress and learn It is essential to evaluate whether flexible arrangements are meeting the needs of both employees and the business, and whether the original objectives have been met. Measurement criteria can include the number of employees who convert to flexible arrangements, level of employee awareness of the options available to them, the degree of understanding and support from managers and employees’ peers, retention and turnover rates, return rates from parental leave, absenteeism and customer service/satisfaction levels. The CEO and senior executives should be briefed on progress. Links should be made to the business case and other relevant business measures. Identify the way forward.

¶25-070 Why some arrangements fail Work/life balance requires more than just asking employees what they need and making a few programs available. It is essential to have an organisational culture, management attitudes and behaviour that fully support work/life balance and the need for flexible work practices. In other words, work/life balance programs need to be integrated with business operations, not simply added on, in order to be effective. Professor Don Edgar, former Director of the Australian Institute of Family Studies, made the following criticisms of the way in which many programs are devised and implemented in a presentation at the 2001 AHRI/ARTDO National Convention: • There is too much emphasis on financial cost/benefit analysis of work/life balance programs, and not enough recognition of the importance of family life itself. Many programs fail to ask employees what

their needs actually are, and fail to evaluate their impact on job performance and morale. • Managers who fear losing control are reluctant to give employees much say in how/when/where they work, with the result that “presenteeism” is encouraged. There needs to be a culture of trust before programs will work. • Programs are too business-focused. Research suggests that work demands affect home/family life more than vice versa, and work demands tend to be a significant causal factor in relationship failures. • The work environment itself must be genuinely flexible. Often, when little attempt is made to gain a supportive culture, only management and professional employees tend to use the programs. • Some programs tend to be confined to “women’s issues” (eg child care). A broader view, inclusive of all employees, is required. For example, elder care, phased retirement and tertiary study are among many issues that concern both men and women. Also, the proportion of employees who are single is increasing, and now exceeds one-third. Workplaces need to be structured to deal with the diversity of employees’ needs at different stages of their working lives. • Employers need to be more politically active in achieving a supportive community for work/life balance. For example, they should pursue links with schools, family support agencies and so on, and help them in practical ways (eg with advice, business management skills, resources and financial support). This enables the services available to become more oriented towards the needs of workplaces. The Managing Work/Life Balance 2006 Annual Benchmarking Survey of Work/Life Initiatives found that the major impediment to achieving work/life balance was that increasing work demands (eg requiring employees to work longer hours) took precedence over personal needs. This occurred in about 80% of organisations. Other barriers, all mentioned by more than 30% of respondents, included the following: • failure to evaluate the impact of programs • difficulty in changing managers’ views about the value of flexible work arrangements • managers lacked the competence to manage employees with work/life issues • inadequate data to build the business case for introducing initiatives • inadequate budget • insufficient involvement of, and communication with, senior management • focus on the programs themselves, rather than cultural change and the way work is done • covert discrimination against employees who work non-standard hours, and • lack of communication with employees about their needs, what is available and how to access programs. An update to the above research (Flexible Work in 2010 — A Pulse Survey conducted by Managing Work/Life Balance International in 2010), found that — over the preceding five years — there had been minimal changes in the attitudes of managers to flexible working, with 47% of respondents “agreeing” or “strongly agreeing” that they were hindered by leaders in their organisation who found it difficult to change their views about the value of flexible working. Furthermore, just over a quarter of the respondents (26%) did not believe that their managers/leaders felt competent to manage flexibility within their work teams. The survey identified the following hindrances to the achievement of flexibility: • insufficient involvement of senior managers • covert discrimination against staff who worked non-standard hours

• lack of communication to staff • a focus on programs rather than the way work is done • leaders who find it difficult to change their views about flexible working, and • increased work demands overshadowing personal needs.

¶25-080 Overcoming the problem of blurred boundaries between work and non-work For some people, inability to resist regularly checking their emails or using media such as Twitter when they are “not working” can develop the characteristics of an addiction to the technology. Research also suggests that people’s ability to resist will weaken as the day drags on, because they have already put much effort into resisting temptation earlier in the day. Therefore, they may have less resistance to checking and sending emails in the evening when they are no longer “at work”, when it will interrupt their leisure time — or else make them feel guilty if they don’t interrupt that time to check up on work. A survey by the software protection company Neverfail in 2012 found that 83% of professional employees checked their emails outside of normal working hours. Two-thirds had taken a work-related device (eg smartphone or laptop) with them on holidays. More than half had sent emails during meals with family or friends. In other words, the issue potentially affects a clear majority of employees. The rapid spread of smartphones and other mobile communication devices is likely to make this issue even more serious as the boundaries between work and non-work life become more and more blurred. Whether employeeowned or provided by the employer, such devices will usually have both work and personal data and applications stored on them. Employees can be contacted at virtually any time or in any place, unless they can discipline themselves to switch the devices off when they are not working, which many are very reluctant to do. Some employers have now banned the sending of work emails outside of normal working hours, unless there is a genuine emergency. Other approaches have included scheduling specific work breaks during which use of mobile technology is banned, banning work travel at certain times (eg during one week per month), and banning the reading and sending of emails at certain times of the day. However, the jury is still out on the effectiveness of such policies. A better approach is to involve employees in devising solutions that enable them to regain control over the situation and work best for them individually. For example, some employees prefer to go through their emails and messages outside of normal work hours because they believe it reduces interruptions during those hours. It is also crucial for senior management to set reasonable expectations and act as effective role models.

¶25-090 Returning to work after parental leave: entitlements and obligations A contentious issue relating to parental leave has been related to the entitlements of employees who return to work after a period of parental leave. Many employees who had worked full time before taking their leave now wish to resume work part time, or seek alternatives such as working from home for at least part of their working hours, or varying their working hours to fit in with child care requirements. Employees generally seek these variations in order to manage and balance their work and family responsibilities more effectively. The NES provide a return to work guarantee — a guaranteed return to the employee’s pre-parental leave position or, if that position no longer exists, a suitable position for which the employee is qualified and which is close to the previous role in status and pay. Section 65(1A) of the FW Act provides for employees to request flexible working arrangements in certain circumstances. One of these is a parent or someone who has responsibility for the care of a child who is of school age or younger. Section 65(1B) provides that an employee who is a parent or has responsibility for the care of a child, and who is returning to work after the birth or adoption of that child, is entitled to request to work on a parttime basis to assist the employee to care for the child.

Several court/tribunal cases have examined the return to work issue in recent years. Each case has been decided on its individual circumstances, but at this stage it is possible to draw the following conclusions: • Parental leave legislation and award provisions generally entitle an employee to return to the same job the employee held before the leave or an equivalent job. Factors likely to be relevant in deciding if the job is appropriate include: job content, reporting relationships, job grading or status, opportunities for advancement, and job security. Merely offering the same pay and employment conditions is not enough to make a job “equivalent”. • There is no automatic entitlement for a full-time employee to return to work on a part-time basis — unless the employee’s contract contains a specific provision to do so. However, decisions to date suggest that courts and tribunals will examine the employer’s jobs structure and business circumstances closely to determine whether part-time work can reasonably be provided to employees who request it. Employers, therefore, need to make genuine attempts to assess such requests against genuine business operational requirements. It is not a matter of assuming what is good for the employee — there must be genuine consultation between the parties and any proposals suggested by the employee should be seriously and objectively evaluated before making a decision. Nor can an employer merely insist that there is no alternative to full-time work without investigating the situation first and considering whether the employee’s needs can be accommodated by making reasonable adjustments. • If a position of lower status is offered to the employee (eg because it provides an opportunity for more flexible working arrangements) the employee must genuinely consent to the arrangement and there must have been genuine consultation between the parties — it must not be presented as an ultimatum or as the only option. Failure to follow the above steps may expose an employer to a possible claim of discrimination on the grounds of sex and/or carer’s responsibilities. However, employers may be able to establish a defence to such a claim if they are able to prove that it is not “reasonable in all the circumstances” to provide the proposed arrangement. To do so, however, the employer will need to have carefully evaluated the proposal before rejecting it. Following are some case examples that have considered the above issues.

Case examples Rind v Australian Institute of Superannuation Trustees In Rind v Australian Institute of Superannuation Trustees (2013) EOC ¶93-693; [2013] FWC 3144 the FWC upheld an employee’s application under the FW Act for constructive dismissal following a period of parental leave. The FWC found that the employer unreasonably refused the employee’s request for part-time work and that she was constructively dismissed. The employer made the employee’s return to part-time work after parental leave conditional upon recruitment of another parttime employee. This was unreasonable and amounted to a refusal of her request to work part-time. The employee’s offer to work part-time, namely three days a week, was reasonable and would have adequately replaced the need for an external service provider; she could have fulfilled her role as database/IT systems administrator on a part-time basis. The employee was not required to put up with a persistent and unreasonable refusal of her request to work part-time, and was entitled to treat the employment relationship as at an end because of the employer’s unreasonable refusal of her request to work part-time. The employee was constructively dismissed and, therefore, was at liberty to make an application to the FWC pursuant to the FW Act. The employer’s jurisdictional objection was dismissed. Rispoli v Merck Sharpe & Dohme & Ors In Rispoli v Merck Sharpe & Dohme & Ors (2003) EOC ¶93-304; [2003] FMCA 160, a woman returned to work from maternity leave, but was given a job with lower status and inferior job content to her previous one, even though its pay and conditions were the same. She successfully argued that

the employer had breached the terms of its own maternity leave policy, which stated that employees returning from maternity leave would be placed either in their former jobs or in equivalent ones. This policy reflected the contents of relevant industrial relations legislation. It was held that the terms of the policy gave business efficacy to, and should be regarded as forming an implied term of, the employment contract. Thomson v Orica Australia Pty Limited In Thomson v Orica Australia Pty Limited (2002) EOC ¶93-227; [2002] FCA 939, a woman took her second period of maternity leave. On her return, she was given a position with no direct customer contact and less valuable accounts, although her remuneration remained the same. The woman claimed that this was a demotion which amounted to both unlawful discrimination and repudiation of her contract of employment. Again, the employer’s policy stated that employees were entitled to return to the same or an equivalent position as their previous one. Placing the woman in an inferior job was held to be a breach of the employment contract. The breach itself, plus the manner in which it occurred (ie her manager had reacted angrily when she informed him she intended to take maternity leave), was also held to be a breach of the employer’s duty of mutual trust and confidence. The woman was awarded damages for wrongful dismissal. Kelly v TPG Internet Pty Ltd In Kelly v TPG Internet Pty Ltd (2004) EOC ¶93-315; [2003] FMCA 584, the issue of a woman’s entitlement to return to work on a part-time rather than full-time basis was examined. The employee sought to return from maternity leave on a part-time basis (and at a higher salary than before she took leave), but the only positions the employer offered her were either her previous job on a full-time basis, or jobs in other parts of the company that were casual, not part-time, jobs. At the time, the company did not employ anyone on a part-time basis, with all jobs being full-time or casual. The Federal Magistrates Court held that, as part-time jobs were not generally provided by the employer, provision of part-time work at a higher salary would have amounted to providing her with a benefit and did not constitute discrimination. There was no “requirement” to work full-time (as the employee had claimed) in this case, only a refusal to vary the contract to enable part-time work. The distinction between this case and previous ones was that, in the other cases, it was found that the women concerned had been subjected to other employment-related detriments as well. Also, the employer in this case had a less flexible job structure in that it did not have provision for part-time jobs per se. There was no evidence that women were disadvantaged overall in this workplace as part-time work was not a generally available benefit. Reddy v International Cargo Express In Reddy v International Cargo Express (2004) EOC ¶93-351; [2004] NSWADT 218, a woman requested to return to work three days per week, but her employer insisted that she return full-time. When the woman proposed some alternatives, including being “on call” for work emergencies on the other two days, the employer still insisted there was no alternative to full-time work. The NSW Administrative Decisions Tribunal held this to be discrimination on the ground of carer’s responsibilities. It said that the employer had failed to consider seriously the possibility of part-time or flexible arrangements and reacted in a “knee-jerk” fashion by immediately dismissing all of her proposals, and not discussing or trialling any of them. Thus, no attempt was made to accommodate her carer’s needs. Mayer v ANSTO In Mayer v ANSTO (2003) EOC ¶93-285; [2003] FMCA 209, the employee, a business development manager, requested to return to work part-time after taking maternity leave. However, her manager informed her that the position was only available on a full-time basis. She was unable to return to work full-time because of child care responsibilities, and treated the contract as terminated, claiming she had been constructively dismissed. The Federal Magistrates Court found that the refusal of part-time work did not amount to direct discrimination on the ground of family responsibilities, because the requirement to work full-time was a business-related decision and not made because of the employee’s family responsibilities.

However, it amounted to indirect discrimination because a requirement to work full-time was likely to have the effect of disadvantaging women, because they had a greater need for part-time work than men, particularly around confinement and for a period thereafter. The court also found that the employee was constructively dismissed because of her sex. The employer’s refusal to vary the contract to permit part-time work made it impossible for her to return to work at all. The employer’s refusal of part-time work until the end of her contract was unreasonable, as suitable part-time work was available. Howe v Qantas Airways Ltd In Howe v Qantas Airways Ltd (2004) EOC ¶93-359; [2004] FMCA 242, the employee sought to return to work part-time but the employer argued that no part-time jobs were available at the time. The employee then requested demotion to a lower-level job that provided more flexible working arrangements. However, she claimed that being “forced” to seek that demotion amounted to constructive dismissal and discrimination. While the Federal Magistrates Court found that discrimination on the ground of pregnancy had occurred in relation to a pre-maternity leave issue, it also concluded that the employer’s enterprise agreement restricted the number of part-time jobs it could provide. It had acted to comply with the agreement but, in any case, had also offered to consider the employee for any part-time jobs that did arise. The employer had not insisted on the demotion: the woman had sought it voluntarily, so she was not constructively dismissed. State of Victoria v Schou In State of Victoria v Schou (2004) EOC ¶93-328; [2004] VSCA 71, a Hansard reporter for the Victorian Parliament requested to perform part of her work from home to enable her to meet her carer’s responsibilities. Parliament agreed to the request but failed to make arrangements for it to happen. Schou successfully argued that discrimination on the ground of family responsibilities had occurred and was awarded more than $160,000 as compensation for loss of income. After more than one appeal by the employer, the case went to the Victorian Supreme Court, Court of Appeal. To determine whether the requirement to attend the workplace on-site at all times was reasonable, the Court of Appeal determined that the correct test was firstly to consider the requirement itself, independently of any alternative, and then to consider the reasonableness of the requirement with regard to the alternatives. In this case, parliament had provided sufficient evidence that the on-site attendance requirement was reasonable. The mere presence of an alternative (ie installing a modem in the employee’s home to enable her to work there), even if reasonable in itself, did not make the employer’s requirement unreasonable. The employee’s proposed alternative arrangement was less efficient than working on-site at all times, even though it may have worked adequately after making some adjustments to workflow arrangements. The court overturned the award of compensation.

Family responsibilities versus business needs A New South Wales case provides some guidance on the issue of work/life balance versus operational business needs in the context of carer’s responsibilities.

Case examples Wilkie v National Storage Operations Pty Ltd In Wilkie v National Storage Operations Pty Ltd (2013) EOC ¶93-700; [2013] FCCA 1056, the Full Federal Circuit Court of Australia ordered an employer to pay over $32,000 to an employee after taking unlawful adverse action against her by issuing her with a warning letter, demoting and transferring her, and finally dismissing her because of her family responsibilities. The employee (W) worked as a centre manager at the employer’s Cockburn Centre in Perth. The events which led to her receiving a warning letter were not disputed. On 7 December 2011, W notified her team leader (F) that she would need to leave at 2.30 pm the following day to collect her

son from school. Arrangements to have someone else collect him had fallen through. Through no fault of either W or F the email was not received until the following day. F then informed W by email that no one was available to cover for her, that the office could not be closed and she would need to make alternative arrangements for her son. Nonetheless W left the office at 2.30 pm. As a result she was issued with a first and final warning. The court noted that W’s obligation to ensure that her son was collected from school fell within the ambit of family or carer’s responsibilities. W had a workplace right under s 340 of the FW Act to take personal/carer’s leave or unpaid carer’s leave due to an unexpected emergency, namely the need to collect a primary school child from school. The employer was well aware of why W sought to leave work early. The court was satisfied that the warning amounted to adverse action (contrary to s 351) in that it made W more vulnerable to dismissal. Three days after receiving the warning, W was informed that she was being transferred from the employer’s Cockburn Centre to its Belmont Centre. W did not wish to transfer, given the extra travel time involved, and the fact that she viewed the transfer as a demotion. The terms of W’s contract enabled the employer to transfer her between centres within the Perth metropolitan area on a temporary or permanent basis. However, the employer admitted that the decision to transfer W was motivated, at least in part, by her personal circumstances, including her use of personal leave for medical reasons and/or family responsibilities, which was not permissible. The court also found that while W’s salary was to be maintained, the transfer involved a change of role from centre manager to assistant manager, which was effectively a change of contract terms. The change altered W’s position to her prejudice as it reduced her status and level of responsibility. The court then considered whether the demotion amounted to a dismissal. Section 386(2)(c) of the FW Act provides that, in order for a demotion to amount to a dismissal, it must involve a significant reduction in remuneration or duties. The court found that W’s demotion was a repudiation of her contract entitling her to treat the employment as having come to an end and, on that basis, a termination at the initiative of the employer. The court awarded W $32,130.78 for lost remuneration. Gardiner v WorkCover Authority of New South Wales In Gardiner v WorkCover Authority of New South Wales (EOD) (2004) EOC ¶93-314; [2004] NSWADTAP 1, the NSW Administrative Decisions Tribunal held that requiring a manager with two young children to relocate from Sydney to the employer’s Central Coast office, with an associated increase in travel requirements, did not amount to indirect discrimination on the ground of her carer’s responsibilities. After the employer announced that it would be moving its head office from Sydney to Gosford, the employee successfully applied for a permanent team leader position, believing she would be able to negotiate with her employer to remain at the Sydney office. The employer said that it required the position to be located at Gosford, but was willing to accommodate her responsibilities as carer generally by providing flexible working hours and shared time between the Sydney and Gosford offices. However, the employee claimed that the office relocation varied her conditions of employment in a way that amounted to indirect discrimination on the ground of carer’s responsibilities. The tribunal considered whether the requirement to relocate offices was reasonable. It took into account the practical requirements of team leaders to be centrally coordinated by management, the woman’s prior knowledge of a possible move, and the attempts by the employer to respond to her concerns (including flexible hours and starting times). Although it found that the employee’s proposal to remain in Sydney and attend meetings in Gosford was a feasible option, it concluded that requiring her to be based in Gosford where she could interact with staff on a regular and predictable basis was a legitimate and reasonable management requirement. Thus, discrimination had not occurred in this case.

¶25-100 Further information

The federal Department of Education, Employment and Workplace Relations provides access to a wide range of information and resources on managing work/life balance. These resources include a resource kit, details of specific work/life balance initiatives, and an extensive bibliography. There are also several management consulting firms that can provide various forms of assistance to organisations. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶65-000. References and further reading CCH Australia Limited, “Workplace flexibility” Australian and New Zealand Equal Opportunity Law & Practice, see from ¶13-000, Sydney. —— 2007, “Managing Work/Life Balance 2007 Annual Benchmarking Survey of Work/Life Initiatives”, Australian Human Resources Management , Flexible Work Practices section, CCH, Sydney. Managing Work/Life Balance 2010, Flexible Work in 2010 — A Pulse Survey conducted by Managing Work/Life Balance International, see www.worklifebalance.com.au. Research studies by Business Work Ageing.

26. SKILLS SHORTAGES AND THE AGEING WORKFORCE Editorial information

By Carol Louw, Head of content — legal publishing, Wolters Kluwer

¶26-010 Introduction The ageing of the Australian population, characterised by declining fertility rates and a slowing down in migration, presents an unprecedented social and economic challenge. A key finding of the 2015 Intergenerational Report: Australia in 2055 was that an ageing population presents significant long-term challenges for the economy and the sustainability of government finances. The proportion of working age people is projected to fall, with just 2.7 people of working age to support each Australian over 65 years of age by 2055, compared with 4.5 working age people per aged person in 2015 and 7.3 in 1970. It is predicted that the number of Australians aged 65 and over will double between 2015 and 2055.

¶26-020 Demographics Ageing of the Australian population is evident, with pronounced further ageing predicted over the next 40 years. The 2015 Intergenerational Report notes that Australians continue to have one of the longest life expectancies in the world. Life expectancy for those born in 2054–2055 is predicted to be 95.1 years for men and 96.6 years for women. The report predicts that 4.9% of the population will be over 85 years of age by 2055. There will be even fewer people of traditional working age, compared with the very young and the very old. Australian Bureau of Statistics (ABS) projections on age demographics up to 2050 indicate that the number of people over the age of 50 will grow by more than 22% between 2011 and 2020. By 2050, the number will have increased by 80%, while the number of people aged 18–49 is likely to grow by just 35%. The labour force participation rate for people aged 15 years and over is projected to fall to around 62.4% by 2055, compared with around 64.6% in 2015 (2015 Intergenerational Report). Ageing and health pressures are projected to result in an increase in total government spending, from 22.4% of Gross Domestic Product (GDP) in 2015–2016 to 27.1% by 2049–2050 (Australian Government 2010). An ageing population is not a uniquely Australian issue. The population of most developed countries is ageing. A United Nations report released in 2002, World Population Ageing 1950–2050, suggests that, by 2050, 20% of the world’s population will be over 60, compared with around 8% in 1950. Australia’s population, with a median age of 36.8, is not ageing as quickly as some developed countries. Japan’s median age is almost 45 years, while many European countries have a median age in the forties. The proportion of Australians aged 65 years and over is smaller than many OECD countries, including Canada, France, Germany, Italy, Japan and the United Kingdom. However, a larger proportion of the Australian population is over 65, compared to China, India and Indonesia (2015 Intergenerational Report).

At the High Level Forum on Ageing and Employment Policies held in Brussels in October 2005, it was noted that the number of retirees in Europe would increase significantly in coming decades, while the number of employees would stagnate. It is expected that, by 2050, there will be just one European in employment for each one in retirement. This will not only put pensions at risk, but will also increase tax pressures on the working population. In its 2005 report, Ageing and Employment Policies — Australia, the Organisation for Economic Cooperation and Development (OECD) notes that — unless there is a substantial increase in labour force participation (particularly among older people) — Australia’s workforce will remain stagnant over the next 50 years, while the proportion of the population in retirement will increase significantly (OECD 2005a). The number of Australians aged 50–64 participating in the labour market is much lower than in other OECD countries (eg Japan, New Zealand, Sweden and the United States). Also, many older Australians withdraw from the labour market well before reaching the official retirement age. These demographic changes are long-term shifts rather than temporary fluctuations. Australia’s age structure is expected to stabilise with a far higher proportion of older people and a smaller proportion of people of working age.

¶26-030 Social and economic challenges associated with an ageing workforce The ageing population will impact on a number of areas. It presents a social challenge in terms of caring responsibilities of the “sandwich generation” (ie those people, many of whom work, who are responsible for caring for children as well as ageing dependants such as parents). There is an enormous economic challenge for the government where income from taxes may be insufficient to cover welfare spending. For business, there is the prospect of skills shortages. However, as the 2015 Intergenerational Report notes, Australians will not only live longer but also remain active for longer due to improved health, presenting opportunities for continued workforce and community participation. Workforce participation rates for those aged over 65 are expected to increase from around 12.9% in 2015 to around 17.3% in 2055. In an ageing society, employers that fail to engage and retain older workers will lose a wealth of knowledge that will be difficult to replace, given the shrinking pool of workers. A paper released by the Australian Chamber of Commerce and Industry in March 2012, The Business Case for Recruiting and Retaining Mature Age Workers: Employ outside the box, identifies an array of benefits for businesses that employ mature aged workers, including: • obtaining a better return on investment in human capital through the advantages of significant length of service, investment in training and wealth of accumulated experience • tapping into a source of skill and labour when supplies become scarce • maximising the chances of employing the best people for the job • adding value to the business by accessing mature age workers’ networks, external interests and experiences • benefiting from a strong commitment to the business by mature age workers who are often more loyal and tend to stay with a business for longer • reflecting the changing age profile of customers (mirroring the community) • acknowledging that mature aged workers retain corporate memory/knowledge with experience (which is often not recorded) and making this available to younger workers • marketing the business as a good employer by promoting diversity in the workforce and making changes to traditional human resources (HR) practices, and • taking advantage of any government-funded financial incentives, special training grants and support

for job creation (as and when available). What can be done? Both government and business must act to encourage older workers to remain in paid employment. The Intergenerational Report 2010 suggested that increasing the participation of mature age workers by 5% over the next 40 years would increase Australia’s real GDP per capita by 2.4%. The OECD (2005b) has suggested that the Australian Government take steps to remove the barriers older workers face to carry on working, as well as incentives for early retirement. These include: • Facilitating later retirement while removing incentives to early retirement: This includes reducing penalties for combining a pension with income from work and limiting the possibility of drawing superannuation benefits as a lump sum. • Taking steps to prevent disability benefits being used as a pathway to early retirement: The report recommends that disability benefits should be tied more closely to a substantial reduction in work capacity and rehabilitation measures for (older) people applying for disability support should be expanded. • Increasing the effectiveness of age discrimination legislation: This includes raising awareness about rights and responsibilities under existing legislation and also increasing the penalty for engaging in age discrimination. • Strengthening older workers’ employability: The OECD suggests improving training opportunities for low-skilled and non-regular workers, as well as addressing their lack of motivation to participate in training. It also recommends better targeting of assistance to older job seekers. Given that harnessing the skills and knowledge of older Australians will not only relieve tax and retirement pressures but will also help to plug the skills gap, businesses must also find ways to encourage older workers to keep working. According to a Drake International white paper (2005), the challenges for business in the face of a changing labour profile and supply will be to secure enough people and to retain knowledge. If companies wish to retain the corporate knowledge, skills and experience of older workers, they will have to address stereotyped perceptions about older workers and embark on active campaigns to recruit and retain them. In many instances this means that they will have to change the way that work is done. The federal government’s Workforce Tomorrow report (2005) recommends that employers should consider: “creating and maintaining a more diverse workforce, retaining mature age employees, mentoring and coaching new employees to improve their productivity, increasing education and training for existing employees, improving work/family balance for their employees to attract and retain workers with children and/or caring for elders, providing childcare facilities in or near the workplace, modifying the workplace and tasks so that they can be performed by employees with various levels of disability, and taking advantage of government incentives to try out new employees with different characteristics from their current employees.” In 2010, the Australian Human Rights Commission (AHRC) prepared the Age Discrimination — exposing the hidden barrier for mature age workers report to look at and raise awareness about ageism and unlawful discrimination against mature age workers within the workplace. It expressed concern that in 2008–2009 the bulk of complaints to the AHRC related to discrimination at work, and the majority of complaints were made by people over the age of 45. The report notes that: “It is vital to national productivity that all people in Australia who want, or need, to be in paid work are able to do so to the maximum of their skills, abilities and aspirations — regardless of their age. Yet mature age workers remain an under-utilised part of the labour force in Australia. The workforce participation rate for mature age workers in Australia is lower than our counterparts in other key OECD countries including Canada, the United Kingdom and New Zealand.”

¶26-040 Stereotypes of older workers While research indicates that older workers are often more reliable, loyal, stable, flexible and have fewer incidents of absenteeism than their younger co-workers, negative stereotypes surrounding the capabilities and productivity of older workers are prevalent. A significant obstacle for job seekers over the age of 45 is the attitude of prospective employers, who tend to regard this group as too old to employ. According to findings in a 2011 ABS survey on job search experience, the main difficulty for unemployed people aged 15–24 years in obtaining work was “insufficient work experience” (17%), while for those aged 45 years and over it was being “considered too old by employers” (18%). A 2013 Australian Human Rights Commission report (Fact or fiction? Stereotypes of older Australians Research Report 2013) assessed the prevalence of stereotypes and negative attitudes towards older Australians, and provided insight into the impact of these attitudes on older Australians and the general community, including business decision-makers. According to the report, discrimination is prevalent with 71% of people saying that age discrimination is common in Australia. 88% of community respondents and 92% business respondents felt that discrimination was likely to occur in the workplace. According to the report, 35% of Australians aged 55–64 years and 43% of Australians aged over 65 years have experienced discrimination because of their age. And 67% of Australians aged 54–65, and 50% aged over 65 reported being turned down for a job. The report also found that one in ten business respondents had an age above which they will not recruit — the average age was 50 years. This attitude is also illustrated in the results of an Australian Human Resources Institute (AHRI) HR Pulse Survey, which examined issues relating to recruitment and retention of older workers. The survey was conducted online among AHRI members in December 2011 and 1,212 responses were received. The results indicate that negative perceptions about mature age workers hinder their employment (AHRI 2012). Almost two-thirds of respondents to the survey reported a negative perception regarding high performance and risk, with a third saying their organisation had some bias against employing older workers. Just one-third said they were certain that negative perceptions had no influence on recruitment decisions. This is despite the fact that almost half of respondents to the study reported that a departure of older workers from their workplace over the past year resulted in a loss of key knowledge or skills, with twothirds saying retaining older workers would benefit productivity and one-fifth saying their departure caused the organisation to be less competitive. Just over three-quarters said retaining older workers was a necessary precaution against the sudden loss of essential knowledge and skills. While federal legislation aims to educate and encourage attitudinal change regarding older workers, it appears that negative stereotypes are not the only barrier to mature age participation in the workforce. Positive stereotypes surrounding mature age workers exist too, and while research indicates that most employers recognise the value of age diversity, little is being done to actually secure it. Research commissioned by the National Seniors Productive Ageing Centre, The Process of Participation and Phased Retirement: Evidence from Mature-Aged Workers in Australia, found that a significant gap existed between employers’ attitudes towards mature age workers and their actions. The study found that, while many employers had a fairly positive view of mature age workers, few had corresponding programs reflecting this. Less than 10% of respondents reported they engaged in the active recruitment of mature age workers and only one respondent of the total 38 organisations involved in the study had a specific budget allocated to training for mature age workers. Across the board, levels of participation of workers over the age of 50 were below the national expectations. The study measured perceived organisational benefits and costs of mature age employees and found the following primary responses: • Benefits: – experience

– knowledge – mentoring capability – commitment, and – strong work ethic. • Costs: – higher ongoing costs (sick and annual leave benefits) – resistance to organisational change – opportunity cost of losing potential long-term employees in favour of those with limited time in the workforce – lack of adaptability in relation to training and technology, and – need for more sophisticated training and study options. The authors of the study suggest that organisational focus on cost-cutting and gaining value from employees, coupled with the perception that older workers are less productive than younger workers, may account for the shortfall between the beliefs of the respondent organisations and their actual practices. Interestingly, the study also found discrepancies between how employers view mature age workers and how mature age workers view themselves. Respondents were given a list of stereotypes of mature age workers and asked to rate their agreement with the statements. Overall, the responses were fairly positive, and below are the top five stereotypes that respondents agreed to: (1) lower absenteeism (2) physically able (3) special knowledge (4) good for image, and (5) more cognitively able. Mature age workers were given the same statements and asked to rate their agreement accordingly. Only two of the top five organisational responses were mirrored in the mature age workers’ responses — lower absenteeism and special task knowledge. The biggest contrasts in responses between the two groups were in the following areas: • productivity relative to younger workers • cooperation • reliability, and • ability to handle crises. Overall, mature age workers have the self-perception of being more reliable, more conscientious and more mature in their handling of issues. The study showed an obvious gap between how mature age workers are seen by employers, and how they view themselves. This disparity presents yet another barrier to the required increase in mature age worker participation in the Australian workplace.

¶26-050 Review of legal barriers

A 2012 paper prepared by the AHRC identifies obstacles faced by older people who wish to remain in the workforce. The paper, Working Past Our 60s: Reforming Laws and Policies for the Older Worker, details how age-related obstacles in areas such as workers compensation, income insurance and licensing prevent people in their sixties, who are willing and able to work, from continuing to do so. For example, most workers compensation stops at 65 or soon after, and income insurance is hard to obtain after the age of 60. The Australian Law Reform Commission (ALRC) conducted a review into Commonwealth legal barriers to older persons participating in the workforce or other productive work. It examined a range of laws that impact mature age participants (defined as older than 45 years) in the workforce or other productive work. These included: • superannuation law • family assistance • child support and social security law • employment law • insurance law • compensation law, and • any other relevant Commonwealth legislation exempt under the Age Discrimination Act 2004 (Cth). The ALRC report Access All Ages — Older Workers and Commonwealth Laws, tabled on 30 May 2013, identified legal barriers to workforce participation by mature workers and made 36 targeted recommendations relating to a range of laws. However, given that enabling better workforce participation by older Australians requires a broader focus (rather than just on law), the ALRC’s key recommendation was that a “National Mature Age Workforce Participation Plan” be put in place to provide a national coordinated policy response. The ALRC report is available via the ALRC website. See www.alrc.gov.au.

¶26-060 Age discrimination legislation The Age Discrimination Act 2004 (Cth) (Age Discrimination Act) was enacted in June 2004 as a direct response to Australia’s changing demographics. The ageing population has many repercussions, one of the most significant being reduced labour force participation. In order to boost the workforce, mature age workers must be encouraged to be active in the workforce for longer, and all barriers that prevent this participation need to be addressed. The Age Discrimination Act prohibits both direct and indirect discrimination on the ground of age. Age is defined as including age group. Thus, an act of discrimination does not have to be linked to a specific age but can be related to the age group of a person. Initially the Age Discrimination Act applied the dominant purpose test. It provided that, if an act was done for more than one reason, it would only be unlawful if the age of the aggrieved person was the dominant reason for performing the act. In 2009, the Age Discrimination Act was amended to remove the dominant purpose test. Now, if an act is done for two or more reasons and one is the person’s age, then the act is taken to be done because of the person’s age, even if that is not the dominant or substantial reason for the act. The Age Discrimination Act was again amended in 2011 to create an office for an Age Discrimination Commissioner within the AHRC — the first time the position had been created at the federal level. The Age Discrimination Commissioner is responsible for raising awareness about age discrimination, educating the community about the impact of age discrimination, and monitoring and advocating for the elimination of age discrimination across all areas of public life.

¶26-070 Barriers to workforce participation The current working environment must undergo major changes if older Australians are expected to join/stay in the labour force. Mature age people face significant challenges in securing employment and in their working lives, and these barriers must be overcome if they are expected to increase their activity in the Australian workplace. As previously discussed, mature age workers are surrounded by stereotypes and assumptions regarding their perceived capabilities and productivity in the workforce. Although the federal government has enacted age discrimination legislation to educate and penalise those who engage in discrimination, we are still a long way from achieving age-balanced workplaces. HR practitioners and employers will play a pivotal role in retaining mature age workers and encouraging them into the workforce by recognising that age is not an indicator of performance. Some of the issues that mature age people face are discussed in the following paragraphs. Recruitment Mature age job seekers face significant challenges in securing employment simply because they are considered “too old”. Assumptions that older workers are inflexible, difficult to train, and will retire soon anyway have made employers disinclined to even consider them for vacancies. Older workers often report feeling discouraged from applying for jobs because of this reason. The wording of advertisements (although addressed in federal legislation) can be off-putting as well for older workers. The recruitment industry has a predominance of younger employees, many of whom may not recognise the skills and experience that older workers offer. Older workers report that younger recruitment consultants tend to identify with people their own age, and overlook the experience of mature age people. People aged 55 and over have the toughest time finding work according to figures released in 2011 by the ABS. The ABS report, Persons Not in the Labour Force, Australia, showed that, in September 2011, just over 10% of the 900,000 people wanting work and willing to start within four weeks gave up looking for work. Half of this discouraged group of 90,700 were aged 55 or older. A third of the discouraged group was older than 66 years of age, with around 18% older than 70 years of age. Discouraged job seekers reported that their main reason for giving up looking for work was that they were “considered too old by employers” (36%). (For further information on this survey, see www.abs.gov.au.) The situation is reinforced by the findings of the Australian Human Rights Commission Fact or fiction? Stereotypes of older Australians Research Report 2013, which found that the per cent of businesses would not hire anyone over the age of fifty. Older women Older women face the greatest challenge in securing employment. Many have had breaks from their working life due to raising a family (and, consequently, may have limited work experience). This significantly jeopardises their employment prospects. Women in this group may feel discouraged from finding work due to a lack of confidence in their abilities, and may feel that they cannot “catch up” with new work processes and technologies that developed while they were out of the workforce. Older women need special assistance when re-entering the workforce, especially in terms of support and encouragement. Barriers to participation in the workforce are particularly concerning when one considers that women hold the majority of casual and part-time work in Australia. In effect, women have lower incomes and accrue less superannuation. According to a 2013 report by the Diversity Council Australia and AHRC, Older women matter: Harnessing the talents of Australia’s older female workforce, improving workforce participation of women over the age of 45 would benefit business and the wider community. The report found that employers could reap significant benefits by reviewing their attraction, retention, transition and flexible working strategies with older women in mind. It also found that women over 45 years represent a large and growing segment of the labour force. The report recommended seven key actions employers can take to attract, engage and retain older

women workers, as well as to structure effective transitions into retirement: (1) source talent (2) consider careers and capabilities (3) cultivate culture (4) get flexible (5) invest in health and wellbeing (6) focus on finances, and (7) tailor transitions. For further information on the report, see www.alrc.gov.au/publications/access-all-ages-120summary/recommendations-neteffect. Training Mature age workers may not be offered the same training opportunities as younger workers due to assumptions that they: • take longer to train • are unable to learn new skills, and • may retire soon, therefore, the employer will not receive a return on investment for providing training. Training should be adapted to the particular learning styles of workers. Mature age workers benefit from training which recognises their existing skills and experiences and builds on these. Research indicates that mature age workers remain longer in an organisation after training than younger workers. Therefore, they provide a better return on investment. Promotion Similar to training, mature age workers are often overlooked for promotion on the assumption that they may retire soon, so any promotion will be a waste of time. Retrenchment and redundancy Mature age workers may be targeted for retrenchment or redundancy based on the assumption that they are inflexible and their productivity will only decrease as they get older. Retrenchment and redundancy have a significant effect on older workers because of the difficulties they face in finding new employment. Another form of discrimination is when an older worker is denied a redundancy. Workers who may be close to (or assumed to be close to) retiring may not be offered redundancy because the employer finds it more economically viable to wait until the employee retires.

¶26-075 Government initiatives In 2015, the federal government created the position of Ambassador for Mature Age Employment to drive greater awareness among employers of the business benefits of hiring older workers and help open new doors for job seekers. The Ambassador position built on the existing incentive for employers and mature age job seekers through the $10,000 Restart Wage Subsidy. The subsidy enables Australian businesses that provide jobs to people aged 50 or older to obtain financial assistance from the Australian Government. An employer who takes on an eligible job seeker aged 50 or over can receive the $10,000 subsidy over 12 months as of 1 November 2015. Read more about the Restart programme at: www.employment.gov.au/restart-help-employ-matureworkers-0.

The Australian Government also has an Investing in Experience Employment Charter and Tool Kit, which provides practical guidance for employers wishing to recruit and retain mature aged staff. Information is available at: www.employment.gov.au/investing-experience-employment-charter-and-toolkit-0. And the federal government’s Corporate Champions programme provides one-on-one assistance to employers to recruit and retain mature age workers. Corporate Champions are employers who make a public commitment engage mature age workers. Employers who participate in the programme work closely with Corporate Champion providers to develop innovative plans that will improve practices in employing mature age people. Information about the programme is available at: www.employment.gov.au/corporate-champions.

¶26-080 Corporate initiatives The annual Australian Human Resources Institute (AHRI) awards recognise excellence in human resources practices. The annual Award for Age Diversity in the Workplace recognises excellence in age diversity initiatives and programs in the workplace. A number of businesses have put in place strategies to attract and retain older workers.

Case studies National Australia Bank (NAB) The NAB MyFuture programme provides mature age workers and their managers with options that enable them to make informed decisions and plan for the future — whether it is career redirection, a change of pace, or retirement. The first step of the programme, Create MyFuture, provides tools that allow mature age employees to explore their preparedness for future career direction, including options around flexibility, health, finances, relationships and retirement or redirection. It focuses on the skills, knowledge and confidence employees need to extend their career and plan for the future. The second step, MyFuture: a pathway to 2020 consists of an interactive leadership forum that looks at the challenges and opportunities of an ageing workforce, and how people leaders can support mature age workers plan for their future and create a culture that values experience and maturity. Benetas In 2006, Benetas won the Diversity@work Award for Employment and Inclusion of Mature Age Workers (101–1,000 employees) for the second year running. The award was in recognition of the organisation’s reputation as an employer of choice for mature age workers through provision of flexible hours, leave and work arrangements, and continued training and development. In 2006, Benetas increased its proportion of mature age workers from 62% to 66% over the age of 40 and from 34% to 40% over the age of 50. Benetas (which means “a good age of life”) was previously known as the Anglican Aged Care Services Group. It is a not-for-profit aged care provider that provides residential and community care services throughout Victoria. Benetas also received the AHRI Innovation Award in 2005 for initiatives in an ageing workforce. Benetas was recognised for progressive leadership in providing extensive training and development programs aimed at encouraging and supporting older workers to remain in the workforce. The organisation was also recognised for offering: • flexible working hours • traineeship programs for older workers (with around 30% of participants being over 50) • superannuation support for older workers, and

• ongoing training and development. Further information about the organisation can be found on its website at www.benetas.com.au. IBM IBM won the 2006 Diversity@work Award for large employers (over 1000 employees) in the Employment and Inclusion of Mature Age Workers category. The company also won awards in 2002 and 2003 following the creation of a taskforce to develop an inter-generational strategy. Based on consultation with its mature age employees, IBM expanded its range of flexible work arrangements and support services for staff, including financial, health and wellbeing programs, and family and elder care services. The company has since increased its mature age employment rate and has found that employees’ feelings about work satisfaction have improved. Westpac In 2005, Westpac’s commitment to age diversity was recognised by the Department of Employment and Workplace Relations when it gave the company a Mature Age Employment Champion award. Ilana Atlas, Westpac Group Executive, People and Performance, has expressed the company’s commitment to workforce diversity as follows: “At Westpac we have set ourselves an objective of creating ‘Age Balance’ within our organisation. We strive to create a work environment that is as diverse as the customers we serve; an environment that benefits from the contribution of attributes that people of all ages bring to the workforce. We are passionate about recruiting and retaining mature-age workers. Our strategy commits us to take a leadership role in encouraging others to respond to the national challenge of increasing workforce participation by mature-age workers.” (Thew et al 2005, p 8) Having analysed its workforce a few years back, Westpac discovered that while 39% of customers were over 45, only 20% of staff fell into this age group. The company decided to address the issue by better aligning the age of its employees with those of its customers. At the same time, the company was experiencing high levels of turnover among staff in their 20s. Many saw the company as a stepping-stone in their career path. Mature workers on the other hand were found to be three times more likely than their younger counterparts to remain with the same employer. They also have a good work ethic and low absenteeism levels, and bring extensive life experience to work. Westpac decided to set itself a target of creating age balance within its workforce, ie to recruit workers of all ages. Against this background, Westpac’s Age Balance Initiative involved a commitment to recruit 900 mature age workers (aged over 45 years) by September 2005. The initiative consisted of three elements: (1) developing a detailed understanding of the age profile of Westpac’s customers and employees (2) developing and implementing an integrated strategy to achieve age balance within Westpac, and (3) leading the community in developing awareness and action to increase workforce participation. Since making the commitment, recruitment has occurred primarily in the company’s contact centres in Perth, Brisbane and Adelaide. The company has also focused on branches, financial planners and advisors. When the company’s contact centre in Joondalup (Western Australia) opened, it partnered with recruitment specialist Hudson Global Resources to ensure age balance among employees there. Consequently, 50% of employees are older than 35, 30% are older than 45 and 25% are under 25; compared to other centres where around 31% of staff tend to be over 35 and 14% over 45. Atlas has noted that there are barriers to recruiting and retaining mature age workers. These include the fact that many mature age workers want to retire, stereotyping of workers of various ages and the

challenges of managing a cross-generational workforce (Thew et al 2005, p 10). The company has sought to counter these issues with an integrated approach across recruitment, opportunities for development and progression and support through career transitions both within the company and beyond (Thew et al 2005, p 11). For information about equal opportunity and diversity at Westpac, see www.westpac.com.au (search “diversity”). ANZ In 2004, ANZ won the Diversity@Work Award in the Employment and Inclusion of Mature Age Workers category for its Career Extension program. The program, introduced in 2004, is designed to give mature age employees flexibility to adapt their career to suit their changing lifestyle. There are seminars that provide information on superannuation, retirement planning and the Career Extension program. The Career Extension program offers three alternatives: (1) “rejuvenate” (2) “rebalance”, or (3) “reshape”. Employees are offered the option of rejuvenating by means of a number of leave and career break options. These include up to four weeks lifestyle leave (either unpaid or purchased) and double long service leave at half pay. Employees also have the option of taking an extended career break of unpaid leave for personal development or family needs. The rebalancing options are designed to allow employees to redefine work to suit their lifestyle. Possibilities include job sharing, telecommuting and other flexible work arrangements (eg part-time work). Finally, the reshaping options are designed to allow ANZ employees to take a gradual approach to retirement, to start a new challenge or to make a career switch. The idea is to avoid experienced employees leaving the company to accept a less onerous role elsewhere. In a further initiative in 2005, employees aged 55 and over were guaranteed the option of moving to part-time work should they choose to do so. All employees with a minimum of five years’ service can move to part-time work in their existing role or another role. Information about diversity at ANZ and the company’s Career Extension program can be found online at www.anz.com (search “diversity”).

¶26-090 Promoting mature age employment A report released in 2012 by the AHRC predicted a potential boost of billions of dollars to the national economy based on increased workforce participation by older workers. The report, Increasing participation among older workers: the grey army advances report, was prepared by Deloitte Access Economics and released at the AHRC’s older workers and business growth strategy forum in Sydney in September 2012. It highlights the impact on the national economy of increasing mature age workforce participation. It predicts that current growth in mature age workforce participation is likely to result in a $55b increase in national income by 2024–25. At the forum, representatives from a wide range of business sectors proposed actions to recruit and retain older workers, including: • removing generational labelling, (ie Generation X, Y and baby-boomer labels), which reinforce destructive and negative stereotypes • ensuring that managers at all levels support employment and retention of older workers

• properly exploring the skills and capabilities of workers, regardless of age • confronting unconscious bias against older workers • thinking differently about the way work is organised and changing the structure of the workplace to reflect this (eg creating flexible workplaces where people can work different hours to meet the needs of family and transition to retirement) • training older workers into new occupations • introducing and supporting mid to late career planning beyond the annual performance review • considering five-year cycles of work planning • resolving workers compensation barriers • encouraging recruiters to include mature workers (eg improving job advertisements so these do not exclude older workers) • introducing a program of mass IT reskilling and/or addressing the perception that older workers do not have the required skills, and • elevating age discrimination to the same level as gender discrimination (eg by strengthening legislation). A number of recruiter focus on the mature age market. Some examples follow. Adage The recruitment industry has a critical role to play as the gatekeeper for many positions. However, it is a youthful industry and this demographic is often reflected in the age of candidates short-listed for positions. In a survey of 1,000 professionals by recruitment consultancy Adage, more than half of respondents claimed some form of discrimination in the recruitment industry, preventing successful connection with organisations. However, organisations do appear to recognise the importance of age balance, as revealed in the same survey, where 91% of the 220 organisations surveyed acknowledged that creating age balances in their organisation would be crucial for future success, and 67% had already begun developing strategies for attracting mature age workers. These results are reflected in anecdotal evidence received by Adage since its establishment in May 2005, namely that mature age workers are keen to find employment and companies are keen to hire them but, somehow, the two groups are not necessarily connecting. This is the very gap that Adage is seeking to address. The recruitment consultancy was established as a division of mature age consultancy SageCo Pty Ltd. It offers online mature age recruitment, claiming on its website to be “a community of mature age professionals connecting with organisations that value experience and wisdom and are interested in hiring maturity”. The company has an exemption under s 126 of the Anti-Discrimination Act 1977 (NSW) to enable it to advertise for mature age job seekers and to screen for candidates aged over 40. For further information, see adage.com.au. DOME DOME (Depend On Mature Experience) is another agency that has positioned itself in the niche market for mature age recruiting. The Perth agency represents mature (40 and over) and experienced unemployed people. It endeavours to “promote to the employer the advantages of engaging pre-skilled labour and emphasises the cost-efficient benefits of having a workforce with qualifications and experience”.

DOME Training Services is a registered training organisation that offers computer training to clients. See www.dome.org.au for more information. BeNext BeNext — is an online mature age job and career centre. See benext.com.au. Olderworkers OlderWorkers is a national jobs board which positions itself as “connecting older job seekers with age friendly employers”. See olderworkers.com.au. Seniorsearch Seniorsearch states that it “provides mature age job seekers opting to remain in or return to formal employment, an efficient portal for accessing suitable job opportunities”. See www.seniorsearch.com.au/about_us.php. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶10-500 and the following references. References Australian Bureau of Statistics (ABS) 2011, Job Search Experience Survey, see www.abs.gov.au. —— 2011, “Persons Not in the Labour Force, Australia”, Report, see www.abs.gov.au. —— 2009, Australian Social Trends, March 2009, see www.abs.gov.au. Australian Chamber of Commerce and Industry 2012, The Business Case for Recruiting and Retaining Mature Age Workers: Employ outside the box, March, see acci.asn.au. Australian Government 2015, 2015 Intergenerational Report: Australia in 2055, Treasury, see www.treasury.gov.au. Australian Government 2010, Australia to 2050: future challenges (also referred to as the Intergenerational Report 2010), Treasury, January, see www.treasury.gov.au (archive). Australian Human Resources Institute (AHRI) 2012, Mature Age Workforce Participation, HR Pulse Survey Report, 8 March. —— 2011, Mature Age Workforce HR Pulse Survey, December. Australian Human Rights Commission (AHRC) 2012, Working Past Our 60s: Reforming Laws and Policies for the Older Worker, see www.humanrights.gov.au/publications/working-past-our-60s-reforminglaws-and-policies-2012. Australian Human Rights Commission (AHRC) 2013, Fact or fiction? Stereotypes of older Australians Research Report 2013, see www.humanrights.gov.au/our-work/age-discrimination/publications/fact-orfiction-stereotypes-older-australians-research. —— 2010, Age Discrimination — exposing the hidden barrier for mature age workers, see www.humanrights.gov.au/age/hiddenbarrier/index.html. Australian Law Reform Commission (ALRC) 2013, Access All Ages — Older Workers and Commonwealth Laws report, 30 May, see www.alrc.gov.au. DEEWR 2011, Investing in Experience Employment Charter. Deloitte Access Economics 2012, “Increasing participation among older workers: the grey army advances”, Report for the AHRC, September, see www.humanrights.gov.au/increasing-participationamong-older-workers-grey-army-advances2012. Diversity Council and AHRC 2013, “Older women matter: Harnessing the talents of Australia’s older female workforce”, Research report, see www.alrc.gov.au/publications/access-all-ages-120summary/recommendations-neteffect. Drake International 2005, The Age Chasm: Successfully Managing Age in Your Organisation, White

Paper, vol 2(5). Drew J and Drew M 2005, The Process of Participation and Phased Retirement: Evidence From Mature Aged Workers in Australia, Post Pressed, Australia. Federal Minister for Employment and Workplace Relations 2005, “Workforce Tomorrow — Adapting to a more diverse Australian labour market”, Report, released 24 November 2005. National Seniors Productive Ageing Centre 2005, “The Process of Participation and Phased Retirement: Evidence from Mature-Aged Workers in Australia”, Executive Summary, see www.productiveageing.com.au. Organisation for Economic Cooperation and Development, (OECD) 2005a, “High Level Forum on Ageing and Employment Policies”, Chair’s conclusions, Brussels, 17–18 October, OECD. —— 2005b, Ageing and Employment Policies — Australia, OECD. Productivity Commission 2005, Economic implications of an ageing population, released 14 April. The Treasury 2003, Australia’s Demographic Challenges, Social Policy Division, The Treasury, Canberra. Thew P, Eastman K and Bourke J 2005, Age Discrimination: Mitigating Risk in the Workplace, CCH Australia Ltd. United Nations 2002, “World Population Ageing 1950–2050”, Report, see www.un.org/esa/population/publications/worldageing19502050.

27. MERGERS AND ACQUISITIONS — MANAGING THE HUMAN RESOURCES Editorial information

Originally written by Mike McKeon (Ernst & Young) and Karen Payget (formerly of Ernst & Young) Significantly rewritten in 2016 by David Werner, Partner Ernst & Young

¶27-010 Introduction M&A activity during 2015 in Australia saw a return to pre-GFC levels and predictions are that this will continue through 2016. Sentiment is being driven by low domestic growth expectations, continuing highquality acquisition opportunities, low cost of capital and increasing confidence in the ability to close deals. Global volatility has seen IPOs are predicted to slow, however, international strategic and trade buyers have returned to the Australian market and are driving activity across several sectors including Financial Services and infrastructure. Across the ASX 200 deal activity has included planned carve outs of non-core businesses as well as uninvited takeovers. Such activity has seen businesses have to deal with addressing change of control terms in equity and deferred incentive plans for executives and employees, as well as considering the level of information that will be disclosed about key employees during any diligence process. Trade buyers are seeking detailed workforce data to support synergy and pricing models, particularly during competitive bids, while also seeking assurance that key talent will be retained through any completion and integration period. Planned divestitures allow businesses to plan for such challenges and implement mitigation strategies, and for bidders to consider their approach, however, the unexpected bids are placing pressure on boards to determine their approach without any certainty that a deal will progress. In M&A transactions, the changing ownership and structure of organisations have a significant impact on both the leadership and employees of the “buyer” and “seller” organisations involved (see Table 27.1 for useful terms and definitions). This chapter provides guidance on the first three key phases of a transaction: (1) Transaction risk assessment (2) Human Resources (HR) due diligence, and (3) Day 1 readiness. These three phases are based on the firm’s own experience of working with companies that successfully use HR professionals when acquiring another entity. As each transaction is conducted to achieve specific and unique business objectives, this chapter is limited to the generic guidance, processes and analysis required for a commercial HR risk review, a robust HR due diligence and a successful Day 1, and should not be treated as a definitive authority on the subject. Other information on specific terms and conditions of employment within a transaction (eg relating to annual and/or long service leave) should be read in

conjunction with this chapter. Information on contracts, terms and conditions is available in a number of chapters of this Guide. Every deal is different and there are many different types of M&A activity, broadly grouped into: • acquisitions (and mergers) • divestments • spin offs • joint ventures, and • Initial Public Offerings (IPOs). There are intricacies to each deal type and HR has a critical role to play in all types of deals. This chapter will focus on describing activities and issues for a “friendly” (as opposed to “hostile”) acquisition. Friendly acquisitions enable appropriate access to documents and time to assess the findings in the due diligence phase. Many of the concepts outlined in this chapter, however, may be applied across all types of M&A activity and the competencies needed to deliver them are relevant for restructuring, outsourcing and other significant workforce changes. The chapter does not cover issues such as post-Day 1 integration activities, cultural alignment or change management strategies, which should figure in a first 90-day plan.

¶27-020 The role of HR in M&A Imagine this scenario: the HR Director has just come from a meeting with the Chief Executive Officer (CEO) and Head of Corporate Development and has approached you in your HR Manager or HR Business Partner role with the confidential information that a potential merger or acquisition by your company has just been discussed. There will be an initial review before the approach is confirmed, and then it will be publicly announced. The due diligence process has just commenced and you are needed to support the deal team. So what happens next for HR? What are the steps? Who is involved? What is important and just as importantly, what is not? Organisations going through this type of M&A transaction are conducting a more comprehensive HR due diligence than in the past where just the usual high-level financial review of the target’s salary and wages in the Profit and Loss (P&L) accounts was seen to be sufficient. A robust HR due diligence, which encompasses all facets of the employment relationship, allows the buyer to receive a comprehensive insight into all relevant workforce issues. Further, it provides mitigation strategies that will ensure a smooth transaction. Once an agreement has been reached to purchase the new entity, it is essential for HR to be involved in the transaction to prepare for Day 1 readiness and post-merger integration. Increasingly, in Australia, HR professionals are being involved in the initial strategic transaction assessment phase (prior to a decision being made to progress with an offer) as well as the formal due diligence phase. There has been a broader shift in the perception of the role of HR in a transaction’s due diligence, from being a bystander (and reactive to the deal) to being strategically involved from the time a potential deal is being assessed at the executive level. It is important that HR is an integral member of the acquisition team. Consequently, leaders in the HR function should be involved as soon as possible following the strategic discussions, which are typically conducted under a high level of confidentiality and with limited participation. This position has been slowly evolving from the “bad old days” when HR was often “the last to know” and recognises the value that strategic HR brings to the M&A planning and decision-making process. It is uncommon for HR findings alone (in a due diligence) to be the critical “go or no go” decision on a transaction but it does happen, particularly where there is critical IP in an organisation, or a shortages in

key talent areas. However even where there is not a material workforce or HR issues, HR-related findings can be critical to inform in a due diligence the findings from other work streams such as finance, tax and legal. In some acquisitions, the employee-related costs are more than 50% of the target’s operating costs, and findings that are considered material may be included in purchase price negotiations. HR due diligence also regularly provides insights for integration planning and budgeting that is critical for the longterm success of a deal. Once the deal has been agreed, it is essential for HR to be involved to prepare for the transition of all employees to the new entity on the date that the deal completes. This is known as “Day 1 readiness”. In preparing for the transition requirements for the acquisition of the new entity, it is important to understand the nature of the deal (ie is it a share deal or asset deal?) and whether alignment of HR policies and practices is required prior to Day 1, or will this be a Day 2+ activity. The details of the deal pertaining to the employee-related matters will be negotiated and documented in an overall deal agreement, likely a “Sale and Purchase Agreement” or some type of “employee matters” agreement. This agreement will provide key items for Day 1 readiness activities including timing of any offers, transfer of liabilities and warranties from the vendor. HR will play a critical role in the success of Day 1 and, ideally, will be involved in all of the various deal-related work streams to ensure that the deal completion is executed in accordance with the deal terms. Table 27.1: Useful terms/definitions used in mergers or acquisitions Useful terms

Definitions

“Bidders”

Organisations who are looking at the Target business, the number of bidders will generally reduce as a process progresses to final binding bid phase.

“Buyer”

The organisation that is acquiring or purchasing the assets or shares in a new entity.

“Carve Out”

Where a business is sold by a parent company, conglomerate or business it currently manages.

“Company Secretarial”

Senior management role focused on board and company administration with a focus on compliance with statutory and listed company requirements.

“Completion period”

The time from when a deal is signed and announced to when the buyer takes control of the target on Day 1.

“Cross-border”

A transaction may involve businesses located interstate or overseas. Additional items (eg local labour laws and employee benefits) will need to be taken into consideration when an HR due diligence is being performed.

“Data room”

The location where requested documents regarding the target are held for analysis by interested parties. Usually this is a secure website.

“Day 1”

The day when the deal is completed and all assets/liabilities are transferred to the acquiring organisation.

“Deal” or “Transaction”

The purchase process an organisation undertakes to acquire another organisation or part of an organisation.

“Deal breaker” or “Show stopper”

A material finding that could potentially stop the deal from proceeding.

“Deal price”

The price paid to acquire the target, this could be a complex mix of cash, equity, debt and dividends.

“Deal team”

The team driving the transaction project is usually comprised of senior internal and external (adviser) resources. This is also usually the defined group of people to whom the sharing of confidential information will be confined to.

“Materiality”

The agreed dollar amount, which is considered “significant” and would impact the deal price. The figure will vary for Balance Sheet and the P&L impacting items.

“NewCo”

The “new company” created by the transaction.

“Red flag”

Item highlighted to the deal team for further analysis. The discovery of a material finding that could impact the deal price or require additional analysis to assist in quantifying a potential risk.

“Seller” or “Vendor”

The organisation selling the asset or shares. This may be a wholly owned business or part or a business.

“Sale And Purchase Agreement”

The documents of sale, can also be known as a Sale Deeds, Share Purchase Agreement or other terms. There are many areas of the agreements referring to the workforce impacted by the transaction.

“Special Purpose Vehicle (SPV)”

An entity set up to facilitate the transaction, often to provide a new entity that is unencumbered with historical liabilities.

“Target”

The company or business being acquired.

¶27-030 The project team — skill requirements Once the deal is announced, it is important to get the right team in place. This is sometimes difficult in the due diligence phase because, typically, only a handful of people know about the proposed acquisition at this stage. Many HR professionals are excellent project managers, have excellent HR technical knowledge, understand the commercial and strategic aims of their business, can work with uncertainty and are adept at contributing to a multidisciplinary team. M&A requires all of these competencies and presents an excellent opportunity to broaden an HR practitioner’s business skill set. At the initial review stage, the HR role in the project is likely to be held by a senior HR professional working alongside the Company Secretary or the organisation’s legal counsel. It is critical that the HR professional assigned to deliver the due diligence has deep HR experience, understands workforcerelated financial reporting (both Profit & Loss and balance sheet) and understands the wide range of HR costs, risks and opportunities. These skills are critical to be able to input directly into the deal price discussions. The HR professional may also need to interact with and/or manage third parties who may complete the HR due diligence on behalf of the acquiring company. To build on the knowledge gained in the due diligence stage, the project team will benefit from having the same HR professionals involved in planning during the completion for readiness for legal Day 1. It is

important when assigning the lead HR professional to the deal team that expectations are set in regard to the time required to undertake both the due diligence and Day 1 readiness. This time increases significantly if the deal is “cross-border” or where there is a complex “carve out” requiring replacement of corporate functions. Depending on the size of the deal, is it likely that the HR team involved during the confidential due diligence stage will grow to match the volume of work. It is important that the team has both the skills and capacity to take on the work. Deadlines are critical and often very tight and the pace/frequency of change can be extraordinarily demanding on team resources. Backfilling the role of key team members mitigates the risk of deal deadlines not being met or of issues arising in an HR professional’s normal “day job”. Once the deal becomes public, it is common for the HR project team to draw support from colleagues in payroll, remuneration and benefits, industrial relations (IR), legal and other specialty areas to plan and execute an integration or divestment. There are a number of key skills an HR transaction professional should possess. These include: • the capability/capacity to conduct an on-site (or virtual data room) review of the target’s HR policies, plans and programs • the ability to analyse financial management accounts and deliver detailed reports on the employmentrelated historical expenses and forecasts, deal opportunities and any employee-related risks and issues • a strong technical HR background, including current industry practices • the ability and (preferably) experience in interviewing senior management • the ability to work under pressure and with uncertainty • experience in managing third parties • having an understanding of the broader commercial drivers of business success • the ability to work within a multidisciplinary deal team • the capability/capacity to plan for Day 1 readiness and post-merger integration, and • the ability to manage the confidentiality requirements of M&A projects. M&A can be a frustrating process. Constant changes to all elements of the deal should be expected. Work will often be done, and then sometimes redone, at a fast pace. All deal team members need to be able to operate in this sort of environment, and their managers need to support them during times of stress. Finally, HR also has an important role to play in taking a pragmatic approach to assessing employee issues and potential solutions. In this role, HR has a role with coordinating all workforce issues and advisers, such as: legal, IR, superannuation, remuneration and benefits (as well as others), to ensure that the collective HR view is presented in a balanced and commercial manner and appropriate issues are shared with finance, tax, operations and other transaction work streams.

¶27-040 The HR transaction process The full scope of work in acquiring a new entity involves a number of phases (see Figure 27.1). The first phase revolves around planning the deal and carrying out an initial high-level risk assessment. Once the potential purchaser expresses interest in purchasing a new entity or part of a business, then an agreement to conduct a due diligence will occur. Once the due diligence is completed and the deal team has negotiated the deal price, the next phase involves preparing for Day 1 readiness. The timing of the date of purchase depends on the complexity of the deal. It (potentially) could take up to

six months or more for larger deals or, if regulatory approvals are required (eg from the Foreign Investment Review Board, APRA, or the Australian Competition and Consumer Commission), or if there is a complex carve out from a parent company. Smaller deals can take less than one month to agree and finalise negotiations. While this chapter only covers the initial phases of the overall transaction process, once the deal has been completed, the post-merger integration requirements, evaluation and implementation of HR strategy may take months or years to implement. The timing of the implementation often depends upon publicly stated synergy targets, budgetary constraints, geographical or IR considerations, technology limitations and the strategic direction of the new company (NewCo). Figure 27.1: The HR transaction process

¶27-050 Clarifying objectives, deal type and structure The first step is for the HR professional to clarify the objectives and type of deal. This is of primary importance as it will enable the determination of any additional information requests and analysis that need to be performed prior to deal completion. For example, there is significant difference in the degree of due diligence required for the organisational structure if the acquisition is purely a purchase of a standalone business that will remain operationally independent, versus a full merger that is anticipated to provide significant future cost savings through headcount reductions. It is critical to understand if an existing independent business is being purchased, or if it is currently part of a larger group being “carved out” for sale. The structuring of the deal does not only impact the tax and financial teams involved. There are significant implications for the HR team as well if the deal is an equity (share) or asset deal, particularly for the Day 1 readiness process.

¶27-060 The risk assessment Prior to any decision being made as to whether a deal should be pursued, the transaction team will undergo a confidential review of publicly available information to identify critical deal risks and synergy opportunities. From this, it will determine an indicative valuation to take to the target. For this review, the deal team (including HR) will likely only have access to publicly available information. The deal will also be highly confidential, preventing the deal team from making even informal enquiries. It is critical to understand the aims of the deal, however, as the approach to the deal may change following this assessment. In the risk assessment phase, the deal team is looking for deal breakers, risks and opportunities that will have a material impact on the deal price or integration, so it is critical to make use of what information is available. Key sources of information can include: • annual reports, which will provide key executive remuneration, pension/superannuation (including defined benefit funds) costs, and will often include headcount and other employee-related data

• analysts’ reports with more detail on locations and the breakdown of labour costs • registered collective agreements • general news/media • union websites for insights to IR activity or disputes, and • company websites, which can identify employee benefits as well as provide other employee data. In conducting a risk assessment, HR should consider issues that also impact other functions and reach out to the relevant groups to discuss these issues (eg employee locations will impact property and lease commitments, above statutory level leave entitlements, defined benefit funds may be a material financial matter and so on). Some key things to look at in a “public information only” risk assessment are as follows: • Locations: What are the locations of business and employees when compared with the acquirer? • IR activity: Have there been any recent industrial disputes/union activities that may cause concern? • Agreements: How many collective agreements are there? How complex are they? • Skills: Is this an industry with talent shortages? • Superannuation: Are there any defined benefit superannuation funds? • Work health and safety: What is the safety record of the organisation like? Are there any outstanding claims/grievances? • Industrial Action: Is there any ongoing or threatened activity, has there been a history of disputes? • Legal: Is there public employee-related litigation? (eg unfair dismissal, discrimination and so on). Identifying critical risks and issues will also assist in planning the full due diligence should the transaction progress to the next phase.

¶27-070 HR due diligence Once the decision is made to progress with the deal, the first phase is the due diligence. This may still be confidential or there may be a public announcement. In any event, it is critical to understand the confidentiality needs of the project. For HR, one of the first questions often asked is: “What is an HR due diligence?” A transactional due diligence is an activity where, through discovery and analysis, an opinion or report is formed on whether or not to proceed with a transaction. If it progresses, then it becomes a matter of “What price?” and “What risk?”. An HR due diligence typically involves the following 12 steps: (1) confirmation of the “in scope” organisational structure (2) assessment of full-time equivalent (FTE) employee numbers, casuals, contractor and subcontractor arrangements (3) understanding the business resourcing strategy, how it attracts and retains talent and how it uses employees, contractors and casual employees (4) provision of a strategic review of key HR issues, which enables the buyer to fully understand the current state of a target’s remuneration and HR programs, including historical and forecasted total employment-related costs for the following:

• fixed salary costs • short-term incentives • long-term incentives • benefits, including superannuation arrangements, leave entitlements and vendor relationships (5) analysis of the market competitiveness of the remuneration and benefit structures for the executives and employees (6) an assessment of the IR environment and implications (7) an assessment of any risks associated with key talent, pending litigation and so on (8) an assessment of the HR operations and functions of the target organisation (9) analysis of employment-related opportunities for synergies or growth (10) quantification of HR-related assets and liabilities (including employee leave provisions) (11) evaluation of financial risk impact on: • the deal price • Day 1 readiness • the transaction integration process (12) provision of mitigation strategies to manage identified risk.

¶27-080 Key phases of a due diligence In a due diligence there are four key phases, which are typically completed within a two- to four-week period. The uncertain nature of M&A activity can, however, result in a frustrating “stop and start” process that can stretch out for many months. The four phases include: (1) confirmation of the project scope (also referred to as “project start-up”) (2) document review (also referred to as “data gathering”) (3) analysis (or “data analysis”), and (4) report writing (or “report out”). These phases are set out in Figure 27.2 and described further in the following paragraphs. Figure 27.2: Four key phases of a due diligence

Phase 1 — Project start-up The first phase in the due diligence is where the overall project team is agreed, roles are clearly defined, project governance and reporting is set up, and HR is integrated into the multidisciplinary transaction team. Another important decision made in these up-front meetings is clarifying the scope of work and priorities to ensure that the HR due diligence meets the expectations of the deal decision team. Another critical factor is timing. Most due diligences are completed within a short timeframe with clear milestones. HR must meet these deadlines to ensure that any finding that is considered material is integrated into deal price negotiations. Dedicated resources (ie to work exclusively on the transaction) will be critical in ensuring that the project is adequately resourced with appropriate expertise and capacity. Phase 2 — Data gathering As part of the due diligence, the target organisation will be requested to provide critical HR information into a “data room”. This data room may be an office within the target’s appointed solicitor or a confidential “virtual data room”, to which the HR professional on the deal will be given access via the internet. Everyone who requests access to the data room will need to sign confidentiality agreements and abide by data room protocol (these vary by deal). Given the sensitivity around the employment issues, the HR professional may be given additional access to review employee details (eg individual salary details). In some deals, third party advisors will review the HR data and work with the acquiring company’s HR professional to review the findings and any future strategies needed to mitigate or resolve risks and issues. Once the documents in the data room have been reviewed, typically there is a tightly controlled process to ask the target company questions (ie a question and answer (Q&A) process). This process depends on the deal. In some cases, the HR professional may be able to speak directly to the target’s HR Manager or executive team, or attend a management presentation to clarify questions or findings. In other cases, a formal list of questions will need to be submitted and responses monitored. It is of primary importance that all the appropriate documents are requested and questions are asked to ensure a robust due diligence: hence the need for an experienced HR professional (internal or external) to conduct the due diligence. It is common for information provided to be incomplete or vary from what was requested. This increases the importance of having a Q&A process and any possible management interaction where there is an opportunity to ask questions directly of members of the target’s management team or the target’s main HR contact person. Data request lists

To gain an understanding of the HR-related financial implications and mitigate any potential risk in the new entity, a data request list for the target company needs to be created. This request list is typically compiled alongside all the other services areas and is forwarded to the project management or legal team working on behalf of the target. The list needs to be comprehensive and aligned with the transition team requirements of the period under review. The HR team needs to ensure that the list covers the key areas for HR activity in order to make an appropriate assessment of the target. The request list should focus on material issues and consider: • the strategic aims of the transaction (eg synergy driven, product extension, acquisition of intellectual property (IP), critical skills, a new geographical area and so on) • key elements of the acquiring organisation’s HR strategy, and • drivers of business costs. Data will generally be available for a historical period of (potentially) the last three years and a forecast period. Forecast periods are typically to the end of the current financial year and the next. Once the data request list has been forwarded, it will need to be continually followed up as the HR data is usually not received all at once, but over time. On occasions, the target company may not always be forthcoming with its individual employee-related data — especially in regard to salary and wages. In this instance, the only information obtained may be salary data in aggregate by grade or total remuneration costs. It is generally accepted that data will be released in phases over the course of a transaction with more sensitive data withheld until there is greater certainty of a deal completing. It is common for some data to be held until a “Black Box” phase for a single preferred bidder, and this data to include details such as individual salaries of key employees, executive short-term and long-term incentive plans, key performance indicators (KPIs) and payments, retention payments and termination or change in control clauses in contracts. The data request lists should be informed by any information made available to the deal team. Often there are sources of information that can be invaluable to the deal team: (1) Information Memorandum (IM), and (2) Vendor Due Diligence (VDD). Information Memorandum The IM is a commercial or sales document that will have been provided by the lead adviser to the vendor. An IM will usually have limited information on the employee group; however, headcount information and biographies of the management team are usually included. There will be valuable information on business strategy and critical issues for the vendor that give useful insights into what the key HR issues may be. Vendor Due Diligence Many deals (particularly carve outs, private equity divestments or government privatisations) will include a set of VDD reports for potential buyers to review. It is common for there to be financial, tax and legal VDD documents. HR VDDs are becoming more common. These documents should have undergone independent scrutiny and validation and provide a greater level of reliance on the information provided. Even where there is not an HR VDD, there will be valuable information in the financial (historical and forecast labour costs), tax (fringe benefits tax (FBT) benefits) and legal (review of contracts/collective agreements and executive contracts) VDD documents. More companies are investing time in preparing concise and accurate HR information when they are contemplating a sale as it allows for expedited negotiations which demonstrate seller credibility and, in turn, increase shareholder value (Ernst & Young 2013(b)). Following is an example of a document request list for HR which, depending on the complexity of the target organisation and deal structure, will need to be adapted to meet the requirements of a transaction.

The following request list is not exhaustive and further data can be requested on wider areas of HR, such as culture or employee engagement surveys. Table 27.2: Example document request form HR due diligence — Document request form Documents/information List of all executives and senior management employees and succession planning policies Comprehensive employee demographics, including current total headcount (or FTE) of workforce (including breakdown of executives, employees, permanent full time (FT)/part time (PT), casual and contract employees, contractors, subcontractors) Labour jurisdiction or location (eg state) for each executive and employee Details of the company’s labour resourcing strategy Historical headcount/FTE and turnover (for trend analysis and labour cost KPIs) Copy of executives’ employment contracts (Note: If no employment contract is available, then documents regarding terms of employment for executives should be provided instead.) Organisational charts Length of service of employees List of all foreign employees by home/host location (including terms of assignments) List of executives/employees by visa status (including type and expiry date) Copy of current employment contracts, any legacy agreements, collective agreements or other existing agreements (eg certified agreements) for all employees Copy of any contractor agreements Copy of all HR policies and procedures, or other policies that relate to employees Information on trade union activity and participation, if any Notice periods for all levels of employees Copies of any severance/termination pay plan(s) or arrangements/practices in the absence of a written policy Copies of performance management system documentation Detailed employment costs — historical and forecasted, direct and indirect costs (Note: These should represent “actual costs”, not a company determined “corporate allocation”.) Summary of change of control provisions in any employment

Date requested

Date received

contracts/agreements Remuneration Organisation remuneration strategy, including market positioning, mix of fixed and variable remuneration, and approach to performance-based pay Fixed remuneration and actual short-term compensation for employees for current and last three financial years (including any deferred compensation) Long-term incentive plans (eg equity, derivatives, cash) and supporting documentation All benefits and supporting documentation for each employee (eg company car, superannuation, private health care, travel, memberships) Overtime policy and historical overtime expenses Liabilities Long service and annual leave provisions and actual accruals for all employees Sick leave policy Any employee loan agreement and outstanding balances Outstanding litigation matters (eg relating to unfair dismissal, equal employment opportunity, discrimination, harassment and so on) Workers compensation policy, history, costs Payroll tax provisions FBT liabilities for benefits Benefits Superannuation plan(s) details, including all current and legacy plans (ie accumulation or defined benefit) Life assurance policy document and participation Details of any salary continuance or death and disability plans Treatment of above statutory superannuation contributions Salary continuance insurance policy document and participation For any defined benefit pension plan, the last actuarial valuation report and copies of last three audited financial statements (for funded and unfunded plans) Any other benefit plan policy and third party contract, if applicable Copy of any other third party vendor arrangement (eg Employee Assistance Programs, Training & Development agreements and so on)

HR function Outline of HR team, identifying where any resources will not be included in the transaction List of material HR third party and outsourced providers Details of HR Information Systems, including employee data, payroll, resource managing, rostering and performance management tools. HR strategy and copies of minutes of any HR Board committees for the last three years Phase 3 — Data analysis A thorough approach to the data analysis is essential. When there are no documents, or requested information has not been provided, the HR professional must continue to pursue the acquisition of this material by working with other deal team members and advisers. In addition, they should arrange to meet with the target organisation’s HR representative for a Q&A session. This session will likely be organised through the deal team or the target’s solicitors and will likely be conducted with a person from the deal team to record the responses. While data room materials provide for an analytical review of expressed terms and conditions of employment, the Q&A process will enable HR to discover any implied terms, historical practices, variations in terms and gain insight into other broader issues. Occasionally, in transactions a number of material terms may be of a verbal nature and this aspect is critical in discovering the full extent of costs associated with an acquisition. This is particularly common with private companies or businesses without an established HR function. HR is now more likely to be invited to attend vendor management presentations with the opportunity to ask questions of the CEO, Chief Financial Officer (CFO) and executive team. Discussions may also be arranged with HR or the legal advisers who are supporting the vendor, particularly if a VDD has been prepared. Frequently, discussions with the target will be with the HR Director. These occasions present an opportunity to assess the delivery model and modus operandi of the target’s HR team, which may point to synergies and potential structures from a post-implementation perspective. This can also inform what target HR resources may be available to assist with Day 1 planning and execution. Phase 4 — Report out Once the data is received, the acquiring organisation will analyse all the findings and determine if there is a significant financial impact or risk. These findings are typically provided in a report to the transaction team of the acquiring company and the solicitors. The report itself should reference all documents or discussions to provide an appropriate audit trail. HR professionals should state clearly where there is outstanding information and the level of risk involved in not providing the required information. Deal teams are moving towards providing short “traffic light” reports, focusing on key deal issues. These enable critical risks to be rapidly identified and consolidated into a comprehensive report of all risks, issues and opportunities. It is likely that an HR professional will have a long list of issues that will need to be addressed during integration (eg minor variations in benefits) that are not material for the deal price. HR professionals need to ensure that time is not wasted on immaterial issues that will not impact the deal price or viability.

¶27-090 Mitigation strategies There are key areas which may be of concern to the buyer. When a key issue is found and it is considered material, options are considered. Typically in an Australian due diligence, the key areas likely to give rise to a material issue are as follows: • terms of individual executive remuneration agreements triggered by a change in control, which have a

material value, or are likely to increase turnover risk or loss of IP • treatment of equity plans (and other long-term incentives) on transmission of business • defined benefit superannuation arrangements • IR issues • lack of compliance with recent regulatory or legislative changes • retention of key talent, and • appropriate provisioning on the balance sheet (eg for long service leave, other leave or entitlements). Should any of these areas reveal a material issue there is a variety of mitigation strategies to consider. Examples could include negotiating with the seller to reach agreement on a strategy of cost impact, adjusting the approach to employee provisions in the completion accounts, adding warranties in the Sale and Purchase Agreement or Escrowed Purchase price. For an issue that is not a deal breaker, it may be sufficient to raise it to be tracked and managed in integration planning. In some cases (eg defined benefit plans or a long service leave accruals), the findings may require an actuarial review and advice before being subject to further negotiation with the seller, or have a price adjustment after completion. Large issues could drive a variation to the bid price. It is important that any HR-related material findings are brought to the attention of the deal project team for assessment as soon as possible for inclusion in the deal price calculations and the deal negotiations. Should a number of HR issues be found, or the seller has not provided the appropriate detail for HR to undertake a robust due diligence, it is likely the HR work stream findings will be similar to other work streams and may indicate that the target lacks sufficiently robust business processes. It is important to note that most organisations that go through a due diligence process do not purchase the target organisation due to a number of factors, such as: • unacceptable risks (eg legal, commercial, regulatory, labour) • business performance • customer uncertainty • commercial confidence • strategic alignment • market or political uncertainty • wrong cultural fit, or • competition from other purchasers (ie that may outbid your company).

¶27-100 The Sale and Purchase Agreement The Sale and Purchase Agreement (SAPA) is the formal sale document and will generally provide an opportunity to include representations and warranties from both the seller and the buyer. While the role of HR in the SAPA is often limited, it is critical that a review is undertaken. Terms often included (and relevant to HR) are as follows: • Classification of in-scope employee group — who will and will not be included in the transferring workforce as part of the deal • Employee offer acceptance levels — outlining a minimum offer acceptance rate of transferring employees as a buyer will want to be sure that a business is fully resourced on transfer and the

vendor does not wish to be left with a group of stranded employees who may make claims for redundancy • Completion account terms — outlining how accruals for incentives and other payment will be valued on transfer • Warranties on any employee liabilities — eg leave liabilities, litigation and workers compensation • Warranties on tax and benefits liabilities — including FBT, payroll tax and superannuation contributions, and • Clauses for key employees — the SAPA may also include lists of key employees who must be included in the deal or sign new contracts with the buyer to give security, eg from non-compete clauses. Note: If buying a publicly-listed company, there will be limited disclosure of information and will not be a SAPA and little or no opportunity for any warranties or indemnities. This also impacts a buyer’s approach to retention of key people and can cause a large number of Day 1 activities to be pushed back to postintegration.

¶27-110 Asset vs share/equity deal There are many factors that impact the complexity of a deal. One of the most basic variations is an asset deal rather than a share/equity deal. Even with this distinction there are many complexities so, in basic terms, the differences are as follows: • An asset deal involves buying select assets from a company and transferring them to another business. Employees will be required to transfer to a new employing entity — necessitating a relatively high level of administration and legal activity for a successful transition on Day 1. This also reduces the certainty of how many employees will actually come with the sale. This approach mitigates risks arising from historical liabilities associated with the prior owner. • A share deal translates to one company buying all the shares of another. With this comes all of the company, including its assets, liabilities, contracts and employees. In this type of deal, the employees of the acquired entity will usually come across to the new owner on their existing terms and conditions on Day 1 without the administrative requirements of an asset deal. There are many exceptions to these rules, such as share deals that require employees to be transferred to a new employing entity, either on Day 1 or shortly after, and asset deals where there is absolute clarity on who is in scope. Regardless, understanding the structure of the deal is critical to successfully executing the due diligence and planning.

Case study — HR due diligence for asset deal Scenario: A US-listed company with an existing Australian subsidiary was seeking to purchase an Australian-based Private Equity owned organisation. The deal was an asset deal. Process: The acquiring company engaged a third party to manage and deliver the due diligence. An online data room was set up by the target’s solicitors and interested parties signed confidentiality agreements and were given access to the data room. An HR request list was provided to the target company. An HR professional attended the management presentations, which were provided by the target to all interested parties and included the target’s CEO, CFO and HR Director. Separate individual meetings were formally set up with the HR Director of the target to answer questions and confirm understanding of the HR-related data room documents. Findings: A report detailing the HR due diligence findings included key HR risks that were material to the deal. These risks included more than $18m of liabilities, which were not provisioned for in that

financial year. The liabilities were mostly related to executive payments that would vest on the change in control of the business (regardless of the business performance) — with the one off windfall increasing turnover risk in key roles and giving rise to a one off expense. Multiple variations in employment contracts existed with terms and conditions inconsistent across the employee group. This had the potential to increase the administrative burden and risk in the transfer. The target lacked a performance management framework, and all existing employee incentive schemes were entirely discretionary with no links to employee or business performance. Target employee benefits also varied from the bidding company’s existing Australian employee group. This highlighted the need for a change management and training program, as well as a new benefits framework. Finally, the ability of the finance team to meet US-listed company reporting requirements was not clear due to the short tenure of many of the team and lack of international company experience. Outcome: The acquiring organisation decided to purchase the target company due to the overriding commercial rationale of the deal. To mitigate the issues identified in the HR diligence, they placed several conditions on the sale. The purchase price model was adjusted to reflect the payments, and new contracts for the senior management team (including non-compete terms) were required as a condition of sale. The buyer also factored into the price the costs of additional senior finance team members and redundancies for some existing roles. Finally, integration plans were developed to be implemented during the completion period.

¶27-120 Day 1 readiness The time between the deal being given approval and the completion date of the transaction allows organisations to plan all the required HR activities to deliver the new terms and conditions of employment, vendor arrangements, employment law requirements, employee communications and other HR services, particularly in asset deals. To ensure that all the various work streams of HR are executed, the HR professional (who is tasked with the transfer of employees from one entity to another) needs to carefully project plan each activity and milestone. The HR work stream will be part of the overall transition team and, depending on the complexity of the transaction, a Steering Committee and a Project Management Office (PMO) may be formed to monitor progress and provide decisions when required. If HR has been part of the due diligence process, the Day 1 readiness process is smoother as there is already an understanding of the employment terms, related costs, risks and liabilities. Being involved in the due diligence accelerates the HR planning for the completion date, reduces Day 1 risk, and can accelerate the achievement of transaction aims. Guiding principles Many decisions will need to be made in the Day 1 readiness process. Agreeing in the project planning stage on principles which will guide these decisions is important. Most companies will be very clear on the guiding principles for HR. Example guiding principles for all decisions within the Day 1 readiness process include: • treating all impacted employees with respect and recognising their prior employer • minimising business disruption through a smooth transition for employees • retention (notably, of identified key talent) • keeping solutions simple • replicating all employment terms and conditions, where possible • adhering to all legal requirements, where applicable • maintain a focus on the existing workforce

• treating people fairly and equitably, and • providing clear and open communications to all employees. Alternatively, some guiding principles take the approach to focus on completing a merger of terms and conditions prior to Day 1, or include principles that state “no defined benefits plans”, or “no transitional services agreements”, or focus on cost control. Clearly communicating to employees that their acquired business is now part of something bigger will assist employees to understand, but the acquiring company should look for opportunities to incorporate best practice from the acquired company in their business to build capability and bring new ideas.

¶27-130 Planning for Day 1 readiness Planning for a successful Day 1 or completion date of the deal is essential. For the HR professional, an understanding of the complexity of the deal from a legal, financial and commercial perspective is important. Timing is also critical. From a legal perspective, it is important to understand the NewCo legal entity structure and timing for registration of this new company. That is, if it is to be a standalone business or if it is to be integrated into a current organisational structure. A generic Day 1 readiness project management model (see Figure 27.3) and project plan (see Table 27.3) are presented below. For complex transactions, it is common for a matrix model to be adopted with additional “horizontal” work streams cutting across each function and responsible for a particular geographical or significant site. Key planning decisions include: • confirmation of the HR charter and scope of work • formation of the HR Steering Committee • agreement on the HR work streams (these will vary with each transaction) • agreement on the accountability to deliver the activities and overall country management • agreement on the project management governance, and • agreement on who can make decisions, and sign offer letters and vendor contracts. Figure 27.3: Generic Day 1 readiness project management model Human Capital Day 1 and Post-close Organisation Chart: Example

As in due diligence, the HR Day 1 team will be one of several teams working to deliver a successful Day 1. These will generally be organised along functional and/or geographical lines. It is critical that HR builds effective relationships with other teams to ensure that teams synchronise activities, share information and work together to deliver the Day 1 result. Table 27.3: Project plan and key factors for success Project Plan: Day 1 Readiness — Detailed Country HR Work Plan KEY FACTORS FOR SUCCESS: Coordination of HR work streams activity to enable successful employee transfer by close date (anticipated to be dd/mm/yyyy) Work stream/activity

Responsible party: buyer; seller

Targeted/actual completion date

Interdependencies Open issues, risks, pending actions and comments

(1) Compensation Milestone: Current state of compensation documented Milestone: Compensation approach agreed Milestone: Future compensation arrangements in place Milestone: Future arrangements for exec comp and equity communicated (2) Benefits Milestone: Current state of benefits documented Milestone: Future benefits agreed Milestone: Future benefits vendors agreed Milestone: Future benefits in place

¶27-140 Implementing Day 1 readiness by HR work streams This section provides some examples of the activities in the work streams (as identified earlier). Every transaction will have different requirements and work streams. Compensation and benefits

Getting started on the compensation and benefits work stream should occur immediately after the project team structure is complete for Day 1 readiness. Draw on the due diligence findings and thorough further reviews to ensure you have a complete inventory of all local compensation and benefits. Once the inventory is completed, the next step is to go through the findings and ask the following questions: • Does this benefit fit with the NewCo remuneration methodology? • Does the new benefits approach meet regulatory requirements of a no less favourable offer? • Can this benefit be duplicated, grandfathered or substituted? • Will the employee benefit be at the same level and cost to the NewCo? • Will external vendors continue to provide benefits at a similar fee? • Do employees need to sign new contracts? • What are the legal or regulatory requirements in regard to employee benefits? • Who can sign off on the vendor contracts? • Are there new benefits the purchaser will be offering to the employees? Key deliverables for these work streams are as follows: • Compensation and benefits inventories – Scope documents — current transaction inventories – Recommendations for NewCo – Decisions • Vendor inventories – Vendor agreements to provide same level of support, at the same cost – Contractual timeframes for existing vendor agreements – What (if any) are the premium/underwriting conditions? – Cost and risk analysis • Decision templates – Weekly tracking of progress against the project plan – Risks and issues logs. HR service delivery and HR information systems When working through the requirements for the new entity, HR should review the current HR capability of the new entity and the supporting HR Information System (HRIS) for the HR policies and practices. There are clearly interdependencies for HR with both IT and finance in understanding the full service delivery requirements. During the Day 1 readiness period, it is important to identify what is “critical” for Day 1 and what activities or tasks can be completed on Day 2 and beyond. One of the most critical areas of service delivery within the Day 1 readiness process is provision of payroll. Regardless if it is provided through an in-house team or through an outsource function, a project plan for payroll transition is essential, as payroll is a service that is of key concern to employees in a transaction. Continual updates on the payroll transition should be provided throughout the Day 1 readiness period.

Other areas to include in a review of HR service delivery in the target organisation include: • the HR operating and service model • recruitment and selection • workforce planning and management • outsourced provider contracts • learning and development (L&D) • the remuneration and benefits strategy • the performance management framework, and • employee communications. This list is not exhaustive. To ensure a smooth transfer on completion, HR will need to be thorough in its approach to preparing the appropriate future model for the new business. The complexity of the transaction and the agreed potential synergies between the buyer and the target will influence how HR service delivery will be implemented post-Day 1. Transitional Service Agreements Depending on the deal, a Transitional Service Agreement (TSA) (or agreements) may be required. For example, a TSA may be required to ensure that critical HR services (eg payroll) are delivered by the seller to the buyer within a limited timeframe. This is common in instances when the buyer has no infrastructure in the jurisdiction of the acquisition. It is also common for TSAs to be required where there is a short “Completion Period”, or if the target organisation is a separate business unit from the target parent and some services will not be in scope. TSAs are most common where the target entity is a subsidiary of a larger parent and is provided with HR support from a centralised corporate function. In such cases (usually referred to as carve outs), it is common for TSAs to be provided to facilitate a faster completion period, rather than have completion delayed until a buyer can set up stand-alone support functions (Ernst & Young 2013(b)). Many TSAs are agreed where the buyer does not have a presence, or has not had time to recruit key personnel or do any risk mitigation. For example, in Australia, TSAs may be developed for the payroll to ensure that employees in the NewCo are paid on time in the new entity; or for the vendor management of third parties. HR and procurement may be involved to negotiate with the vendors in order to retain the same level of benefit for the NewCo employees, as well as gain purchasing power (as a result of economies of scale) with the seller for a limited time. TSAs will be subject to intense negotiation as the buyer will need to purchase the services of the seller for (generally) between a 3–12 month-period. TSAs that cover HR services are included as it is in the best interests of both parties in the transaction to enable a smooth transition and enable the buyer to gain more time to consider alternative HR service delivery models for the NewCo. Drafting the TSA is a formal process and the TSA agreement is typically made at the transition steering committee level at the same time as the SAPA. A TSA form or statement of work needs to be completed, and an agreed methodology of costing the scope of work required is also needed. This area highlights the interdependencies between HR, legal and finance. Long TSAs can leave a vendor with a set of stranded employees after the TSA service is completed. It is becoming more common for a vendor to seek to have buyers share the burden of any redundancy costs that arise when a TSA is completed. Similarly, vendors may seek to have the employees servicing a TSA then transition to a buyer after the completion of the TSA. This can complicate the establishment of a replacement function for a buyer. Using the example of payroll, any decision to transition staff following completion of a TSA should consider the implications of building a new team, as well as fit of the individual against the required level of competence, skills and experience for a role.

Employee communication It is essential that HR supports the employee communication strategy. Effective implementation of employee communications can provide a true “win” for the buyer and seller in a transaction. It is also critical that all impacted employees, from both the target and buyer organisations, are considered and communicated with effectively. There are many interdependencies that the communications stream must consider: • Communications need to be coordinated with Company Secretarial and the deal teams due to the interdependencies with public disclosure requirements. These requirements will almost certainly restrict employee communications and require a different approach to what an HR or change management professional would normally implement in a non-transaction project. • Communication plans should be developed in partnership with the target communication team to ensure that the target employee perspective is understood and incorporated into messaging. • Communications should be completely aligned with public messaging around the deal strategy. The first task that a change or communications manager should undertake is a detailed assessment of all impacted individuals including: • employees of both the target and buyer organisations • contractors • third party resources, and • employees on long-term leave and so on. From this assessment, potential outcomes for each group can be brainstormed along with appropriate milestones, frequency and methods of communicating with them. In the Day 1 readiness planning process, it is important to understand the acquired company’s preferred mode of employee communication and to work within the appropriate medium, while also overlaying the communication approach of the new business. This may consist of emails directly from the senior management team, regular “Town Hall” meetings, or conference calls and emails from communications and HR teams. The Day 1 readiness process will be an uncertain time for the senior management team and employees; therefore, it is important to regularly update both the management and employees about the plan, progress and next steps. Be honest in the assessment of the status of the HR work streams and to let the employees know that HR is working on the various issues raised. Communication forums may include: • Q&As backed up by lists on email or an intranet site • employee presentations on future terms and conditions of employment • employee presentations or webcasts to communicate key messages about culture and strategy • a Day 1 or completion date “Event in a Box” (ie a corporate item accompanied by business information for all employees) planned for distribution to celebrate the successful transition, and/or • presentations or materials from benefits providers (eg superannuation, salary packaging and so on) that are new to the target employees. It is essential that all stakeholders receive timely and relevant information. This includes communicating with all employees on parental/extended leave, overseas assignments, and (in some cases) individuals who have signed employment contracts, but who have not yet joined the organisation (eg graduates). The communication plan also needs to provide back-up strategies to ensure all parties are captured. It is critical that communications also address the questions and concerns of the buyer’s existing

employee group who may feel ignored in all the activity. Legal The legal work stream is perhaps the most important work stream in the Day 1 readiness process. The timing for delivery of some key activities will be guided by legal requirements. As stated earlier, depending on the type of deal, an offer letter from the buyer may need to be provided to each employee to be signed and returned prior to Day 1. The contents of this letter will need to be reviewed and signed off by local legal counsel. In addition, a buyer may have been unable to interact with the target employee group (or their representatives) and the vendor legal team will likely have commenced a consultation process and undertaken other regulatory requirements that will need to be continued. In an Australian asset deal, employees will likely receive an offer letter from the new business that includes a clause concurrently terminating their prior employment. The legal team will normally handle the drafting of appropriate template contracts; however, HR are normally responsible for ensuring that the relevant terms and conditions, benefits and employee data are included, and that these are no less favourable. In addition, they should provide information that covers things, such as whether continuous service is able to be included in any new employment contract. Ideally, these contracts include implied terms as well, to remove uncertainty and mitigate employee concerns. New employment contracts provide an important opportunity to communicate with the target employee group, and any cover letters and contracts need to be consistent with broader employee communications. This process also presents an opportunity to bring consistency to employee terms and reduce the future administrative burden on HR, while ensuring all employee terms are current and comply with legislative and regulatory requirements. In conjunction with legal requirements, HR professionals will need to provide consistent clear communications to employees about both the buyer and the steps leading up to Day 1. The communications should answer employee concerns and provide an opportunity for reinforcing opportunities for employees. If the target organisation employs expatriates, legal advice may be necessary on the management of these contracts (including the impact on their existing visa status). In addition, the legal work stream will be integral to the contractual agreements between the employee benefit providers to ensure consistent coverage from Day 1 under the new entity structure. Training and development To ensure a smooth transfer, some organisations have training and development as a separate work stream. All training and development policies should be agreed within the Day 1 readiness process to ensure that employees’ study is not disrupted and any costs that need to be transferred are considered by the relevant parties. Employees will typically have questions around their personal training and development requirements during the Day 1 readiness process. Should there be any changes to the training and development programs (eg to be more aligned to the buyer), employees will need to have clear communication around such changes. For those employees in current programs, one mitigation strategy is to grandfather these programs and then move the employees onto the buyer’s policy at a later date. Training also plays an important role in onboarding the new employee group. It is important for any existing induction materials to be tailored to reflect the circumstances of a target employee group who will be expecting their prior employment to be acknowledged. It will be likely that some target employees will not be happy about the change in ownership of the business. Training should also present links between the acquirer and vendor systems and processes to avoid any impact on “business as usual” caused by employees struggling to adapt to new systems. Well planned training can mitigate disruptions and help a business educate employees on compliance (eg safety, harassment, discrimination and so on) and related/other processes. Recruitment and selection Unfortunately, during the life of a transaction there can be a tendency for the normal HR operating functions to take a back seat, and sometimes the market may make false assumptions about the need to recruit and replace. Assuming that the project plan has identified future resourcing needs, the capability of the recruitment teams to maintain a business-as-usual approach is equally critical.

Integration may lend itself to some rationalisation of third party vendors and leveraging of economies of scale. Best practice recruitment and selection methodologies should be adopted by the NewCo, and policies and procedures determining the approach going forward should be developed and presented upfront. Brand recognition in the marketplace needs to be considered to ensure that the market appeal of the old entities or the new branding is given sufficient exposure and prospective candidates are aware of the changes. This is particularly critical where the NewCo may be recognised internationally, but has limited or no market presence domestically. More broadly it is important that HR assists in maintaining stable business operations throughout the divestment process. They can do this by addressing employee issues and activities as they arise (these can increase due to the general uncertainty that a deal can bring as employees try to determine the impact on themselves).

Case study — transferring current terms and conditions Scenario: A global company was seeking to purchase a local Australian organisation as well as other target entities in multiple countries around the globe. The project required Australian input into the regional and global project management requirements. Process: The agreed work streams comprised of compensation and benefits, employee benefits, HRIS, employee communications, TSA readiness, an onboarding process, policies and practices and external hiring. The Australian business being purchased and the seller had weekly calls in the Day 1 readiness period to agree on project plans, identify activities, action activities, provide project status, resolve issues, make decisions and reach the milestones. The seller was required to ensure that the new entity was a stand-alone business for the acquirer on Day 1. Findings: In this case study, the buyer adopted principles to transfer current terms and conditions, wherever possible, and support those employees consenting to transfer to the new company. The timeframe was four months for Day 1 for the Australian business. The acquiring company had no infrastructure in Australia and, consequently, they needed to establish a process which ensured acquiring employees maintained their terms and conditions, and the provision of a TSA to assist in delivering the HR services. To achieve a “no less favourable” position on acquisition, a range of continuation vendor agreements were established and some benefits were grandfathered to provide continuity for the transferring employees. The management of the acquiring company and HR of the seller presented employee communications and termination/offer letters to the employees. Throughout the Day 1 readiness period, employee communications and updates appeared on the intranet which was accessible by employees. Outcome: It was a successful completion date with employees transferring to the new entity. All terms and conditions were transferred to the new entity. The TSA for HR service delivery was extended from six months to nine months to ensure continuity of service provision. The new entity has continued to grow within Australia.

¶27-150 Cross-border transactions “Cross-border” or international transactions add an element of complexity to an acquisition or merger. In Australia, HR professionals may be required to provide employee data to a potential offshore bidder — or an Australian company may purchase an entity offshore, in which case HR professionals will be seeking data from outside their country where they are more familiar with regulations and legislation. In both the due diligence phase and the Day 1 readiness phase, it is important to be aware of and meet all legal requirements for employees, reach all agreed milestones and provide employees with

appropriate communication throughout the process. Cross-border transactions typically require a tight project management process to ensure that the agreed milestones are met and progress is reported. In addition, the different cultures, different languages, decision-making processes and potential employees’ terms and conditions requiring integration are more complex. An HR professional in Australia will typically be involved in project management from a country perspective if a transaction includes an offshore buyer, or they may need to manage other HR teams should the Australian entity be the purchaser of the target organisation. It is important not to underestimate the amount of time it takes to complete all the requirements for an offshore or international transaction. The HR project team will need to be carefully selected to ensure a successful Day 1 for the acquiring company.

¶27-160 Next steps To complete the transaction process, HR will also need to continue with the last two key phases (not covered in this chapter). These are: • transaction integration, and • evaluation. Successfully planning and implementing the activities and milestones for these phases will support the realisation of the transaction objectives and employee opportunities at the NewCo. For more information on topics covered in this chapter, please refer to Chapter ¶62 of this Guide. References Ernst & Young Australia 2006, Mergers & Acquisitions Index — An annual study of mergers and acquisitions activity amongst Australian listed industrial companies, December, Ernst & Young. Ernst & Young 2016(a), Global Corporate Divestment Study. —— 2012(b), Australasian Capital Confidence Barometer, October. —— 2015(a), Australasian Capital Confidence Barometer, November. —— 2013(b), Human Capital Carve Out Study.

28. HUMAN RESOURCES OUTSOURCING Editorial information

Simon Lane Managing Director, Offsite Human Resources

¶28-010 Introduction Human resources (HR) outsourcing is the process of transferring elements of a company’s HR functions or activities to an external provider. This means the transferring of the rights to make decisions and deliver on set outcomes as determined by the company in return for a mutually beneficial commercial contract. Greaver (1999) states that outsourcing is not simply a matter of engaging consultants to do work on behalf of a company: “Because the activities are recurring and a contract is used, outsourcing goes beyond the use of consultants. As a matter of practice, not only are the activities transferred, but the factors of production and decision rights often are, too.” HR outsourcing can be in a physical or intellectual capacity. Many companies will outsource an HR concept that has not yet been translated into action. This is especially true in the instance of start-up companies, where the infrastructure is still embryonic and no centrally assigned responsibility for HR has taken place yet. There is no reason why HR outsourcing cannot encompass all of the traditional elements centralised in so many companies. Areas of HR that are currently cited as examples of outsourcing in Australia include: • recruitment and selection • employee reference checking • employee relations management and legal representation • remuneration and benefits management • occupational/work health and safety (OHS/WHS) • occupational rehabilitation services • payroll services • superannuation administration • training and development • HR information systems • career management • psychometric and other assessment activities • employee assistance services

• graduate and trainee management • HR audits • HR due diligence activities • benchmarking activities (eg climate surveys, competitor analysis) • expatriate management • employee coaching and mentoring, and • employee onboarding/induction. Also included is operational HR support, which can involve an array of other activities that are not listed above. HR can be outsourced at the strategic, tactical and operational levels. HR outsourcing can be viewed as a company’s use of external HR support to supplement its internal HR capacity. This supplementation can be anywhere between 1%–100%, depending on the needs of the organisation. HR outsourcing is only one consideration in finding an optimum people management approach, but it is one that is finding continuing support in the Australian business community. Because the term “outsourcing” has acquired a poor image in some instances, “HR skill insourcing” may be a more positive term to use. The company outsourcing its HR activities, in this case, simply does not own the “insourcer”.

OUTSOURCING HR — THE “LAST CRAFT” ¶28-020 Why is HR outsourcing mainly a recent phenomenon? Before considering the answer to this question, it is appropriate to evaluate the whole concept of outsourcing before HR became involved. The history of work itself has undergone a full cycle in the last 200-plus years of Australia’s development. Organised work began in Australia with the heavy influence of crafts and guilds that covered the vast variety of trades that were plied in the day, and supplemented the fledgling primary industry. As the wheels of industry ground forward, industrialised work was created and developed. Production line activities, collective unionism, automation and volume labour were features of companies’ structures as they replicated more efficient production models from Europe and the United States. Many companies had infrastructure that, by the 1970s, included sales, marketing, finance, IT, production, legal services, fleet administration, cleaning, food services, security and personnel. It was around this time that many companies thought it appropriate to reconsider what infrastructure they wished to support internally, and which activities could be done by external parties. Functions such as legal services, cleaning, food services, security and fleet management were noticeably moved “off the balance sheet” in the first wave of what is now called “outsourcing”. At that time, there were several companies that could demonstrate the provision of these functions to organisations that once housed these activities, and could do so in a more professional and value-adding manner. In turn, the capacity of these suppliers expanded to allow them to pursue the same model with even larger enterprises. Other organisations found that they too could copy this strategy successfully. Large legal firms, fleet management companies, cleaning companies, catering operations and security firms emerged in the marketplace alongside large accounting houses, and marketing and advertising companies. By the 1980s, Australian businesses had gained some level of comfort with the possibility of key company activities being delivered from outside of the business itself. It was about then that the larger IT providers (based in the United States) started to convince Australian industries to hand over their IT infrastructure. Outsourcing became a major challenge for large companies to address. Many companies, knowing that IT was a core element of their ongoing success, realised that, in the long term, they could not compete

against IT companies for labour, skills and knowledge. Thus, the realisation that this core activity could be outsourced to other providers established itself in Australian business dialogue. It was recognised that there were now some new “crafts” that had emerged from the preceding industrial revolution. These were the crafts of law, finance and IT, to name a few. And what of HR? HR is deemed by some to be “the last craft” within an organisation. It has long remained one of those activities that no one believed could be outsourced. It was perhaps seen as outsourcing “your people”. Others viewed it as outsourcing the company’s responsibilities to its people. It is, in fact, both and neither. HR outsourcing was first experimented with in two key areas. The first was in legal services. This was brought about by the increasing complexity of Australia’s labour laws and the inability of in-house counsel to manage it effectively. Most companies had in-house legal teams to deal with commercial contracts, secretariat work, risk management and compliance issues. It was rare that these teams also had the increasingly necessary capacity and skills to deal with employee relations issues. Work of this nature found its way to legal firms. Contracts were drawn up and services were provided — from strategic advice to advocacy. As the IT outsourcing bandwagon of the 1980s continued to gain momentum, the first (and sometimes only) technological element of HR, the payroll, was considered as a likely candidate for outsourcing. Large IT companies were now able to demonstrate their ability to process large payrolls externally and companies began to hand over this element of HR. It should be noted that the payroll has bounced for decades between HR and finance as an owned function. However, it was most likely a financial decision that ensured that payrolls were outsourced. It was also the HR function’s first opportunity to see what other elements of its functions could be handled in a similar way. The Olsten Corporation in the United States conducted a survey in 1994 of 400 companies and found that 45% of executives had outsourced payroll management. The outsourcing of HR is not really a recent phenomenon at all. Over the years, several components of HR have been outsourced. However, for the full range of HR activities to be taken up by a single external provider is a more recently recognised possibility. The emergence of HR as a “last craft” industry is well under way today.

¶28-030 Why companies consider outsourcing HR There are many reasons why a company might consider the outsourcing of its HR activities. Some of these include: • increasing the company’s access to better practices • increasing the company’s access to better research • increasing the company’s business focus • reducing or mitigating the risks faced by the company • correcting difficult functional issues not salvageable internally by the company • reducing the bottom line costs to the company • enabling the company to access resources not readily available internally, and • spreading specialist activities across subject matter experts not affordable or practical to engage as employees. To fully appreciate the benefits of HR outsourcing, each of these elements is explored in the following paragraphs. Increasing access to better practices It is easy for a company to adopt a practice or approach to people management that is less than “best

practice”. This can occur because the skills and experiences of the introducing practitioner do not allow for a better outcome. Rarely are the practices themselves audited and, when done so by in-house auditors, it is usually for compliance to the system rather than against what is deemed to be best practice or even legal. Access to and the introduction of better HR practices can be reliant on appropriate training and further education occurring. The availability and relevance of these options will typically determine their usefulness. The strength with which HR participates in the organisation will also determine how successfully line management can be convinced to embrace better HR practices. For all of the reasons that an in-house HR function may be unable to access better practices, an external provider may actually be in no better position. However, there are two major reasons why an external provider may be more likely to deliver better outcomes: (1) External providers of HR are usually specialists in this area, therefore, there is usually an appropriate commitment to skills, tools and research. (2) An external provider will enter into a commercial arrangement to secure an HR outcome for itself and the client. The outsourcer’s dependence on fulfilling the commercial arrangement should force it to explore the best ways in which to produce the optimum outcome. Despite the existence of the two reasons above (and others not discussed here), not all outsourcing options will produce access to better practices. This must be framed within the service level agreement (SLA) between the two entities, or the outcome could be “access to the cheapest possible service” instead. Increasing access to better research There is an expectation that, for an HR outsourcing company to secure contracts, it must be able to demonstrate (among other things) its ability to provide best practice operations, products and thinking. This is unlikely to occur without some investment in research and innovation. Increasing business focus Some issues within a company are difficult to cure and may be related to culture or poor HR practices that have been in place for a long period of time. These can cause distractions and losses for the business. The outsourcing of some HR elements may assist an organisation in refocusing its efforts. For example, if the company has managed the payroll poorly for a long period of time (along with other remuneration elements, such as superannuation and packaging) and it successfully outsources this function to an expert provider which delivers on its SLA, the focus of the business may improve as a consequence of reduced industrial action, lower turnover (and subsequent need to replace employees), and improved morale. Reducing or mitigating the risks faced As with any activity, negative outcomes can lead to unexpected business costs. The HR area is not immune to this either. There are several areas of people management that come into the domain of centralised HR activity that are litigious by nature. These areas are: • employee relations • OHS/WHS • workers compensation, and • performance management. If managed badly, these areas can accrue enormous expenditure for a company in the form of unnecessary costs, fines, and lost sales or productivity. By turning over some of these activities to expert providers and attaching the outcomes expected to an SLA, a company may mitigate its risks significantly.

Correcting difficult functional issues not salvageable internally by the company A lack of skills or resources can lead to a diminished position for a company in the area of people management. An example might be the inability to provide training in a necessary, but infrequently required, expert skill. To have a provider with this capacity in-house may not be justifiable. Reducing the bottom line costs While this might be a very common trigger for HR outsourcing, the company should ultimately regard HR outsourcing as a value proposition. The sooner a company realises that the difference between itself and its competition is the people it employs, the faster it will stop what Johnson (1997) describes as “a kneejerk reaction to companies in trouble”. Johnson believes that this outcome is the most compelling tactical reason for a company to outsource, and that “customers are too sophisticated to accept the costs associated with an organisation’s attempts to maintain singular control over all of its resources”. Enabling the company to access resources not readily available internally Access to resources can apply in many ways. It can be associated with the: • systems and technologies that an HR outsource provider may bring to its client • number of skilled operators who work within the outsource provider and come with the contract, or • research ability of the outsource provider (that the company does not have the resources to support). For whatever reasons a company chooses to outsource part or all of its HR functions, it should be recognised upfront that the outsourcing exercise in itself may not solve the problem. Corbett (2001) states: “Outsourcing is not an end result in itself. It is simply a tool that you are using to achieve organisational objectives.” Spreading specialist activities across subject matter experts The multifaceted nature of today’s HR portfolio can require an organisation to outsource specialist functions to a number of organisations or to an organisation with multiple capabilities. In the earlier days of personnel, where some activities such as canteens, fleet services and staff benefits resided, these functions became the first examples of HR outsourcing. Having no place in personnel (or modern day HR departments), these functions were outsourced to providers who could specialise in such activities. In more recent times, HR functions have linked outsourced services and packaged them for one provider (eg coupling payroll with HR information systems that goes to one provider, or packaging recruitment and selection with induction that goes to another provider). In a labour market where quality specialist resources are becoming rarer and more expensive, some organisations are turning to outsource providers of specialist HR for their answers. This is a two-part response to current organisational pressures. The first part is that the organisation itself often cannot dedicate such a large amount of salary to such a small or specialised area. A typical working example of this is in the area of employment law, where specialist employee relations practitioners with a legal background are expensive (relative to HR practitioners). The second part is that the organisation often cannot justify a full-time role for a position that it requires on an ad hoc basis or for specific periods of time. An example is where OHS/WHS experts (who, in some organisations, are important during audits, training and investigations) may not be fully utilised, as these activities are limited to a couple of times a year or a day or two each week. This way of working may not appeal to the specialist in demand. The advantage HR outsource providers have in this area is the ability to engage specialists and spread them across multiple clients, providing economies of scale for the provider, specialist and client. In this chapter, there are several examples of what types of services can be outsourced by HR departments. What is being seen in the marketplace in more recent times is the appointment of master vendors to manage multiple providers of HR services on behalf of the client. While the client retains a strategic overview, the master vendor delivers activities in line with expected operational requirements, deploying tactical responses where required. The master vendor may also work with the client and

outsourced providers to shape the strategic direction into operational outcomes.

¶28-040 Reluctance to embrace HR outsourcing To effectively consider the opportunity to outsource HR functionality, there is a need for the company to divorce itself from some of the emotional issues that go with decision-making. Many HR practitioners have spent decades moving the function of centralised HR activities to the company’s strategic table. In doing so, they have been playing with a double-edged sword. To be seen as both a business partner and a strategic arm of the company, the function must consider the reasons for not being there as much as for being there. When looking at the reasons described in ¶28-030 as a basis for considering outsourcing of the HR function, it would take a very pragmatic HR professional within a company to weigh up the in-house functional performance against an outsourced specialty service. For several reasons, many of these evaluations, therefore, do not take place. It is not uncommon for the Chief Executive Officer (CEO) or finance director of a business to initiate an HR outsourcing exploration. HR practitioners should work hard to become comfortable with external comparisons with their operations to ensure that the function is about true value-adding. If it is a committed part of the business, then it will recognise one or all of the following to be reasonable organisational expectations that: • centralised HR functions within a business are expected to deliver the best possible service at the best possible price • if this goal cannot be achieved, the business should choose to: – invest further in its infrastructure – supplement its infrastructure with additional resources, either internal or external to the company – reduce its expectations of the HR service, or – cut the service altogether and have it provided in another format (this may or may not include an outsourced provider) • in having the company arrive at its chosen option, the ability of the HR function to represent all of the issues at hand appropriately and present the best case to the organisation, will be a key determinant of its own fate • HR services should compete in an open market, as must the company’s in-house call centre, marketing team, IT group or any other business unit, and • if there is a recognition that true HR management is enacted between the line managers and their direct reports, then the emotional ownership linking HR departments to people management can be recast. If these statements are true within an organisation’s philosophical approach to people management, then it is appropriate for HR, like any other function, to be measured on its ability to create wealth for the company. It is HR’s inability, in some cases, to represent itself effectively that allows companies to make such decisions on the function’s behalf. This is not to say that HR practitioners do not have good cause to be sceptical about the value of outsourcing their function. When self-interest is put aside, the HR practitioner in modern Australian business can point to a host of failed outsourcing engagements that have preceded them, specifically in the field of IT. Various reports from within the IT industry argue the effectiveness of IT outsourcing that occurred in the 1990s. Numerous organisations have regretted the decision to outsource, or have questioned their ability to operate as a manager of an outsourced relationship. It can be safely assumed that the HR profession would be able to point at these poor outcomes and suggest a similar (but potentially dire) outcome if people management were to follow suit. Even the Commonwealth Government has had to rethink outsourcing within its federal departments, given the outcomes sought versus those

gained. There are two factors that regularly cause outsourced HR contracts to fail. These are: (1) a failure to ensure that the work to be outsourced has been vigorously scoped and that appropriate metrics have been applied, and (2) a failure to articulate and agree on the principles on which the relationship is to go forward. To prepare in advance for these pitfalls, companies should look to the experiences gained since early IT outsourcing commenced. SLAs are now regularly presented in a manner that: • clarifies the parameters of the relationship, and • attracts severe penalties to the service provider for non-delivery in both quality and quantum. Companies have improved their project management skills in relation to outsourced contracts and outsource vendors have matured as their experience base has grown. Despite the doubts, in the United States, HR outsourcing has nearly doubled and it is expected that the HR outsourcing industry will continue to grow. Indeed researchers Kinange and Murugaiah (2011) indicate a list of top 10 activities to consider for HRO: 1. Compensation surveys 2. Salary administration 3. Psychometric testing 4. Attitude surveys 5. Outbound training 6. Assessment centres 7. E-learning 8. Evaluation of training effectiveness 9. 360-degree appraisal 10. Human Resource accounting. Some HRO 2015 predictions into the future (eg Bragar 2015) suggest a continued shift to cloud-based platforms, including: • The Multi-Process HRO (MPHRO) market will grow with a mid-single digit CAAGR through 2018. • Offerings will continue to be structured around a core model, including payroll and HR administration; benefits and recruitment services will continue to be the most popular add-ons. • Workday use will increase in MPHRO contracts; other cloud-based platforms such as Employee Central will penetrate as well. Momentum among existing MPRHO clients for cloud-based platforms will pick up significantly by 2017. • Partnership activity will far exceed acquisitions, with partnerships primarily focused on cloud-based platforms and analytics. • The proportion of mid-market clients will outnumber large market activity by 2016. • Demand for end-to-end MPHRO deals will be almost non-existent, as buyers continue to seek specialists for some of their services (eg learning) and reduce risk by not having one vendor provide

all HRO services. This does not mean that HR outsourcing will always be a viable option for all companies. It just means that HR outsourcing should remain a consideration for all companies seeking to improve their HR outcomes. For those that opt for such services, in order not to incur cost increases, it is essential that they conduct cost-benefit analyses to monitor their return on investment.

PREPARATION FOR HR OUTSOURCING ¶28-050 HR outsourcing as a reflection of corporate vision The outsourcing of HR activities should not be viewed as an isolated opportunity to manage certain issues within a company. The entire process of HR outsourcing should be undertaken in the context set by the direction of the greater organisation. This commences with the company’s long-term business plan and principles, which the people management strategy should support. To fulfil its obligations within that strategic framework, HR practitioners and other key stakeholders should consider the outsourcing of some or all elements of the HR function if it is believed that, by doing so, the certainty of long-term HR delivery is acceptably increased. HR outsourcing can only be considered a viable option if outsourcing generally is supported as a foundation principle of the organisation. An HR strategic framework can only be agreed after the company’s strategic framework has been outlined, building on the foundation principles. HR outsourcing is then considered in the context of the HR strategy. A company could look back at these strategy documents post-HR outsourcing and determine the success of the action simply by acknowledging that: • the HR service was not observed to have been provided overtly by a third party outside the company • the HR service outcomes met all of the strategic framework requirements set in the HR and company business plan, and • those who were aware of the HR outsourcing have seen all milestones and outcomes of the SLA achieved. It is hard to imagine that any of these outcomes could be achieved without some significant alignment to the company’s vision for itself and the people within it. The vision and goals of the business can raise some obvious people management challenges. These traditionally include: • skill infusions in current employees • importation of expertise from outside the company • lifting of management’s ability to stimulate productivity • improved systems of setting and measuring performance (individually and collectively) • improved methods of reward to motivate people to achieve desired outcomes, and • reduction in elements that weaken productivity (eg absenteeism, workplace accidents and staff turnover). All of these issues can be addressed through the application and support of an HR plan, of which outsourcing is a possible component. The recognition is that the chain of thinking involved in solving HR issues should include the consideration of outsourcing as one of the end options.

¶28-060 Benchmarking pre-outsourcing HR performance One of the greatest mistakes that a company could make in approaching HR outsourcing is to

misunderstand current HR performance. Companies that are happy to use anecdotal evidence run the risk of either setting poorly placed expectations within the SLA of the outsource provider, or outsourcing (or deciding not to outsource) particular elements of HR for incorrect reasons. It can, therefore, assist an organisation if (in its plan for HR improvements) it incorporates a benchmark and an expected rise above that level during the course of the contract. When benchmarking HR activity, there are seven considerations that should be made: (1) How accurate is this activity? (2) How useful is this activity? (3) How usable is this activity? (4) How timely is this activity? (5) How does this activity compare against the market? (6) How much legal risk is attached to this activity? (7) How much commercial risk is attached to this activity? These considerations are discussed in greater depth in the following paragraphs. How accurate is this activity? When evaluating an HR activity on this platform, a company is seeking to ascertain that what has been laid down in policy and philosophy has been accurately translated into the work arena. Is it reflective of the changing nature of the company? Has it been watered down in the field and, if so, why? By understanding this element, a company has a good chance of correcting accuracy issues through an outsourced solution. How useful is this activity? This element of evaluation seeks to determine whether an aspect of HR provides meaningful outcomes for the business. This will deal with issues such as policies that no longer apply due to changes in the organisational direction or, worse, they now hinder operations for no apparent reason. Analysis of this platform also seeks to determine if poor supporting information and context have caused the activity to be misused or even abandoned through lack of understanding. How usable is this activity? As with the previous paragraph, this platform of evaluation seeks to ascertain not whether the HR activity is useful, but whether, in its current format, it is a “friendly” approach to an activity. That is, will the HR issue be dealt with efficiently because of how the supporting system and knowledge have been established? For example, it is less than ideal to construct a performance management system and then not provide training on how it works. Or, the system works in the Australian operation, but not in New Zealand for legal reasons. How timely is this activity? This platform of evaluation seeks to assist understanding on a business relevance scale. If information is available, but only after a delay of some weeks (eg through a monthly payroll run), information normally considered to be useful may be rendered almost useless through poor timing. The timeliness of the data is not the only issue. Questions about what version of a particular piece of information is in circulation and being worked with also need to be considered. How does this activity compare against the market? The obvious intent of this platform of analysis is to shift the focus from comparing intended HR activities and outcomes within the company to those same activities undertaken outside the company. In doing so, a company can determine whether it is/is not meeting the demands of its current operation, as well as whether it is able/unable to accommodate future marketplace expectations or fluctuations.

How much legal risk is attached? The goal of this examination is to assist the company to close down risks caused by existing or potential non-compliance issues. These can lead to fines (where a legislation breach has occurred), common law actions brought about by company negligence in a particular people management approach, or third party actions taken by a customer, supplier or visitor to the business. How much commercial risk is attached? This platform of evaluation is probably the least evaluated in a company’s bid to determine the performance of its HR function. Questions that would typically be explored here would include: • Does the company’s recruitment approach cost it time when placing applicants? • Has the impact of a (eg discrimination) claim damaged this employer’s branding in the greater business community? • Do any extreme or onerous management policies exist that have the potential to shorten tenure within the organisation? The dollar impact of high staff turnover, high absenteeism, poor morale, inadequate training, poor recruitment practices and poor management development and so on, have been well documented. Evaluating the HR function’s contribution to these outcomes is less frequently recorded. Henning (1997) states that the HR function cannot be transformed into a commercial contributor until “all of the safety and security the old framework holds” are taken away. Henning claims that, by doing this, the focus of HR is more likely to be able to change to building competence and capacity for the organisation. Having gained clear information on the performance of the HR functions within a company, that business will be well placed in determining new expectations for the outsource service provider. Those expectations can be included in the SLA along with the metrics used to “baseline” current HR performance, and then be monitored and corrected throughout the life of the contract.

¶28-070 Finding and evaluating appropriate providers Once a company has made the decision to further explore the possibility of HR outsourcing, it then needs to find an organisation capable of delivering the required services. Prior to going to the market, however, a company should ideally be able to demonstrate some, if not all, of the following: • knowledge of the current state of the HR functions within the business • knowledge of what the business is facing in terms of its upcoming people challenges • an understanding of the desired type of HR outcomes required from an outsourced arrangement • a clear view of what functions and activities are “in scope” • a fundamental understanding of the metrics to be used • that there is a budget to manage the transition and the ongoing management of the contract, and • a view of the type of culture and performance an outsource provider should have. A company should take time and money to evaluate any outsourcing decision, HR included. By investigating and analysing all available options in depth, this can mean the difference between an organisation selecting an external provider on the basis of capacity, versus selection on advertised capabilities. Throughout this process, the company considering the outsourcing should expect to find the following qualifications in a provider as assurance that it has a service worthy of consideration: • a track record of successfully outsourced contracts of a similar nature

• clients willing to participate in the discovery process • a demonstrated capability to undertake research and apply that research on a continuous basis throughout the contract • access to its employees for assessment of skills and experience in the HR field • evidence of relevant licences allowing it to provide certain services (eg recruitment or rehabilitation) • access to its policies and philosophies on HR • a demonstration of geographical coverage capacity and appreciation of local and industry issues • a suitable disaster recovery plan for each service provided • a demonstration of applied tools and technology to be used to deliver the promised services, and • clear provision of insurances to protect its clients as well as itself in the provision of HR services. These qualifications are discussed in detail in the following paragraphs. Track record An obvious starting point in the evaluation of any potential provider is to assess the performance of that business on other company sites. Interviews with a client of the outsourcer allow the company the opportunity to see how the outsourcer has built relationships, handled difficulties, and generally performed against the SLA. Questions should extend to the capabilities of the actual people providing the service onsite. Clients willing to participate Where companies are willing to provide testimonials, it is more likely that the service they provide will meet market expectations. While the comparison between businesses in terms of expectations and baseline positions of their HR will have been established at the commencement of the contract, much information can still be gleaned from discussions with these businesses. Conversations on how the transition process was managed will also provide valuable insights. Capability to undertake and apply research on a continuous basis A reasonable expectation attached to outsourcing elements of the HR function is that the provider can continue to refine the delivery of the function throughout the life of the contract. There is a big difference between saying that it will have a capacity to actually improve HR through research and application, and actually demonstrating this. During the investigation and analysis process, companies should look for examples where the provider demonstrated commitment to research and the application of new HR initiatives. Use of technology is clearly a major component of this evaluation. Skills and experience of provider’s employees in the HR field There is a tendency for some companies trying to secure outsourcing contracts to have two teams involved in the activity — the client acquisition team and the delivery team. The acquisition team may not have the same members as the delivery team because of differing skill sets and focus. Acquisition teams are likely to have high-level practitioners involved in the process, because the outsource provider wants to demonstrate as much capacity as possible in the sales mechanism. This is so that it can demonstrate strategic capacity as well as be able to deliver operationally in the field. At the investigation and analysis stage, it is important to see past the sales pitch of high-level practitioners and evaluate those who are most likely to be providing the actual service. While some outsource providers will establish an account manager of some seniority to oversee service delivery, the actual people delivering the service are the most important. They are the ones who will influence culture, improve service outcomes, and implement new research as it becomes available. A company considering the outsourcing of HR should recognise that only a small (although vital) component of the service is based on strategy and the remainder will be on project implementation and operational stability.

Evidence of relevant licences It should never be assumed that the company tendering for HR work is actually allowed to provide it. For example, a number of areas (eg recruitment, rehabilitation, some forms of training, representation in certain courts of law, or even operating as a company) require licensing. There is no loss in asking for copies of such licences to be attached to any such bid for work. Provider’s policies and philosophies on HR If a company is considering having other people provide HR support, then evaluating how they consider the same service within their own company is an important insight. Are there clear policies and philosophies? Do they reflect a culture that the company can warm to? Is their culture provided in simple language, easily accessible using modern technology? Answers to these questions will give a company a good insight into how the providers may approach an HR service. At the very least, the outsource providers should be able to provide a company with a vision or mission on the topic of HR service delivery. This may be difficult for those which do not have HR as a core business function or are not as advanced in HR service delivery. Capacity and appreciation of local and industry issues There is little value in being impressed by HR service delivery in one location if it cannot be replicated in other parts of the business. The use of technology (eg online solutions, email, telephone support centres and so on) can deal with several of these support issues. However, if there is a requirement for “people on the ground”, then it is important to ensure that the outsource provider has the capacity to deliver this. Another consideration posed here concerns the appreciation that an outsource provider needs to be able to deliver on requirements in different types of locations within the one company. For example, a company that outsources its HR function, which previously supported business units in Sydney, Auckland, Singapore and Tokyo, would have had to deal with different local employment and industrial law issues, cultural characteristics, compliance elements and so on. If the outsource provider plans to use branches in other countries to deal with a company’s workforce in that location, it needs to gain an understanding of how everything is coordinated. Arranging for a manager in each of those locations to meet with the outsourcer’s local HR employees is a good idea to ensure that people will be satisfied with the service delivery if it occurs through the provider. Applied tools and technology to be used It is important that a company seeking to outsource its HR functions actually gets to see what tools and technology will be applied on its behalf. This will allow the company to see how the outsourcer’s systems interact with its own, how the reports appear, what language is used and how advanced the outsourcing company is, as compared with the company seeking to outsource. It would also be logical to examine the future plans of the outsourcer in terms of keeping its systems and knowledge up to date and how that might affect the recipient of such services. Provision of insurances required There is an obvious requirement for a company outsourcing its HR functions to know that the new provider of this service has all appropriate insurances in place. This will also provide a level of comfort to the outsourcing company in the unlikely event that it has to take legal action arising from the contract itself.

¶28-080 Seeking an outsourced HR service provider Many companies will process the tender for HR services as they would any other service. This may involve advertising in newspapers or trade magazines, although in terms of HR outsourcing to date, this has been rare outside of government departments. Most companies approach businesses that they have researched and believe demonstrate these kinds of outsourced services. These businesses are then asked if they would like to lodge an expression of interest to take over the company’s HR functions. Businesses that take on outsourced functions are generally found through the marketplace or via industry knowledge and connections, advertising within peak bodies such as the Australian Human Resources

Institute (AHRI), internet research, or even via legal or accounting practitioners. Legal and accounting practitioners are often used by small businesses to provide fundamental HR advice in the early days of a company’s operation. A large percentage will come from referrals from trusted sources that know of or use similar services.

¶28-090 Managing the tendering process When managing a tendering process, companies should aim to adopt the following recommendations to guide them: • Use concise, clear documentation that does not require onerous amounts of reading. • Have a clear submission methodology, closure date and time. • Provide a set date for the announcement of the winner of the tender. • Provide the same information to each company that is tendering, including questions asked (ie if one company asks a question, then that question and its answer should be made available to all respondents). • Set the “scoring” criteria prior to the tender commencing. • Ensure that confidentiality agreements have been signed before any company responding to the tender is able to access information (in certain areas, this information should not be allowed to leave the premises). • Finally, be prepared to debrief unsuccessful tenderers.

TRANSITIONING THE HR FUNCTION ¶28-100 Outsourcing contracts In the construction of an outsourcing contract, there are usually four components: (1) scope of the service to be provided (2) service level to be achieved (3) terms and conditions under which the contract is awarded, and (4) pricing schedule. Contract scope The scope of the contract is usually well known to the outsourcer, given that it has responded to a tender request outlining the services to be provided. Additionally, the outsourcing company has usually conducted an in-depth investigation and analysis at this point, so both parties should be aware of what is to be provided. The contract will provide the blueprint for outsourced activities for the next few years. Therefore, it is important to clearly articulate in the contract what is/is not to be provided (ie what is considered to be “in scope”). For example, if a business agreed to outsource its recruitment function, would the scope include recruitment advertising or reference checking? When is the activity of recruitment deemed to have been completed? Is it when the applicant starts on the first day, or is it when they have completed a probation period? Does the company provide the facilities for interviews or does the provider of the new services provide the facilities? Can the outsource provider use its own name when advertising, or must it use the name of the company that has engaged its services? Many questions need to have been addressed by the time the contract is prepared. This is not only so

that activities, responsibilities and focus can be assigned, but also so that it can be advertised throughout the company as the new way this component of the business will be undertaken. Service level agreements The SLA should set out the terms of performance on each element or activity undertaken by the outsource provider on behalf of the client. It should seek to measure outcomes in terms of: • time • quality • productivity • costs, and • other desirable outcomes (eg improved morale and employee retention). The SLA should be very clear on what metrics will be used to determine whether success or failure is apparent in terms of agreement and delivery. Additionally, the SLA should outline what penalties apply for non-performance. Penalties can include rework at no cost to the company that has outsourced the HR function, payments by the outsource provider for non-compliance to a preset amount, liquidated damages (where the penalties escalate for each instance of non-performance), or termination of the contract itself. Terms and conditions This component of the contract will determine how the contract itself is to be managed. It will include such factors as: • length of the contract • billing and payment terms • issues regarding confidentiality • assignment of the contract • licences and insurances • inclusion of service support (eg people, technology, systems, facilities, telecommunications and contingency arrangements) • reporting mechanisms, including audits • changes in business that affect: – volumes – exchange rates – prices of supplies – quality – compliance with government regulations, and – the location from which the service is provided • breach of contract, and • termination of contract.

Pricing Both parties will agree on pricing in a contract and there will often be a number of assumptions attached. That is why there are often provisions that allow for variations in the contract, including variation of prices. When establishing an initial pricing model, it is important for both parties to explain the rationale attached to the model so that future decisions on amendments can be accommodated, if necessary, without undue stress for the negotiating parties. The two largest impacts on pricing during a contract are usually volume and exchange rates. Wild volume fluctuations that are unanticipated by either party can lead to a supplier being unable to economically support the model it has agreed to, or the outsourcing company being unable to make payments given the larger-than-expected outcomes. Exchange rate variations are most likely to hurt contracts that extend over multiple countries, where the initial costing is calculated usually on the negotiating country’s currency. If the countries outside of the negotiating country’s part of the contract experience sharp rises or falls against the host, then huge disparities can occur within parts of the pricing model. Intellectual property In any partnership arrangement of this nature, there will be an active and ongoing exchange of information, which may be viewed by either party as proprietary. As such, any good SLA should contain specific instructions as to who owns what material, and who may retain that material (and in what form) after the relationship has ended. If an outsource provider has employees on the client’s site, it should ensure that the client understands that the employee will be working under the provider’s contractual terms regarding intellectual property. This means that anything the employee creates on behalf of the client remains the property of the provider unless other contractual arrangements have been made. The employee’s employment contract relationship is with the outsource provider, and it is underpinned by a common law understanding that allows created outcomes of employees to be surrendered with their rights of ownership to their employer. The client must understand that these outcomes, if not explicitly stated elsewhere, remain the property of the outsource provider. Confidentiality While it should go without saying that the client will expect the outsource provider to ensure complete confidentiality, this needs to be explicit rather than implied. This is particularly the case where an outsource provider is servicing competitors of the client — the client must be assured that their information will not be passed on to their competitor. Agreements as to staff access can be put in place to prevent some accidental movement of confidential materials. Another area which has attracted interest in more recent years is where outsourced information is transferred offshore. In many instances where personal information of employees is involved, there have been some concerns expressed in the community as to how safe personal details are in an offshore environment. Outsource providers need to be able to provide clear and demonstrable measures to show control of confidentiality data of both the client and its employees. Contract severance While the terms of the SLA should explicitly outline how a contract may be ended and under what terms, it is appropriate to consider the practical outcomes of having an outsource provider withdraw its services. If a large amount of infrastructure owned by the outsource provider is withdrawn, what will the client replace it with? In many instances, outsource providers construct complete frameworks, such as organisational policies and procedures, or introduce new methodologies and supporting templates to assist in everything from recruitment to performance management. If the materials provided are proprietary, then the client has no right to use them after the contract has ended, unless there is some contractual arrangement that allows otherwise. In some instances, clients who have severed the service arrangements may make an acceptable offer to the outsource provider to retain certain elements of the previously provided framework. However, to avoid a potentially painful and costly exercise at a time where both parties may be aggrieved, it is wiser to have

outlined in the SLA how this type of situation might be dealt with.

¶28-110 HR outsourcing communications strategy When the decision is made to outsource HR activities to an outside provider, there is a need to communicate why the decision was taken, how the company will benefit and what employees are now required to do. In companies that do not have a centralised HR function, or one that has a large devolvement of HR activities to line managers, this is an imperative that cannot be ignored. Many individuals within an organisation will feel comfortable with services or relationships they might have formed elsewhere in the provision of HR services. Including them as part of the decision-making process is often a way in which commitment to the new outsourcing arrangements can be made. If this is not possible, then a clear communication on the topic must be implemented before the arrival of the new provider. Line management must commit to using the new provider if the contract is to have a chance of success. If they continue to ignore the new provider, then the company’s ability to hold the outsource service provider to the terms of the contract will be severely reduced. Volumes and quality may be impacted by the inability of the company to hand over all activity in that particular area, thus eroding many benefits that the contract originally presented. It is important, therefore, for line managers to have the opportunity to meet and discuss their HR needs with the new provider, and that the accessibility to the new provider is maintained at a very visual level during the early months of the contract. This will assist in building the relationship with line management.

¶28-120 Avoiding continuance of poor or undesirable HR practices Once a contract with a new HR provider has been struck, it is important (for all the reasons stated in the previous section) that old practices cease. Position descriptions that contained HR responsibilities should be altered to reflect the new arrangements, along with targets attached to key result areas. Clear repercussions should be explained in the event that employees choose to alter the path chosen by the selection of an HR outsource provider. In some instances, loss of expected contract performance, where attributed to non-compliance within a business unit, should be put against that business unit’s performance. If necessary, disciplinary action should be taken to protect the intention of the outsourced contract. To discourage employees from continuing to pursue poor or uneconomic HR practices, arrangements should be made between the new provider and the company to begin an education process that can yield immediate improvements to the business. This also allows the relationship and trust between line management and the new service providers to become established. Over time, there would be an expectation that the new provider could demonstrate through its outcomes why it should be supported. It is for this reason that an ongoing communications program should be managed, highlighting the continued improvements in people management activities.

A COMPANY’S RELATIONSHIP WITH THE NEW HR PROVIDER ¶28-130 Building and maintaining a good business relationship Both parties have a vested interest in driving effort towards building a good working relationship during the term of the contract and beyond. These parties have entered the agreement with the prospect of gaining from both the experience and the agreed outcomes. It is preferable that the relationship, like the contract, succeeds on all fronts. There are some fundamental communication and relationship elements that should be expected when running an outsourced HR contract. These include: • retaining a high level of personal contact • providing honest and timely feedback

• assuming that all issues are shared problems • anticipating events that could impact on the contract and the sharing of that information • reminding the team of the need to understand the contract’s intent over the letter of the law • reassessing the performance of all participating stakeholders regularly, and • regularly communicating to everyone how the contract is dealing with issues on behalf of the company. By treating the outsourced HR contract as a partnership agreement, the focus of both parties can be on solutions to problems rather than on apportioning blame. Outsourced services (eg HR) can have a vital and immediate impact on the performance of the organisation. The executive management team is unlikely to accept trite excuses if the contract stops delivering what was intended. Both parties will be linked to any failures as much as they will be to any successes. Therefore, it is preferable for both parties to the contract to hold regular discussions around what sorts of issues are being experienced, and what issues are anticipated. Rather than behaving like “scorekeepers”, the managers of the outsource relationship should be working with the outsource provider/supplier to make the contract work. Treating the HR outsource provider as a supplier which can be “screwed down” to get the best possible deal is only courting the possibility of a sour relationship where the supplier is unlikely to give its “heart and soul” to the company. It is common practice for both parties to appoint a contract manager. Successful outsourcers suggest that what is needed for this role is a manager with an outgoing personality, who gets on well with people, but who also knows the overall business the company is in, and has a thorough knowledge of the area that is to be outsourced to a subcontractor (Johnson 1997). By providing a single point of contact, along with the skills and responsibility to manage the contract to its intended outcome or better, the company should both mitigate potential losses and maximise opportunities through the appointment.

¶28-140 Measuring and rewarding success Just as with employees, suppliers of outsourced HR services should be encouraged to perform to agreed targets and to exceed them. In such circumstances, exceeding expected outcomes should yield desirable benefits to the company that may deserve to be rewarded. Therefore, incentive clauses in contracts may be both a wise and economic inclusion. As described earlier in this chapter, all outsourced HR contracts will require metrics against which the performance of the outsourced service provider can be measured. When setting these metrics and their desired levels of achievement, it is within a company’s scope to consider rewards for better-than-agreed outcomes. Such consideration would need to balance all of the dynamics attached to the goal set, such as dollar savings, volumes, quality or opportunity for cost reductions, to name a few. Incentives may range from sharing in revenue or savings generated from the outcome through to extension of the contract.

¶28-150 Reversing the decision to outsource HR While a company should always take a positive view as to how the outsourced services will be provided as per the agreed contract, it is recognised that sometimes contracts fail. Legal practitioners will put enough emphasis on the exit clauses for a company to be able to terminate a relationship. While termination of a relationship would be considered the last point of a problem-solving journey, it may not necessarily be the hardest part of the decision-making process. Taking a service back in-house has its own difficulties, as does passing a contract over to a competitor of the outsourced service provider originally chosen. In making such a decision, the following factors should be considered (as a starting point): • How can the outsourcing company avoid making the same mistakes again?

• How will that company communicate the change internally and to the marketplace? • How can the confidence of the other stakeholders be regained or maintained? • How can the contract be (logistically) taken back in-house or transferred to another provider? • Do the same imperatives apply now as they did at the time of the original decision to outsource? In 1993, the International Facilities Management Association conducted a study of the reasons why outsourced services were brought back in-house. The study highlighted that over half of the reasons why outsourced services were brought back in-house were related to quality issues, cost concerns, or a simple need to regain control of the function. These findings suggest that a company that has outsourced its HR functions may not necessarily fix or improve its situation just by passing these to another service provider. In fact, over one-third of the respondents brought the function back in-house following dissatisfaction with the service provider. Companies considering outsourcing must remember that the contract will end one day. The questions that should be asked are: • Will it end earlier than expected? • Will it end on good terms? It is suggested that the way in which contracts are selected and managed will determine the answers to a large extent.

¶28-160 Line management and the new HR provider Developing the relationship As with all working partnerships, to be successful, there is a requirement for both time and understanding to be invested for the outcome to be truly beneficial to all parties. When a new HR provider is appointed to a business, it is important for it to develop a strong understanding of the business and the line management’s objectives, so that it may make a meaningful contribution. For this reason, new HR providers should be encouraged to spend a large amount of the initial contract time with the line managers they will be working with. This time should be invested using a formula not dissimilar to a selfpaced induction program. By the completion of this period, the HR provider should understand: • products and services delivered by the company • people implications • priorities and goals of the business and its individual management units • culture and values (and where they might differ in the business) • immediate issues and upcoming impacts likely to affect the business, and • operating units and their employees. In essence, this is what an in-house HR provider should look to gain in trying to settle into the team and contribute quickly. An external provider is in much the same position. Additional HR services to line management A new HR provider should work quickly to identify the external HR services that line management currently uses. This might vary from legal advisers to recruitment consultants and training providers to rehabilitation services. The new HR provider would be well advised to understand the nature, frequency, cost and level of satisfaction each relationship brings to line management before making any decisions. Many HR practitioners have established professional relationships that they are comfortable with, and they may wish to introduce them as part of their new business offering, so this is an area where each

party’s sensitivities should be understood. The new HR provider should assist the line managers in understanding what services they will be providing directly, and what services they will be managing indirectly. It makes little sense for an organisation to outsource its HR function only to have a large percentage of the services duplicated because line managers are unaware of the new services or are simply more comfortable doing it the way they used to. For a large range of reasons, none less than for pure alignment purposes, how HR will be managed should be explained to line management before the new services start. Once the new HR provider has assessed the needs of line managers for external HR services, it would be wise to involve the same line managers in an assessment of current services provided or the choice of a new provider. This not only avoids a relationship being imposed on the line manager, but assists in a better line manager/external HR services fit. Value of new HR providers to line management There are many advantages a line manager can gain from an outsourced HR provider. The first is that, in many instances, the company will engage a service provider rather than an individual. The subtle difference here is that a service provider often entails the delivery of outcomes or services, rather than the assignment of a person to a given position. To be more precise, it might include provision of systems, software, after-hours services, and a wide range of specialty advice that is unlikely to be possessed by one individual. The company engaging the outsource provider is mainly concerned with the delivery of the required services. While it should also be keen to understand exactly how this will be done, the emphasis will still be on things such as “building an HR intranet”, as opposed to engaging an HR manager whose job might include building an intranet. In the outsourced model, as long as the approach, fee and time lines are acceptable, the engaging company should not be concerned whether four people are involved in the project or just one. After all, they are seeking a project outcome. Line managers should understand what type of HR service their company has purchased. Where they might have been accustomed to dealing with one in-house HR manager, they might now have access to three or four HR providers from the new HR outsourcing arrangement. One reason HR outsourcers might be able to provide this level of support is economies of scale. If the engaging company is one of seven in that HR outsourcing team’s portfolio, then the fee revenue from the seven companies might be strong enough to sustain a highly skilled and experienced HR team. This being the case, the smaller engaging companies that normally would be unable to afford access to this level of practitioner, will now find that they have a greater level of expertise at their disposal. Line managers who understand this will be able to advance their business by taking advantage of the new skill set, one that might be considerably deeper than previous incumbents. Another advantage that an outsourced HR provider brings to line management is the continued exposure to changes and trends across a wide range of industries. Where an employed HR practitioner brings their most recent industry experience to the table, once engaged in the new business, experience tends to have a time limit, unless the business also funds the provision of additional information resources so that the individual may keep up to date. With an outsource provider that continues to work in other industries, this is not the case. Line managers can take advantage of this by asking their new outsource providers for examples of current experiences in other parts of the market. Feedback Most outsourced HR providers will operate under contracts governed by SLAs. The SLA is useful for improving the ongoing relationship between the provider and the engaging organisation and, as such, should be used positively. The best person to help the key decision-makers on both sides understand performance is the line manager. They are likely to be key beneficiaries of the new service and, as such, are ideally positioned to answer any questions about the appropriateness of the service received. For this reason, the outsourced HR provider is well advised to maintain strong dialogue with line management so that any corrective action can be taken at the right time, rather than issues potentially escalating into a contract dispute. For their part, line managers should keep communications open to maximise the benefits of the contract and the opportunity for the provider to improve services, rather than waiting for the opportunity to complain via a contract review. If both parties are intent on achieving a positive outcome, then the SLA

should not be the mechanism that drives that result. The SLA should be the framework and, perhaps, in the instance of significant dispute, the legal record of the arrangement. Just as working to a position description does not make a perfect HR manager, nor will an SLA make a perfect outsource provider. The relationship will always be between people, so it makes sense to manage the relationship in the same manner that relationships between any other two colleagues are managed. If things are not working, there should be clear avenues for escalation and resolution. Realistically, the engaging company is only going to bring in outsourced HR providers if it believes it will give its line managers an advantage. Whether that be in time, expertise, or even indirectly through costs, these are most likely to be the drivers. If line managers appreciate and embrace this logic, they have a greater chance of maximising the outcome. They will also have opportunities to measure and give feedback when it comes to the service they actually get. It is in the line manager’s best interests that the relationship works.

¶28-170 Future of HR outsourcing As stated earlier in this chapter, HR outsourcing is neither new nor a passing trend that will dissipate in the near future. As organisations grapple with the variety of people management issues they must deal with, the outsourced HR solution must remain a viable consideration. The question of whether the marketplace can produce a variety of qualified and quality HR providers, who are experts in HR outsourcing, remains to be answered. At this time in Australia, it can be difficult to find HR outsourcing providers which cover a range of HR activities as their core competency. Additionally, it is not easy to find HR outsourcing companies with the capacity to deal with large corporate entities or, at the other end of the spectrum, the desire to provide services to small- to medium-sized companies in need of their skills. In fact, the leaders in HR outsourcing in Australia have been more successful with their historic outsourcing offering in IT, finance and administration. The HR outsourcing providers will continue to be shaped by the desires of the companies seeking this form of solution. While the marketplace is embryonic, companies will have a far greater opportunity to shape how these outsource suppliers will look, behave and serve. HR outsourcing is part of a very considered process. In many cases, it is not appealing or it will not work. However, if a business is to adopt an intelligent approach to building a successful business outcome for people management, then HR outsourcing must remain an option worthy of serious consideration.

¶28-180 Observations of HR outsourcing to date The 21st century commenced with several predictions as to how HR outsourcing would boom, specifically in the first decade. Most popular among the predictions was that the business processes connected with HR management would be dramatically improved, no doubt by ever-refined technological solutions. Have the predictions been right so far? The answer is both “yes” and “no”. In 2005, the Boston research company Yankee Group predicted that HR business process outsourcing (HRBPO) would triple by 2009 and by that time would represent a US$14b industry. It went on to cite 90 organisations of the Fortune 2000 that were at that time evaluating HR outsourcing contracts. Forecasts for that year predicted a lift of 27% on spending against 2004, with North America dominating the outsourcing picture. NelsonHall, an HRBPO firm, predicted with similar vigour that “by 2010 HRBPO would be the dominant approach to HR operations”. However, stories from the front line do not reflect these predictions with any accuracy. In fact, 2006 appeared to be a year that was littered with stories of how HRBPO had not yielded the results predicted. Most reviews of HR outsourcing contracts cited a concentration on process with minimal advantages gained in culture. Given the HR function has a primary responsibility for delivering the best possible outcomes for its workforce in equal exchange for increased profits and productivity, these reports should be disturbing. The improvements that were widely predicted have not been accepted as being any better than what the outsourcing organisations themselves believe they would have been able to deliver. It appears that the focus of HR outsourcing on processes has been targeted as “low-hanging fruit” by the outsource

providers, where streamlined approaches, workflows and technology were expected to demonstrate immediate improvements. It also seems that the expectations of the outsourcing organisations (while embracing the process improvement component of the contracts) were far more focused on improvements to the cultural aspects of their business. Areas such as talent attraction, retention, remuneration program advancements, improvements in morale, training and employee relations are under-reported in articles addressing the impacts of HR outsourcing. Many HR outsource providers refer to their services or strategic approach as a “segmented HR outsource strategy”. Renowned business author David Ulrich stated in an earlier book Human Resource Champions: The Next Agenda for Adding Value and Delivering Results that, to contribute effectively to an organisation, an HR function must be able to: (1) carry out transactional HR administrative work through service centres (2) work directly with business leaders to embed HR (3) provide specialist advice through centres of expertise, and (4) oversee the whole HR function, implementing organisation-wide initiatives and working with the top business leaders. In the segmented attack undertaken by many HR outsourcing providers, it appears that this may in fact be the order in which they are going about the transition process. There is a certain logic that supports this as an appropriate strategy. However, if this order lingers too much on the first point and fails to yield results quickly in the remaining three, the outsourcer opens itself to the same arguments previously endured by the HR department. That is, the provider is not supporting line management in a worthwhile and value-adding format. According to the Australian Bureau of Statistics , the workforce is ageing and not replenishing in line with retirement forecasts. This underpinning issue is placing pressure on both HR departments and HR outsource providers. For those companies which entered into HR outsource arrangements several years ago, these emerging labour force issues (while known to many) were not seen as the significant impediment to future plans as they are today. Additionally, HR outsource providers were likewise less concerned about the same issues that they are being asked to deliver on today. It is argued that HR outsource providers are no better equipped to deal with the emerging people management issues than their predecessors. Transactional HR issues would account for only a small percentage of the overall HR responsibilities. While it is important to run payrolls effectively or manage leave administration accurately, it is hardly going to improve the overall profitability and productivity of a business. The segmented approach to outsourcing has allowed outsource providers to deal with issues that are more certain, such as administration, recruitment processes, workers compensation management and so on. It remains to be seen whether these same providers are offering meaningful and strategic contributions that will enable organisations to deliver on their plans. It also appears that the HR outsourcing providers may be experiencing the same problems as their clients. Finding highly qualified and experienced HR practitioners and specialists has become increasingly more difficult for the entire marketplace. HR outsourcing providers may well be questioning their own ability to deliver across so many areas of HR in a cost-effective manner. While transactional HR can, in many instances, be easily accounted for in terms of costs and improvements, the more difficult areas of talent attraction, development and retention cannot be so easily measured. This makes for difficult SLAs where legal and financial experts will often overtake the HR professionals in constructing arrangements. The International Journal of Innovation, Management and Technology reported that from 2004–2007 the market for HR outsourcing services grew by 25%–30% each year. It was also predicted that this market would continue to grow at a compounded rate of about 16% annually for the next five years. In the same article, consulting group Gartner Inc was mentioned as having predicted that. business process outsourcing will generate $133.7b in 2012, which is an 8% increase on the previous year. This growth report is supported by Hewitt Associates who, in a survey of 129 companies, found that 94% already outsourced at least one HR function, with the majority expected to increase the number of HR services

outsourced. A report on a survey of 292 HR organisations (released by the Aberdeen Group in December 2011) indicated that HR outsource providers were offering an increased level of strategic support to clients, which was now contributing almost as much as the provision of tools and services to support day-to-day people management activities. HR outsourcing is no longer the domain of large businesses. In more recent years, there has been a large increase in HR outsourcing from small businesses within Australia who, understanding the need for quality support for their people, have increasingly engaged specialists to assist them. Rather than engaging with small businesses using a typical “consulting formula” with project-driven solutions, HR outsource providers are increasingly catering for small business owners’ end-to-end HR requirements. According to the Australian Government’s Department of Industry, Innovation, Science, Research and Tertiary Education, half of the nation’s private sector industry employment has been categorised as sitting within the small business sector. The Council of Small Business of Australia has indicated that it understands that small business owners have to face the same people management issues as big businesses with regard to recruitment, employee relations, people development, remuneration, evaluation and exit strategies. Small businesses have been increasingly looking for support on a permanent basis to deal with these issues. The HR outsourcing industry is responding to this increase in demand as the market continues to expand both locally and internationally. On the basis of the previous observations, it would be wise for any organisation evaluating the option of outsourcing its HR function in the future to consider the activities that are hardest to cost-assess first. Moving away from a cost-base model to an efficiency and contribution-based relationship will be difficult. However, this is what many current in-house HR departments are asking for. If an outsource provider is incapable of demonstrating strategies, expertise and success within its own boundaries, it is unlikely that it will convince its clients that it has a solution for them as well. For those organisations seeking to outsource and entrust outsource providers with providing skilled labour to deliver on the organisation’s future, it is essential that they undertake an appropriate initial investigation. This ensures that the provider selected is best suited to the work, and even the “best fit” culturally for the organisation.

¶28-190 Conclusion The future of HR outsourcing in small- to medium-sized businesses remains strong. The business marketplace continues to be more aggressive in its search for talent, and the need for continued HR support is only going to grow as the demands for good labour grow. It is unlikely that this support can be provided by one or two HR practitioners in a small business, especially when the demand for these practitioners is as high in big business. An outsourced provider of a range of HR services will continue to be an intelligent and attractive option to these concerns. 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 (ABS) 2013, Industry value added by sector and business size, 2010–11, cat no 8155.0, see www.abs.gov.au/ausstats/[email protected]/mf/8155.0. Berkshire JC 2004, “Seeking full partnership”, HR Magazine, Society for Human Resource Management, vol 49(7), see www.shrm.org/Publications/hrmagazine/EditorialContent/Pages/0704berkshire.aspx. Bloom N 2006, BPO Insight, NelsonHall, January, see www.nelson-hall.com/. Bragar 2015, “HRO Predictions for 2015”, research.nelson-hall.com/sourcing-expertise/hr-outsourcing/? avpage-views=blog&type=post&post_id=331, access date 19 October 15. Corbett MF 2001, Outsourcing Justification Study, Pretium Partners Inc, Ohio State University. Department of Industry, Innovation, Science, Research and Tertiary Education 2012, Australian small business key statistics and analysis, December, see

www.innovation.gov.au/SmallBusiness/KeyFacts/Documents/AustralianSmallBusinessKeyStatisticsAndAnalysis.pdf Greaver II MF 1999, Strategic Outsourcing, Amacom, New York. Henning JP 1997, The Future of Staff Groups, Berrett-Koehler, San Francisco. —— 1999, Outlook on outsourcing, International Facilities Management Association (IFMA), see www.ifma.org. Johnson M 1997, Outsourcing in Brief, Butterworth-Heinemann, Oxford. Kinange UM and Murugaiah V 2011, “Human Resource Outsourcing: A New Mantra for Business Sustenance”, International Conference on Asia Pacific Business Innovation & Technology Management: Elsevier. Saba J 2011, “PEO: Taking Outsourcing a Step Beyond Pays Off for Small and Mid-sized Companies”, Aberdeen Group report, August, see sandhill.com/wp-content/files_mf/peostudy.pdf. Saul Dr P 2013, “Brave New World”, HR Monthly, July. Seth Dr M and Sethi Dr D 2011, “Human Resource Outsourcing: Analysis Based On Literature Review”, International Journal of Innovation, Management and Technology, vol 2(2), April, see www.ijimt.org/papers/118-M514.pdf. Ulrich D 1997, Human Resource Champions: The Next Agenda for Adding Value and Delivering Results, Harvard Business Press, Boston, MA. Ulrich D 1999, “Outsourcing HR”, HR Monthly, October. —— 2001, “Don’t outsource a culture”, Business Review Weekly, 25 January. —— 2001, “The outside experts”, Business Review Weekly, 13 July. —— 2001, “Outsourcing gets going once again”, Australian Financial Review, 20 July.

29. MOVING FROM EMPLOYEE TO CONSULTANT Editorial information

Simon Lane, Offsite Human Resources Karen van Druten, Strategic Human Resource Consulting

¶29-010 Introduction Working as a human resources (HR) consultant can be an extremely rewarding and satisfying career choice. However, as with most important decisions, it delivers both its benefits and its challenges. This chapter sets out to explain how HR practitioners can make the transition from in-house employee to external consultant (and back) successfully. In becoming an HR consultant, there are several options, two of them being: (1) working for an HR consultancy, and (2) building an HR consultancy. In this chapter, we have chosen to concentrate on the issues surrounding “building an HR consultancy”. Our rationale is that working for an HR consultancy is comparable with working as an employee. While the products and services you deliver when working for an HR consultancy may be very close to your knowledge and skill set, the relationship still largely remains like that of an employer to an employee. In the creation of your own business, an HR consultant will inherit all of the demands of running a successful entity, from sales and marketing to finance and operations. The design of this chapter is focused on how to run a successful HR-centred business. Many HR practitioners have never run a business before. They may have spent their careers removed from such things as the day-to-day commercial rigors of cashflow management and brand protection. This chapter will look at the challenges of turning skills and knowledge into a commercially viable outcome.

¶29-020 Why become an HR consultant? Many people decide at some point in their career that they would prefer to have more control over their destiny, work, finances, work/life balance, learning and themselves. The motivation to become an HR consultant in the first place will often determine how long the consultant will stay in private practice and how successful they will become. It is not uncommon to begin your career as an HR consultant unexpectedly. Many practitioners have been happily employed only to find their roles have suddenly been made redundant or their business has restructured, moved or closed. Then there are those practitioners who, for whatever reason, decide that they wish to run a business on their terms using their skills and knowledge. Whether it has been a long- or short-term dream, the goal is to be successful and sustainable for however long you decide it meets your requirements.

¶29-030 Planning to succeed

Despite mythology about small enterprise failures in Australia, the reality is that most are successful. It was estimated in 2007 that of the 15% of small business exits, there was only a small subset of business failures (ABS 2007). This represents around 300,000 small businesses that commence operating every year with just as many ceasing business. The Reserve Bank indicated that between 2007–11 (the last evaluation) rates of turnover have slowed only marginally (Connolly et al 2012). As with most ventures, there is a requirement for planning and research for your business in order to maximise its chances of success. A good plan should act as your operational framework allowing you to track your progress against your aspirations. Your plan should: • clearly articulate your ideas and goals • provide a basic framework on which you will run your business • set measures to determine your progress • help you understand the market in which you operate, and • provide an understanding to those who may need to invest in your services or business. Your business plan must be a practical and realistic document. Questions that would be useful in the business planning process may include: • What skills, knowledge or experience could I bring to the marketplace? • Why would they buy my skills, knowledge or experience over someone else’s? • How many people would seek out my kind of skills, knowledge or experience? • How many other people are selling similar skills, knowledge or experience? • How will I find people who want my skills, knowledge or experience? • How do I tell people about my skills, knowledge or experience? • Would people pay for these types of skills, knowledge or experience? • How much would people pay for my skills, knowledge or experience? Having outlined for yourself (at a high level) the basic premise on which your business will operate, attention should then turn to the more pragmatic elements that will be required to support it. Questions would include: • What do I have to do legally to establish my practice? • Where will I operate from? • Will I need to employ other people? • What insurances will I need? • What office equipment, collateral and supplies will I need? • How will I manage the bookkeeping? • What will the hours of operation be? • What will be the style of my website, and to what extent will I include blogs, articles, other web links, an eCommerce facility and/or advertising?

• To what extent will I invest in marketing, advertising and promotions? Will this include social media? • What will I call my business? • Do I need financial support? The vision for your business should be practical, clear and memorable if it is to serve its primary purpose — to anchor your overarching goal. Simply choose a few words that best describe what it is you want to achieve. Establishing organisational values helps you to explain to those who work with you (either as an employee or a client) what you are and are not prepared to do. The prioritisation of your preferences provides good behaviour calibrations when hiring, rewarding, performance managing and removing employees from your business. When properly considered, they also create an ethical base on which you will deliver your services, which should not be compromised. They may even form part of your contractual agreements. Essentially, this self-imposed code of professional practice will help you (and those around you) to understand what you are prepared to live by. This moral compass can then play a role as a baseline test in your ongoing business decisions.

¶29-040 Legal considerations It is fair to say that running a legally compliant business in today’s changing economy requires a reasonable amount of research and planning. Legal considerations extend to the: • type of business structure you choose • business name you wish to use • registration of your business • rules under which your business will operate • duties of office holders within your business • rights of shareholders • financial reporting and taxation requirements • insurances (eg third party property, occupational/work health and safety (OHS/WHS)), workers compensation, key man (ie who insures the business against the impact caused through the loss of key personnel through accident/death), income protection, director’s insurance, professional indemnity and personal liability • director’s contracts • employment contracts • third party supplier contracts • property and equipment leases • finance loans • protection of business ideas through patents, and • protection of brands and names through registration. It is important to understand that, by law, your accountant cannot do any legal work that requires a solicitor’s involvement. Work involving contracts, patents, trademarks, property and so on, will require

input from a licensed legal practitioner. If in doubt, consult a legal practitioner for advice.

¶29-050 Working “on” vs working “in” consulting One of the first things that you might notice when launching your own business is that a large proportion of your time is taken up with the operation of your business, as opposed to the fee-paying provision of client services. Running a business is complex: but it can be simplified by adopting a planned and logical framework with appropriate checks and balances. The phrase “working on the business, rather than in it” is often bandied around the small business marketplace to reflect the eternal juggling act that business operators face, especially at the outset of their business venture. If you want to make money, you have to deliver products and services. If you want to run a successful business, you have to back this up with intelligent management of everything else behind the scenes.

¶29-060 Business components There are many facets of a business that help it operate efficiently and achieve its owner’s goals. In larger businesses, these can be easily recognised by the setup of various departments to manage particular activities. When a company is first started it is unlikely to have a “department” approach. In many instances, you will be every department! There are several departments/activities that should be considered: • operations — property and/or facility management, expenses, and suppliers • finance — invoicing, cashflow management, payroll, superannuation contributions, insurances and balance sheet production • sales/business development — relationship management, customer service and lead generation • marketing and advertising — market segments, promotional materials and brand placement • information technology — software and hardware, email and web access, and security • product development — development plans, research, licences, and • human resources — recruitment and selection, OHS/WHS, HR policies and procedures, and subcontractors. This list is neither exhaustive nor exclusive. However, it does provide an insight into the large number of activities that go into managing a business beyond the delivery of work for clients. It is hard to imagine that many of these listed activities would require your attention on a regular basis. If a reasonable amount of work goes into the creation of infrastructure, policies and procedures around these activities, there will be less uncertainty and wasted resources when they are required. Making money The goal of a commercial enterprise is to make a profit. To do this, you need to provide goods and services at a price that is greater than the cost to make it. The cost of running a business must be met by either revenue you earn or money that you borrow, which might be raised by yourself as an investor or from other investors (eg banks or shareholders). In addition, capital injections may be secured from the Australian Government, which offers a range of repaymentfree small business grants. After any loan debts have been repaid in the first instance, you can start to determine the balance of your operating income. Obvious starting points are your salary, reinvestment in the business, discretionary spending and so on. Following are some questions you should answer in your financial planning: • How much have I invested in the business upfront in terms of cash and assets?

• How much have others invested in my business? • What is the annual percentage return expected by other shareholders? • How much does it cost on a monthly basis to keep my business open? • What types of taxes will be levied on me and my business that I must allow for, and how much needs to be held in account each month (eg goods and services tax, pay-as-you-go, income tax, fringe benefits tax, payroll tax)? • How much money will I accept as a salary? (ie gross and net) • What do competitors charge for similar products or services to the ones I will provide? • How can I justify my prices in comparison with other providers of similar services? • How much consulting time, contracts for support, product sales and so on are feasible for sale? Does this vary from month to month? Raising invoices in a timely fashion is a key to good cash management. If you are invoicing over a long period, make sure your service level agreement (SLA) allows for upfront invoicing or payments along the way for completed segments of work. When an invoice has been raised, establish a method that allows you to track payments and cashflow. A simple method of cashflow reporting can be undertaken using an Excel spreadsheet that itemises all invoices raised, the expected date of receipt, along with the bills you have due and when they need to be paid. The Australian Taxation Office (ATO; see www.ato.gov.au) also provides free downloadable software and home customer support. When establishing your business and bank accounts it is often a good idea to allow for online banking facilities. This allows your clients to directly deposit money into your account and, likewise, you can pay suppliers either by direct debit or BPAY (see www.bpay.com.au). Creating revenue The primary work of generating revenue is vital to the long-term success and viability of your consultancy. Answering the following questions may help you in this respect. • What am I going to sell? – Take your personal acquisitions and skills and turn these into results for your clients through one of two forms — the provision of professional services or products. • Who am I going to sell to? – Work out your target market. For example, ask yourself — Will they be small businesses with no HR presence? Will they be large companies with a learning and development function? Will they be a business that is expanding? • Where am I going to sell? – There is no value in having products and services that do not reach the customer. Look for areas where your product/service is in demand and ensure they are visible to those they are intended for. • How am I going to sell? – There are a variety of channels available to assist in the selling of a product, including: • direct sales • via the internet, and

• via third party sellers as a wholesaler. • How much am I going to sell for? – The setting of fees for service will most often depend on answers to many of the following questions: • If I know what it costs me to deliver the service, what do I put on top of this as an acceptable margin of profit? • What are my on-costs that need to be considered when averaging out my costs of delivery? • What costs (excluding labour) may be involved here? How much is picked up by the client directly? • What are others of equivalent skills, knowledge, experience and expertise charging for their services and how do I justify a variance (either up or down on this point)? • How much would I need to earn to be happy? Alliances When you commence your business, there is little doubt that you will already know operators in the marketplace that you may be able to form a partnership with for mutual gain. Most functional alliances feature written agreements with the following clearly articulated: • lead fees paid for directing work to the partner • client ownership and management • respect for intellectual property • payment terms and methodology • use of brands • rectification of issues around performance in the agreement, and • severance. It may well be that, in the early days of your operation, you are asked to work under the brand of another company and represent yourself as an employee of that company. It is important that you understand the benefits and downsides to this arrangement. Benefits include the creation of income (which is rather important to most when starting out), building of relationships, gaining of confidence in your ability to consult and learning about how consultancies work from the inside. The downside is that you may be precluded from working with that client on an ongoing basis under your own banner due to your alliance agreement, thus building the brand of someone else versus growing your own business. Your decision is entirely circumstantial and must not only be right for you, but pragmatic given your longer term goals.

¶29-070 Advertising Most small businesses cannot initially pour a lot of money into advertising. As such, in start-up mode your advertising budget should be dominated by: • logo design • business card design • brochures, and • website design.

With the above in place, you can present your credentials to the marketplace professionally. Website design is particularly important in today’s business marketplace. You will not always have the time to explain your offering and your business in detail, nor will customers always have the time to listen. A website can provide a lot of the background to your offerings and ideas, allowing you to focus your sales meetings or your alternative advertising on key notes, messages and ideas. Google Adwords, Facebook and LinkedIn Ads or pages are powerful means to market services to a receptive market. You need at least a single page which is powerful, contains a “call to action”, and maintains a reader’s interest. Digital marketing experts advise having an effective landing page for each main area of your services. This is critical to the process of converting leads into business. Research shows that you only have a few seconds to interest the surfer or they will leave (referred to as the “bounce rate”). Dr Gitte Lindgaard at Carlton University in Ontario was able to determine that first impressions of web pages could create judgments in participants within 50 msec–500 msec and this first impression carried over to cognitive judgments, such as usability and credibility (Lindgaard and Narasimhan 2007). Because of the increasingly mobile nature of today’s business community, communicating via methods such as Quick Response (QR) codes (often seen as a square matrix) are becoming popular. These allow interested parties to scan and download further information about your business and can be created using web-based software at little or no cost. It is best to rely on those with skills and experience in these areas (but supported by your thoughts and ideas), so that the end result looks and feels like something you have created and are proud of, and which drives your business in a cost-effective manner.

¶29-080 The sales cycle It is rare for sales to “just happen”. Sales in any industry are invariably the result of activity-driven business development. To increase the certainty of delivering sales to your business, a planned and considered approach should be adopted. There are several steps that you can follow to secure that revenue stream: • Sourcing: This refers to research into potential buyers or associates/contacts with potential buyers. • Sales pitch: Know as much as you can about your products and services and ask questions to determine how your business can help your customer. • Qualifying the sales prospect: Ask questions to determine whether the customer understands what you have to offer and whether they are interested in purchasing from your business. • Sales meetings: The sales meeting is an event that allows you to showcase your credentials and your company. It is best that a measured and professional approach dominates (eg dressing appropriately, arriving on time and coming prepared). • Determining background information: Ask questions to determine current issues, objectives for the project, resources available and outcomes expected. • Creating a proposal: This should include products and services you propose to supply to the customer and the timeframe for delivery, as well as the fee structure, expense payment and invoice terms, and any warrants or cancellation policy terms. • Responding to tenders: Tenders often have a predetermined format to maintain fairness for all submissions. However, feel free to submit additional information. It may not be taken into account, but the inclusion can give useful background information and may prove to be an advantage. • SLAs: Once you have secured a contract with a client, it is important to have some clear written understanding of the mutually-agreed deal for both parties. The SLA template should be crafted by a solicitor. These “prenuptial” business agreements not only help mitigate the risk, but help manage your business.

• Creating a pipeline report: It is good to have a clear understanding of what is going on as a result of all of your sales activities. A simple Excel spreadsheet will allow you to track and manage all your current activities. • Evaluating success: A self-evaluation and simple survey for customers to complete after a project or an event has concluded is useful. These can help guide your business as well, and also be used as potential reference information documents. • Cross-selling and up-selling: Current clients have an understanding of your quality, reliability, value, fee structure and organisational fit, which often makes it easier to upgrade or offer more products/services to them later on.

¶29-090 Product development In terms of product development, the following questions need to be considered: • Do you have the expertise to build a product that is desirable to the marketplace? • Do you have the time and resources to build such a product? • Why would the marketplace want to buy your product? • What competition already exists for your product? • Is the marketplace big enough to support you as another competitor in this space? • Why build or sell the product at all? Product sales provide mix and variation to your business which can be of great advantage. It is worthwhile sourcing popular products and researching into reseller opportunities if you are unable or unwilling to build your own.

¶29-100 Building a sustainable business To create a successful and enduring business, there are a number of things that should be carefully monitored. Monitoring of the following will assist you to protect both your asset and your livelihood, and potentially increase longevity: • Suppliers: Ensure you receive quality and timeliness from suppliers, such as accountants, web administrators, consultants and associates. • Customer service and account management: Ensure you have a customer service ethos that is both reactive and proactive. It should be reactive in the sense that when something goes wrong, you go out of your way to fix it. It should be proactive in the sense that you make regular contact with your clients to see how the service is going and/or if there is anything else you can do for them. • Quality: Ensure quality controls are put in place so that your service is not compromised. • Creating sustainable revenue: To create regular and sustainable income, you may need to vary your services from “hour worked-our paid” fee equations to longer term contracts. To create a longer term contract, you may need to have an offering that the client is keen to have available to them over an extended period of time. Alternatively, find a product that companies will ease into (instead of buying from you), or pay you an ongoing licence fee to keep using.

¶29-110 Growth management A good goal to set in running any business is to grow it to a level that provides profits and security, not only for yourself but also your employees, partners, shareholders and family members. The following

elements will all have an impact on that growth ability: • Staffing: Your business plan should be the basis of the timing and scaling of your staffing decisions. Ensure you can afford to have those resources. • Subcontracting/outsourcing: In a growth period, some of the most critical decisions will involve other providers, suppliers and consultants — either to produce products and services to your business or on behalf of your business — as part of the service offering. Subcontracting part or all the work can be a highly effective resourcing strategy. The main concern is the quality of the work and integrity of those invited into such an arrangement. • Partnerships and alliances: A partnership requires legally drawn up contracts and, in the most part, an equity stake. This option shares the risks, but also the control of decision-making. Alliances are more flexible growth strategies. Carefully chosen alliance partners can add to your product and service portfolio, credibility and reach. • Multiple sites: Once you have established your core business, it may make sense for you to repeat the success equation by establishing your operations in other markets. Recognise that the reasons for your success may not always translate into another market. You may require employees or additional partners to help you establish your business in markets/locations where you do not have a great deal of experience. • Infrastructure: Weakness in infrastructure will impact on areas throughout your business. It is advisable to set about building a strong, robust and expandable infrastructure right from the outset. • Finance: Managing all aspects of your finances is important for liquidity, cashflow, financing and profitability. It is preferable from the outset to seek financial accounting and tax advice as well as to purchase software such as MYOB (see myob.com.au) so that you can oversee your finances. It is a legal requirement for directors to be responsible for the financial statements and the director’s declaration, which signs off those same statements as being true and fair. The three most important financial statements are: (1) balance sheet (2) profit and loss, and (3) statement of cashflows. Since 2005, disclosing entities must apply the Australian equivalent of International Financial Reporting Standards. Internal controls are, therefore, important to ensure the integrity of the data, and directors should evaluate the efficiency of those controls. This extends to knowledge of income tax imposts, financial ratios and the implications to the performance of your business. This is because these ratios change over time. • Boards and governance: As a company director, there is an increasing range of general and specific duties for which you are liable for ensuring. These duties include governance, risk management and compliance performance. To ensure compliance, companies may establish either an advisory board or, in the case of a public company, a board. Collectively, the directors form the board of the company and can only act to influence decision-making when meeting as a group. The corporate governance structure adopted by your company may vary according to its size, ownership and the industry framework. Small companies run by directors who are substantial shareholders may find it difficult to differentiate between the roles of director, shareholder and manager. Nonetheless, processes must be developed to provide reasonable diligence. You can learn about your responsibilities and receive legislative changes through membership of the Australian Institute of Company Directors (see www.companydirectors.com.au). In the case of public companies, registering and updating your details with the Australian Securities and Investments Commission (ASIC; see www.asic.gov.au) is a requirement. See also the ASX Listing Rules, available at www.asx.com.au/regulation/rules/asx-listing-rules.htm.

• Personal resilience: In creating what Bridges (1997) terms “You & Co”, he suggests that what is also needed is the capacity to be your own career manager. Part of this requirement includes developing personal resilience. This comes from doing the basics well, learning and growing as a person, and having resources available for support and perspective through hardships.

¶29-120 Rewards of successful business The rewards of running your business can be many, both financially and non-financially. There are several ways in which revenue that you receive can be used to support you. It is wise to seek out the services of a good, qualified accountant to understand the features and benefits of all of the options listed below and how they might be applied to your own situation. Traditionally, these options include: • base salary and mandatory superannuation contributions • commissions on sales • payment of expenses • allowances (eg travel) • bonus payments, and • dividends.

¶29-130 Exit strategies Many people fail to consider how they want to leave their own business when they are setting it up, purely because it is considered too far down the track or even negative. However, all plans have an end, and the plan to start a business should be accompanied by one to leave it. Here are some of the options open to you. Business sale At some point in the future, for whatever reason, you may decide to leave your business by selling it in part or total to another person or entity. This will require you to have built something worth selling. Most professional services firms rely on their client base and goodwill to create equity in their business. However, these are not as tangible as products that you might own outright or under licence, such as long-term contracts, web domains or business assets (eg property, equipment and so on). Your accountant should be able to do some calculations for you based on your previous trading track record and advise you on what might potentially be added to the sale price. It is common that a professional services consultancy sale will require the owner to work in the acquirer’s entity for a period of time. It is not uncommon for performance hurdles and staggered business payments to also be included in the deal. You may only sell a portion of your business to raise capital, retire personal debt or bring new people into the business. The above points will still feature in any purchaser’s opinion of the value of the business, adjusted on a proportionate basis. If your business evolves into a major operation with a very large revenue and profit base, and a large workforce, your business may have potential to make a share listing on the stock exchange where your equity in the company might be valued in millions of dollars. If this happens, you know you have been very successful! Wind-ups and forced sales The poor alternative to selling your business is having it sold from under you or “wound up”. Forced sales are usually prompted by recognition that you are unable to continue to guarantee solvency or an acknowledgment that you no longer want to be a consultant. If you are in regular communication with your accountant, you should be able to recognise if your business is sustainable without constant injections of your personal cash. This recognition allows you to choose a course of action. If you find that you are

unable to pay your debts and are put into administration, the administrator will take all decision-making and control away from you, including the business sale. You may also be required to make up any shortfall in debts owed through personal liability. The two dominant debtors likely to initiate a bankruptcy are your bank and the ATO. Strong dialogue and plans to meet obligations in times of trouble are the key to avoiding administration. On the other hand, many consultants find that running a consultancy is not for them and they want to return to traditional employment. For them, it can be a matter of finishing up work under contract, notifying ASIC of a cessation of trade, payment of all outstanding bills, selling or moving home any assets that are transferable and closing the doors. Whichever option you are faced with, it is important to have a good accountant and perhaps a solicitor involved as there are significant legal and taxation implications in the process of closing a business. Generation handover Many people start a business with a view of securing their family’s future. In the past, it was not uncommon to have children follow their parents into the family business and continue to grow it. This phenomenon is becoming less prevalent in today’s fast-paced business climate, especially in professional services firms. As such, it can be a real disappointment if you work in your business for many years with a view of having your children take it over, only to find they are not interested. If deciding that handing the business to your children is an agenda item, make sure that: • you have a good understanding of your children’s interests and capacity, and • there is an alternative plan if they have neither interest nor capacity to handle your business. Moving from employee to non-executive director There may come a time when you are no longer interested in working in the business, but are happy to keep owning it. Moving from an employee of your company to a non-executive director or chairperson requires a large change in thinking and the role. You are no longer responsible for the operation of the business — rather its direction and governance. The Chief Executive Officer or Managing Director (if they are indeed a shareholder) whom you appoint will report to you and the board on the operational aspects and strategic decisions they are making along the way. While you may receive directors’ fees and expenses, you will not be receiving a salary anymore. Your primary source of income will come from dividends the company yields from its profits or possibly the outcome of any sale down the track.

¶29-140 Looking after yourself This chapter demonstrates many of the joys and pressures of setting up, running and leaving your own business. It can be hard, rewarding, lonely and exciting: sometimes all in the same day! It is important that you constantly check your own feelings, beliefs and thoughts with others you can trust so that any signs of trouble can be dealt with. Recent university research (Featherstone 2009) has shown that small business owners are susceptible to depression, especially if a sole operator. Some of the advice the research provides is included in the following 10 steps to consider when under pressure: (1) Think about what it will take to run a business before you start. It might not be for you. (2) Have a contingency plan that allows for “worst case scenarios”. (3) Understand that failure is part of business. (4) Have a cut-off point where you close the business if no change to the situation is in sight. (5) Develop strong processes and values early on to protect yourself from inappropriate behaviours. (6) Develop and maintain work/life balance. Make time for life and activities outside of work. (7) Never become too isolated. Keep your networks active.

(8) Seek out similar business owners to share and trade solutions to problems. (9) Keep yourself fit and healthy. This not only helps ward off depression, but helps you to avoid getting sick and being unable to work. (10) Never be ashamed to seek professional medical help if you feel you are no longer coping or if you are depressed. While working from home may be the preferred initial office arrangement, isolation can cause loss of creativity and loss of motivation. Recent trends (Johns 2012) highlight the positive shift for sole operators into coworking “hubs” as an alternative, which can provide side-by-side concentrations of able minds. Johns suggests that shunning the commuting, politics and prescribed hours of traditional work can be a good thing when “hubbers” connect in a learning space with collaborators.

¶29-150 Conclusion All business equations are relatively straightforward: • Find what people want. • Provide it at a price that is more than it costs you. • Factor in a margin for profit. • Provide it in a way that makes them want more. • Repeat. There is little doubt that having read everything in this chapter, many may consider that running your own business is hard work. That may be true. However, at the moment, many of us do hard work for an employer. While there are many intricacies in running your own business, who would say that there are fewer in running someone else’s? Some say the insecurity of losing clients or having no revenue scares them. But being part of someone else’s business does not preclude you from being retrenched either. There are countless “swings and roundabouts”, positives and negatives, and advantages and disadvantages in the argument of working for yourself or someone else. This chapter is best completed with a quote from Jan Carlzon (1987) from his book Moments of Truth in which he states: “The richest reward of all is being proud of your work”. References Australian Bureau of Statistics (ABS) 2007, Counts of Australian Businesses, including Entries and Exits, Jun 2003–Jun 2007, cat no 8165.0, see www.abs.gov.au/AUSSTATS/[email protected]/Lookup/8165.0Explanatory%20Notes1Jun%202003%20to%20Jun%202007 Bridges W 1997, Creating You & Co — Be the Boss of Your Own Career, Addison Wesley Longman Inc, US, pp 3–4. Carlzon J 1987, Moments of Truth, Ballinger Publishing Company, Cambridge, MA. Connolly E, Norman D and West T 2012, “Small business: An Economic Overview”, Reserve Bank of Australia, May, pp 6–7, see www.rba.gov.au/publications/workshops/other/small-bus-fin-roundtable2012/pdf/01-overview.pdf. Featherstone T 2009, “Out of the Blue”, based on interviews with Clare Shann and Dr Angela Martin, BRW, 14 January. Johns P 2012, Home from Home, HR Monthly, October, pp 18–20. Lindgaard G and Narasimhan S 2007, “Factors influencing feature-usage in work-related communication”, Behaviour & Information Technology, vol 27(2), pp 153–168.

30. MANAGING KNOWLEDGE AND INTANGIBLE ASSETS Editorial information

Professor John Rodwell Australian Catholic University (formerly at Deakin University)

¶30-010 Introduction Around the world there is growing recognition that the structure of the economies of developed countries has changed. There has been a major change in the source of gross domestic product (GDP) — one of the measures of national income and output — in most first world countries, and particularly so in Australia. The traditional mainstays of a developed economy, such as primary industries and manufacturing, no longer provide the main source of GDP. Instead, the service-related sector is now dominant, with tourism, technology, education, financial services, personal services and communications becoming much more important. The impact of these changes is dramatically clear in terms of the number of employees in the workforce in each sector of the economy. Figure 30.1 highlights the change over the last 20 years — where the service sector has grown to represent almost 80% of employment. These changes are also reflected in the extent to which the value of a company is not represented by standard accounting practices. For example, in publicly-listed companies’ annual reports there is usually a discrepancy between the tangible value of the firm and its market value. Classic examples of the importance and value of Intangible Assets (IA) to modern business include Microsoft’s ratio of market value to assets often being more than 12 to 1 (for this and more examples see Roos et al 1997), and Australian companies with the market value represented by shares trading at many times their net tangible assets (eg CSL Limited). The difference between market value and the value of tangible assets has been variously called Invisible Value, Intellectual Capital (Roos et al 1997), or IA (Sveiby 1988, 1997) and the relationships between these concepts will be presented later. Figure 30.1: Proportion of the labour force by sector in Australia — 1985–2005

The general trend away from fixed-asset and capital-intensive industries towards those that are more service-based has meant that people, rather than financial and physical assets (eg cash, buildings or equipment), are frequently the critical differentiator between organisations. People are often the creators of value within an organisation and can provide its competitive advantage. The increasing importance of the knowledge economy requires a new approach to management. In the information age, knowledge-intensive industries and businesses are an increasing force — evident in all developed countries. Intellectual and service activities occupy critical aspects of organisational value chains regardless of whether the company is in the service or manufacturing sector. In service industries the vast majority of the value provided is derived from intangibles. Similarly, as much as two-thirds of the value added to a product within a modern manufacturing environment can be from intangibles (Quinn 1992). Consequently, improvements in the understanding and management of IA will have a direct impact on a very large part of the economy. Research has focused on how to identify and classify the greater hidden value of the firm, and many frameworks have been suggested. This chapter will outline a comprehensive framework for managing IA that can be used by managers and researchers to determine the most effective strategies and practices for their organisation’s IA. The overall approach is summarised by the model in Figure 30.2. Working through this model will help to draw out the impact of intangibles in an organisation. The focus of this chapter is not to be prescriptive about what to do, given that there is a wide variety of situations faced by different organisations. Instead, this chapter focuses on how organisations can think about the IA issues they face. Figure 30.2: An overview of the key issues for managing IA

This chapter will work through Figure 30.2 by first outlining a basic strategic analysis approach that most managers will be familiar with. The aim is to raise awareness of IA in the strategic context, and to emphasise that these are inherent to strategic analysis. To finalise the details of those strategic analyses, the elements that make up those strategies will need to be reviewed. Therefore, the remaining sections of this chapter review the types of IA and then overview measures of IA. Each of the types of IA then need to be assessed by managers to determine whether they are: • a necessity

• just “nice to have”, or • strategically critical in underpinning the organisation’s competitive advantage. The following section reviews the management of IA, including a systematic approach to analysing the overall pattern of activities within the organisation, stepping back from the details of the policies, procedures and practices.

¶30-020 Basic strategic analysis Analysis of the knowledge and IA of an organisation is usually done in a strategic context. This section provides an outline of some basic strategic analysis tools that may be applied to IA. The overview is essentially based on strategy analysis, but it will be translated into IA in later sections. That is, after conducting SWOT and VRIO analyses (explained later in this section), the results are recast in terms of IA and then a Gap Analysis is used to explore where the organisation wants to be. The final step is to step back from the results of all of these analyses and highlight the key, preferably integrated, message(s) that arise, which will underpin the organisation’s strategy. When determining the nature of IA in the organisation’s strategy a common and simple process is to conduct a SWOT analysis: that is, determine the organisation’s strengths, weaknesses, opportunities and threats and then analyse the patterns across the elements present in those four areas. When determining strategies for moving forward, analyse the SWOT information such that strategies are generated that simultaneously do all of the following: • build on the organisation’s strengths • minimise the weaknesses • take advantage of opportunities, and • avoid threats. This process can be taken further by reviewing where in the organisation’s value chain IA adds the most value and where it could add more value — in a manner that would be unique and defensible. This process of generating strategic issues can then be checked at a broad level by undertaking a gap analysis of the differences between where the organisation is now and where it wants to be in terms of its IA and strategic positioning. The next step is to review the issues arising from this analysis and recast them in terms of the resources that provide each capability. For a resource to hold the potential to comprise or develop sustained competitive advantage it must have four attributes (adapted from Barney 1991, 2002 and Hoskisson et al 2004, among others), often known as the VRIO model. It must be: • Valuable • Rare among an organisation’s current and potential competition • Inimitable (ie unable to be imitated) with no strategically equivalent substitutes, and • exploited by the Organisation. A series of checks can be done on this analysis to clear any possible blind spots and strengthen the strategic decisions that may be made: • Ensure that you have demonstrable evidence of the status of the resources. For example, get proof that a particular resource confers an advantage and is valuable, rare, inimitable and so on. • Establish how well the key resources are “protected”, especially in terms of how they are organised and exploited within the organisation.

• For each resource, determine which set of the organisation’s stakeholders finds the benefits provided by the resource valuable. • Compare the resources with your competitors; are the specific resources truly and objectively valuable, rare, inimitable (and so on)? Are they relative to current and future competitors? This may require critical, if not brutal, honesty. There is a key element in applying this resource approach that is often ignored in strategic textbooks (found by Heys and Rodwell 2004; Rodwell et al 2000). When reviewing resources, there may be some that do not meet the VRIO criteria summarised previously, yet you know from your industry experience that those resources are absolutely critical. These resources may be a “necessary condition” to compete in your industry but, on their own, may not be sufficient for organisational success. For example, a recent study of medium and large law firms and consultant engineers found that the human resources, especially well-qualified professional staff, were seen as critical to their organisation’s success. All of the firms studied were aware of this and had what they felt were good human resources. Having good, well-qualified staff had become a necessary condition to be in their industry at all, but their competitors also had access to a similar set of well-qualified employees and, subsequently, they did not generate an advantage solely from having well-qualified (trained and so on) staff. In that case, having well-qualified staff had become a ticket to be able to enter the game, but other issues were the basis of competitive advantage. As a consequence, it is important to separate out, but not ignore, the sets of resources you may have in your list that are a necessary condition for success in your industry, but that will not provide a competitive advantage. This section gives the strategic context for managing the organisation’s knowledge and intangibles. The strategic analysis assesses which resources can (individually or when grouped with other resources) lead to competitive advantage. The result of the analysis is a short list of key resources for developing competitive advantage, with one or two items set aside as necessary conditions for success in the industry. After doing your SWOT and VRIO analyses, the next step is to re-conceive your analysis in terms of IA and then do a Gap Analysis, comparing where the organisation is and where it wants to be. Finally, draw out the messages across the analysis to generate the organisation’s strategy, incorporating a greater awareness of IA. Of course, within the field of knowledge management and IA there is a variety of types and categories of IA.

¶30-030 Types of Intangible Assets The process of breaking down the invisible value of the firm into categories of IA is often based on theories such as that of Karl-Erik Sveiby (Sveiby 1988, 1997; Sveiby and Lloyd 1987). Similarly, in the spirit of increasing managers’ awareness of IA, terms such as Intellectual Capital have become popular. One of the earliest and most commonly cited models of Intellectual Capital is based on the Value Scheme from Skandia. Related work has explored in more detail some of the categories from the Skandia model leading to a modified categorisation (see Roos et al 1997). The categorisation proposed here integrates the terminology from key sources into three main forms of IA. A good starting point for examining the forms of IA is the work of Sveiby (1997), who proposes that the IA of a company have three main parts: (1) External Structure (2) Internal Structure, and (3) Competence of Personnel. These three components reflect how people in an organisation primarily direct their efforts in two directions: (1) outward — working with customers, and

(2) inward — maintaining and building the organisation. Then there are the people themselves. The three equivalent categories from the work of Roos et al (1997) are: (1) Relationship Capital (2) Organisational Capital, and (3) Human Capital. Sveiby’s Competence of Personnel is very similar to the idea of Human Capital. External Structure is similar to Relationship Capital and Internal Structure is similar to the idea of Organisational Capital. The terminology can often get confusing — especially between the terms IA and Intellectual Capital. Not all IA are “intellectual” or even created from specific intellectual effort. Subsequently, it may be more appropriate to classify intangibles as forms of IA rather than Intellectual Capital. For example, a marketing manager’s close relationship with a newspaper journalist is not necessarily an intellectual product, but is more based on the social relationships held by the people involved. Throughout the remainder of this chapter, the term IA is used to represent the broader class of intangibles. Overall, the market value of the firm consists of its financial value and intangible value (see Figure 30.3). The intangible value is a reflection of the IA of the organisation, although the size of this intangible value is often based on market analysts’ estimates drawn from limited information. That is, there is often an imperfect translation of the value of the IA to the organisation’s intangible value. The extent to which this translation is opaque could also depend on whether the analyst is looking from outside into the organisation (eg for a publicly-listed company), or inside trying to project the value of the company to those outside it. A key vehicle for this translation is through reporting. Figure 30.3: Representation of the types of IA and their link to market value

The IA of the organisation consist of Relationship Capital, Organisational Capital and Human Capital. Some examples of these are set out in Table 30.1. Human Capital (ie employee competence) is, arguably, the most important component of the firm’s IA. For example, Human Capital represents the capabilities of the individuals required to provide solutions to customers (Stewart 1998).

When employees’ efforts are directed inward they create an internal structure. This internal structure is more explicitly owned by the company and can be separated into Organisational Capital (eg databases, process manuals, intellectual property) and Relationship Capital. Organisational Capital often has a value higher than its material value (Roos et al 1997). Table 30.1: Some examples of IA for each of the three categories Relationship Capital

Organisational Capital

Human Capital

• Repeat customers

• Customer databases

• Staff with specialist expertise

• Customer concentration

• Patents, trademarks

• Staff with experience within the industry

• Strong ties with suppliers

• Integrated databases

• Education and qualifications of employees

• Brand equity

• On demand/pass through sourcing

• Distribution channels Relationship Capital is based on the organisation’s relationships with outside parties (eg its customers and suppliers). In Sveiby’s terminology, when working with customers, employees create customer relationships and an image in the marketplace that is partly “owned” by the company and called the external structure. Ownership of these relationships can be complicated — but often the relationships that comprise and create Relationship Capital are with the organisation as a whole and not with single individuals within the company (Roos et al 1997). Relationships oriented around the individual, such as those that occur in highly personalised services, are often more appropriately classified as a component of Human Capital. When we drill down into more detailed categorisations, demarcations between categories can begin to blur. For example, within the relationships that the organisation has, the relationships with customers are among the most important. These have been singled out as “Customer Capital” for some detailed studies (see Gibbert et al 2001), often representing an important component of Relationship Capital, although these relationships could be classified under Human Capital for highly-personalised services. Similarly, the social nature of Relationship Capital has led to explorations of relationships at the inter-firm level (see Dyer and Singh 1998; Lane and Lubatkin 1998) being assessed as Social Capital. This can be considered as a subset of Relationship Capital, where the relationships may be with suppliers, customers or peer firms (among other foci of relationships). Social Capital is often kept within the remit of Relationship Capital, but increasingly research is opening up links between Social Capital and Human Capital.

¶30-040 Which of the Intangible Assets to begin with? Choice may be based on strategic imperatives or mobility The three forms of IA are rarely of equal value and vary in terms of the extent to which they can be created or harnessed. Organisations with highly developed IA across all three categories would usually focus on the outcomes of the strategic analysis detailed in the section above, in order to determine where they begin their next set of IA development. However, across many studies, an emerging message is that under certain fairly common circumstances, Human Capital may have primacy among the three types of IA. A key reason for this primacy is the ease of its mobilisation, especially when an organisation is in a hurry or is building its IA off a low base. For example, in expanding overseas it may be easier to first train up staff and hire new staff than to try to build other forms of IA, such as links with potential sales agents, or build a database of potential customers from the home country (Rodwell and Teo 2003). In general, but not always, Human Capital is more quickly mobilised for new challenges and threats. However, organisations with more developed and substantial IA across all three categories would usually focus more on the outcomes of the strategic analysis.

¶30-050 Intangible Assets can have different properties in various circumstances One of the most interesting and potentially important properties of IA is that it can increase in an additive and/or multiplicative manner. In some circumstances, IA may behave as an additive asset, where more of that asset could be bought in, created or destroyed. In other circumstances, IA may behave more as a multiplicative asset (ie extra IA are created as if “out of thin air”, usually by other IA, without the consumption of extra resources). One of the drivers of this “multiplicative” property is that many IA have the property of non-consumption. An example that demonstrates the multiplicative nature of some knowledge is where a senior expert working on a project with a more junior staff member may share some of their knowledge with the junior staff member. The senior expert has not lost the knowledge, but now the junior staff member also has some of that knowledge. IA often have dual properties. In the case of the senior expert above, they may have had to think more deeply about their knowledge to be able to express it in such a manner that the junior employee understands at least some of it. In doing so, the senior expert’s own level of knowledge may have increased (an additive effect, wherein they put in effort to generate more IA). Sharing and utilisation can also create additional knowledge, such as often occurs when another person integrates the new knowledge with their different background and experience (a multiplicative effect). There can also be a variety of mechanisms acting on IA depending on characteristics, such as the degree to which a particular element is dormant, passive or active. Other implications that the properties of IA may have include the need to apply the IA differently depending on their state. For example, IA can be grown by: • acquiring (from outside the organisation) • creating • exploiting (acting on) • reporting (conveying to stakeholders), or • harnessing (tapping into the IA). Together, the three broad categories of IA (Relationship, Organisational and Human) form the basis of the Invisible Assets of the firm. However, translating the inherent value of the IA into a form that is recognised externally as intangible value depends on the perceptions of various stakeholders and may often reflect the nature of the reporting processes. Furthermore, not all IA are equal, both in terms of the strategic importance of the elements of each type of IA, as argued by the VRIO system, and in terms of the ease with which certain IA elements can be mobilised. Across these categories of IA, implementing strategies entail a need to more explicitly and directly manage the IA and the issues that impact on them.

¶30-060 Knowledge management, managing Intangible Assets Although research has come a long way in terms of identifying and measuring IA, little work has been done on how IA can be explicitly managed. The types of IA (ie Relationship, Organisational and Human) presented earlier are a good starting point. The focus of this section is on some of the levers that may be used to “manage” the IA. It briefly reviews some of the research that has explored the impact of various management activities and practices on IA. The review is broken down into the three areas identified earlier and will align the management practices with their most directly related type of IA.

¶30-070 Managing Relationship Capital Many issues impact on the creation and maintenance of relationships at both the individual level and between organisations. The examples provided here (and in Table 30.2) are more to help you think of

things that are different from the standard practices and issues. One of the factors that impact on the building of Relationship Capital is the level of complexity of the customer’s work, an issue known in mainstream literature as “customer demandingness” (Li and Calantone 1998). When customers are demanding, they prompt firms to learn specific customer needs and develop products of superior value. Similarly, the degree of interaction and strength of ties with customers can enhance the knowledge acquired by the firm (Yli-Renko et al 2001). Table 30.2: Examples of practices that directly impact on IA in mainstream management terms Relationship Capital

Organisational Capital

Human Capital

• How demanding the customers are

• Decentralisation

• Strategic HRM

• Social interaction (eg standing meetings/coffee tables)

• Formalisation

• Organisational commitment to employees

• Customer knowledge processes

• Enterprise resource planning

• HR practices (eg selective staffing, training, equitable pay)

• Competitor knowledge processes

• Automated intranet reports • Propensity modelling

¶30-080 Managing Organisational Capital Again, there are many issues that impact on the Organisational Capital form of IA. One of the most powerful issues in the marketing field that impacts on Organisational Capital is the notion of market orientation. The extent to which the firm undertakes customer-scanning and competitor-scanning activities, and inter-functional liaison, is an element of market orientation (Narver and Slater 1990) and the means by which the firm can impact on its internal structure (Sveiby 1997). Customer knowledge processes typically use customer research to explore innovation opportunities created by emerging market demand, and to reduce potential risks of misfitting buyer needs (Li and Calantone 1998). The systematic conduct, recording and analysis of market research are a direct manifestation of these customer knowledge processes. Customer knowledge processes provide a source of stimuli, assist in determining product performance requirements, and clarify the benefits of product features and their value to customers (Cooper 1992). Competitor knowledge processes enable diagnostic benchmarking of the firm’s position (Day and Wensley 1988). A concrete form of competitor knowledge processes is the information obtained and analysed by competitor scanning and competitive intelligence activities. Competitor knowledge processes can also create information asymmetries between organisations (Li and Calantone 1998) that vary in terms of the degree to which they implement these processes, which may add to the firm’s competitive ability (eg if they comply with the VRIO criteria above). Often the issues right before us can also impact on the management of IA. For example, the structural characteristics of the organisation, such as the degree of decentralisation, can constrain or enhance Organisational Capital. Decentralisation is the extent to which decision-making authority is delegated to employees within the organisation, allowing it to be responsive to market demands and empowering employees (Lin and Germain 2003). Organisational Capital also includes the information technology (IT) infrastructure of the firm as a key means of creating and maintaining knowledge (Meso and Smith 2000). In addition, the more concrete representations of Organisational Capital are legally recognised assets such as patents (Roos et al 1997). Across the categories of IA, but especially for Organisational Capital, it is often necessary to leverage and exploit the sources of IA before their contribution can be recognised. For example, databases of customer information may not be actively contributing to IA until they are used to develop mechanisms, such as propensity modelling or customer lifetime value analyses, that can exploit or harness some of their potential value.

¶30-090 Managing Human Capital One of the largest and most central forms of IA is Human Capital. Within Human Capital the skills, knowledge and abilities possessed by employees provide economic value to organisations. However, a fact that underscores the fundamental conundrum of Human Capital is that people can be rented, but not owned. Therefore, one of the crucial skills of the knowledge age is the ability to manage this Human Capital. A key mechanism for harnessing Human Capital is by using appropriate human resources (HR) practices (Rodwell 2003; Rodwell and Teo 2001, 2002; Youndt et al 1996). An integrated and strategic approach to HR management (HRM) involves designing and implementing a set of internally consistent practices and policies that attempt to successfully harness the firm’s Human Capital, particularly employees’ collective skills, knowledge and abilities towards the achievement of its business objectives (Huselid et al 1997). Specific HRM elements that are part of the repertoire available to managers include the use of selective staffing, comprehensive training, reward systems and HRM control systems. The extent to which an organisation invests in the development of its employees is a key mechanism for increasing the productivity and, subsequently, the value of the employees (Koch and McGrath 1996). Similarly, an Organisation’s Commitment to its Employees (OCE) reflects the firm’s focus on investing in competence development (Lee and Miller 1999). OCE engenders a sense of involvement with the company and greater employee initiative and innovation, independent of direct rewards (Shore and Wayne 1993). Across all of the policies and practices that impact on Human Capital, it is important to consider that Human Capital may not be created if there is not the capacity available to absorb it. This capacity may be in various forms, such as the ability of a specific individual to learn advanced techniques, or the capacity of certain knowledge to be conveyed. This section has explored a few of the mechanisms for addressing and managing IA for each of the three categories separately. The next level of analysis is to examine the potential interactions between categories of IA.

¶30-100 Processes for creating Intangible Assets by transferring between categories The previous sections have focused on managing each of the three categories of IA individually. When analysing the impact of various practices from an IA perspective, it can often be beneficial to also look at activities that can create links between any two of the three categories, thereby giving another six sets of channels to impact on IA. The subsequent nine mechanisms (discussed in this and previous sections) parallel the nine “transformations” in Sveiby (1997). The extra six mechanisms linking any two of the three categories together are: (1) Human Capital to Organisational Capital (2) Human Capital to Relationship Capital (3) Organisational Capital to Human Capital (4) Organisational Capital to Relationship Capital (5) Relationship Capital to Human Capital, and (6) Relationship Capital to Organisational Capital. The key benefit in examining these extra six mechanisms is pragmatic in that they are handy for thinking of lateral or alternative activities for generating IA. That is, exploring the potential mechanisms for creating IA of one category from IA in another category can be a powerful model for brainstorming lateral alternatives for activities that manage or generate IA. (A possible “tenth” channel for creating IA would be to create IA across all three categories simultaneously. In reality, many practices actually impact across all three categories, but vary in terms of the degree of impact for each of the categories. This difference is

often a matter of emphasis. The focus on the nine channels is an exercise to help generate more ideas and explicitly focus on IA, rather than being theoretically exhaustive.)

Example — Brewery A good way of looking at the potential impact of linking the different categories of IA is to review a hypothetical example (based on a hybrid of many analyses in organisations in many different industries, both public and private). Some breweries attempting to implement some form of knowledge management have historically focused on the codification of the knowledge of their chief brewers (with limited success). A key reason for this limited success is that, from the chief brewers’ point of view, the codification was seen as a threat to their expert power and to their position. If the brewery’s knowledge strategy required the development of Human Capital, they may have wanted to consider other options. The most straightforward options are Human Capital to Human Capital, such as “buddying”, mentoring and having senior and junior staff working together on projects. The brewery may also have wanted to consider actively managing other options. Organisational Capital may link to Human Capital through activities such as online training, reviewing and analysing company databases (especially customer databases), and more comprehensive processes such as patenting key aspects of the process with licence fees to the chief brewer. Relationship Capital may link to and impact on Human Capital through many activities, such as using links with distributors to improve the beer. For example, if the distributor’s staff know that the brewer’s main product goes off very quickly above a certain temperature, that knowledge fed back to the brewery could lead to a special project to develop a new, more heat-tolerant, beer. Similarly, the results of customer market research could be fed back to the actual brewing staff. Tours of other breweries, or of other companies’ comparable processes (eg a water utility’s filtration plant systems — to learn more about keeping water pure) could also enhance Human Capital. Trying to think of processes and practices that can transfer or translate IA in one category to IA in another category is often a useful exercise for generating new IA management practices, and further embeds IA issues into the thinking of the organisation. Do not worry about the details of whether you have allocated a specific activity against the “correct” category of IA. Working through the nine processes against which IA management practices can be allocated is not meant to create an absolute model of how IA works, but rather to stimulate ideas about how the IA of the organisation can be explicitly managed. Once you have a list of activities that look like they will help your organisation achieve its strategy, check that all of the practices are compatible with each other and, if necessary, add or remove practices until you have a coherent set.

¶30-110 Checking your Intangible Assets management activities using configurations To check whether the IA-managing activities an organisation has in place or intends to implement would work, a form of analysis looking for configurations can often be useful. Configurations are a holistic approach involving analysing all IA management practices together, not just one by one. Indeed, the idea of coherence between the elements of organisational arrangements is central to configurations. To do a configurational analysis, write out all of your IA management activities and look at the pattern across all of the practices. This approach can sometimes be like the Eureka moment of finding the 3D picture in a dot painting. A useful hint in configurational analysis is that, across the IA-managing practices within the organisation, there is usually a common theme. The theoretical basis of this form of analysis is that competitive advantage grows out of an entire system of activities (Porter 1996). The competitive value of individual activities (or the associated skills, competencies or resources) cannot be uncoupled from the system or the strategy. The organisation “may

be driven toward configuration in order to achieve consistency in its internal characteristics, synergy (or mutual complementarity) in its processes, and fit with its situation” (Miller and Friesen 1984, p 21). Similarly, competitive advantage can come from the way a firm’s activities fit and reinforce one another (Porter 1996). The implication is that organisations can be better understood by looking at the overall patterns of practices in the organisation rather than where an organisation fits in the two-by-two matrices common in strategic management textbooks. The configurational approach implies that a relatively small number of very common but quite different configurations exist. The widespread differences between configurations are caused by a stable and complex form of interdependency (sometimes referred to as coherence) among the elements (Pettigrew 1992). Similarly, the practices mutually reinforce the mechanisms of the other practices. The implication of this coherence, when considering changing from one configuration to another, is that many elements must change together, therefore, firms will usually find it best to change in a multifaceted way. That is, configurations consist of many mutually supportive elements that fit together and act as a structure of resistance against changing just a few elements of that configuration. The previous points suggest that, when an organisation moves between configurations, the changes will often have to be comprehensive and dramatic. These characteristics of configurational change reflect many of the truisms in management. For example, most managers would be able to think of instances where an organisation has introduced one or two changes that were very important to the organisation, which failed, often because they clashed with another set of more entrenched or salient practices, especially reward systems. In hindsight, using configurations terminology, it may have been that the new practices represented by those minor changes did not mutually reinforce the practices already in place, resulting in a lack of coherence within the configuration of practices. Subsequently, in particularly unfortunate cases, piecemeal change might destroy a configuration without having the scope to erect a new one. Industry by industry, there is a wide variety of possible configurations of practices that are viable. A further characteristic of configurations is that the change and energy required to move in one direction (eg from configuration A to configuration B) is not usually equal to the energy required to change in the other direction (eg from B to A). These asymmetries can also influence whether firms’ strategic postures can be easily copied. Another consequence of configurations that can help explain some of the unusual results we see in real business life is due to configurations having the “property of equifinality”. The property of equifinality means that there are different ways to get to the same end point (think “high road” versus “low road”, but they both get there). That is, two organisations in the same industry could have different configurations and yet be equally successful.

¶30-120 Configurations should have clear themes Holistically analysing patterns of issues can often be difficult. A handy technique is to think in terms of themes that pervade many activities, such as low cost, a particular or differential notion of customer service, or a particular or differential conception of the value delivered (Porter 1996). Rather than trying to do everything well, the effective organisation may instead concentrate its efforts on a theme, and seek to bring its elements in line with the theme. An example of the way in which configurations can reflect themes was found in a study of Australian manufacturing companies (Rodwell 2003). At a broad level of analysis, the study found two sets of configurations and their themes reflected the classic commitment and control approaches discussed by Walton (1985). The control approach has often been seen as the traditional mode of management. The basis of the control approach is the establishment of order and the attainment of efficiency. Conversely, the commitment approach grew out of various employee-oriented styles that were based on the belief that eliciting employee commitment will lead to enhanced performance. However, it is important to note that the two groups of companies inform our understanding of firms. Neither group is “good” or “bad”: they are simply different, and are only two examples of possible configurational themes. There is no absolute guide to a set of practices that, if you implement them, will mean that your company is suddenly “doing knowledge management”. Many of the practices already in place in organisations can

be seen to have their main impact on one or more forms of IA. The focus of this section has, therefore, not been to give an absolute answer of what to do, but to outline some processes that can enable you to analyse current and proposed practices that can help your organisation enact its strategy. When analysing the set of practices from a holistic perspective, ensure that they complement each other and have a coherent theme that aligns with the strategy.

¶30-130 Conclusion Over most of the last century, developed economies have faced a trend towards a knowledge-based economy. At the organisational level, this trend is most explicitly demonstrated by the difference between a company’s market value and the value of its tangible assets. The difference between the market and tangible values represents the intangible value of the firm. This intangible value represents approximately two-thirds to four-fifths of the average value of an organisation — a proportion so large that it requires managers to incorporate intangibles into their strategy and pay a lot more attention to them. Incorporating intangibles into strategic analysis is often simply a matter of recasting the elements of the strategic analysis into IA terms. To assist this recasting process, this chapter worked through Figure 30.2, starting with a quick outline of some commonly used basic strategic analysis tools. After doing your SWOT and VRIO analyses, re-conceive the analyses in terms of IA and then do a Gap Analysis comparing where the organisation is and where it wants to be. Finally, draw out the messages across all of these analyses to generate the organisation’s strategy, incorporating a greater awareness of the various types of IA. The three broad categories of IA (Relationship, Organisational and Human) are useful starting points for understanding the IA of the organisation. Translating the inherent value of the IA into a form that is recognised as intangible value often depends on the perceptions of stakeholders that is informed by mechanisms such as reporting processes. Furthermore, not all IA are equal, both in terms of the strategic importance of the elements of each type of IA as argued by the VRIO system, and in terms of the ease with which certain IA elements can be mobilised. The levers that may be used to directly manage the IA can be organised in terms of whether they work within the one category of IA or whether they work between categories of IA. Analysing the sets of policies and practices that impact on a particular IA category provides nine main sets of activities. This framework of having links either within or between IA categories is often handy for thinking of lateral or alternative activities for generating IA. To check whether the IA-managing activities an organisation has in place or intends to implement would work, analyse the configuration of the activities. To do configurational analysis write out all of the IA management activities and look at the pattern across all of the practices to see if there is a common theme. Check that the theme is consistent with the overall strategy of the organisation and iterate through this process until you are confident that you have considered an appropriate set of practices for the execution of the strategy. The details of the elements of each of the sections are summarised in Figure 30.4. Figure 30.4: Detailed summary of the key issues for managing Intangible Assets

Hopefully, this chapter has opened up some of the issues that often need to be considered in managing intangibles. Working through iterations of the processes and issues in this chapter is a good first step to help managers explicitly and directly manage the IA that represent a large proportion of the value of their organisations. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Barney J 1991, “Firm resources and sustained competitive advantage”, Journal of Management, vol 17(1), pp 99–120. —— 2002, Gaining and Sustaining Competitive Advantage (2nd edn), Prentice Hall, Upper Saddle River, NJ. Cooper RG 1992, “The NewProd system”, Journal of Product Innovation Management, vol 9(2), pp 113– 127. Day GS and Wensley R 1988, “Assessing advantage”, Journal of Marketing, vol 52, pp 1–20. Dyer JH and Singh H 1998, “The relational view: Cooperative strategy and sources of interorganizational competitive advantage”, Academy of Management Review, vol 23(4), pp 660–679. Gibbert M, Leibold M and Voelpel S 2001, “Rejuvenating corporate intellectual capital by co-opting customer competence”, Journal of Intellectual Capital, vol 2(2), pp 109–125. Heys A and Rodwell JJ 2004, “High performing professional service firms build relational and structural capital and strategically harness HR”, International Academy of Management and Business, 2004 Conference, Las Vegas, Nevada. Hoskisson R, Hitt M and Ireland RD 2004, Competing for Advantage, Thomson South-Western, Cincinnati. Huselid MA, Jackson SE and Schuler RS 1997, “Technical and strategic human resource management effectiveness as determinants of firm performance”, Academy of Management Journal, vol 46(1), pp 171– 188. Koch MJ and McGrath RG 1996, “Improving labor productivity: Human resource management policies do matter”, Strategic Management Journal, vol 17, pp 335–354. Lane PJ and Lubatkin M 1998, “Relative absorptive capacity and interorganizational learning”, Strategic Management Journal, vol 19, pp 461–477.

Lee J and Miller D 1999, “People matter: Commitment to employees, strategy and performance in Korean firms”, Strategic Management Journal, vol 20(6), pp 579–593. Li T and Calantone RJ 1998, “The impact of market knowledge competence on new product advantage: Conceptualization and empirical examination”, Journal of Marketing, vol 62, pp 13–29. Lin X and Germain R 2003 “Organizational structure, context, customer orientation, and performance: lessons from Chinese state-owned enterprises”, Strategic Management Journal, vol 24, pp 1,131–1,151. Meso P and Smith R 2000, “A resource-based view of organizational knowledge management systems”, Journal of Knowledge Management, vol 4(3), pp 224–234. Miller D and Friesen PH 1984, Organizations: A Quantum View, Prentice Hall, Englewood Cliffs, NJ. Narver JC and Slater SF 1990, “The effect of a market orientation on business profitability”, Journal of Marketing, vol 54, pp 20–35. Pettigrew AM 1992, “The character and significance of strategy process research”, Strategic Management Journal, vol 13, pp 5–16. Porter ME 1996, “What is strategy?”, Harvard Business Review, vol 74(6), pp 61–78. Quinn JB 1992, Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry, Free Press, Sydney. Rodwell JJ 2003, “Configurations of intangible assets in manufacturing: Commitment and control”, 7th Decision Sciences Institute (DSI) Conference-International, Shanghai, PRC. —— 2003, “The need to accumulate human capital across levels of export intensity: Activating resources that are increasingly difficult to mobilise”, Research & Practice in Human Resource Management, vol 11(2), pp 17–31. —— 2002, “Strategic HRM, Knowledge Retention and Human Capital in Australian Exporting Firms”, International Employment Relations Review, vol 8(1), pp 57–70. —— and Teo STT 2001, “Strategic HRM, knowledge retention and human capital in Australian exporting firms”, International Management Division, Academy of Management Conference, Washington, DC. —— Lam J and Fastenau M 2000, “Benchmarking HRM and the benchmarking of benchmarking: Best practices from outside the square in the Australian finance industry”, Employee Relations, vol 22(4), pp 356–374. Roos J, Roos G, Dragonetti N and Edvinsson L 1997, Intellectual Capital: Navigating in the New Business Landscape, MacMillan Business, London. Shore LM and Wayne SJ 1993, “Commitment and employee behavior”, Journal of Applied Psychology, vol 78, pp 774–780. Stewart TA 1998, Intellectual Capital: The New Wealth of Organisations, Nicholas Brealey Publishing, London. Sveiby KE 1997, The New Organizational Wealth: Managing and Measuring Knowledge Based Assets, Berrett-Koehler, San Francisco. —— 1988, Den Osynliga (The Invisible Balance Sheet), Konrad Group, Stockholm. —— and Lloyd T 1987, Managing Knowhow, Bloomsbury, London. Walton RE 1985, “From control to commitment in the workplace”, Harvard Business Review, March–April, pp 77–84. Yli-Renko H, Autio E and Sapienza HJ 2001, “Social capital, knowledge acquisition, and knowledge exploitation in young technology-based firms”, Strategic Management Journal, vol 22, pp 587–613. Youndt MA, Snell SA, Dean JW Jr and Lepak DP 1996, “Human resource management, manufacturing strategy, and firm performance”, Academy of Management Journal, vol 39(4), pp 836–866.

31. POLICIES AND PROCEDURES Editorial information

By Baker & McKenzie lawyers and Glenn Martin, Writer and Consultant on HR, training and ethics

¶31-010 Introduction The area of policies and procedures can produce much tension between human resources (HR) practitioners and employment lawyers. HR practitioners approach policies as a tool for giving expression to corporate values, as well as exhibiting commitment to compliance with laws relating to behaviour in the workplace (eg harassment, privacy, safety). Employment lawyers view policies as instruments with potential contractual effects and other legal implications and, so, prefer policies and procedures to be judiciously drafted so that the employer has room to move in the event of a legal challenge by an employee. This chapter explores the potential legal ramifications of an employer’s policies and procedures, and addresses the process of developing and implementing an appropriate policy framework. Policies and procedures are the expression of the organisation’s commitment to values. The challenge for HR practitioners is to formulate them in a way that provides a foundation for employee trust and compliance, but does not create unintended legal consequences.

¶31-020 Why are the lawyers so concerned? It is becoming increasingly common for employees to rely on an employer’s policies and procedures in legal proceedings against an employer. The obvious example is where an employee claims an entitlement to redundancy payments set out in an employer’s employee handbook. The following are two less obvious examples: (1) An employer’s HR policy contains an opening statement that all employees will be treated “fairly and equitably”: The employer pays annual bonuses to its employees. One employee believes that they should have received a higher bonus than their colleagues because their performance has been much better. They believe that the bonus paid to them has been determined unfairly. The employee claims that the HR policy gives rise to a contractual right to be treated fairly, and that the employer has breached this obligation by determining their bonus in an unfair way. The employee brings a claim for damages against the employer. (2) An employer’s disciplinary policy requires that it ensures employees have a “buddy” present during any interviews that may result in disciplinary action: An employee’s employment is terminated for continually being absent from work. The employer’s HR staff followed the disciplinary policy except that they forgot to ensure the employee had a “buddy” present during an interview. The employee brings a claim for unfair dismissal. Ordinarily, it may not have been unfair for an employee to be interviewed without a buddy. However, the tribunal finds that, because the disciplinary policy required that the employee have a buddy present, the employer’s failure to comply with this requirement made the dismissal unfair. The tribunal awards compensation to the employee. As these examples show, there are two principal areas of potential liability for employers. First,

employees may claim that policies and procedures form part of their contract of employment. Second, employees may claim that policies and procedures form a standard for fairness for the purposes of unfair dismissal proceedings. Each of these areas will be addressed in turn.

¶31-030 Incorporation of policies and procedures into an employee’s contract of employment There is a growing body of case law in Australia in which the courts have found that, in certain circumstances, an employer’s policies are contractually binding on the employer. The cases do not go so far as to say that all policies will have contractual effect. Rather, the courts will look at the words of the policy and the overall circumstances surrounding the policy, and determine whether the parties intended the policy to be contractually binding. While the question of contractual enforceability will depend on the facts of each case, it is sound practice for an employer to assume that anything contained in an HR policy may have the same effect as a term contained in a contract of employment.

Case examples Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 (Riverwood) In Riverwood, Mr McCormick’s position was made redundant by Riverwood after 36 years and 11 months of employment. Mr McCormick’s letter of offer contained the following statement: “You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced.” This document provided that: “Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply”. It also contained a Redundancy Agreement setting out the entitlements of employees in the event of redundancy. In terms of his redundancy payment, Mr McCormick was paid a much lower redundancy payment than was set out in the Redundancy Agreement. Mr McCormick commenced proceedings against Riverwood seeking payment of a larger amount pursuant to the Redundancy Agreement. Riverwood argued that the words “You agree to abide by” in Mr McCormick’s letter of offer only bound Mr McCormick to abide by Riverwood’s policies and procedures, but did not oblige Riverwood to do so. However, two of the three judges concluded that Riverwood was obliged to make a payment under the Redundancy Agreement and subsequently found the following: • Mr McCormick had a general understanding of parts of the Redundancy Agreement, but did not specifically know of the policy manual. • It was both permissible and necessary to examine the provisions contained in the manual to ascertain the intentions of the parties with respect to this phrase. • Riverwood’s policies were expressed in the language of obligation. The major part of the manual placed very few burdens on employees and was, therefore, concerned principally with laying down employee entitlements. As a result of these circumstances, the agreement to “abide by” the policies meant that Mr McCormick would also receive the benefit of the policies. • The parties may be bound by the meaning reasonably to be inferred in the circumstances, and that evidence of surrounding circumstances was admissible to assist in the interpretation of the letter of offer. • The fact that the policies could be amended from time to time did not change their contractual effect. As a result of these considerations, Mr McCormick was entitled to a redundancy payment pursuant to the Redundancy Agreement. Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120 (Nikolich)

(See also Nikolich v Goldman Sachs J B Were Services Pty Limited [2006] FCA 784.) In Nikolich, the firm had a policy entitled “Working With Us” which contained the following statements: • “We are committed to make sure that anyone who makes a genuine complaint will be able to discuss the concern confidentially, will be supported by the firm and is not penalised in any way.” • “We treat each other with respect and courtesy, as individuals who want the opportunity to contribute, learn and succeed in a positive, safe, secure and inclusive environment that respects diversity. Although we are aggressive in the marketplace, we are not aggressive with each other.” • “The J B Were culture and ‘family’ approach means each person is able to work positively and is treated with respect and courtesy. It is within the context of our culture that all people within the J B Were team will work together to prevent any unwelcome, uninvited and unwanted conduct which makes another team member feel offended, humiliated or intimidated in any work related situation and where that reaction is reasonable in the circumstances.” • “J B Were will take every practicable step to provide and maintain a safe and healthy work environment for all people.” Mr Nikolich became extremely distressed as a result of an ongoing conflict with his supervisor. Management (including HR) were aware of this but did not take appropriate steps to prevent the distress that Mr Nikolich was suffering. The judge found that this failure was in breach of the health and safety obligation contained in the “Working With Us” policy. An issue on appeal was whether the terms of the “Working With Us” policy were contractually binding on the employer. The Full Court of the Federal Court affirmed the position that if a reasonable person in the position of a promisee would conclude that a promisor intended to be contractually bound by a particular statement, then the promisor will be so bound. What matters is what the language used, in context, would have led a reasonable person in the position of Mr Nikolich to believe. In the “Working With Us” policy, the firm was holding itself out as having a commitment, which it regarded as very important, that being — to provide a caring and safe environment based on mutual respect and concern. Black CJ distinguished between mere aspirational statements, which would not have contractual effect, and statements intended to bind the employer. He found that the relevant statements were not merely aspirational but, in the context they were used, were intended to bind the employer contractually.

Variation of policies In Riverwood, the Federal Court found that there are constraints on an employer’s ability to unilaterally vary their policies. The Federal Court also found the following: • A variation or addition to the company policies could only achieve a binding contractual effect if there were a separate agreement with employees. This was the case even though there was an agreement by Mr McCormick to abide by alterations or additions to the policies or practices of Riverwood. • Riverwood’s power to change its policies, or introduce new policies, would be constrained by an implied term that it would act with due regard for the purpose of the contract of employment. As a result, it could not act capriciously and, arguably, could not act unfairly towards Mr McCormick. It might also be a power which, by implication, must be exercised reasonably having regard to the nature of the contract and the entitlements which exist under it. The Federal Court agreed with these remarks in Nikolich. The Federal Court’s findings in Riverwood have significant ramifications for employers. They could be relied on by an employee to restrict an employer from altering the contents of their policies without the agreement of the employees when that alteration may lead to an unfair result. This is another reason why

employers should be cautious about the status of their policies. The obvious situation where policies and procedures will be taken to form part of an employee’s contract of employment is where the contract expressly states that this will be the case. There are other ways that policies and procedures can be incorporated, including the following: • In Ajax Cooke Pty Ltd (t/as Ajax Spurway Fasteners) v Anthony Nugent [1993] VicSC 673; (1993) 5 VIR 551, the court held that a notice to employees to inform employees that a redundancy agreement had been reached created a contractual right for employees to be paid in accordance with the policy. • Sometimes employers require employees to agree to abide by certain policies. This could take the form of an express written agreement by the employee or agreement by way of an electronic acknowledgment of policies on an employer’s intranet site. This express agreement could be taken to constitute an additional contract between the employer and employee consisting of the terms set out in the policies. • Contracts of employment often state that an employee must abide by their employer’s policies and procedures. The courts have found that this can also place a reciprocal obligation on employers to abide by their policies and procedures. • If an employer has an established practice of following a particular policy or procedure, an employee may claim that there is an implied term that the employer is bound to follow this practice in the future. For instance, if an employer has a practice of paying bonuses in a particular way each year, an employee may claim that the employer is bound to continue paying bonuses that way in future years. • The High Court rejected that there was an implied term of mutual trust and confidence in all contracts of employment in Commonwealth Bank of Australia v Barker [2014] HCA 32 although it is still open for a court to imply a good faith term, in particular in relation to the exercise of a contractual discretion (see Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357; Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177). In some situations, a relevant factor in determining whether the employer is bound by a policy will be whether the policy has been communicated to employees. Policies that are kept confidential to HR or management staff are less likely to be considered to have been incorporated into an employee’s contract. Conversely, where policies are promulgated widely, they are more likely to create contractual obligations. However, it is unlikely that the policy will be binding unless there is some evidence that the employer intended the document to create legal rights. What are the ramifications of policies and procedures being incorporated into a contract? If an employer’s policies and procedures are considered part of the terms of an employee’s contract, the failure by an employer to follow those policies or procedures will be considered a breach of contract. In the event of breach, an employee will have a right to claim damages for any loss or damage they have suffered as a result of that breach. Following are some examples of claims that employees may bring: • An employer has a redundancy policy posted on its intranet site, which provides that employees will be paid one month’s salary per year of service in the event that their position is made redundant. The employer sells the business to another company and the new company offers all employees employment on the same or better terms and conditions. Some employees do not wish to take up the new employment because they do not like the new employer. They claim that they have been made redundant and that the employer has a contractual obligation to make redundancy payments in accordance with the redundancy policy. The employees claim damages being the amount set out in the redundancy policy and any associated losses. • An employee’s contract provides that their employment can be terminated for any reason with one month’s notice. The employee does not have access to the unfair dismissal jurisdiction. The employer has a policy requiring them to follow a particular procedure before terminating someone’s employment. The employee is causing problems in the workplace, so the employer wants to dismiss the employee straight away. The employer does not follow the policy for this employee and

terminates their employment by giving one month's notice, as stipulated in the employment contract. Based on the policy, the employee claims that there is a term in their employment contract that the employer must follow a fair procedure and the employer is, therefore, in breach of contract. The employee claims damages. • In this case the employee could claim that, had the policy been followed, they would have remained in employment for at least a further (say) three months while the correct procedure was followed, and that they are entitled to the amount of remuneration they would have received during this time. The employee might also be able to claim that, had the correct procedure been followed, the employee’s employment would not have been terminated and they are entitled to the amount of remuneration they would have earned had they remained in employment. For example, the employee might claim that they would have remained in employment for at least another two years and is, therefore, entitled to two years’ remuneration (less mitigation). • In Nikolich, the relevant policy required the creation by the employer of a healthy and safe working environment, which (the court found) was intended to provide peace of mind to employees. The court found that the employer failed to take appropriate steps to prevent the distress that Mr Nikolich suffered as a result of an ongoing conflict with his supervisor, and that this was a breach of these provisions of the policy. Mr Nikolich suffered a severe psychological condition as a result of the conflict with his supervisor and claimed damages for the loss and damage he suffered as a result of this condition. While damages for distress caused by a breach of contract are not ordinarily recoverable, the court found that Mr Nikolich’s condition was a particularly severe manifestation of the very type of detriment the policy was intended to prevent. Therefore, the company was liable in damages. The court awarded Mr Nikolich approximately 2¾ years’ remuneration as compensation for loss of income resulting from his inability to work, as well as $80,000 in general damages (for pain and suffering, distress and so on). Where an employee is unable to establish that an employer’s policies and procedures are incorporated into their employment contract, the employee may be able to claim that the employer’s policies contained representations, and any failure to adhere to those representations gives rise to a claim for damages. Depending on the circumstances, an employee may be able to bring such a claim under s 31 of the Competition and Consumer Act 2010 (Cth), Sch 2 (referred to as the Australian Consumer Law) or equivalent state legislation for misleading or deceptive conduct, a misrepresentation claim at common law, or a claim that the employer is estopped from departing from the representations contained in the policy. In such a claim, the damages are likely to be limited to the loss suffered by the employee in reliance on the employer’s representations, such as by forgoing more lucrative employment in reliance on entitlements contained in a policy. Accordingly, damages for misrepresentation are not likely to be as sizeable as they could be in a contract-based claim.

¶31-040 Policies as a standard for fairness Employers often have written policies which govern the procedures that are to be followed prior to terminating an employee’s employment. In the event that such policies are not followed, either wholly or in part, an employee may be able to rely on the failure to do so to claim that their dismissal was unfair. This could give rise to a claim for compensation or reinstatement in unfair dismissal proceedings if the employee has access to this jurisdiction. Further, where an employer has a practice of following a particular procedure prior to terminating an employee’s employment, a failure to adhere to this practice may give rise to a claim of unfairness. This will particularly be the case where the practice has been applied to other employees in a similar situation to the employee in question.

¶31-050 How can employers minimise liability? In order to minimise the risk of liability, employers should draft their policies carefully, avoiding language of a contractual nature that could give rise to a claim in the event that the policy is subsequently relied on by an employee. Employers should use the same degree of care when drafting a policy as they would

when drafting a contract. In their policies, employers can also include express statements which reserve the employer’s rights to vary, revoke or replace the policy. Such statements should be drafted with care so that it is clear the policy is not intended to create binding obligations on the employer. For some policies it will need to be made clear that the policy is intended to constitute a direction to employees, and therefore, employees are bound to follow the policy. It should be noted, however, that the Riverwood and Nikolich decisions have placed constraints on an employer’s ability to rely on variation clauses. In their contracts with employees, employers can also include express terms which deal with the contractual effect of the employer’s policies and procedures. Often policies and procedures are incorporated into a contract of employment by way of an implied term. The courts will usually not imply a term into a contract of employment if it is inconsistent with an express term. Therefore, the use of express terms that deal with the contractual effect of policies and procedures can reduce the risk of liability arising.

¶31-060 What should a policy contain? Policies should not deal with the terms and conditions of employment, such as post-employment restrictions, confidentiality agreements, termination provisions and employment benefits. These matters require the agreement of the individual employee and should be inserted into the employment contract. Alternatively, they may be incorporated into a collective workplace agreement. Policies should only deal with matters which do not require an employee’s agreement, such as: • matters which fall within an employer’s “managerial prerogative”. (This is a reference to an employer’s right to manage its business by giving the employee lawful and reasonable directions. For the purposes of a policy, this may include directions on expected behaviour within the company, or on administrative issues such as the process for claiming expenses and so on), and • a description of legislative rights and entitlements which do not rest on the employment agreement (eg this may include a description of parental leave rights and the administration of parental leave). There are also compliance areas where the employer is likely to incur liability if policies are not issued and enforced.

¶31-070 Policies and procedures — the HR perspective Organisational policies and procedures are established by employers to provide employees with guidelines for behaviour and performance. Policies provide the framework within which management’s strategic objectives and business processes are formulated. Carefully drafted policies and procedures provide clarity and direction, and will save organisations time and effort spent in confusion and disputes about matters that are often mundane. The consistent interpretation and application of policies will also reduce the likelihood of such matters escalating to become legal disputes. The major purposes of policies and procedures are to: • provide a repository of rules and guidelines for decision-making in routine situations so that workers and managers do not need to refer to senior managers or HR managers • establish a consistent and clear standard of conduct across the organisation • show good faith that employees will be treated fairly and equally • communicate an expectation to employees about standards of behaviour and performance, and • articulate the organisation’s commitment to and interpretation of legal compliance requirements in its context (eg privacy, equal employment opportunity, bullying, harassment, work health and safety). Policies and procedures complement each other. Policies are statements about a topic which set out the organisation’s position on it, its rationale and what

it is seeking to achieve. They give expression to the organisation’s values and are a key factor in reinforcing the organisation’s culture. Procedures are methods by which policies are implemented. They address questions about the tasks and processes that must be performed (ie What? How? By whom? When?). Policies and procedures underpin all employee behaviour and performance. They should be the first thing given to a new employee, whether in hard copy or via the company intranet. They should also be easily accessible and the most up-to-date version. Policies and procedures must be communicated to employees. Management must know that employees have been apprised of organisational rules and guidelines for practice. On many workplace issues, employees want and need that type of guidance in black and white. Policies also define management’s standards for making decisions on personnel and organisational issues. Features of effective policies and procedures Writing policies that are effective, enforceable, understood and accepted by employees is not easy. Policies can either enhance or hinder the chances of achieving organisational objectives. Content creation takes some research, beginning with information gathering. Policies should be based on an in-depth understanding of core business practices, the organisation’s culture and employment law obligations. They may also emanate from a need to control operations: therefore, a good understanding of how the business functions is a necessary first step in developing good policies. If policies are to achieve their purposes, they should exhibit a number of features: • Policies, procedures and rules should be logically structured and clearly distinguishable from each other. • The purpose of each policy should be explained. • Policies on specific topics should be mutually supportive of others. • Policies and procedures should be consistent with practices adopted by similar organisations, as well as with employment law obligations and other public policy. • The format should be consistent for each policy/procedure. • Wording and format should be clear, simple and succinct, so that it is easily understood by all of the organisation’s employees. • The legal implications of policies and procedures should be considered and, if there is doubt, legal advice should be sought. • Before policies and procedures are finalised, employees at various levels of the organisation should be consulted. • The design and format should enable ease of handling, use and updating. • Policies and procedures should be actively communicated to employees, and be accessible to all relevant employees. • Revisions to policies must also be communicated. Policies and legal compliance One of the central purposes of organisational policies is to ensure the organisation’s compliance with external legal requirements and the avoidance of legal actions against the organisation. Compliance refers to the many ways in which laws can impinge on the conduct and activities of both organisations and the people employed by them. In some situations, there are specific laws which can be breached. In other situations, tribunals and

commissions can hear complaints or disputes and give orders which are binding on the organisation. There are many areas of compliance for employers, most of which apply to all types of employers, although some regulations apply to specific industries and occupations. Legislation may be enforced by inspectors or investigation officers, and there are a number of tribunals that issue decisions which are binding on the employer. The following list is not exhaustive, but it covers the major areas of compliance that impact on organisations: • discrimination — on numerous grounds (eg sex, race, age, family responsibilities) • harassment and bullying — can be psychological as well as physical • work health and safety: – systemic issues (eg risk management, policies, training, hazard identification) – specific issues (eg smoking, ergonomics, noise, plant safety, handling hazardous materials, fire and emergency procedures, reporting and record keeping) • workplace relations — negotiating and complying with awards and agreements, dismissals (unfair — inadequate grounds for dismissal and unlawful — defective dismissal process) • privacy — protection of employee information and customer information • security — protection of company information and intellectual property • financial and operational integrity — compliance with accounting procedures, prevention of theft and misuse of organisational property • trade practices and fair trading — fairness and honesty in advertising and business transactions • contractual obligations to employees — honouring terms of employment agreements and individual contracts • laws and codes of practice — where they apply for specific industries (eg environmental laws), and • protection of whistleblowers. To ensure internal compliance with these regulatory regimes, organisations need to establish their own instruments of compliance, including policies and procedures, standard operating instructions and codes of conduct. These instruments translate the general requirements of law into the organisational environment and give expression to the values of the organisation. Specific topics that might be covered include: • email and internet use by employees (eg a ban on accessing pornography) • use of drugs and alcohol at work • conflicts of interest, and • acceptance of bribes or gifts. Policies and procedures in practice Policies and procedures should always be approached with dual vision. They are an essential aspect of compliance and avoidance of legal actions; but they also affect the workplace environment and the organisation’s culture, as an expression of the standards of conduct the organisation expects and requires. The application of policies and procedures in practice is as important as their formulation and communication to employees. Policies and procedures concerning the organisation’s compliance

responsibilities form part of its compliance program. An Australian Standard covers compliance programs (AS 3806: Compliance Programs). It deals with all aspects of the compliance process, beginning with executive commitment and company systems, and extending to the identification of risks, communication and training for staff. It is generally the responsibility of HR staff to ensure that policies and procedures are communicated clearly. HR staff also have some involvement in maintaining policy adherence. Unless policies are communicated to employees they will not protect the organisation against prosecutions and other legal actions. Moreover, the everyday practices of managers and workers must align with the stated policies and procedures; otherwise, in the case of a dispute or legal action, the organisation is similarly vulnerable. Training for workers and managers is a critical element of compliance programs and should occur on commencement of employment as well as on a recurring basis. For example, the organisation may have a policy on harassment in the workplace which may have been communicated to employees; but if a complaint is made to a tribunal, the tribunal will ask if the employees involved have received training on the issue. If the implementation of policies is not consistent, tribunals may find that an employee who has been dismissed for a breach of policy has been unfairly dismissed. The following case illustrates the issues that may be raised.

Case example Budlong v NCR Australia Pty Limited The Full Bench of the New South Wales Industrial Relations Commission found that an employee was unfairly dismissed after breaching his company’s email policy. It concluded that the employee’s behaviour did not warrant summary dismissal and ordered his reinstatement. The employee had been employed for 31 years. He was dismissed after the employer found pornographic material on his laptop computer. In the initial hearing, his dismissal was upheld. The appeal was made on the grounds that: • the employer did not have a “zero tolerance policy” in respect of pornography at work • the employer was unequal in its treatment of similar conduct of other employees • the employer allowed a culture which encouraged employees to view pornography, and • proper weight was not given to the cumulative effect of all the factual matters in the case. The full bench found that, although there was a Code of Conduct, a “zero tolerance policy” did not exist. It also found that the employee had been treated less favourably than other employees, because a previous employee had only received a warning after downloading similar images. In addition, the full bench found that the employer had allowed and encouraged a culture of employees viewing pornography because managers failed to set a good example to others. The full bench ordered the employee’s reinstatement subject to his strict compliance with the company’s email and pornography policies. See also Budlong v NCR Australia Pty Limited (2006) 58 AILR ¶200-277.

¶31-080 Conclusion The value of policies and procedures It is easy for organisational policies and procedures to be seen in a negative light as they are concerned with controlling employee behaviour. Many policies do place boundaries on behaviour and are aimed at promoting good internal controls. However, policies also have a positive aspect. They can actually

empower employees by providing them with a degree of freedom within the boundaries. With good policies in place, employees are able to execute their duties without constant managerial oversight. In that way, policies empower staff to work autonomously. The establishment of effective policies and procedures is a critical aspect of HR responsibilities. Policies and procedures can be the vehicle for defining and managing most HR tasks. Approaching HR tasks from a policy perspective should ensure that HR actions and initiatives are fair to all employees, relevant to organisational values and business goals, and mindful of legal and business risks to the organisation. Establishing policies and procedures and ensuring compliance with them requires HR practitioners to consider the possible conflicts and costs that can arise from employee and managerial actions — before crises occur. The aim of policy formulation is to provide an opportunity for considered reflection on how a variety of situations should be addressed. Appropriate decisions are more difficult to make when a conflict or dispute is already happening: emotions can be heated and exacerbated when people do not know what the ground rules are, or if they suspect they will be treated unfairly. Further, decisions made at such times can easily set unanticipated precedents and lead to future problems. Involving employees in the formulation or review of policies and procedures contributes to their acceptance. It is not just the product that is important — the process is also important. A wellimplemented policy framework underpins HR credibility. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Armstrong M 2006, A Handbook of Human Resource Management Practice, 10th edn, Kogan Page, London.

32. JOB DESCRIPTIONS AND PERSON SPECIFICATIONS Editorial information

Michael Toten Human Resources Writer and Consultant

¶32-010 Introduction This chapter considers the function of job descriptions and person specifications in organisations. It describes the components of both in detail, and suggests areas to address when preparing these documents. While prescriptive on task information, it acknowledges that the degree of specificity in job descriptions will be influenced by factors such as seniority and level of autonomy. Definitions A job description is one of the main outcomes of job analysis (see Chapter ¶9). It is a statement of the tasks, duties and responsibilities of a job (ie the work that is actually done on the job). A person specification (sometimes called job specification) describes the qualifications, skills, knowledge, abilities, personal qualities and other prerequisites required to perform a job effectively. Note that a person specification does not refer to the qualifications and so on, that the job holder actually possesses but, rather, refers to what the job requires. The person specification evolves from the job description in the sense that it matches the “ideal” person with the description of the job. The job description and person specification are often combined into a single document. Why use job descriptions and person specifications? A job description is used to clarify and communicate to employees their role in the organisation. It outlines what is expected of them in terms of behaviour, performance and outcomes. A job description is essential to the key human resource processes of recruitment, selection, training and performance management. A well-drafted job description can also assist an employer’s case in an unfair dismissal claim where employee performance is the issue. Information in the job description must be objective and reflect the outcomes of the work (ie the results to be achieved). A job description needs to demonstrate the relationship of the job to other jobs in the organisation and to the organisation’s overall goals. A person specification is useful as a recruitment tool to identify and document the attributes and competencies required to fulfil the job description. Even where there is no formally documented specification, this analysis is a necessary prerequisite to the recruitment and selection process. The person specification is also linked to training and development. An employee’s developmental needs for a specific role are based on the relevant person specifications.

¶32-020 Preparing a job description The components of a job description, together with guidelines on how to prepare one, are outlined in the following paragraphs. Job title and identification

The job title should be short, but should provide some indication of the role. It should also indicate the relative level of the job within the organisational structure (eg by using terms such as “manager”, “senior”, “assistant” and so on). Avoid the use of sexist terminology and the use of similar titles with qualifiers (eg “manager 1”, “manager 2”). “Identification” covers the location (section/department/place), the person/title to whom the job holder reports, the number of employees performing the job and the date of the job description. Other relevant items may include a payroll/code number and the number of employees in the section where the job is located. Summary statement of the job The summary statement of the job immediately follows the job title/identification. It provides a brief statement of the main tasks of the job (no more than about 50 words) and acts as a lead-in to more detailed descriptions of tasks. Detailed descriptions of tasks The detailed description of the tasks covers all regular and occasional duties of the job, listed in either order of importance or chronological sequence. Normally, there is also a weighting attached to each task (eg a rank order, degree of importance or percentage of time required). This weighting enables employees to prioritise tasks if, for example, the workload becomes excessive. This section should also include the following information: • responsibilities for other employees, work equipment, vehicles, money and so on • tools and equipment used • results/outcomes to be achieved • standards for effective performance and for evaluating performance • accountabilities of the job (eg finances, assets, production volume, sales volume and so on) • timing of work (ie when it has to be done) • volume of work (eg it is better to estimate how many calls per hour a call centre operator has to handle, rather than say “answers incoming calls”. If there are busy and quiet periods, note these as well.) • problem-solving requirements (eg frequency) and an indication of whether problems are routine, complex and/or repetitive • a statement of accountability for safety at work • where relevant, distinguish management functions from operative functions and estimate the percentages of time required for each, and • any temporary work assignments. Some commentators recommend restricting this section to a list of no more than five to eight key tasks, while others claim that every task should be listed. In the latter case, care may be needed to avoid a very large and unwieldy document. Working relationships The working relationships section covers: • relationships with managers, subordinates, external agents (eg suppliers) and customers • line and staff linkages to other jobs

• decision-making responsibilities • material and financial resources flows to and from the job, including their source • destination of job outputs, and • any feedback mechanisms. Working conditions and occupational/work health and safety (OHS/WHS) The working conditions and OHS/WHS section covers items such as: • physical demands (eg movement, lifting, travel, talking, seeing/inspecting, standing/sitting and so on) • environmental conditions (eg climate/temperature, lighting, noise, hazards, ventilation, indoor/outdoor, separate office/open plan and so on). Preparation should include a risk assessment of all the likely threats to the employees’ health and safety, and the actions they need to take (and in what circumstances) to preserve it. Any accommodations required for disabled employees to perform the job should be noted. Conditions of employment The conditions of employment section covers items such as: • remuneration and benefits • award/agreement coverage and classification • working hours • leave entitlements (may be inherent in award/agreement coverage), and • travel requirements.

¶32-030 Guidelines for preparing job descriptions Not all job descriptions require the same level of detail. They will vary according to two main criteria: (1) the level of specific information (eg manager or consultant roles will be less specific than processoriented jobs), and (2) the extent to which the job focuses on activities (ie how it is done) versus results (ie what is done). As a general rule, the more autonomy and discretion the job allows, the less specific a job description is. Higher-level jobs tend to focus more on achieving results. The following general principles apply to preparing job descriptions: • list tasks and responsibilities in a logical sequence (eg in order of importance or chronologically) • use quantitative terms wherever possible • use standardised terms throughout the organisation • use action verbs wherever possible • answer the questions “What?”, “How?”, “When?”, “Why?”, and • clearly specify performance standards and required outcomes.

¶32-040 Preparing a person specification

The person specification is more flexible than the job description. It does not involve attempting rigidly to “fit” a person to a job. Instead, it is essential to distinguish between the qualities that are essential to the job and those that are merely desirable. This distinction should appear on the document itself. Both the job and the person can be varied; the latter, for example, by training and development. When preparing a person specification, focus more on measurable or observable human qualities rather than abstract ones. The “types” of people or behaviour that have been successful or unsuccessful in the job may be relevant, provided the specification does not become an unattainable “ideal”, or the virtues of previous employees are considered to the exclusion of their faults. Categories used The following categories are frequently used in job specifications: • Knowledge — a body of information applied directly to the job • Ability — the demonstrated capacity to perform an observable behaviour or a behaviour that results in an observable product (eg “the ability to make independent judgments in claim payments”) • Skills — the application of learning generally compared with a standard of performance (eg “using a keyboard” is an ability, but “using a keyboard to type 50 words per minute” is a skill. Ability and skill are sometimes combined and described as aptitude.) • Training — formal or informal instruction in the performance of specific tasks • Education — formal qualifications (eg degrees or trades certificates) that do not have a specific occupational objective, but are needed to be able to perform the job • Experience — the level or amount of work experience required to perform the job effectively • Temperament — a generic term for personal characteristics required to perform the job effectively (eg dealing with people, performing under stress, coping with repetitive or continuous work tasks, sensory/judgment criteria, influencing/persuading and coping with variety or change) • Interests — in the context of a job, an interest is a preference for a type of experience (eg preferences for dealing with either people or things, abstract/creative versus “concrete” activities, highly organised/routine activities versus unpredictable work environments) • Environmental conditions — the surroundings in which the job is performed • Physical demands — the physical functions required (eg see the section “Working conditions and occupational/work health and safety (OHS/WHS)” section in ¶32-020). Note also that the needs of people with a disability must be considered. Equal opportunity legislation requires employers to take measures that are “reasonably practicable” in the circumstances. • Generic competencies — these are general work-related competencies rather than specific industry/occupational skills (eg collecting, analysing and organising information; communicating ideas and information; planning and organising; working in teams; using mathematical ideas and techniques; solving problems; and using technology). For further guidance, refer to the definitions in the Australian Qualifications Framework: www.aqf.edu.au, and • Attitudes and values (eg as reflected by the organisation’s published core values or generic factors such as “customer focus”). There appears to be a trend for attitudes and values to assume greater importance in person specifications than in the past. More organisations are adopting policies that promote “recruiting for attributes” and which align with the core values of the business, rather than recruiting people with specific skills or past experience. Such policies are based on the assumption that possession and use of these attributes by employees will give the business an advantage over its competitors. Therefore, the desired attributes need to be stated and reflected in person specifications.

As with job descriptions, it is useful to list the requirements for a person specification in order of importance (eg “essential” first, then “desirable”). Other general points to note include the following: • Use quantifiable terms wherever possible. • Examine all criteria for relevance and ensure that there are no instances of direct or indirect discrimination that could breach equal opportunity legislation (eg setting arbitrary and unnecessary levels of experience that preclude younger, but capable, employees). • It may also be useful to prepare a list of attributes that preclude employees from being suitable for the job. Examine these attributes regularly for relevance. • Avoid setting too many and/or too strict criteria that overstate the requirements of the job. Sample job description/specification form Following is an example of a combined job description/person specification form, although it is possible to use separate forms for each purpose, if preferred. Figure 32.1: Combined job description/person specification form

For more information on topics covered in this chapter and examples of separate job description and person specification forms, refer to the CCH Human Resources Management subscription information service.

33. MANAGING INTERNATIONAL WORKERS Editorial information

Samantha Healey, Senior Associate, Baker & McKenzie

¶33-010 Introduction In the last few years, Australia has experienced a large intake of skilled migrants and temporary workers. This has been attributed to the emergence of a global employment market and a skills shortage in the domestic employment market. The accelerated growth in the employment of foreign nationals has made it necessary for the Department of Immigration and Border Protection (DIBP) to ensure more streamlined processing of work and employment-related visas. At the same time, it has necessitated closer monitoring of employers to ensure they are meeting their obligations under Australian immigration and employment laws. A key priority of the federal government has been to ensure a balance between addressing the skills shortage in the Australian labour market and preventing worker exploitation. It is important, therefore, for employers to understand and be aware of their responsibilities to visa holders so that they may adhere to an increasingly strict compliance regime. The growing complexity of immigration law has resulted in greater pressure being placed on human resources (HR) and recruitment professionals who manage and source foreign national employees. This chapter discusses business and employment-related visa options and requirements, the legal obligations employers have to foreign national employees, and the compliance framework under which the DIBP operates.

¶33-020 Compliance Employer sanctions legislation This legislation, which applies to all employers, provides for civil and criminal penalties to be issued where a person knowingly or recklessly allows foreign nationals (referred to later as “non-citizens”) to work unlawfully, or refers them for work unlawfully. It is important to note that the civil penalty provisions are non-fault based as a result of amendments to the Migration Act 1958 (Cth) (Migration Act), effective 1 June 2013. Allowing a non-citizen to work Under the Migration Act, a person commits an offence if: • they allow, or continue to allow, a person (the worker) to work when they know that the worker is an unlawful non-citizen, or are reckless about that fact (eg an employee begins employment without holding a valid visa, or is allowed to continue working after the visa has expired), or • they allow, or continue to allow, a person (the worker) to work in breach of a work-related condition attached to the person’s visa. The fault element once again is knowledge or recklessness (eg an employee begins employment while holding a visitor visa. Although this is a valid visa for a temporary stay in Australia, it does not carry work rights).

Referring a non-citizen for work Under the Migration Act, a person commits an offence if: • they operate a service, either paid or unpaid, of referring one person (the worker) to another for work, and at the time they refer a worker they know them to be an unlawful non-citizen, or are reckless about that fact (eg a recruitment agency which refers an applicant whose visa has expired), or • they operate a service, either paid or unpaid, of referring one person (the worker) to another for work, and at the time of the referral the worker will be in breach of a work-related condition solely because of the work in relation to which the worker is referred. The fault element once again is knowledge or recklessness (eg an employment agency which refers an applicant who holds a visitor visa and the applicant commences employment while holding this visa). The Migration Act places an obligation on employers and recruiters to verify both prospective and current employees’ work rights. The consequences of breaching the Migration Act are severe. Employers and recruiters risk criminal prosecution and serious financial penalties if non-compliance is found to have occurred. The breadth of these offences also places criminal and civil liability on executive officers of bodies corporate (eg directors or chief executive officers in a position to influence the conduct of the body). Additionally, if an employee is being exploited, the sanctions under the Migration Act are more severe. Exploitation is defined as being a condition of forced labour, forced marriage, sexual servitude or slavery (eg illegal sex workers whose passports have been confiscated and/or are confined to brothels to work for little or no pay). A candidate’s visa status should always be checked prior to an offer of employment being made to ensure that they hold a valid visa with appropriate work rights and the visa conditions permit the type of work offered. Many employers make it a condition of employment that their foreign national employees hold a valid visa for the duration of their employment. In fact, statutory defences are available if the employer has taken reasonable steps at reasonable times to verify the worker’s visa status and work rights (eg verifying the worker’s status on the DIBP Visa Entitlement Verification Online service). Failure to comply with these requirements may result in the penalties listed in Table 33.1. Table 33.1: Penalties that may be imposed Type of sanction

Maximum penalty

Imposed by

Illegal Worker Warning Notice (IWWN)

No penalty — this is an administrative activity to educate and warn the employer

DIBP

Infringement

Fine — (per illegal worker):  • individuals — $3,240  • body corporate — $16,200

DIBP

Civil penalty

Fine — (per illegal worker):  • individuals — $16,200  • body corporate — $81,000

Civil courts

Criminal offence

Two years imprisonment and/or fine (per illegal worker):  • individuals — $21,600  • body corporate — $108,000

Criminal courts

Aggravated criminal offence

Five years imprisonment

Criminal courts

and/or fine (per illegal worker):  • individuals — $54,000  • body corporate — $270,000 Consequences for employees Employees in breach of their visa conditions may also be sanctioned. The Migration Act gives the DIBP power to cancel an employee’s visa, detain and deport them, and place a bar on them returning to Australia for a specified period of time. Visa cancellation is discussed in more detail later in this chapter. Worker protection legislation There are a number of provisions in the Migration Act which govern employers’ obligations to employees sponsored for temporary work skilled visas (subclass 457) and certain other temporary visas. These provisions allow the federal government to monitor employers and impose penalties where a breach occurs. The legislation allows for specially designated workplace inspectors who have the power to enter premises without force and inspect documents, work, facilities, machinery, and to interview employers and employees. The provisions also expand the range of sanctions that may be imposed on sponsoring employers. Noncompliant employers face civil penalties of up to $10,200 for each breach of their sponsorship obligations. These obligations are discussed in more detail later in this chapter. The DIBP can also apply to court for a civil penalty order of up to $51,000 for a corporation for each breach. Charging for a Migration Outcome On 30 November 2015, the Migration Amendment (Charging for a Migration Outcome) Act 2015 came into effect, making it unlawful for a person to ask for, offer, give or receive a benefit in return for a migration outcome in relation to certain skilled work visa programmes. These sanctions are not restricted to employers of 457 visa holders. Although there were existing compliance measures to ensure business sponsors were held accountable for a breach of their obligations towards 457 visa holders, the DIBP was previously unable to take direct action in cases where payments for visa outcomes occurred. Explicit sanctions were required to address this conduct. A new criminal and civil penalty framework has now been introduced which allows sanctions to be imposed on sponsors and other third parties who engage in such conduct. Sanctions include: • up to two years imprisonment • fines of up to $64,000 for an individual person and $324,000 for a body corporate, and • visa cancellation. The introduction of these new sanctions sends a clear message that payment for visa outcomes will not be tolerated. This new penalty regime was implemented to assist in maintaining and improving the integrity of the 457 visa programme and Australian workplace law. Visa cancellation The DIBP has the power (in certain circumstances) to cancel a visa without notice if the visa holder is found to be in breach of their visa conditions (eg a tourist visa holder engaging in employment). Prior to cancellation, however, the DIBP will often be required to issue the visa holder with a “Notice Of Intent To Cancel” which specifies the grounds on which they intend to cancel the visa and provides the visa holder with an opportunity to respond. Visa cancellation is a serious matter which can result in the detention and subsequent deportation of the visa holder. A person whose visa is cancelled may also face a period of exclusion before being permitted to return to Australia. When deciding whether to cancel a visa, the DIBP is required to take into account a wide range of matters including:

• the person’s length of lawful residence in Australia • whether cancellation will cause hardship to the visa holder and others • the circumstances in which the grounds for cancellation arose • the seriousness of the grounds for cancellation, and/or • the applicant’s conduct in relation to the DIBP (eg whether they have been cooperative and truthful, or whether they have sought advice or taken action to become lawful).

¶33-030 Employment-related visas Several types of visas are available to foreign nationals who wish to enter Australia for business or employment purposes. Some of these visas are colloquially and procedurally referred to by name as well as number: therefore, both references will be used in this chapter. The application criteria and related legal issues which require consideration are also outlined.

¶33-040 Short stay visas These visas are appropriate for foreign nationals who wish to undertake short-term business visits of three months or less. These visas are not suitable for persons seeking to undertake formal paid employment in Australia. Business Electronic Travel Authority (ETA) The Business Electronic Travel Authority (ETA) (subclass 601) is an electronic visa designed to facilitate travel by nationals of countries who, on the basis of statistical data, have shown to be genuine business visitors and unlikely to overstay their visas. These nationals must be from the following countries: Andorra

Ireland

Singapore

Austria

Italy

South Korea

Belgium

Japan

Spain

Brunei

Liechtenstein

Sweden

Canada

Luxembourg

Switzerland

Denmark

Malaysia

Taiwan

Finland

Malta

United Kingdom — British citizen

France

Monaco

United Kingdom — British National (overseas)

Germany

The Netherlands

United States of America

Greece

Norway

Vatican City

Hong Kong SAR

Portugal

Iceland

Republic of San Marino

The Business ETA can be applied for via the internet at the DIBP’s website (www.border.gov.au), or through a travel agent or airline booking service. The Business ETA, which is an electronic visa, is ordinarily issued on the spot. A visa label does not need to be placed in the applicant’s passport as airline and DIBP databases automatically obtain a record of the visa grant. An electronic confirmation of the visa grant is usually issued for the visa holder’s records. eVisitor Visa

The eVisitor Visa (subclass 651) is also an electronic visa with the same effect and operation as the Business ETA. The holder of this visa may enter Australia for a maximum of three months on each occasion during the visa validity period. This visa is, however, available to a different list of passport types as follows: Andorra

Hungary

Poland

Austria

Iceland

Portugal

Belgium

Ireland

Romania

Bulgaria

Italy

Republic of San Marino

Cypress

Latvia

Slovakia

Czech Republic Liechtenstein

Slovenia

Denmark

Lithuania

Spain

Estonia

Luxembourg

Sweden

Finland

Malta

Switzerland

France

Monaco

United Kingdom

Germany

The Netherlands

Vatican City

Greece

Norway

Croatia

Conditions of the Business ETA and eVisitor Visa The most significant condition which applies to both the Business ETA and eVisitor Visa is that the holder must not engage in work in Australia. Work, in this instance, means any activity in Australia which would normally attract remuneration. The Business ETA and eVisitor Visa are primarily designed for business visitors who wish to undertake business-related activities such as: • attending conferences, trade fairs, seminars or business meetings • exploring business or employment opportunities, or • investigating, negotiating, entering into, or reviewing a business contract. Short Stay Activity Visa The Temporary Work (Short Stay Activity) Visa (subclass 400) is designed for foreign nationals who are required to undertake highly skilled work in Australia for up to three months. The visa holder is required to enter Australia within six months of the grant and may stay for a maximum of three months in total. Multiple entries are possible during this period. While DIBP policy allows up to three months employment on the visa, it is possible to negotiate a greater visa validity/work authorisation period of up to six months depending on the nature of the work assignment. The most prominent difference is that some applicants must apply for this visa at an Australian Mission (ie an Australian Embassy, Consulate or High Commission) in their usual country of residence. Other passport holders who are citizens of listed countries are eligible to submit an online application for this visa subclass. The applicant is required to submit numerous documents with the application, including explanatory statements/invitations from the employer, evidence of their skills or employment history, and their financial ability to support themselves while in Australia. Consequences of breaching the conditions of a Business ETA, eVisitor Visa or Short Stay Activity Visa If, on arrival in Australia, immigration officials have reasonable grounds to suspect that a visa holder will

breach the conditions of their visa, or that they are entering on an inappropriate visa, they can be refused entry into Australia. It is important that all visa holders are aware of the conditions of their visa prior to travel.

¶33-050 Long stay visas The following visas are appropriate for employers wishing to engage foreign nationals for a period of more than three months. Temporary Work (Skilled) Visa (subclass 457) Australian and foreign companies who meet certain requirements set out by the DIBP can be approved to sponsor foreign nationals for paid employment through the temporary work skilled visa (subclass 457) program. The vast majority of temporary skilled workers in Australia hold 457 visas, making it the key Australian work visa. Businesses that can sponsor employees Foreign businesses Foreign businesses without an operating base or representation in Australia can sponsor foreign nationals for various purposes, including: • establishing business operations in Australia • establishing a representative office, or • to fulfil specific contractual obligations. Australian businesses Australian businesses (whether incorporated or unincorporated entities) can also sponsor foreign nationals for a 457 visa. Irrespective of the entity type, the DIBP assesses their suitability to sponsor foreign nationals by considering issues such as their financial status and whether they provide training and professional development opportunities to Australian employees. In addition, they must attest to having nondiscriminatory employment practices. As part of the application process, businesses agree to meet certain sponsorship obligations in respect of the foreign national employees they will sponsor. These obligations are discussed later in this chapter. Features of the 457 visa program Under this program, the primary visa holder (ie the employee) is restricted to working for the employer which has sponsored them for their 457 visa. The sponsor and employer are generally the same entity; however, they can be different entities as long as they are related to each other (ie they are part of the same corporate group). For example, an Australian subsidiary company can act as sponsor even though its United States parent company may be the employer. Note, however, that if the sponsor is a foreign business, the employee must remain employed in the business of that sponsor and it is not permissible for a related business, whether Australian or foreign, to act as the employer. If the primary visa holder wishes to change employers, then the new employer must lodge a nomination application which transfers the employee to their sponsorship. The 457 visa provides temporary residence in Australia for up to four years (with unlimited options to renew) and can also provide a pathway to employer-sponsored permanent residence via the Employer Nomination Scheme (ENS). The ENS program is discussed later in this chapter. Dependent family members of a 457 visa holder may be included on the original visa application or may be added to the visa at a later date. For the purposes of a 457 visa, the term “spouse” also includes a de facto partner or same-sex partner who has been in a committed, exclusive and ongoing relationship with

the primary visa holder for at least six months prior to the lodgment of the application. The spouse of a primary visa holder does not face any work or study restrictions and therefore, they are permitted to undertake casual, part-time or full-time employment for any employer and in any industry. It is a condition of the 457 visa that the primary visa holder and any secondary family members obtain and maintain private health insurance for the duration of their visa. There are, however, exceptions in place for visa holders who are eligible for Australian Medicare cover. Eligibility for 457 visas Skilled position A 457 visa applicant must be appropriately skilled and/or experienced to be employed on a 457 visa. A skilled applicant is one whose position can be classified within the following occupational categories: a manager (eg a general manager), professional (eg an accountant), semi-professional (eg computing support technician) or skilled tradesperson (eg a welder). University qualifications, although mandatory for some occupations, may not be required if the applicant can show that they possess a specified level of relevant work experience (typically three or five years, depending on the occupation). Applicants for the 457 visa must also have “vocational” English language ability. “Vocational” English is defined by the DIBP as a score of five in each of the four test components (ie speaking, reading, writing and comprehension) in the International English Language Testing System (IELTS) test. Applicants are exempt from this requirement if they: • hold a passport from the United Kingdom, Ireland, Canada, the United States or New Zealand • are paid an annual base salary of at least $96,400, or • can evidence they undertook at least five years of full-time secondary or tertiary study where the instruction was delivered in English. Character Applicants and accompanying family members will need to be of good character. Health Applicants and their family members may be required to undertake health examinations. This will depend on a number of factors including: • medical history • nationality • country of current or previous residence, and • length of time they plan to stay in Australia. Equivalent terms and conditions of employment Employers must ensure that they offer equivalent terms and conditions of employment to the foreign employee as they would offer to an Australian citizen or permanent resident performing an equivalent role. This essentially requires the employer to offer an equivalent salary (or what is colloquially referred to as “market rate”) to the foreign employee for their skills, experience, position and location of employment, as would be offered by the local labour market to an Australian employee performing the same or a very similar role. The DIBP has set guidelines as to how this equivalency is to be determined. In most cases, it is determined by comparing the terms and conditions of employment of an existing Australian employee performing the same role with those offered to the foreign employee. Labour market testing Labour market testing (“LMT”) was introduced in 2013 and requires sponsors to demonstrate that a

suitably qualified candidate in Australia cannot be identified for the position in question. Sponsors are required to undertake (and provide evidence of) LMT in relation to a nominated occupation unless the occupation is exempt or it would be inconsistent with Australia’s international trade obligations. Nominated occupations with a skill level equivalent to Skill Level 1 or Skill Level 2 as provided for in the Australian and New Zealand Standard Classification of Occupations (“ANZSCO”) are exempt from LMT. This exemption, in broad terms, captures those occupations requiring at least the skill level of an AQF Associate Degree, Advanced Diploma, Diploma or at least three years’ relevant experience, for example occupations such as, Managers, Accountants, Business, Human Resource and Marketing Professionals, Financials Brokers and Dealers, and ICT Professionals. Some protected occupations have specifically been excluded from this exemption. However, nursing, engineering and many trade occupations are not exempt from LMT. Timing Applications take approximately six weeks to process, depending upon case load at the time of application. In certain cases a request can be made for a shorter processing time if the employer can demonstrate that there is a significant business need or there will be a quantifiable loss to the business if the employee does not start by a certain date.

¶33-060 Sponsorship obligations To become an approved sponsor a business must agree to meet certain obligations in relation to sponsored employees. These obligations apply to sponsors of subclass 457 visas and certain other sponsors of temporary workers (eg Training and Research visa holders). The sponsorship obligations operate in addition to employers’ general obligations under Australian industrial relations and taxation laws. These obligations apply regardless of whether the employee is being recruited from overseas, transferred from another office overseas or recruited while in Australia. The obligations cannot be waived, nor can employers contract out of them. There are 11 obligations in total which are relevant to employees holding 457 visas: (1) Obligation to cooperate with inspectors: This enables monitoring of businesses to ensure they are complying with their sponsorship obligations. (2) Obligation to ensure equivalent terms and conditions of employment: This ensures consistency of workplace treatment between 457 visa holders and Australian permanent residents and citizens. (3) Obligation to pay travel costs to enable sponsored persons to leave Australia: This ensures sponsored employees have the resources to return home once employment ends. (4) Obligation to pay costs incurred by the Commonwealth to locate and remove an unlawful noncitizen: This obligation further strengthens the necessity to provide return travel so that former employees do not overstay their visa and incur costs which the government can seek to recover from former employers. (5) Obligation to keep records: This requires the employer to keep records to demonstrate that they are complying with various sponsorship obligations pertaining to return travel, employees’ nominated positions and the notifiable events discussed in point (7) below. (6) Obligation to provide records and information to the minister: This requires a business to provide information to the DIBP during the course of business sponsor monitoring. Monitoring is discussed in more detail in the next section. (7) Obligation to provide information to the DIBP when events occur: This requires the employer to notify the DIBP in writing within 28 days when certain events occur. The legislation prescribes over 10 notifiable events, including:

• the cessation of work of a sponsored employee • the appointment of new directors or partners • the payment of return travel costs, and • where sponsors face debt, insolvency or similar situations as prescribed under provisions in bankruptcy legislation or the Corporations Act 2001 (Cth). (8) Obligation to ensure the primary sponsored person does not work in an occupation other than the approved occupation: This obligation is to ensure that sponsored employees work in the occupation for which they are nominated. (9) Obligation not to recover certain costs from a primary sponsored person or secondary sponsored person: This requirement is to ensure that employers do not pass on either the cost of immigration assistance or the cost of recruitment to the sponsored employee (or their spouse). (10) Obligation to meet the relevant training benchmarks throughout the term of the business sponsorship approval (usually three years): This obligation requires sponsors to ensure that they continue to spend the required level on training Australian staff. (11) Obligation not to engage in discriminatory recruitment practices: This obligation requires all sponsors not to engage in discriminatory recruitment practices based on a person’s immigration status or citizenship. Business sponsor monitoring The DIBP conducts a monitoring program to check whether businesses are complying with their sponsorship obligations and also with employment and taxation laws. The DIBP may engage inspectors in the monitoring process (eg to visit premises to ensure 457 visa holders are in fact working in the positions for which they have been nominated). The most common form of monitoring is a paper audit of an employer’s sponsored employee records. Audits are undertaken approximately every 6–12 months. These require an employer to provide comprehensive information on current and former employees sponsored for 457 visas to ensure that visa conditions and sponsorship obligations are being met. Examples of documentary evidence that may be requested include pay slips and PAYG statements (to ensure the salary is equivalent to market rate and income tax has been deducted). As part of the audit process, the DIBP may also contact employees to verify that the information provided is accurate. Sponsorship bar or cancellation The DIBP may decide to cancel the approval of a business to sponsor employees or bar the business from sponsoring employees for a certain period of time. The circumstances under which this may occur include where: • the business has failed to satisfy a sponsorship obligation • the business has provided false or misleading information • circumstances giving rise to a sponsorship approval no longer exist, and • there has been a contravention of the law by the sponsoring business.

¶33-070 Labour hire agreements On-hire businesses (eg recruitment agencies) are required to enter into labour agreements in order to sponsor 457 visa holders for contracting to third parties. Labour agreements are an agreement the on-hire business makes with the Commonwealth (through the DIBP and Department of Education, Employment and Workplace Relations).

Businesses seeking to enter into a labour agreement must demonstrate a significant commitment to training and the provision of professional development opportunities for Australian staff. They must also consult with the relevant industrial stakeholders (eg professional bodies and unions) in relation to the viability of the proposed labour agreement. The concerns or input of the industrial stakeholders will be relied on by the Commonwealth as a guide and do not necessarily act as a veto. Generally, the terms of any labour agreement (eg skill and salary level) will be determined through negotiation between the business and the Commonwealth. Sponsorship obligations associated with the 457 visa scheme apply to the labour hire business and not to the end user.

¶33-080 Non-business visas Temporary non-business visas are appropriate for foreign nationals who intend to enter Australia temporarily to engage in training or industry-specific employment. These visas also allow entry for foreign nationals who can contribute to the economic, cultural and social development of the Australian community. The most prevalent visas for these purposes are: • Working Holiday Visa (subclass 417): This visa is for foreign nationals of certain countries (including the United Kingdom, France, Ireland and Japan) who intend to go on holiday in Australia, but wish to supplement this with incidental work. Holders of a working holiday visa are permitted to work for any one employer for a period of up to six months. This visa is valid for 12 months, but may be extended for an additional 12 months if the visa holder works for three months in a regional area in the building, agriculture, mining or forestry industries. For immigration purposes a “regional area” is typically any area which excludes Sydney, Melbourne, Perth, Brisbane, Newcastle and Wollongong. • Training and Research Visa (subclass 402): This visa is for foreign nationals seeking to enhance their skills, experience and/or education by undertaking comprehensive workplace-based training, research or professional development activities in Australia. • Temporary Work (Entertainment Visa) (subclass 420): This visa is for singers, actors and other foreign nationals in the entertainment industry. • Temporary Work (International Relations Visa) (subclass 403): This visa is intended to facilitate the entry of persons to work or undertake an activity in Australia which serves Australia’s international relations interests (eg representatives of foreign government agencies or foreign language teachers).

¶33-090 Permanent visas Employer Nomination Scheme (“ENS”) (subclass 186) and eligibility Australian employers may sponsor skilled foreign national employees for permanent residence under the ENS. An employee is eligible to apply for an ENS Visa if they are suitably qualified or experienced for their nominated position. There are a number of additional specific requirements that must be met including those set out in the following paragraphs. Avenues of application The employee must meet at least one of the following three criteria: (1) they have worked for at least two years on their subclass 457 visa with their sponsoring/nominating employer (temporary residence transition stream) (2) they have undertaken a skills assessment by the industry body for their occupation, have met the Australian standards for their nominated occupation and have demonstrated that they have at least three years of recent post-qualification work experience in that occupation (direct entry stream), or (3) they currently receive or have been offered an annual salary of at least $180,001 (direct entry stream).

Position The employee must be offered either: • a full-time, fixed-term appointment of at least two years that does not exclude the possibility of renewal, or • a permanent, ongoing, full-time position. Age and English language ability The employee must have “vocational” English ability to apply for this visa. “Vocational” English is defined by the DIBP as a score of five in each of the four test components (ie speaking, reading, writing and comprehension) in the IELTS test. Applicants are exempt from this requirement if they hold a passport from the United Kingdom, Ireland, Canada, the United States or New Zealand. Exemptions also apply to certain applicants who have undertaken full-time studies in English. Higher English language requirements apply to applicants under the direct entry stream. Certain very specific exemptions are available based on the applicant’s occupation or annual earnings. Applicants must also be under the age of 50. Narrow exemptions are available to holders of the subclass 457 visa who have been working on such a visa for at least four years while earning a certain level of income. Employer obligations Employers are not required to meet sponsorship obligations in respect of employees sponsored for permanent residence under the ENS. It is important to note that sponsorship obligations will continue to apply during the ENS application process if the employee is the holder of a 457 visa: however, the obligations cease to apply as soon as the permanent residence visa is granted. Furthermore, the DIBP does not undertake monitoring in respect of the ENS program. Although this class of visa provides for permanent residence through sponsorship by an employer, there is no requirement that the employee remain with the sponsoring employer once permanent residence is obtained from an immigration perspective. The nexus between the employee’s visa status and employment ceases once the permanent residence visa is granted.

¶33-100 Conclusion Australia’s immigration requirements are highly complex and require a thorough understanding of the legislative regime with each visa subclass in order to determine the appropriate option for each foreign employee. This chapter seeks to capture some important issues to note when transferring foreign employees to Australia, and offers a starting point for HR. In particular, it serves to highlight not only the complex requirements for certain employment-related visas, but also the compliance measures in place to monitor the activities of employers in Australia. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶75-000. Further reading Department of Immigration and Citizenship (DIBP) — see www.border.gov.au. DIBP — Employer Hub — see www.border.gov.au/Busi/Empl/Empl. DIBP — Visa Entitlement Verification Online (VEVO) — see www.border.gov.au/Busi/Visa.

34. PRE-EMPLOYMENT VETTING Editorial information

Genevieve Auld Associate, Baker & McKenzie

The original version of this chapter was authored by Kathleen Thornton. Kathleen was a Senior Associate at Baker & McKenzie until she passed away on 21 March 2006.

¶34-010 Introduction The recruitment and selection process has, as its basic function, the appointment of an applicant who can perform the technical and behavioural competencies required by the organisation. In selecting the right person for the job, an organisation will generally require evidence of qualifications, work experience and character. Based on this information, and coupled with the interview process, a decision to appoint will be made. Most job applicants are truthful about their qualifications and work experience. However, in some cases, the law permits a job applicant to withhold certain information. This chapter outlines the various limits imposed by relevant legislation on an organisation’s ability to undertake pre-employment vetting, including background checks. For information on interviewing, see Chapters ¶10 and ¶35.

¶34-020 Background checks Background checks are generally permissible where: • they are directly relevant to the position • the applicant consents to the check, and • the questions do not relate to any of the following prohibited grounds of discrimination: – age, sex, race, marital status, disability, sexuality, sexual preference or homosexuality, religion, pregnancy, breastfeeding, colour, nationality or ethnic origin and immigration, parental status, family responsibilities, political conviction, transgender status, trade union activity, physical features (Victoria only), criminal records (although not all states prohibit discrimination on this ground — see ¶34-060), spent convictions (except where the question relates to a “genuine occupational qualification” for the job in question), medical records or HIV status. Discrimination laws vary from state to state and between state and federal jurisdictions. However, enquiries on any of the grounds outlined above, whether made of the applicant or any third party may (if relied on to reject an applicant) constitute unlawful discriminatory conduct. Therefore, they should be avoided as a matter of policy. Under both state and federal laws, it is also unlawful to harass individuals in relation to many of the

grounds listed above. Intrusive questions which relate to those grounds may amount to harassment, unless there is a proper justification for asking such questions in relation to the requirements of the job in question. To justify a request for personal information in a job application form, an organisation may need to refer to the inherent requirements of the position. For example, an organisation may not be able to ask for information relating to the health of an applicant unless it relates to the applicant’s ability to perform the inherent requirements of the position. Or — the position involves some special risk, which requires the employer to be certain about the applicant’s health.

¶34-030 Verifying résumés Checking with educational institutions and former employers to confirm that the information on the applicant’s job application or résumé regarding education, experience and prior employment is permitted where that information is relevant to the position for which the potential employee has applied. Employers should be particularly careful that any checks do not relate to information which concerns any of the prohibited grounds of discrimination set out previously. Such enquiries of the applicant or of a third party, if relied on to reject the applicant, may constitute breaches of state and federal anti-discrimination laws. Where an applicant has provided documentation (eg an academic transcript), further checking should be avoided without a good reason.

¶34-040 Reference checking Checks with a former employer are permitted. All enquiries should be relevant to the position applied for and should not be related to any potentially discriminatory matter, except where the question relates to a genuine occupational qualification for the job applied for. As a matter of practice, prior employers will tend not to provide information on formal performance reviews or the reasons for termination. An interesting issue which, to date, has not been judicially considered, is whether the provision of a referee in a job application form or résumé amounts to implied consent for the prospective employer to contact the referee. As this is not clear, best practice is to obtain consent from the applicant to check references, which may include an express statement in the application form that, by providing a referee, the applicant gives such consent. If a request for confirmation of previous employment is received, organisations should also be cognisant of the ability of an employee to sue an ex-employer for defamatory statements or negligent misrepresentation. Employers owe a common law duty of care to ensure that any reference provided about an employee is not negligently prepared. Further, if an ex-employee suffers loss as a result of a breach of this duty, or due to statements made by an ex-employer to a prospective employer, the employee may have an action in tort against the employer (see Wade v State of Victoria [1999] 1 VR 121). Most ex-employers choose to simply confirm position and dates of employment to prospective employers.

¶34-050 Criminal record checking and spent convictions Criminal records are kept by police services in each jurisdiction in Australia. An individual can obtain a copy of their criminal record and an employer can request a police check with the person’s consent. The police in most states will provide a check of the records held by the police service or a National Police Certificate which will include a check of all records held in all jurisdictions. The information that may be disclosed in a criminal record check will vary from state to state, depending on the purpose of the check, the agency requesting it, the types of offences and any relevant spent conviction legislation applying in that state or territory. Spent conviction legislation operates in all states and territories (other than Victoria) which have administrative guidelines for police on the disclosure of criminal convictions. Under the Crimes Act 1914 (Cth) and Spent Convictions Act 2000 (Cth), and also under crimes legislation in New South Wales, Queensland, Western Australia and the Northern Territory, a person is not required to disclose (for any purpose) the fact that they have been charged with or convicted of a “spent” offence. In 2009, the South Australia Parliament passed the Spent Convictions Act 2009.

An offence is “spent” if a specified period has elapsed since the conviction and the person has completed a period of crime-free behaviour. These periods vary depending on the nature of the crime, and from jurisdiction to jurisdiction. A summary of the relevant spent conviction legislation is set out in Table 34.1. The main purpose of such legislation is to allow the criminal records of offenders to be amended by removing some offences after a certain period of time. This permits an individual to start with a “clean slate” with respect to certain offences. An interviewee is entitled to treat any questions from a prospective employer regarding convictions as referring only to offences which are not spent. However, not all convictions are covered. For example, in some jurisdictions serious sexual offences and offences involving lengthy prison terms are excluded. In addition, certain types of employment (eg child care and law enforcement) are excluded. It is a criminal act in most jurisdictions for a public authority to disclose, or a person to obtain or use, information relating to a spent conviction (eg by denying a prospective job applicant employment). Exemptions are generally available only where the spent conviction relates to sexual offences against children, and the job in question involves interaction with children. For example, the New South Wales “Working With Children Check” requires the disclosure of all convictions, whether or not they are spent, and all charges which have not been heard or finalised, are proven but have not led to any conviction, or have been dismissed, withdrawn or discharged by a court.

¶34-060 Discrimination on the grounds of criminal record and spent conviction While certain conduct may be found to constitute discrimination, it is not unlawful under the Australian Human Rights Commission Act 1986 (Cth) (the Act) to discriminate against someone based on their criminal record. “Criminal record” is named in the regulations to the Act as one of the grounds under which someone can complain to the Australian Human Rights Commission (AHRC) for alleged discrimination. This ground will only relate to criminal records and not to any convictions which have lapsed. Under the Act, no specific remedies are available to an applicant in circumstances where a party was found to have breached the Act. If the AHRC finds the act or practice unlawful and the complaint is unable to be conciliated, then the Commission’s powers are limited to preparing a report with recommendations to the Attorney-General for tabling in parliament. It cannot compel a party to comply with its recommendations. Discrimination on the ground of “irrelevant criminal record” is unlawful in Tasmania and the Northern Territory , while discrimination on the ground of a spent conviction is unlawful in Western Australia and the Australian Capital Territory. Both the Tasmanian Anti-Discrimination Act 1998 (s 50) and the Northern Territory Anti-Discrimination Act 1992 (s 37) incorporate an “inherent requirements” defence, recognising that there are occasions when “circumstances relating to the offence for which the person was guilty may be ‘directly relevant’ ”. Each of these Acts also includes a specific exemption with respect to discrimination in relation to the education, training or care of children. In both Tasmania and the Northern Territory, a variety of legal remedies is available if a finding of discrimination is made, including issuing an order to not repeat the conduct, to pay compensation or to take specific action (eg reemploying a person). Table 34.1: Comparative table of legislation on spent convictions CTH

ACT

Legislation

Crimes Act 1914

Definition of conviction

• Conviction summary or

NSW

QLD

SA

Spent Criminal Criminal Convictions Records Act Records Act 2000 1991 (Spent Convictions) Act 1992

Criminal Law (Rehabilitation of Offenders) Act 1986

Spent Convictions Act 2009

• Conviction summary or

• Conviction by or before any court

• Conviction, whether

• Conviction summary or

NT

• Any conviction

indictment • Finding of guilt, but dismissed without conviction • No finding of guilt but matter taken into account in passing sentence for another offence Conviction • Sentence capable of with no becoming spent imprisonment • 30-month sentence or less • Pardon other than wrongly convicted

indictment • Charged with an offence and a court finds the person guilty

indictment • Finding of guilt/offence proved, without conviction • Order to be of good behaviour

• Offence for an offence proved • Order made without proceeding to conviction but constitutes criminal record under Act

summary or on indictment of an offence

• 6-month sentence or less (except for sexual offence, body corporate and prescribed convictions)

• 6-month sentence or less (except for sexual offence, body corporate and prescribed convictions)

• 6-month sentence or less (except for sexual offence, body corporate and prescribed convictions) • Conditional pardons (immediately upon completion of condition)

• Conviction for offence committed by an adult which a sentence of imprisonment not imposed, or a sentence of imprisonment less than 12 months • Conviction for offence committed by a juvenile when sentence not imposed or sentence less than 24 months unless conviction is: (a) a conviction of a body corporate (b) a conviction for a sex offence (unless an eligible sex offence including same sex activities) (c) a conviction prescribed by

• Sentence with no imprisonment • 30-month sentence or less

the regulations Waiting period

10 years 10 years (adult) (adult) 5 years (child) 5 years (child) NB: good behaviour bond spent on completion of conditions

10 years (adult) 3 years (child) NB: good behaviour bond spent on completion of conditions

10 years (adult) 5 years (child) NB: conviction not recorded and person discharged; conviction is immediately spent NB2: offence proved and no conviction, conviction spent subject to completion of conditions

10 years (indictable adult) 5 years (other offences/offenders)

10 years (adult) 5 years (child)

Automatic upon expiration of waiting period (subject to no further conviction)

Automatic upon expiration of waiting period (subject to no further conviction)

Automatic upon expiration of waiting period (subject to no further conviction) (Convictions of juvenile offenders convicted in an adult court become spent on application to the Police Commissioner)

Automatic upon expiration of waiting period (subject to no further conviction)

Automatic upon expiration of waiting period (subject to no further conviction) Conviction for an eligible sex offence is spent by a magistrate’s order

Commencement From the date At the end of of waiting of conviction the period of period imprisonment served

At the end of the period of imprisonment served

At the end of the period of imprisonment served

From the date of conviction

From the date of conviction (unless the person is convicted of another offence)

Consequences • Not required of conviction to disclose becoming spent that conviction or charge

• Not required to disclose that conviction • Criminal history taken to refer to convictions not spent

• Not required to disclose that conviction • Criminal history taken to refer to convictions not spent

• Not required to disclose that conviction • lawful to claim upon oath that person has not suffered conviction

• Not required to disclose that conviction • Criminal history taken to refer to convictions not spent • The spent conviction

Means by which Automatic conviction upon becomes spent expiration of waiting period (subject to no further conviction)

• Not required to disclose that conviction • Criminal history taken to refer to convictions not spent

will play no role in the application of any legislation to the person • The spent conviction cannot be used on a basis to refuse or revoke an appointment, post, status or privilege Consequences of disclosing spent convictions

• Person who knows or should reasonably know that conviction is spent should not disclose it without consent and should not take the spent conviction into account • Person may complain to Information Commissioner about a breach of the Act

• Not entitled to take into account the spent conviction when assessing a person’s character • Offence to disclose spent conviction without authority • Offence to fraudulently or dishonestly obtain spent conviction information

• Not entitled to take into account the spent conviction when assessing a person’s character • Offence to disclose spent conviction without authority • Offence to fraudulently or dishonestly obtain spent conviction information

• Not entitled to take into account the spent conviction when assessing a person’s character • Offence to disclose spent conviction without authority or for a person who knows or should reasonably know that a conviction is spent to disclose it unless in accordance with the Act • Offence to fraudulently or dishonestly obtain spent conviction information

• Offence to contravene any provision of the Act, including disclosing the spent conviction (unless under authority or permit) or breaching provisions relating to disregarding any spent conviction

• Not entitled to take into account the spent conviction when assessing a person’s character • Offence to disclose spent conviction information • Offence to fraudulently or dishonestly obtain spent conviction information

¶34-070 Job applicant’s right to silence Because a job applicant is not an employee, they do not owe fiduciary or contractual obligations of honesty to a prospective employer. It has been accepted under Australian law that an applicant is not under any obligation to answer questions put by an employer (in a job application form or in an interview)

or volunteer information, even if this would clearly influence the employer’s decision. However, if a job applicant’s silence on a particular matter is misleading when taken together with other statements, then the applicant is taken to have a duty to disclose the relevant information to avoid misleading a prospective employer. If an applicant refuses to answer a question in a job application form (provided the question does not offend anti-discrimination legislation), the employer may draw negative inferences from the refusal and rely on these inferences to not offer employment. In practical terms, an applicant may be reluctant to refuse to answer a question on a job application form as it may prejudice their application. Dishonest or misleading information An organisation may have grounds to terminate any employment offered in circumstances where an applicant has been dishonest or misleading in answering a question or volunteering information. However, it will only be able to do so in circumstances where the misrepresentation relates to an important matter which is relevant to the position. Certainly, lying about qualifications can amount to grounds to dismiss. It is also important that the information relates to a matter which influenced the decision. If an organisation has not relied on the misrepresentation in making the decision to employ the individual, then it may not operate as a ground for termination. Duty to act promptly An organisation cannot sit on information with respect to false or misleading information. Failure to act promptly once such information is discovered may result in an organisation waiving its rights to take action against the individual. Provided that the above criteria are satisfied, misrepresentation may form grounds to terminate the employment. An employer may also sue the employee for damages. These damages may include expenses which the employer has incurred as a result of employing the individual. Such costs may include training, job advertising and the use of recruitment consultants.

Case example Kim Michelle Hollingsworth v Commissioner of Police Pre-employment disclosure was canvassed in the decision of the Full Bench of the NSW Industrial Relations Commission on appeal, Kim Michelle Hollingsworth v Commissioner of Police [1999] NSWIRComm 240. Ms Hollingsworth, in both an application form and selection interview with the police service, failed to disclose that she had been a stripper and prostitute. When the police service found out, it summarily dismissed her. She sued for unfair dismissal. On appeal, the full bench held that she was not under any obligation to disclose her employment history. It held that: • she had a duty to disclose all relevant information only if asked • there was no duty to give more information than what was requested, and • there was no obligation to be frank about matters which may have disqualified her from employment other than to honestly answer the questions put. The full bench held that the onus of ensuring the potential employee’s fitness for the position lay squarely on the employer’s shoulders. The majority held that “it is the employer who properly has the task of laying down the requirements for a job and of obtaining suitable employees to perform it”.

An employer should not expect job applicants to “second-guess” what information is relevant and material to their application.

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

35. INTERVIEWING FOR RECRUITMENT Editorial information

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

¶35-010 Introduction The interview is the single most commonly used selection technique, and one that is often given the most weight. Despite its susceptibility to error in application, the interview remains almost mandatory in selection as very few employers will take the risk of hiring a candidate sight unseen. As other assessment and screening procedures become more popular (see Chapter ¶10), reliance on the interview as a single selection technique is becoming less common and organisations are, typically, interviewing fewer candidates for each position. Despite this, the interview remains central to the selection process because it provides an opportunity to engage with candidates in ways that are similar to many formal business interactions. The interview is a social interaction between the candidate and the interviewer, and provides a vehicle for judgment of social competencies such as: • sociability • communication skills • impression management • some aspects of intelligence (eg verbal fluency and ability to assimilate information quickly) • non-verbal behaviour • job and organisational fit, and • other candidate characteristics which cannot otherwise be easily assessed. Interviews can take many forms and may be structured or unstructured, and may use a single interviewer or a panel, depending on the organisation and role. Interviews can be used for multiple purposes, from eliciting facts to making complex judgments. From the employer’s perspective, the interview has two basic purposes. (1) to get information about job candidates that can be used to make a valid prediction about which candidate is likely to perform best in a job, and (2) to provide candidates with information about the organisation and job so that they can make an informed judgment about whether the organisation and the job are right for them. Most writing and research on interviewing are focused on the first purpose. According to research studies conducted over the last 70 years (Posthuma et al 2002), the various forms

of interview have widely differing levels of reliability and validity, so the potential user of the interview for selection should think carefully about the purpose, structure and form of the interview before using it to make selection decisions. For many years, research on the interview produced negative conclusions concerning its reliability, validity and general usefulness. Three broad reasons for poor reliability and validity of the interview as a selection technique have been put forward and relate to: (1) faulty processing of interview data or poor judgments (2) poorly conceived questions, and (3) poorly developed interviewing skills. More specifically, some of the common problems that can occur with interviews include: • trying to do too much (Research suggests that interviews are more effective when they try to measure only a few characteristics which can be effectively assessed in interviews, eg applied social skills.) • not considering the candidate properly in terms of job and organisational fit • lack of reliability, particularly when there are different interviewers • lack of validity, because the interview is not related to appropriate predictors of performance for the job in question (Interviews should not be used solely as a judge of mental ability. Although a good indicator of some aspects of mental ability — information processing and interpretation — the interview should not be used as a substitute for other more appropriate tests of general mental ability.) • risk of interpersonal subjectivity, which can lead to “halo” and “horn” effects, where interviewers either like or dislike one characteristic of a candidate and this biases all other judgments (A classic horn effect might relate to the dress sense, hair style or jewellery wearing habits of a younger person when they are being judged by an older person. At a more subtle level, the effect might manifest itself in stereotypical comments such as “typical engineer/IT person/salesperson”.) • possible leniency or strictness effects, where different interviewers employ varying standards to judge candidates. More recent work (Gatewood et al 2008), however, has concluded that, if designed appropriately and used correctly, the interview has a good utility and can substantially improve the quality of hiring decisions.

¶35-020 Individual interviews Despite the problems noted in ¶35-010, the individual interview provides the best method for establishing close contact between interviewer and interviewee. As such, it is considered the best way of getting to know a candidate. However, because of this closeness, the individual interview is also vulnerable to high levels of subjective bias and research suggests only a moderate validity for individual interviews, especially those that are unstructured. Often, for reasons of cost, individual interviews are used for screening purposes. Where this is the case, the research suggests reliability is increased if individual interviews with different candidates are based around common questions. Many organisations conduct a cull after the initial individual interview, and ask the preferred candidate(s) back for a second interview (and sometimes a third). These subsequent interviews will often involve more senior management and structured approaches which address any gaps in knowledge about the candidate’s capabilities and experience that were identified after the first interview. They will also give the candidate(s) more exposure to the organisation, and vice versa.

¶35-030 Panel interviews

Where more than one, and often several, interviewers participate in an interview (typically a supervisor and/or line manager together with a human resources (HR) representative), this is often referred to as a panel interview. Panel interviews are more commonly used by larger entities, including educational and public sector organisations. The obvious advantage associated with a panel interview is the opportunity for interviewers to share information and modify superficial judgments in the light of alternative viewpoints. The disadvantage is time (and cost) to panel participants.

¶35-040 Structured and unstructured interviews Other interview options relate to structured and unstructured interview formats. In an unstructured interview, interviewers will ask any questions that seem appropriate and will delve into different areas with different candidates. In a structured interview, by contrast, interviewers will use a disciplined process to conduct the interview based on job analysis. Typically, interviewers will ask the same questions of all candidates and base these questions on jobrelated behaviours. In addition, interviewers will use a thorough and standard format for recording responses. The advantage of the structured interview is that it provides a common basis for comparison between the candidates. Research studies indicate that structured and panel interviews are generally more reliable and valid than unstructured individual interviews (Judge et al 2000). Other methods that are known to increase the reliability of interviews are: • the standardised and systematic recording of scores or judgments by interviewers as the interview progresses • training to teach interviewers better rapport building and follow-up question skills to elicit better quality information, and • asking questions that are relevant to the job. This is the basis of behaviourally-based interviewing, which will be discussed in more detail in the following paragraphs. Behaviourally-based interviewing Behaviourally-based interviewing, sometimes known as situational interviewing or by proprietary terms such as DDI’s “Targeted Selection”, is based on the idea that past behaviour and performance are the best predictors of future performance, and that past behaviour can be closely examined via a structured interview based on: • questions built around critical elements of job-related behaviour • questions aimed at revealing in some detail how candidates have handled situations and tasks involving similar competencies to those of the job in question, and the results of those actions, and • questions that unearth the true nature of the candidate’s knowledge, behaviours, motivation and values. As reported by Pulakos and Schmitt (1995), interviews based on behavioural, rather than situational, criteria (ie on what candidates really did in past situations rather than what they might do in hypothetical future situations) had higher levels of predictive validity. The process of conducting behavioural interviews begins with the construction of a list of competencies or critical incidents (see earlier examples in Chapter ¶10) that are specific to the job in question and are deemed central to effective performance in a particular job. These incidents are then allocated to a specific interviewer for investigation in the interview process. Behaviourally-based interviews should always involve at least two interviewers. For example, an HR manager may decide to probe a candidate’s leadership experiences, while a line manager may question the candidate on product familiarity, customer service orientation or technical knowledge. Within the competency framework for the job, the interviewers will question the candidates about their qualifications and skills, about specific experiences where they have used the skills and the results of this

usage, and about the underlying motivations behind their actions and behaviours. An example of this is where an organisation is looking to select a new salesperson and two of the key dimensions are “tenacity” and “persuasiveness”. The behaviourally-based interview should be built around getting the candidates to talk about situations where they were required to exercise these competencies in previous jobs. The interviewers would probe in detail to ascertain exactly what the candidate did/said using these competencies in specific circumstances and what happened as a result. Typical questions on persuasiveness might follow a sequence similar to that set out below, where each question probes further into the detailed actions, consequences and underlying motivations of the candidate: • Describe a situation where you had to overcome extreme buyer resistance to get a sale. • What was different about this situation? • What objections did the client raise? • How did you answer these? • How did you feel in response to the client’s negativity? • What did you say next? • How did you close the sale? • What was the result of your action? • How did you feel at the close and why? In some ways, the behavioural interview almost becomes a role play of the candidate dealing with an actual work situation, and this can indeed be made to happen by the interviewers interposing “what if?” types of questions or putting “behavioural event” types of questions to candidates that relate directly to the job (eg asking candidates what they would say to a difficult customer who shouted at junior employees). In this way, “real” behaviours can be observed and any pretence on the part of the candidate can be brought to the surface. As the interview proceeds, the interviewers should note or rate the responses to each dimension as these are explored. Once this has been done systematically with each candidate, notes and/or scores can be compared for all candidates. Whatever type of interview is used, the advice in Table 35.1 should be followed. Also useful here is the material in Table 35.2 on interviewing skills. Table 35.1: What to do and what not to do in interviews What to do • Plan the interview and specific questions to ask candidates

What not to do • Start without preparation

• Intimidate candidates • Encourage candidates to talk — for about 70% of the time • Talk too much • Stick to the structure and timing in the plan

• Ask leading or closed questions

• Probe in-depth in key areas — begin with open questions and then focus on key behaviours and actions taken by candidates and the results of these actions

• Allow the candidates to over-generalise about their achievements without specifics • Jump to conclusions about suitability of candidates too early in the interview

• Try to unearth the candidate’s knowledge, behaviour and motivations

• Allow “halo” or “horn” effects to bias your judgment

• Focus on real past events and behaviour • Be clear about the next steps

• Leave an unfavourable impression of your organisation

• Maintain the candidate’s self-esteem Table 35.2: Interviewing skills — listening, questioning and note-taking Listening

• Allow the applicant to qualify any answers. It is extremely difficult to give an accurate, relevant or satisfactory account of one’s life in 10–20 minutes. Applicants should be allowed to talk freely about themselves and their careers. • Allow the applicant to do most of the talking — after all, they are the one being assessed — but be sure to fully answer any questions. • Give full attention to applicants, without distraction. Do not allow them to gloss over major facts. • Listening is the opportunity to assess speech and vocabulary. • Emotions will be revealed by the tone of answers, adding an extra dimension to their meaning. • Clues to further and deeper questions may result from answers. For example, if an applicant mentions starting a course, it would be useful to know whether it was completed or passed. • Listening allows careful evaluation of words. If an applicant claims to have held a managerial position, you need to know exactly what this implied in terms of duties and responsibilities. • Avoid displaying unfavourable reactions to answers. Fear of rejection by the interviewer may result in applicants only providing information they think will please the interviewer, rather than honest information. • If applicants are able to express “unfavourable” information without criticism or blame, they may be encouraged to open up and the interview will be more successful. • A pause by the interviewer can be judiciously used as a means of persuading the applicant to elaborate or continue. Silence is generally interpreted as a request for more information. If this does not work, gentle prompting will probably have the desired effect. • The interviewer’s posture and facial expressions should be communicative and encouraging, yet without bias. This requires practise and self-control.

Questioning

• The application form is often used as a basis for probing areas which seem inconsistent or unfavourable. Raising such matters enables the applicant to clarify or explain, possibly to their advantage. If unfavourable, there is a chance for the applicant to be tactfully shown that they are not a suitable candidate, or an opportunity for the applicant to turn the job down, thereby preserving self-esteem. • In the interest of maintaining rapport, the interview should begin with easy questions and gradually build up to more difficult or searching ones. Hard questions asked early may break down the interview relationship. • Use open-ended questions, which allow applicants to express themselves and not just answer “yes” or “no” (eg “Tell me about your previous job” is likely to

reveal more information than “Did you work for Smith and Co?”). • A useful guide is to commence questions with “what”, “why”, “when”, “where” or “how”. • Do not ask leading questions that imply what the answer should be (eg “You did not like being a sales rep?” suggests the response “No”, whereas “How did you feel about being a sales rep?” is a more impartial question). • Ask only one question at a time. This will save both parties from becoming confused and missing vital areas (eg “Tell me about your last job and why you left” should be divided into two questions with appropriate time spacing). • An interviewer who wants the applicant to elaborate further can use either the pause technique or else prompt in a questioning tone (eg “You mentioned other responsibilities?”). • Make sure the exact meaning of the question is clear by using simple and appropriate words. Do not use technical terms and jargon unless both interviewer and applicant understand them. • Frequent questions by the interviewer suggest interest in the applicant and should be used with this in mind. • An interviewer must learn to be appreciative of almost everything the applicant says or does, and search for responses that assure the interviewee that they are saying the right things. An example of a comment might be: “That’s unusual but very interesting. Tell me more about it”. Note-taking

• Note-taking supports the recall of interview details, particularly if there are a large number of applicants for a position. Some of it must be done during the interview. • Permission to take notes should be obtained from the applicant at the start of the interview. • Note-taking should be continuous and discreet. Continuous recording also implies that the interviewer is interested in everything the applicant says. • Do not write too much during the interview, otherwise both concentration and rapport will be lost. • If working from an application form, a code or shorthand recording may be useful.

As noted earlier, research on behaviourally-based interviewing suggests that it is a more valid selection method than standard interviewing and many other selection methods. It is, therefore, recommended as a relatively cost-effective method of selection interviewing with a good level of validity as a predictor of job performance.

¶35-050 Conclusion In conclusion, the recommendations about the appropriate use of interviews from the authoritative work of Gatewood et al (2008) should be borne in mind when organisations are about to undertake interviewing activities: • Use interviews to focus on the most relevant job dimensions. • Use the more reliable structured approach with common questions. • Use only job-related questions and follow-up probes. • Rely more on interviewing panels rather than single interviewers.

• Use formal and standard scoring methods. • Finally, ensure that interviewers are appropriately trained and prepared. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Gatewood RD, Field HS and Barrick MR 2008, Human Resource Selection, 6th edn, South-Western, Cengage, Mason, OH. Judge TA, Higgins CA and Cable DM 2000, “The employment interview: A review of recent research and recommendations for future research”, Human Resource Management Review, 10(4), pp 383–406. Posthuma RA, Morgenson FP and Campion MA 2002, “Beyond employment interview validity: A comprehensive narrative review of recent research and trends over time”, Personnel Psychology, vol 55(1), March, pp 1–81. Pulakos ED and Schmitt N 1995, “Experience-based and situational questions: studies of validity”, Personnel Psychology, vol 48(2), June, pp 289–309.

36. INDUCTION Editorial information

Lee Beyer HR Consultant

¶36-010 Introduction Starting a new job is a daunting experience, regardless of a person’s previous work experience. The first 90 days of employment is a critical period as this is when new employees form their impression of and attitude towards their new employer. Induction is a critical development program, yet many employers undervalue its significance in fostering employee engagement and mitigating early labour turnover. What is induction? Induction is the process of providing information, guidance and support to new employees to enable them to adjust to a new environment and begin productive, meaningful work as quickly as possible. Induction should be a structured program that is implemented consistently across an organisation to provide orientation, organisational knowledge and on-the-job training. It should be conducted in developmental stages and be followed up with regular progress evaluations. The period over which induction is conducted will vary depending on the role and the organisation; but it should not be considered complete until the employee has been successfully integrated into the workplace and is achieving an acceptable level of productivity. This applies not only to new starters, but also to existing staff members embarking on new roles within an organisation through promotion or transfer.

¶36-020 New starters/early leavers A person’s decision to accept a job offer is based on all the information available to them at the time; however, it is not until they actually begin work that the realities of their decision become known. Even when a job offer has been accepted, an employer’s efforts to secure that person as a long-term employee are far from over. Just as the probationary period is designed to assess an employee’s competence and professional behaviour before making a commitment to their ongoing employment, induction is the employee’s opportunity to assess the organisation’s suitability before committing themselves. A product of an absent or weak induction program is early turnover. According to the Aberdeen Group, 86% of new hires decide to stay or leave a company within their first six months, and new employees are 69% more likely to stay longer than three years if they experience well-structured onboarding (Willyerd 2012). According to the National President of the Australian Human Resources Institute (AHRI), the common complaint made by departing workers at exit interviews is that there was no induction and they were thrown in at the deep end (White 2011). Staff turnover bears a high cost to business. Early labour turnover is especially costly as the company has not yet seen a return on their investment. For an

average mid-level manager, the estimated “break-even point” (ie when a new starter starts to contribute more value than they have consumed) is usually 6.2 months (Watkins 2003). Consider these direct and indirect costs of early turnover: • Recruitment: Initial advertising expenditure and recruitment costs, time and effort will not have been recouped and will be doubled by having to repeat the process. • Loss of productivity: Duties/priorities of other staff members will need to be reorganised to cover the duties of early leavers. • Impact on morale: Existing employee engagement levels may be affected if their organisation is unable to hold on to new employees. • Temporary replacement: Temporary staff may be hired to fill the gap, bearing an additional cost to the company. They will need to undergo initial training and, depending on the nature of the work, may be unable to work on long-term projects, thus affecting productivity further. • Adverse publicity: Advertising the same position within a short period of time creates a poor impression of the organisation to job seekers and industry competitors. • Competitor advantage: An early leaver may go directly to a competitor business with insight into company weaknesses.

¶36-030 Effective induction An effective induction program prepares a new starter to succeed in their role. To be effective, an induction program should: • deliver consistent messages through a number of communications channels • present networking opportunities • encourage feedback, and • be continually evaluated. According to the Corporate Leadership Council (Corporate Executive Board 2004), key aspects of onboarding which drive the overall engagement, performance, and retention of new hires include: • clearly explaining job importance • teaching about organisational vision and strategy, and • teaching about the group or division. Connecting the dots From day one, induction should serve to connect the dots for a new employee so they understand the importance of their role and how their role fits into the broader organisational strategy and objectives. Paint a picture A company’s mission and vision statements are often aspirational, motherhood-type statements. They may not mean much to a new starter, except that their new employer is striving for good things. Story telling is one of the most effective ways to convey a company’s mission and vision as it captures the imagination and showcases what employees are actually doing to achieve the corporate vision. Such stories help strengthen workplace culture because they paint a vivid picture of an organisation’s values and norms in action (Lee 2006). Encourage feedback

New starters should be encouraged to provide details about themselves, ask questions, and provide feedback on what they experience. This exchange of information will enable the organisation to learn about the employee, identify their areas of need, and provide appropriate information and assistance. By encouraging information from the new employee, the organisation will be able to review and improve existing induction procedures. It is an ideal opportunity for an organisation to gain insight into policies and procedures generally. Areas in need of improvement are likely to be more obvious to new staff. Showing consideration for and adopting feedback is an excellent way to demonstrate to a new employee that they are valued and cared for. Buddies Standing out as “the new person” can be an added source of anxiety for a new starter. Company culture, or “the way we do things around here” (Fowler 1999, p 1), is an important concept for any new employee to grasp in order to feel comfortable in their new role. A buddy program is an effective way to informally introduce new employees to the conventions and customs of their new workplace. Buddies can also assist with social integration by introducing new starters to other people in the organisation on an informal level. The need for social interaction in the workplace should not be underestimated. Feelings of rejection or exclusion from private social groupings have a profound effect on an employee’s wellbeing and performance. Failure to integrate socially at work is not an uncommon reason for early resignation (Fowler 1999). Buddies are discussed further at ¶36070.

¶36-040 A blended learning approach An induction program should use multiple communications channels to convey information and training. This will make induction more engaging for new starters and also take the pressure off any one person being the designated “hand-holder”. Pre-commencement Many organisations make online induction resources available to new starters prior to the actual commencement date. This provides a “sneak peak” into company culture. New hires can learn about the company’s history and vision, watch videos of senior leaders delivering welcome messages and describing the company mission, values and vision, and hear testimonials from other employees. Online resources are also useful to provide information on housekeeping matters such as office location and parking arrangements. This type of information can go a long way towards easing first-day jitters. Having access to online resources prior to commencement means a new hire can learn at their own pace, and will not be so prone to information overload when they start work. It also ensures the new hire will feel a sense of commitment to their new organisation, even before they have walked in the door. Online training Delivering training via online learning modules can be a cost-effective training method. The benefits of delivering online training are that new hires across the board receive consistent messages, regardless of geographical location and role. Participants are able to learn at their own pace and have their knowledge assessed as part of the process. Many companies provide online mandatory compliance training so accreditation can be tracked for auditing purposes. Businesses can purchase generic online courses from learning and development providers and pay to have them tailored with their own company logos. Some companies develop their own learning modules. Regardless of who develops learning modules, they cannot be part of a “set and forget” program. A program needs to be regularly reviewed to ensure that is up to date with regard to legislation and organisational change. Social media Many companies are using social media platforms (eg Facebook, Google+ and Yammer) internally to enable staff to connect and share information more easily. Social media platforms are especially useful

where teams are not co-located. Social media provides an excellent platform for new starters to access vast amounts of information, have questions answered and build networks. New starters can join an online community of other new starters, tap into colleagues with similar jobs, and ask questions without having to constantly go to their immediate colleagues. The platform itself serves as an organic database, where new starters can browse past topics of conversation. Social media tools canvass a broad audience and elicit immediate responses, which all serve to improve new starter productivity. More information on social media, networking and the workplace is covered in Chapter ¶24. Face-to-face time Managers cannot underestimate the importance of ensuring enough time is devoted to face-to-face time with a new starter. It is the manager’s job to fully explain role responsibilities, objectives and performance expectations. While written materials are good to leave someone to work through, these must be followed up with regular check-ins to see if the information is being understood. Group induction Group induction is a great way for new starters to meet other new people and establish their own networks and camaraderie. A group induction event is a good opportunity for time-poor senior executives to meet new starters and speak about the company vision and strategy. Having the organisation’s vision/mission explained by senior executives will make new starters feel valued and will contribute to their understanding of and commitment to the workplace. Induction events may also involve presentations from subject matter experts. Departmental representatives can provide specific information such as advice on legal compliance, occupational/work health and safety, information security, records management and so on. Linking a face with policies and procedures can assist new starters to better retain information and will encourage buy-in. It will provide new starters with a contact name if they need assistance in these areas. Socialisation activities Socialisation activities are designed to bring an element of fun to workplace navigation. These activities are a good opportunity for new employees to bond with others while working toward a common goal (eg a scavenger hunt). In the example of a scavenger hunt, employees are tasked with obtaining objects or information from across the business. New employees are then exposed to a variety of areas. Ice-breaker activities are also useful in providing new starters with a structured format to meet new people from teams other than their own.

¶36-050 A shared service across the business A common misconception about induction is that it is a one-off training event conducted solely by the human resources (HR) department. Ideally, induction should be carried out in stages and involve people from across the organisation. Importantly, it requires major commitment from supervisors/line managers. Human resources With regard to induction/onboarding, HR’s primary responsibilities revolve around recruitment and administration. This department also designs the induction program and associated documentation (eg intranet resources), and regularly evaluates the induction program to ensure it is meeting organisational objectives. HR is also responsible for ensuring that line managers have the necessary skills and training to identify new starter developmental needs and deliver induction effectively. Induction training may include communication skills, such as giving and receiving feedback. Line managers Line managers “own” the induction process. They have a comprehensive understanding of the requirements and expectations of the new starter’s role and can identify training and development needs. Line managers are also best placed to offer ongoing feedback and support to new starters.

Line managers will likely be responsible for conducting performance appraisals in conjunction with probation requirements. As part of induction, the organisation’s performance management framework should be explained in order for new starters to understand the work outputs (key performance indicators) and behaviours expected of them. Training and development plans should also be created at this time. As well as conducting formal performance reviews, line managers should meet regularly with new starters for informal feedback sessions. Colleagues Induction is also an ideal opportunity for existing staff members to gain valuable management experience by coaching/mentoring new employees. See Chapter ¶47 for more information on coaching and mentoring.

¶36-060 Performance management The performance of new employees is regularly appraised throughout the probationary period. As such, the organisation’s performance management framework should be comprehensively explained in the induction program so that new employees know how regularly their performance will be assessed, in what format the assessment will take place, and what performance standards will be used. It is important that expected work outputs and professional behaviours are articulated by the line manager in the early stages of induction so new employees have a clear idea of performance measures. Formal performance reviews should be supplemented with regular informal discussions between the line manager and the new employee. These discussions can help to identify possible inadequacies in the induction program so that additional information or training can be provided when required, rather than waiting for formal sessions. Regular feedback and guidance sessions in the early stages of employment provide new employees with an opportunity to raise concerns and seek clarification as matters arise. Regular check-in sessions also act as a morale booster for new employees by demonstrating that their development and comfort in the workplace is important to the organisation.

¶36-070 Buddies Assigning a buddy is a useful way to provide an informal support mechanism for new employees. The buddy can provide an informal introduction to the workplace and assist in social integration. The buddy should be an experienced staff member of an equal or higher level of responsibility. Importantly, the buddy provides an avenue for answering questions that the new employee may not feel comfortable in asking their supervisor. New employees are particularly receptive to the atmosphere in their new workplace. Whether consciously or not, personal attitudes may be conveyed when information is presented, and a negative attitude will not go unnoticed. Care should be taken when selecting an appropriate buddy. Choose a team member with good communication skills and a positive attitude. It may be prudent to develop some documentation to clarify what issues are appropriate for buddies and mentors to deal with, and what issues are not. The role of the buddy is to provide a friendly face and point of contact outside the new starter’s work area for general day-to-day queries. It should be made clear that a buddy is not: • the new starter’s manager or supervisor and, as such, is not in a position to allocate work, or resolve or adjudicate issues/conflicts • responsible for the new starter’s performance, or • responsible for the new starter’s professional development.

¶36-080 Getting the simple things right If you don’t have the budget for online induction portals or videos — don’t worry. Effective induction programs do not need to be expensive or elaborate to engage new starters. Getting the basics right will

go a long way. Being friendly and welcoming is free, as is answering questions with patience and understanding. Ensuring you have adequate time to spend with a new starter and encouraging their feedback will foster goodwill. Other simple steps: • Alert your colleagues that you have a new starter commencing. Inform immediate team members so they are not taken by surprise when introduced to the new person but, rather, offer them a warm welcome. Include also your reception/security personnel. • Take the time to provide an overview of how the new employee fits in with the rest of the team, how the team fits in with the department, and how the department contributes to the overall organisation. • Show the employee you are prepared for them. Ensure that a workstation, phone and computer are ready to go. Contact the IT department so that the new employee can be set up on email and telephone systems prior to their arrival. • Give the new employee a task to start working on that is relevant to their ongoing work. This will ensure the employee is being productive and feels useful from the start. The task should be easily achievable, yet meaningful.

¶36-090 Evaluation of the induction process Evaluating the induction process is essential to establishing and maintaining a program’s effectiveness. Regular evaluation will assist in the program’s continuous improvement and ensure its relevance to the current environment. Evaluation should address two aspects: namely, the usefulness of the induction program to the: (1) new starter, and (2) organisation. Evaluation should be used to determine the following: • Does the employee feel confident in their work? • Have their needs been adequately met? • Has the employee reached an acceptable level of productivity? The answers to these questions can be ascertained on an individual level through regular informal meetings between the supervisor and the employee. Honest and frank feedback should be encouraged. Ensure any issues that are raised are followed up quickly. Along with check-in sessions, participant evaluation can be sought via formal questionnaires/surveys issued at the completion of various stages of induction. Possible survey questions include: • What information would you have liked to receive during induction, but didn’t? • How much information was actually remembered on the job? • Were your initial questions answered adequately? • Was anything confusing or overwhelming? • Was the delivery engaging? • Was the content relevant to your job? In addition to employees, feedback should also be sought from others who were involved in the induction

process (ie supervisors, managers, mentors, trainers and so on). As with any other training exercise, management is unlikely to buy into and invest in induction if there is no evidence of return on investment. The effectiveness of an induction program can also be measured by: • new employee productivity • new employee retention rates • positive performance review reports • customer feedback • error rates, and • absenteeism rates.

¶36-100 Conclusion As shown throughout this chapter, a well-planned and professionally conducted induction is the most effective way to transition a new starter into a productive, engaged employee and retain them beyond their probation period. Well thought out and supported induction programs reflect favourably on the organisation as a whole. They also offer new employees the assurance that their decision to join the organisation was the right one. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References and further reading Corporate Executive Board 2004, New Hire Onboarding Activities, Corporate Leadership Council, accessed 15 June 2013, see http://clc.executiveboard.com/Members/Popup/Download.aspx? cid=6802062. Fowler A 1999, Induction, Institute of Personnel and Development, London. Lee D 2006, “All Aboard! Does Your Onboarding Process Lead to Employee Engagement or Buyer’s Remorse?”, HumanNature@Work, accessed 16 July 2013. Meighan M 1995, How to Design and Deliver Induction Training Programmes, 2nd edn, Kogan Page, London. Tilling M 1999, The Induction Organiser, Gower Publishing, Hampshire. Watkins M 2003, The First 90 Days, Harvard Business School Press, Massachusetts. White L 2011, “Proper introductions”, Management Today, article, Australian Institute of Management, Jan/Feb, accessed 14 June 2013. Willyerd K 2012, “Social Tools Can Improve Employee Onboarding”, Harvard Business Review: HBR Blog Network post, 21 December, accessed 14 June 2013, see http://blogs.hbr.org/cs/2012/12/social_tools_can_improve_e.html.

37. INDEPENDENT CONTRACTORS Editorial information

Michael Michalandos Partner, Baker & McKenzie

¶37-010 Introduction Workers are generally engaged to perform work as either independent contractors or employees. In the last 20 years, independent contractor arrangements have become very popular. Workers are becoming more attracted to the independence, diversity of work opportunities, and usually higher rates of pay that are often associated with contractor status. Employers are also progressively more disposed to engaging independent contractors because these arrangements are more flexible and less regulated than employment relationships (and, on occasions, an insidious way of reducing head count restrictions). Contractors are not covered by the award system, are not entitled to the benefit of the National Employment Standards (NES) (including leave entitlements and redundancy payments), and also do not have access to unfair dismissal rights. However, employers should take care when engaging independent contractors to perform work usually reserved for employees for the following two reasons: (1) As employment arrangements become increasingly complex, the demarcation between independent contractors and employees is becoming less clear, and the consequences of misclassification are quite serious. (2) Even though contractor arrangements are less regulated than employment relationships, there are still a number of very important rights which accrue to independent contractors. These are discussed later in this chapter.

¶37-020 What is the difference? The distinction between a contractor and an employee has plagued employers for decades, and the courts have consistently failed to establish a simple test. One of the tests often cited in decisions about the distinction is the “elephant test”. It posits that an independent contractor is like an elephant, an animal which is too difficult to define but easy to recognise when you see it (eg Bromberg J in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366). But, in the same way that elephants have trunks, independent contractors do have a number of important distinguishing features. At the very core of independent contractor status is the concept of “independence”. An independent contractor is a person (or entity) who conducts a truly independent business of providing services to a section of the public or the public at large. Contractors are usually engaged to complete a specific task or project, are given a large degree of control as to the manner in which the services are provided, pay for their own expenses, and take the risk of making a profit or loss on each job. In the On Call Interpreters and Translators Agency Pty Ltd decision, Bromberg J of the Federal Court put it this way:

“A genuine independent contractor providing personal services will typically be autonomous rather than subservient in its decision making; financially self reliant rather than economically dependent upon the business of another and chasing profit rather than simply a payment for the time, skill and effort provided.” A classic example of a contractor is a plumber. You pay the plumber to unblock your pipes, and you don’t tell him how to do his job. Once you pay him, he will then leave you and perform the same work for another client. In contrast, the employment relationship is one of dependence and subservience. After all, the concept of employment grew from the master-servant relationship. Employees are still expected to “serve” the employer by complying with the employer’s lawful directions and perform the work personally. Employees are usually engaged to perform a role or assume a responsibility within an employer’s organisation, rather than perform a specific task. They do not generate their own goodwill or have their own clients, but the employer will reimburse them for all expenses incurred in relation to their work for the employer. The distinction between an employee and a contractor depends on the substance of the relationship and not the form in which it is clothed. Employers often become unstuck when they attempt to create an independent contractor arrangement simply by labelling a person who works for them as an independent contractor and signing a formal independent contractor agreement. This will not work. Although a court will have regard to the existence of an independent contractor agreement, it will not be an influential factor when all other factors point to an employment relationship. As eloquently put by his Honour Justice Grey of the Federal Court in Re Application By Donald Alexander Porter of An Inquiry Into An Election In the Transport Workers’ Union of Australia [1989] FCA 226; (1989) 34 IR 179: “the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.” The fact is, it is very difficult to convert employees into contractors. This is because an independent business does not grow overnight, and it usually includes tangible elements such as clients, business cards, advertising, websites and offices. It is also important to note that, in determining whether or not a worker is an independent contractor or an employee, the courts will look at a number of disparate factors. No single test or indicia is conclusive, and the courts will consider in each case whether or not the relationship is more closely aligned to employment or independent contractor status. Following are some key tests and indicia which the courts will consider in their review. Control test The “control test” has been the predominant test up until recently. This test is based on the proposition that employees are subject to a greater degree of control, as opposed to contractors. In applying this test, the courts will look at the following three matters: (1) when and where the work is to be performed (2) designation of the actual work to be performed, and (3) the manner in which the work is to be carried out. When and where the work is to be performed Employers control the hours within which their employees must perform the work. These hours are usually fixed in the employment agreement. Maximum hours are also regulated by the NES. Further, the work is usually performed at the employer’s workplace, or at other locations as assigned by the employer. In contrast, independent contractors usually have a greater discretion as to when and where they will perform their work. Designation of the actual work to be performed

Employees are engaged to perform a broad range of duties which fall within the general nature of their position and are assigned specific tasks from time to time by their employer. Independent contractors are engaged to perform a task or project, or achieve an end result, which is usually agreed in advance in an independent contractor agreement. The manner in which the work is to be carried out Employers usually have greater control to direct their employees as to the manner in which their work is performed. Employees are also required to perform the work personally and cannot unilaterally assign their work to others. Independent contractors usually have a large degree of control over the manner in which they perform their work. This means that they are generally not supervised and are not subject to human resources (HR) policies, practice manuals or performance guidelines. Independent contractors usually have the right to delegate the work to employees or subcontractors. The control test is often difficult to apply. For example, casual employees often have as much flexibility in terms of their engagements as independent contractors. Further, where an employee is engaged to perform a highly skilled task, an employer may not have the practical ability to control the manner in which the employee performs their work. In these cases, the courts tend to look at control over “fringe issues”.

Case example Zuijs v Wirth Brothers Pty Ltd A low tech but classic example is contained in the decision of the High Court in Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561. This decision involved a trapeze artist, Mr Zuijs, who suffered a nasty accident while on the job. Mr Zuijs asserted that he was an employee of the circus so that he could access workers compensation benefits. A key problem for Mr Zuijs was that the circus owner did not (and could not) exercise any direct control as to how he performed his work because he was a skilled artist. However, the High Court still found that he was an employee and not a contractor because Mr Zuijs was subject to the circus owner’s control in all other aspects of his performance, such as the costumes he wore, where he got dressed, when and where he conducted his rehearsals, and what safety measures had to be observed. The High Court held that, in this instance, the critical issue was whether the circus owner had the right to “command” Mr Zuijs, to the extent that there was scope for it.

Other tests More recently, the courts have shifted to focusing on multi-layered tests, which consider whether or not the worker is part of the organisation of the principal (in which case the worker is more likely to be an employee) and also other assorted factors. These are discussed briefly below. The organisation test Factors which would lead to the conclusion that a worker is an employee under the organisation test would include the following: • The worker is engaged at the offices of the principal and uses the resources and facilities of the principal. • The worker works closely with other employees. • The worker manages the employees of the principal. • The worker represents the principal and may enter into agreements on behalf of the principal.

• The worker attends the internal meetings and functions of the principal. • The worker has access to the principal’s intranet. • The worker wears the uniform of the principal or has a business card of the principal. • The worker holds offices or undertakes roles which are internal roles (eg supervisor, fire warden or employee representative). Factors which may lead to the conclusion that a worker is a contractor under this test would include the following: • The worker maintains independent offices. • The worker operates a business under a business name. • The worker possesses all the trappings of an independent business, including separate insurance, business cards, letterheads, a public website, advertising material and intellectual property. • The worker engages its own employees. • The worker provides services to multiple clients at the one time and holds goodwill with these clients. • The worker is not required to perform work exclusively for the principal. • The worker pays for his/her own insurance. Other factors Other factors which may lead to the conclusion that a worker is an employee include the following: • The worker is paid remuneration, even when they take leave. • The worker is provided with a motor vehicle or other tools of trade by the principal. • The principal has agreed to pay for the expenses of the worker. • The arrangement is for the long term. • The worker receives “employee” type benefits. Other factors which may lead to the conclusion that a worker is a contractor include the following: • The worker is paid on a results basis for the completion of the task. • The worker is paid fees after issuing invoices. • The worker pays for his or her own expenses.

¶37-030 The use of corporate “middle men” Other important criteria in determining the status of a “worker” include whether or not the worker is providing services directly or through an intervening corporate entity. This is because an employee must be a natural person, and employment will not arise unless there is an agreement directly with the employee. One method which organisations commonly use to avoid employer obligations is to engage workers through a “middle man”, such as a family company or a labour hire company. However, this is not a riskfree arrangement. The courts have been prepared to look behind the corporate veil, where all indications suggest that the

true agreement is with the worker and the employer is attempting to avoid employment obligations. A “sham” may be present where the entity has no assets, no pool of clients, and consists of one person who performs work for one principal on an ongoing basis. It may also present itself where the intervening entity is simply a conduit for paying the employee, and exercises no control over the work performed by the employee.

Case example Jamie Orlikowski v IPA Personnel Pty Ltd In Jamie Orlikowski v IPA Personnel Pty Ltd [2009] AIRC 565, the Australian Industrial Relations Commission allowed a worker engaged through a labour hire company to perform work for a client and to join the client to unfair dismissal proceedings. SDP Lacy accepted that the arrangement was “payrolling”: that is, the labour hire company was simply a conduit for paying wages, while actual control of the worker remained with the client. Employers should be particularly wary when they transfer employees to a labour hire company, only to have them contracted back to the employer to perform the same work.

In Taxation Ruling TR 2013/1, which principally dealt with cross-border arrangements, the Australian Taxation Office (ATO) specifically addressed circumstances where workers were transferred to a labour hire agency. The ATO posited that the court’s “substance over form” approach may lead to a conclusion that the true employer is not the labour hire entity (ie the entity which is specified in the written contract of employment with the employee), but the client of the labour hire agency. This may occur where: • the conduct of the parties is not consistent with the terms of the written contract of employment or another contract with the third party, including instances where such terms are ambiguous, or • under the contractual terms, the true nature of the relationship(s) between the parties is misrepresented or disguised. The ATO gives an example of a construction company (Construct Co) which transfers an employed engineer to a labour hire company. The labour hire company engages Kevin on similar terms and pays Kevin on time sheets provided to both the labour hire company and Construct Co. Under a separate contract, Construct Co pays the labour hire company the amount of Kevin’s remuneration, travel expenses, and other employment benefits and charges plus a labour hire fee. Construct Co has the right to determine whether, where and when Kevin will work, and provides Kevin with the necessary tools and equipment to complete these tasks. The moral of this example is that, for tax purposes, Kevin’s employer will remain Construct Co because, in substance and reality, the relationship between Kevin and Construct Co has not been altered by the interposition of the labour hire company.

Case example Damevski v Giudice The ATO position reflects the decision of the Full Court of the Federal Court in Damevski v Giudice [2003] FCAFC 252. In this case, the Full Court of the Federal Court found that — despite the existence of a written contract between a company and a labour hire company, which provided cleaning services — the true agreement was between the employer and an individual cleaner. This was because the labour hire company did nothing more than receive wages, while the employer continued to direct the cleaner.

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd The issue was dealt with by the High Court in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45. In this case, two housekeepers were employed by Quest South Perth Pty Ltd for a number of years. Quest claimed that the employees became independent contractors when they entered a “triangular contracting” arrangement. In this arrangement, the housekeepers were engaged as independent contractors by a company called Contracting Solutions, and Contracting Solutions provided the services of the housekeepers to Quest under a labour hire agreement between Contracting Solutions and Quest. However, the change in the arrangement did not affect the work the housekeepers did for Quest, in fact their role was “precisely the same”. The High Court held that the housekeepers remained employees of Quest under an implied contract of employment between Quest and each housekeeper. In doing so, the High Court affirmed that s 357 of the FW Act encompasses “triangular” sham contracts involving third parties.

¶37-040 Prohibitions on sham arrangements The Fair Work Act 2009 (Cth) (FW Act) provides civil penalties to employers who are covered by this federal law and who engage in sham independent contracting arrangements. A person will contravene the FW Act if they do any of the following: • Misrepresent an employment relationship as an independent contractor arrangement (s 357(1)) For this provision to apply, a person must have made a representation to an individual that a contract (which is in force at the time of the representation) is a contract for services under which the individual performs, or is to perform, work as an independent contractor, when it is in fact a contract of employment. However, there will be no contravention if the person can prove that, at the time the representation was made, the person did not know that, and was not reckless as to whether, the contract was one for employment, rather than services. • Misrepresent a proposed employment relationship as a proposed independent contractor arrangement (s 357(1)) For this provision to apply, a person must have made a representation to an individual that a contract would be a contract for services under which the individual would perform work as an independent contractor, when the contract (if entered into) is in fact a contract of employment. However, there will be no contravention if the person can prove that, at the time the representation was made, the person did not know that, and was not reckless as to whether, if the contract was entered into, the contract was one for employment rather than for services. • Dismiss or threaten to dismiss an employee for the purpose of engaging that person as an independent contractor (s 358) For this provision to apply, an employer must dismiss or threaten to dismiss an employee for the sole or dominant purpose of engaging that person as an independent contractor to perform the same, or substantially the same, work that they performed as an employee. Where proceedings are taken in respect of this contravention, it is presumed that the employer’s sole or dominant purpose was to engage the person as an independent contractor to perform the same, or substantially the same, work that they performed as an employee, unless the employer can prove to the contrary. • Prohibited conduct for the purpose of engaging certain persons as independent contractors (s 359) For this provision to apply, the person must knowingly make a false statement to a previous or existing employee with the intention of persuading or influencing that person to become an

independent contractor, whereby that person would perform the same, or substantially the same, work as they performed as an employee. A person who breaches these provisions will be liable to significant penalties. Further, the court may grant an injunction, order compensation or order reinstatement (if the contravention involved dismissing an employee).

Case example Fair Work Ombudsman v Mineeff The sham contractor provisions were recently applied in the decision of Fair Work Ombudsman v Mineeff [2012] FMCA 232. In this case, Mr Mineeff, the owner-operator of a Sydney truck company — Villtrick Pty Ltd (in liquidation) — was fined $13,024 for sham contracting and underpaying an employee, Mr Scholte. In 2009, Mr Scholte was dismissed from his employment with Villtrick Pty Ltd and was not paid his accrued entitlements. He was then immediately re-hired as an “independent contractor” and performed the same duties, worked the same hours, reported to the same person and wore a promotional cap bearing Villtrick Pty Ltd’s logo as when he was an “employee”. The court held that, despite his new title as “independent contractor”, Scholte was legally classified as an employee and that Mineeff had acted with “careless disregard” for the law in breaching the sham contracting provisions of the Workplace Relations Act 1996 (Cth) and the FW Act. The court ordered Mineeff to pay Scholte $13,024, taking into consideration the maximum penalties for the contraventions, as partial rectification of the underpayment. Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor Similarly, in Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor [2014] FCCA 2144, it was found that the employer had breached the sham contracting provisions of the FW Act by mischaracterising an employee as an independent contractor. This finding was based on a number of factors including that the worker was given instructions in relation to his duties, was provided with equipment needed for these duties, wore a company uniform and was paid on an hourly basis. The Federal Circuit Court ordered a total penalty of $57,024 despite the fact that the underpaid wages and entitlements owed to the worker was under $2,000.

¶37-050 Implications of mischaracterisation Leaving aside the sham arrangement provisions discussed in the previous section, there are other very serious implications for organisations that classify workers as contractors who should be properly classified as employees, regardless of whether or not this is deliberate or innocent conduct. First, organisations will be exposed to claims for the back-payment of minimum employment benefits. These may include not only benefits under the NES, but also benefits under industrial instruments (eg applicable modern awards or enterprise agreements). These may also include minimum wages, overtime rates, allowances, penalties, unpaid expenses, annual leave pay, personal leave pay, long service leave, notice benefits and redundancy benefits (plus interest). An organisation may also be fined for breaching these instruments. Second, where organisations have published to their workforce at large that they will provide certain additional employee benefits, it may also be possible for a reformed contractor to assert that they are entitled to these benefits as a matter of contract. For example, there have been cases where claims have been made by reformed contractors for benefits under shares and options schemes, and also enhanced severance benefits under redundancy policies. Third, there can be significant tax and superannuation issues. As an employer, an organisation would be obliged to deduct tax from the contractor’s fees and also make superannuation contributions. The ATO

may pursue unpaid taxes from the employer directly, and the employer may suffer substantial penalties for failing to make deductions and contribute superannuation. Organisations should also note that, under the tax administration laws which have recently been amended, directors may be liable for pay as you go (PAYG) withholding tax and the superannuation guarantee charge if these liabilities are not paid by the company within three months of their due date. Directors owe a positive obligation to ensure that these payments are made. Under these laws, where a director receives a director’s penalty notice, the director must either pay the penalty or ensure that the company goes into voluntary administration or begins to be wound up. Finally, contractors may accrue valuable rights to challenge the termination of their engagement under unfair dismissal laws. These liabilities have the potential to cripple an employer, particularly when the issue of mischaracterisation tends to be raised at the end of the working relationship, after many years of service, and there is a pool of like “contractors”. Organisations may be able to offset some contractor benefits against some employee entitlements but, by and large, the courts have not accepted that an employer can offset one benefit, such as fees, against an employee entitlement of a different nature, such as annual leave.

¶37-060 Important contractor rights Even though contractors are not as highly regulated as employees, they still have important rights under federal and state laws. It is often the case that employers do not anticipate these rights when making a decision to engage a contractor. Some of these rights are outlined below. Superannuation contributions Under s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act), if a contractor works under a contract that is wholly or principally for that person’s labour, the contractor will be deemed to be an employee and the company must make superannuation contributions. For this to have application, the contract must be wholly or principally for labour, rather than services or the supply of goods or materials. Superannuation Guarantee Ruling 2005/1 (see tinyurl.com/SGR2005-1), which was released by the ATO, provides that a contract will be wholly or principally for the labour of an individual and they will be an employee for the purposes of s 12(3) of the SGA Act, where the individual is: • remunerated (wholly and principally) for their personal labour and skill • required to perform the work personally (there can be no right to delegation), and • not paid to achieve a result. Superannuation Guarantee Rulings do not have the force of law, and each case is dealt with according to its merits; however, they do provide guidance as to how the ATO may deal with a potential situation. These provisions commonly catch out organisations that engage freelancers to “fill-in” for employees. Freelancers may provide their services temporarily but, at the end of the day, they sell the same thing, that being their personal service. If, on the other hand, a substantial component of the contracted fee includes payment for goods or materials from the contractor, the contractor is not required to perform the work personally, or the contractor’s fees are tied to the achievement of a result, then the obligation to make superannuation contributions is unlikely to apply. Workers compensation Under the Workplace Injury Management and Workers Compensation Act 1998 (NSW) (Sch 1, cl 2), an independent contractor who performs work exceeding $10.00 in value will be deemed to be a “worker” employed by the company for the purposes of that Act if: • the work undertaken is not incidental to a trade or business regularly carried on by the contractor in the contractor’s own name, or under a business or firm name, and

• the contractor neither sublets a contract, nor employs workers to undertake the work. This provision is designed to afford workers compensation benefits to persons who are either engaged as independent contractors on an infrequent basis or who work consistently for the one organisation, or contractors who personally perform the work. In addition, the Workers Compensation Act 1987 (NSW) (s 20) provides that a company will generally be liable to pay workers compensation to a “worker” employed by a contractor if the contractor does not have a policy of insurance at the time that its worker receives an injury. This obligation arises if the injury occurs on, in, or about the premises which are under the company’s control or management. The workers compensation legislation in each of the other states and territories of Australia also contain deeming provisions with respect to workers compensation obligations for independent contractors. See Workers Compensation Act 1951 (ACT); Work Health Act 1986 (NT); Workers Compensation and Rehabilitation Act 2003 (Qld); Workers Rehabilitation and Compensation Act 1986 (SA); Workers Rehabilitation and Compensation Act 1988 (Tas); Workers Compensation Act 1958Workers Compensation and Injury Management Act 1981 (WA). Adverse action Under the FW Act (s 340), independent contractors have a right of action where a person takes “adverse action” against the independent contractor because, among other things, the contractor has a workplace right or exercises or proposes to exercise a workplace right. For the purposes of this provision, a workplace right is defined broadly and may include a right to a benefit, a right to participate in proceedings, or generally the ability to make a complaint or seek an inquiry under a workplace law or to seek compliance with that law or a workplace instrument. However, unlike employees, the fact that the contractor may have a general ability to make a complaint or seek an inquiry will not of itself constitute a workplace right. Adverse action against an independent contractor may include action by a principal to terminate an agreement with the contractor, to refuse to use that contractor’s services, to injure the contractor in relation to the terms and conditions of the agreement, or to alter the position of the contractor to the prejudice of the contractor. An example where this right may arise is where an employer terminates an independent contractor agreement or reduces the services required of that contractor after that contractor asserts rights to superannuation, or any other right usually associated with an employee. It may also apply in circumstances where a principal takes adverse action against a contractor after the contractor threatens to take proceedings under unfair contract laws (discussed in this chapter) or lodges a complaint under anti-discrimination laws. These provisions are equally available to a person who is seeking to be engaged as a contractor with a principal. Independent contractors have the right to seek compensation in the event that a principal breaches s 340 of the FW Act.

Case example Louka v Centrelink In Louka v Centrelink [2010] FWA 6827, Mr Louka was an employee of On-Call Interpreters & Translators Agency Pty Ltd and was contracted to work as an interpreter for Centrelink. As a result of a customer complaint about Mr Louka, Centrelink requested that On-Call Interpreters & Translators Agency Pty Ltd no longer allocate him to Centrelink for future interpreting work. Although this application failed on jurisdictional grounds for delay in lodgement, the Commissioner stated as a “provisional view” that adverse action under the FW Act encompasses “a refusal to make use of services offered by an independent contractor in the form of services provided by that contractor through a particular employee of, or subcontractor to, that contractor”.

Unfair contract rights Under the Independent Contractors Act 2006 (Cth) (IC Act), certain contractors have the right to seek the variation of their services contract, or seek to set it aside on the grounds that it is harsh or unfair. This federal unfair contracts regime does not extend to all services contracts. It is limited to either contractors who are engaged as individuals, or corporate contractors where the work to which the contract relates is mainly performed by a director of the body corporate or a member of the family of a director of the body corporate. Services contracts which relate to the performance of work by the independent contractor for the private and domestic purposes of another party to the contract are excluded from the operation of these provisions. In conducting its review, the Federal Court or Federal Circuit Court will consider such factors as the relative bargaining positions of the parties, undue influence, and where the total remuneration received by the contractor is less than an employee who performs similar work. The IC Act provides that, in making an order, the court’s only purpose is to place the parties to a services contract as nearly as practicable to a position which makes the grounds on which the contract became unfair or harsh no longer applicable. The unfair contracts jurisdiction is a no-costs jurisdiction. However, the court may award costs to a party where proceedings have been brought vexatiously, without reasonable cause, or the proceedings have, by an unreasonable act or omission, caused the other party to incur costs.

Case example Informax International Pty Ltd v Clarius Group Limited In Informax International Pty Ltd v Clarius Group Limited [2012] FCAFC 165, the Full Court of the Federal Court set aside a post-employment restriction which was inserted into a labour hire agreement on the grounds that it was unfair. In doing so, it held that a labour hire contractor should ordinarily be subject to a shorter period of restraint as compared with a direct employee because of “the short-term nature of the engagements organised by labour hire firms and the diminished nature of the exposure to risk compared to that generally faced by an employer from the solicitation of customers by a former long-term employee”.

Work health and safety Under the model Work Health and Safety Act 2011 (Cth) (WHS Act: which has been adopted so far in the Australian Capital Territory, New South Wales, the Northern Territory, Queensland, South Australia and Tasmania), a person who conducts a business (eg an employer or principal) has a primary duty to ensure the health and safety of all workers who they engage, cause to be engaged, or may directly influence or control. A “worker” is defined broadly to include a contractor, a subcontractor and their respective employees. While it is true that contractors will owe their own obligations under this legislation, these obligations are independent and concurrent. A principal or employer cannot simply delegate all responsibility for health and safety issues to a contractor. In fact, under the legislation, duty holders are required to consult and cooperate with each other and coordinate on occupational health and safety (OHS) matters. This means that a dialogue must occur as to how the OHS function will be discharged between the parties. Under the OHS legislation in Victoria and Western Australia, employers also have a general responsibility for the health and safety of contractors at the workplace. Anti-discrimination Federal and state anti-discrimination laws extend to contractors and contract workers. Principals could, therefore, be liable if contractors suffer discrimination on the grounds of sex, race, age, disability and other unlawful grounds, and also if they are harassed on these grounds. Principals may also be liable if a

contractor subjects staff to inappropriate behaviour. A contractor who is the victim of bullying can also complain under WHS legislation. Taxation Under the relevant federal, state and territory legislation, a principal may have obligations in relation to their independent contractors regarding taxation, including payroll tax and income tax. The perceived tax benefits of contractor status have largely dissipated due to the personal services income rules, PAYG instalment system and, in some cases, PAYG withholding system (if the contractor does not provide an Australian Business Number (ABN)). For example, if a worker provides personal services to a principal through a middle man company and that company derives 80% or more of its income through this work, this income may be treated as the wage of the worker, and the middle man company would have to deduct PAYG tax and make superannuation contributions from this income.

¶37-070 Benefits of employment status Given the matters above, employers should carefully consider the appropriateness of a contractor arrangement in each instance. In doing so, employers should take into account the advantages of an employment relationship. These advantages include the following: • An employer is able to exercise a larger degree of control over an employee, including the manner in which the work is performed. • Unlike contractors, employees owe implied obligations of good faith, which oblige them to act in the best interests of their employer. These obligations prevent an employee from destabilising an employer’s business, diverting work away from the employer, assisting a competitor, or placing themself in a position of conflict. • All intellectual property which is created by an employee in the course of the employment is automatically owned by the employer. • Courts are more likely to enforce post-employment restrictions in an employment contract as opposed to an independent contractor agreement. Therefore, if the work is likely to result in the creation of business critical intellectual property, extensive access to critical confidential information, or close dealings with key clients, then the commercial imperative of protecting the business may favour the selection of an employment relationship. This is because an employer has more powerful business protection rights over its employees as opposed to a principal over its contractors. Ultimately, the status of the worker should be determined by the nature of the work. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

38. ANNUAL LEAVE Editorial information

Updated in 2016 by Kerryn Kahler Senior Associate, Baker & McKenzie

¶38-010 Introduction Employees are provided with various types of leave from work. The most common types are annual leave holidays (annual leave), long service leave, sick leave, parental (maternity and paternity) leave and carer’s leave. Additionally, employees may be provided with leave for a variety of specific purposes, including study, jury service and union training. Leave entitlements are governed by a variety of sources, including federal and state legislation, awards, other industrial instruments and, where the employee has an individual contract, by the terms of that contract. This chapter deals with annual leave. Annual leave is currently provided to employees under the Fair Work Act 2009 (Cth) (FW Act), federal awards and other industrial instruments, and (for a limited number of employees) state-based awards and legislation. Full-time employees generally receive 20 days (or four weeks) paid holiday leave per year. Leave is a complex area. Entitlements and legal requirements may vary among states and employers. Consequently, complex legal questions should be referred to a legal adviser.

¶38-020 What is annual leave? The FW Act, federal awards and other industrial instruments, and (for a limited number of employees) state-based awards and legislation, provide for a period of paid holiday for employees which accrues during continuous employment with a single employer. The standard entitlement to annual leave is 20 days per year for a full-time employee. Part-time employees are generally entitled to annual leave on a pro rata basis (ie leave calculated on the basis of the proportion of an ordinary full-time work week that they work). Casuals are generally not considered to be entitled to paid annual leave. Their casual wage loading is held to compensate for their various leave entitlements. In addition, there is usually provision for “accrued” annual leave to be paid out “in lieu” to employees on the termination of their employment or on their death (ie if an employee has leave that has been earned but not taken, that entitlement must be paid out on termination of the employment). Annual leave legislation generally requires employees to take holidays. Employees generally cannot be paid out their entitlement, except on termination of the employment or death, although there are limited exceptions to this. An employer can generally direct an employee to take annual leave.

¶38-030 What is the right jurisdiction? Due to the referral of state industrial relations powers to the federal government, the vast majority of

employees in Australia will now fall within the federal industrial relations jurisdiction (see Chapter ¶43 regarding the application of the Fair Work Act 2009 (Cth) (FW Act) to National System Employers and Employees). Accordingly, the annual leave provisions contained in the National Employment Standards (NES) contained in the Fair Work Act 2009 (Cth) (FW Act) apply as minimum entitlements to all National System Employers and Employees. If an employee is covered by a federal industrial instrument (eg an enterprise agreement or a modern award), the annual leave terms contained in that instrument may provide for more generous entitlements than the NES, but cannot provide for entitlements or obligations which are less generous to an employee than those contained in the NES. The information in this chapter is intended to provide guidance only. If there is uncertainty about the correct jurisdiction, or there are specific issues relating to the operation of the annual leave provisions of the federal legislation, seek professional advice. The Acts shown in Table 38.1 are the first point of reference for determining annual leave entitlements. Table 38.1: Legislative provisions for annual leave in Australia Annual leave

Source of legislative provisions

Australian Capital Territory

For all employees, see Federal.

Federal (Note: Most employees will be in this jurisdiction.)

Fair Work Act 2009

New South Wales

For most state and local government employees: Annual Holidays Act 1944 Industrial Relations Act 1996 For all other employees, see Federal.

Northern Territory

For all employees, see Federal.

Queensland

For most state and local government employees: Industrial Relations Act 1999 For all other employees, see Federal.

South Australia

For most state and local government employees: Fair Work Act 1994 For all other employees, see Federal.

Tasmania

For most state government employees: Industrial Relations Act 1984 For all other employees, see Federal.

Victoria

For all employees, see Federal, with the exception of specific matters reserved in relation to some state government employees under Victorian referral legislation.

Western Australia

For state and local government employers and all employers in Western Australia who are not constitutional corporations: Minimum Conditions of Employment Act 1993 For employers in Western Australia who are constitutional corporations, see Federal.

¶38-040 Entitlement to annual leave

Federal Jurisdiction A person will be entitled to accrue a paid annual leave entitlement where the employee is: • a “worker” or an “employee”, and • employed as a permanent full-time or part-time employee (casual employees may be entitled, but are generally paid a loading instead). Under all federal and state laws, annual leave accrues at the rate of 20 days (or four weeks) per year for the majority of full-time employees, prorated for part-time employees. The FW Act specifically provides that shiftworkers are entitled to five weeks of annual leave per year. A shiftworker is any employee defined as such under the terms of a modern award or federal enterprise agreement or, where there is no applicable modern award or enterprise agreement, an employee who is employed in an enterprise in which shifts are continuously rostered 24 hours a day, seven days a week, who is regularly rostered to work those shifts, and regularly works on Sundays and public holidays. Under the FW Act, an employee’s entitlement to paid annual leave “accrues progressively during [the employee’s] year of service according to the employee’s ordinary hours of work, and accumulates from year to year”. Paid annual leave may be taken for a period agreed between an employee and his or her employer. Where an employee’s employment terminates, they must be provided with a payment in lieu of their accrued, but untaken, annual leave entitlements. State Jurisdiction State legislation generally provides that an employee must have completed 12 months’ “continuous service” or “continuous employment” with an employer before the employee accrues a right to take annual leave — except in Western Australia where annual leave entitlements accrue pro rata on a weekly basis. Generally under state laws, where an employee’s employment is terminated (or they die) before completing 12 months’ service, the employee will be entitled to a pro rata payment based on the period of service completed. State legislation, like federal legislation, provides for an entitlement to 20 days of annual leave for all fulltime employees, prorated for part-time employees. The Queensland legislation also specifically provides for a five-week entitlement for shiftworkers. Under this legislation, a shiftworker is defined as an employee who is employed in a calling in which shifts are worked 24 hours a day, seven days a week, and who works a rotating roster that includes each of the shifts. Permanent full-time and part-time employees Permanent employees (whether full-time or part-time) are entitled to annual leave. Casual employees are not generally regarded as being eligible for annual leave, but are generally paid a loading on top of their hourly wage, partially in compensation for the various leave entitlements. For example, under federal modern awards, casual employees receive a loading, usually 25%, in part to compensate for not receiving annual leave entitlements. “Continuous service” or “continuous employment” Federal Jurisdiction Under the NES in the FW Act, an employee accrues four weeks’ annual leave per “year of service” (five weeks for shiftworkers). A full-time non-shiftworker employee will, therefore, accrue 20 days of annual leave per year, while a part-time non-shiftworker employee will accrue the equivalent of four weeks’ leave at the usual number of days that they work in a four-week period. The FW Act (s 22(2)) defines various periods which do not count as service. These include any periods of: • unauthorised absence, and • unpaid leave or unpaid authorised absence, other than periods of community service leave (see Chapter ¶42), periods of stand down or other periods or absence of a kind prescribed by the

regulations. To qualify to take annual leave under state laws, an employee must also have 12 months’ continuous “service” or “employment” with an employer. State Jurisdiction Most state statutes contain provisions that deem service to be continuous in certain circumstances, generally providing that an absence for the following reasons will not break an employee’s continuity of service or employment, and annual leave will continue to accrue during the absence where the: • employer has terminated and re-employed the employee or acted in some other way with the intention of avoiding annual leave obligations • employee has taken annual leave, long service leave or a public holiday, and • employee has a sickness that prevents them from attending work, and the employer has granted paid or unpaid sick leave. In some jurisdictions, annual leave will not accrue after a certain period. An absence for the following reasons will not affect continuity of service or employment, but annual leave may not accrue during the absence: • where the employee has been granted leave other than annual leave, sick leave, long service leave or a public holiday (The continued accrual of annual leave depends on the type of leave granted. Generally, annual leave will continue to accrue during paid leave, but not during unpaid leave.), and • where the employee is absent on workers compensation benefits. Other absences, including industrial disputation, will generally not break continuity of service or employment unless the absence terminates the contract of employment or, in some jurisdictions, the absence is unreasonable.

¶38-050 Continuity during business transmission or transfer What happens to an employee’s entitlements to annual leave if part or all of the employer’s business is sold or transferred (transmitted) to another business, or if the employee “transfers” to a related corporation? Transfer of business Where a part or the whole of a business is sold or transferred to another business entity (a “transmission of business”), the employment of “transferred” employees will terminate under common law principles and a new contract of employment will be formed with the new employer. This will not occur where some or all of the shares in the business are sold, because the employees will continue to be employed by the same entity. Unless an employee’s continuity of employment is preserved by legislation, the result of the common law termination is that all employee entitlements must be paid out. In addition, statutes generally require payment of accrued annual leave on termination. Federal Jurisdiction Under the FW Act, if there is a transfer of business and employees between “associated” national system employers, service with the first entity counts as service with the new employer for all leave entitlement purposes, including accrued, but untaken, leave entitlements. “Associated” companies is defined at s 50AAA of the Corporations Act, based on the two entities being related bodies corporate or one entity being able to control the other entity, among other things. This is not the case in the federal jurisdiction in relation to transfers of business between non-associated companies in respect of certain types of entitlements, including annual leave, unless the new employer specifically agrees to recognise the service of the transferring employees in respect of annual leave entitlements. However, if the new employer does recognise the service of the transferring employee (and,

therefore, accrued annual leave entitlements), the employee is not entitled to a payment in lieu of the annual leave entitlements from the first employer (s 91(2) of the FW Act). The treatment of annual leave in this type of scenario is different from the treatment of personal leave (see Chapter ¶39). It should be noted that redundancy issues may arise where there is a transmission of business. Briefly, where employees are not offered employment with the new employer on substantially the same terms of employment and with recognition of service, an entitlement to statutory redundancy payments under the FW Act may arise. If the accrued entitlement to annual leave is transferred across to the new employer, rather than being paid out, this may assist (although is not determinative) in any argument that the employee has been offered employment on substantially the same terms, and that severance payments are, therefore, not payable. State Jurisdiction Continuous service will not be broken for the purposes of annual leave where there is a transfer of business in the New South Wales and Queensland jurisdictions, and the employee’s entitlement will transfer across. However, on transmission there will still be a common law termination of the employment. This means that there is a conflict between the requirement to pay out annual leave on termination, and the transfer of the entitlement. In effect, this means that in these jurisdictions the buyer and seller of the business can decide whether to pay out entitlements or transfer them across. Importantly, in the New South Wales and Queensland jurisdictions, employees are barred under statute from claiming the entitlement from more than one employer in respect of the same period of service. In the state jurisdictions that do not have statutory provisions dealing with transmission of business, awards or industrial instruments may transmit annual leave entitlements in a similar way. In the absence of any provision in a statute, award or industrial instrument which transmits entitlements, the result of the common law termination and statutory provisions is that accrued entitlements must be paid out on termination. In practice, the new employer often adopts the accrued leave balances of the old employer. Where the employee consents to this de facto transfer of entitlements, there will seldom be any question about the legitimacy of the transfer. Transfer to a related corporation Where an employee “transfers” to another business entity that is a “related corporation”, their employment will terminate under common law principles and a new contract of employment will be formed with the new employer. Unless the employee’s continuity of employment is preserved by legislation, the result of the common law termination is that all employee entitlements must be paid out. Federal Jurisdiction As noted earlier, under the FW Act, if there is a transfer of business and employees between “associated” national system employers, including related corporations, service with the first entity counts as service with the new employer for all leave entitlement purposes, including accrued, but untaken, leave entitlements. Accrued annual leave entitlements must, therefore, be recognised. State Jurisdiction In certain state jurisdictions, annual leave entitlements are preserved by legislation where an employee transfers to another business entity that is a “related corporation”. Where the relevant legislation provides, continuous service will not be broken for the purposes of annual leave where there is a transfer to a related corporation and the employee’s entitlement will transfer across. However, on transmission, there will still be a common law termination of the employment. This means that there is a conflict between the requirement to pay out annual leave on termination and the transfer of the entitlement. In effect, this means that, in these state jurisdictions, the buyer and seller of the business can decide whether to pay out entitlements or transfer them across. Awards or industrial instruments may transmit entitlements in a similar manner. As discussed earlier under “Transfer or Transmission of business”, if the entitlement is not transferred by

statute or industrial instrument, the accrued entitlement must be paid out on termination by the old employer. In practice, the new employer often adopts the accrued leave balance with the employee’s consent.

¶38-060 Taking annual leave Applying for annual leave Generally, employees request annual leave at a particular time, which may or may not then be approved by the employer. An employer must have reasonable grounds for refusing a leave application. In practice, the process is an agreement between the worker and the employer as to when it is convenient for leave to be taken. An employer often has policies that require employees to give suitable notice of leave, require a written leave request, or allow the employer to refuse inconvenient leave. In the Western Australian jurisdiction, under statute, employees must give two weeks’ notice of their intention to take annual leave, while in Tasmania employees must give four weeks’ notice of any period of annual leave. The FW Act does not specify any required notice period for an employee to request annual leave, or any period within which leave must be taken. Under state legislation, annual leave must generally be taken within 6–12 months after it falls due. Directing employees to take annual leave Federal Jurisdiction The FW Act provides that modern awards and enterprise agreements may provide for terms which allow an employer to require an employee to take annual leave, provided that the requirement is reasonable. Many modern awards contain terms dealing with this issue. For example, the Clerks (Private Sector) Award 2010 provides that an employer may require an employee to take annual leave by giving at least four weeks’ notice as part of a close down of its operations, or where the employee has accrued more than eight weeks of annual leave. In an attempt to unify the mechanisms available to employers to direct employees to take annual leave, the Fair Work Commission has recently made a ruling that a model clause be inserted into all modern awards allowing employers to direct award covered employees to take annual leave where an employee has accrued “excessive annual leave”. The model clause defines “excessive leave accruals” as eight weeks for full-time employees or 10 weeks for shiftworkers, and establishes mechanisms to allow both employers and employees to reduce excessive leave accruals. This includes the requirement for: • either party to request a meeting, and • the parties to try and reach agreement on steps to be taken to reduce or eliminate excessive leave. It is expected that this model clause will be inserted into modern awards during the course of 2016. Where an employee is not covered by a modern award or an enterprise agreement, the FW Act provides that the employer may require the employee to take annual leave, provided that the requirement is reasonable. A note to the relevant section of the FW Act (s 94(5)) indicates that a requirement to take paid annual leave may be reasonable if, for example, the employee has accrued an excessive amount of annual leave, or the employer’s enterprise is being shut down for a period (eg between Christmas and New Year). The Explanatory Memorandum to the FW Act listed several criteria which will be considered relevant in assessing the reasonableness of such a requirement: • the needs of the employee and the employer’s business • any agreed arrangement with an employee • the custom and practice in the business • the timing of the requirement to take leave, and

• the reasonableness of the period of notice given to the employee to take the leave. State Jurisdiction Statutes in most states specifically allow the employer to require employees to take leave. In the Western Australian jurisdiction, there is no specific legislative term allowing for an employer to direct an employee to take leave. However, awards may allow such a direction. Additionally, a reasonable direction by the employer to an employee to take leave, taking into account the employee’s circumstances, would be lawful. The notice periods that employers are required to give to employees to take their annual leave are shown in Table 38.2. Table 38.2: Notice periods required by an employer to direct an employee to take annual leave Jurisdiction

Whether an employer can require an employee to take leave

Notice period for employer to require leave

Federal (Note: Most employees will be in this jurisdiction.)

Generally yes, if the requirement is reasonable (s 93 and 94 of FW Act and the terms of applicable modern award or enterprise agreement)

No period specified in the FW Act — should be a reasonable period. A modern award or enterprise agreement may specify a particular period of notice which is required.

New South Wales

Yes (Annual Holidays Act 1944, s 3(6))

One month, subject to industrial instrument terms.

Queensland

Yes (Industrial Relations Act 1999, s 12(2))

14 days if parties cannot agree, subject to industrial instrument terms.

South Australia

Yes (Fair Work Act 1994, Sch 4, s 4(2) (a))

Two weeks if parties cannot agree, subject to industrial instrument terms.

Tasmania

Yes (Industrial Relations Act 1984, s 47AE(7))

Four weeks, subject to industrial instrument terms.

Western Australia

Yes, if a lawful and reasonable direction Reasonable period.

Annual close-down In addition to requiring individual employees to take annual leave, employers can generally shut down the whole or a part of their enterprise and require all employees to take leave at that time (eg over the Christmas break). State legislation generally restricts shutdowns to one “annual close-down” per year. The FW Act provisions which provide for employers to direct employees to take annual leave (whether under the terms of a modern award or in relation to award/agreement-free employees) will also permit an employer to direct an employee to take annual leave as part of an annual close-down of the employer’s business. However, that requirement must be reasonable, on the basis of the same criteria outlined above. Table 38.3: Notice period required to be given to employees at annual close-down Jurisdiction

Source of provisions

Notice period for employer to require annual close-down

Federal (Note: Most employees will be in this jurisdiction.)

Employer may generally direct an employee to take leave, including during an annual close-down of the employer’s business, provided that the requirement to do so is reasonable (s 93 and 94 of FW Act and the terms of any applicable

None specified in the FW Act — should be a reasonable period of notice. Modern awards may specify a particular period of notice which is required.

modern award). New South Wales

Annual Holidays Act 1944, s 4A.

One month, subject to industrial instrument terms.

Queensland

Industrial Relations Act 1999, s 12(2). (NB. This is the same provision which gives a general right to direct an employee to take leave.)

Two weeks if the parties cannot agree, subject to industrial instrument terms. Otherwise acceptable if a lawful and reasonable direction by employer.

South Australia

Fair Work Act 1994, Sch 4, s 4(2)(b).

Two weeks, subject to industrial instrument terms.

Tasmania

Industrial Relations Act 1984, s 47AE(7). (NB. This is the same provision which gives a general right to direct an employee to take leave.)

Four weeks, subject to industrial instrument terms.

Western Australia

Relevant award.

See terms of award or agreement — generally one month. Otherwise acceptable if a lawful and reasonable direction by employer.

Accrued leave deficit at close-down Federal Jurisdiction The FW Act does not specifically deal with the issue of when an employee does not have enough annual leave to cover an annual close-down. However, this would be a relevant consideration as to whether the employer’s requirement for the employee to participate in the annual close-down would be reasonable. The employer may have to allow the employee to take annual leave in advance during the close-down period, or otherwise treat the employee as being on discretionary paid leave. Recently, the Fair Work Commission has considered a proposal that all modern awards should be varied to insert a model clause that will permit employees and employers to make leave in advance agreements. This would allow an employer to deduct leave not repaid by the employee on termination on their employment. State Jurisdiction Where an employee has not accrued enough leave to cover the close-down period, state legislation usually provides that employees take leave without pay. Some jurisdictions provide for a pro rata payment. The amount of this payment is often unclear on the terms of the legislation. In practice, employers often allow leave in advance; others take the potentially risky step of ignoring the pro rata payment. Number of periods of leave Legislation and awards sometimes specify the number and length of periods in which leave must be taken. For example, the Annual Holidays Act 1944 (NSW), s 3(2) states: “An annual holiday shall be given and taken either in one consecutive period or two periods which shall be of three weeks and one week respectively, or if the worker and the employer so agree, in either two, three or four separate periods and not otherwise.” This, and similar sections in other statutes, can be used by employers to restrict employees taking annual leave, for example, in single-day lots. In practice, employers and employees usually divide leave up in whichever way is mutually convenient. The FW Act provides that leave is taken as agreed between the employer and the employee. Terminating employment during annual leave An employer can generally terminate an employee’s employment during leave only where there is a

sound legal reason such as redundancy, grounds for summary dismissal or a repudiation of the contract by the employee. However, if the employee is not given normal procedural fairness, the employer may be exposed to legal action, including an unfair dismissal action. A summary dismissal may occur where an employee has engaged in conduct which allows the employer to terminate the employee’s employment without notice. Generally, a summary dismissal will not become effective until the end of the leave period. If the employee’s employment is terminated by giving notice during the leave, the notice period is generally seen as not starting to run until the end of the leave. Practically, and in the absence of extremely pressing reasons to the contrary, a termination should be delayed until the employee returns from annual leave. Employees working for another employer during leave Generally, an employee may work for another employer during annual leave, provided that the work does not jeopardise the position of the employer or interfere with the employee’s principal employment. This depends on the circumstances but, as an example, working with a competitor of the employer and using skills unique to the work performed with the employer would not be allowed. There may be a specific prohibition on working for another employer in individual awards, or within an employee’s employment contract. Employee replacement during leave An employer can have someone work in the employee’s position while the employee is on annual leave. Employers may temporarily transfer another employee to the position, or hire a casual or fixed-term employee. The replacement should be specifically made aware of the temporary nature of the employment or transfer. Generally, the employee should return to the same position, responsibilities and seniority. However, employers may restructure the workforce if appropriate procedures for a restructure are followed.

¶38-070 Payment of annual leave during employment Annual leave entitlement Each qualifying employee will be entitled to annual leave on the basis outlined in the relevant legislation, award, agreement or contract. The standard entitlement to annual leave is 20 days per year. This entitlement is also expressed as “four weeks per year”, or “28 consecutive days” in some legislation. The FW Act expresses the standard entitlement for employees in the federal jurisdiction as “four weeks of paid annual leave” “for each year of service”. Awards, agreements or individual contracts may provide for more annual leave, often depending on the type of industry in which the employee works. Seven-day shiftworkers (eg those whose ordinary working period usually includes Sundays and holidays on which they may be regularly rostered for work) usually receive an extra week’s leave. For example, and as mentioned in ¶38-040, the FW Act specifically provides that shiftworkers are entitled to five weeks’ annual leave per year. A shiftworker is any employee defined as such under the terms of a modern award or federal enterprise agreement or, where there is no applicable modern award or enterprise agreement, an employee who is employed in an enterprise in which shifts are continuously rostered 24 hours a day, seven days a week, who is regularly rostered to work those shifts, and who regularly works on Sundays and public holidays. Payment for annual leave taken is generally in the course of usual salary or wage payments. Some states provide for payment in advance where the employee requests it. Annual leave loading may apply. Calculating payment during annual leave The terminology used to refer to the pay basis on which annual leave is calculated differs between annual leave legislation throughout Australia.

Federal Jurisdiction The FW Act provides that, at a minimum, annual leave is paid at the employee’s “base rate of pay” for the employee’s ordinary hours of work during the period of the annual leave. “Base rate of pay” is defined in s 16 as the “rate of pay payable to the employee for his or her ordinary hours of work” but not including incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or “any other similar separately identifiable amounts”. This also appears to equate to base salary only. State Jurisdiction By contrast, state legislation generally provides that employees must be paid their “ordinary pay” during periods of leave. For example, pursuant to the Annual Holidays Act 1944 (NSW) an employee is entitled to an annual holiday of four weeks on “ordinary pay”. The relevant annual leave legislation in some states provides (often confusing) definitions of “ordinary pay”. The standard components of “ordinary pay” were initially decided in the Annual Leave Cases (1972) 144 CAR 528 where a Full Bench of the Australian Conciliation and Arbitration Commission decided that, in the usual course of events, the following items should be included in annual leave payments: • over-award payments for ordinary hours of work • shiftwork premiums, according to roster or projected roster, including Saturday, Sunday or public holiday shifts • industry allowances • climatic or regional allowances • leading hand allowances • first aid allowances • tool allowances • qualification allowances, and • service grants. Further, “ordinary pay” will generally include: • commissions • non-discretionary bonuses, and • any other components of the salary package which the employee could have chosen to take as cash. Items the commission considered ought to be, in general, excluded from payment for annual leave were as follows: • overtime payments • camping allowances • travelling allowances • rates associated with confined spaces and dirty work • car allowances, and • meal allowances.

As such, where an employee is covered by state annual leave provisions, commissions and incentive payments must generally be included in the calculation of payments for annual leave. The Annual Holidays Act 1944 (NSW) specifically excludes commissions and bonuses from the calculation of annual leave payments for high income earners. Under s 2(6) of this Act, if the employee’s “ordinary pay” (excluding the bonuses or commissions) exceeds a certain amount prescribed by the regulations (presently $144,000), annual leave is calculated only on the basis of the “ordinary pay” (excluding the bonuses or commissions). The Industrial Relations Act 1999 (Qld) provides that a payment for annual leave for an employee in the Queensland jurisdiction must include the average of commissions paid to the employee in the 12 months preceding the taking of the leave, unless the contract or industrial instrument applicable to the employee provides otherwise, or the Queensland Industrial Relations Commission considers it to be unfair to provide it. In the Western Australian jurisdiction, leave is to be paid at the rate the employee would have received under their contract. This means that employees must be paid any commission they would have received during the period of the leave, but it is not necessary to include an additional component for commissions. Many employers in state jurisdictions have previously mistakenly paid annual leave calculated on base salary only, especially in the case of commission-based employees. As claims can generally extend back six years, significant unpaid amounts may be involved. As such, employers in state jurisdictions should take great care to ensure that they have paid annual leave on the correct basis. When no “ordinary pay” is fixed or able to be determined for a particular employee (eg where it varies weekly or, for part-time employees, where the hours worked vary), under state legislation “ordinary pay” would usually be computed by reference to the average weekly amount earned during the 12 months prior to taking the annual leave. This is particularly relevant where an employee is remunerated wholly or partly by commission. Employees engaged on light duties When an employee is engaged on light duties during the year that have involved the employee being paid at a lower amount (eg for workers compensation purposes), that period is not to be taken into account in calculating that employee’s average weekly wage for annual leave purposes (see C Smith v Australian Wire Industries Pty Ltd, Industrial Commission in Court Session (Fisher P, Cahill and Watson JJ) (No 498 of 1984) 27/5/85; Smith v Australian Wire Industries Pty Ltd 1985 AILR ¶213). Annual leave loading Many awards entitle employees to an extra “loading” on top of their ordinary pay for the holiday period. The majority of federal modern awards provide for leave loading to be payable where the employee actually takes the annual leave, calculated on the modern award wage rates applicable to the employee (not on the employee’s actual wage rate where it exceeds the modern award rates). The loading under federal modern awards is generally calculated as follows: • for employees who would have worked on day work only had they not been on leave, at 17.5% or the relevant weekend penalty rates, whichever is the greater but not both, and • for employees who would have worked on shiftwork had they not been on leave, a loading of 17.5% or the shift loading (including relevant weekend penalty rates), whichever is the greater but not both. Most state awards provide for a 17.5% annual leave loading (eg various clerical awards) where the employee takes the annual leave. Some awards provide for a higher loading in industries such as coal mining, transport and oil. Awards vary according to whether the loading is payable on an employee’s ordinary pay or only on the award rate component of the employee’s pay. In jurisdictions where the loading is calculated on the award rate, employees who are paid over the award rate often do not receive a specific loading payment in practice. This is because their additional wages include an amount equivalent to the loading and can, therefore, absorb the leave loading entitlement.

Employers who wish to include employee’s leave loading entitlements in their salary must include a statement in such employees’ contracts that the salary specifically includes an amount in respect of leave loading. Casuals Casual employees are not generally granted a right to annual leave. State legislation in Queensland, South Australia and Western Australia specifically exclude casuals from the entitlement, while Tasmanian legislation makes no reference to casuals. However, casual employees are generally entitled to a loading on their hourly rate. This is often regarded as being, in part, compensation for leave (including annual leave) to which casuals are not otherwise entitled. For example, under federal modern awards, casual employees receive a loading, usually 25%, in part to compensate for not receiving annual leave entitlements. In the New South Wales jurisdiction, it is unclear whether casuals are entitled to a loading for annual leave in addition to any casual loading provided in their award. It is sometimes argued that casuals are entitled to annual leave, on the basis that, under the terms of s 3(1) of the Annual Holidays Act 1944 (NSW), employees are entitled to four weeks’ annual holiday “at the end of each year of the worker’s employment”. Casual employees, it is argued, become entitled to a pro rata payment of leave after each calendar year in which they were employed, in addition to their casual loading. Given the uncertainty, and to avoid any suggestion of award breaches, employers in the New South Wales jurisdiction often pay the casual loading and a 7.7% annual leave amount to casual employees, unless the relevant award specifically includes annual leave in the casual loading. The New South Wales Government Industrial Relations website (see www.industrialrelations.nsw.gov.au) shows casual pay rates on this basis. Cash payments in lieu of accrued annual leave Generally, employers cannot give employees a cash payout in lieu of accrued statutory annual leave during their employment. Under the FW Act, annual leave will be able to be cashed out in the following circumstances: • Modern awards and enterprise agreements may contain terms which permit cashing out for employees covered by their terms. However, the FW Act provides that such terms must require that an employee retains an accrued annual leave balance of four weeks after any cashing out, that each cashing out must be contained in a separate written agreement, and that the employee must receive at least the amount that they would have received if they had taken the leave. Notably, most modern awards currently in operation do not provide for terms allowing cashing out of annual leave. However, the Fair Work Commission has proposed a new model clause about cashing out of annual leave and to be included in all modern awards. This will mean that in any 12-month period a maximum of two weeks paid annual leave can be cashed out, provided the total leave balance does not drop below four weeks. It is expected that this model clause will be included in modern awards during the course of 2016, following a period of consultation. • An employee who is not covered by a modern award or a federal enterprise agreement may also cash out leave. However, the FW Act also requires that such an employee must retain an accrued annual leave balance of four weeks after any cashing out. Further, each cashing out must be contained in a separate written agreement, and the employee must receive at least the amount that they would have received if they had taken the leave. Elsewhere, statutes or standard awards either prohibit payment in lieu, other than on termination or death, or only allow for payment on termination or death.

¶38-080 Payment of annual leave on termination or death Calculating annual leave payments On termination or death, employees (or their estate) are generally entitled to a payment of their accrued

but untaken annual leave calculated pro rata on their service as at termination. Federal Jurisdiction The FW Act provides that annual leave is paid out at termination at the amount that the employee would have received if they had taken the leave. As noted above, at a minimum, annual leave is paid at the employee’s “base rate of pay”, which does not include incentive-based payments and bonuses, loadings, monetary allowances, penalty rates or “any other similar separately identifiable entitlements”. However, employees may also be entitled to additional payments when they take annual leave. For example, they may be entitled to annual leave loading under an applicable industrial instrument. The requirement to pay annual leave loading on termination was confirmed by the Federal Court in Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 136. State Jurisdiction State legislation provides that annual leave is paid out at termination, calculated on the basis of “ordinary pay”, as defined in the relevant legislation. However, in some state jurisdictions, it is unclear if employees are to be paid out for leave which they were required to take in a certain period (eg within six months of it accruing), but did not take.

Case example Patman v Fletcher’s Fotographics Pty Ltd In the New South Wales case of Patman v Fletcher’s Fotographics Pty Ltd 1984 AILR ¶104; (1984) 6 IR 471, it was decided that, on termination, employees would forfeit all rights to payment in lieu for accrued leave which was not taken within six months of it falling due.

The Annual Holidays Act 1944 (NSW) was subsequently amended in 1984 to provide that terminated employees were entitled to payment for all accrued leave. Similar protections arise in Victorian awards. Because the language of state legislation is sometimes unclear, it may be uncertain if employees in some jurisdictions have an entitlement to payment of all accrued leave, or forfeit that which is not taken within six months of it falling due. In practice, however, employers in all states generally pay out all accrued leave at termination or death. Limitations on pro rata payment Some awards may limit the pro rata payment that is to be made, where the employee has not served a minimum period of employment or is dismissed for misconduct. Employers should refer to the award to determine if this applies.

¶38-090 Other matters Record-keeping Industrial relations legislation and leave legislation (federally and in each jurisdiction) require employee records to be kept. This requirement includes leave records. Although the requirements vary, they will generally be met where the employer retains records including: • the full name of the employee • the occupation and position of the employee • full-time, part-time or casual status • the address of the employee

• wages, salary and commissions paid • accrued entitlements • the date of commencement of employment • the date of termination of employment • the date of the entitlement accruing • the date of each holiday • the dates of other absences from work • amounts paid in respect of each holiday, and • amounts paid on termination. Penalties may be payable for non-compliance with record-keeping requirements. In addition, statutes usually lay out procedures whereby records may be inspected by unions, employees and/or inspectors. When an employee is terminated, employers may be obliged to issue both a pay as you go (PAYG) payment summary and an employment separation certificate. Where an employee makes a written request, a PAYG payment summary must be issued within 14 days of either termination or the request, whichever is later. The PAYG payment summary will include details of leave payouts. Additionally, an employee may request an employment separation certificate to provide to Centrelink. This certificate also outlines any cash payments in respect of leave. Recovery of unpaid annual leave Statutes in each state jurisdiction and the FW Act outline procedures whereby employees can enforce their statutory entitlements to annual leave and recover underpayments. Employees granted contractual annual leave entitlements in excess of what is required under legislation may need to take a common law action for breach of contract to enforce or recover the extra entitlements. Table 38.4 summarises the recovery provisions available to employees. Table 38.4: Recovery by employees of annual leave not paid Jurisdiction

Source of provisions

Recovery process

Federal (Note: Most employees will be in this jurisdiction.)

Sections 44 and 539 of the FW Act (and see also Sch 16 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009)

Breaches of the former Australian Fair Pay and Conditions Standard (under the Workplace Relations Act 1996 (Cth) Pt 7, Div 4) and the NES (including the annual leave provisions) give rise to a right for an employee, a union or an inspector to seek a civil penalty and recovery in the Federal Court, the Federal Circuit Court or an eligible state or territory court. Fines may be imposed. An employee may sue in an eligible court for recovery of unpaid wages, leave, or similar, for up to six years after payment was due.

New South Wales

Sections 11–13 of the Annual Holidays Act 1944 (NSW); s 357, 364–366 of the

Section 11 of the Annual Holidays Act 1944 (NSW) provides for fines of 10 penalty units for breach of the Act. (NB. A penalty unit in NSW is currently $110.) Actions for breach may be taken before the Chief Industrial Magistrate (CIM) or the New South Wales Industrial Relations Commission

Industrial Relations (NSWIRC). Employees may apply to the CIM or NSWIRC for Act 1996 (NSW) unpaid holiday pay that has become due up to six years before application. Section 357 of the Industrial Relations Act 1996 (NSW) also allows fines of up to $10,000 for breach of an award, including leave provisions. Actions may be brought by an inspector, employee or union before the CIM or NSWIRC. In those proceedings, the court may make orders for payment of unpaid amounts. Sections 364–366 of the Industrial Relations Act 1996 (NSW) lay out procedures for recovering unpaid amounts under an industrial instrument and above-award amounts. Section 379 lays out small claims procedures for unpaid amounts less than $10,000. Queensland

Sections 399, 400, 666, 670 and 671 of the Industrial Relations Act 1999 (Qld)

Non-payment of wages (including leave) may be prosecuted before a magistrate. An employee, a union or an inspector may apply to a magistrate for unpaid leave within six years of it becoming payable.

South Australia

Sections 224, 233 Non-compliance with an award, including leave provisions, and 234 of the Fair may result in a fine of up to $2,500. Where there is a Work Act 1994 conviction, the employee may apply for an order for payment. (SA)

Tasmania

Part III of the Non-payment of wages (including leave) under an award or Industrial Relations entitlements under the Industrial Relations Act 1984 may be Act 1984 (Tas) prosecuted. Where a conviction is found, the court may order payment of amounts due to the person.

Western Australia

Sections 83–84A of the Industrial Relations Act 1979 (WA)

The registrar of the Western Australian Industrial Relations Commission, an industrial inspector, a union or an employee may apply to Western Australian courts to enforce awards or minimum conditions of employment. Fines are applicable, and orders may be made for payment.

For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶30-000.

39. PERSONAL, SICK AND CARER’S LEAVE Editorial information

Kerryn Kahler Senior Associate, Baker & McKenzie

¶39-010 Introduction As of 1 January 2010, the personal leave provisions contained in the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act) cover the vast majority of employees in Australia. The effect and coverage of the federal legislation are set out in more detail in the following paragraphs. “Personal leave” in the federal jurisdiction may be taken as either “sick leave” or “carer’s leave”. “Sick leave” is leave which employees can take when they are unable to work due to illness, provided that they are not entitled to workers compensation benefits in relation to the illness (see Chapter ¶59 for more information on workers compensation). “Carer’s leave” may be taken where an employee needs to take care of a member of their immediate family or household who is sick, or in the event of an unexpected emergency affecting such a person. Leave is a complex area. Entitlements and legal requirements vary between states and employers. The information in this chapter is intended to provide guidance only. Professional advice should be sought where the correct jurisdiction is unclear, or where there are specific queries relating to the operation of the personal leave provisions of the NES, state legislation or industrial awards.

¶39-020 Entitlement to sick leave Full-time and part-time employees will generally have an entitlement to paid sick leave arising from legislation or, if they are not in the federal jurisdiction, from an award or employment contract. Casual employees are usually not entitled to sick leave, but are often paid a loading to partially compensate for the sick leave entitlements which they do not receive as casuals. Contractors are not entitled to sick leave. Once the entitlement has been exhausted, sick leave is taken as unpaid leave. Untaken sick leave may generally be carried over from year to year. Employees are not generally paid for untaken sick leave on termination of their employment. Application of FW Act Prior to 1 January 2010, the terms of the FW Act applied to all employees employed in Australia by constitutional corporations. However, due to the referral of state industrial relations powers to the federal government, the vast majority of employees in Australia will fall within the federal jurisdiction (see Chapter 43 regarding the application of the FW Act to National System Employers and Employees). As a result of the referral of powers, from 1 January 2010, the personal leave provisions contained in the NES apply as minimum entitlements to all federal jurisdiction employees. More generous personal/sick leave entitlements may be included in employees’ individual contracts. If an employee is covered by a federal industrial instrument (eg a collective agreement), the personal and sick leave terms contained in those instruments may provide for more generous entitlements than the NES, but cannot provide for

entitlements or obligations which are less generous to employees than those contained in the NES. If an employee is not covered by the federal jurisdiction, the relevant jurisdiction (outlined in the following paragraphs) will be that in which they work. State awards will generally contain minimum sick leave terms applicable to all employees covered by the award. Further, legislation in Queensland, South Australia, Tasmania and Western Australia provides minimum sick leave entitlements. These entitlements will continue to apply to employees who do not fall within the federal jurisdiction and who are employed in those states. In other states, employees who are not covered by a state industrial instrument or the federal legislation do not have a basic entitlement to sick leave unless it is provided in their contract of employment. Despite this, it is standard and expected practice in all states to provide sick leave entitlements to employees. It would be a brave (or foolhardy) employer who denies sick leave to their employees on this basis. Untaken sick leave for employees not covered by the federal legislation may accumulate from year to year, but may be subject to a maximum accumulation. The sick leave entitlements in each jurisdiction are outlined as follows. Federal personal leave entitlements All full-time and part-time employees who fall within the federal jurisdiction will be entitled to the minimum “personal leave” entitlements laid out in the terms in the NES (Pt 2-2, Div 7, FW Act). As mentioned earlier, these entitlements are for paid personal leave which the employee may use as for: • sick leave, when they are sick or injured, or • carer’s leave, which they may take when they need to provide care or support to a member of their immediate family or household due to the personal illness or injury of that person, or to an emergency which affects that person. The strict wording of the NES provides for an entitlement for all employees of 10 days’ paid personal/carer’s leave per year of service, which is to accrue progressively during a year of service according to the employee’s ordinary hours of work (s 96, FW Act). Although the Explanatory Memorandum to the FW Act states that the effect of s 96 is that entitlements to personal leave are provided on a pro rata basis for part-time employees, this is not immediately apparent from the actual wording of the relevant section, and it is at least arguable (if unlikely to be upheld by a court) that all employees are entitled to 10 days’ personal leave regardless of the number of hours that they work each week. As mentioned previously, unused personal leave accrues from year to year. Under the former Workplace Relations Act 1996 (Cth), employees were permitted to take a maximum of 10 days’ personal leave per year as paid carer’s leave. However, this restriction no longer applies under the NES, and employees may take any or all of their accrued personal leave as carer’s leave. If an employee does not have any personal leave accrued or has exhausted their entitlement to take paid carer’s leave, they may take a period of up to two days as unpaid carer’s leave, on each occasion that a member of their immediate family or household requires care or support due to the personal illness or injury of that person, or an emergency which affects that person. New South Wales sick leave entitlements The vast majority of employees in New South Wales will be entitled to the personal leave entitlements outlined under the federal jurisdiction. New South Wales entitlements will only apply to state and local government employers in New South Wales. That state does not have a general statutory personal leave entitlement. All New South Wales awards must contain sick leave entitlements equal to or in excess of minimum entitlements provided in the Industrial Relations Act 1996 (NSW) (s 21, 26). The minimum entitlement is one week for each year of service, which can be rolled over for the following three years if not used. Enterprise agreements in New South Wales will generally contain sick leave entitlements equal to or

exceeding award entitlements. New South Wales jurisdiction employees not covered by an award or enterprise agreement do not have an automatic entitlement to sick leave unless it is contained in their employment contract. However, employment contracts will generally contain sick leave entitlements equal to or in excess of the most common contractual entitlements of five days in the first year, and eight days in subsequent years or, alternatively, 10 days per year. Queensland sick leave entitlements The vast majority of employees in Queensland will be entitled to the personal leave entitlements outlined under the federal jurisdiction. The Queensland entitlements will only apply to state and local government employers in Queensland. Queensland jurisdiction employees covered by state awards or enterprise agreements will generally have minimum sick leave entitlements contained in those instruments. Under the Industrial Relations Act 1999 (Qld), Queensland jurisdiction employees (other than casual employees, pieceworkers (employees paid a fixed amount for each item they complete) or school-based apprentices and trainees) are entitled to minimum sick leave conditions unless an industrial award or agreement provides otherwise or the employer and employee agree otherwise. The entitlement is eight days on full pay for each completed year, which accrues at the rate of one day for each completed six-week period. Employees must notify their employer of the illness and the approximate period of absence. If the absence is more than two days, evidence must be provided. Sick leave accumulates from year to year, unless an applicable instrument provides otherwise. South Australian sick leave entitlements The vast majority of employees in South Australia will be entitled to the personal leave entitlements outlined under the federal jurisdiction. The South Australian entitlements will only apply to state and local government employers in South Australia. Employees in this jurisdiction covered by South Australian state enterprise agreements and awards will have the minimum sick leave entitlements provided in those instruments. Under the Fair Work Act 1994 (SA), all contracts of employment are deemed to contain minimum sick leave conditions, unless the provisions of the contract are in accordance with an award or enterprise agreement, or are more favourable to the employee. These minimum sick leave conditions are for sick leave accruing at the rate of 5/26 of a day for each completed week in the first year (total of 10 days) and 10 days per year, accruing at the beginning of each year. Employees must give notice as soon as practicable (and within 24 hours) and provide a medical certificate if requested. Up to five days of sick leave in each year may be used as carer’s leave. Tasmanian personal leave entitlements The vast majority of employees in Tasmania will be entitled to the personal leave entitlements outlined under the federal jurisdiction. The Tasmanian entitlements will only apply to state government employers in Tasmania. Tasmanian awards contain personal leave entitlements, which are generally based on a standard clause. The standard entitlement in awards is two weeks of ordinary working time. The Industrial Relations Act 1984 (Tas) provides for minimum personal leave entitlements for all Tasmanian jurisdiction employees of 10 days per year of service. This entitlement accrues at the rate of 5/6 of a day for each month in the first year of the employee’s employment, and a further 10 days per year on each anniversary of the employee’s employment. Part-time employees have a pro rata personal leave entitlement. Employees must inform their employer and provide evidence of the illness. Leave accumulates from year to year. Victorian sick leave entitlements All Victorian employees will be entitled to the personal leave entitlements outlined in the federal legislation

(unless they fall within the exceptions for specific matters reserved in relation to some state government employees under Victorian referral legislation). Western Australian illness, injury or family care leave entitlements All employees in Western Australia employed by constitutional corporations will be entitled to the personal leave entitlements outlined under the federal jurisdiction. The Western Australian entitlements will only apply to those employees who are not employed by constitutional corporations in Western Australia. Western Australian jurisdiction employees covered by awards or workplace agreements will generally have minimum sick leave entitlements. Under the Minimum Conditions of Employment Act 1993 (WA), minimum leave conditions for illness, injury or family care will be deemed for all Western Australian jurisdiction employees (whether covered by a workplace agreement, award or contract) unless the terms of employment provide for more generous sick leave. The minimum entitlement is personal leave equivalent to the number of hours worked by the employee in a standard two-week period, up to a maximum of 76 hours per year. Such leave is not available where the illness or injury is attributable to serious or wilful misconduct, or gross and wilful neglect on the part of the employee. The minimum conditions provide for accumulation from year to year. No payment in lieu of personal leave is required on termination. Employees must provide evidence of the illness. Australian Capital Territory sick leave entitlements All Australian Capital Territory employees will be entitled to the personal leave entitlements outlined in the federal legislation. Northern Territory sick leave entitlements All Northern Territory employees will be entitled to the personal leave entitlements outlined in the federal legislation.

¶39-030 Non-standard employees (and personal/sick leave) Part-time employees Part-time employees will be entitled to personal/sick leave on a pro rata basis (although the FW Act is arguably unclear on this point). For example, if a full-time employee has an entitlement of 10 days per year of personal/sick leave in the relevant jurisdiction, a part-time employee who works one day each week will be entitled to two days per year of personal/sick leave. Casual employees Casual employees are not generally regarded as being eligible for personal leave, but are generally paid a loading on top of their hourly wage, partially in compensation for the various leave entitlements. For example, under federal modern awards, casual employees receive a loading, usually 25%, in part to compensate for not receiving leave entitlements, including personal leave. Other employees In the case of fixed-term employees, sick leave may be guaranteed by statute or award — as long as employees work for a sufficient period to qualify for this form of leave. A contract cannot legally deny a sick leave entitlement to employees who qualify for such entitlement under the terms of a statute, registered enterprise agreement or award.

¶39-040 Service required before sick leave entitlement Awards, industrial instruments or contracts may provide for a specified period of employment (generally one to six months) before an employee can take sick leave, although this will not be valid if contrary to the terms of legislation.

¶39-050 Periods of less than a day Employees can generally take sick leave in half-day periods if required (eg where an employee becomes sick and goes home at lunch time). Employers may exercise discretion to allow sick leave in shorter periods. Periods less than a one-quarter day would be unusual.

¶39-060 Illness or incapacity Where employees have a right to take sick leave, employees will be able to take that sick leave where they have an illness or incapacity which incapacitates them to a degree that they are unable to work, but for which they are not entitled to workers compensation payments. Illnesses which allow sick leave have been broadly interpreted by the courts. Medical or dental treatment, which does not require an absence from work, would generally not be included: although employers often exercise their discretion to allow sick leave, and time recovering from such procedures may be included. Self-inflicted injuries would not entitle an employee to sick leave, unless these were to arise from an underlying mental illness, which may be difficult for the employer to determine.

¶39-070 Transmission of business or transfer to related companies Sick leave is not generally paid out on termination of employment, for example, where the whole (or a part of the) business is sold or transferred to a new business entity, or the employee is transferred to a related corporation. These types of activities result in a common law termination of employment. Personal leave entitlements will not transfer across, unless they are transferred by legislation or under the terms of the employee’s award, industrial instrument, or are recognised by the new employer. Under the FW Act, if an employee transfers from one employer to another to perform the same work, and where there is a “transfer of business” (including a transfer between associated entities), the employee’s service with the first entity counts as service with the new employer for the purposes of calculating personal leave (see Chapter ¶43).

¶39-080 Sick leave — notification and proof Employees must generally notify their employer as soon as practicable. This should generally be on the first day of any sick leave. There may be circumstances where the employee cannot notify the employer, in which case the employer should exercise appropriate discretion. Under the FW Act (s 107), an employee must give notice of any leave (including personal leave) as soon as practicable, including notification of the expected period of the leave. In addition, for any period of personal leave, carer’s leave or compassionate leave, the employee must provide evidence of the reason for the leave which would satisfy a reasonable person. However, many employers do not normally require such proof unless an illness extends for more than two days, or the employee has taken multiple single days of personal leave. Awards often provide that proof is not required for single days, or until a certain number of single days have been taken. An employer’s policy on proof (rather than an award or statutory term requiring proof) is not legally binding and should be exercised with discretion. Generally, a medical certificate should state the nature of the illness and the recommended absence. It should generally be provided by the doctor at a consultation during (not after) the illness. Challenging a medical certificate is difficult. Where the employee claims an ongoing illness, an employer may require an employee to consult the employer’s chosen doctor. The employer would pay for such a consultation. An employer may exercise discretion (and should do so in appropriate cases) to accept other proof, such as a letter from a parent or spouse, a statutory declaration or a prescription received by

a chemist.

¶39-090 Interaction of sick leave with other leave Public holidays during sick leave If an employee is sick and has notified the employer that they will return after a public holiday, the public holiday will be counted and paid as a public holiday, and will not be deducted from sick leave. Obviously, the employer might require proof of such sickness. If the employee has not notified the employer, the public holiday will be paid as sick leave and deducted from the employee’s sick leave balance. Sick leave during annual or long service leave Under state jurisdictions, if an employee gets sick while on annual leave or long service leave, the period will generally count as annual leave or long service leave. However, for federal jurisdiction employees, the FW Act (s 89(2)) specifically provides that, if a period of annual leave includes a period of any other leave (other than unpaid parental leave) under the NES, then that period does not count as annual leave. As such, where an employee is sick while on annual leave, and can meet the notification requirements, the period of illness may be taken as sick leave, not annual leave. Other exceptions are: • where an award or agreement specifically provides that, where an employee is sick during annual leave or long service leave, they may claim sick leave, or • (in South Australia) where the minimum sick leave entitlements specify that sick leave taken during annual leave is not counted as annual leave if the person is too sick to work for a period of three days during their annual leave, and notifies their employer appropriately of that illness. Maternity leave Problems sometimes arise because of the interaction of maternity leave and sick leave.

Case example Association of Non-Government Education Employees v SA Commission for Catholic Schools In Association of Non-Government Education Employees v SA Commission for Catholic Schools (1998) 44 AILR ¶11-113(6); [1998] SAIRC 51; [1998] SAIRComm 78, a teacher wished to access her sick leave, however, her employer insisted on placing her on maternity leave. The employer claimed that her illness was related to her confinement and so she was not entitled to sick leave. The South Australian Industrial Court held that any illness occurring before the commencement of maternity leave entitled the employee to sick leave for the duration of the illness. Maternity leave was not an intervening event which overrode another paid entitlement that she may lawfully access. It is a benefit to an employee, additional to other entitlements, which recognises the need for flexibility in meeting family responsibilities.

Special maternity leave is also available to employees under the FW Act for pregnancy-related illness where the employee is unfit for work (s 80). However, special maternity leave is unpaid. For this reason, in practice, an employee with a pregnancy-related illness would usually apply to take accrued sick leave in preference to special maternity leave, where accrued paid leave is available to them. The use of special maternity leave does not reduce an employee’s entitlement to unpaid parental leave. Workers compensation

Under the FW Act, an employee is not entitled to accrue or take any leave (paid or unpaid) during a period where the employee is absent from work because of personal illness or injury, for which the employee is receiving compensation under Commonwealth, state or territory workers compensation law. A narrow exemption applies where taking such leave is allowed by the relevant workers compensation law (s 130).

¶39-100 Payment during sick leave Employees will be paid for sick leave at their ordinary rate of pay. This will generally not include shift allowances, overtime or commission unless the employee’s award or agreement allows for their inclusion. Piecework employees are paid at their “ordinary time rate of pay”. Payment is made in the normal round of salary/wage payments. Payments are taxed at normal pay as you go rates.

¶39-110 Payment other than where leave is taken During employment Payment in lieu of sick leave during employment is not generally allowed under state statutory provisions, unless provided for in an award or agreement. If the employer does attempt to pay it out in lieu, in the absence of an award or agreement condition allowing payment, the employee may still be entitled to take the whole sick leave balance. If the employee’s personal leave entitlements do not arise under statute or an industrial instrument, but arise entirely from their contract or an employer’s sick leave policy, the employer may allow the employee to cash out the leave in accordance with their contract. Under the FW Act (s 100, 101), personal leave cannot be cashed out, except where cashing out is permitted under the terms of a modern award or an enterprise agreement applicable to the employee. Such terms cannot permit cashing out which would result in the employee retaining less than 15 days of accrued leave. Further, each cashing out event must be the subject of a separate written agreement between the employer and employee, and any leave paid out must be paid at the full amount that the employee would have received if they had taken the leave. It should be noted that most modern awards do not include terms permitting cashing out. On termination Employees generally do not receive payment for untaken sick leave on termination, unless (as in very rare instances) an award or agreement provides for such payment. This position will also apply in the event of termination as a result of redundancy, and redundant employees will not generally be entitled to payment for unused sick leave. However, some awards and enterprise agreements make provision for the payment of unused sick leave to redundant employees.

¶39-120 Termination during sick leave An employer can generally only terminate an employee during sick leave where: • there is a sound legal reason (eg redundancy), or grounds which would allow the employer to terminate the employee without notice (eg termination) (Note: Normal procedural fairness must be given and, on a practical basis, in the absence of extremely pressing reasons to the contrary, such a termination should be delayed until the employee returns to work, because an unfair dismissal action may result.) • the employee fails to notify the reason for their absence and could have done so (this may constitute an effective abandonment of employment) • the employee’s sick leave claim is fraudulent and justifies summary dismissal for serious and wilful misconduct, or

• the employee is so ill that the employee cannot effectively carry out their duties for a significant period. It should be noted that the termination of an employee who is ill, especially if they are on sick leave, may constitute an unlawful act or give rise to legal action. Legal action may arise on the bases outlined in the following paragraphs. Disability discrimination Termination of an employee due to illness or injury may constitute a breach of state and federal laws prohibiting discrimination on the basis of disability, except where it can be shown that, as a result of the illness, injury or disability, the employee cannot carry out the inherent requirements of their position, or that the employer would be required to provide facilities that would place an unjustifiable hardship on them (see Chapter ¶13). Federal jurisdiction and unlawful dismissal The federal legislation provides that it is unlawful to terminate an employee on the basis of the employee’s absence from work due to illness or injury, unless the absence extends for more than three months, or the total absences within a 12-month period are more than three months, and the employee is not on paid sick leave for any of the three-month period. Unfair dismissal Termination of an employee while on sick leave may constitute grounds for an unfair dismissal action. In this sense, even where a dismissal is lawful and effected according to the terms of an applicable industrial agreement or contract of employment, a tribunal may find that a dismissal was harsh, unjust or unreasonable in all the circumstances of the case. Any such finding will be based on factors including whether: • there was a valid reason for dismissal related to the employee’s capacity or conduct, or the operational requirements of the business • any problems with job performance were drawn to the employee’s attention beforehand • the employee was given any opportunity to respond to any allegations of poor performance (eg to explain any mitigating factors), and • any prior warnings had been issued to the employee. Injured workers legislation In addition, state industrial relations or workers compensation legislation generally provides protection for injured workers who are entitled to receive workers compensation for the injury. Termination of these employees who are unfit for employment, either at the time of the unfitness, or within six months of the unfitness is generally unlawful. Termination of a sick employee for any reason is complicated and it is generally recommended that legal advice be sought.

¶39-130 Other matters (sick leave) Other paid employment during sick leave An employee cannot take other paid employment during sick leave as it is a condition of the taking of such leave that they are unfit for work. The taking of other paid employment while on sick leave may justify termination for wilful misconduct. Such issues should generally be dealt with on the employee’s return to work. Replacement employees Employers may temporarily transfer another employee to the position, or hire a casual or fixed-term employee, while an employee is on sick leave. The replacement person should be specifically made aware of the temporary nature of the employment or transfer.

Generally, the employee should return to the same position, responsibilities and seniority. However, employers may restructure the workforce if appropriate procedures for a restructure are followed.

¶39-140 Family or carer’s leave — background Carer’s leave (leave taken so that the employee may take care of an unwell member of their immediate family or household for whom they are responsible) was initially recognised by the Australian Industrial Relations Commission (AIRC) in the Family Leave Test Case (1994) 57 IR 121 handed down on 29 November 1994, which allowed employees covered by federal awards to use their sick leave entitlements to care for family members who were ill. As a result of this decision, clauses were subsequently inserted into most federal awards allowing for a proportion of sick leave or bereavement leave to be used for carer’s leave purposes. Similar decisions have been handed down by industrial tribunals in New South Wales, Queensland, South Australia and Tasmania, which provide for model award clauses to be inserted into awards in those states. In June 2000, the New South Wales Government passed the Anti-Discrimination Amendment (Carer’s Responsibilities) Act 2000, which amended the Anti-Discrimination Act 1977. This Act outlawed discrimination on the grounds of a person’s responsibilities as a carer. It includes discrimination by an employer against an employee on the basis of their carer’s responsibilities in the terms and conditions of employment that the employer affords the employee, including leave and the provision of leave. Employers must take into account the carer’s responsibilities of all employees when determining work arrangements and when considering applications for leave. Requests by non-award employees to use part of their sick leave entitlement for the purposes of caring for immediate family members must be given due consideration and must not be treated in a discriminatory manner. The federal FW Act and legislation in most state jurisdictions specifically provide for rights for employees to use all or part of their sick leave entitlements as carer’s leave.

¶39-150 Entitlement to carer’s leave Employees’ entitlements to sick leave have been discussed in ¶39-020 and ¶39-030. This section will now look at employees’ entitlements to carer’s leave. The federal legislation, Queensland, South Australian, Tasmanian and Western Australian legislation, and many state awards contain provisions allowing employees to use a proportion of their personal leave for the purposes of caring for members of their family or household who are ill and for whom they have a responsibility. Employers should refer to the federal legislation, the applicable state legislation or the relevant industrial instrument to determine the basis on which this leave can be taken. All full-time and part-time employees who fall within the federal jurisdiction will be entitled to the minimum “personal leave” entitlements. Under the FW Act, an employee may use an unlimited amount of their accrued personal leave entitlements as paid carer’s leave, so that they may provide care or support to a member of their immediate family or household, due to the personal illness or injury of that person, or due to an emergency which affects that person. If such an employee does not have any personal leave accrued, they may take a period of up to two days as unpaid carer’s leave. This leave is available on each occasion that a member of their immediate family or household requires care or support due to the reasons mentioned above. The Industrial Relations Act 1999 (Qld) provides that an employee may use up to 10 days of their sick leave each year to care for and support members of the employee’s immediate family or household. If an employee has exhausted their entitlement, they may take up to two days’ unpaid carer’s leave each time they need to care for a member of their family who is sick, or in the case of an unexpected emergency. The Fair Work Act 1994 (SA) permits employees to take up to five days per year out of their sick leave entitlement to care for members of the employee’s family who are sick, subject to the provision of notice and appropriate proof. The Industrial Relations Act 1984 (Tas) states that personal leave entitlements may be used for carer’s

leave purposes. The Minimum Conditions of Employment Act 1993 (WA) provides that an employee may use any of their entitlement to paid leave for illness, injury or family care as paid carer’s leave, provided that the employee has been in continuous service with the employer for a period of at least 12 months prior to taking the leave. If the employee cannot take paid carer’s leave, then the employee is entitled to take up to two days’ unpaid carer’s leave on each occasion of illness or injury of a member of their family or household, or an unexpected emergency affecting such a person. Employees not covered by legislation or an industrial instrument which permits the taking of sick leave as carer’s leave may not automatically have an entitlement to take carer’s leave as part of their sick leave entitlement. However, entitlements to take carer’s leave are often included in employment contracts, and/or employers exercise their discretion to allow employees to take part of their sick leave for carer’s leave purposes. This is particularly relevant in New South Wales where the provisions of the Anti-Discrimination Act 1977 dealing with carer’s responsibilities prohibit discrimination by an employer against an employee on the grounds of the employee’s responsibilities as a carer. To avoid acting contrary to this Act, employers must give due consideration to requests to use sick leave for carer’s leave purposes.

¶39-160 Non-standard employees (and carer’s leave) As mentioned in ¶39-020, casual employees are not generally entitled to personal leave and, therefore, generally do not have an entitlement to carer’s leave. Casual employees are generally paid a loading on top of their hourly wage, partially in compensation for the various leave entitlements. For example, under federal modern awards, casual employees receive a loading, usually 25%, in part to compensate for not receiving leave entitlements, including carer’s leave. The Industrial Relations Act 1999 (Qld) specifically provides an entitlement to 10 days’ unpaid carer’s leave for long-term casual employees, and an entitlement for short-term casual employees to be absent from work on an unpaid basis for up to two days each time the employee needs to act as carer for a member of their family or household.

¶39-170 Service required before carer’s leave entitlement Because entitlements to take carer’s leave generally arise from an employee’s personal leave entitlement, where an award, agreement or contract provides for a qualifying period for such leave, the same qualifying period will also apply to carer’s leave. An employee may have to wait one to six months before being entitled to take carer’s leave. There are no such restrictions under the NES for federal jurisdiction employees. See also ¶39-020 for similar qualifying periods for sick leave.

¶39-180 Family and household members and taking carer’s leave As the carer’s leave provisions enable an employee to take time away from work to care for members of a family or household, it is important to understand how “family” or “household” is defined. The following paragraphs set out who is included. Who is a “family member”? Family members will generally include a: • spouse (including former spouse, de facto or former de facto) • partner of the same sex • child or adult child (including an adopted child, stepchild or the child of a former spouse) • parent (including a foster parent or a legal guardian)

• grandparent • grandchild, or • sibling of the employee or of the employee’s spouse. In Queensland, a former foster child has been specifically included in the definition of “family member”. In Tasmania, the category of step-parent has also been added. The New South Wales Industrial Relations Commission has specifically discussed the issue of same-sex couples. Under the New South Wales State Personal/Carers Leave Case — August 1996 (1996) 68 IR 308, carer’s leave is extended to a situation where the employee is responsible for the care and support of a same-sex partner who lives with the employee as a de facto partner on a bona fide domestic basis. Under the FW Act, “immediate family” is defined to include a current or former spouse or de facto spouse of the employee (including a de facto of the same or opposite sex), and a child, parent, grandparent, grandchild or sibling of the employee or their spouse or de facto partner. The term “household” is intended to be broader, and often encompasses flatmates and other persons living with the employee. In Queensland, South Australia and Tasmania, a same-sex partner will generally fall within the scope of a “household member” provided that the employee is responsible for that partner’s care at the time. It is important to note that the fact that the sick person is a family member is not sufficient to justify carer’s leave. In addition, the employee must be responsible at the time for the care of that person. Who is a “household member”? Courts in Queensland, South Australia and Tasmania, as well as the Fair Work Commission (previously known as Fair Work Australia), have not provided a definition of who is a member of an employee’s household. As such, the individual circumstances of each case will need to be taken into account. In New South Wales, “household members” have been restricted to relatives of the employee who are members of the same household, where relative means a person related by blood, marriage or affinity (ie the relationship that a spouse has to blood relatives of the other spouse due to the marriage). Same-sex partners are generally included in the definition of household if the employee is in a jurisdiction which does not include same-sex partners within the definition of “de facto”. It is important to note that the fact that the sick person is a member of the household is not sufficient to justify carer’s leave. In addition, the employee must be responsible for providing care or support for that household member.

¶39-190 Carer’s leave — notification and proof Notification and proof requirements for carer’s leave are generally on the same basis as those required for sick leave. Employees intending to claim carer’s leave must notify the employer in advance, wherever possible, nominating the expected period of the carer’s leave. Employees who wish to take carer’s leave must generally notify their employer as soon as practicable. This should generally be on the first day of any carer’s leave taken. The member of the employee’s family or household must have an illness or incapacity, where the employee is responsible for the care of that person while they are ill, or be the subject of an unexpected emergency. The employee should provide details of the illness or emergency, the name of the person who requires care, the relationship to that person, the reasons for taking the leave and an estimated period of absence. There may be circumstances where the employee cannot notify the employer, in which case the employer should exercise appropriate discretion. Employees who cannot notify in advance must notify the employer at the first reasonable opportunity. If required by the employer, the employee must produce evidence of the reason for the carer’s leave which would satisfy a reasonable person, such as a doctor’s certificate or statutory declaration showing

that the family or household member is ill with an illness that requires care by another person (ie justifying the claim for carer’s leave). The employer has the discretion to waive such requirements. Such discretion should be exercised carefully. Awards usually only require that the medical certificate or statutory declaration establish the illness of the person, and that the illness was of such a nature that it required the care of another person. There is usually not a requirement that the relevant documentation specify the type of illness. Challenging a doctor’s certificate in these circumstances will be extremely difficult. While an employer may require that an employee provide an alternate medical certificate from a doctor specified by the employer, the employer will be liable for any costs of obtaining such a certificate. This requirement may impose undue hardship on the employee, and would generally only be imposed in extreme cases. The Industrial Relations Act 1999 (Qld) requires that the employee must, if practicable, give the employer notice of the: • intention to take carer’s leave before taking that leave • name and relationship with the person who requires the care • reason for taking the leave • estimated period of absence, and • nature of the emergency (where leave taken because of an unexpected emergency).

¶39-200 Payment for carer’s leave Payment for carer’s leave is on the same basis as sick leave. Employees will be paid at their ordinary rate of pay, not including shift allowances, overtime or commissions. This general statement may be subject to the terms of the individual award. Generally, the requirement will be that the employee does not lose pay on the basis of taking carer’s leave.

¶39-210 Termination during carer’s leave Termination of an employee during carer’s leave would be undertaken only in the most extraordinary of circumstances. Generally, this would occur only where the carer’s leave was taken on a fraudulent basis (eg if the employee took alternative employment during carer’s leave, or similar such situations). Where the employee had taken genuine carer’s leave, a termination during this carer’s leave might constitute an unfair dismissal, and would possibly contravene anti-discrimination legislation based on a carer’s responsibilities in New South Wales. In any event, it is generally recommended that the employer waits until the employee returns to work before undertaking disciplinary action for any misconduct, or proceeding with a termination resulting from a work restructure, or other redundancy exercise. A lawful termination may take place where the illness of the family or household member is such that the employee’s responsibilities to care for that person will continue for a considerable time (ie the employee cannot continue to carry out the contract of employment). These issues are complicated and legal advice is recommended.

¶39-220 Other matters (carer’s leave) Other employment Employees cannot undertake other employment while on carer’s leave because they are required to take care of a family member who is sick in order to justify the leave. Other employment during carer’s leave

may constitute misconduct. Replacement employees Employers may temporarily transfer another employee to the position, or hire a casual or fixed-term employee while an employee is on carer’s leave. The replacement must be specifically made aware of the temporary nature of the employment or transfer. Generally, the employee should return to the same position, responsibilities and seniority. However, employers may restructure the workforce if appropriate procedures for a restructure are followed. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

40. LONG SERVICE LEAVE Editorial information

Updated in 2016 by Baker & McKenzie lawyers

¶40-010 Introduction Leave entitlements are governed by a variety of sources, including federal and state legislation, awards and industrial instruments and, where the employee has an individual contract, by the terms of that contract. This chapter deals with long service leave. Despite the centralisation of industrial relations powers under the Fair Work Act 2009 (FW Act), long service leave continues to be regulated by state and territory legislation, except where long service leave entitlements are specifically provided under a federal industrial instrument. Leave is a complex area. Entitlements and legal requirements vary among states and employers. Consequently, complex legal questions should be referred to a legal adviser.

¶40-020 What is long service leave? Legislation in each state and territory of Australia provides for a period of long service leave to employees who have completed a prescribed period of continuous employment, usually 10 or 15 years, with a single employer. The entitlement to long service leave varies by jurisdiction. Federal legislation does not currently prescribe minimum entitlements to long service leave, although the legislation does deal with preservation of some award and industrial agreement-based long service leave entitlements. The explanatory memorandum to the FW Act contemplates development of a national long service leave standard, although there does not appear to have been any substantive movement towards such a standard. In addition to the entitlement to take leave, there is usually provision for “accrued” long service leave to be paid out “in lieu” to the employee on the termination of the employee’s employment or death after a specified period (eg five years in New South Wales). The right to payment in lieu is generally lost if the employee is dismissed for “serious and wilful misconduct”. In some jurisdictions, payment in lieu is not made where the employee resigns other than for “domestic or pressing necessity”. Long service leave legislation generally requires employees to take the leave, and (eg in New South Wales) employers may direct an employee to take long service leave “as soon as practicable having regard to the needs of the employer’s establishment”, or at a particular time provided notice is given to the employee. Therefore, generally, employees cannot be paid out their entitlement except on termination of the employment or death. However, some states allow long service leave to be cashed in where the entitlement becomes due and there is a written agreement to that effect. Part-time employees are generally entitled to long service leave on a pro rata basis. This is calculated on the basis of the proportion of an ordinary work week that they work. Casuals are sometimes entitled to paid long service leave.

¶40-030 Jurisdiction Different employees may be covered by different statutes, awards or industrial instruments. Generally, the appropriate long service leave legislation will be that of the state or territory in which the employee works, even for employees in the federal jurisdiction. In the remaining sections of this chapter, the discussion assumes that employee entitlements arise under state legislation unless specifically noted in the text. Federal jurisdiction Employees in the federal jurisdiction may have long service leave entitlements which do not arise under state legislation, as discussed in this section. Federal legislation does not currently prescribe minimum entitlements to long service leave on an Australia-wide basis. The FW Act specifically states that the Act does not exclude state or territory long service leave Acts (s 27(2)), except in relation to employees whose long service leave terms and conditions are derived from a (see s 113): • pre-FW Act federal award applicable to the employee immediately prior to 1 January 2010, in which case such applicable award-derived long service leave terms continue to apply to such employees after 1 January 2010, or • pre-Fair Work agreement or preserved state instrument, or a Fair Work enterprise agreement applicable to the employee immediately prior to 1 January 2010, in which case such applicable agreement-derived long service leave terms may continue to apply to such employees after 1 January 2010 where the Fair Work Commission (formerly Fair Work Australia) has made an order, once it is satisfied that the terms apply in more than one state and are more beneficial than applicable state or territory long service leave laws. The FW Act also states (s 113A) that if a pre-Fair Work industrial instrument provides that an employee is not entitled to long service leave, and that first instrument ceases to apply, and a new replacement enterprise agreement comes into operation in respect of that employee immediately after the first instrument ceased to apply, the replacement agreement may provide that a specified period during which the employee was covered by the first instrument does not count as service for the purposes of long service leave calculations, either under the FW Act or state and territory long service leave laws. Federal modern awards cannot include terms dealing with long service leave. Some commentators suggested that the intention of the FW Act was to provide that new long service leave provisions contained in enterprise agreements made on or after 1 January 2010 would apply subject to state and territory long service leave laws: that is, that federal enterprise agreements entered post-1 January 2010 cannot provide for long service leave entitlements less than those applicable under relevant state legislation. However, there does not appear to be a specific prohibition in the FW Act on new federal enterprise agreements modifying or excluding the effect of state long service leave legislation, and it is arguable that it remains the position that federal enterprise agreements can exclude state long service leave laws. Where an employee has worked in more than one state Where an employee has worked in more than one state during the qualifying period, the applicable legislation will generally be the state in which the leave was applied for, or where termination occurred. An entitlement to long service leave in a particular jurisdiction will arise where the act of termination has occurred in that state, and the service of the employee “may be fairly said to be service” of that state or “substantially connected” with that state. This principle was stated in the case of Australian Timken Pty Ltd v Stone (No 2) (1971) AR (NSW) 246 and International Computers (Australia) Pty Ltd v Weaving 1981 AILR ¶456; (1981) 2 NSWLR 64. There has been little discussion around the meaning of “substantially connected” with a state, beyond the fact that it is not considered appropriate to approach any determination as to whether there is a “substantial connection” with a state by reference to whether there are more considerations pointing to a connection with a particular state as opposed to those which indicate the lack of such connection, among other things (see Cohen v iSoft Group Pty Limited [2012] FCA 1071). Accordingly, jurisdiction in each case will be

decided on the individual facts and circumstances of the employment. Special schemes — construction, mining and cleaning industries Special schemes operate in the construction, coal mining and cleaning industries. However, the operation of these schemes is complex and, so, does not fall within the scope of this chapter. In the construction industry (and due to the limited duration of jobs), each state has introduced a portable long service leave scheme under which employees can claim in respect of their total service within the industry. Because levies are paid by the project developer, employers outside the construction industry may find themselves liable for levies where they participate in projects involving a construction component. Construction is broadly defined. In the coal mining industry, a single national scheme covers long service leave. A levy is charged on payroll. Entitlements are determined by the relevant award. In New South Wales, special provision is made for long service leave for workers employed in a metalliferous mine. The Australian Capital Territory, New South Wales and Queensland make special provision for long service leave for cleaning industry workers. State legislation Table 40.1 shows the first point of reference for determining long service leave entitlements. Table 40.1: Legislative provisions for long service leave Jurisdiction

Source of legislative provisions

Federal jurisdiction employees

See FW Act and applicable federal industrial instruments. Otherwise, see state or territory legislation below.

Australian Capital Territory

Long Service Leave Act 1976 (ACT)

New South Wales

Long Service Leave Act 1955 (NSW)

Northern Territory

Long Service Leave Act 1981 (NT)

Queensland

Industrial Relations Act 1999 (Qld)

South Australia

Long Service Leave Act 1987 (SA)

Tasmania

Long Service Leave Act 1976 (Tas)

Victoria

Long Service Leave Act 1992 (Vic)

Western Australia

Long Service Leave Act 1958 (WA)

¶40-040 Entitlement to long service leave General discussion National system employers with employees covered by industrial instruments which make reference to long service leave should read the discussion at ¶40-030. Otherwise, as noted, in the remaining sections of this chapter, the discussion assumes that employee entitlements arise under state legislation, unless specifically noted in the text. Under the relevant statutes, a person will be entitled to take paid long service leave where they: • are a worker or employee • are employed as a permanent, full-time or part-time employee (casual employees may be entitled in most states), and • have the specified period of continuous service or continuous employment with the employer.

Where the employment is terminated or the employee dies after completing a specified period of service, the employee will generally be entitled to a pro rata payment based on the period of service completed. Permanent full-time and part-time employees Permanent employees (whether full time or part time) will be entitled to long service leave. Casual employees in all states may have an entitlement. The entitlement of casual employees is discussed in “Casual employees’ long service leave”. Specified period of service or employment Employees must generally complete a specified period of continuous employment or service before they can take long service leave. Most statutes contain provisions which deem service to be continuous in certain circumstances. Generally, an absence for the following reasons will not break an employee’s continuity of service or employment, and long service leave will continue to accrue during the absence where the: • employer has terminated and re-employed the employee, or acted in some other way with the intention of avoiding long service leave obligations • employee has taken annual leave, long service leave or a public holiday, and • employee has a sickness which prevents the employee attending work, and the employer has granted paid or unpaid sick leave: although an extended period of unpaid sick leave may affect continuous service. An absence for the following reasons will not affect continuity of service or employment, but long service leave may not accrue during the absence where the employee: • has been granted leave other than annual leave, sick leave, long service leave or a public holiday (The continued accrual of long service leave depends on the type of leave granted. Generally, long service leave will continue to accrue during paid leave, but not during unpaid leave. Notably, long service leave does not accrue during parental leave, although continuity is preserved.), and • is on workers compensation. Other absences (including industrial disputation) will generally not break continuity of service or employment unless the absence terminates the contract of employment or, in some jurisdictions, the absence is unreasonable. An example of this relates to apprentices. Where a person completes an apprenticeship and is reemployed by the company within a specified period, the period of the apprenticeship will be included for long service leave purposes. The relevant period is 12 months in the Australian Capital Territory, New South Wales, the Northern Territory, South Australia and Victoria, two months in Western Australia, and three months in Queensland and Tasmania. Required period of service or employment by state Table 40.2 outlines the period of continuous service or employment initially required in each state and under standard federal awards to qualify to take long service leave. It should be noted that legislation in New South Wales, South Australia, Victoria and Western Australia allows employees to take leave in advance. Table 40.2: Continuous service requirements to take first long service leave Jurisdiction Australian Capital Territory

Section/clause Sections 3(1) and 4 of the Long Service Leave Act 1976 (ACT)

Qualifying period in years

Period of leave

7

1.4 months

New South Wales

Section 4(2)(a)(i)(A) of the Long Service Leave Act 1955 (NSW)

10

2 months

Northern Territory

Sections 8(1) and (2) of the Long Service Leave Act 1981 (NT)

10

13 weeks

Queensland

Section 43(2) of the Industrial Relations Act 1999 (Qld)

10

8.6667 weeks

South Australia

Section 5(1) of the Long Service Leave Act 1987 (SA)

10

13 weeks

Tasmania

Section 8(2)(a)(i) of the Long Service Leave Act 1976 (Tas)

15

8 2/3 weeks

Victoria

Section 56A of the Long Service Leave Act 1992 (Vic)

10

8.66 weeks

Western Australia

Section 8(2)(a) of the Long Service Leave Act 1958 (WA)

10

8 2/3 weeks

Note that the Queensland, Victorian and Western Australian Acts provide for transitional entitlements to deal with employees who have partially accrued long service leave entitlements under differing old and new statutory provisions. Leave does not need to be taken immediately or as a single period. The options and timing for taking of leave are discussed at ¶40-060 “Taking long service leave”. Having achieved their first entitlement to long service leave, employees will continue to accrue long service leave in relation to any subsequent continuous service. Employees must complete a subsequent period of continuous service before being entitled to take the additional period of leave (see Table 40.3). Table 40.3: Qualifying period for long service leave and length of leave Jurisdiction

Section/clause

Qualifying period in years

Period of leave

Australian Capital Territory

Sections 3(2) and 4 of the Long Service Leave Act 1976 (ACT)

1

0.2 month

New South Wales

Section 4(2)(i)(B) of the Long Service Leave Act 1955 (NSW)

5

1 month

Northern Territory

Section 8(3) of the Long Service Leave Act 1981 (NT)

5

6.5 weeks

Queensland

Section 43(2) of the Industrial Relations Act 1999 (Qld)

5

4 1/3 weeks

South Australia

Section 5(1) of the Long Service Leave Act 1987 (SA)

1

1.3 weeks

Tasmania

Section 8(2)(a)(ii) of the Long Service Leave Act 1976 (Tas)

5

4 1/3 weeks

Victoria

Section 56 of the Long

5

4 1/3 weeks

Service Leave Act 1992 (Vic) Western Australia

Section 8(2)(b) of the Long Service Leave Act 1958 (WA)

5

4 1/3 weeks

Casual employees’ long service leave Casuals may be entitled to long service leave in all jurisdictions under their respective state or territory legislation. Note, though, that in some cases it will be overridden by the National Employment Standards award-derived long service leave terms or by the relevant industrial instrument. Casuals will generally need to establish continuous service with the employer to establish a right to long service leave. Case law indicates that where the: • casual employee has offered services to the employer, generally as and when required under a continuing contract of service, and • employer has accepted that offer and requires the employee for work on a regular basis (not necessarily the same day or days each week or month), there will be “continuous service”, obviously depending on the individual facts in each case (see Port Noarlunga Hotel Ltd v Stewart 1981 AILR ¶237; (1981) 48 SAIR 220 and Federated Clerks Union (WA Branch) v Automatic Totalisators Ltd 1979 AILR ¶18). In an instructive New Zealand case, Edwards v Auckland City Corporation [1936] NZLRS 121, the court said that: “the real test appears to be: is there a mutual obligation or understanding that, subject to the incidents of the trade, the workman will work and the employer will allow the man to work? … In some cases, such as that of dock labourers, the workman is employed for the day and paid off at night. There is a new contract of service entered into each morning, but a continuous and unbroken succession of such contracts as these, for three years, might form the basis of an employment for three years.”

¶40-050 Transmission or transfer of business, related companies and preservation of continuity of service Transmission of business Where a part or the whole of a business is sold or transferred to another business entity (ie a “transmission” or “transfer” of business), the employment of transferred employees will terminate under common law principles. A new contract of employment will then be formed with the new employer. This will not occur where some or all of the shares in the business are sold, because the employees will still be employed by the same entity. Exactly whether each transmission constitutes a real transmission of business is determined on the facts. Each case may require careful legal analysis. Unless an employee’s continuity of employment is preserved by legislation, the result of the common law termination is that all employee entitlements must be paid out. In addition, state statutes generally require payment of accrued annual leave on termination. However, in all state jurisdictions, entitlements to long service leave are preserved by legislation. Continuous service will not be broken for the purposes of long service leave where there is a transmission of business and the employee’s entitlement to leave will transfer across. However, on transmission, there will still be a common law termination of the employment. This means that there is a conflict between the requirement to pay out accrued long service leave amounts on termination, and the transfer of the entitlement. In effect, this means that the buyer and seller of the business can decide whether to pay out accrued entitlements or transfer them across. Importantly, in New South Wales and Queensland, employees are barred under statute from claiming the entitlement from more than one employer in respect of the same period of service.

Even where the employee’s accrued amount of long service leave is paid out on transmission, the employee will still have continuity of service, and the employee’s prior service will be counted in respect of long service leave entitlement. For example, a New South Wales employee has seven years’ service with Employer A when there is a transmission of business to Employer B. Employer A chooses to pay out the employee’s accrued long service leave due to the common law termination, and pays out a pro rata amount based on seven years’ service. However, the employee only needs to work three years with Employer B before being entitled to take long service leave (10 years’ total service). The amount of long service leave that can be taken is a pro rata amount based only on service with Employer B (service with both, less seven years already paid out). In practice, the new employer often adopts the accrued leave balances and long service leave entitlements of the old employer. Where the employee consents to this de facto “transfer” of entitlements, there will seldom be any question about the legitimacy of the transfer. It should be noted that redundancy issues may arise where there is a transfer of business. Briefly, where employees are not offered employment on substantially the same terms of employment with the new employer, an entitlement to redundancy payments may arise. If the accrued amount of long service leave is transferred across to the new employer, rather than being paid out, this will assist in any argument that the employee has been offered employment on substantially the same terms. Transfer to a related corporation Where an employee transfers to another business entity that is a related corporation, the employee’s employment will terminate under common law principles and a new contract of employment will be formed with the new employer. Unless the employee’s continuity of employment is preserved by legislation, the result of the common law termination is that all employee entitlements must be paid out. However, in jurisdictions, different entitlements are preserved by legislation, including annual leave and long service leave in most states, and sick leave in Queensland. Continuous service will generally not be broken for the purposes of long service leave where there is a transfer to a related corporation, and the employee’s entitlement will transfer across. However, on transmission there will still be a common law termination of the employment. This means that there is a conflict between the requirement to pay out long service leave on termination and the transfer of the entitlement. In effect this means that the related corporations can decide whether to pay out entitlements or transfer the entitlements across. As previously discussed in “Transmission of business”, if the entitlement is not transferred by statute or industrial instrument, the accrued entitlement must be paid out on termination by the old employer. In practice, the new employer often adopts the accrued leave balance with the employee’s consent. See also Chapters ¶27 and ¶62.

¶40-060 Taking long service leave Applying for long service leave Legislation in each jurisdiction (except Queensland and Victoria) states that long service leave should be taken “as soon as practicable” after the leave becomes due, subject to agreement between parties. The Queensland and Victorian Acts simply provide for the leave to be taken when the parties agree. However, each Act allows consideration of the business interests of the employer, and allows the parties to delay the taking of the leave. Generally, employees request long service leave at a particular time that suits them, which may or may not be approved by the employer. In practice, the process is, therefore, an agreement between the worker and the employer as to when it is convenient for leave to be taken. An employer often has policies that require employees to give suitable notice of leave, require a written leave request, or allow the employer to refuse the taking of leave at a time which is considered inconvenient.

The Western Australian statute specifically requires an employee to give two weeks’ notice in order to take long service leave (Long Service Leave Act 1958 (WA), s 9(1b)). The statute also provides that, where the employer and employee cannot agree on when the leave is to be taken, the employer must not refuse the employee taking the leave at any time more than 12 months after the right to take the leave accrued. Direction to take long service leave The statutes in each state (except Tasmania and Western Australia) give the employer the statutory right to specify when leave will be taken. In Tasmania, the Secretary for Labour will direct when the leave will be taken where there is no agreement. In Western Australia, the statute provides that, where the employer and employee cannot agree, the employer must not refuse the employee taking the leave at any time more than 12 months after the right to take the leave accrued. An employer in Western Australia would be entitled to provide an employee with a lawful and reasonable direction to take leave, but would have to agree to such time as the employee chose to take the leave, which was more than 12 months after the right to take the leave accrued. The notice periods that employers are required to give to employees to take leave are shown in Table 40.4. Table 40.4: Notice periods in relation to the taking of leave Jurisdiction

Can an employer require an employee to take leave?

Notice period for employer to require leave

Australian Capital Territory

Yes (s 6(2) of the Long Service Leave Act 1976 (ACT))

60 days

New South Wales

Yes (s 4(10) of the Long Service Leave Act 1955 (NSW))

1 month

Northern Territory

Yes (s 8(7) of the Long Service Leave Act 1981 (NT))

2 months

Queensland

Yes, where agreement cannot be reached (s 45(3) of the Industrial Relations Act 1999 (Qld))

3 months (must take at least 4 weeks’ leave)

South Australia

Yes (s 7(3) of the Long Service Leave Act 1987 (SA))

60 days

Tasmania

No, if no agreement, the Secretary for Labour may direct when leave is taken

—

Victoria

Yes (s 66 of the Long Service Leave Act 1992 (Vic))

3 months

Western Australia

Yes, provided that the direction was lawful and reasonable. However, the employee can choose when the leave is to be taken at any time more than 12 months after the right to take the leave accrued

—

Number of periods of long service leave Generally, the statutes require that long service leave be taken in a single period. However, most statutes lay out a maximum number of periods in which the leave can be taken. In practice, the number of periods is agreed between the parties. Leave in advance

The legislation in New South Wales, South Australia, Victoria and Western Australia allows employees to take long service leave in advance, generally by agreement. Employees who take leave in advance are generally not entitled to any further long service leave until they complete the period in respect of which the leave was taken. If the employee dies or their employment is terminated before they have earned leave that has already been taken, the amount of that leave can be deducted from any remuneration payable on termination. Other leave The following types of leave can be taken at the same time as long service leave and extend the period of leave: • Annual leave: A period of annual leave and long service leave may be taken consecutively. • Study leave: Where study leave is provided, a period of study leave and long service leave may be taken consecutively. • Leave without pay: Such leave may be granted in addition to long service leave. • Public holidays: Those holidays that occur during a period of long service leave do not count as long service leave and extend the period of long service leave by one day each (except in South Australia, where the Long Service Leave Act 1987 (SA) provides that public holidays which occur during long service leave are counted as long service leave). However, periods of sickness, bereavement or jury service, and rostered days off that occur during long service leave cannot be taken as those forms of leave. Part of the period allocated as parental leave may be taken as paid long service leave, up to the maximum permitted period of parental leave. Termination during long service leave An employer can generally only terminate an employee’s employment during leave where there is a sound legal reason, such as redundancy, grounds for summary dismissal (ie where the employee can be dismissed without notice) or a repudiation of the contract by the employee. However, if the employee is not given normal procedural fairness, the employer may be exposed to legal action, including an unfair dismissal action. Generally, a summary dismissal will not become effective until the end of the leave period. If the employee’s employment is terminated by giving notice during the leave, the notice period is generally seen as not starting to run until the end of the leave. In practice, in the absence of extremely pressing reasons to the contrary, a termination of employment should be delayed until the employee returns from long service leave. Working for someone else during leave Under the legislation in the Australian Capital Territory, New South Wales, Queensland and Tasmania there is no specific prohibition on an employee to working for another employer during long service leave. As such, an employee can arguably do so, provided that the work does not jeopardise the position of the employer or interfere with the employee’s principal employment, or the employer has not explicitly prohibited such employment. This depends on the circumstances, but, as an example, working with a competitor of the employer and using skills unique to the work performed with the employer would not be allowed. However, the legislation in the Northern Territory, South Australia, Victoria and Western Australia specifically prohibits other employment during long service leave. Employee replacement Employers may temporarily transfer another employee to the position, or hire a part-time, casual or fixedterm replacement, while an employee is on long service leave. The replacement should be specifically made aware of the temporary nature of the employment or transfer. Generally, the employee should return to the same position, responsibilities and seniority. However, employers may restructure the workforce if appropriate procedures for a restructure are followed.

¶40-070 Payment — during employment Calculating payments The calculation of long service leave is based on both similar terminology and analysis to the calculation of annual leave. The terminology used to refer to the pay basis on which long service leave is calculated differs between long service leave legislation throughout Australia. For example, the Australian Capital Territory legislation refers to “ordinary remuneration”. Pursuant to the New South Wales Act, an employee is entitled to an annual holiday of four weeks on “ordinary pay”. The South Australian Act refers to “ordinary weekly rate of pay”. For the purposes of this chapter, the term “ordinary pay” is used as a generic term for the applicable legislation throughout the states and territories of Australia, unless otherwise indicated. The relevant long service leave in some states provides (often confusing) definitions of “ordinary pay”. The standard components of ordinary pay (initially decided in the Annual Leave Cases (1972) 144 CAR 528) are generally applicable to “ordinary pay” for long service leave. Where the employee does not have an ordinary rate of pay at the time the leave is calculated, the rate is generally calculated by taking the average weekly pay for the last 12 months. In New South Wales and Victoria, the average is taken over the last 12 months or five years, whichever is higher. In South Australia, where the employee was, during the period of three years prior to the date of payment or taking the leave: • employed on an hourly basis or on an hourly rate of pay • employed as a casual or part-time employee, or • subject to a change in their ordinary hours of work, the employee’s ordinary pay is calculated by averaging the number of hours worked by the employee per week over that three-year period, and multiplying that by the employee’s hourly rate at the date of payment or taking of the leave. Ordinary pay generally includes non-discretionary commissions and bonuses, while entirely discretionary bonuses (eg Christmas bonuses) are excluded. Many employers mistakenly pay long service leave calculated on base salary only, especially in the case of commission-based employees. Legal claims may be brought for unpaid long service leave amounts where employers have paid leave on base salary only. As claims can generally extend back six years, significant unpaid amounts may be involved. Bonuses and commissions Although generally non-discretionary bonuses and commission are included in ordinary pay, the New South Wales legislation specifically excludes these for high income earners. Under s 3(2C) of the Long Service Leave Act 1955 (NSW), if the employee’s “ordinary pay” (excluding the bonuses or commissions) exceeds a certain amount prescribed by the regulations (presently $144,000), long service leave is calculated only on the basis of the ordinary pay (excluding the bonuses or commissions). The Queensland legislation provides that average commissions in the preceding 12 months must be included, unless the relevant industrial instrument or contract between the employer and employee provides otherwise, or the relevant Queensland commission holds that the inclusion of commission would be unfair in the circumstances. Leave payment Where employees take long service leave, they can be paid: • in full at the beginning of the leave

• in the normal cycle of payments, or • in another way that the employer and employee agree on. Increase in salary while on leave If an employee’s pay goes up, so that their ordinary pay increases, the employee must receive the increase. If the employee has been paid in advance for the period of leave, the employee should receive a lump sum payment for the difference. Light duties When an employee is engaged on light duties during the year which have involved the employee being paid at a lower amount (eg for workers compensation purposes), that period is not to be taken into account in calculating that employee’s average weekly wage for long service leave purposes (see C Smith v Australian Wire Industries Pty Ltd Industrial Commission in Court Session 1985 AILR ¶213; (Fisher P, Cahill and Watson JJ) (No 498 of 1984) 27/5/85). Payment to casuals As discussed earlier, casual employees may have a right to long service leave. The payment to casuals who are entitled to take long service leave is calculated on the basis of the average hours per week they have worked over the previous 12 months, or: • in full at the beginning of the leave • in the normal cycle of payments, or • in another way that the employer and employee agree on. This number of hours will be paid for each week over the period of leave. For example, a casual employee in Victoria has continuous service over the preceding 10 years. The employee will be entitled to two months (eight weeks) of long service leave. The employee has worked an average of 10 hours per week over the preceding 12 months. The employee can, therefore, take up to two months off, during which time they will be paid at the average amount they would receive for 10 hours per week over the preceding 12 months. The employee is, therefore, receiving the average ordinary pay they would receive if they had been working. Taxation of paid long service leave Payments of long service leave taken are taxed at the employee’s usual pay as you go (PAYG) rate. Paying out accrued long service leave Generally, it is not permissible to give cash payments in lieu of taking long service leave. The jurisdictions which allow it are South Australia, Tasmania and Western Australia. For this to occur, a written agreement is required, and the employee must be paid at the same rate as if they took the leave. In Queensland, a payout is allowed only where the applicable award provides for it. However, an employee may apply to the Queensland Industrial Relations Commission (QIRC) for a payout on compassionate grounds. Interestingly, the QIRC has found that an employee’s wish to use their accrued long service leave to purchase a primary residence may constitute grounds to allow a payout. Elsewhere, statutes or standard awards either prohibit payment in lieu other than on termination or death, or only allow for payment on termination or death.

¶40-080 Payment — on termination or death Pro rata payment Each jurisdiction provides that employees who have completed a particular length of service receive a payment in respect of their accrued long service leave on termination or death. Each state’s legislation differs according to the required period, and the period of service required before a payment is made

depends on the circumstances of the termination. Most jurisdictions increase the period of service that must be completed in order to receive a pro rata payment, where the employee: • is dismissed for serious and wilful misconduct (or serious misconduct in the Northern Territory, Queensland and Western Australia), or • resigns for reasons which do not include illness, incapacity or “domestic or other pressing necessity”. Table 40.5 outlines the period of service in each jurisdiction after which a right to payment will accrue in different circumstances of termination. Table 40.5: Right to long service leave payments on termination or death (See Table 40.1 for the list of Acts.) Jurisdiction

Length of service before entitlement

At what stage of service does an employer have to pay if the employee: is dismissed is dismissed resigns due resigns for serious other than to illness, other than (and wilful) for serious incapacity due to misconduct? (and wilful) or domestic illness, misconduct? or other incapacity pressing or domestic necessity? or other pressing necessity?

dies?

Australian Capital Territory

5 years (s 11C)

7+ years — pro rata payment

5+ years — pro rata payment

5+ years — pro rata payment (includes resignation due to retirement)

7+ years — pro rata payment

5+ years — pro rata payment

New South Wales

5 years’ service (s 4(2)(a))

10+ years — pro rata payment

5+ years — pro rata payment

5+ years — pro rata payment

10+ years — 5+ years — pro rata pro rata payment payment

Northern Territory

7 years (s 10(2))

10+ years — payment based on completed 10 years and additional completed 5year periods only (not pro rata)

7+ years — pro rata payment based on completed years

7+ years — pro rata payment based on completed years (includes resignation due to retirement)

10+ years — pro rata payment based on completed years

Queensland

7 years (s 43)

10+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

10+ years — 7+ years — pro rata pro rata payment payment

South Australia

7 years (s 5(3))

10+ years — pro rata

7+ years — pro rata

7+ years — pro rata

7+ years — pro rata

7+ years — pro rata payment based on completed years

7+ years — pro rata

payment based on completed years

payment based on completed years

payment based on completed years if employee does not “unlawfully terminate”

payment based on completed years if employee does not “unlawfully terminate”

payment based on completed years

Tasmania

7 years (s 8(2)(b))

15+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

15+ years — 7+ years — pro rata pro rata payment payment

Victoria

7 years (s 58(1))

7+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

Western Australia

7 years (s 8) 10+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

7+ years — pro rata payment

Illness, incapacity, domestic or other pressing necessity As discussed, some jurisdictions increase the period of service required for a payout of long service leave where the employee resigns other than for “illness, incapacity, domestic or other pressing necessity”. For example, if an employee has more than seven years’ service in Tasmania and resigns for reasons of incapacity or domestic or other pressing necessity, the employee receives a pro rata payment of long service leave. If the Tasmanian employee does not have such a reason for the resignation, the employee does not get a pro rata payout unless the employee has more than 15 years’ service. Illness or incapacity justifying resignation The illness or incapacity must cause sufficient pain or discomfort to the employee that the employee makes a reasonable decision to resign. The illness or incapacity need not be the sole reason, and resignation need not be necessary, only reasonable. Employees would normally be required to provide an appropriate medical certificate. Where there is another job available at the same rate of pay that the employee could perform despite the injury, it may be harder but not impossible for the employee to still claim the entitlement. Domestic or other pressing necessity Whether a situation constitutes a domestic or other pressing necessity involves a consideration of the circumstances, the employee’s subjective view of the situation, and how a reasonable person would view the situation. Australian courts have said that there should be a serious situation in the home, although not necessarily a crisis, such that a reasonable person might feel compelled to resign (Franks v Kembla Equipment Co Pty Ltd (1969) AILR ¶55; 1969 AR 17). The reason should be a genuine motivating reason, but need not be the sole reason (see Computer Sciences of Australia Pty Ltd v Leslie (1983) AILR ¶556; (1983) 6 IR 188; 1983 AR 828). Examples where a court has found a domestic or pressing necessity include: • pregnancy • caring for a sick spouse or sick children • taking a higher paying job to cope with financial commitments • work stress and its impact upon the worker’s family, or

• where the employer had relocated and the travel placed a strain on the family situation. Generally, problems at work will not be sufficient justification, unless there is an impact on the domestic situation. When payment is due Although each statute terms it differently, where a payment is due on termination, it should be paid at termination. Where the employee has died, Queensland and Victoria hold that payment should be made immediately. However, the other states hold that payment is made to the employee’s representative (probably the executor of the employee’s estate) on a request from that representative. Calculating long service leave payments If an employee is entitled to a payout of accrued long service leave, the employee receives a payment based on the employee’s ordinary pay (see ¶40-070) and usually calculated on the basis of total service. In some instances, in the Northern Territory and South Australia, the payment is calculated only on completed years of service. These are indicated in Table 40.5.

¶40-090 Other matters Record-keeping Federal and state industrial relations and leave legislation require employee records to be kept. This requirement includes leave records. The required information for leave records is outlined in Chapter ¶38. Note that the Long Service Leave Act 1976 (ACT) requires records as to the employee’s birth date, relevant award and, where overtime may be payable, the number of hours worked, and start and finish times. Penalties may be payable for non-compliance with record-keeping requirements. In addition, statutes usually lay out procedures whereby records may be inspected by unions, employees and/or inspectors. Records must be retained for a period specified in each piece of state legislation. When an employee is terminated, employers may be obliged to issue both a PAYG payment summary and an employment separation certificate, containing information about long service leave payouts. Non-payments The federal legislation and statutes in each state outline procedures whereby employees can enforce their statutory entitlements to long service leave and recover underpayments. Generally, employees can only recover under these provisions in respect of statutory or award entitlements. Employees granted contractual long service leave entitlements in excess of the statute may need to take a common law action for breach of contract to enforce or recover the extra entitlements. See Table 40.6. Table 40.6: Recovery by employees of unpaid long service leave Jurisdiction Federal award or workplace agreement employees

Source of provisions Relevant award Chapter 4 of the FW Act

Offences and recovery Action for breach of a federal industrial instrument which provides for long service leave may be taken by an inspector, the affected employee or a union (in specified circumstances). Such remedies would be available where the relevant instrument provides a long service leave entitlement, even if the instrument simply refers back to state long service leave legislation. Fines may be imposed. Employee may sue in an eligible court for recovery of unpaid wages, leave and so on, up to six years after

payment was due. Australian Capital Territory

Sections 13D13G of the Long An employee may complain to the registrar Service Leave Act 1976 about breaches of the Act. The registrar has (ACT) established complaint procedures to resolve complaints which are conducted by authorised officers, who may issue a “notice to comply” to an employer. Fines are payable for non-payment of long service leave.

New South Wales

Section 10 of the Long Service Leave Act 1955 (NSW)

Section 10 of the Long Service Leave Act 1955 (NSW) provides for fines for breach of the Act. Employee may sue for recovery before the Chief Industrial Magistrate (CIM) or the New South Wales Industrial Relations Commission (NSWIRC) for unpaid long service leave which became due up to six years earlier.

Sections 357, 364–366 of the Industrial Relations Act 1996 (NSW)

Section 357 of the Industrial Relations Act 1996 (NSW) also allows fines for breach of a state award, including leave provisions. Actions may be brought by an inspector, employer or union before the CIM or NSWIRC. In those proceedings, the court may make orders for payment of unpaid amounts. Sections 314–366 of the Act lay out procedures for recovering unpaid amounts under an industrial instrument and aboveaward amounts. Section 379 lays out small claims procedures for smaller unpaid amounts.

Northern Territory

Sections 17–19 of the Long Service Leave Act 1981 (NT)

Failure to comply with the Act may incur fines or imprisonment. On conviction the court may make orders for payment of unpaid amounts, within three years of the act or omission.

Queensland

Sections 399, 400, 666, 670 and 671 of the Industrial Relations Act 1999 (Qld)

Non-payment of wages (including leave) may be prosecuted before a magistrate. Employee, a union or an inspector may apply to a magistrate for unpaid leave within six years of it becoming payable.

South Australia

Sections 12 and 13 of the An inspector may direct an employer to make Long Service Leave Act 1987 payments or provide leave in accordance (SA) with the legislation. Employee may apply to the Industrial Relations Court for an order to grant leave or make payment. Non-compliance with a state award, including long service leave provisions, may result in a fine of up to $2,500. Where there is a conviction, the employee may apply for an order for payment.

Tasmania

Section 13 of the Long Non-payment of wages (including leave) Service Leave Act 1976 (Tas) under an award may be prosecuted. Where a

conviction is found, the court may order payment of amounts due to the person up to three years prior to proceedings. A dispute as to entitlement to long service leave is referred to the secretary of the Workplace Standards Authority for investigation, and then to a commissioner, who may make orders for payment if necessary. Victoria

Section 160 of the Long Service Leave Act 1992 (Vic)

Employee may take proceedings in the Industrial Division of the Magistrates Court to recover monies owed, within six years of the entitlement arising.

Western Australia

Section 11 of the Long The industrial magistrate has jurisdiction to Service Leave Act 1958 (WA) determine disputes as to long service leave. The registrar, an industrial inspector, a union or an employee may apply to the industrial magistrate for enforcement of awards. Fines may be imposed for a breach, and orders may be made for payment.

¶40-100 Conclusion This chapter has looked at long service leave. It is important that adequate records of start dates for all employees, including records of any outstanding long service leave, are kept. Legal advice should always be sought if in doubt over leave entitlements as these vary depending on the applicable award, agreement or instrument. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶30-000.

41. PARENTAL LEAVE Editorial information

Updated in 2016 by Genevieve Auld Associate, Baker & McKenzie

¶41-010 Introduction Where an employee or an employee’s spouse is having a baby or adopting a child, the employee can generally take parental leave. Both parents can usually take a short period of unpaid leave immediately following the birth or adoption. Parents can also take longer periods of unpaid leave to be the primary caregiver of the child. The vast majority of employees in Australia currently fall within the federal industrial relations jurisdiction. They have parental leave entitlements under the terms of the National Employment Standards (NES) provided under the Fair Work Act 2009 (Cth) (FW Act). See Chapter 43 regarding the application of the FW Act to National System Employers and Employees. From 1 January 2010, the parental leave provisions contained in the NES apply as minimum entitlements to all federal jurisdiction employees. If an employee is covered by a federal industrial instrument, such as a collective agreement, the parental leave terms contained in those instruments may provide for more generous entitlements than the NES, but cannot provide for entitlements or obligations which are less generous to employees than those contained in the NES. Where the employee is covered by a state award or agreement that provides for more generous terms, the state award or agreement will prevail over the state legislation. Unpaid parental leave entitlements in each jurisdiction are largely similar. However, there may be differences in notification requirements, employees’ rights to return to work, and other important procedural aspects of the different statutory regimes. The federal government has also passed legislation providing for paid parental leave entitlements. Federal and state employees are both eligible for the paid parental leave entitlements. Although such paid entitlements are funded by the federal government, the legislation imposes significant obligations on federal jurisdiction employers. As such, it is important for employers to have a clear understanding of the parental leave provisions which apply to their employees. The information in this chapter is intended to provide guidance only. If the correct jurisdiction for parental leave entitlements is unclear, or there are specific queries relating to the operation of the parental leave provisions of the federal legislation, seek professional advice.

PARENTAL LEAVE ¶41-020 What is parental leave? Parental leave is the general term used to encompass maternity leave, paternity leave and adoption leave which is taken when an employee or an employee’s spouse is having a baby or adopting a child. Some state jurisdictions which provide for parental leave distinguish between these three kinds of parental leave.

By contrast, the federal jurisdiction does not provide for a general distinction between these kinds of leave, referring to them all as parental leave, although the legislation does provide some specific entitlements which vary depending on the particular circumstances of the employee and in which the leave is taken. For the purposes of this chapter, however, we have largely retained the distinction between the different kinds of parental leave to clearly indicate what leave entitlements different kinds of employees have. Parental leave is currently unpaid leave, unless an award or contract of employment specifically provides for a period of paid leave. However, the federal government has also passed legislation providing for paid parental leave entitlements. Although such paid entitlements are funded by the federal government, the legislation imposes significant obligations on employers in relation to the administration of payments for paid parental leave entitlements. Parental leave can generally only be taken by an employee who is to act as the primary caregiver of the child. Under the federal jurisdiction, both the father and the mother may take concurrent parental leave of up to eight weeks in total following the birth or adoption of the child. Under various state jurisdictions, both parents may take parental leave during the: • week following the birth of the child, and • three weeks following the adoption of the child. In all jurisdictions, the standard period of parental leave is up to 52 weeks, which can be shared between the parents, and which must be generally be taken within the year following the birth or adoption. In Queensland and under the NES, an employee who has taken parental leave may apply for a further period of up to one year, which can only be refused by the employer on reasonable business grounds. It is becoming more common for employers to provide employees with paid maternity or parental leave entitlements, which will generally operate in addition to any statutory entitlements.

¶41-030 Source of law The state governments of New South Wales, Queensland, South Australia, Tasmania and Western Australia have enacted legislation to provide parental leave. The federal legislation provides minimum conditions for employees within the federal jurisdiction. Most Australian employees will fall within the federal parental leave regime. The relevant statutes are shown in Table 41.1. Table 41.1: Legislative provisions for parental leave Jurisdiction

Source of legislative provisions

Federal (Note: Most employees will be in this jurisdiction.)

Fair Work Act 2009

Australian Capital Territory

For all employees, see Federal.

New South Wales

For most state and local government employees: Industrial Relations Act 1996 (NSW) For all other employees, see Federal.

Northern Territory

For all employees, see Federal.

Queensland

For most state and local government employees: Industrial Relations Act 1999 (Qld) For all other employees, see Federal.

South Australia

For most state and local government employees: Fair Work Act 1994 (SA) For all other employees, see Federal.

Tasmania

For most state government employees: Industrial Relations Act 1984 (Tas) For all other employees, see Federal.

Victoria

For all employees, see Federal, with the exception of specific matters reserved in relation to some state government employees under Victorian referral legislation.

Western Australia

For state and local government employers and all employers in Western Australia who are not constitutional corporations: Minimum Conditions of Employment Act 1993 (WA) For employers in Western Australia who are constitutional corporations, see Federal.

Parental leave provisions are also found in industrial awards, agreements and orders. The relevant state legislation will not override parental leave provisions contained in awards or agreements if those provisions provide a more favourable entitlement to an eligible employee than those provided under the state legislation. If state legislation provides greater entitlements than the industrial instrument, then the legislation operates to “top-up” the shortfall of the industrial instrument. In the federal jurisdiction, the NES provide for minimum standards which will be read into all industrial instruments. Industrial instruments may provide for parental leave entitlements which exceed those under the NES. This chapter refers primarily to the legislation listed in Table 41.1. Employers should check all relevant awards or agreements to determine any applicable clauses.

¶41-040 Terminology “Spouse” defined The legislation usually refers to “spouses” in defining the interaction between parental leave taken by couples. “Spouse” is defined to include married couples and separated couples. The NES specifically refer to both spouses and de facto partners, and the definition of “de facto” specifically includes a same-sex partner. Other states have differing notice provisions. The Tasmanian legislation refers to a “partner”, which is defined in the Relationships Act 2003 (Tas) as a person who is or has been in a personal relationship and which, arguably, extends to same-sex partners. Primary caregiver Long parental leave entitlements are provided to employees who either are, or will be, “the primary caregiver” of a child in the period of parental leave (“long” is used interchangeably with “extended”). Only one parent can be the primary caregiver at any one point in time. However, parents can be the primary caregiver during separate periods within the parental leave period. Persons seeking parental leave must generally provide a statutory declaration to the effect that they will be the primary caregiver for the period during which they seek leave. Knowingly making a false statutory declaration is a criminal offence. Where an employee ceases to be the primary caregiver of a child and remains on parental leave, that employee would be in breach of their employment contract.

MATERNITY LEAVE ¶41-050 What maternity leave can be taken?

For the purposes of this chapter, maternity leave refers to a period of parental leave taken by a woman who will actually give birth to a child. Maternity leave is unpaid leave and is available for a period of 1–52 weeks (which can often be extended for a further year under the NES and in Queensland). An employee is entitled to take maternity leave where they are to give birth to a child. Maternity leave can be taken prior to the birth of the child: however, it cannot extend past the relevant period after the birth of the child. Maternity leave is available to employees who satisfy the following conditions: • The employee is a permanent employee who has worked continuously for a minimum period of 12 months in the organisation. • The employee is pregnant at the time of application. Under the federal legislation, and in the New South Wales, Queensland and Western Australian jurisdictions, long-term casuals are also entitled to maternity leave. In state jurisdictions, the employee’s spouse may take a week’s paternity leave at the same time as the mother, following the birth of the child, while in the federal jurisdiction this period is up to eight weeks in total for members of an employee couple. The total of parental leave taken by both parents cannot exceed 52 weeks (two years under the NES and in Queensland), including the extended paternity leave. Compulsory commencement of leave In South Australia, Tasmania and Western Australia an employee, who is to give birth, must start maternity leave six weeks before the expected date of birth, unless a medical practitioner has certified that the employee is fit to work closer to the expected date of birth. The federal legislation provides that maternity leave (for an employee who is to give birth) must commence some time between six weeks before the expected date of birth and the actual date of birth. Under the federal legislation, an employer can require such an employee to provide a medical certificate stating that the employee is fit for work within six weeks of the estimated date of birth. If the employee does not provide a medical certificate within seven days of the employer’s request, or if the employee provides a certificate within that time stating that she is not fit for work, an employer may require the employee to commence maternity leave as soon as reasonably practicable. The federal legislation and the New South Wales and Queensland legislation provide that an employee may be transferred to a “safe job” (ie a role which it is safe for her to perform while pregnant) on recommendation by her medical practitioner, if her current role poses risks to her health as a result of her pregnancy.

¶41-060 Qualifying service Full-time employees New South Wales and Queensland require 12 months’ “continuous service” with the employer prior to the date on which the employee begins maternity leave before an employee is entitled to take maternity leave. All other federal and state legislation provide maternity leave when it is reasonable to expect that the employee will complete (or have completed) at least 12 months’ continuous service on the day before the estimated or expected date of birth. Casual employees Casual employees are not generally entitled to maternity leave outside of the operation of the federal, New South Wales, Queensland and Western Australian legislation. Similar provisions have been included in some South Australian awards by the South Australian Industrial Relations Commission. In New South Wales, casual employees are entitled to maternity leave if they are regular casual

employees: that is, casual employees who work for an employer on a regular and systematic basis for at least one year of continuous service and who have a reasonable expectation of ongoing employment on that basis. In Queensland, casual employees are entitled to maternity leave if they are long-term casual employees: that is, casual employees who are engaged by a particular employer on a regular and systematic basis, for several periods of employment during a period of at least one year immediately before the employee seeks the relevant leave. In Western Australia, casual employees are entitled to maternity leave if they are “eligible casuals”. An eligible casual is a casual employee who has been employed on a regular and systematic basis: • for a sequence of periods during a period of at least 12 months, and who, but for the birth of a child, would have a reasonable expectation of continuing employment, or • for a period of less than 12 months, where the employment ceased at the employer’s initiative (the first period) and then, after a period of no greater than three months, was again employed by the same employer on a regular and systematic basis (the second period), such that the first and second periods are of a combined length of at least 12 months and who, but for the birth of the child, would have a reasonable expectation of continuing employment with the employer. Under the NES, a casual employee must have been employed by the employer on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months and, but for the birth of a child, would have a reasonable expectation of continuing employment by the employer on a regular and systematic basis. Employers to whom legislation does not apply should check relevant awards.

¶41-070 What is continuous service? Continuous service is generally service under a contract of employment, including any authorised paid leave or absence. New South Wales specifically includes any period of part-time work as continuous service. This leave is available to employees who have worked continuously for a minimum period of 12 months prior to commencing leave. Employers should check the relevant legislation to determine whether certain types of service should be considered for the purposes of determining the minimum continuous service period.

¶41-080 Documents required for maternity leave An employee who is to give birth to a child and wishes to take leave is required to give written notification of her intention to take maternity leave and evidence confirming that she is pregnant and the expected date of birth. The federal legislation and relevant legislation in each state stipulates when this notice must be given. Generally, an employee is required to give at least 10 weeks’ notice of the intention to take leave and the expected date of birth, and/or four weeks’ notice prior to the dates between which leave is to be taken, unless this is not reasonably practicable. Some state legislation stipulates that the employer may also require the employee to provide a statutory declaration setting out the amount of any parental leave the employee’s partner is seeking.

¶41-090 Pregnancy termination or death of the child The termination of a pregnancy, other than by the birth of a living child, automatically cancels maternity leave where the maternity leave has not commenced. Similarly (with the exception of the federal legislation, New South Wales and Queensland), if the child, who is the subject of the leave dies during the maternity leave, the leave is cancelled. In New South Wales and Queensland, the employee is entitled to resume work at a time nominated by the employer within two weeks after the date on which the employee gives the employer a notice in writing stating that

the employee intends to resume work and the reason for the intended resumption. All other jurisdictions are silent on this issue. The NES provide that, where an employee has commenced parental leave and the child born alive dies, the employer can notify the employee in writing that she must return to work on a specified day. This day must not be less than six weeks after the date of the notice. There is also provision for special maternity leave if a pregnancy terminates other than by the birth of a living child. Special maternity leave is discussed at ¶41-120.

¶41-100 Varying the period of leave It is possible to shorten or lengthen the period of leave. The period of leave may generally be lengthened once during the leave period if the following conditions are met: • the extension will not exceed 52 weeks, and • the employee gives the employer four weeks’ notice under the NES and in Queensland. Other states have differing notice provisions. Under the NES and in Queensland, an employee who has taken the full period of parental leave may also apply for a further period of up to one year, which can only be refused by the employer on reasonable business grounds. At least four weeks’ notice is required. The period of leave may be shortened if the following conditions are met: • the employer agrees, and • the employee gives four weeks’ written notice to the employer under the NES and Queensland.

¶41-110 Interruption of maternity leave In New South Wales, an employee may, with the agreement of the employer, interrupt the period of leave by returning to work for the employer, whether on a full-time, part-time or casual basis. The period of leave, however, cannot be extended by such return to work beyond the 52 weeks allowed, or one year after the birth.

¶41-120 Special maternity leave Special maternity leave is unpaid leave and covers situations where: • a pregnancy terminates other than by the birth of a living child, or • an illness occurs that is attributable to the pregnancy. The period of such leave is the amount of time certified as necessary by a medical practitioner. Any sick leave entitlements may be claimed during this period. Pursuant to the federal legislation, an employee may take special maternity leave when an illness related to her pregnancy occurs, or on the termination of a pregnancy, after 28 weeks, other than by the birth of a live child, and on provision of a medical certificate. Special maternity leave is not provided for under South Australian and Western Australian legislation.

¶41-130 Paid parental leave Under state legislation, maternity leave is unpaid leave. However, it is increasingly becoming the case

that industrial instruments and individual contracts of employment may provide a period of payment for maternity leave. Federal paid parental leave scheme — a brief outline In 2011, the federal government introduced paid parental leave entitlements under the terms of the Paid Parental Leave Act 2010 (Cth). The terms of the legislation are complex and impose obligations on employers. From 1 July 2011, payments have been paid to employers who then become responsible for making the parental leave payments to their eligible employees. The relevant provisions have been summarised below. However, detailed advice should be sought by employers to ensure that they are complying with their legal obligations. Under the scheme, the federal government funds payments to the primary caregiver of children of working parents born or adopted after 1 January 2011. Both state system and federal system employees are eligible for payments. The Department of Human Services (DHS) is the federal government body primarily responsible for administration of the paid parental leave scheme. Eligible persons who have had a child or who have adopted a child on or after 1 January 2011, have been able to apply to the DHS — with paid parental leave payments commencing from 1 January 2011. To be eligible, the birth mother or the initial primary carer of a recently adopted child must apply for the entitlement. They must: • be an Australian resident • have met the paid parental leave work test before the birth or adoption occurs (ie they must have worked for at least 10 of the 13 months before the birth or adoption of their child, and have worked for at least 330 hours in that 10-month period (just over one day a week), with no more than an eightweek gap between two consecutive working days) • have received an individual adjusted taxable income of $150,000 or less in the previous financial year, either before the date of birth or adoption, or the date of the claim (whichever is earlier), and • be on leave or not working, from when they become the child’s initial primary carer until the end of their period of paid parental leave. The responsibility for making a claim rests with the employee. Claims must be lodged with the DHS and include a number of details, including the nominated start date for the paid entitlements and the child’s expected date of birth (or the day the claimant expects to become the child’s primary carer). Claims can be lodged up to three months before the expected date of birth or adoption. The employer is not required to make an assessment as to eligibility for their employees — this is the responsibility of the DHS. The DHS makes a determination and informs the employer in writing of any employees which the employer is required to make paid parental leave instalments to. Where the employer has received a notification, the employer has 14 days in which to respond — either accepting the determination or applying for a review. Payments are made at the level of the national minimum wage (currently $672.70 per week before tax) for a maximum period of up to 18 weeks, which can be taken at any time within the first year after the birth. Payments are made to the employer by the DHS. The employer is then responsible for paying those amounts to the employee. Federal paid parental leave scheme — Dad and Partner Pay On 1 January 2013, the federal paid parental leave scheme was expanded to include a new two-week government funded payment for working dads or partners, called “Dad and Partner Pay”. This payment is made to eligible working dads or partners at the rate of the national minimum wage (as mentioned earlier — $672.70 per week before tax) when they are on unpaid leave from work or are not working. To be eligible, the dad or partner must be one of the following: • the biological father of the child

• the partner of the birth mother • the adopting parent • the partner of the adopting parent • the parent in a surrogacy arrangement • the partner of a parent in a surrogacy arrangement, or • the same-sex partner of the birth mother, biological father, or the adopting parent. The dad or partner must also: • be an Australian resident • provide care for a child born or adopted from 1 January 2013 • have met the paid parental leave work test before the birth or adoption occurs (ie they must have worked for at least 10 of the 13 months before the birth or adoption of the child, and have worked for at least 330 hours in that 10-month period (just over one day a week) with no more than an eightweek gap between two consecutive working days) • have an individual adjusted taxable income of $150,000 or less in the financial year, either before the date of their claim, or the date their Dad and Partner Pay period starts (whichever is earlier), and • be on unpaid leave or not working during their Dad and Partner Pay period. Recent developments to the federal paid parental leave scheme The DHS has recently announced a change to the parental leave pay entitlements paid under the federal government-funded paid parental leave scheme explained in the Fairer Paid Parental Leave Bill 2015. It is proposed (subject to the passage of legislation) that for children born or adopted on or after 1 July 2016 the parental leave pay entitlement will be reduced where an employee is also entitled to employer provided paid maternity leave. If the above change is adopted, it would mean that employees would no longer receive both paid parental leave from an employer and paid parental leave pay from the federal government. Instead the employee’s government-funded paid parental leave pay will be reduced proportionately by the amount of the employer-provided paid parental leave. If the employer-provided paid parental leave is equal to or more than the employee’s entitlement under the government-funded paid parental leave scheme, then the employee will not be entitled to any amount of government-funded paid parental leave pay. Administrative obligations Employers have a number of administrative obligations under the federal paid parental leave scheme, including obligations to: • respond within 14 days to the notice from the DHS and either accept the Employer Determination (in which case they must provide payroll cycle information for the employee and details of the employer bank account into which the DHS is to deposit the payment amounts) or apply for a review of the determination • receive and monitor incoming payments from the DHS (including detecting overpayments) • monitor outgoing payments made to employees • ensure payments are made on time to employees in accordance with their usual payday in their pay cycle • provide prescribed information to the employee, by pay slip or other written notification, before the end

of the next working day after the payment has been made • withhold appropriate pay-as-you-go (PAYG) amounts from the payments • keep and maintain appropriate records • inform the DHS when certain events happen, such as: – where there has been a change to an employer’s bank details – where there has been a change in the pay cycle or payday cut-off – where the employer has been being overpaid or underpaid – where an employer ceases to carry on business – if and when an employee returns to work, and – if and when an employee is no longer engaged with the employer, and • repay amounts to the DHS, when required, including overpayment amounts.

¶41-140 Other payments during maternity leave Annual leave/long service leave An employee may (instead of, or in conjunction with, maternity leave) take any annual leave/long service leave or part of annual leave/long service leave to which she is entitled, provided that the overall period of leave taken by both parents does not exceed 52 weeks, or one year after the birth of the child (two years under the NES and in Queensland). Sick leave Sick leave is not available to an employee while on maternity leave. However, if the pregnancy of an employee who is not on maternity leave terminates, other than by the birth of a living child, or the employee suffers illness which is attributable to the pregnancy, the employee may use any sick leave to which she is entitled before commencing her unpaid special maternity leave. Public and special holidays Public holidays, picnic days and similar such paid days off work may not be claimed by an employee on maternity leave. Workers compensation An employee who suffers a recurrence of a compensable injury while on maternity leave could make a claim for workers compensation provided that the original injury was work-related and qualifies as a claim. Social security A person on maternity leave is not unemployed for the purposes of claiming social security benefits. However, this does not prevent the employee from claiming other benefits if the income test is met.

¶41-150 Accrual of leave and entitlements Maternity leave temporarily suspends the employment. Generally, entitlements to annual leave, long service leave, sick leave and any other leave do not accrue during the period of the maternity leave. Continuity of service is preserved, but does not otherwise count as service, except for the purpose of determining a later entitlement to maternity leave or as expressly provided for in an industrial instrument.

PARTNER LEAVE

¶41-160 What partner leave can be taken? Under the state jurisdictions, the term “paternity leave” is generally used to refer to unpaid leave available to a male employee whose spouse is having, or has just had, a child. With recognition of same-sex relationships within parental leave legislation, and the removal of the previous distinction between maternity, paternity and adoption leave under the federal legislation, the designation “paternity” leave is no longer always appropriate. As such, in this section, we have used the term “partner” leave to refer to parental leave taken in association with the birth of a child by the partner who did not give birth. The leave is available for a period of 1–52 weeks (two years under the NES and in Queensland), which an employee is entitled to take in relation to the birth of a child to their partner. The partner may choose not to take parental leave. In this case, the birth mother can take the maximum entitlement. The amount of partner leave available to an employee will be reduced by the amount of parental leave taken by the birth mother in state jurisdictions. An employee can take a short period of parental leave at the same time as the birth mother (eight weeks in total under the NES and one week under state jurisdictions). However, the total of parental leave taken by both parents cannot exceed 52 weeks (two years under the NES and in Queensland). Partner leave cannot extend past 12 months (two years under the NES and in Queensland) after the birth of the child.

¶41-170 Qualifying service Full-time employees New South Wales and Queensland require 12 months’ continuous service with the employer before an employee is entitled to take partner leave. The federal legislation and legislation in all other states provide partner leave when it is reasonable to expect that the employee will complete or had completed at least 12 months’ continuous service on the day before the estimated or expected date of birth. Casual employees The same requirements for partner leave apply as those specified in ¶41-060.

¶41-180 What is continuous service? As with maternity leave, continuous service is generally service under a contract of employment, including any authorised leave or absence. New South Wales specifically includes any period of part-time work as continuous service. This leave is available to employees who have worked continuously for a minimum period of 12 months prior to commencing leave. Employers should check the relevant legislation to determine whether certain types of service should be considered for the purposes of determining the minimum continuous service period.

¶41-190 Documents required for partner leave Partner leave is not granted automatically. An employee must specifically apply for the leave before partner leave can be taken. When applying for partner leave, an employee must produce (depending on the legislative requirements in state and federal legislation) a doctor’s certificate that names their spouse or de facto, confirms that the spouse or de facto is pregnant and states the expected date of the birth. If leave is applied for after the birth of the child, the certificate must state the date on which the birth took place. The employer may also require the employee to provide a statutory declaration setting out the amount of

any maternity leave the birth mother is seeking.

¶41-200 Commencement of extended partner leave Extended partner leave cannot begin before the actual date of birth, but can commence at any time after the birth if the partner is to be the primary caregiver for the child. Extended partner leave must not overlap with a period of maternity leave taken by the birth mother except for the short period immediately after the birth of the child.

¶41-210 Cancellation of partner leave Where partner leave has been applied for, but is not required because of the termination of the spouse’s pregnancy other than by the birth of a child, the leave is generally cancelled automatically. Under the Queensland legislation, if the child dies while the father is on parental leave, the employee is entitled to resume work at a time nominated by his employer within two weeks after the day on which the employee gives his employer a written notice stating the employee intends to resume work, and the reason for the resumption. The NES do not explicitly deal with the issue of termination of partner leave where the child dies. However, it provides that where an employee has commenced parental leave and no longer has responsibility for the care of the child, the employer can notify the employee in writing that they must return to work on a specified day. This day must be not less than four weeks after the date of the notice.

¶41-220 Varying the period of extended partner leave Under the Fair Work Act 2009, the period of leave may be lengthened once if the following conditions are met: • the extension will not exceed 52 weeks or one year after the birth, and • the employee gives the employer four weeks’ notice. Other states have differing notice provisions. The period of leave may be shortened if the following conditions are met: • the employer agrees, and • in some state jurisdictions the employee gives two weeks’ written notice to the employer. Under the NES, there is no listed notice period for reducing a period of unpaid parental leave. Both South Australian and Western Australian legislation are silent on the issue of variation of the leave period. Under the NES and in Queensland, an employee who has taken the full period of parental leave may also apply for a further period of up to one year, which can only be refused by the employer on reasonable business grounds. At least four weeks’ notice is required.

¶41-230 Paid partner leave Under the state jurisdictions, partner leave is unpaid leave. However, it is increasingly becoming the case that various industrial instruments and individual contracts of employment may provide a period of payment for partner leave. State system employees may be eligible for paid partner leave by the federal government. The federal government has introduced paid parental leave entitlements which are discussed further at ¶41-020 and ¶41-130.

¶41-240 Other payments during partner leave Annual leave/long service leave An employee may (instead of, or in conjunction with, partner leave) take any annual/long service leave or part of the annual/long service leave to which they are entitled, provided that the overall period of leave does not extend beyond 52 weeks (less any maternity leave taken by their spouse or de facto) (two years under the NES and in Queensland). It is possible for an employee to choose to take the annual/long service leave entitlement further into the leave, provided that the notice provisions are satisfied. This may mean that the employee could be entitled to any applicable higher rates of pay. Sick leave payments and public holidays An employee is not entitled to paid sick leave during partner leave, nor are they paid for public holidays or any award holidays such as picnic days. Workers compensation An employee who suffers a recurrence of a compensable injury while on partner leave could make a claim for workers compensation, provided that the original injury was work-related and qualifies as a claim. Social security A person on partner leave is not unemployed for the purposes of claiming special security benefits. However, this does not prevent the employee from claiming other benefits if the income test is met.

¶41-250 Accrual of leave and entitlements Partner leave temporarily suspends the employment. Generally, entitlements to annual leave, long service leave, sick leave and any other leave do not accrue during the period of partner leave. Continuity of service is preserved but does not otherwise count as service, except for the purpose of determining a later entitlement to partner leave or as expressly provided for in an industrial instrument.

ADOPTION LEAVE ¶41-260 What adoption leave can be taken? Adoption leave is unpaid leave available to permanent employees (both male and female) who are in the process of adopting, or have recently adopted, a child. The types of adoption leave available are: • Special adoption leave: This is a period of up to two days taken before the placement of the child to attend examinations and interviews related to the placement of the child (which is available under the federal legislation and in New South Wales and Queensland). • Short adoption leave: This is an unbroken period of up to eight weeks in total (one week in South Australia, Tasmania and Western Australia) at the time of the placement of the child (which can be taken concurrently with the employee’s spouse or de facto). • Extended adoption leave: This is an unbroken period of up to 52 weeks (less any adoption leave taken by the employee’s spouse or de facto) in order to care for the child. Adoption leave covers both the usual adoption situation as well as “relative adoptions”. A “relative adoption” occurs when a child is adopted by a grandparent, brother, sister, aunt or uncle (whether by blood or marriage). However, it does not apply where a child or stepchild of the employee or the employee’s spouse, or a child who has previously lived with the employee for six months or more, has been placed with the employee. Adoption leave is available only in respect of the adoption of a child under the age of five years in all jurisdictions except New South Wales, where the adoptive child can be aged up to 18 years, and under

the NES in the federal jurisdiction, where the adoptive child can be aged up to 16 years.

¶41-270 Qualifying service Full-time employees New South Wales and Queensland require 12 months’ continuous service before an employee is entitled to take adoption leave. The federal legislation and all other states provide adoption leave when it is reasonable to expect that the employee will complete (or will have completed) at least 12 months’ continuous service on the day before the estimated or expected date of adoption. Casual employees The same requirements for adoption leave apply as those specified in ¶41-060.

¶41-280 What is continuous service? Continuous service is generally service under a contract of employment, including any authorised leave or absence. New South Wales specifically includes any period of part-time work as continuous service. This leave is available to employees who have worked continuously for a minimum period of 12 months prior to commencing leave. Employers should check the relevant legislation to determine whether certain types of service should be considered for the purposes of determining the minimum continuous service period.

¶41-290 Documents to be produced for adoption leave Adoption leave is not granted automatically. An employee must specifically apply for the leave before adoption leave can be taken. Generally, employees are required to provide written notification of their intention to take adoption leave immediately after they receive approval for the placement of the child. The employee may also be required to provide: • a statement from the adoption agency confirming the expected date of placement of the child, and • a statutory declaration verifying the details of the adoption, the leave sought and any adoption leave the employee’s spouse or de facto intends to take.

¶41-300 Special adoption leave The federal, New South Wales and Queensland legislation allow an employee who is seeking to adopt a child up to two days’ unpaid leave if they require that leave to attend compulsory interviews or examinations as part of the adoption procedure. The federal legislation also provides that the employer may require the employee to take paid leave if that leave is available to the employee.

¶41-310 Varying the period of leave Under federal legislation, the period of leave may be lengthened once if the following conditions are met: • the extension will not exceed 52 weeks or one year after the birth, and • the employee gives the employer four weeks’ notice. We note that state legislation may differ regarding the notice required. The period of leave may be shortened if the following conditions are met: • the employer agrees, and

• in some state jurisdictions the employee gives two weeks’ written notice to the employer. Under the NES, there is no listed notice period for reducing a period of unpaid parental leave. Both South Australian and Western Australian legislation are silent on the issue of variation of the leave period. Under the NES and in Queensland, an employee who has taken the full period of parental leave may also apply for a further period of up to one year, which can only be refused by the employer on reasonable business grounds. At least four weeks’ notice is required.

¶41-320 Paid parental leave Under the state jurisdictions, adoption leave is unpaid leave. However, it is increasingly becoming the case that various industrial instruments and individual contracts of employment may provide a period of payment for adoption leave. The federal government has introduced paid parental leave entitlements which are discussed further at ¶41-020 and ¶41-130.

¶41-330 Other leave during adoption leave Annual leave/long service leave An employee may (instead of, or in conjunction with, adoption leave) take any annual leave/long service leave or part of annual leave/long service leave to which they are entitled provided that the overall period of leave does not exceed 52 weeks (two years in Queensland and under the NES). It is possible for an employee to choose to take the annual/long service leave entitlement further into the leave provided that the notice provisions are satisfied. This may mean that the employee could be entitled to any applicable higher rates of pay. Entitlements to sick leave or public holidays An employee is not entitled to paid sick leave during adoption leave, nor are they entitled to be paid for public holidays or any award holidays (eg picnic days).

¶41-340 Employee no longer primary caregiver If, during a substantial period, either on or after the beginning of an employee’s adoption leave, the employee is not the child’s primary caregiver, and it is reasonable to expect that the employee will not again become the child’s primary caregiver within a reasonable time, the employer may notify the employee in writing that the employee must return to work on a specified day that is not less than four weeks after the notice is given. If the employee returns to work, the employer must cancel the remainder of the adoption leave.

GENERAL ISSUES ¶41-350 Returning to work Following any period of parental leave, the employer must employ the employee in the position that the employee held immediately before that leave period. If that position no longer exists, but the employee is qualified for, and can perform the duties of, other positions in the employer’s employment, the employer must employ the employee in the position that is nearest in status and remuneration to the position that the employee held prior to the leave. Under the federal legislation and New South Wales, Queensland, South Australian, Tasmanian and Western Australian legislation, if an employee was temporarily acting in or performing the duties of a position immediately before starting the parental leave, the entitlement relates to the employee’s position

held immediately before commencing the temporary role. The return-to-work provisions of the legislation also relate to female employees returning to work after a period of leave on special maternity leave and sick leave. In South Australia and Tasmania, an employee who is entitled to parental leave may, by agreement with the employer, reduce the employee’s hours of employment to an agreed extent in lieu of taking parental leave. In Queensland and Western Australia, an employee has a statutory right to return to work on a part-time basis. Under the NES, any employee who: • has more than 12 months’ continuous service (or for casuals, is a long-term casual with a reasonable expectation of ongoing employment), and • is a parent or has responsibility for the care of a child who is of school age or younger, or is a carer (within the meaning of the Carer Recognition Act 2010 (Cth)), may request the employer in writing for a change in working arrangements to assist the employee to care for the child. The employer must provide a response within 21 days of receipt of the request, and can only refuse the request on reasonable business grounds, listing the reasons for the refusal. Employees returning from parental leave are likely to make use of this provision to seek to return on a part-time basis from their period of parental leave, or to request other kinds of arrangements. All requests by employees to return to work from a period of parental leave on a part-time basis should be carefully considered by the employer. Refusal to grant part-time work may constitute discriminatory conduct on the basis of the employee’s sex, family responsibilities or responsibilities as a carer, and may expose the employer to claims of unlawful discrimination.

¶41-360 Replacement employees Before engaging a replacement employee or transferring another employee, an employer should inform that person of the temporary nature of the employment and of the rights of the employee who is being replaced. The same requirement exists where the employer is engaging a person to replace an employee who, before their leave, was temporarily promoted or transferred.

¶41-370 Termination during parental leave An employer must not terminate an employee’s employment by virtue of the fact that the employee has exercised or is about to exercise their rights under the parental leave provisions. An employer cannot terminate an employee’s employment because an: • employee or an employee’s spouse is pregnant or has given birth to a child • employee or an employee’s spouse has applied to adopt or has adopted a child, or • employee has applied for, or is absent on, parental leave. An employer would be entitled to dismiss an employee only if the circumstances give rise to a true case of misconduct or a genuine redundancy situation. Causing a detriment to an employee on the basis of their taking of parental leave, or as a result of factors related to parental responsibilities, would generally constitute adverse action and/or unlawful action under the terms of the FW Act. An employer would also need to consider their obligations under the various discrimination laws which make it an offence to dismiss an employee on the grounds of sex, marital status, carer’s responsibilities

or pregnancy.

¶41-380 Conclusion This chapter has looked at parental leave, including maternity leave, partner leave and adoption leave. It has also considered some general issues, such as returning to work, the use of replacement employees and termination of employment while on leave. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶30-000.

42. OTHER TYPES OF LEAVE Editorial information

Kerryn Kahler Senior Associate, Baker & McKenzie

¶42-010 Introduction In addition to the types of leave discussed in Chapters ¶38–¶41, there are other types of leave which employees are generally entitled to take. For example: • on public holidays • when a member of their family or household dies (“bereavement” or “compassionate” leave), and • when they undertake other tasks, such as serving on a jury, undertaking formal study or training, or choosing to donate blood. Leave can be a complex area. Entitlements and legal requirements may vary between states and employers, and often overlap. However, due to the referral of state industrial relations powers to the federal government, the vast majority of employees in Australia will fall within the federal jurisdiction (see Chapter ¶43 regarding the application of the Fair Work Act 2009 (Cth) (FW Act) to National System Employers and Employees). The federal industrial relations legislation affects the applicability of state legislation which previously dealt with some types of leave entitlements discussed in this chapter. Consequently, complex legal questions concerning leave should be referred to a legal adviser.

¶42-020 Public holidays Public holidays are declared by the federal and state governments and are generally applicable to all employees in the particular state or territory. Under the terms of the National Employment Standards (NES) under the FW Act, employees in the federal jurisdiction are entitled to be absent from work on a public holiday in the state in which they work. An employer may request that an employee work on a public holiday, but the employee may refuse on reasonable grounds. Full-time or part-time employees are paid as usual if they do not work on the day of the holiday. Award and wage employees required to work on a public holiday will generally receive penalty rates for such work which are set out in the relevant award or industrial instrument. Part-time employees whose usual day of work falls on a public holiday will generally be entitled to a paid day off if not required to work that day. However, where a public holiday does not fall on a part-time employee’s usual day of work, the employee will generally not be entitled to payment for that public holiday. Casual employees are not paid unless they work on the day of the holiday.

The standard public holidays are: • New Year’s Day (1 January) • Australia Day (26 January) • Good Friday • Easter Saturday • Easter Monday • Anzac Day (25 April) • Queen’s Birthday • Labour Day • Christmas Day (25 December), and • Boxing Day (26 December) (Proclamation Day in South Australia). Where a public holiday falls on a Saturday or Sunday, state governments will usually provide for another public holiday, which generally falls on the following Monday. Federal modern awards generally only refer to the terms of the NES, but may provide for additional penalty rates for work on a public holiday or allow substitution of a different day for a public holiday by agreement between the employer and the employee. Additional public holidays may be gazetted in each state, and may apply to the whole state or part of the state. See www.business.vic.gov.au/operating-a-business/how-to-start/trading-hours/non-metropolitanpublic-holidays. Other industrial instruments may also provide for area- or industry-specific holidays (eg “bank holidays” or “labour day holidays”) or picnic days which have a similar effect to public holidays. Information on the dates of public holidays in each state can generally be found on the websites of industrial relations or labour departments in each state. Work on a public holiday Employers can direct employees to work on public holidays. There is little case law on this matter, and most legislation is silent. The FW Act provides that an employer may require an employee to work on a public holiday, but only where the employer’s request is reasonable. It further provides that the employee may refuse to work on a public holiday, also on reasonable grounds. The FW Act provides a list of matters which must be taken into account when determining whether an employer’s request was reasonable and whether an employee has reasonable grounds for refusing a request to work on a public holiday. Considerations include: • the nature of the employer’s workplace (including its operational requirements) • the nature of the work performed by the employee • the employee’s personal circumstances (including family responsibilities) • whether the employee could reasonably expect that the employer would request them to work on a public holiday • whether the employee is entitled to additional payment for working on a public holiday or receives remuneration which reflects an expectation to work on a public holiday

• the type of employment of the employee (ie full-time, part-time, casual or shiftwork) • the amount of notice the employee was provided of the request to work on the public holiday, and • the amount of notice the employee provided in refusing the request. It remains unclear how these considerations would be assessed and applied to decide a particular case. The FW Act does not provide for any additional payment for working on a public holiday, although (as noted) such entitlements may arise under an award or other industrial instrument. Where an award allows for payment at prescribed rates for work done on a public holiday, a requirement to work would normally constitute a lawful and reasonable direction by the employer, subject to the reasonableness considerations outlined in the FW Act. A directive to a salaried employee to work on a public holiday would generally be permitted (again subject to the reasonableness considerations outlined in the FW Act), but it would be usual to provide an extra day of holiday in lieu, or an overtime payment. Other leave Annual leave Where a public holiday occurs during annual leave, the day will be paid as a public holiday, not as annual leave. Long service leave Where a public holiday occurs during long service leave, the day will be paid as a public holiday, not as long service leave, except in South Australia, where the Long Service Leave Act 1987 (SA) specifically provides that public holidays occurring during long service leave are counted as long service leave. Sick and personal leave Where a public holiday occurs during a period of sick or personal leave, the day will be paid as a public holiday where the employee has notified the employer that the sick or personal leave will extend past the public holiday. Payment General discussion Full-time and part-time employees are paid for the public holiday at their ordinary rate if they do not work on the day and would normally be required to work on that day. Overtime, commissions, special allowances and so on are not normally paid. If employees are absent the day before or the day after a public holiday without a reasonable excuse, they will generally not be paid for the public holiday. Payment for working on a public holiday may be governed by the terms of the relevant award or industrial instrument. Often, if employees are required to work on a public holiday, they will be paid under the terms of an award or instrument at a “penalty rate” (for example, at 2½ times their ordinary rate of pay). Casuals are often paid penalty rates under the terms of an award or instrument if they work on the public holiday. Awards and industrial instruments may contain different penalty rates. Shiftworkers who work rotating or irregular shifts are generally paid penalty rates for that part of their shift which falls on a public holiday. Some awards and industrial instruments contain provisions which require a minimum payment (eg four hours) for work on a public holiday, regardless of hours actually worked. Queensland The Industrial Relations Act 1999 (Qld) sets out rates of pay applicable to Queensland employees covered by Queensland awards or agreements. These provisions will not apply to employees covered by federal legislation and, as such, these provisions will generally only apply to public servants employed by the state.

Employees (including casuals) who work on a public holiday are paid a minimum of four hours at time and a half if they would normally be required to work on the public holiday, and “double time and a half” if they would not normally work on the public holiday, unless an industrial instrument provides otherwise. Seven-day shiftworkers Seven-day shiftworkers (ie those rostered regularly to work on Sundays and holidays) may receive public holidays in several ways under an award or other industrial instrument. For example: • payment for the holiday where it falls on their rostered day off • a day added to annual leave for any public holiday that falls on their rostered day off, or • a week added to annual leave. See the terms of the relevant award or industrial instrument for more information.

¶42-030 Compassionate or bereavement leave Compassionate leave, also known as bereavement leave, is granted to an employee on compassionate grounds where the employee has suffered the death of a near relative or member of the employee’s household. The serious illness of a near relative (or other similar grounds) may be included. For example, under the FW Act, compassionate leave may also be taken in the event of a life threatening illness or injury. Obviously there is some call for employers to exercise discretion as to the circumstances in which compassionate leave will be granted, and the terms and period on which that leave will be granted. Entitlement to compassionate or bereavement leave Awards and industrial agreements covering employees may make specific provision for bereavement leave, although federal modern awards generally refer back to the NES entitlements. Additionally, nonaward employees may have an entitlement to bereavement leave arising from the terms of their contract, or the employer’s general policy. The NES under the FW Act entitle a federal system employee to two days’ compassionate leave where a member of the employee’s immediate family or household has a personal illness, or injury, that poses a serious threat to their life, or after that person’s death, referred to as a “permissible occasion” (FW Act, s 104). These provisions will apply to all federal system employees. Full-time and part-time employees will be entitled to be paid for their ordinary hours of work which occur during the period of the compassionate leave. Casual employees can take compassionate leave, but it is unpaid. The Minimum Conditions of Employment Act 1993 (WA) will continue to apply to Western Australian employees who are not employed by constitutional corporations (ie those employed by partnerships, sole traders or the state government). This Act provides that any employee is entitled to a maximum of two days’ paid bereavement leave on the death of a member of the employee’s family or household, which need not be consecutive. South Australian and Queensland legislation also provide for specific bereavement leave entitlements, which will apply to employees who remain in those state jurisdictions (generally only public servants employed by those states). The Fair Work Act 1994 (SA) provides a right to two days’ paid bereavement leave on the death of an employee’s family member, which is paid for full-time employees and paid on a pro rata basis for part-time employees. This entitlement must be used within the period from the time of death to two days after the funeral. The Industrial Relations Act 1999 (Qld) grants a specific entitlement to two days’ paid bereavement leave plus unpaid reasonable travelling time to all full-time and part-time employees on the death of a member of the employee’s immediate family or household. Casuals are entitled to two days’ unpaid bereavement leave and unpaid travelling time. Under s 40(1), piecework employees are specifically excluded. When does compassionate leave apply? The list of persons whose death allows an employee to qualify for compassionate leave is broad. It

generally includes spouses (including de facto spouses and same-sex partners), parents, parents-in-law, siblings, children and stepchildren, and may also include grandparents and grandchildren. Under the FW Act, compassionate leave is available in the event of a permissible occasion affecting members of the employee’s immediate family and “household”. “Immediate family” is defined to include a current or former spouse or de facto spouse of the employee (including a de facto of the same or opposite sex), and a child, parent, grandparent, grandchild or sibling of the employee or their spouse or de facto partner. The term “household” is intended to be broader, and will often encompass flatmates and other persons living with the employee. The Fair Work Act 1994 (SA) refers only to members of an employee’s family, which is not defined. The federal, Queensland and Western Australian Acts specifically refer to members of immediate family and “household”. Furthermore, “de facto” is included in the definition of “immediate family” in both the federal and Western Australian Acts. While the Minimum Conditions of Employment Act 1993 (WA) does not define the meaning of “de facto”, the FW Act specifically defines “de facto” to include a de facto of the same or opposite sex. In any event, a same-sex partner could be brought under the commonly accepted meaning of “household”, which is not defined in any of the Acts. Again, discretion must be exercised by employers and, on the death of a person falling outside this list, it may be appropriate to grant compassionate leave, or unpaid leave, or to permit the employee to use other kinds of paid leave. Death or injury outside Australia Where the death, injury or illness has occurred outside Australia, the employee does not receive a greater entitlement to compassionate leave. However, the employer should have regard to the relationship, particularly in the case of the death or serious illness of a spouse (including de facto spouses and samesex partners) or parent, and apply appropriate discretion to deciding if a longer period of unpaid leave or the use of other kinds of paid leave will be permitted. Notification and proof The employee should notify the employer as soon as possible. The federal, Queensland, South Australian and Western Australian Acts allow an employer to require evidence of death where reasonably required. Generally, awards and agreements do not provide specific provisions as to notification or proof. Obviously such matters are largely discretionary on the part of the employer. Under the FW Act, an employee must give notice of any leave (including personal leave) as soon as practicable, including notification of the expected period of the leave. In addition, for any period of compassionate leave, the employee must provide evidence of the reason for the leave which would satisfy a reasonable person. Suitable proof would be provided by the provision of a death notice or a statutory declaration. In many cases, employers do not require the production of any evidence where the claim for compassionate leave is obviously genuine. Length of compassionate leave Where an employee is unfortunate enough to suffer a number of permissible occasions in a single year, the entitlement to compassionate leave arises on each occasion. Under the FW Act, where an employee has a right to compassionate leave, the leave may be taken in one lot or as two separate days, or as otherwise agreed. If the leave relates to an illness or injury, the employee may take the leave at any time while the illness or injury persists. Employers may also exercise their discretion to allow a period of unpaid leave following on from a period of paid compassionate leave, a longer period of paid compassionate leave, or to allow the employee to use other accrued paid leave. As an example, in one case before the Western Australian Industrial Relations Commission, an employee was allowed extra paid leave on the basis that she would have been subject to censure from her ethnic community had she not taken a period of extra leave.

Awards or industrial agreements may also grant a period of unpaid compassionate leave following on from a period of paid compassionate leave. An employer may also exercise their discretion to grant paid annual leave or long service leave, where such leave is available. Effect on other leave Except under the federal jurisdiction, where an employee is on annual leave or long service leave when a death occurs, compassionate leave is generally not available. The period taken still counts as annual leave or long service leave. Under the terms of the FW Act, a period of compassionate leave which occurs during a period of authorised annual leave does not count as part of the annual leave. Rate of payment Payment for compassionate leave (where applicable) is at the employee’s ordinary rate of pay including shift allowances. Special allowances and overtime would not be payable.

¶42-040 Jury leave What is jury leave? Jury leave arises where an employee has been summoned to serve on a jury. Some awards and agreements provide for jury leave, as do some employment contracts or employer policies. An entitlement to jury leave also arises under the terms of the NES as part of the federal community service leave regime. The NES provide for community service leave, such that an employee is entitled to be absent from work if engaged in eligible community service. Jury service is included in eligible community service. Other community service, such as participating in voluntary emergency services, may also give rise to an entitlement to be absent (see ¶40-060). The requirement to attend for jury duty is a legal requirement on the employee under state laws (eg Jury Act 1977 (NSW)). As such, there is a presumption that the employer will grant such leave to enable the employee to comply with their legal duty to attend the initial selection process, even if only to seek exemption. While employees may request exemption from jury service on the basis of their employment, nonetheless, they may be required by the court to attend and undertake jury service. Even where there is not a legal entitlement to take jury leave, employers should exercise significant discretion in granting such leave. Jury service may extend for a significant period depending on the nature of the case being heard. As such, there is usually no specific period of jury leave to which an employee is entitled. The period will vary according to the requirements placed on the employee by the court. Notice and proof Employees receive a notification from the court when they are required to attend for jury service. Employees should notify their employer as soon as possible after the call to jury service is received, and provide a copy of the notification. The employee may not know the likely length of the jury service. If they do receive an indication of the period from the court, they should notify the employer. An employer may also require their employees to provide them with proof that they have taken all necessary steps to obtain any amount of jury service pay to which they are entitled, and the total amount of jury service pay that has been paid, or is payable, to the employee. Lengthy period of jury service The requirement to attend for jury service is a legal requirement. If the employee is not exempted from jury service by the court due to their work commitments, the employee is required to attend. This attendance may extend for a lengthy period, depending on the nature of the case being heard. Employers should make appropriate arrangements for a replacement employee or transfer another employee to cover during the employee’s absence. Payment

Persons who attend jury service are, in most cases, entitled to a daily allowance from the court. Employers may require employees to present proof to them that they have taken all necessary steps to obtain any amount of jury service pay to which they are entitled, and the value of this payment. The employer will generally pay the difference between the employee’s ordinary rate of pay and the payment from the court. Some employment contracts or company policies require the employee to sign over the court payment to the employer. The employee is then paid their ordinary pay (excluding overtime and other allowances) in the normal round of pay. Under the NES, non-casual employees are entitled to be paid at their base rate of pay for a maximum of 10 days’ jury service, which may be reduced by the amount of any jury service allowance paid by the court to the employee. However, if the employee does not provide proof: • of the payment made to them, and • that they have taken all necessary steps to obtain any amount of jury service pay to which they are entitled, the employer is not required to pay the employee for any period of the jury service.

¶42-050 Victim’s leave The Industrial Relations Act 1996 (NSW) contains provisions which allow for full-time, part-time and casual employees to take unpaid leave to attend criminal court proceedings where the employee was the victim of the crime which is the subject of the proceedings. These provisions will arguably be excluded by the operation of the FW Act in respect of federal system employees. To qualify, the employee must be: • a person who has suffered harm as a direct result of an act committed or apparently committed by another person in the course of an alleged violent crime • the parent, grandparent or guardian of a child who has suffered such harm (where the child is under 15 years of age at the time of the leave), or • a member of the immediate family of a person who dies as a result of such an act (including a spouse, a person with whom they are in a de facto relationship, parent or guardian, grandparent, child, grandchild or sibling). “Harm” is defined as actual physical bodily harm, mental illness or nervous shock. In addition, the crime must be a violent crime, which is defined as a serious indictable offence involving violence, including a sexual or indecent assault. An indictable offence is one which is punishable by imprisonment for life or for a term of five or more years. Victim’s leave is unpaid. It may be taken in order for an eligible employee to attend proceedings before a court against the person charged with the crime, including: • committal proceedings • sentencing • appeal proceedings, or • proceedings on a related offence. This leave may also be taken for the purpose of travelling to and from the court, where the victim lives more than 100 km from the court. This component may not exceed one day.

If the proceedings take only part of a day, the employee is entitled to take the full day as leave. The employee must give one week’s notice of the leave. The employer may require a certificate from a police officer, prosecutor or other relevant official confirming that the employee is a victim of crime, and the date or dates on which the court proceedings will be held. These requirements do not apply if the employee is not notified of the proceedings in sufficient time or if it is not reasonably practicable to comply. Employees taking victim’s leave have a right to return to the same position, or an equivalent position if their position no longer exists. Victim’s leave does not break an employee’s continuity of service for other leave purposes. However, if the leave extends for more than three months, it is not taken into account when calculating the employee’s period of service (eg where calculating long service leave).

¶42-060 Specific purpose leave In addition to the major forms of leave covered by this chapter, employees may be granted, or request, other forms of leave that relate to specific purposes or activities. Specific purpose leave may arise under the terms of specific awards, under the employment contract, or at the discretion of the employer. The most common forms of specific purpose leave include study leave and union training leave. Additional circumstances that call for specific purpose leave may include leave for the purposes of donating blood, undertaking activities with defence forces, or reserve defence forces and emergency services leave. While these forms of special purpose leave may be included under the terms of an award or contract, they are generally granted at the discretion of the employer, in the interest of facilitating employee activities that are seen to be in the public interest. As previously noted, the NES provide that employees are entitled to community service leave. The community service leave entitlement includes a right to take unpaid leave where the employee is requested to engage in voluntary emergency management activity (eg volunteer fire or rescue services). Employers should also refer to the specific terms of awards and industrial instruments covering employees to determine if specific purpose leave is applicable. If employees request these types of leave where they are not specifically covered by the legislation or the employee’s award, industrial instrument or contract, employers should exercise appropriate discretion in determining the approval of such leave. Awards, agreements and employment contracts may provide for leave for the purpose of: • study • trade union training • trade union business • donating blood • emergency services leave (ie leave provided to enable employees to attend emergencies related to their volunteer service in bushfire brigades, the state emergency service and surf lifesaving patrols. This would normally not include routine rosters for such volunteer work.) • defence services leave (ie leave for the purposes of military training due to the employee’s membership of the Defence Force Reserve), or • some other specific purpose. Employers may also exercise discretion to allow such leave on a paid or unpaid basis. The employee should provide appropriate proof of the requirement to attend for that purpose, and proof of their actual attendance. The period of the leave in question depends on the terms of the award, agreement or employment contract and the length of the specific purpose. For example, many employment contracts provide for a specified period of leave that employees may use at their discretion, and with the agreement of their employer, to assist in courses of study they are undertaking. If the leave is to be paid leave, employees would generally be entitled to be paid their ordinary rate of pay

during such leave, which would exclude overtime and other allowances.

¶42-070 Other matters relating to other types of leave Alternative employment during leave Generally, unless working for another employer outside of working hours is expressly prohibited by a contract of employment, an employee may undertake work for another employer in their free time. However, an employee cannot take up alternative work with another employer where such work will conflict with the interests of the primary employment. For example, a conflict of interest would occur if an employee were to use skills unique to work performed with the primary employer with another employer. Notwithstanding this general position on alternative work during an employee’s own time, where an employee has been granted paid leave for a specific purpose (eg on the death of a family member, or for jury service), alternative work is not permissible and may constitute misconduct. Termination during other types of leave Termination may occur at any time during the employment relationship, including during periods of leave where valid grounds for termination exist. However, given the circumstances which lead to an employee taking certain types of leave, such as bereavement or victim’s leave, employers should exercise care and generally avoid termination during such periods. Termination during periods of bereavement or victim’s leave may lend a character of unfairness to such termination in the context of any subsequent unfair termination proceedings. Generally, misconduct should be dealt with after an employee returns from bereavement or victim’s leave. Where employees are entitled to expect procedural fairness in the event of termination of their employment, an employer must consult with an employee prior to termination, regardless of whether the employee is on leave for any of the reasons discussed in this chapter. Employers must also consult with employees, regardless of whether they are on leave, in relation to any intended redundancies. An employer would normally exercise discretion and delay any consultation or termination until the employee had returned to work. Replacement employees If an employee takes extended leave for any of the reasons discussed in this chapter, an employer may hire a replacement employee or transfer another employee to the position. The replacement or transfer employee should be clearly informed that the hiring or transfer is temporary in nature. The employee who has taken leave should return to the same position, with the same responsibilities, unless a restructure has been implemented, in which case consultation should occur prior to the employee returning to work, as outlined above. For more information on the various types of leave, refer to the CCH Human Resources Management subscription information service, section commencing at ¶30-000.

43. NATIONAL EMPLOYMENT STANDARDS Editorial information

Janet Wood Workplace Relations Writer and Consultant

¶43-010 Introduction Under the Fair Work Act 2009 (FW Act), the National Employment Standards (NES) provide minimum conditions for the majority of Australian workers. They override any provision of an existing agreement or modern award for a less beneficial entitlement than the NES, and cannot be excluded by those instruments. The NES, which commenced operation on 1 January 2010, continue the regime established under the former Workplace Relations Act 1996 (Cth) (WR Act), whereby the Australian Fair Pay and Conditions Standard (AFPCS) for the first time prescribed in federal law statutory minimum standards for wages, ordinary working hours, annual leave, personal leave and parental leave, and acted as a “floor” for enterprise bargaining purposes. However, unlike the WR Act, the FW Act includes a two-part safety net protecting minimum wages and conditions, consisting of: (1) the 10 NES, and (2) modern awards providing industry-relevant details. Modern awards, which also commenced on 1 January 2010, provide 10 additional minimum standards and are tailored to industries and occupations. These are the responsibility of the regulatory body, the Fair Work Commission (FWC), which was until 1 January 2013 known as Fair Work Australia (FWA) and replaced the Australian Industrial Relations Commission (also on 1 January 2010). Modern awards contain pay scales and conditions that apply nationally. The NES do not deal with national minimum wages which, instead, are provided for by a national minimum wage order covering all award/agreement-free national system employees. This order must also set special national minimum wages for junior employees, employees with a disability or employees to whom training arrangements apply. Where employees earn less than $136,700 for the year ending 30 June 2016 (indexed annually), they are covered by the NES and modern awards. Employees earning more than $136,700 are covered by the NES only. The Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (TPCA Act) was put in place to provide the legislative link between the former WR Act (WorkChoices) regime and the changes implemented by the FW Act. The majority of the TPCA Act provisions came into effect on 1 July 2009.

¶43-020 Who do the NES cover? The NES apply to all employees of national system employers — there is no “high income” exclusion. Therefore, the NES cover most employees, except state public servants and local government employees in most states. The exception is Western Australia. At the time of writing, it had not referred its industrial relations powers to the Commonwealth. (In Western Australia, the NES generally apply to employees of

constitutional corporations and federal public servants, waterside and maritime workers, and flight crew, but not private sector employees of unincorporated businesses.)

¶43-030 The 10 National Employment Standards Since 1 January 2010, the NES have covered the following 10 matters: (1) maximum weekly hours of work (2) requests for flexible working arrangements (3) parental leave (4) annual leave (5) personal/carer’s leave and compassionate leave (6) community service leave (7) long service leave (8) public holidays (9) notice of termination and redundancy pay, and (10) the Fair Work Information Statement. Maximum weekly hours of work The NES provide for a maximum of 38 ordinary hours of work for full-time employees. Employers can ask an employee to work more than 38 hours, either through a direct request or by implication (eg because work cannot be completed unless additional hours are worked). Such a request must be reasonable. The following factors need to be taken into account in determining whether additional hours are reasonable: • any risk to employee health and safety posed by the additional hours • the employee’s personal circumstances, including family responsibilities • the needs of the enterprise • whether, in working additional hours, the employee is entitled to overtime payments, penalty rates or other compensation • any notice by the employer of a request or requirement to work the additional hours • the notice (if any) given by the employee of their intention to refuse to work the additional hours • patterns of work in the industry • the employee’s role or level of responsibility • whether the additional hours are in accordance with averaging terms permitted by the FW Act (see below), and • any other relevant matter. An employer may request or require an employee to work additional hours either expressly or by implication. An employee has the right to refuse to work unreasonable additional hours.

The hours an employee works in a week include any hours of authorised leave or absence (whether paid or unpaid) that the employee takes in the week. There is no specific guidance in the FW Act regarding averaging of hours of work, but modern awards and enterprise agreements can include terms providing for the averaging of hours of work over a specified period, provided that the average weekly hours do not exceed: • for a full-time employee — 38 hours, or • for a part-time employee — the lesser of 38 hours and the employee’s ordinary hours of work in a week. An award/agreement-free employee and their employer may agree in writing to an averaging arrangement under which hours of work over a specified period of not more than 26 weeks are averaged. However, the average weekly hours must not exceed the time limits outlined above. Requests for flexible working arrangements The introduction of the Fair Work Amendment Act 2013 (Cth) (FW Amendment Act) resulted in changes to flexible working arrangements for employees. Employees are now able to request a change in their working arrangements where they: • are a parent, or have responsibility for the care of a child of or under school age • are a carer (within the meaning of the Carer Recognition Act 2010 (Cth)) • have a disability • are 55 years of age or older • are experiencing violence from a member of their family, and • provide care or support to a member of their immediate family or household who requires care or support because the member is experiencing violence from their family. In addition, where an employee is a parent or has responsibility for a child and they are returning to work after having taken some leave in relation to the birth/adoption of that child, then they can lodge a request to work part-time so that they may manage that caring responsibility. Such changes may include changes in hours of work, patterns of work or location of work. Employees must have 12 months of continuous service with the employer before making such a request, or must be long-term casuals with a reasonable expectation of ongoing employment with the employer on a regular and systematic basis. (A “long-term casual” is defined in the FW Act as a casual employee who has been employed by the employer on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months.) The employee must make the request in writing, setting out the change sought and the reasons. The employer must respond to such a request in writing within 21 days of receiving it. If refusing the request, the employer must set out the reasons for refusing in a way that the employee can understand. The employer cannot simply refuse without explanation. An employer can only refuse a request on “reasonable business grounds”. Reasonable business grounds include: • that the new working arrangements would be too costly for the employer • that there is no capacity to change working arrangements of other staff to accommodate the request • that it would be impractical to change the working arrangements of other employees or recruit a replacement employee to accommodate the employee’s request • that the new arrangements would be likely to result in significant loss of productivity or efficiency, or

• that the new arrangements would be likely to have a significant negative impact on customer service. However, there is no civil penalty action available under the FW Act to an employee whose employer has refused a request for flexible working arrangements where there are no reasonable business grounds for doing so. Thus, the NES provisions may be of little practical use to most employees. An employee, whose request for a return to work from parental leave on a part-time basis was refused, successfully argued that she had been unfairly dismissed. The employer refused the request and would not allow the employee to return on anything less than full-time hours. Commissioner Lewin found that the employee had been constructively dismissed as the refusal was not on objective business grounds and the employee had no choice but to not return to work. The employer was utilising a part-time contractor in her absence and continued to do so, despite arguing that it was not ideal, after she did not return to her position. This undermined the argument that the refusal was reasonable: Rind v Australian Institute of Superannuation Trustees (2013) 65 AILR ¶101-924; [2013] FWC 3144. Alternatively, an employee could rely on an enterprise agreement which includes provisions relating to requests for flexible working arrangements that are the same or substantially the same effect as the NES provisions. If an enterprise agreement includes terms to the same effect as the NES provisions on this matter, contravention of such terms would be subject to the normal enforcement mechanisms applying to enterprise agreements under the FW Act, whereby the FWC can deal with disputes about such provisions. In addition, because the FW Act does not apply to the exclusion of state or territory laws providing more beneficial employee entitlements than those under the NES, employees may seek remedies under relevant state or territory discrimination legislation for discrimination on the grounds of, for example, family responsibilities, sex or disability. Parental leave The NES provide parental leave as a minimum standard for all Australian employees, not just national system employees (by reliance on the external affairs power to give effect to International Labor Organization conventions and recommendations on family responsibilities). The term “parental leave” is used collectively throughout the FW Act to cover maternity, paternity and adoption leave. Eligibility for parental leave The general rule for employees, who are not casual employees, is that they do not have an entitlement to leave (other than pre-adoption leave) unless the employee has, or will have, completed at least 12 months of continuous service with the employer immediately before: • the date of birth, or the expected date of birth, of the child, if the leave is birth-related (ie unpaid parental leave taken in association with the birth of a child or unpaid special maternity leave), or • the day of placement, or the expected day of placement of the child, if the leave is adoption-related (ie unpaid parental leave taken in association with the placement of a child for adoption or unpaid preadoption leave). However, if the leave is unpaid parental leave that is to start within 12 months after the birth or placement, the employee must have completed at least 12 months of continuous service with the employer immediately before the date on which the employee’s period of leave is to start. Similar requirements apply to a member of an employee couple taking a period of unpaid parental leave. A casual employee is not entitled to leave (other than unpaid pre-adoption leave) unless the employee is, or will be, a long-term casual employee of the employer immediately before the: • date of birth, or the expected date of birth, of the child, if the leave is birth-related, or • day of placement, or the expected day of placement, of the child, if the leave is adoption-related, and the employee would have a reasonable expectation of continuing employment on a regular and

systematic basis, but for the birth or expected birth of the child, the placement or expected placement, of the child, or the taking of a period of unpaid parental leave in certain circumstances. In the case of an employee on a fixed term contract (which ends due to the passing or lapsing of time), the return to work guarantee would not apply if the fixed term period ends while the employee is absent on unpaid parental leave. However, if the employee returns to work before the fixed term contract ends, they are entitled to return to the same job prior to taking parental leave, and complete the remainder of the period of the fixed term contract. The NES specifically permit same-sex de facto partners to take parental leave. Non-national system employees The NES relating to unpaid parental leave and related entitlements (and to notice of termination or payment in lieu of notice) are extended to non-national system employees to give effect to: • the ILO Convention (No 156) concerning Equal Opportunities and Equal Treatment for Men and Women Workers: Workers with Family Responsibilities, 1981, and • the Workers with Family Responsibilities Recommendation, 1981, by providing for a system of unpaid parental leave and related entitlements, that will help employees who have responsibilities in relation to their dependent children. The provisions apply in relation to a non-national system employee and a non-national system employer as if those provisions referring to a national system employee and a national system employer extended to include a non-national system employee and employer (respectively). A non-national system employer must not contravene the extended parental provisions. Transfer of employment If there is a transfer of employment in relation to an employee who has already started a period of parental leave under the NES, the employee is entitled to continue on that leave for the balance of that period. Further, if there is a transfer of employment in relation to an employee who has already taken a step with their first employer that is required in relation to taking leave (for example, giving notice), the employee is to be treated as if they took the same step in relation to the second employer. Period of parental leave An employee is entitled to 12 months of unpaid parental leave if: • the leave is associated with the birth of a child of the employee or the employee’s spouse or de facto partner, or • the placement of a child with the employee for adoption, and the employee has, or will have, a responsibility for the care of the child. It is significant to note that although the definition of “spouse” in the FW Act is quite narrow (ie only extending to include a former spouse), the definition of “de facto partner” is broad and includes: a person who, although not legally married to the employee, lives with the employee in a relationship as a couple on a genuine domestic basis; and a former de facto partner of the employee. The definition of “de facto partner” includes a same-sex relationship. The NES increased the total amount of unpaid parental leave that an employee can request from 12–24 months. Under the Fair Work Amendment Act 2013, unpaid special maternity leave no longer reduces the employee’s entitlement to maternity leave. Each parent can take up to 12 months’ unpaid leave (to run consecutively) or one parent can request up to 24 months’ leave. The request may only be refused on reasonable business grounds, and a response refusing a request must include details of the reasons for the refusal. Leave has to be taken in a single continuous period. An exception to the requirements that leave be taken in a continuous period, and that parents’ leave periods run consecutively, is an entitlement to a maximum of eight weeks’ concurrent leave. Concurrent

leave must not commence before the actual date of birth or date of placement (in the case of adoption) of the child. Concurrent leave can be broken up and taken in a few separate periods. Each period should be no shorter than two weeks in length, unless otherwise arranged with the employer. Notice periods apply to this leave (see the later section on notice periods). As suggested earlier, an employee can request up to an additional 12 months’ leave after the first 12month period of parental leave. The employee must give the employer at least four weeks’ notice of the leave. The employer must respond to the request within 21 days. An employer can refuse a request for an additional period of parental leave (ie after the initial 12-month period) on reasonable business grounds. The employer must provide the employee with reasons for the refusal. In the case of a member of an employee couple, where the leave is birth-related, one employee’s period of leave must start first, and the period of leave must begin no later than the date of birth of the child, but a female employee who is bearing the child may start their leave up to six weeks before the expected date of birth. The other employee’s period of leave must start immediately after the end of the first employee’s period of leave. If the leave is adoption-related, one employee’s period of leave must start on the day of the placement of the child, and the other employee’s leave must start immediately after the end of the first employee’s leave. In essence, couples could have a parent caring for a child during the first two years of the child’s life, or placement following adoption, by: • one parent taking up to 12 months of parental leave and at the conclusion of that period the other parent then taking up to 12 months of parental leave, or • one parent taking up to two years of parental leave. Death of child If a child dies after birth and the relevant employee is the female who gave birth to the child, before the unpaid parental leave starts, the employee or employer may give written notice cancelling the leave. In that case, the employee is not entitled to unpaid parental leave. However, an entitlement remains if the leave has already started, whether or not the employee taking the leave is the female employee who gave birth to the child. Keeping in Touch day The NES provide that periods of unpaid parental leave can include “Keeping in Touch” days on which an employee performs work without the continuity of the period of unpaid parental leave being broken. Keeping in Touch days cannot occur until after 42 days from the child’s birth. The employer will be obliged, under the relevant contract of employment or industrial instrument, to pay the employee for performing work on a Keeping in Touch day. The Paid Parental Leave (PPL) Scheme allows employees to maintain contact with their workplace for up to 10 days from the time they become the primary carer until the end of their PPL period without losing their entitlement. Where an employee and employer have agreed on a Keeping in Touch day, the employee will continue to be eligible for the PPL Scheme. If an employee participates in paid work before the end of their PPL period for any purpose other than Keeping in Touch, their PPL will stop. The employee will also be considered as having returned to work if they access more than 10 Keeping in Touch days during their Paid Parental Leave period. While PPL pay is paid at the rate of the National Minimum Wage, if an employee performs paid work on a Keeping in Touch day, they must be paid in accordance with their contract of employment or industrial instrument. Usual record-keeping and notification requirements apply, for example, payroll records and payslips. Note that, regardless of her seniority or type of work, no employee is obliged to maintain contact with their employer during her maternity leave. The employer and employee must both agree they can take part in a Keeping in Touch activity and the arrangements for the activity. Either party can decide they do not wish

the Keeping in Touch activity to take place. Fitness for work A pregnant employee, who is entitled to unpaid parental leave and continues to work during the six-week period before the expected date of birth of the child, may be asked to give her employer a medical certificate indicating whether she is fit for work and, if so, whether it is advisable for her to continue in her present position during her pregnancy because of illness or risks arising out of the employee’s pregnancy, or hazards connected with the position. The employer may require the employee to take a period of unpaid parental leave if she does not provide the certificate within seven days of the request, or the certificate is provided but states she is unfit for work, or that she is fit for work but that it is inadvisable for her to continue in her present position. Such leave must end no later than the earlier of the end of the pregnancy, or the start of any other leave connected with the birth of the child about which the employee has given the employer notice. Notice requirements With regard to parental leave, the employee must provide written notice to their employer at least 10 weeks before starting the leave or as soon as practicable, stating the intended start and end dates of the leave. Four weeks prior to the intended start date that is specified in the notice, the employee must, unless it is not practicable to do so, confirm the intended start and end dates of the leave or advise the employer of any changes to the intended start and end dates. An employer may require evidence that would satisfy a reasonable person of the date (or expected date) of birth of the child or, in the case of adoption leave, the date (or expected date) of the placement of the child, and that the child is (or will be) under 16 years of age. Notice required for concurrent leave ranges from four to 10 weeks, depending on the amount of leave that will be taken at the time of the request. If it is not practicable to provide notice by the time the leave is taken, then the employee should provide such notice at the earliest possible time after the leave has commenced. Extending the period of leave An employee is entitled to extend the period of unpaid parental leave once by providing written notice of the extension at least four weeks before the end date of the original leave period. The notice must state the new end date for the leave. However, an employee and employer may agree to further extensions of the period of unpaid parental leave. An employee may request a further period of up to 12 months immediately following the end of the “available parental leave period”. The request must be in writing and given to the employer at least four weeks before the end of the “available parental leave period”. An employee is not entitled to extend the period of unpaid parental leave beyond 24 months after the date of birth or placement of the child. An employer must provide an employee with a written response to such a request as soon as practicable and not later than 21 days after the request is made. The request may only be refused on reasonable business grounds. A response refusing a request must include details of the reasons for the refusal. There is no definition of what constitutes “reasonable business grounds” in relation to a refusal of a request for an extension of unpaid parental leave. Unlike the majority of the NES, there is no civil penalty action under the Act available against an employer who has contravened the Act by refusing a request on reasonable business grounds where there are no such grounds. This of course means that an employee will not be able to challenge their employer’s refusal of their request for an extension of parental leave pursuant to the provisions of the NES, or to investigate a refusal allegedly made on the basis of “reasonable business grounds” under the NES. Thus the NES provisions may be of limited or little practical utility to most employees. However, an enterprise agreement may include provisions relating to requests for extensions of parental leave that are to the same or substantially the same effect as the NES provisions, and the FWC could deal with disputes about such provisions. Furthermore, if an enterprise agreement included terms to the same effect as the NES provisions on this subject, contravention of such terms would be subject to the normal enforcement mechanisms under the FW Act.

Reducing the period of leave An employee who has commenced a period of unpaid parental leave may reduce the period of leave if the employer agrees. This may be required if an employee ceases to have responsibility for the care of the child. Where this occurs, an employer may give written notice requiring the employee to return to work on a specified day at least four weeks after the notice is given and, in the case of an employee who has given birth, no earlier than six weeks after the birth of the child. Interaction with other leave An employee is entitled to take any other kind of paid leave (except paid personal/carer’s leave or compassionate leave) at the same time that they are taking unpaid parental leave. The employee is not entitled to any payment for jury service or emergency services activities while taking unpaid parental leave. Unpaid special maternity leave A female employee may take special maternity leave if she is unfit for work because of a pregnancyrelated illness, or the termination of a pregnancy within 28 weeks of the expected date of the birth. She must give her employer notice of the leave as soon as practicable (which may be after the leave has started) and must advise the employer of the period (or expected period) of the leave. The employer may require evidence (eg a medical certificate) that would satisfy a reasonable person that the leave is being validly taken. The entitlement to 12 months of unpaid parental leave associated with the birth of a child is no longer reduced by the amount of any unpaid special maternity leave that the employee takes. Transfer to safe job An employer is required to transfer a pregnant employee to an “appropriate safe job” if she provides evidence that, although fit for work, it is inadvisable for her to continue in her present position because of illness or risks arising out of her pregnancy, or hazards connected with her present position. If a safe position is available, the employee must be transferred to it with no other change to her terms and conditions of employment. An appropriate safe job is one that has the same ordinary hours of work as the employee’s present position, or a different number of ordinary hours agreed to by the employee. If there is no appropriate safe job available, the employer must provide the employee with paid “no safe job leave” during the risk period (ie leave which is paid at the employee’s base rate of pay for the employee’s ordinary hours of work). Where an employer is providing “no safe job leave” the employer may request a further medical certificate, stating whether she is fit for work. If the employee fails to provide a further medical certificate within seven days of the request, or provides one stating that she is not fit for work, the employer may require her to take a period of unpaid parental leave as soon as practicable. Pregnant employees are able to transfer to a safe job, or take “no safe job leave”, even if they have not completed 12 months’ continuous service with their employer. However, where they take no safe job leave, this leave will be unpaid leave. Paid or unpaid “no safe job leave” does not impact on the amount of unpaid parental leave an employee is entitled to take. Consultation with employee on parental leave If, while an employee is on unpaid parental leave, the employer makes a decision which will have a significant effect on the status, pay or location of the position held by the employee before starting the leave, the employer must take all reasonable steps to provide the employee with information about the effect of the decision on their position. This is in addition to providing an opportunity to discuss the decision. Return to work guarantee On completing a period of unpaid parental leave, an employee is entitled to return to their pre-parental

leave position or, if their pre-parental leave position no longer exists, an available position for which the employee is qualified and suited, and which is nearest in status and pay to the pre-parental leave position. Unpaid pre-adoption leave Employees seeking to obtain approval for the adoption of a child are entitled to up to two days of unpaid pre-adoption leave to attend any required interviews or examinations. However, the employer may direct the employee to take some other form of available leave instead. An employee must give their employer notice as soon as practicable (which may be after the leave has started) of their wish to take unpaid preadoption leave, and advise the period (or expected period) of leave. The employer may request evidence that would satisfy a reasonable person that the leave is required to attend an applicable interview or examination. Paid parental leave A paid parental leave (PPL) scheme was implemented by the Paid Parental Leave Act 2010 (Cth) — it is not part of the NES. The PPL scheme provides 18 weeks of PPL payments at the minimum wage ($656.90 per week from 1 July 2015), less income tax for eligible workers in relation to babies born or adopted from 1 January 2011. The PPL period is the time an employee takes off work and is paid PPL. It can be up to 18 weeks at a time. Legislation expanding the PPL scheme to include a two-week paternity leave payment (effective 1 January 2013) was passed by the parliament in June 2012. Note that at the time of writing a Bill to restrict PPL to those employees whose employers do not offer a more generous PPL scheme is before parliament. Employees eligible for Dad and Partner Pay would not be affected by this measure. Further commentary on the PPL Scheme can be found at Chapter ¶41: Parental Leave. Annual leave Under the NES, all full-time, non-casual employees are guaranteed four weeks’ paid annual leave each year for each year of service with the employer, accruing on the basis of the employee’s ordinary hours. Part-time employees are entitled to four weeks’ annual leave paid pro rata. Shift workers are entitled to an additional paid week of annual leave. An employee’s entitlement accrues progressively during a year of service, according to their ordinary hours of work, and accumulates from year to year. Service includes all periods of employment except: • unpaid leave • unpaid absence, other than community service leave, or • unauthorised absence (eg unprotected industrial action). “Ordinary hours of work” for award/agreement-free employees is defined in the FW Act to mean the hours agreed by the employer and the employee to be the ordinary hours of work of the employee. If there is no agreement, then the ordinary hours of work are either 38 hours per week (in the case of a full-time employee) or the lesser of 38 hours per week or the employee’s usual hours per week (in the case of a part-time employee). For an award-regulated employee a modern award must include terms specifying or providing for the determination of the ordinary hours of work for each classification of employee and each type of employment covered by the award. An employee may take paid annual leave for a period agreed with their employer, and the employer must not unreasonably refuse to agree to a request by the employee to take paid annual leave. A public holiday which falls during a period in which an employee has taken paid annual leave, or any other type of absence or leave (except for unpaid parental leave), will not be treated as annual leave. Annual leave is paid at the employee’s base rate of pay for their ordinary hours of work in the period of leave. On termination, an employee is entitled to be paid the amount that would have been payable had the employee taken that period of leave.

Cashing out of annual leave is allowed for award- and agreement-covered employees and for nonaward/agreement employees — so long as the agreement is in writing. A balance of four weeks’ leave must remain after cashing out the leave. The employee must be paid at least the full amount that would have been payable had the employee actually taken the leave.

Case examples In a significant decision, a full bench of FWA found that a clause in an agreement which provided that annual leave would be paid in advance in a “loaded rate”, but which still allowed the employee to take the period of annual leave (but at no pay), did not constitute a “cashing out” arrangement under the FW Act (see Warren and others [2011] FWAFB 6709). The FWC found that the minimum entitlement is to take “paid annual leave”. Subject to the cashing out provisions of the FW Act, the entitlement cannot be “set off” or contracted out of by “paying” annual leave progressively as a loading or incorporating it into hourly rates of pay. The paid annual leave must be paid when it is taken: see Canavan Building Pty Ltd [2014] FWCFB 3202.

A modern award or enterprise agreement may include other terms relating to the taking of paid annual leave and, in particular, may include terms that would allow an employer to require an employee to take paid annual leave in particular circumstances, provided that the requirement is reasonable. Examples listed in the FW Act are where an employee has accrued an excessive amount of paid leave and where the employer’s enterprise is being closed down for a period, such as between Christmas and New Year. An award/agreement-free employee and their employer may also agree on when and how paid annual leave may be taken by the employee. Note that taking and accruing of annual leave are restricted where an employee is absent from work and in receipt of workers compensation payments. Personal, carer’s and compassionate leave An employee (other than a casual employee) is entitled to 10 days of paid personal/carer’s leave for each year of service. Like annual leave, paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year. There is also an entitlement to two days’ unpaid carer’s leave for emergencies per permissible occasion. Permanent employees are entitled to two days’ compassionate leave for each permissible occasion. “Ordinary hours of work” for award/agreement-free employees are the same as for annual leave (see above). A modern award must include terms specifying or providing for the determination of the ordinary hours of work for each classification of employee covered by the award and each type of employment permitted by the award. Personal/carer’s leave is to be paid at the employee’s base rate of pay for the employee’s ordinary hours of work in the period that the leave is taken. An entitlement to paid personal/carer’s leave arises if, because of a personal illness or personal injury the employee is not fit for work, or the employee takes leave to provide care or support to a member of their immediate family or household who has a personal illness or personal injury, or who is affected by an unexpected emergency. “Immediate family” is defined in the FW Act as covering the employee’s spouse (including a de facto one and same-sex partner), and children (including adult children and adopted children), parents, grandparents, grandchildren or sibling of the employee or the employee’s spouse or de facto partner. However, the term “member of the employee’s household” is not defined in the FW Act. A public holiday which falls during a period of personal/carer’s leave will not be treated as personal/carer’s leave. Awards and agreements can provide for employees to cash out personal leave, so long as a balance of

15 days remains, but non-award employees are not so entitled. However, the relevant modern award or enterprise agreement must provide that the employee be paid at least the full amount that would have been payable to them had they actually taken the leave. There is also an entitlement to up to two days of unpaid carer’s leave for each occasion when a member of the employee’s immediate family or household requires care or support because of a personal illness or personal injury, or an unexpected emergency affecting the member. Permanent employees are entitled to up to two days of compassionate leave for each occasion when a member of the employee’s immediate family or household is ill, or suffers an injury that poses a serious threat to their life, or dies. Payment must be at the employee’s base rate of pay for the employee’s ordinary hours of work in the period. Casual employees may take unpaid compassionate leave. An employee wishing to take personal/carer’s leave, unpaid carer’s leave or compassionate leave must give their employer notice of the taking of leave as soon as practicable (which may be after the leave has started) and advise the period, or expected period, of the leave. The employer may require evidence that would satisfy a reasonable person that the leave is taken for the reasons set out in the applicable provisions. Note that personal/carer’s leave may not be taken or accrued where an employee is absent from work and in receipt of workers compensation payments. Community service leave Under the NES, employees are entitled to leave for eligible community service activities (eg paid leave for jury service and reasonable unpaid leave for a “voluntary emergency management activity”, including certain travel time). The regulations can prescribe an activity that is of a community service nature as an eligible community service activity. An employee is engaging in a voluntary emergency management activity if they participate on a voluntary basis in an activity concerning an emergency or natural disaster, and as a member of an association with a recognised emergency management body. The employee must have been asked to engage in the activity, or it must be reasonable to expect such a request would have been made if the circumstances had permitted. Employers must pay full-time and part-time employees called up for jury service for a period of up to 10 days, at the employee’s base rate of pay for the employee’s ordinary hours of work in that period, subject to some limitations. The amount the employer is required to pay will be reduced by any jury service payment received by the employee. An employer may require evidence that would satisfy a reasonable person that the employee has taken all necessary steps to obtain any amount of jury service pay, as well as what the total amount of jury service pay that has been or will be paid to the employee. If the information is not provided, the employee will not be entitled to payment by the employer. If an employee is absent in excess of 10 days, the employer is only required to pay the employee for the first 10 days of absence. An employee must give the employer notice of the absence as soon as practicable (which may be after the absence has started) and advise the period, or expected period, of the absence. An employer may require evidence that would satisfy a reasonable person that the absence is because the employee has been or will be engaging in an eligible community service activity. State or territory legislation may provide a more beneficial entitlement to community service leave, which will not be overridden by the FW Act. Long service leave Long service leave is regulated by state and territory legislation, awards and agreements. Long service leave cannot be included as a term of a modern award. However, the NES provide that where there are applicable award-derived long service leave terms, the award terms continue to apply. “Applicable award-derived long service leave terms” are terms of an award that would have applied to the employee immediately before the commencement of the NES on 1 January 2010. There are applicable agreement-derived long service leave terms for an employee if the FWC has made an order that terms of an enterprise agreement, a collective agreement, a pre-reform certified agreement or an old industrial

relations agreement, as well as any ancillary or incidental terms, are applicable agreement-derived long service leave terms which are not detrimental in any respect to an employee compared with the NES. Public holidays The NES provide for payment when an employee is absent on prescribed public holidays at the employee’s base rate of pay for ordinary hours that would have been worked on that day or part-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 public holidays includes the following days: • New Year’s Day (1 January) • Australia Day (26 January) • Good Friday • Easter Saturday • Easter Monday • Anzac Day (25 April) • Queen’s Birthday • Labour Day • Christmas Day (25 December), and • Boxing Day (26 December) (Proclamation Day in South Australia). However, if a state or territory law specifies another day in substitution for one of the above days, the substituted day is the public holiday. Further, a modern award/enterprise agreement may include terms providing for an employer and employee to agree on the substitution of a day or part-day that would otherwise be a public holiday. Similarly, an award/agreement-free employee and their employer may also agree to such a substitution. Notice of termination and redundancy pay The NES provide a minimum entitlement to notice of termination for all Australian employees, as well as redundancy pay entitlements for all national system employees. Notice of termination The NES relating to notice of termination or payment in lieu of notice are extended to non-national system employees to give effect to: • the ILO Convention (No 158) concerning Termination of Employment at the Initiative of the Employer, 1982, and • the Termination of Employment Recommendation, 1982. The provisions apply in relation to a non-national system employee and a non-national system employer as if those provisions referring to a national system employee and a national system employer extended to include a non-national system employee and employer (respectively). A non-national system employer must not contravene the extended notice of termination provisions. The NES set out the period of notice that an employer must give when terminating an employee’s employment, based on length of service. The notice must be in writing. If an employer has not given the employee the necessary period of notice, they must pay the employee in lieu of that notice. The required

periods of notice are set out in Table 43.1. Table 43.1: Continuous service and termination Employee’s period of continuous service with the employer at the end of the day the notice is given

Period

Not more than 1 year

1 week

More than 1 year but not more than 3 years

2 weeks

More than 3 years but not more than 5 years

3 weeks

More than 5 years

4 weeks

An employer must give an employee who is older than 45 years an additional week’s notice if the employee has worked for the employer for at least two years. These notice provisions apply not only to national system employees, but are extended to all employees (by reliance on the external affairs power to give effect to International Labor Organization conventions and recommendations on termination of employment at the initiative of the employer). However, these provisions relating to notice of termination or payment in lieu of do not apply if the employee is: • employed for a specified period of time, for a specified task, or for the duration of a specified season (unless the substantial reason for employing the employee in that manner was to avoid the application of the notice of termination provisions) • dismissed because of serious misconduct • a casual employee • an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time, or limited for any reason to the duration of the training arrangement • an employee prescribed by the regulations as an employee to whom the division does not apply • a daily hire employee working in, or in connection with, the building and construction industry • a daily hire employee working in the meat industry in connection with the slaughter of livestock • a weekly hire employee working in connection with the meat industry and whose termination of employment is determined solely by seasonal factors, or • an employee prescribed by the regulations as an employee to whom these provisions do not apply. A modern award or enterprise agreement may also include terms specifying the minimum period of notice required for termination of employment. Note that the NES provisions relating to notice of termination only apply to notices of termination and terminations occurring after 1 January 2010. Redundancy entitlements The NES also provide redundancy pay entitlements to all national system employees. An employee is entitled to redundancy if their employment is terminated at the employer’s initiative because the employee’s job is no longer required to be done by anyone (except where this is due to the ordinary and customary turnover of labour), or because of the employer’s insolvency or bankruptcy. However, an employer cannot voluntarily wind up a company, run down accounts and then apply for relief from redundancy pay (see Moltoni Waste Management v P Fairs & Ors [2012] FWA 5590). An employer does not have to pay any redundancy pay if it is classified as a small business (ie one with

fewer than 15 employees) or the employee being made redundant has less than one year’s service. An employee’s redundancy entitlement is calculated at the employee’s base rate of pay for their ordinary hours of work using Table 43.2. Table 43.2: Continuous service and redundancy Employee’s period of continuous service with the employer on termination

Redundancy pay period

At least 1 year but less than 2 years

4 weeks

At least 2 years but less than 3 years

6 weeks

At least 3 years but less than 4 years

7 weeks

At least 4 years but less than 5 years

8 weeks

At least 5 years but less than 6 years

10 weeks

At least 6 years but less than 7 years

11 weeks

At least 7 years but less than 8 years

13 weeks

At least 8 years but less than 9 years

14 weeks

At least 9 years but less than 10 years

16 weeks

At least 10 years

12 weeks

An employee’s service prior to the commencement of the NES on 1 January 2010 is not counted for redundancy pay purposes if, immediately before that date, their terms and conditions of employment did not include an entitlement to redundancy pay. Where there is a transfer of employment of a national system employee between non-associated entities and the second employer decides not to recognise the employee’s service with the first employer, then provisions in the FW Act concerning recognition of previous service and continuity of service in the case of a transfer of employment of an employee do not apply for the purposes of redundancy under the NES. Therefore, the employee would have an entitlement to redundancy pay. Where there is a transfer of employment of a national system employee and any period of service with the first employer counts as service with the second employer, the employee will not be entitled to redundancy pay from the first employer. Similarly, an employee will not be entitled to redundancy pay where employment with the first employer is terminated and the employee rejects an offer by a second employer of employment on terms and conditions substantially similar to and, overall, no less favourable than the terms and conditions of employment with the first employer. Nor will there be an entitlement if the second employer recognises the employee’s service with the first employer for the purpose of long service leave and, if accepted, would have meant there was a transfer of employment. However, the FWC may order the first employer to pay a specified amount of redundancy pay that the FWC considers appropriate, if the FWC is satisfied that not to do so would operate unfairly to the employee. The NES redundancy provisions do not apply if the employee is: • employed for a specified period of time, for a specified task, or for the duration of a specified season (unless the substantial reason for employing the employee in that manner was to avoid the application of the redundancy provisions) • dismissed because of serious misconduct • a casual employee • an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or limited for any reason to the duration of the training

arrangement • an apprentice • an employee to whom an industry-specific redundancy scheme in a modern award applies • an employee to whom a redundancy scheme in an enterprise agreement applies if the scheme is an industry-specific redundancy scheme that is incorporated by reference into the enterprise agreement from a modern award that is in operation, and the employee is covered by the industry-specific redundancy scheme in the modern award, or • an employee prescribed by the regulations as an employee to whom the redundancy provisions do not apply. Note that the redundancy pay entitlement in the NES only applies to terminations occurring after 1 January 2010, even if the notice of termination occurred prior to that date. Fair Work Information Statement Employers are required to provide all new employees, either before, or as soon as practicable, after they commence employment, with a Fair Work Information Statement which contains prescribed information about the employee’s rights and entitlements at work, including: • the NES • modern awards • agreement making under the FW Act • the right to freedom of association • termination of employment • individual flexibility arrangements • union rights of entry (including the protection of personal information by privacy laws), and • the role of the FWC and the Fair Work Ombudsman. However, there is no obligation to provide the statement to existing employees. The current version of the Information Statement was gazetted on 24 June 2015: see www.fairwork.gov.au/employee-entitlements/national-employment-standards/fair-work-informationstatement. Transitional provisions Transitional provisions for the application and operation of the NES to existing instruments and employment arrangements following their 1 January 2010 commencement are found in the TPCA Act. The TPCA Act refers to “transitional instruments” which include all the awards or agreements operating on 1 January 2010, when the NES commenced operation. The Act provides that, to the extent that a term of a transitional instrument is detrimental to an employee in any respect when compared with an NES entitlement, the term of the transitional instrument has no effect. The TPCA Act specifies that provisions in the NES on the following matters have effect from their commencement day as if a reference to a modern award or an enterprise agreement included a reference to a transitional instrument: • averaging of hours of work • cashing out and taking paid annual leave

• dealing with cashing out and paid personal/carer’s leave • dealing with the evidence required for paid personal/carer’s leave and so on • substitution of public holidays • terms dealing with an employee giving notice to terminate their employment • situations in which redundancy pay entitlements under the NES do not apply, and • payment of loading in lieu for school-based apprentices and trainees. Where a transitional instrument applies to an employee, he/she is taken to qualify for the shift worker annual leave entitlement available under the NES. An employee’s service with an employer before 1 January 2010 counts as service for the purpose of determining the employee’s entitlements under the NES, other than entitlements to paid annual leave and paid personal/carer’s leave. Where (before 1 January 2010) an employee already had an entitlement calculated by reference to a period of service with the employer, that period of service is not counted again when calculating their entitlements under the NES (although this limitation does not require any initial qualifying period of service for long service leave again). An employee’s period of service prior to 1 January 2010 does not count towards the calculation of redundancy pay entitlements under the NES if the employee’s terms and conditions of employment immediately before 1 January 2010 did not provide for redundancy pay. Leave to be taken or being taken as at 1 January 2010 is to be taken or continued under the rules prescribed by the relevant NES. The NES relating to notice of termination only applies to notices of termination and termination occurring after the commencement of the NES. The obligation under the NES to supply a Fair Work Information Statement only applies to an employee who commences employment after the NES commences. Enforcement The FW Act states that an employer must not contravene a provision of the NES. Contravention gives rise to civil remedy provisions, with the maximum penalty being 60 penalty units. Applications for orders can be made to the FWC in relation to contraventions of civil remedy provisions. However, orders cannot be made in relation to a contravention of the requirement that an employer refuse a request for flexible working arrangements or a request to extend unpaid parental leave for a further 12 months only on reasonable business grounds (see above). An application for orders in relation to a contravention of the NES can be made by an employee affected by the contravention, a union entitled to represent that employee or an inspector. The application can be made to the Federal Court, the Federal Circuit Court or an eligible state or territory court.

¶43-040 Conclusion This chapter has looked at the NES and how they apply to different types of employees. More information on each standard is available in other chapters of this Guide. For more information on the National Employment Standards, please see the CCH Human Resources Management subscription information service.

44. SUPERANNUATION Editorial information

James Leow Co-author of the CCH Australian Master Superannuation Guide

¶44-010 Introduction This chapter outlines the obligations of employers under the superannuation guarantee (SG) scheme to make compulsory superannuation contributions for employees and the scheme’s interaction with the award superannuation system. It examines who is an employee for SG purposes, the rules for payment of employer SG contributions and the penalties for non-compliance. The SG scheme also includes a choice of superannuation funds regime under which employees are able to choose the superannuation fund to which employer superannuation contributions for them are to be paid. However, certain employees, such as those employed under a collective agreement, enterprise agreement, State award or State agreement, are not always entitled to a choice. The choice of fund rules are discussed in ¶44-050. The chapter also discusses some of the main obligations of employers under the superannuation industry supervision legislation (¶44-100).

¶44-020 Superannuation guarantee scheme — SG contributions requirement The SG charge is imposed by the Superannuation Guarantee Charge Act 1992 (Cth). The SG scheme is administered by the Australian Taxation Office (ATO) under the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act) and Regulations (SGA Regulations) on a self-assessment basis. The SG scheme operates in conjunction with an employee’s award and other contractual superannuation obligations. Therefore, the types of contributions counted for SG purposes are: • compulsory contributions made by the employer under an award, an industrial law or the SGA Act • additional voluntary contributions by the employer, and • contributions made under an effective salary sacrifice arrangement entered into by the employer with an employee (see ¶44-045). How does the SG scheme work? The SGA Act extends to every external Territory referred to “Australia” (as defined in the Income tax law). The SG year is made up of four quarters, ending 30 September, 31 December, 31 March and 30 June of each year. Under the SG scheme, employers are required to make compulsory superannuation contributions for their employees (subject to certain exemptions), based on a prescribed percentage (see “Amount of employer SG contributions required” below) of the employee’s ordinary time earnings in each quarter.

Employers must pay the SG contributions by the 28th day after the end of each quarter (see ¶44-040) to avoid incurring an SG charge for the quarter. An employer that fails to make, or makes insufficient, SG contributions for an employee in a quarter will have an SG shortfall in respect of the employee and incur an SG charge liability for the employee for that quarter. In that case, the employer will be required to lodge an SG statement with, and pay an SG charge to, the ATO for the quarter. The SG charge amount for an employee in a quarter is made up of the SG shortfall amount plus an interest component and an administrative charge. Upon receipt of the SG charge from an employer, the ATO will redistribute the shortfall and interest component of the charge to a complying superannuation fund, complying approved deposit fund (ADF), retirement savings account (RSA) or the Superannuation Holding Accounts Special Account (SHASA) for the benefit of the employee in respect of whom the charge was paid. Amount of employer SG contributions required The minimum level of superannuation support that an employer must provide for each employee to avoid incurring an SG charge liability is calculated by reference to a “charge percentage” (commonly called the SG rate) of the employee’s ordinary time earnings. All employers are subject to the same SG rate, regardless of the size of their annual national payroll. The meaning of “ordinary time earnings” is discussed at ¶44-040. The SG rate is 9.5% for the 2016/17 financial year. This rate is legislated to remain at 9.5% for later years up to and including 2020/21. The rate will then increase by 0.5% on 1 July 2021/22 and in each later year until it reaches 12% for years starting on or after 1 July 2025 (see Table 44 below). Table 44 — SG rate Financial year

SG rate

2014/15 to 2020/21

9.5%

2021/22

10%

2022/23

10.5%

2023/24

11%

2024/25

11.5%

2025/26 and later years

12%

Employers are not required to make SG contributions for employees in respect of certain payments of salaries or wages. Employees who are “exempt” from the SG scheme are discussed in ¶44-035. The exemptions include salary and wages paid to Norfolk Island resident employees for work done in Norfolk Island or outside Australia, and salary and wages paid by Norfolk Island resident employers to Australian resident employees for work done in Norfolk Island. The exemption for work done in Norfolk Island ceased for SG quarters starting on or after 1 July 2016. From 1 July 2016, a special Norfolk Island transitional SG rate starting at 1% and increasing by 1% each year over a 12-year period applies (see Table 44.1 below) to salary and wages that were previously exempt from the SG scheme (to the extent that they were exempt). Table 44.1 — Norfolk Island transitional SG rate Financial year

General SG rate

Norfolk Island transitional SG rate

2016/17

9.5%

1.0%

2017/18

9.5%

2.0%

2018/19

9.5%

3.0%

2019/20

9.5%

4.0%

2020/21

9.5%

5.0%

2021/22

10.0%

6.0%

2022/23

10.5%

7.0%

2023/24

11.0%

8.0%

2024/25

11.5%

9.0%

2025/26

12.0%

10.0%

2026/27

12.0%

11.0%

2027/28

12.0%

12.0%

The transitional SG rate will apply to salary and wages that were previously exempt from SG, and the general SG rate will apply to salary and wages that were not previously exempt. Employers will need to apportion the salary and wages they pay between the two categories (amounts previously subject to SG and amounts previously exempt) and apply the correct SG rate to the salary and wages in each category.

¶44-030 Employers and employees under the SG scheme The SG scheme applies to all employers, including: • family companies and trusts paying salaries or wages • the Commonwealth and tax-exempt Commonwealth authorities, state and territory governments and authorities • tax-exempt organisations, and • non-resident employers who have employees working in Australia. Related employers are not treated as a single employer, and each entity that is an employer has its separate SG obligations. There are special rules which clarify the status of partnerships, unincorporated associations and trusts that are employers for SG purposes. Who are employers and employees for SG purposes? Under the SG scheme, the terms “employer” and “employee” have their common law meanings as well as expanded meanings to avoid doubt as to the status of certain persons. Generally, an “employee” is an individual who receives payment in the form of salary or wages in return for work or services rendered, whether the individual works on a full-time, part-time or casual basis. The person liable to make the payment is the employer, subject to certain exceptions. Fringe benefits to employees do not constitute salary or wages (¶44-035). Under its expanded meaning, a person is an “employee” or “employer” in the circumstances below. • A person who is entitled to payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate is an employee of the body corporate. • A person who works under a contract that is wholly or principally for labour of the person is an employee of the other party to the contract (eg contractors). • A member of the Commonwealth Parliament, state parliament or territory Legislative Assembly is an employee of the Commonwealth, state or territory. • A person who receives payment to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity, or any

similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skill, or who receives payment to provide services in connection with any of these activities, is an employee of the person liable to make the payment (for a case example, see General Aviation Maintenance 2012 ATC ¶10-235). • A person who is paid to perform services in, or in connection with, the making of any film, tape, disc, or of any television or radio broadcast is an employee of the person liable to make the payment. • A person who holds, or performs the duties of, an appointment, office or position under the Constitution or under a law of the Commonwealth or of a state or territory (including service as a member of the Defence or Police Force), other than a person holding an office as a member of a local government council, is an employee of the Commonwealth, a state or a territory (SGA Act s 12(2) to (9)). For SG purposes, the following are not employees: • a person who holds office as a member of a local government council is not an employee of the council (however, a person who is a member of an eligible local governing body and whose remuneration is covered by the PAYG system is an employee of the body) • a person who receives payment to do work wholly or principally of a domestic or private nature for not more than 30 hours per week. Examples of persons who are not employees because they are paid to do “work of a domestic or private nature” include those employed to clean homes, mind children, effect home repairs or maintenance, or tend gardens for not more than 30 hours a week. Whether the exemption applies requires an examination of the nature of the work carried out by the worker, the identity or attributes of the person who pays for that work, the relationship between the payer and the worker, or the nature of the work or services that the worker provides to the payer. The exemption was held not to apply to the employees of a labour hire business who were paid to provide community services for its clients.

Case example Natalie Newton (trading as Combined Care for the Elderly) v Commissioner of Taxation In Natalie Newton (trading as Combined Care for the Elderly) v Commissioner of Taxation 2011 ATC ¶10-226; [2011] AATA 897, the AAT found that the workers were employees under the extended meaning of employee in s 12(3), and probably also as common law employees. The workers provided services under a labour hire agreement and that pointed strongly in favour of a finding that the workers are employees (see “Work arranged by intermediaries” later in this section). There was no evidence that the workers were obliged to produce a result and, despite the contractual description of being an “independent contractor”, that of itself establishes nothing.

Once an employer/employee relationship is established, the employer cannot “contract out” of its SG obligations (see ML Griffiths and RD Griffiths and RJ Griffiths v Commissioner of Taxation [2009] AATA 482; 09 ESL 07). ATO guidelines — employer and employee relationships Except in clear cases, it is sometimes difficult to determine whether an individual is an employee or an independent contractor. These issues are discussed in Chapter ¶5. The ATO guidelines on employer and employee relationships are found in its ruling SGR 2005/1 (see www.ato.gov.au). Briefly, when determining whether an individual is an employee for SG purposes, the following principles should be kept in mind:

• Whether a person is an employee of another is a question of fact, as determined by having regard to the common law tests as to whether an employer-employee situation exists. • Whether a person is an employee is not determined by reference to whether the person is a full-time, part-time or casual worker. • Where an individual performs work for another party through an entity (eg a company or trust), there is no employer–employee relationship between the individual and other party, either at common law or under the statutory SG meaning of employee. The individual, however, may be the employee of the intermediary entity, depending on the terms of the agreement (see “Work arranged by intermediaries” later in this section). • If a partnership has contracted to provide services, then the person who actually does the work is not the employee of the other party to the contract. This is so even if the worker is a partner and even if the contract requires the partner to do the work. However, if partners contract outside the partnership in a personal capacity to provide their labour to fulfil a contractual obligation, they can be an employee of the other party to the contract. • A person who holds an Australian Business Number (ABN) may be an employee for SG purposes, based on the facts and circumstances. • The application or otherwise of the personal services income measures under the income tax law is not determinative of whether an individual is an employee under the SG legislation. • An arrangement between parties that is structured in a way that does not give rise to a payment for services rendered but a payment for something entirely different, such as a lease or a bailment (a common example is that of a taxi owner and taxi driver), does not give rise to an employer-employee relationship. Contract workers and contractual relationships It is important to distinguish between a “contract of service” and a “contract for service” and other working arrangements. Most contractual conditions are equivocal as indicators of the true character of a contract (ie whether the contract establishes an employer–employee or an independent contractor relationship). For example, worker discretion in matters such as time and place of work, and a performance-based mode of payment, may be consistent with an independent contractor relationship; on the other hand, payer prescription as to time and place of work, and a time-based mode of payment, may be consistent with an employment relationship (Taxation Ruling TR 2005/16). A contract for a person’s labour is one where the work must be done by that particular person. If the contract leaves the person completely free to have the work performed by another person, it is not a contract for labour of a particular person and a person working under such a contract is not an employee under s 12(3) of the SGA Act, ie as a person who works under a contract wholly or principally for the labour of the person (see above). In particular circumstances, an independent contractor at common law may still be an “employee” under the SGA Act. The ATO view is that a contract is considered to be wholly or principally for the labour of the individual engaged (and the individual will be an employee under s 12(3)) where the terms of the contract in light of the parties’ subsequent conduct indicate that the individual: • is remunerated (either wholly or principally) for their personal labour and skills • must perform the contractual work personally (ie there is no right of delegation), and • is not paid to achieve a result (SGR 2005/1, para 11).

Examples • Taxi operators and taxi drivers — their relationship is not one of employer and employee, but one of bailment (see Commissioner of Taxation v De Luxe Red and Yellow Cabs Co-operative (Trading) Society Ltd 98 ATC 4466; [1998] FCA 361). • Casual market research interviewers — employees at common law and employees within the meaning of s 12(3) (see Roy Morgan Research Pty Ltd v Commissioner of Taxation 2010 ATC ¶20-184; [2010] FCAFC 52). • Freelance interpreters — not common law employees nor employees within the extended meaning given in s 12(3) (see On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) 2011 ATC ¶20-258; [2011] FCA 366). • Sportspersons — common law employees if the relationship to the payer conforms to the indicators and factors that typify a common law employment relationship (see SGR 2009/1 for the treatment of other payments). • Worker entitlement fund (WEF) arrangements — no employer/employee relationship between the WEF and the individual receiving the long service leave payments; the employer is not making, or is not liable to make, SG contributions on the WEF payments to the individual (ATO ID 2005/33). Payments under the Fair Entitlements Guarantee (FEG) scheme The Fair Entitlements Guarantee (FEG) scheme (which replaced the General Employee Entitlements and Redundancy Scheme from 5 December 2012) provides assistance to employees who have lost their employment due to their employer’s liquidation or bankruptcy and who are owed certain employee entitlements. Where the Department of Employment makes a FEG advance to a former employee of a company in liquidation (taxpayer company) through a third party provider rather than via the insolvency practitioner, the taxpayer company is liable to the SG charge if the third party provider does not make superannuation contributions in respect of the FEG advance by the relevant quarterly cut-off date (ID 2015/13). A taxpayer company is also liable to the SG charge if the company’s liquidator has not made sufficient superannuation contributions by the relevant quarterly cut-off date (see ¶44-040), in respect of a FEG advance to a former employee of the company (ID 2015/14). The SGA Act does not impose a liability on a liquidator to pay the SG charge out of its own funds if the liquidator fails to make sufficient superannuation contributions by the relevant quarterly cut-off date in respect of a FEG advance to a former employee (ID 2015/15).

Work arranged by intermediaries Many employers (as end users) often acquire the services or labour of individuals through an intermediary, rather than engaging them directly under a single contractual arrangement. These labour market intermediaries operate under various names, such as: • service firms — for example, a security firm that provides a security guard to its client • labour hire firms — for example, a firm providing temporary workers (eg typists) to its client, or • employment or recruitment agencies (as a commission agent) — where the user client is the employer of the worker, not the agency. In tripartite working arrangements (TWAs), a number of contracts can arise. For SG purposes, it is

necessary to determine whether the worker engaged through an intermediary is an employee of the intermediary or end user, or neither. Under some arrangements, a contract does not exist between the worker and the end user. Instead, there may be: • a contract between the intermediary and the end user (under which the intermediary agrees to supply the services of the worker), and • another contract between the intermediary and the worker (under which the worker agrees to perform work for the end user). In other arrangements, the intermediary’s role is to bring the end user and the worker together, so that they may enter into a contract with each other. In such cases, neither an employer/employee nor principal/independent contractor relationship exists between the intermediary and the worker. Determining if there is an employment relationship Apply the following principles when determining if there is an employment relationship where workers are engaged through an intermediary: • In a TWA, it is first necessary to determine whether a contract for the performance of work exists and with whom it exists. Once this is established, the precise nature of the relationship (whether employee or otherwise) can then be determined. • If there is no contract between the worker and the end user in a TWA, the worker cannot be an employee of the end user. Similarly, if there is no contract between the worker and the intermediary, the worker cannot be an employee of the intermediary. • The description of the TWA is not conclusive when determining the nature of the relationship involving the parties to the arrangement. In a TWA, it is the ultimate or legal control over the worker that is most relevant, not the day-to-day direction and control. • A contract between the intermediary and the worker can still be a common law contract of employment even though the work is done for the immediate benefit of the end user. • In certain TWAs, the intermediary only performs an agency role to bring about a contractual relationship between the worker and the end user. If an agency relationship does exist between the intermediary and either the end user or worker, and the intermediary merely brings about a contractual relationship between the end user and worker, the worker is not an employee of the intermediary firm. • If a worker is not contracted personally to perform work or services but via an interposed entity, such as a company or trust, neither the end user nor the intermediary is the employer of the worker, because any contract they have is with the interposed entity and not with the worker. The worker may be the employee of the interposed entity. ATO online tool to determine if a person is an employer or employee The ATO SG Eligibility Decision Tool can assist employers to determine whether they need to make SG contributions for workers they employ, including contractors who are treated as employees. See www.ato.gov.au/Calculators-and-tools/Super-guarantee-eligibility.

¶44-035 Employees who are “exempted” An employer does not have to make SG contributions for certain employees. The SG scheme provides for this category of “exempt” employees by not taking into account certain payments of salary or wages made to the employee in the calculation of the employer’s SG charge liability for the employee, or by excluding the income of certain employees as salary or wages for the purposes of the SGA Act altogether (SGA Act s 11(2), 11(3), 27, 28, 29). Exempt employees — salaries or wages not included in SG shortfall calculation

The “exempt” employees are: • non-resident employees paid for work done outside Australia (except to the extent covered by a scheduled international social security agreement), or for work done in the Joint Petroleum Development Area • resident employees employed by non-resident employers for work done outside Australia (ATO ID 2015/24 explains the meaning of “work done outside Australia”) • Norfolk Island resident employees for work done in Norfolk Island or outside Australia, or Australian resident employees who are paid by Norfolk Island employers for work done in Norfolk Island (the Norfolk Island exemption ceased from 1 July 2016: see ¶44-020) • employees who hold certain visas or entry permits, as prescribed by the SGA Regulations (ie foreign executives) • employees receiving salary or wages under the Commonwealth Government Community Development Employment Program • employees working temporarily in Australia, who are covered by a scheduled international social security agreement • employees who are receiving paid parental leave and ancillary leave payments, payments for service with the Defence Force Reserves, and payments for eligible community service activity (see “Employees receiving parental leave and other payments” later in this section) • employees receiving salary or wages of less than $450 in a month (based on the salary or wages actually paid by the employer in the month) • employees who elect not to receive SG support because their accumulated superannuation benefits exceed the pension reasonable benefit limit (RBL) (no employees are added to this category from 1 July 2007) • part-time employees under 18 years of age, and • members of the Reserve Forces, other than those in continuous full-time service, when they receive tax-exempt pay and allowances. The more common categories of “exempt” employees are discussed below. “Part-time” employees under 18 years of age A “part-time” employee means a person who is employed to work not more than 30 hours per week. The term “employed to work” means actual hours worked. Therefore, a person who actually works for more than 30 hours per week is not a part-time employee even if there is a written document that stipulates the employee is to work fewer hours. See the examples below.

Example 1 Emily usually works for a supermarket for 12 hours per week. In the school holidays, Emily works an additional 22 hours per week, which means that, during that school holiday period, she is “employed to work” for 34 hours per week. Emily is not considered a “part-time” employee. Example 2 Andrew is employed by a fast food chain under a written contract which states that Andrew’s hours of work are 25 hours per week. During the school holidays, Andrew works an additional 10 hours each week. For those weeks Andrew is “employed to work” 35 hours. Andrew is not a part-time employee

for those weeks.

New Zealand citizens As New Zealand citizens do not require a visa to work in Australia, they do not come within the category of “exempt” employees holding a prescribed visa or entry permit. This also covers employees who are temporarily transferred from New Zealand to Australia. Employees covered by a scheduled international social security agreement This category of “exempt” employees addresses the issue of potential “double superannuation coverage” that can arise where an employee is sent to work temporarily in another country and the employer is required to provide superannuation for the employee under the legislation of both Australia and the foreign country. The effect of the “scheduled international social security agreement” is that only the home country’s superannuation scheme will apply. Australia currently has agreements with the following countries: the United States of America, Portugal, the Netherlands, Croatia, Chile, Belgium, Ireland, Norway, Switzerland, Korea, Greece, Germany, Japan, Finland, Poland, the former Yugoslav Republic of Macedonia, Czech Republic, Austria, the Slovak Republic, Latvia, Hungary and India. To qualify for the exemption, the employer must apply to the ATO for a “Certificate of Coverage” before the employee leaves Australia. Detailed information on applications is available from the ATO (see www.ato.gov.au/Individuals/Super/In-detail/Growing/Bilateral-agreements---individuals). See the following example.

Example Jack is an Australian resident working in Australia for an Australian employer. His employer intends to send him to the United States to work for a year. Jack’s employer will be required to make compulsory social security (including superannuation) contributions for him under United States law. In addition, Jack’s employer is also required to make SG contributions for him in Australia. To have double superannuation coverage relief, the Australian employer should apply to the ATO for a Certificate of Coverage before Jack leaves Australia. This is to enable the ATO to check and certify that the agreement between the United States and Australia applies to Jack’s situation. The effect of the Certificate of Coverage is that Jack and his employer are exempt from making contributions under United States law. However, SG contributions must continue to be made for Jack in Australia. Similarly, if a United States employee is sent to work temporarily in Australia, the employee can be exempt from Australia’s SG system. In that case, the employee and employer must continue to make social security contributions under the United States system.

Employees receiving parental leave and other payments Employers do not have to make SG contributions on salary or wages paid to employees: • for a period of parental leave or ancillary leave, regardless of whether the payments are made under current awards or agreements, or a statutory paid parental leave scheme “Parental leave” includes maternity leave, early paid leave relating to an inability to be transferred to a safe job, paternity leave and other leave taken by partners at the time of birth or adoption, pre-adoption leave and adoption leave • who are engaging in an “eligible community service” activity as defined in the Fair Work Act 2009 or

are undertaking service with the Australian Defence Force Reserves, and are paid by the usual employer while absent from their usual employment. Eligible community service includes jury service • which are payments of “green army allowance” within the meaning of the Social Security Act 1991 (these are payments to Green Army Programme participants by Green Army service providers). Exempt employees — payments which are excluded as salary or wages Certain payments to employees are specifically excluded from being salary or wages for SG purposes. They are: • remuneration under a contract for the employment of a person, for not more than 30 hours per week, in work that is wholly or principally of a private or domestic nature (SGA Act s 11(2)), and • “fringe benefits” as defined in the Fringe Benefits Tax Assessment Act 1986 (SGA Act s 11(3)). An example of an exempt employee under the first dot point is where a person pays a part-time nanny or housekeeper for work of a private or domestic nature. Such a worker may also not be an “employee” under s 12(11) of the SGA Act (¶44-030). The Commissioner considers that other employee “benefits” that are neither fringe benefits nor salary or wages are not salary or wages for SG purposes, eg employer contributions to a complying superannuation fund for an employee and the acquisition of a share or of a right to acquire a share under an employee share scheme (SGR 2009/2). ATO checklist of salary or wages and OTE Superannuation Guarantee Ruling SGR 2009/2 provides a checklist of whether certain payments and amounts are included in OTE and/or “salary or wages” for SG purposes (see Table 44.2 in ¶44-040.

¶44-040 Payment of SG contributions by employers Employers are required to make SG contributions for their employees based on a percentage (SG rate) of the employee’s “ordinary time earnings” (OTE), subject to a maximum contribution base (which is indexed annually). The SG rate for a financial year is set out in ¶44-020. An employee’s OTE means the total of the employee’s earnings in respect of ordinary hours of work and earnings consisting of over-award payments, shift loading or commission for the quarter, other than any lump sum payment made to the employee on the termination of employment in lieu of unused annual leave, unused long service leave or unused sick leave. An employee’s OTE in a quarter for SG purposes is therefore the lesser of: • the OTE for the quarter, and • the maximum contribution base for the quarter ($50,810 per quarter in 2015/16). Long service leave is determined on the basis of attending or working the relevant ordinary hours. Therefore, if there is no termination of employment, payment for such leave in lieu of an employee taking the leave is included in OTE (ID 2001/14). Ordinary hours of work An employee’s “ordinary hours of work” are the hours specified as their ordinary hours of work under a relevant award or agreement, or under documents governing the employee’s conditions of employment. It is generally expected that other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours. This means that any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employee’s ordinary hours of work. If they are not specified in a relevant award or agreement, the “ordinary hours of work” are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case, although this is not necessarily the minimum or maximum number of hours worked or required to be

worked. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee’s work, and the actual hours worked should be taken to be the ordinary hours of work. Ordinary hours of work are not necessarily limited to hours to be worked between 9 am–5 pm, Monday to Friday. Depending on the relevant award or agreement (if any), the ordinary hours of work may include hours to be worked at other times, including at night, on weekends or on public holidays. Earnings in respect of ordinary hours of work All amounts of earnings in respect of employment are in respect of the employee’s ordinary hours of work unless those amounts are remuneration for working overtime hours, or are otherwise referable only to overtime or other hours that are not ordinary hours of work. The ATO considers that there is no such thing as earnings that are merely in respect of employment generally, and are not OTE because those earnings are not in respect of any particular hours of work. An award or agreement may contain a definition of “OTE” that purports to apply for superannuation purposes. However, for SGA Act purposes, the key question is what amounts are “earnings in respect of ordinary hours of work”. In some cases, this can be a different amount from any purported amount of OTE in the award or agreement. The ATO accepts that “ordinary hours of work” are as determined by the relevant award or agreement, but that does not imply that OTE itself is necessarily as determined by the award or agreement. It should be noted that the ATO’s view of “ordinary hours of work” for SG purposes is not the same as the meaning given in the FW Act, where that expression generally means “the hours agreed by the employee and their national system employer as the employee’s ordinary hours of work”. Therefore, in the absence of an agreement, this means that the ordinary hours of work are 38 hours for a full-time employee and the employee’s usual weekly hours of work for a part-time employee (FW Act s 20(1), (2)). Attributed personal services income Attributed personal services income (PSI) will not generally give rise to an SG obligation because an employer’s SG obligation hinges upon the notion of receipt of payment for work and the attributed PSI amount is generally not paid to the personal services provider. However, where the personal services provider receives salary or wages and the payment is made after the end of the 14th day after the PAYG payment period, this amount is treated as attributed PSI (ITAA 1997 s 86-15(4)). In such a case, the payment is considered to be “earnings in respect of ordinary hours of work” in relation to an employee under the definition of OTE and this will give rise to an SG obligation for the employer (ID 2015/9). ATO checklist of salary or wages and OTE The checklist below from Superannuation Guarantee Ruling SGR 2009/2 shows whether certain payments and amounts are included in OTE and/or “salary or wages” for SG purposes. Table 44.2: Checklist of salary or wages and OTE Payment to employee in relation to …

Salary or wages

OTE

Awards and agreements A simple overtime situation

Yes

No

Overtime hours — agreement prevailing over award

Yes

No

Agreement supplanting award removes distinction between ordinary hours and other hours

Yes

Yes

No ordinary hours of work stipulated

Yes

Yes

Casual employee — shift-loadings

Yes

Yes

Casual employee — overtime payments

Yes

No

Casual employee whose hours are paid at overtime rates due Yes to a “bandwidth” clause

No

Piece-rates — no ordinary hours of work stipulated

Yes

Yes

Overtime component of earnings based on “hourly driving rate” formula stipulated in award

Yes

No

Allowance by way of unconditional extra payment

Yes

Yes

Expense allowance expected to be fully expended

No

No

Danger allowance

Yes

Yes

Retention allowance

Yes

Yes

Hourly on-call allowance in relation to ordinary hours of work for doctors

Yes

Yes

Reimbursement

No

No

Petty cash

No

No

Reimbursement of travel costs

No

No

Payments for unfair dismissal

No

No

Workers compensation — returned to work

Yes

Yes

Workers compensation — not working

No

No

Yes

Yes

Termination payments — in lieu of notice

Yes

Yes

Termination payments — unused annual leave

Yes

No

Yes

Yes

Bonus labelled as ex gratia but in respect of ordinary hours of Yes work

Yes

Christmas bonus

Yes

Yes

Bonus in respect of overtime only

Yes

No

Allowances

Payments of expenses

Leave payments Annual leave Termination payments

Bonuses Performance bonus

SG contributions must be made to complying fund or RSA by the due date To avoid incurring an SG charge liability in a quarter, an employer’s SG contributions for employees must be made to a complying superannuation fund or a retirement savings account (RSA) by its due date. The due date in a quarter is the 28th day of the month following the quarter (eg 28 July for the April to June quarter) (see Table 44.3 below). An employer’s SG obligations in respect of a deceased employee may be satisfied by paying an amount equal to the employer SG contributions directly to the deceased employee’s legal personal representative. A complying superannuation fund is one that has received a notice to that effect under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and an RSA is a deposit account or policy within the meaning in the Retirement Savings Accounts Act 1997 (Cth). A list of RSA providers may be found on the website of the Australian Prudential Regulatory Authority (APRA) (see www.apra.gov.au/Super/Pages/list-of-institutions-offering-retirement-savings-

accounts.aspx). An employer cannot pay an increased wage or salary to an employee in lieu of making SG contributions to a complying fund or RSA for the employee as this does not satisfy the employer’s SG obligations and the employer will still be liable to the SG charge (see Weston v Commissioner of Taxation 2008 ATC ¶10052; [2008] AATA 869). Similarly, an amount paid to an employee allegedly for superannuation will not comply under the SGA Act (Payne v FC of T 2016 ATC ¶10-421). SG statement and payment of SG charge An employer who fails to make the required SG contributions has an SG shortfall for the quarter and must lodge an SG statement with the ATO by the 28th day of the second month following the end of the quarter. Table 44.3 sets out the due dates for: • making SG contributions for employees in an SG quarter (SGQ), and • lodging an SG statement with the ATO and paying the SG charge. Table 44.3: Due dates — SG contributions and SG statement SGQ

Due date for payment of SG contributions

Due date for lodgment of SG statement and payment of SG charge

1 Jul–30 Sept

   28 October

   28 November

1 Oct–31 Dec

   28 January

   28 February

1 Jan–31 Mar

   28 April

   28 May

1 Apr–30 Jun

   28 July

   28 August

Where the last day for making superannuation contributions in a quarter falls on a weekend, public holiday or bank holiday, contributions may be made in respect of the quarter on the next working day (Superannuation Guarantee Determination SGD 2003/2; TAA s 388-52). The SGA Act does not provide employers with an extension of time to make SG contributions, and the Commissioner has no discretion to overlook a failure to make the contributions by the due date. In an appropriate case, contributions made after the due date can be counted as advance contributions for the next quarter, or may be used to offset the employer’s SG liability (see “Late contributions may be used to offset SG liability” later in this section). The Commissioner may extend the SG statement lodgment date or the SG charge payment date, and may allow for payment of the SG charge in instalments (Taxation Administration Act 1953 (Cth) (TAA)). This does not alter the fact that the full SG charge is due and payable on the relevant due date and the general interest charge begins to accrue from that time. Contribution made through a clearing house Instead of making contributions for employees directly to a complying superannuation fund or RSA, employer contributions can be made using a clearing house facility. A “clearing house” is a service provided by an organisation (including a superannuation fund) that accepts employer contributions (in some cases through a direct debit authority) and distributes them on behalf of the employer to the particular funds chosen by the employees. A contribution for the benefit of an employee through a clearing house (other than the SGA Act “approved clearing house”: see following) is made when the contribution is received by the fund trustee or the RSA provider. This is the case even if the clearing house is operated by the superannuation fund (Superannuation Guarantee Determination SGD 2005/2, para 1, 3). This means that a failure by the clearing house to forward the contributions to the fund or RSA provider by its SG due date is a failure by the employer to make the contributions by the due date. “Approved clearing house” under the SGA Act

The approved clearing house under the SGA Act is the “Small Business Superannuation Clearing House” (SBSCH), which is a free online service administered by the Australian Tax Office. Employers who can use the SBSCH are: • those which have fewer than 20 employees (whether employed on a full-time, part-time or casual basis), or • from 1 July 2015, those which have an annual aggregated turnover below $2m (regardless of the number of employees). Details of the registration process to use the SBSCH are available at www.ato.gov.au/Business/Super-foremployers/Paying-super-contributions/Small-Business-Superannuation-Clearing-House. An employer who makes a payment to the SBSCH for the benefit of an employee is taken to have made a contribution to a complying superannuation fund or an RSA at the time of payment if the SBSCH accepts the contribution (SGA Act s 23B). This means that the payment counts as a contribution made to a complying fund or RSA at that time to measure the employer’s superannuation support for the employee, rather than when the contributions are received by the fund as with contributions made through other clearing houses. Back-payment of salary to former employees Where an employer makes back payments of salary or wages to a former employee in a quarter after the employment relationship has ceased (eg a court makes an award due to an underpayment of salary or wages), the employer will have an obligation to make SG contributions related to those back payments. This obligation arises in the quarter in which the back-payment is made. Late contributions may be used to offset SG liability An employer may make late contributions to offset an SG charge in respect of an employee if the contribution is made after the due date (ie 28th day after the end of a quarter) and the employer elects in the ATO approved form for the contribution offset. The election is irrevocable and must be made: • in a statement having effect under SGA Act s 35 as the employer’s assessment for the quarter, or • within four years after the employer’s SG charge for the quarter became payable. If the election happens after the employer’s assessment for the quarter is made, the assessment must be amended accordingly for the offset to take effect. The late contribution offset is not available where the employer does not make an election and, in that case, the Commissioner cannot remit any SG shortfall amount (Payne v FC of T 2016 ATC ¶10-421). Record-keeping and payment summaries An employer must retain records of all transactions and acts in relation to its SG obligations, irrespective of whether the employer is liable to the SG charge. An employer who is liable to pay the SG charge is further required to keep detailed records of the calculation of amounts shown in the SG statement that is lodged with the ATO. An employer who, without reasonable excuse, fails to comply may be subject to penalties. There is no required form of record-keeping. However, records must be kept in writing in English and be retained for five years. Examples of records include: • copies of employment contracts and industrial agreements • information on how the employer calculated the employee’s salary or OTE • information on how the employer calculated reportable employer superannuation contribution, or • information on how the employer calculated the employee-influenced portion of the total employer contribution.

¶44-043 Superannuation and interaction with workplace laws The SG scheme since its commencement on 1 July 1992 has operated independently of, but alongside, the award superannuation system so that any superannuation contributions by an employer in accordance with an industrial award may be counted towards the SGA Act prescribed minimum level of superannuation support required of the employer (¶44-020). The SGA Act does not affect the jurisdiction, functions and powers of the Fair Work Commission (FWC) or the operation of the Fair Work Act 2009 and related Acts. The operation of the SG scheme therefore does not alter award provisions or the Commonwealth or state industrial relations commissions’ jurisdiction to deal with industrial disputes involving superannuation issues (SGA Act s 5B). Default superannuation system Default superannuation funds in Australia were included in awards when superannuation became an industrial matter in national wage bargaining in the 1980s. Since then, many of the industry-based superannuation funds that were established to cater for employees in specific industries have become public offer funds which are open to members of the public. Modern awards were developed during 2008 and 2009, with some modern awards covering a large and diverse range of industries and occupations and others covering a smaller, more defined group. Superannuation funds which were selected for listing in the modern awards (mainly industry funds, along with some retail and corporate funds) were largely those that were already included in the relevant awardbased transitional instruments. Since the commencement of modern awards on 1 January 2010, applications have been made to list additional default funds in awards. Under the “choice of fund” regime in the SGA Act (¶44-050), most employees have been able to choose a superannuation fund, and/or a specific superannuation product offered by that fund, to which the SG contributions made by their employers for them are paid. The main exceptions are employees for whom the employer makes contributions under enterprise agreements and workplace determinations, or other specified pre-reform agreements or prescribed legislation. In other cases where employees do not choose a superannuation fund, the employer must make SG contributions for the employees who derive their default superannuation fund in accordance with a modern award into one of the default funds listed in the award (unless “grandfathering” applies). The Fair Work Act makes a distinction between employees: who are covered by an award, and employees who are award reliant. An employee is covered by the award if they are in a group of employees expressed to be within the scope of the award, while an employee is award reliant if their pay and conditions are solely determined by the award, and not some other industrial instrument. Employees who derive their default superannuation fund in accordance with a modern award encompass three main categories: • award-reliant employees, who have all the terms and conditions of their employment, including their default superannuation fund, determined by the award • employees who receive some above-award wages or conditions but derive their default superannuation product in accordance with a modern award • employees covered by enterprise agreements that do not specify a default fund but refer to the modern award for superannuation purposes. Awards and other industrial instruments are discussed in detail in Chapter 7. This section outlines some of the areas that employers may need to have regard so to avoid conflicts arising from the operation of the SG scheme. Award and SG obligations — potential conflicts An employer who has satisfied its SG obligations must ensure that it has also have complied with an industrial award to which it is a party. Some practical points of difference between the SG scheme and award system include the following.

• An employer who pays the SG charge instead of making superannuation contributions, and is discharged from its SG obligations, may not be discharged from the obligation to provide superannuation contributions under the award. • The salary or wages of certain employees who are exempted from an award may not be exempt for SG purposes (¶44-035). Also, certain “exempt” employee under the SG scheme (eg those earning less than $450 per month) may not be exempt from award superannuation, and award contributions will still need to be made for them. • The SG contribution requirements for employees are based on a charge percentage (SG rate) of the employee’s ordinary time earnings which has a specific meaning in the SGA Act (¶44-020). An award may stipulate a different basis of calculating the superannuation contribution required. • The frequency of payments may vary. The SG scheme requires contributions to be made at least quarterly (¶44-040), while monthly payments may be required under an award. Superannuation fund nominated in award In Re Finance Sector Union of Australia; ex parte Financial Clinic (Vic) Pty Ltd (1993) 67 ALJR 687, the High Court was called upon to consider whether an industrial award could specify which superannuation fund should be used for non-union members. The court decided by a majority that the award in question could not require employer superannuation contributions in respect of employees who are not members of a union to be paid into a specified superannuation fund. For union members, if an award specifies the fund into which contributions should be made, it will be necessary for contributions to be made into that fund in order for them to be made in accordance with the award. For non-union members, a consequence of the High Court’s decision is that in some cases a contribution can be in accordance with the award even though it is not made into the “award nominated fund”. The ATO has noted that the court, however, did recognise that there are circumstances in which an award can properly nominate the fund for non-members’ contributions. Consequently, Superannuation Guarantee Determination SGD 94/6 states that for SG purposes, the ATO will only accept a contribution made into a superannuation fund, other than that nominated in an award, as being in accordance with the award if: • the award does not require contributions into a nominated fund, or • a court decision has held that the particular award cannot specify the fund into which the contributions should be made. Arrangements not covered by modern awards Industrial agreements in force at 1 January 2010 remain unaffected by modern awards, and State Enterprise Agreements continue until their termination. Although state awards (rather than modern awards) applied to most employers who are not constitutional corporations, all the states except Western Australia have agreed to refer their industrial relations power over private sector employers to the Commonwealth. State awards generally continue to apply for 12 months from the referral date.

¶44-045 Salary sacrifice and superannuation An employer may be able to satisfy its SG obligations if employer contributions have been made under an effective salary sacrifice arrangement (SSA). This is because the SGA Act does not prescribe how employer SG contributions for employees are to be funded. An SSA arises where an employee contractually agrees to give up part of the remuneration that they would otherwise receive as salary or wages in return for the employer providing benefits of a similar value (eg superannuation benefits). An employee becomes entitled to salary or wages when the work is

performed: the date of payment is irrelevant. An employee cannot be compelled to enter a salary sacrifice or other deduction arrangement. Where one exists, the employee must genuinely agree to such an arrangement and the details of the arrangement must be properly recorded. Only an effective SSA involving the employee giving up a future entitlement to salary or wages can be effective for SG and tax purposes. An ineffective SSA arises where salary or wages to which an employee is already entitled are directed to be paid in another form (Taxation Ruling TR 2001/10). An effective SSA may provide that an employee’s entitlement to salary or wages is reduced below the minimum entitlement under industrial law (see below). If an employee is receiving workers compensation payments, the employer and employee must refer to a written SSA to determine whether salary sacrifice can continue. If there is no restriction, they can agree for the SSA to continue in relation to the workers compensation payments received in lieu of wages (ID 2002/372). A person who is an “employee” for SG purposes because he/she works under a contract that is wholly or principally for the person’s labour (¶44-030) can also enter into an effective SSA. In that case, the salary sacrifice contributions in lieu of “salary or wages” for the person are employer contributions (Superannuation Guarantee Determination SGD 2006/2). Minimum wage under an award An employer and employee can agree to an SSA that reduces the cash wages payment to below the minimum award wage.

Case example Casey Grammar School v Independent Education Union of Australia The case of Casey Grammar School v Independent Education Union of Australia [2010] FWA 8218 examined the interaction of s 45 of the FW Act, which provides that a person must not contravene a term of a modern award, and s 324(1) of the FW Act, which provides that an employer may deduct an amount from an amount payable to an employee in accordance with s 323(1) of the FW Act (dealing with the method and frequency of a payment). Importantly, Note 1 to s 324 states that a deduction in accordance with a salary sacrifice or other arrangement, under which an employee chooses to “… forgo an amount payable to the employee … but receive some other form of benefit or remuneration; will be permitted …”. The Tribunal held that Casey Grammar School could lawfully agree to the teacher’s salary sacrifice request arrangement. This would not involve a breach of the Education Services (Teachers) Award 2010 (Award) as such an arrangement is authorised by s 324. The FW Act takes precedence over a modern award to the extent of any inconsistency, unless the FW Act itself authorises an inconsistent term of that sort. Accordingly, if a deduction is authorised by s 324, nothing in the Award can have the effect of overriding that authorisation. The Tribunal accepted that, from time to time, examples may emerge where employers have obliged employees to “agree” to grossly excessive deductions, and that such conduct can lead to the safety net being undermined. However, deductions which are properly authorised under s 324 could not properly be seen as undermining the safety net, even when those deductions come from a minimum award wage.

Interaction with industrial law The Commissioner’s views on the interaction of SSAs and industrial law are expressed in TR 2001/10 (para 58):

“If the employment agreement provides that salary or wages entitlements are below the minimum entitlements under the relevant industrial law, award or workplace agreement, and non-cash payments are made, the employee may retain a legal entitlement to receipt of the minimum level of salary or wages. Where an employer and an employee enter into a SSA that so provides, we accept that the income tax law takes the factual situation that exists between the two parties as it finds it. However, the employee may have rights to enforce payment of an underpayment of salary or wages under industrial law. For example, the Federal Court of Australia in Poletti v Ecob (No 2) (1989) 31 IR 321 gave a direction for the payment of an under payment of wages where the appellant (employer) had provided the respondent (employee) a package of benefits rather than the salary or wages as required by the relevant award. Where a Court gives an order concerning payment of under paid wages, the amounts awarded are assessable income of the employee under either section 6-5 or 610 of the ITAA 1997.” Salary sacrifice into superannuation — tax consequences Remuneration management is discussed in detail in Chapter ¶11, including salary packaging models (¶11-120). This section outlines some of the consequences under the SG and tax laws for the employer and employee where an effective salary sacrifice is made for superannuation contributions: • the employer may be entitled to a deduction for the salary sacrificed contributions • unless the employment contract provides otherwise, the employer can count the salary sacrificed into superannuation as SG contributions • the employer’s liability to make SG contributions may be measured against the employee’s earnings after reduction for the sacrificed salary • fringe benefits tax by the employer is not payable on the contributions provided they are made to a complying superannuation fund on behalf of an employee • the sacrificed salary is not assessable income of the employee • employer contributions are “concessional contributions” for tax purposes. If, together with other concessional contributions made for or by the employee, the contributions exceed the concessional contributions cap for the year, the excess contributions are included in the employee’s assessable income and taxed at marginal rates. The employee is also liable to pay an excess concessional contributions charge, and • the employer contributions under the salary sacrifice arrangements are assessable contributions of the recipient superannuation fund, ie contributions tax is payable by the fund. This treatment will affect how superannuation benefits eventually paid from the fund will be taxed in the hands of the employee (fund member).

¶44-050 Choice of fund The choice of funds regime in the SGA Act requires employer to give most of their employees a choice of fund into which their SG contributions are paid. If an eligible employee fails to choose a fund, or chooses a fund which cannot be used by the employer, the employee’s SG contributions will be paid to the employer’s default fund. An employer’s contribution is taken not to comply with the choice rules if the employer imposes a direct cost or charge on the employee as a consequence of having to contribute to a fund. How an employer complies with the choice rules The three main ways for employers to comply with the choice of fund requirements are: • employee choice — by making SG contributions to a fund chosen by the employee (whether the choice is made before or after being given a standard choice form by the employer), or by contributing to certain unfunded public sectors schemes

• employee does not make a choice — by making SG contributions to a “default fund” chosen by the employer and the requirements of s 32C(2) are met (this will generally be the case for eligible employees who do not choose a fund), or • deemed compliance — by making SG contributions to a fund under or in accordance with certain industrial agreements and workplace determination or enterprise agreements, or a prescribed Commonwealth, state or territory legislation (see “Employees who are not eligible to choose a fund” below) (SGA Act s 32C). From 1 January 2014, employers must make SG contributions for employees who have not made a choice of fund to a default fund that offers a MySuper product (see ¶44-060). An employer cannot make SG contributions to a default fund where an employee has not chosen a fund if the employer is required to give the employee a standard choice form but does not do so by the required time (see “Time for giving a standard choice form to employees” below). Employees who are eligible to choose a fund Employees are generally entitled to choose their superannuation fund if they are: • employed under a federal award • employed under a former state award (since 27 March 2006, this is called a notional agreement preserving state award) • employed under another award or agreement that does not require superannuation support, or • not employed under any state award or industrial agreement (including contractors who are regarded as employees under the SG Act: see ¶44-030). Employee who are not eligible to choose a fund In the situations below, employer contributions to certain funds, or in certain circumstances or under certain superannuation arrangements, are deemed to comply with the choice of fund rules so that the employer in those cases do not have to offer choice to the employees concerned. Contributions under certain agreements An employee is not eligible to choose a fund if their employer is already paying superannuation for them under a state industrial award or a preserved state agreement, a federal industrial agreement (eg an Australian workplace agreement, a collective agreement, a workplace determination and an enterprise agreement) (s 32C(6), (6A), (6B), (7), (8)). These agreements or determinations may specify a given superannuation fund, or a number of superannuation funds, to which the employer may contribute for the benefit of the employee. The instruments above have the same meanings as in the FWTPCA Act (SGA Act s 12A). Only one instrument can apply to an employee at a particular time. An enterprise agreement may incorporate the terms of an award. One consequence of the deemed choice compliance as noted above is that those employees (which include those with a superannuation fund nominated in an enterprise agreement, a workplace determination or a state-based award) effectively do not have a choice of funds for their SG contributions. Where certain conditions are met, “default” fund clauses in enterprise agreements are permitted under s 194 of the Fair Work Act 2009 (Cth). It is therefore lawful for both collective agreements and enterprise agreements to continue to contain terms which do not allow for choice of funds as the employer’s contributions which are made under the default fund clauses are taken to comply with the SG choice requirements. While this process enables bargaining representatives, nominated by majority ballot, to select a compulsory superannuation fund, it also denies employees genuine freedom of choice. Proposed amendments to extend choice to employees under enterprise agreements or workplace determinations

The Superannuation Legislation Amendment (Choice of Fund) Bill 2016 proposed amendments to the SGA Act so that employees are able to choose their superannuation fund where new enterprise agreements or workplace determinations are made from 1 July 2016. Under the proposed changes: • employer SG contributions to a fund under, or in accordance with, a workplace determination or an enterprise agreement made before 1 July 2016 will comply with the choice of fund requirements • for a workplace determination or enterprise agreement made on or after 1 July 2016, an employer will be required to allow employees to choose their own superannuation fund, ie the employer must give a standard choice form to the employee (see below). This will be the case unless other circumstances exempt the employer from doing so. If the employee does not choose a fund, the employer can continue to make SG contributions to the same fund to which the employer contributed for the employee under a workplace determination or enterprise agreement made before 1 July 2016. An employer will also be able to specify this fund as a default fund in the standard choice form provided to the employee. The proposed changes address the recommendation made by the Financial System Inquiry to extend choice of funds to employees under a workplace determination or an enterprise agreement (see ¶44-300). The Superannuation Legislation Amendment (Choice of Fund) Bill 2016 lapsed in April 2016 when parliament was prorogued. Contributions for employees under a prescribed Commonwealth or state law An employer’s contribution for an employee is taken to be in compliance with the choice rule for them if the contribution is made under a Commonwealth, state or territory law that is prescribed in the SGA Regulations (see ¶44-070). Employee choosing a fund An employee is not obliged to choose a superannuation fund or an RSA. If an employee does not make a choice, the employer’s SG contributions for the employee are paid to the employer’s default fund. An employee who wants to choose a superannuation fund (or an RSA) as their “chosen fund” must give the employer written notice to that effect. This is usually done using the standard choice form provided by the employer, but another form may also be used provided it contains all of the required information. The employee’s choice of fund becomes the chosen fund two months after that notice is given, or earlier if the employer agrees. The employee’s chosen fund must be an eligible choice fund to which the employer can make contributions for the employee’s benefit. An employer may refuse to accept the employee’s chosen fund if the employee: • does not provide the required information and written evidence that the fund will accept employer contributions, or • has chosen another fund within the previous 12 months. The required information includes the employee’s fund and membership details and the contribution payment requirements of the relevant fund (this information is specified in Pt B of the ATO standard choice form). Eligible choice fund A fund is an “eligible choice fund” for an employer at a particular time if, at that time, it is a complying superannuation fund or complying superannuation scheme (or a fund or scheme taken to be complying under the SG legislation), or is an RSA (¶44-040). Standard choice form A standard choice form must contain information prescribed by the SGA Regulations. The ATO Choice of superannuation fund — Standard choice form (Nat 13080) is available from any Taxation Office or the

ATO website (see www.ato.gov.au/Forms/Superannuation-(super)-standard-choice-form). Time for giving a standard choice form to employees An employer may give an employee a standard choice form at any time, but must do so within 28 days: • of starting employment — for a new employee who is eligible for choice • of receiving a request — if an employee makes a written request for a form (except where a form has been given in the previous 12 months) • of knowing — if the employer becomes aware that the: – employee has no chosen fund because the employer is unable to contribute to the chosen fund, or – chosen fund has ceased to be an eligible choice fund • following a change — if the employer is making contributions for the employee to an eligible choice fund for the employer, and the employer changes the fund, or • of becoming aware — if an employer cannot contribute to the default fund specified in the standard choice form, the employer may contribute to an alternative fund provided the employer gives the employee a standard choice form within 28 days of the employer becoming aware of the problem. When a standard choice form need not be given An employer is not required to give an employee a standard choice form in the following circumstances: • the employee has chosen a fund • the employer is making SG contributions for the employee that are in compliance with the choice of fund requirements (see earlier information under “How an employer complies with the choice rules”) • the employee was employed before 1 July 2005 and has chosen a fund before that date which has been taken to be the chosen fund (If the employee requests a standard choice form or there ceases to be an employee chosen fund after 1 July 2005, the employer must give the employee a form within 28 days.) • the employee is not eligible to choose a fund (see above) • the employee leaves employment before the time the employer is required to give the employee a form • if the employees are in certain defined benefit schemes (see “Defined benefit funds”), and • as a condition of employment, the employee must choose a fund from one of the employer’s default funds. This only applies where all employees of the employer have always done this, and the employer does not have an arrangement to make contributions other than to a fund chosen by the employee in the event that the employee failed or refused to choose a fund. Once an employer contributes to a fund other than one chosen by the employee or makes arrangements to do so, the employer can no longer benefit from this exemption. Temporary residents From 1 July 2015, an employer is not required to provide a standard choice form to an employee if the employee is the holder of a temporary visa within the meaning of the Migration Act 1958 (s 32NA(11)). The holder of a temporary visa is commonly referred as a “temporary resident” (this term is not defined in the SGA Act). A “temporary resident” under the Migration Act would also include a New Zealand citizen, even though New Zealand citizens can generally stay indefinitely in Australia. The government has explained that

including New Zealand citizens in the definition of “temporary resident” is to further reduce complexity and compliance costs for small businesses which would otherwise have to distinguish between New Zealand citizens and other temporary residents. Transfers to successor funds From 1 July 2015, an employers is not required to provide a standard choice form to an employee whose superannuation benefits are transferred from a chosen fund or a default fund to a successor fund as a result of a superannuation fund merger arrangement (s 32NA(1A)). Where benefits are transferred from a default fund to a successor default fund, the successor default fund is deemed to be the fund specified in the standard choice form for a given employee. This means that contributions which the employer makes to the successor default fund for the benefit of the employee will satisfy the choice of fund requirements and the employer will not need to give the employee a standard choice form (s 32C(2)(ba)(ii), (iii); 32C(2AB)). Defined benefit funds Certain employees who are members of certain defined benefit schemes do not have a choice of funds. In the situations below, an employer does not have to provide an employee with a standard choice form where the employee is a defined benefit member and: • the scheme is in surplus • the employee has accrued his/her maximum benefit in the scheme, or • the employee’s benefits in the scheme will remain the same if the employer makes contributions to another fund for the employee (s 32NA(7)–(9)). The Superannuation Legislation Amendment (Choice of Fund) Bill 2016 (lapsed) contained amendments so that an employer does not have an increase in the SG shortfall in a given quarter for employees who are members of a defined benefit scheme, where the employee’s benefit in the scheme would not be affected if SG contributions were made to another fund. This will ensure that employers cannot be penalised for failing to technically comply with the choice provisions if there is no chosen fund for an employee, notwithstanding that the employee concerned is unable to choose a fund under s 32F(3) of the SGA Act.

¶44-060 Default fund terms in modern awards — MySuper products The creation of “MySuper” as a default superannuation fund for employees is one of the consequences of the Cooper Review into Superannuation in 2010. Essentially, the MySuper concept is intended to provide a new, simple, cost-effective default superannuation product to replace existing default products for employer contributions under the SG choice of funds regime. “The MySuper component of the choice architecture model aims to provide a simple, cost effective product with a single, diversified portfolio of investments for the vast majority of Australian workers (roughly 80 per cent of members) who are in the default option in their current fund. MySuper is designed with two large groups of members in mind: those who take no real interest in their super (at least not initially) and those who choose to be in a large, low-cost and well-managed product where the investment strategy is designed and implemented by the trustee. MySuper would have a number of features designed solely with the member in mind: specific trustee duties designed to deliver lower cost outcomes for members; increased transparency leading to better comparability, especially of costs and long-term net performance; provision of intra-fund advice; simpler communications; and an embedded retirement product. It has been designed to sit within the existing superannuation structures and is based on existing widely offered and well understood default investment options.” (Cooper Report, Pt One, p 11, para 5.1.1) The SIS Act and FW Act provide the rules for the implementation and regulation of MySuper providers

and products. Some key features of the MySuper regime include the following: • Only a MySuper product is eligible to be a “default” fund nominated by an employer. • Only MySuper products are eligible to be nominated and all MySuper products are able to be nominated for “default fund” purposes in awards approved by the FWC. • Any fund that is a “successor fund” (as defined in the SIS Act) to a fund currently nominated as a default fund under an award should, where the successor fund is a MySuper product, be accepted automatically as a default fund under the award, so that there is no impediment to consolidation for those funds that wish to do so. • The FW Act: – prescribes the requirements in relation to modern award terms about default superannuation, and a process under which the FWC will review default fund terms every four years, at the same time as the four-yearly review of modern awards – provides for the establishment of the Expert Panel which will assess default superannuation funds (see “Default fund terms in modern awards” later in this section). • A superannuation fund (generally a registrable superannuation entity (RSE)) can only offer MySuper products if the RSE is licensed by APRA under the SIS Act (Pt 2C). This is basically to ensure that all MySuper products must meet core criteria (eg a single diversified or lifecycle investment strategy; all members have access to the same options and facilities; only permitted fees can be deducted from member accounts; and the permitted fees are the same for all members in the MySuper product, with the exception of the administration fee). In addition, additional specific trustee duties are imposed under the SIS Act in relation to MySuper products, including giving APRA the power to make prudential standards in relation to superannuation and issue directions to RSE licensees; rules for the charging of financial advice deducted from member accounts and charging for intra-fund advice; specific disclosure requirements in relation to MySuper products, including a product dashboard; and arrangements for the transition of member accounts from existing default superannuation products to MySuper products. Default fund terms in modern awards Modern awards specify particular funds to which employers are required to make compulsory superannuation contributions for the benefit of employees who have not chosen a fund (default fund employees). A failure to make contributions for such employees to a default fund specified in the award constitutes a contravention of the award, exposing the employer to civil penalties under the FW Act. Sections 149B, 149C and 149D of the FW Act deal specifically with terms that must be included in modern awards: • A modern award must include a term requiring employers to make such superannuation contributions to a superannuation fund for the benefit of an employee as this will avoid the employer being liable to pay the SG charge with respect to that employee (s 149B). This provision ensures that, if an employer is required to make superannuation contributions for an employee to whom a modern award applies so as to avoid paying the SG charge, the employee will also have an entitlement to be paid those contributions under the terms of the modern award. The FWC is required to include the term in all modern awards from the time awards are varied as part of the first four-yearly review of default fund terms. The term will apply in respect of both default fund employees and employees who have a chosen fund. • Modern awards must include “default fund terms” which require any superannuation contributions for employees who have no chosen fund to be made to certain funds. Such contributions must be made to a superannuation fund specified in the award, unless the contributions are made to a “defined benefit scheme” in respect of a “defined benefit member”; an exempt public sector superannuation scheme; a state public sector superannuation scheme (if a state law requires the contributions to be

made to such a scheme for the benefit of the employee); or a transitionally authorised superannuation fund (s 149C, 149D). • Default fund terms in modern awards must permit an employer to make contributions, for the benefit of a default fund employee, to a superannuation fund that offers an employer MySuper product that relates to the employer and is on the Schedule of Approved Employer MySuper Products (s 149D(1A)). The requirement that contributions can only be directed to a fund in respect of an employer MySuper product if the product has been approved by the FWC and included on the Schedule of Approved Employer MySuper Products will not apply until the FWC varies the modern award as part of the first four-yearly review of default fund terms. Approval process for employer MySuper products A two-stage process under which the FWC will assess employer MySuper products for inclusion on the Schedule of Approved Employer MySuper Products is set out in Subdiv D of Div 4A of Pt 2-3 of the FW Act. The FWC will be constituted as an Expert Panel when conducting both stages of the assessment process for employer MySuper products. In each four-yearly review of default fund terms, the FWC must make and publish the Schedule of Approved Employer MySuper Products and repeal any previous Schedule (s 156L). Essentially, the effect of an employer MySuper product being included on the Schedule is that an employer can make contributions, for the benefit of a default fund employee to whom a modern award applies, to a superannuation fund that offers the product, pending reassessment of the product as part of the next four-yearly review. Whether an employer MySuper product is included on the Schedule is not intended to affect the ability of an employee to choose a fund, or the ability of employers and employees to agree to enter into an enterprise agreement which nominates a different default superannuation fund, or remains silent on default superannuation. Complying with choice rules — default funds and MySuper products An employee who is entitled to choice may choose a superannuation fund (or an RSA) for the SG contributions made by employers for them. However, if the employee does not make a choice, the employer’s SG contributions will be paid to the “default fund” that is specified in the standard choice form given to the employee by the employer. From 1 January 2014, employers can only make SG contributions for employees who do not have a chosen fund to a superannuation fund that offers a MySuper product (SGA Act s 32C(2)) (¶44-050). In this regard: • a class of beneficial interest in a regulated superannuation fund is a MySuper product if the RSE licensee of the fund is authorised to offer that class of beneficial interest in the fund as a MySuper product • the fund must comply with the requirements (if any) in the regulations dealing with the provision of benefits for MySuper members of the fund which are payable in the event of the member's death, and • the fund must comply with the requirements (if any) in the regulations dealing with offering benefits in respect of fund members (other than MySuper members) which are payable in the event of the member’s death (s 32C(2)(c)–(e)). RSE licensees are generally required under the insurance standards in the SIS Act to provide each member of a fund that holds a MySuper product the member benefits by taking out insurance on permanent incapacity (TPD) and the death of the member. In other words, a fund that offers a MySuper product will have to provide life and TPD insurance as a default within their MySuper product (SIS Act s

68AA). A member who holds the MySuper product may elect to opt-out of the provided life and TPD insurance cover. Special rules for defined benefit funds and schemes Employers may make contributions to a fund for employees who do not have a chosen fund, but are a “defined benefit member” of that fund regardless of whether it offers a MySuper product. Defined benefit members cannot be counted in working out whether an employer is a large employer for the purposes of authorisation of a MySuper product under s 29TB of the SIS Act.

¶44-070 Contributions under prescribed federal or state Acts A superannuation contribution to a fund by an employer for the benefit of an employee at a particular time complies with the choice of fund requirements if the contribution is made under a law of the Commonwealth, of a state or of a territory which is prescribed in the regulations (SGA Act s 32C(9): ¶44050). Certain public sector superannuation schemes are administered under such laws. The exemption from the choice requirements prevents these employers from being subject to “double coverage” situations where they are required to contribute to a certain fund or scheme under the Commonwealth or state or territory legislation while also being required to make contributions to another fund or scheme under Commonwealth legislation. For above purpose, a contribution to a fund by an employer for the benefit of an employee is made in compliance with the choice of fund requirements if the contribution is made under a law set out in an item in Table 44.4 during the period set out in the item (SGA Regulations reg 9B). Table: 44.4: Laws prescribed Item

Contributions made under the …

During the period from …

Commonwealth 1

Parliamentary Superannuation Act 2004

1 July 2005 onwards

New South Wales 2

First State Superannuation Act 1992 (NSW)

1 July 2005 onwards

3

Emergency Services Superannuation Act 1986 (Vic)

1 July 2005 onwards

4

Parliamentary Salaries and Superannuation Act 1968 (Vic)

1 July 2005 onwards

5

State Employees Retirement Benefits Act 1979 (Vic)

1 July 2005 onwards

6

State Superannuation Act 1988 (Vic)

1 July 2005 onwards

7

Transport Superannuation Act 1988 (Vic)

1 July 2005 onwards

Victoria

Queensland 8

Local Government Act 2009 (Qld)

1 July 2010 onwards

Western Australia 9

Coal Industry Superannuation Act 1989 (WA)

1 July 2005 onwards

10

Fire and Emergency Services Superannuation Act 1985 (WA) 1 July 2005 onwards

11

State Superannuation Act 2000 (WA)

1 July 2005 onwards

South Australia 12

Electricity Corporations Act 1994 (SA)

1 July 2005 onwards

13

Local Government Act 1999 (SA)

1 July 2005 onwards

14

Southern State Superannuation Act 2009 (SA)

1 August 2009 onwards

15

Public Sector Superannuation Reform Act 1999 (Tas)

1 July 2005 onwards

16

Retirement Benefits (Parliamentary Superannuation) Regulations 2012 (Tas)

25 December 2012 onwards

17

Retirement Benefits (State Fire Commission Superannuation Scheme) Act 2005 (Tas)

1 July 2005 onwards

18

Retirement Benefits (Tasmanian Ambulance Service Superannuation Scheme) Act 2006 (Tas)

1 July 2005 onwards

Tasmania

¶44-080 Penalties for SG breaches and other compliance matters Employers who fail to provide the required amount of SG support for their employees in each quarter have an SG shortfall and are liable to pay an SG charge to the ATO for the quarter. The charge amount comprises the shortfall amount plus an interest component and an administrative charge (¶44-020). The shortfall and interest component of the charge is redistributed by the ATO to a complying superannuation fund, RSA or SHASA for the benefit of the employees for whom the charge was paid. Employers should also note the following issues dealing with compliance with their SG obligations generally, and with the choice of fund rules as discussed in ¶44-050. Breach of SG obligations Employers are required to self-assess their liability to, and make payment of, the SG charge, if any, to the ATO by the due date in each quarter (¶44-040). The charge is not tax-deductible. Other penalties that may apply for a breach of their SG obligations include: • an SG charge for entering into arrangements to avoid payment of the charge • an additional SG charge for failing to provide an SG statement, or statements or information for the purposes of assessing the employer’s SG liability (a “Part 7 penalty”) • a general interest charge for late payment of the SG charge • penalties under the Taxation Administration Act 1953 (TAA), for example, for failing to provide statements to the ATO or to keep records or produce documents, or for providing false or misleading statements (TAA Sch 1 s 286-75; 286-80; Subdiv 284-B). In addition, the director penalty regime in TAA Sch 1 Div 269, under which the Commissioner of Taxation may recover from the directors of companies unpaid amounts under the pay-as-you-go (PAYG) withholding system, also applies to cover unpaid SG amounts. Under the director penalty regime: • directors may be made personally liable for their company’s unpaid SG amounts • directors cannot discharge their director penalties by placing their company into administration or liquidation when PAYG withholding or superannuation guarantee remains unpaid and unreported three months after the due date, and • directors and their associates may be liable to PAYG withholding non-compliance tax (effectively reducing credit entitlements) where the company has failed to pay amounts withheld to the Commissioner. The director penalty represents the amount of the company’s SG charge, either as assessed by the employer in an SG statement, or as assessed by the Commissioner in a default assessment or as estimated by the Commissioner (TAA Sch 1 s 268-10(1) and (3); 269-10(1) table items 4 and 5).

Increased SG charge for non-compliance with choice of fund Where an employer makes SG contributions for an employee that do not comply with the choice of fund rules, the employer’s individual SG shortfall (¶44-040) for the employee for the quarter is increased by the amount worked out under the SG legislation. The increase in the shortfall amount (choice shortfall) is subject to a maximum (cap) of $500 in a particular quarter or notice period. The cap does not affect the employer’s liability to the normal quarterly SG shortfall (if applicable) as a result of failing to pay the required amount of SG contributions for an employee. The Commissioner of Taxation may reduce the amount of the choice shortfall (including to nil), having regard to written guidelines made for this purpose, on a case-by-case basis. Employer liability for compensation and interaction with other laws Employers are protected from liability to compensate any person for loss or damage arising from anything done by the employer when complying with the choice of fund requirements. For example, if an employee selects a fund from material provided by a superannuation fund trustee or an RSA provider and the fund subsequently performs badly, the employer is not liable to compensate the employee (SGA Act s 32ZA). A requirement in a Commonwealth industrial award, a territory industrial award, or a law of a state or territory that an employer make contributions to a superannuation fund on behalf of an employee is not enforceable to the extent that the employer instead makes the contributions on behalf of the employee, in compliance with the choice rules, to another superannuation fund that is a chosen fund (SGA Act s 32Z, 32ZAA). Payslip reporting of superannuation contributions of employees Section 536 of the FW Act provides for payslip reporting to employees and reg 3.46 of the regulations specifies what must be reported. Briefly, employers are required to report on payslips either the employee’s entitlements to superannuation accrued during the pay period, or the actual contributions made for the employee. These requirements do not apply to public sector employers in New South Wales, Queensland, South Australia, Tasmania and Western Australia, and some (unincorporated) private sector employers in Western Australia. Additional payslip reporting requirements for superannuation contributions were previously also required under former Pt 29B. These requirements were abolished (before implementation) as the SIS reporting requirements had proved to be more complex and expensive to implement than originally expected. Employers covered by the Fair Work legislation are therefore only required to comply with their payslip reporting obligations under that scheme and do not have additional payslip reporting obligations under the SIS legislation. Giving inducements to employers Subject to certain exceptions, the SIS Act and the RSA legislation prohibit superannuation fund trustees and RSA providers from providing inducements to an employer for their fund to be chosen as the employer’s default fund (see ¶44-050). For instance, fund trustees (or their associates) are prohibited from offering, or refusing, to supply goods or services to an employer on the condition that their employees become members of the fund. The exceptions cover supplying or providing: • business loans on a commercial arm’s length basis to an employer where only the employer is required to be a member • clearing house (see ¶44-040) services to an employer • advice or administrative services to an employer or the employer’s employees, and • goods or services that are also available to all of the employer’s employees who are members of the fund on terms not less favourable than the terms offered to the employer (eg low-cost health insurance).

¶44-090 Complaints by employees Except as provided by the SGA Act, a person must not make a record of any protected information or, directly or indirectly, divulge or communicate to a person any protected information concerning another person. Disclosure of information can usually be made for the purpose of assisting superannuation fund members to find their superannuation interests (including amounts held by the ATO) or manage their superannuation accounts (eg consolidate, transfer, cash or in any other way manage the interests) (TAA Sch 1 s 355-65(3) item 10). However, this would effectively prohibit the Commissioner of Taxation from disclosing information or providing details about the progress of any action in relation to or against another person in response to an employee’s SG enquiries or complaints. An employee or former employee may make a complaint to the Commissioner if they think that their employer has not complied with their SG obligations, including the choice of fund rules. If a complaint is made, the Commissioner may provide certain information to the employee and make a record associated with disclosing this information without breaching the SGA Act. For example, the Commissioner may provide information about the steps taken to investigate the complaint and the actions taken under the law and/or the recovery action taken against an employer, but the disclosure does not extend to information about an employer’s general financial or other taxation affairs, or SG shortfall amounts which are not subject to the employee’s complaint. Other forms of redress An individual does not have an enforceable right to require the Commissioner, and the Commissioner has no legal duty, under the SGA Act to take action on the person’s behalf in a dispute about unpaid superannuation by an employer (Kronen v Commissioner of Taxation [2013] FCA 416; 13 ESL 05). As employees cannot directly sue for unpaid SG contributions owed by their employers under the SGA Act, the employee’s redress is largely dependent on the recovery action taken by the ATO. However, other options that may be examined include the following, as appropriate in the circumstances. Case examples Woodford v Landline Investments In Woodford v Landline Investments Pty Ltd [2000] QDC 258, the court said that, given the Commissioner’s right to recover the SG charge, the balance was against the existence of a private right of action under the SGA Act, although a private right of action may exist at common law to enforce a contractual superannuation entitlement (ie a breach of contract claim). Peter Willis v Health Communications Network Ltd In Peter Willis v Health Communications Network Ltd [2007] NSWCA 313, an employee succeeded in a claim for specific performance of his employment contract when the court held that he was contractually entitled to a superannuation contribution of 9% of the lump sum he received in lieu of six months’ notice when he was dismissed. In an appropriate case, an employee may be able to establish that there has been a breach of an industrial award or agreement. For example, employees may be able to recover payments due to them under s 540 of the FW Act or a corresponding state provision (Industrial Relations Act 1996 (NSW) s 368; Industrial Relations Act 1999 (Qld) s 408; and Fair Work Act 1994 (SA) s 14). In these cases, recovery would be limited to the amount required to be paid under the award or agreement, rather than the SGA Act requirement.

¶44-100 Employer obligations under SIS legislation The SIS Act and regulations are the principal legislation for the prudential regulation of superannuation funds. General administration of the SIS legislation for prudential regulation of the superannuation industry is undertaken by “Regulators” named in the SIS Act to the extent that administration of the relevant SIS provisions is conferred on them. The current Regulators are APRA, the Australian Securities and Investments Commission, the Commissioner of Taxation (ATO) and the Chief Executive Medicare.

While s 3(3) of the SIS Act provides that “The Act does not regulate other entities engaged in the superannuation industry”, the government’s view is that this means the SIS Act does not regulate funds that are not “regulated superannuation funds” (as defined in the Act). Employers (and service providers) are not, in this sense, “entities engaged in the superannuation industry” since they do not themselves act as superannuation funds. On this basis, s 3(3) does not prevent the regulation of employers when they interact with regulated superannuation funds, for example, under SIS Act s 64 (employers to remit deductions from salary and wages promptly) and 299C (employers to inform funds of employees’ tax file numbers). Under the SIS legislation, the trustees of a superannuation fund and other persons involved with the fund (eg an employer or a service provider) must comply with various duties and obligations for the prudential management and operation of the fund. Employer representatives who are trustees of employer-sponsored superannuation funds are directly subject to the SIS legislation in their capacity as a trustee in respect of the SIS obligations and duties. An “employer representative”, in relation to a group of trustees of a superannuation fund, a policy committee of a fund or the board of directors of a corporate trustee of a fund, means a member of the group, committee or board (as the case may be) nominated by: • the employer or employers of the members of the fund, or • an organisation representing the interests of that employer or those employers. The prudential supervision regime under the SIS and related regulatory legislation contains many diverse rules for different types of superannuation funds and situations. These rules are complex and penalties may be imposed for a contravention. Except for provisions where only a civil liability can arise for a breach, the penalty for a breach usually takes the form of a fine or term of imprisonment and, in some cases, the fund may also lose its complying fund status and concessional treatment under the income tax law. This section covers some of the obligations that may be relevant to employers and trustees of employersponsored superannuation under the SIS Act. Employers and fund trustees are advised to refer to the CCH Australian Master Superannuation Guide, Australian Superannuation Law & Practice and specialised superannuation services for comprehensive commentary in this area. Trustee appointment and disqualification A person must give consent in writing to be appointed as a trustee or director of a corporate trustee of a superannuation fund. A “disqualified person” must not intentionally be or act as an individual trustee or a responsible officer (ie a director, secretary or executive officer) of the corporate trustee of a superannuation fund. An individual is a disqualified person if: • the person has been convicted of an offence involving dishonesty in any country • a civil penalty order has been made against the person • the person is an insolvent under administration (eg a bankrupt), or • the person has been disqualified by the Regulator or the court under the SIS Act. A body corporate is a disqualified person if: • it knows or has reasonable grounds to suspect that a responsible officer of the body corporate is a disqualified person and it is not eligible to apply to the Regulator for a waiver of the disqualified person status • a receiver, a receiver and manager, an official manager or a provisional liquidator has been appointed to the body corporate, or • it is in the process of being wound up.

A disqualified person who intentionally acts as a trustee, or a responsible officer of a corporate trustee, of a superannuation entity is liable to a term of imprisonment of up to two years. Trustee covenants and protection Certain trust law duties and trustee obligations are codified as trustee covenants in the SIS Act. These covenants (which supplement the trustee duties and obligations under the general trust law) are deemed to be included in the governing rules of a superannuation fund and cannot be avoided or modified. A trustee or a director of the corporate trustee of a superannuation must comply with the covenants at all times. Among other things, the covenants require the trustee: • to act honestly in all matters affecting the fund • to exercise, in relation to all matters affecting the fund, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to a fund of which it is trustee and on behalf of the beneficiaries of which it makes investments • to perform the trustee’s duties and exercise the trustee’s powers in the best interests of the beneficiaries • where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee: (i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons (ii) to ensure that the duties to the beneficiaries are met despite the conflict (iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict, and (iv) to comply with the prudential standards in relation to conflicts • to act fairly in dealing with classes of beneficiaries within the entity or with beneficiaries within a class • to keep fund assets separate (eg from those of the trustees personally and of the employer), and • not to do anything that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee’s functions and powers. Individual trustees or superannuation trustee directors are not subject to criminal or civil penalties in relation to their duty to act in the best interests of members. A member who has incurred loss or damage as a result of director misconduct can seek recovery through civil action or can be disqualified by APRA. The Financial Services Inquiry has noted in its report in 2015 that this is inconsistent with the regime applying to the directors of responsible entities of managed investment schemes under the Corporations Act 2001, who are subject to criminal and civil penalties and has recommended changes (see ¶44-300). Trustee protection Under the SIS Act, a superannuation fund’s governing rules must provide certain safeguards for the protection of trustees. Any rule that is inconsistent with the SIS Act is invalid to the extent of the inconsistency. Some of the protection measures are noted in the following points. • The governing rules (other than a superannuation fund with fewer than five members) must not permit the trustee to be subject to direction by any other person in the exercise of its powers, except by the persons and in the circumstances specified in SIS legislation. • The governing rules must not preclude a trustee from being indemnified out of the assets of the fund, or limit the amount of an indemnity, in respect of any liability incurred while acting as trustee. Such an indemnity does not extend to liability for a monetary penalty under a civil penalty order, or to liability for a breach of trust due to the trustee’s dishonesty or intentional or reckless failure to exercise care

and diligence. • The governing rules must not prohibit trustees from seeking professional advice on any matter concerning the performance of their duties or powers, or from being indemnified for the cost of such advice. • The trustee of an employer-sponsored superannuation fund (including the responsible officer of a corporate trustee) has statutory protection against any act of victimisation in the performance of their obligations or powers under SIS legislation or the governing rules. Employer representation on trustee board of an employer-sponsored superannuation fund The SIS Act requires equal representation of employer representatives and member representatives on the boards of standard employer-sponsored superannuation funds which have five or more members (with some exceptions). The applicable trustee structure also depends on whether it is a public offer superannuation fund. Essentially, the equal representation rules are aimed at ensuring that employers and fund members are able to have significant input in the management and operation of the fund. It is not an offence if a fund contravenes the trustee representation rules. However, the fund may be directed not to accept any contributions made by an employer-sponsor (eg SG contributions), and members can also bring a civil liability action for any loss or damage suffered as a consequence of the breach. A “standard employer-sponsored fund” is a regulated superannuation fund under the SIS Act which has at least one standard employer-sponsor (ie an employer who contributes, or has ceased only temporarily to contribute, to the fund wholly or partly pursuant to an arrangement with the trustee). Examples of such funds are employer funds for employees and industry funds. If employees are able to select the fund to which the employer will contribute, and the employer has no relationship with the fund (apart from making the contributions), the fund is not a standard employersponsored fund. The Superannuation Legislation Amendment (Trustee Governance) Bill 2015 proposed amendments to the SIS Act to require trustees of registrable superannuation entities (commonly referred to as RSE licensees) to have a minimum of one-third of independent directors and an independent chair on their trustee boards. Where the trustee is a group of individual trustees, one-third of these individuals must be independent. For this purpose, “independent” includes, among other things, persons who are not substantial shareholders of the RSE licensee or who do not have or have not had within the last three years, a material business relationship with the licensee. The proposed amendments address some of the recommendations of the Financial Services Inquiry regarding governance of superannuation (see ¶44300). The Bill lapsed in April 2016 when parliament was prorogued. Employers must remit contributions to funds promptly If an employer has deducted an amount from the salary or wages of an employee (whether authorised by the employee, by force of law or otherwise) for the purpose of paying that amount to a superannuation fund as a superannuation contribution for the benefit of the employee, the employer must remit the amount deducted to the fund concerned within 28 days of the end of the month in which the deduction was made. Contributions which are deducted from employees’ salary or wages may be the employee’s voluntary contributions and employer contributions, including salary sacrifice amounts. An exception to the 28-day rules applies if the contributions are made to the SBSCH. Employers who fail to comply may be liable to a fine (SIS Act s 64). The employee may also sue the employer under the common law. Employers must comply with SuperStream Standards SuperStream is the name used by the Cooper Superannuation Review in 2010 (and subsequently by the ATO and superannuation industry) to describe the package of reforms and measures to enhance the “back office” of superannuation. The SuperStream measures are now law, as data and payment

standards under the SIS Act. SuperStream encompasses the whole system covering the submission of data and making of payments electronically in a consistent and simplified manner under the standards. The four key elements of SuperStream are: • a common set of business terms and definitions which are used to describe each element of employee contributions • a common data format for reporting the contributions details for your employees • a standard message structure for sending and receiving messages from your funds, and • standard payment methods. For employers, SuperStream essentially prescribes how they send the following for the purpose of their superannuation contributions process: • contributions for employees to each superannuation fund, irrespective of whether the fund is an accumulation or defined benefit scheme and whether the fund is a default or choice fund • choice contributions made to SMSFs (except for closely held related parties) • initial member registration details for default funds, and • updating and maintaining employee details over time with all funds (whether default or choice). Employers are generally not required to understand the technical details of SuperStream as the data requirements will be sourced from a complying payroll system or other system provided by a service provider. Small businesses have until 28 October 2016 (extended from 30 June 2016) to comply with the SuperStream requirements. They can select how to become SuperStream ready by using a payroll system that meets the standard, a superannuation fund’s online system, a messaging portal or a superannuation clearing house like the ATO’s Small Business Super Clearing House (SBSCH). The SBSCH is a free, optional service for small business with 19 or fewer employees, as well as businesses with an annual aggregated turnover of $2m or less. For the ATO’s step-by-step checklist to help employers prepare for SuperStream, see ato.gov.au/SuperStreamChecklist and www.ato.gov.au/super/superstream.

¶44-300 More superannuation changes on the horizon The Financial System Inquiry Final Report (which was released in November 2014) made a number of recommendations relating to superannuation. Specifically, the Inquiry believes action can be taken in the following three areas: • Set clear objectives for the superannuation system. A clear statement of the system’s objectives is necessary to target policy settings better and make them more stable. Clearly articulated objectives that have broad community support would help to align policy settings, industry initiatives and community expectations. • Improve operational efficiency during accumulation. Subject to the outcome of a review, a formal competitive process may be needed to allocate new default fund members to MySuper products. A formal competitive process would extend competitive pressures from the wholesale default fund market to the broader default fund market and improve after-fee returns It would also reduce costs for funds and compliance costs for employers, who would no longer be required to select default funds for employees. • Improve efficiency in retirement. Greater use of risk pooling could significantly increase retirement

incomes generated from accumulated balances (Chapter 2, pp 89–91). The second dot point and related recommendations are of particular interest to employers in relation to providing compulsory superannuation to employees under the choice of funds rules (¶44-050) and the determination of MySuper products (¶44-060). Among other things, the Inquiry recommended removing the restrictions on some employees choosing the fund for their SG contributions (Recommendation 12: Choice of fund), and improving the governance of superannuation funds (Recommendation 13: Governance of superannuation funds). The relevant FSI recommendations and the government’s response are reproduced below. The FSI report is available at treasury.gov.au/ConsultationsandReviews/Consultations/2014/FSI-FinalReport. The “Government response to the Financial System Inquiry” is available at www.treasury.gov.au/PublicationsAndMedia/Publications/2015/Govt-response-to-the-FSI. FSI recommendation

Government response

Recommendation 10 — Improving efficiency during accumulation Introduce a formal competitive process to allocate new default fund members to MySuper products, unless a review by 2020 concludes that the Stronger Super reforms have been effective in significantly improving competition and efficiency in the superannuation system. Subject to the findings of a review of the efficiency and competitiveness of the superannuation system, government should introduce a formal competitive process to allocate new workforce entrants to MySuper products. The competitive process could be an auction or tender. Current default fund members would also benefit as funds would not be allowed to price discriminate between their existing and new MySuper members. This

The government agrees to task the Productivity Commission to immediately develop and release criteria to assess the efficiency and competitiveness of the superannuation system. The government agrees to task the Productivity Commission to immediately develop alternative models for a formal competitive process for allocating default fund members to products. Subsequent to the development of criteria and following the full implementation of the MySuper reforms, the government will task the Productivity Commission to review the efficiency and competitiveness of the superannuation system. The government will also explore additional measures to improve the efficiency and competitiveness of the current system. While MySuper has been a strong step in the right direction, more needs to be done to reduce fees and improve after-fee returns for fund members. CCH Note: The Productivity Commission has released an Issues Paper for its review of the efficiency and competitiveness of the superannuation system (www.pc.gov.au/inquiries/current/superannuation/competitivenessefficiency/issues). Treasury has also released a discussion paper on the objective of superannuation (www.treasury.gov.au/ConsultationsandReviews/Consultations/2016/Objectiveof-superannuation).

competitive process would replace the industrial relations system in selecting default superannuation funds for workers. The Productivity Commission (PC) should hold an inquiry by 2020, following the full implementation of MySuper (part of the Stronger Super reforms) to determine whether further reform would be beneficial. Recommendation 12 — Choice of fund Provide all employees with the ability to choose the fund into which their Superannuation Guarantee contributions are paid. Government should remove provisions in the Superannuation Guarantee (Administration) Act 1992 that deny some employees the ability to choose the fund that receives their SG contributions due to the exclusions given to enterprise agreements, workplace determinations and some awards. Note: In principle, this recommendation should apply to all employees but, for Constitutional reasons, the Commonwealth cannot instruct changes to state agreements and awards.

The government agrees to extend the choice of fund arrangements to more employees by removing the deemed choice for certain enterprise agreements and workplace determinations. CCH Note: The Bill to implement this measure lapsed when parliament was prorogued in April 2016 (¶44-050).

Recommendation 13 — Governance of superannuation funds

The government agrees with the need to improve the governance of superannuation funds. On 16 September 2015, the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 was introduced which will require superannuation fund

Mandate a majority of independent directors on the board of corporate trustees of public offer superannuation funds, including an independent chair; align the director penalty regime with managed investment schemes; and strengthen the conflict of interest requirements. Government should amend the Superannuation Industry (Supervision) Act 1993 to mandate that public offer APRAregulated superannuation funds have a majority of independent directors on their trustee boards. The chair should also be independent. An arm’s length definition of independence should apply. Government should introduce civil and criminal penalties for directors who fail to execute their responsibility to act in the best interests of members, or who use their position to further their or others’ interests to the detriment of members. To ensure effective arrangements for dealing with conflicts of interest, each director’s interests should be deemed to have been disclosed only when they have been acknowledged by all other directors.

trustee boards to have a minimum of one-third independent directors, including an independent chair. The government supports introducing penalty provisions and criminal sanctions for directors who fail to execute their duty to act in the best interests of members, or who use their position to further their interests or the interests of others to the detriment of members. The government supports APRA requiring board members to acknowledge when a director adds an interest to the conflicts register. This will ensure all board members are aware of interests. CCH Note: The Superannuation Legislation Amendment (Trustee Governance) Bill 2015 which was introduced to implement these measures lapsed when parliament was prorogued in April 2016.

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

45. INCENTIVES Editorial information

Chris Westacott Managing Director, Realise Performance

¶45-010 Introduction Linking incentives to performance has become a major organisational human resources (HR) strategy. Organisations need to ensure that incentive schemes are designed in ways that promote and align the required individual and/or group behavioural and/or performance expectations with the goals and objectives of the organisation. Over recent years, significant evidence supporting the concept that employees ultimately engage in behaviour that promotes their self-interest has become available. In other words, incentives must appeal to the individual’s interests and needs. This means that organisations have to view incentives from an individual perspective if they hope to maximise the benefit to the organisation, because what motivates one person may not be the same for another. It is important to note that focusing only on individual incentives exposes the organisation to a number of potential negatives. Organisations are, therefore, faced with finding the right balance in any incentive program, to ensure individuals are motivated (but not at the expense of groups and/or teams) and that high performance does not come at the cost of organisational values. Also it is important to ensure that incentives are only paid when the performance expectations of the organisation are met. Paying an incentive where performance expectations are not met demonstrates to both the individual employee and the rest of the organisation that non-performance is acceptable and rewarded. From an organisation perspective, this makes the incentive scheme counterproductive. Linking incentives to performance makes the basic assumption that incentives will encourage specific behaviours or result in higher performance levels. If what motivates people is grasped, then how to motivate people through a balanced reward strategy is also likely to be better understood. This is the basic tenet behind linking rewards to performance: that is, “what gets rewarded, gets done”. “Expectancy theory” states that employees pay attention to those things that are rewarded, as long as the performance criteria are attainable, and as long as there is a high expectation that on attaining the required performance criteria the rewards will be delivered. “Equity theory” suggests that, even if the performance criteria are appropriate and employees believe the reward will be delivered, employee motivation will depend on how equitably the reward-for-performance program is administered. Therefore, to avoid dissatisfaction and build motivation in incentive programs, organisations need to: • reward individual performance in a way that ultimately benefits the organisation • ensure that rewarded performance is attainable • ensure that the employer delivers on promises • administer reward-for-performance equitably, and • incorporate financial and non-financial factors in the performance/reward equation, to provide

meaningful and tangible anchors. This chapter provides a brief explanation of the range of incentives available and how these can be used to incentivise and motivate employees and, in turn, enhance and improve organisational performance. It is important to note that the field of incentives is highly specialised. To ensure incentive programs are developed to maximise positive and minimise negative impacts, organisations should consider obtaining professional advice. This ensure that the program is developed objectively in the interests of all parties.

¶45-020 Variable pay Incentives are a form of variable pay designed to reward the accomplishment of specific results which are normally identified at the beginning of the performance cycle. Performance criteria can be based on individual, team, business unit or organisation-wide results. The philosophy behind incentive plans is that they help to align an organisation’s resources and objectives and create a common focus for employees. Incentives also create and reinforce a culture in which employees are recognised for their contributions, and successes are based on predefined objectives. It is important to establish meaningful performance measures in the creation of any incentive program. There are three types of performance measures: (1) financial — including net earnings, net operating income and return on investment (2) quantitative — including increasing market share or production volume, reaching or delivering by a date milestone and productivity goals, and (3) qualitative — such as upgrading skill levels, demonstrating organisational values, or improving the climate or culture of the organisation. While using any of these measures, a program will only be effective if it is clear: • what is being measured • how it will be measured, and • what level of performance will be rewarded. This information should be clearly communicated to those involved. Of the three measures above, the qualitative ones are comparatively more intangible, subjective, difficult to measure and, therefore, can be problematic for employers. In addition to defining the measures in incentive programs, it is also essential for organisations to be sensitive to “line of sight” issues. “Line of sight” refers to an employee’s perceived ability to influence a measure upon which a reward is based. For example, an employee on the shop floor of a multinational organisation cannot see how their role directly impacts on the profitability of the organisation locally or globally. However, the senior executive team of that same organisation has a strong line of sight as they see themselves directly influencing this profit measure at a locally level and (dependent upon how senior they are) globally.

¶45-030 Short-term incentives Short-term incentives (STIs) are incentives for which the performance period is one year or less. Typically, incentive levels vary with the employee’s level in the organisation. The practice of differential STI payments provides support for the line of sight concept. Although it varies according to industry sector, executives (given their degree of influence over the organisation’s success) are likely to have a higher component of at-risk pay in their package (20%–50% of base salary or employment cost is common). Professional, technical and support staff typically have a narrower range of 5%–10%, because their roles are less able to independently and directly influence organisational outcomes. Incentive plans

Incentive plans are reward programs designed to achieve a particular outcome. Payments are geared to defined performance parameters and designed to bring about positive employee action — generally to improve the organisation’s prosperity. Incentive plans are not always directed at achieving profit. They can, for example, be focused on reducing the cost of operations, increasing market share or improving service quality. Bonus plans Bonus plans are generally reward programs based on the organisation’s overall performance. They involve the distribution of an agreed pool of money, which is created as a result of a specific level of performance. Bonuses paid are often discretionary, although payment is often determined as a percentage of an employee’s base rate of pay. Bonus payments can be paid on a monthly, quarterly, halfyearly or annual basis, although the general rule is that they are paid annually after the organisation has finalised its result for the year. It is important to note here that typically if the organisation does not achieve its financial targets or other organisational conditions bonus payments are not paid. Profit-sharing plans Profit-sharing plans allow employees to share in the profits of an enterprise. The share may be a percentage of total profit, a percentage of improved profit, or a variable percentage of profit, increasing with profit growth. Employees generally participate on the basis of salary or some other formula, so the size of their share corresponds with their position in the hierarchy of the organisation. Sales commission plans Sales commission plans are designed to reward employees financially on the basis of sales achieved or revenue generated. These are generally restricted to sales representatives and payment may be related to orders, bookings, revenue, gross margin, new name business, client visits, collections, expense control, strategic account development, profit contribution or product source. Typically, payments are more immediate than other incentive plans and reconciled on a weekly, fortnightly or monthly basis. Gainsharing plans Gainsharing plans are a type of incentive program whereby all employees at a site or company participate in sharing organisational results, which are brought about by improving productivity or quality, lowering wastage or energy use and so on. Project team incentive plans Project team incentive plans are special types of incentive plans that focus more on a “common purpose” team, rather than all employees in a particular organisational unit or site. These plans aim to engage and involve employees, and measure and reward project results. Plans can stand alone or operate in support of other group incentive plans. Typically, these are paid on project completion or achievement of project milestones. Designing an STI program When designing an STI program, there are a number of key design issues to consider, specifically: • What are the objectives of the incentive program and how are they aligned with the organisation’s strategy? • What minimum organisational criteria must be met before incentives can be made and over what timeframe? • What employee behaviours and performance expectations can be stimulated by the program? • How broad is participation likely to be and how much employee buy-in will be realised? • What will the assessment criteria be for employee eligibility? • How will incentives apply and acknowledge both team and individual performance? • What steps will be put in place to ensure that employees are rewarded for results they are directly

responsible for, or can directly influence? • What measures will be used in assessing performance of: – “hard” outcomes (eg financial and production-based) – “soft” outcomes (eg customer satisfaction) • What will the minimum individual and/or team performance thresholds be? • Will the scheme need to be capped? (Note: Capping the scheme, although guarding against extremely high pay-offs, may demotivate employees who reach this ceiling amount.) • What level of incentive will be provided to the various levels, roles and incumbents across the organisation? (Note: This element of the scheme is influenced by factors such as the current fixed components of the reward mix, performance levels, organisational objectives and capacity to pay.) • How will the incentive scheme be funded? In terms of funding, there are two typical methods of funding incentive schemes: • Budgeted pools: These are planned components of the remuneration budget within the organisation’s overall budget. Budgeted pools have the advantage of rewarding high-performing employees regardless of profit levels. • Self-funding schemes: These are reliant on the business reaching a certain profit, cost-saving trigger or target before employees receive the benefit of the program. In contrast to budgeted pools, selffunding schemes, although risk averse, are inconsistent with the line of sight for many employees.

¶45-040 Long-term incentives Long-term incentives (LTIs) are incentives for which the performance cycle is more than one year, commonly two to three years and are more often associated with publicly listed companies. While equitybased plans such as stock options or performance share plans are most common, cash-based plans can also come under this category as long as the cycle is more than one year. LTI schemes are most commonly used for executives (with shareholder approval) and can be complex. They are expanding in size as well as usage. LTI schemes, like STI programs, differ by level because employees further down in the organisation have less ability to affect longer-term organisational performance. Based on this rationale, it is difficult to comprehend the driving force behind providing LTIs to employees below the executive level. It is evident, however, that introducing LTI schemes across all levels is a valuable tool for developing organisational culture by creating a united front and aligning the goals of all employees. In addition to strengthening organisational culture, LTI schemes may also be used as a means for: • providing competitive reward to attract and retain employees as another component of the greater reward mix • linking the interests of employees to those of the shareholders • balancing the focus between short-term and long-term objectives (Note: If an organisation focuses too heavily on short-term objectives over long-term goals, especially at the senior levels, then there is a tendency to aim for short-term gains rather than developing strategies to stimulate growth in the long run.) • allowing employees to share in the success of the organisation (a clear way to further motivate employees and foster a sense of loyalty) • strengthening the link between pay and performance, where performance hurdles are developed to

drive target actions • allowing the stock market to directly fund a proportion of reward (Note: This is valuable for organisations with low cash reserves.) • encouraging executives to focus on making business decisions which the market sees as beneficial to the organisation • leveraging the pay program by shifting from an emphasis on fixed reward towards variable reward, and • providing wealth creation opportunities for employees. The principles surrounding the development of LTI programs are similar to those used in the creation of STI programs. However, as these programs are more likely to involve shares or share options, or other forms of equity, considerable care is required to ensure that the LTI is compliant with legislative requirements. Therefore, it is recommended that organisations obtain professional advice in relation to the development and implementation of an LTI program.

¶45-050 Conclusion In developing and implementing an incentive program, it is important to be clear as to what outcomes the organisation is trying to achieve. Further, in determining this, organisations need to consider the incentives offered in the program from an individual, group/team and organisational perspective. Finding the right mix and balance is the key to ensuring that the incentive program satisfies the unique characteristics of an organisation and its future needs. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

46. EMPLOYEE RETENTION Editorial information

Chris Westacott Managing Director, Realise Performance

¶46-010 Introduction The Australian workplace has undergone and continues to undergo major transformation. Australia has become a more open and less protected economy and, as such, Australian organisations must now compete with the rest of the world to both attract and retain talented and skilled employees. The opportunities available to younger Australians in the global market place appear to be virtually unlimited. As organisations in both established and emerging economies compete to maximise their opportunities, they see Australia with its highly educated, skilled and internationally-oriented workforce as being the source of their future labour needs. In addition to these global pressures, like most of the Western world, Australia is also facing significant labour shortages in a number of areas due to the ageing of its population. The ageing phenomenon can be directly attributed to the post-World War II population explosion and a subsequent decline in birth rates, which commenced in the late 1960s and continue to this day. Consequently, fewer employees will join the workforce and large numbers of highly skilled employees will withdraw from the labour market over the next 20 years. While these macro-economic issues will certainly impact on an organisation’s ability to secure its workforce, years of downsizing and organisational restructures have made the Australian workforce generally more cynical about their employment relationship. This is particularly the case for the children of the so called “baby boomers” who have witnessed firsthand what happened to their parents who saw their employment being with one employer for life, only to have this expectation shattered. This has contributed to the creation of a generation of employees whose number one loyalty is to themselves (rather than their employers). If employers are to retain their employees, employers need to consider the “needs” of their employees and develop and implement more innovative mechanisms/programs to engage them. While research indicates that what employees most want is interesting work, full appreciation of work performed and a feeling of “being part of decisions that impact on their work and themselves”, the motivational reasons for employee attendance and turnover have been identified as follows: • Why do employees come to work? – nature of work – job satisfaction – job security – location – pay and benefits, and – career advancement possibilities.

• Why do employees leave? – poor relationship with their manager – inappropriate organisational culture – poor organisational communication practices – poor job satisfaction – inappropriate pay and benefits – ineffective reward practices, and – lack of effective or appropriate recognition. Over many years, studies have also shown that organisations which pay attention to people issues will see results in their bottom line, thereby ensuring their future sustainability. Although competent and committed employees are essential to organisational success, philosophically, they can only be fully engaged when they understand, appreciate and can contribute to organisational goals. This chapter therefore focuses on working through a number of key areas and strategies that adopt this philosophy, to assist organisations in retaining their employees.

¶46-020 Relationships As highlighted in the previous section, studies undertaken to determine the reasons why employees leave their jobs indicate that one of the main factors is a breakdown in the relationship between the employee and their manager. A key strategy in employee retention is therefore for managers to develop an effective relationship with each employee for whom they have direct responsibility. This relationship is not about becoming friends with each employee: it is about developing a relationship of mutual trust and respect. It is also important for managers to understand their employees holistically. While it is inappropriate for managers to become too involved, or to be seen to be prying into an employee’s personal life, managers do need to understand what motivates or demotivates an employee, when they are most and least effective, and whether they have any personal issues that are likely to impact negatively on their performance. For example, expecting an employee who has recently returned from parental leave to work long periods of overtime may be unrealistic due to breastfeeding or other parental responsibilities. A significant and often overlooked aspect of the manager–employee relationship is the effectiveness with which the manager and the employee communicate. Specifically, the question “Has the manager successfully communicated their expectations of the employee in relation to work performance and behaviour?” needs to be asked. While discussions generally occur on an informal, often day-to-day basis, communication around expectations needs to have a degree of formality attached to ensure that ambiguity does not arise. The setting of effective performance expectations is essentially supported by the appropriateness and clarity of an employee’s current job description. As such, it is increasingly becoming an accepted practice that managers meet at least annually with each employee to ensure that responsibilities/accountabilities set out in the job description are clear and understood. In relation to behaviour, managers have a responsibility to ensure that each employee fully understands key organisational documents containing information on the vision, purpose, values and strategic direction, as well as documents that set out the code of conduct and ethics. Managers should ensure that employees fully understand the behavioural expectations of their job. Specifically, managers should be prepared to spend time coaching employees on the type of behaviour that is acceptable and appropriate. This is particularly the case for employees involved in direct customer service activities. An important aspect of the manager–employee relationship is also the way managers manage. Effective manager–employee relationships require open and consistent communication. Managers who manage their employees in an inconsistent manner create a relationship that is shrouded in a lack of trust and

respect. This, in turn, can be transmitted to other employees, contributing to generally increased levels of staff dissatisfaction and impacting morale negatively. Finally, it is important to remember that the manager–employee relationship of the future will be under even greater pressure as highly skilled and talented employees become the subject of even greater competition. Successful organisations will focus on providing their managers with the skills, tools and opportunities to build sustainable relationships with each employee, thereby using the manager– employee relationship as a key employee retention strategy.

¶46-030 Workplace culture During the 1980s and 1990s, Australia (and most Western economies) went through an unprecedented period of change arising out of economic reforms and globalisation. With large numbers of company closures, retrenchments and forced retirements, the long-held employee perception among Australian workers of “a job for life” was lost forever. Employees of all generations are now much more sceptical of organisations, management, unions and government, and the concept of organisational loyalty or the expectation that someone else will be there to look after their interests has been replaced with the general philosophy of loyalty to oneself. If organisations are to be successful in retaining employees, organisations must create of a culture that supports a greater level of employee control over job security. However, fundamental principal is the existence of an organisational culture that is built on mutual trust and respect. What must management do to develop a culture of mutual trust and respect? Employees want to be heard Managers need to recognise that employees want to be heard and to have some input into decisions that impact them directly. Most employees acknowledge that, in many cases, their input may only have a minor influence on proposed changes. However, employees will accept the change more readily if they believe they have been allowed to express their concerns, or raise issues, and have them taken seriously. Therefore, an excellent strategy is to establish regular forums to allow employees to have their say on a range of issues. Managers must be prepared to communicate effectively and openly with employees. Mutual trust and respect is about having open discussions with employees. Effective communication is not just about communicating the positives or an organisation’s achievements, but also sharing the organisation’s failures or problems. For example, where an organisation is suffering a decline in revenue, which is likely to have an impact on staffing numbers, it is often more appropriate to ensure that each employee understands the full nature of the problem and what management is trying to do to address and overcome it. There is also a body of evidence supporting the notion that once employees become fully informed, they are more likely to develop or suggest additional strategies to help the organisation overcome identified problems. Consistency in management Managers must be consistent in their dealings and decisions on employee issues. Mutual trust and respect is not possible if the manager is not seen to deal with all employees in a balanced and fair manner. It is well known that inconsistent actions without appropriate explanation are a major cause of relationship breakdown between management and employees. Recognition and reward Managers must ensure the efforts of employees are appropriately and effectively rewarded. Organisations where team and individual achievements are effectively recognised and rewarded are more likely to develop a culture attuned to both employee performance and retention. Further details on recognition and reward strategies are outlined later in this chapter.

¶46-040 Job satisfaction Often seen as the major reason for employees leaving organisations, a lack of job satisfaction is one area

where effective management can have the greatest impact. Lack of job satisfaction is essentially driven by an employee not having: • a clear and coherent understanding of the organisational direction • strong, open and effective leadership whose actions are consistent with what they say • a clear understanding of the requirements of the role • a clear understanding of management’s expectations of their performance in the role • a clear understanding of how the role fits into the activities of the organisation • the appropriate skills and competencies to perform the role effectively • a clear organisational structure, where reporting lines are apparent • a reasonable number of responsibilities which they are capable of fulfilling in the time available • variety in their role, thereby making the job boring and unfulfilling • their efforts recognised or being provided with constructive feedback on their performance, and • work/life balance, due to long hours or excessive travel requirements (whether these are imposed by the role or due to the location of the job in relation to the employee’s residence). While the existence of a formal job description can assist in eliminating or minimising these issues, it is essential that a common job description format is applied across all positions that details: • primary objectives of each role • position title • to whom each position reports • essential skills and competencies required to undertake each position effectively • specific responsibilities required of each position, and • how these will be assessed. An employee’s job description should be a living document and, where appropriate, be developed in consultation with the employee. As mentioned earlier, managers and employees should meet regularly to review job description content to ensure its relevance and appropriateness. While there may be some positions where little variation occurs (eg process-oriented jobs) it is important for retention purposes that employees gain a sense of ownership over their roles as this enhances job satisfaction. Discussions (of the type identified above) can be particularly useful in helping all employees more clearly understand their role and its place in contributing to organisational success. It is also important to ensure that the organisation’s performance management system enables the manager and the employee to have a meaningful discussion around the employee’s job description, thereby ensuring direct links between each job role, and individual and organisational performance. In addition, it is essential that the requirements of the job and the individual’s performance in the job drive much of the employee’s learning and development activities. A major employee retention strategy is to ensure that employees have the necessary skills and competencies to effectively fulfil the requirements of their roles.

¶46-050 Work/life balance

In more recent times, an employee’s ability to enjoy an appropriate work/life balance has moved to the forefront of modern human resources management practice. Increasingly, employees are questioning the amount of time they spend either at work or travelling to and from work. Many employees are no longer prepared to sacrifice their lifestyle and family relationships for a job, regardless of how much it pays. As such, more and more employees are making decisions to change jobs purely to enhance their work/life balance. Staff turnover in response to employees seeking work/life balance is very much a response to an employee’s unique individual needs. Organisations can reduce their exposure to this issue by encouraging their managers to be proactive in their manager-employee relationships and, where possible, identify opportunities and workforce strategies that enhance the work/life balance of their employees. For example, facilitating teleworking or more flexible working hours may be useful in helping those employees with family responsibilities, or with great distances to travel to and from work, to balance their work and personal commitments. Where practicable, all strategies to enhance employee work/life balance should be available to all employees, irrespective of their personal circumstances. To provide these opportunities to one employee or group of employees at the exclusion of others in the same work group will inevitably create dissension and contribute to an overall reduction in the level of job satisfaction experienced across the organisation. Work/life balance is discussed in greater detail in Chapter ¶25.

¶46-060 Pay and benefits As mentioned above, there have been numerous studies undertaken to ascertain what factors contribute to employee retention. In all cases, money and benefits are well down the list. However, the significance of pay cannot be overlooked, as an employee’s lifestyle is essentially driven by their disposable income. Chapter ¶11 covers in detail the development of an effective remuneration strategy. From an employee retention perspective, however, the key remuneration questions impacting on employee retention are as follows: • Are employees receiving pay and benefits that are competitive with other organisations, both within the industry and in the market in general? If they are not, and the variance is great, an organisation can be exposed to retention issues. This is particularly the case if there are other organisational issues impacting on the organisation’s culture. • Is the application of pay and benefits policies consistent and transparent across the organisation? Employees need to see that, within an organisation, their work is valued as much as other employees with similar skill levels and responsibilities. Strategies to ensure this occurs have been outlined in detail in Chapter ¶11. • Are the organisation’s payroll processes and benefits policies reliable and consistently applied? A major demotivator for employees is to find that their pay is constantly wrong. There are many examples of good employees leaving an organisation due to the unreliability of the organisation’s payroll function. This is because the payment of salary is a “basic hygiene factor” (or basic need/expectation). If an employee’s pay is regularly late or inaccurate, the inability to pay bills and so on can become a major source of frustration. With respect to the receipt of benefits, employees need to see consistency in application. For example, the provision of free meals to management staff while other workers have to queue and pay for a meal at the cafeteria has been proven to be a major demotivator and a significant source of employee dissatisfaction and frustration.

¶46-070 Reward and recognition systems Many aspects of performance can be celebrated most effectively through the use of non-financial rewards. Non-financial rewards often have a direct cost, but the focus is on recognition rather than on

remuneration. For this reason, these can be used by organisations as a low cost/high value form of recognising those employees who are leading performers. 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 common types of non-financial rewards are: (1) personal or public praise (2) material rewards, and (3) career rewards. Personal or public praise Praise can be something as simple as a manager saying “thank you” or acknowledging higher levels of work performance delivered by a specific employee and/or team. Personal or public praise 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 letters, plaques or certificates to recognise their efforts and acknowledge their contributions. Importantly, these activities are only of real value if they are undertaken in a genuine manner. They will become a significant demotivator if employees feel that their manager’s action was forced by an organisational policy or their manager’s manager. Employees need to feel that they are respected by their immediate manager and that personal recognition and praise provided to them is an acknowledgment of that respect. Material rewards Material rewards are of a monetary nature. These should be relatively low cost to the organisation and, when kept below certain monetary thresholds, are exempt from fringe benefits tax (FBT). See Chapter ¶11. Practical examples of material rewards include: • dinner vouchers • flowers • movie and/or sporting event tickets, or • shopping vouchers/gift cards. At the higher end, material rewards can also include local and international holidays; however, there are likely to be FBT implications for higher value rewards. 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 a reward to be more closely linked to an individual’s specific motivation and, in turn, enhance the outcome. Career rewards Career rewards refer to recognising performance with a reward that is related to the employee’s career or

professional development, such as providing the opportunity to attend a conference, receive specific training or undertake interesting or professional development-related projects. Rather than offering an immediate “prize” for performance, these types of rewards are usually longer term. They are more likely to have ongoing motivational effects as they tend to focus on the individual, their growth and their career development within the organisation. In addition, career rewards tend to have a benefit to both the recipient and the organisation. The value of these rewards in the form of nonfinancial recognition may, however, be secondary to their contribution to a succession planning, career development or performance management strategy.

¶46-080 Designing reward and recognition systems The attraction of personal and public praise and material rewards is that they do not form part of the employee’s ongoing salary, can be highly motivational, and can be kept at a level that maximises the benefit and minimises the cost. High-value material rewards (eg holidays or long-term career rewards) generally should not only be used to reward past performance. These should also be used to motivate an employee towards sustained and/or significantly improved future performance. Importantly, the criteria by which rewards of this nature are paid need to be rigorous if the organisation is to realise optimum outcomes. To leverage these rewards, they need to be managed with the same rigour as a cash-based incentive program. Performance measures need to be identified and targets set, and the means by which performance is measured against these targets should be clear, reliable and consistent. More so than with other rewards, recognition rewards need to be tailored to the values and needs of the individual. Cash is a universal reward: it has instant value to all employees. Non-financial rewards, however, only have value to the recipient if they are considered to be of real personal value. For example, an employee provided with the opportunity to attend a major conference in another state will see this reward as having no value or even negative value to them if they have significant dependent care responsibilities. In this case, an opportunity to work on a specialist project within normal working hours would offer a more effective reward. Likewise, some employees would be embarrassed to be singled out for praise at a meeting or in a newsletter if they are quite shy or reserved, perhaps instead preferring a personal letter of thanks from senior management. It is also important to note that, within a wider corporate culture, different business units, professional groups, job families or regional offices may develop their own distinct subculture. This subculture can determine (or influence) the effectiveness and appropriateness of non-financial rewards. For example, in the case of factory workers on a shop floor, it may be important that they work as a team. A subculture promoting a strong sense of teamwork may have developed as a result of this. Singling out one member of that team for individual praise and/or recognition could then have a negative and divisive effect on everyone involved. Those receiving the praise may be embarrassed and those who do not receive praise may feel aggrieved that their work was not recognised. The end result in this instance could be that a team no longer operates as a committed and cohesive workgroup. Alternatively, in organisations where employees work in a relatively autonomous manner, the impact of recognition methods will be very different. For example, sales staff often work in environments of “friendly and healthy competition” to achieve targets. This type of culture lends itself to highly visible individual rewards as a symbol of an individual’s achievement and attainment, relative to their peers. Effective reward and recognition systems can, therefore, be appropriately designed to trigger the highest level of motivation for the recipient or recipients. However, the key to maximising the motivational potential of these systems is to ensure that managers have effective policies and procedures to follow, and that they are appropriately trained in the application of these policies and procedures. In addition, managers should also receive tailored training so that they are able to develop the skills that will assist them to identify and appropriately recognise the efforts of their employees. Specifically, such training helps managers to understand the types of basic recognition and the techniques for enhancing recognition communication. It also demonstrates how to: • operate effectively as a manager in providing recognition to staff

• build effective employee relationships • identify opportunities for recognition, and take responsibility for realising every opportunity • identify and understand what motivates each individual • make recognition memorable, and • develop a recognition culture. With careful implementation, recognition is a valuable part of the reward equation. It is also a means of leveraging significantly more value from a reward than the reward’s actual cost to the organisation. The key to an effective material rewards program is to ensure that the assessment criteria for each level of reward is transparent, relevant and understood by both managers and employees. It is also important to ensure that the reward and recognition program is maintained, so it continues to evolve (if necessary), thereby remaining relevant and appropriate. Maintenance may involve conducting a full review of the program annually and implementing recommendations to ensure it remains current. Establishing a recognition and reward program to enhance employment engagement requires consideration of a number of significant factors from both an organisational and individual perspective. Therefore, obtaining independent professional advice on program design, structure and implementation is important if an organisation is to get the most appropriate outcome.

¶46-090 Conclusion Employee retention strategies are vital for ensuring the future competitiveness and sustainability of an organisation. As the population ages and skills become increasingly in short supply, organisations need to be innovative in their approach if they are to retain the skills necessary to meet their future needs. This chapter has focused on providing a range of strategies that can help enhance employee satisfaction and motivation, which in turn can lead to greater employee retention. It is, however, clear that future organisations, through their management, will need to place a greater importance on understanding what motivates each employee, and what strategies can be adopted to ensure that valuable skills and talent are not lost. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

47. COACHING AND MENTORING Editorial information

Glenn Martin Writer and Consultant on HR, Training and Ethics

¶47-010 Introduction Developing the capabilities of employees is an important part of an organisation’s overall business strategy. Organisations can no longer expect to be competitive unless they can retain employees, inspire their commitment, and support them in improving their performance through continuous learning. Human resources (HR) practitioners contribute to organisational success to the extent that they create the systems and climate that enhance employee learning and engagement. Coaching and mentoring take learning and development beyond the provision of formal training programs. Managed well, they can encourage personal commitment by employees to career growth, build positive relationships that support learning across the organisation, and build a workplace climate that fosters innovation. This chapter looks at coaching and mentoring as powerful and cost-effective methods for promoting employee learning. It looks at the differences between coaching and mentoring, the evidence of their contribution to business performance, and the conditions required for successful programs. The relative merits of formal (structured) and informal programs are examined, and the question of whether to use external coaches and mentors or develop internal expertise is also considered. Coaching and mentoring terminology Many labels are used for the person being coached or mentored. The person being coached may be referred to as the coachee, the subject or the protégé. The person being mentored may be referred to as the protégé, mentee, aspirant or mentoree. The choice of terminology is a question of what the coaching or mentoring consultant uses, or what is understood most readily in the culture of the organisation.

¶47-020 Coaching, mentoring and the management role As enterprises continue to shift towards knowledge-based services, they need employees who can show initiative, be creative and react quickly and appropriately to change. Flatter organisational structures have led to increased reliance on relationships and informal networking across the organisation. The command-and-control model of management does not work in this environment, as people need to be able to think independently, rather than simply follow procedures. Workers and their managers operate in work environments that are increasingly uncertain, with greater pressure to deliver high levels of performance using fewer resources and people. Employees are expected to keep their knowledge and skills up to date and be self-motivated. They also need to be able to work collaboratively in teams, and share knowledge with each other. Accordingly, the role of managers is different. At various times, managers need to act as coordinators, instructors, conflict mediators, mentors and coaches. Shortages of skills in the workforce, combined with economic turbulence, have increased the pressure on employers to retain talented employees and ensure that productivity and initiatives are optimised. A 2008 Australian Institute of Human Resources (AHRI) HRpulse survey research report highlighted an average

employee turnover rate of 18.5% across all organisations (AHRI 2008). A recent survey, The 2012 Insync Surveys Retention Review: How to reduce turnover and retain your high performing employees (the Retention Review), found that employees primarily leave an employer due to the job itself, rather than leaving over pay and conditions or relationships with managers or peers. The Retention Review concluded that the primary factor in employee retention and satisfaction is meaningful work. This is supported by recognition of performance and having good relationships in the workplace with managers and colleagues. The idea of meaningful work includes factors such as being in a position that aligns with your skills and interests, having opportunities to learn and develop new skills, and feeling empowered to make decisions about how you do your job (Towers Perrin 2005). At the same time, the HR function has been shifting many “people management” functions back to line managers so that it can focus on more strategic issues at the corporate level. In a study by CCH Australia, AHRI and Melbourne University (Kulik and Bainbridge 2005), over 70% of respondents reported that the people management responsibilities of line managers had increased in the last five years. The study found that line managers (rather than HR) had primary responsibility for promotions, coaching, performance management, employee disciplinary action, termination decisions, career development, and recruitment and selection. However, the study found that line managers did not feel comfortable with many of these responsibilities. This is not surprising. Antonioni (2000) has said that most managers are appointed because of their prowess in technical functions and, therefore, they tend to be uncomfortable with the leading and coaching aspects of the managerial role. Combined with this, flatter organisational structures offer fewer opportunities for high-potential employees to gain management experience in middle management roles before they are appointed to senior leadership roles. Coaching and mentoring are emerging as part of the reshaping of the managerial role in the changing workplace. In discussing the evolution of management over a century, Crainer (2000) ends by pointing to studies by Arie de Geus (of Dutch Shell) (1997) and Collins and Porras (1994). The message, he says, is that managers must live with change. Two key themes emerge. These are the: (1) importance of values, and (2) importance of continuous learning. In a continually changing environment people must continually adapt. The way people adapt is through learning, and values steer the direction of this learning. Managers must also assume more of the qualities of leadership. Numerous recent books and articles on leadership map out models of leadership that begin with selfleadership and emphasise the importance of communication and relationship-building skills as well as strategic skills. The ability to coach, mentor and facilitate learning forms a prominent component of these models. The role of coaching and mentoring in organisations needs to be seen in light of these changing ideas about leadership (Fairholm 2003; Sarros et al 2006; Avolio and Luthans 2006; Bradbery 2010; Kruckeberg et al 2012). Other arguments for coaching and mentoring come from the learning and development function. A study published by the International Personnel Management Association compared outcomes from training (on its own) with those from training combined with coaching (Laabs 2000). The productivity gains for training alone were 22% — but, when combined with coaching, they were 88%, a fourfold increase in effectiveness. Numerous other studies have shown similar benefits from one-on-one coaching as a follow-up to formal training programs (Abbott et al 2006). It is generally accepted among learning and development practitioners that structured skills training needs to be complemented by on-the-job support if new skills are to be applied and internalised. On-the-job support includes coaching, feedback and managerial support. If these do not occur, new skills quickly atrophy and competence is never achieved.

¶47-030 Defining and distinguishing coaching and mentoring

Given that there are good arguments for incorporating coaching and mentoring in a manager’s repertoire of practices, how are coaching and mentoring defined, and what are the differences between these? Coaching Fairholm (2003, p 229) described coaching as the ability to associate with a person in ways that enable them to act: “Coaching is based on exciting workers, dealing with them individually, encouraging them, and creating situations within which, after preparation, they can take independent action in accomplishing joint goals”. The aim is to facilitate sustained change by fostering the ongoing self-directed learning and the personal growth of the person (Abbott et al 2006; Martin 2002). Coaching can also be defined by saying what it is not. Flaherty (1999) says: “Coaching is not telling people what to do; it’s giving them a chance to examine what they are doing in the light of their intentions”. He also described coaching as an approach to “evoking excellence in others”. This can be contrasted with the command-and-control style of management characterised by giving orders and controlling performance through fear. Coaching has a wide variety of manifestations in society, such as “lifestyle coaching” and “sports coaching”. In the workplace, coaching may focus on senior executives, who are assigned an external coach who can help them to clarify and work on their strengths, weaknesses and goals. The value of executive coaching is that it provides the executive with an impartial and insightful means of support, tailored to their specific needs. Organisations often begin their involvement in coaching with executive coaching. In situations where the outcomes are positive, the organisation may then decide that there is value in extending coaching further down through the management ranks. In most cases, external coaches are engaged for these purposes, and the impact on both individuals and the organisation can be profound. For example, a study by Manchester Consulting (McGovern et al 2001) found that 77% of executives reported improved working relationships with their direct reports after coaching. There is a further stage, however, where coaching becomes embedded in managerial and professional roles across the organisation: that is, it becomes part of the organisational culture. Coaching occurs on an ongoing basis as part of normal work relationships. It becomes a form of peer learning as well as part of manager/team member interactions. The subjects of coaching may include job skills, generic skills associated with working in teams and career development. The outcomes for employees include enhanced job knowledge and skills, enhanced generic skills (eg communication, working with others in teams, problem-solving, initiative, planning and organising tasks, self-management and so on), greater motivation and morale, and improved clarity about career direction. Mentoring Mentoring has always had a role in the business world. Traditionally, it has been informal and confined to “a senior manager showing a junior manager the ropes”. In recent years, however, there has been a resurgence in the mentor role as organisations come to see the importance of informal knowledgesharing between employees. The effective use of knowledge in organisations is more dependent on informal conversations (where experts share their tacit knowledge with others) than on codified knowledge in databases. This realisation makes mentoring very relevant. Mentoring can be defined as a constructive learning relationship between two people, where one person (the mentor), who generally has greater expertise and experience, provides assistance, guidance, advice, encouragement and support to another person (the mentee, or mentoree) to foster the latter’s vocational and professional development (Stolmack and Martin 2005). The mentor works with the mentoree to help them identify areas for development or improvement, as well as ways in which they can develop professionally. The mentoring process provides the mentoree with a safe, confidential context to discuss issues that may be controversial and involve risk. The mentoring relationship is a dynamic one involving a balance of nurturing and support on the one hand, together with stretch and challenge on the other. The skilled mentor is able to move smoothly between the two modes.

¶47-040 Coaching and mentoring — contrasts and similarities There is still some confusion in the business world about coaching and mentoring. It is useful to identify

the contrasts and similarities between them. Table 47.1 describes the main contrasts. Table 47.1: Contrasts between coaching and mentoring Coaching

Mentoring

Who does it?

Can be a person external to the organisation; may be the person’s manager

Generally not the mentoree’s line manager; may be a person external to the organisation

Who sets the direction of the activity and interaction?

The coach drives the goal-setting process and determines the strategies

Mentor gives the mentoree more scope to set the agenda; mentor offers advice, experience, suggestions

What is the focus of activity?

Focus is on short-term goals and tasks, and specific skills

Focus is on longer-term development, capability and the person’s future roles

What does the coach/mentor do?

Gives feedback and encouragement on performance; offers techniques for improvement

Gives feedback but also offers insight, and a broader perspective from their own experience

What is the time frame?

Likely to be 3–12 months

Likely to be 1–2 years or longer

What are the coach/mentor’s key qualities?

Skilled in facilitating the learning of skills Mentor is generally an acknowledged and development of confidence; need expert in their field (technical expertise not be a subject matter expert or leadership role); able to build rapport and offer insights

The contrasts in Table 47.1 are not rigid: there can be some overlap. The two roles should be viewed as primarily different in emphasis. For some people, the key difference is that the coach need not be an expert performer in the subject matter area (consider sports coaching), but mentors have usually been acknowledged performers in their careers. Another perspective is that coaching and mentoring fall at different points along a continuum between “performance” and “relationship”. The coach is more focused on immediate improvements in performance while, in mentoring, there is more emphasis on the relationship. In mentoring, role modelling is of greater importance than in coaching. However, in both cases, trust and confidence must be established before useful work can occur. Coaches and mentors often talk about switching from one role to the other. A mentor may talk about using coaching on particular occasions when it is relevant for the mentoree to acquire a particular skill or address a particular obstacle in their development. A coach may shift into the role of mentor when the coachee broaches broader career questions and the coach has relevant personal experience to share. In developing employees, there are occasions when one or the other is more appropriate, and it is important for learning and development practitioners to distinguish between them and to address both needs (Harvard Business School 2004). The skills needed for coaching and mentoring are very similar. Both provide one-on-one support for a person’s learning and development. Both require the coach or mentor to be able to offer both challenge and support at the appropriate time. The skills and qualities are discussed in the following paragraphs.

¶47-050 Evidence for the value of coaching and mentoring The incidence of coaching and mentoring programs is increasing, with many large companies claiming positive outcomes from such programs. These companies reported increases in revenue growth, an increase in market share, gains in productivity, and better outcomes in staff retention (Laabs 2000). The purpose of executive coaching has shifted from seeking to “fix toxic behaviour” by a senior manager to

developing the capabilities of high-potential performers or acting as a sounding board (Coutu and Kauffman 2009). The LEAD Survey (LMA 2010) found that more companies are using coaching and mentoring. Over a period of five years, there was a 50% increase in the incidence of coaching and mentoring. One of the difficulties with measuring the impact of coaching and mentoring in organisations is that it frequently occurs in an informal way. In fact, Kinlaw (2000), an author of one of the more popular books on corporate coaching, described coaching as a “distributed leadership function”. He explained that coaching is a function that can be performed at various times by any member of a team, not just by the person in an appointed leadership role. An Australian study by Moy and McDonald (2000) analysed a large number of other studies on returns on investment (ROI) in training. They concluded that the economic benefits of training were greatest when training was integrated with coaching and associated practices, such as individual development plans, personal action planning and feedback systems. In an oft-quoted study of 100 executives by Manchester Consulting (McGovern et al 2001), a methodology was developed to estimate the ROI on the costs of coaching. It determined that the average return was 5.7:1 and, in some cases, this represented gains to the business of over $1,000,000. It is important to consider the methods and assumptions used in reaching such figures, but such studies give a view of the possible gains of coaching (or mentoring) across the breadth of the business landscape. Grant (2012) cautions against placing too much reliance on such conclusions. He maintains that the outcomes of coaching are complex, and ROI can be misleading and trivialise the real value of coaching efforts in organisations. He offers a wellbeing and engagement framework as a way of gauging the comprehensive benefits of coaching. It should be recognised that coaching and mentoring are complex human interventions and their success or failure is dependent on many factors. Further, these interventions do not take place in isolation, raising the question of how much subsequent improvement can be attributed to the coaching or mentoring initiative. The factors that are critical to the success of programs are discussed below. Coaching and mentoring initiatives should be assessed in terms of their initial objectives (Friday and Friday 2002). Generally, the outcomes for the organisation should include: • enhanced organisational skills and capabilities • improved employee engagement, recruitment and retention, and • the cultivation of an inclusive, team-based corporate culture.

¶47-060 Structured programs for coaching and mentoring To some extent, coaching and mentoring occur naturally in organisations. However, the unstructured approach leaves outcomes to chance. One possible problem with this is that the coach or mentor may not have effective skills in facilitating learning and development. The informal approach may also reinforce existing gender or racial inequalities. Structured programs endeavour to extend the benefits of coaching and mentoring more widely and reliably throughout the organisation. The aim of a structured mentoring program (Stolmack and Martin 2005) is to create effective mentoring relationships, guide the desired professional development of those involved, and evaluate the results for the mentors, the mentorees and the organisation. If the program is directed at coaching for executives, then the aims are similar — to foster the skills and confidence of executives, and achieve measurable improvements for the business. However, if the objective is to build the skills of line managers to incorporate coaching in their normal management style, then the outcomes are of a different nature. The changes to be expected include a widespread cultural shift (which may be reflected in increased job satisfaction across the workforce, individually and within teams) and increased innovation, as well as the financial indicators of increased revenue and profits. The establishment of a structured coaching or mentoring program enables the organisation to determine the approach that is appropriate to the organisation’s culture and strategy. There are many possible

objectives and approaches for structured programs: • leadership development and succession planning • enhanced company investment in training • improved induction and socialisation to improve retention • improved opportunities for disadvantaged people (eg gender, race), and • transfer of knowledge from experts who are near retirement to younger employees. A structured program should deliver greater benefits to the organisation than an informal approach, for a number of reasons. It will: • focus energy towards a particular objective • be planned and organised rather than ad hoc • offer recognition to all participants for their effort • provide training, structure, guidelines and support to all participants • establish suitable guidelines and policies, and • monitor and evaluate the process. Moreover, the participants can be selected on the basis of appropriate criteria and matched through a suitable process. Research on mentoring programs (Ragins et al 2000) has shown that, if the program is implemented effectively and the mentees are satisfied with the mentor, they will show greater job satisfaction, positive career attitudes, and greater commitment to the organisation. Training for mentors to ensure they are motivated and skilled is, thus, critical to the program’s success. The same could be said of workplace coaching programs.

¶47-070 Conditions for effective programs A number of factors are required for coaching or mentoring programs to be effective. As a starting point, there must be a degree of organisational readiness. The Kulik and Bainbridge study (2005) explored the shift of responsibility from HR managers to line managers for various people management functions, including coaching. It found that HR managers were more optimistic than line managers about the benefits of line manager involvement in people management (in terms of higher employee satisfaction and organisational performance). Line managers did not express an interest in taking on more responsibilities for any of the people management activities, and would like to reduce their involvement in some activities. The data also showed that there are people management “hot potatoes” — activities over which both groups (HR and the line) would understandably like to relinquish primary responsibility. Coaching and performance management were two such activities. Coaching also rated as an activity in which organisations were least effective (together with leadership development, career development and succession planning). Kulik and Bainbridge (2005) commented that: “instead of being concerned about whether people management is the responsibility of HR or the line, both parties need to work together to determine the most effective sharing of responsibility for these crucial activities”. If there is resistance to the idea of coaching or mentoring in the organisation, this needs to be addressed at the outset. As with all types of organisational change, senior executives need to show that they understand what the program aims to do and champion its goals. This should be demonstrated in the appointment of a suitable person to coordinate the program and in the allocation of resources (money and

staff time). Managers and workers need to know there is recognition and reward for committing to coaching or mentoring. Misunderstandings and obstacles need to be identified and addressed. Project management skills need to be applied to all aspects of the program (Rolfe-Flett 2003) — formulating objectives, planning and organising all stages of the program, establishing systems for monitoring and support, and evaluation. Quality should be assured for all aspects. At the same time, care should be taken to ensure that coaching or mentoring is integrated with other HR initiatives, such as performance management and career development. The following factors are central to the effectiveness of coaching and mentoring and, while these apply to all types of programs, there may still be enormous differences in the scope and approach taken: • Quality of the relationship: In the Manchester Consulting study (McGovern et al 2001), 84% of participants saw this as the main factor in the success of coaching. Learners must be able to see the coach/mentor as having the practical knowledge and interpersonal skills to help them work through their developmental agenda. This indicates the importance of both selection and training of coaches or mentors. • Structure of the process: A formal coaching or mentoring program should provide sufficient guidelines and support for coaches or mentors to get the most out of the relationship. The structure should establish a guide for scheduling and formatting meetings, and a guide to expectations of the process for both parties (eg activities, records, objectives). • Availability of both parties: Effective coaching and mentoring depend on a threshold level of involvement and commitment. Where either party does not have the time or energy to meet regularly and follow-up on discussions through workplace activities, the chances of success are slim. • Quality of feedback: Giving constructive, appropriate feedback is a key skill of the coach or mentor, complemented by the skills of questioning and exploring alternatives. • Organisational support: Research also shows that effective coaching or mentoring programs are those that have robust organisational support. Part of this support consists of support for the learner from their immediate manager. Another aspect is effective communication, both to program participants and across the organisation.

¶47-080 Skills of coaches and mentors Although there are differences between the roles of coaches and mentors, there is also much common ground. Both roles require a balance between nurturing the learner and stretching them in order to develop new skills. Coaches may challenge their learner more directly than mentors do, but both coaches and mentors act as “critical friends” (Clutterbuck 2000/2001). The processes of coaching and mentoring involve the coach and mentor guiding the learner towards their goals. Coaches and mentors are seeking to assist learners to see their own shortcomings and enable their underlying attitudes to come to the surface. The coach and mentor is also alert for when the learner has missed the point or is avoiding an issue, or feels inadequate at some tasks. See Chapter ¶22 on managerial self-development for further discussion of the qualities of self-awareness, self-reflection and self-regulation. The skills of coaches and mentors can be grouped into three categories: (1) Emotions: Coaches and mentors need the skills of emotional intelligence (EQ). These skills include: • being aware of their own strengths, weaknesses and motivations • being able to manage their own behaviour • being aware of the other person’s strengths, weaknesses and motivations (ie empathy) • having the interpersonal skills to manage the situation

• being able to establish a foundation of trust for the relationship, and • having a sense of humour and sense of proportion. (2) Cognition: Coaches and mentors also need business or professional acumen in order to establish their credibility. They need the intellectual skills to conceptualise the learner’s situation and work with them to explore new options. They are able to use their knowledge to collaborate with the learner on setting goals that are achievable. Coaches and mentors understand the learning process and the difficulties that people might face in acquiring new skills. (3) Values: Coaches and mentors, even with the above skills, are not effective unless they have clarity about their values and act ethically. The values pertinent to the coaching or mentoring situation include: • confidentiality • respect for the coachee/mentoree • fairness • compassion • honesty, and • integrity. One of the critical issues in coaching and mentoring is confidentiality. This is required to ensure a safe environment for learning and exploration. In structured programs, this principle should be established by policy and communicated to all participants. Program coordinators need to clarify who the “clients” of the program are, and clarify what information is shared with whom. A study by Tooth et al (2008) found that the condition of confidentiality was fundamental to the effectiveness of the coaching experience for executives. Another ethical question is what the boundaries are of the coaching and mentoring relationship. What topics will the coach or mentor cover, and what issues should be referred elsewhere? For example, the process sometimes throws up personal issues that are more appropriately dealt with by a counsellor. Again, program policies should clarify the boundaries for the participants. The Harvard Business Review study (Coutu and Kauffman 2009) found that coaches were only hired to address personal issues in 3% of cases — but 78% of coaches said they had assisted executives with personal issues. Finally, where the coach is the person’s line manager, both parties need to distinguish between coaching and managing performance and handle the two roles appropriately. Coaching (or mentoring) requires a non-judgmental style of enquiry. The goal is learning and development. Many managers find this difficult to adopt because managing is, by definition, a judgmental task that involves performance, rewards, hiring and firing. It takes some experience and maturity for a person to accommodate the two roles and know when each is appropriate. Whyte et al (2009) observed that executives (who had received training in coaching) were “too tough, too kind or too busy to be good coaches”. Nevertheless, effective managers need to incorporate coaching skills. Armson (2008) found that the managerial skills and behaviours that served to create a culture of innovation included: • being genuinely engaged in strong and regular two-way communication with staff • actively listening to staff • displaying a coaching style that encourages staff to “have a go” with initiating and implementing new ideas • providing, encouraging and supporting opportunities for staff to engage in informal and formal peer discussions

• encouraging a degree of moderate risk-taking • providing staff with relevant, fun and participative training programs • ensuring that the company structure allows staff enough freedom to experiment • jointly reviewing how staff manage their time, with the view to freeing up some of their time for spontaneous experimentation • discussing and exploring reasons behind resistance to change in some individuals and/or teams. This list of skills and behaviours echoes the skills and behaviours described by Zeus and Skiffington (2000) for managers to apply in coaching their staff. Qualifications and standards for workplace coaching Moves have been made in Australia to accredit workplace coaching. There is now a Certificate IV in Workplace and Business Coaching under the Australian Qualifications Framework. In addition, there are a number of tertiary qualifications, including various degree programs in Applied Science (Psychology of Coaching) at the University of Sydney, and a Master of Business Coaching at the University of Wollongong. These offerings seek to apply some rigour to the process of coaching in organisations. The national association for mentoring — Mentoring Australia — has developed a set of benchmarks for mentoring programs. Similarly, the Australasian chapter of the International Coach Federation has developed a code of professional standards and an accreditation process for coaches. Guidelines for engaging external coaches Standards Australia has produced a coaching handbook containing a set of guidelines on coaching in organisations. It aims to help organisations that purchase the services of coaches for their employees. The handbook contains definitions of different types of coaching, presents desirable education and qualifications for coaches, and gives guidelines to both providers and purchasers of coaching. The handbook is not prescriptive: it is intended to assist organisations to establish a common language and understanding about coaching in the workplace. The handbook addresses key issues in coaching, including codes of conduct. See the Standards Australia website to access a copy in hard copy or digital format (www.standards.org.au).

¶47-090 Coaching, mentoring and organisational culture The ultimate goal of coaching or mentoring programs is to establish ongoing learning as part of the culture of the organisation. In a “learning organisation”, people do more than fulfil tasks. They are always developing their capacity and knowledge so that next time they will do that task better. Similarly, managers are never just organising tasks, assigning responsibilities or checking that tasks are done. They are actively ensuring that their employees are continually improving their knowledge and skills and adapting to changes. This goal is currently being promoted under the banner of “informal learning”, which recognises that learning in the workplace has at least as much significance as structured training programs. Coaching and mentoring are two of the most effective methods by which employee learning is fostered in the workplace. Workplace coaching, in particular, implies a climate where there is a collaborative focus on learning as part of work. Coaching efforts by the manager merge with other workplace learning initiatives and yield high performance, commitment to ongoing development and constructive relationships between people. Cultural change will be achieved if there is a business focus from the start. Why is the organisation embarking on a coaching or mentoring program? If the drivers are problems such as poor retention, high absenteeism or poor utilisation of talented employees, then business outcomes for the program can be specified and these outcomes can be translated into measures of success. Measures may be financial (sales, revenue, profit), time-related (reductions in production time, length of

projects), quality-related (mistakes and rework, customer satisfaction, employee satisfaction) or quantityrelated (production targets, number of customers, inventory use): but it should be recognised that these outcomes are the result of dynamic human factors such as workplace climate and individual motivations. Behavioural measures are also important to assess cultural change. Manager evaluations can utilise 360° feedback; leadership behaviours can be monitored. Despite the value of measuring results, Armstrong (2007) cautions (in relation to coaching) that: “when a new and contagious phenomenon like executive coaching arises, key players jostle to organise and control it with systems, protocols and regulations at both macro (demanding professional standards) and micro (reducing it to simplistic prescriptions) levels”. She says there is always a tension between a command-and-control, profit-driven environment and one that is cooperative, open and people-centred. Executive coaching can be seen as simply an intervention to help improve performance and, therefore, the bottom line. However, executive coaching also gives people a safe place to reflect on their work and their role. Armstrong maintains that: “we need the container of coaching to create safety for open conversations, and the independence of the coach to reflect on and find ways to negotiate conflict and politics. We need … to create the intimacy and trust required for learning; the presence and focus to dare to dream; the structure and ritual to achieve our goals; and the fire to heat up the encounter for challenge and change”. We also need to recognise the significance of the fact that the starting point for a person to coach others is self-knowledge and personal development (Kruckeberg et al 2012). Armstrong concludes that executive coaching (and we can apply this to mentoring as well) is, therefore, somewhat paradoxical and a practice that can never be fully contained or controlled. It creates an opportunity for managers to make choices that may or may not fit organisational goals.

¶47-100 Conclusion From an organisational perspective, the objective of coaching and mentoring is to improve individual and team performance and, thereby, enhance the organisation’s financial and business viability. Many managers know they must incorporate the function of coaching in the way they carry out their role — their role is not just to manage tasks, but to facilitate the harmonious, productive functioning of their team. Yet, busy-ness and the pressure for financial outcomes tend to hold managers in the behavioural patterns of the command-and-control mindset. This context highlights the importance and potential of coaching and mentoring programs. The challenge for HR and executives, however, is to invest in the process and trust it, when the outcomes are not assured at the outset. Coaching and mentoring often involve stepping back, questioning oneself, and recognising and accepting shortcomings before progress can be made. This is the paradox of coaching and mentoring. If it is to be successful it requires HR and executives to give this process time and support to fulfil its goals. Peter Drucker (Hesselbein et al 2000), the pre-eminent 20th century management writer, offered this perspective to underpin coaching and mentoring initiatives: “The organization is, above all, ‘social’. It is people. Its purpose must therefore be to make the strengths of people effective and their weaknesses irrelevant”. For more information on topics covered in this chapter, refer to the CCH Human Resources Management and Managing Training and Development subscription information services. References Abbott GN, Stening BW, Atkins PWB and Grant A 2006, “Coaching expatriate managers for success: Adding value beyond training and mentoring”, Asia Pacific Journal of Human Resources, vol 44(3), pp 295–317. AHRI 2008, “Love ‘em don’t lose ‘em — Identifying retention strategies that work”, HRpulse Research Report. Antonioni D 2000, “Leading, managing and coaching”, Industrial Management, September–October, pp 27–33. Armson G 2008, “How innovative is your culture?”, Training & Development in Australia, August, vol

35(4), pp 20–23. Armstrong H 2007, “Hestia and coaching: Speaking to the ‘hearth’ of the matter”, International Journal of Evidence Based Coaching and Mentoring, Summer, pp 30–39. Avolio BJ and Luthans F 2006, The high impact leader: Moments matter in accelerating authentic leadership development, McGraw-Hill, New York. Bradbery P 2010, “Learning and development as a spiritual journey”, Conference Proceedings, Spirituality, Leadership and Management: Leadership for the emerging world, Spirituality, Leadership and Management, Sydney, pp 140–152. Clutterbuck D 2000/2001, “Quiet transformation: The growing power of mentoring”, Mt Eliza Business Review, Summer/Autumn, pp 47–52. Collins J and Porras J 1994, Built to Last, HarperCollins, New York. Coutu D and Kauffman C 2009, “What can coaches do for you?”, Harvard Business Review, January, pp 91–92. Crainer S 2000, The Management Century, Jossey-Bass, San Francisco. de Geus A 1997, The Living Company, Harvard Business School Press, Boston, MA. Fairholm G 2003, The techniques of inner leadership: Making leadership work, Praeger, Westport, CT. Flaherty J 1999, Coaching: Evoking excellence in others, Butterworth-Heinemann, Boston, MA. Friday E and Friday SS 2002, “Formal mentoring: Is there a strategic fit?” Management Decision, vol 40(2), pp 152–157. Grant A 2012, “ROI is a poor measure of coaching success: Towards a more holistic approach using a well-being and engagement framework”, Coaching: An International Journal of Theory, Research and Practice, iFirst article, pp 1–12. Harvard Business School 2004, Coaching and mentoring, Harvard Business School Press, Boston, MA. Hesselbein F, Goldsmith M and Beckhard R (eds) 2000, The organization of the future, The Drucker Foundation, Jossey-Bass, San Francisco. Insync Surveys 2012, “Why do people leave?”, The 2012 Insync Surveys Retention Review: How to reduce turnover and retain your high performing employees, see www.insyncsurveys.com.au/media/92979/the_2012_insync_surveys_retention_review.pdf. Kinlaw D 2000, “Encourage superior performance from people and teams through coaching”, Women in Business, January/February, pp 38–41. Kruckeberg K, Amann W and Green M (eds) 2012, Leadership and personal development: A toolbox for the 21st century professional, Information Age Publishing, Charlotte, NC. Kulik C and Bainbridge H 2005, “Distribution of activities between HR and line managers”, Human Resources Management, CCH Australia Limited, see Ch 45. Laabs J 2000, “Need peak HR performance? Consider a coach”, Workforce, vol 79(10), pp 132–135. Leadership Management Australasia (LMA) 2010, The Leadership, Employment and Direction (LEAD) Survey, LMA, Sydney. Macneil C 2001, “The supervisor as a facilitator of informal learning in work teams”, Journal of Workplace Learning, vol 13(6), pp 246–253. Martin G 2002, “Coaching: Management’s new magic?”, Human Resources Management, Bulletin 20, CCH Australia Limited. McGovern J, Lindemann M, Vergara M, Murphy S, Barker L and Warrenfeltz R 2001, “Maximizing the impact of executive coaching: behavioral change, organizational outcomes, and return on investment”, The Manchester Review, Manchester Consulting, vol 6(1), pp 3–11. Moy J and McDonald R 2000, Analysing Enterprise Returns on Training, National Centre for Vocational

Education Research, Leabrook, SA. Ragins B, Cotton J and Miller J 2000, “Marginal mentoring: The effects of type of mentor, quality of relationship, and program design on work and career attitudes”, Academy of Management Journal, vol 43(6), pp 1,177–1,194. Rolfe-Flett A 2003, Mentoring in Australia: A Practical Guide, Pearson Education, Sydney, New South Wales. Sarros JC, Cooper BK, Hartican AM and Barker CJ 2006, The character of leadership, John Wiley, Brisbane. Standards Australia 2011, Coaching in organisations, Catalogue No HB 332-2011. Stolmack M and Martin G 2005, Introducing Mentoring into Your Organisation, Training Point, Rowville, Victoria. Tooth J, Higgs J and Armstrong H 2008, “The executive’s perspective on coaching”, Training & Development in Australia, vol 35(4), August, pp 15–17. Towers Perrin 2005, Global Workforce Study, see www.towerswatson.com. Whyte A, O’Flaherty P and Wass M 2009, “Expert View”, Training & Development in Australia, vol 36(1), pp 36–37. Zeus P and Skiffington S 2000, The complete guide to coaching at work, McGraw-Hill, Sydney.

48. FAIR PERFORMANCE AND CONDUCT MANAGEMENT PROCEDURES Editorial information

Michael Michalandos Partner, Baker & McKenzie

¶48-010 Introduction Why is proper performance and conduct management important? The proper and fair management of poor performance and misconduct is a critical part of the employment relationship. Performance reviews are used to make important business decisions, such as whether an employee is suitable for their position, whether an employee should receive a salary increase, bonus or some other benefit, or whether or not an employee should be promoted. For this reason, employees are quick to challenge the process which an employer has undertaken in its review. These reviews may also have legal implications. For example, where an employer has committed to grant a bonus in accordance with certain criteria, an employee may have a right to assert a breach of contract where the employer has failed to properly apply those criteria or has taken into account irrelevant factors. Even where an employer has reserved a discretion as to the conferral of these benefits, an employer may still be required to exercise this discretion in good faith and accordance with any guidelines issued by the employer. Proper and timely performance and conduct reviews are also important for a number of defensive reasons, as set out in the following paragraphs. An employer will first need to show that it conducted a proper performance or conduct management process to defend any claim of unfair dismissal under federal or state laws. In particular, an employer will need to show that it gave the employee a “fair go” before making its decision to terminate the employment, in terms of alerting the employee to the performance or conduct issue, giving the employee an opportunity to rectify the issue, warnings, and a final opportunity to respond. Second, in most Australian jurisdictions, an employee who suffers a psychological injury due to a badly managed performance or conduct management process will have rights to claim workers compensation. However, one of the key exceptions is where the employer has taken reasonable management action in relation to the issue. It is an increasing phenomenon that employees are asserting that they have experienced bullying and suffered a stress injury when they are taken by surprise in relation to a performance or conduct issues and are not allowed to bring appropriate support into a disciplinary meeting. It is critical that an employer conducting a performance or conduct management process is mindful of the psychological impact of its communications with the employee. Third, where an employer is confronted with a claim by an employee that it has acted on unlawful grounds (eg sex, age, race or other grounds which trigger unlawful discrimination rights), it will be important for the employer to show that it had proper performance and conduct grounds, and that it adopted a proper management process. This has become more important due to the increasing use of “reverse onus”

provisions in the employment context. For example, adverse action rights under the Fair Work Act 2009 (Cth) place the onus of proof on the employer to establish that it relied on proper and lawful grounds in its decision-making process. In this jurisdiction it is often very important for the employer to show that it raised the performance ground or conduct ground immediately and acted on these grounds. For the above reasons it is critical that managers actively manage performance and conduct issues as soon as they arise, and they keep proper records of their actions. It is also critical that these actions are fair, measured and consistent, and reflect any company policies or procedures published to employees. Ultimately, employers should be mindful of the fact that proper review procedures are more likely to get the right result in terms of determining who is performing and who is not. Further, employees who realise that the employer has followed a rigorous review process are more likely to accept the employer’s decision and less likely to take legal action. This can only be a good thing.

¶48-020 No implicit rights of fairness — lessons from case law The statutory claims already discussed have had the effect of requiring employers to adopt proper and fair performance and conduct review mechanisms. Furthermore, a series of cases in recent times (Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor [2007] NSWSC 104; State of South Australia v McDonald [2009] SASC 219) led to the acceptance of an implied duty of trust and confidence between the employer and employee. However, the High Court in Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32 reversed these authorities. In this case, Mr Barker was made redundant and the redeployment process miscarried. He argued that the Bank’s failure to comply with its redeployment policy caused him to lose an opportunity to be redeployed. On appeal, a majority of a Full Court of the Federal Court agreed that a term of mutual trust and confidence was implied by law into Mr Barker’s contract. The failure of the Bank to take positive steps to consult with Mr Barker about alterative positions was a breach of this term. However, a unanimous High Court rejected the implication of the term of mutual trust and confidence as to recognise one would be “a step beyond the legitimate law-making function of the courts” (French CJ, Bell and Keanne JJ [1]). The High Court was extremely cautious of the complex policy considerations and thought that the implication of such a term was a matter more appropriate for the parliament. However, the circumstances do change when an employer, either in its own policies or verbally, commits to following a particular procedure. In these instances, there is a greater risk that the procedure forms a binding contractual commitment. It is critical, therefore, that employers do not publish policies with detailed performance and conduct review procedures, unless they can ensure that their managers comply with them.

¶48-030 What constitutes a fair performance management procedure? A fair performance/conduct management procedure involves a number of important elements. At the core of any such procedure is the concept of “natural justice”, which means giving the employee a proper opportunity to be heard on any performance or conduct issue. However, the concept is broader and also includes: • ensuring that employees are aware of the employer’s expectations and standards, in terms of conduct and performance • ensuring that these expectations/standards are reasonable and achievable • providing employees with proper guidance (and sometimes training) and support to meet these expectations/standards • raising any poor performance or conduct as soon as an issue arises • dealing with these issues in a professional manner • giving employees warnings and a reasonable time to meet performance and conduct standards

• setting reasonable targets and goals • giving employees a proper right to be heard before final decisions are made • properly investigating any disputes about performance or conduct • ensuring employees are provided with support during stressful meetings • ensuring that the decision-maker has the benefit of considering all the relevant details that form the basis of the allegation or decision • ensuring that the decision-maker is free from bias, and • acting consistently and ensuring that the disciplinary action is commensurate to the employee’s failure to meet standards. However, simply because one of these factors is missing will not necessarily mean the process is unfair.

Case examples Byrne & Frew v Australian Airlines Ltd The High Court in Byrne & Frew v Australian Airlines Ltd 1995 AILR ¶3-194; [1995] HCA 24 (High Ct (Brennan CJ and Dawson, Toohey, McHugh and Gummow JJ) (Nos S132 and S133 of 1994) 11/10/95); (1995) 61 IR 32 held that there may be circumstances where the use of an unfair procedure is outweighed by other considerations (eg an employee’s serious misconduct), such that overall, the dismissal is found not to be harsh, unjust or unreasonable. Thus, the procedure to be followed may vary depending on the circumstances. Mason v Electricity Commission of NSW t/as Pacific Power In Mason v Electricity Commission of NSW t/as Pacific Power (1995) 62 IR 436, Hill J outlined the broad obligation of an employer as follows: “In my opinion, the matter is governed by the circumstances of the case including the nature and gravity of the misconduct, the certainty or otherwise of its commission, the substance and extent of the prejudice, if any, to the employee as a result of the denial of procedural fairness and other relevant considerations such as the size and experience of the employer, the relevant rules and procedures governing the matter and the nature of the employment involved.”

While the cases in this area are useful in illustrating the basic procedural fairness requirements, they must be seen as guidelines, the applicability of which will depend on a range of factors. Generally, an effective performance/conduct management process should move from a period of initial counselling and guidance, to a period of escalated confrontation where the employee is clearly put on notice that disciplinary action may result if there is no improvement in their performance or conduct. At each stage, the employee must be given an opportunity to respond to the allegations. Further, the employer (through proper investigation) must ensure that it has valid reasons for taking disciplinary action, and that it is acting consistently. It is not sufficient for an employer to rely on rumours or hearsay.

¶48-040 Preliminary step — clearly expressed standards Where unacceptable conduct constitutes a breach of company policy, the policy must be clearly stated, it must be published to all employees, and the employees must be made aware that a breach of the policy may result in disciplinary action. The need for the policy to be understood by all employees may require that information be made available in languages other than English. Ultimately, the onus will be on the

employer to show that its employees were aware of, and understood, the relevant policies. In performance-related cases, the expectations of the employer about the tasks to be performed and the level of performance required of an employee should be outlined to the employee, and must be specific to the particular circumstances of the individual and the employee’s position.

¶48-050 Investigating the issue Acting promptly Where the employee has engaged either in substandard performance or in conduct which is a breach of the employee’s duty to their employer, it is necessary for the employer to act promptly. A failure to act promptly may be taken as an indication that the issue is not considered serious, or that the behaviour is in fact condoned by the employer. One of the factors taken into consideration in the decision in Byrne & Frew v Australian Airlines Ltd 1995 AILR ¶3-194; [1995] HCA 24 (see ¶48-030) was the lengthy delay between the alleged misconduct and the termination. Investigation by employer Once an allegation has been made in relation to the conduct or performance of an employee, the first step for the employer is to investigate the allegation to determine whether: • there is any basis to the allegation • there is any reasonable explanation for it (including whether the employee appreciated the implications of their conduct) • any remedial action is available, or • disciplinary action is instead appropriate. In the investigation: • the employee should be allowed to have reasonable representation, if requested, provided this does not unreasonably interfere with the investigation or the employer’s rights to seek information from the employee • the investigation should be prompt and free from duress or coercion • the investigator should be a person not connected with the subject matter of the investigation (eg a member of the human resources department or management unconnected with the employee’s department) • the allegation should be put to the employee, and the employee should be asked to respond • all other relevant persons should be interviewed in relation to an allegation of misconduct, and • if an employee raises an issue in their own defence and that issue can be investigated, or a witness can be interviewed in relation to it, then the employer should endeavour to do so, wherever possible. If (in order to properly conduct its investigation into misconduct) the employer needs to remove the employee from the workplace, the employee should be suspended for a short period of time on full pay, unless the employment contract provides otherwise. This period of suspension should not be longer than the period required to investigate the matter. Unnecessarily long investigations may be unfair because of the stress and strain they place on the employee. Employers must also be careful, when suspending an employee for the purpose of conducting an investigation, not to give anyone, including the affected employee, the impression that a decision has been made that the employee is guilty of the alleged behaviour. A suspension would rarely be appropriate in the case of a performance issue. There may also be restrictions on suspending an employee where that employee holds an office (eg the office of a

director) or earns variable remuneration which depends on the employee performing work (eg commissions). It is, therefore, advisable that employers check employee contracts and obtain further advice before making a decision to suspend. In addition, in investigating the allegations, the employer should be careful not to ask leading questions; that is, questions which presume the answer (eg “Peter sexually harassed Anne at the Christmas Party, didn’t he?”). The allegations should be kept as confidential as possible. Only those who have a genuine need to know or be involved in the process should be made aware. A written record of the investigation process and the outcome of the process should be kept. Opportunity to respond to the allegations The employee must be given an opportunity to explain their performance or conduct before a decision regarding the outcome is made. The opportunity to respond must be genuine and not just a token formality undertaken to satisfy procedural requirements. The employee must be given the chance to explain their version of events, and why termination is not appropriate. In order for there to be a proper opportunity to answer the allegations, it is necessary that the employee is fully aware of the nature of the allegations. This does not necessarily oblige the employer to give the employee the precise details of all the evidence relating to the unacceptable conduct, but the employer must give sufficient detail so that the employee understands the allegations that are being made. The opportunity to respond must also be a reasonable one. For example, if the employee needs to refer to files or documents to prepare their response, then the employee must be given this opportunity.

Case examples Ian Strover v Brooktide Holdings Pty Ltd In Ian Strover v Brooktide Holdings Pty Ltd (1997) 42 AILR ¶13-119(3); (WAIRC (Gregor C) (1815 of 1996) 28/7/97), the Western Australian Industrial Relations Commission held that a termination was unfair in circumstances where the employer asked the employee for a written response to certain performance issues, and then proceeded to terminate the employee’s employment after they indicated that the response could not be prepared within the required time frame. Boyd v SPI PowerNet Pty Ltd Similar principles were upheld in Boyd v SPI PowerNet Pty Ltd [2012] FWA 5962 when the employer only notified Mr Boyd of one of the two reasons for his dismissal. This was considered a loss of opportunity to respond that amounted to a harsh, unjust or unreasonable dismissal. As reinstatement was inappropriate, the employee was entitled to compensation. CS Heard v Monash Medical Centre If an employee refuses to respond to the allegations within a reasonable time, then the employer is entitled to proceed to make a decision based on the information available to the employer at the relevant time. In CS Heard v Monash Medical Centre (1996) 39 AILR ¶3-203; (IR Ct (Ryan JR) (No VI 95/1005) 12/10/95), the employee was made aware of her employer’s concern about her conduct, but declined the opportunity to explain her position and respond to the relevant allegations. The court held that, by putting the allegations to her and giving her that opportunity, the employer had fulfilled its obligations and the dismissal of the employee was not harsh, unjust or unreasonable.

¶48-060 Possible outcomes

Reaching a conclusion and informing the affected parties Once the employee’s response is received, the employer must properly assess that response and take it into consideration before making its final decision. It is not enough to simply go through the motions to establish procedural fairness. Employers should never presume that an employee is guilty of misconduct before they have properly investigated the allegations and spoken to the employee concerned. If the employer cannot properly assess the employee’s response without further investigation, then the employer must undertake such further investigation prior to making its determination. The employer should make its decision based on all the information available to it at the time that it makes its determination. The employer may decide that the: • incident did occur • incident did not occur, or • employer cannot form a view about whether the incident did or did not occur. The relevant standard of proof which is usually required is “the balance of probabilities”; that is, was it more probable than not that the incident occurred? However, where the issue involves serious misconduct or an allegation of a criminal nature, employers should ensure that they have substantial direct evidence to make out the allegation. Except in cases where summary termination is warranted, those involving disciplinary action should first involve a series of graduated steps, such as warnings, suspension or other disciplinary action, before termination occurs. It is necessary for an employer to assess what action is appropriate to the employee’s conduct. This will depend on the seriousness of the conduct, whether the employee has been involved in prior incidents, and what action the employer has taken in similar cases in the past. In general terms, the action taken by the employer must be commensurate with the unacceptable conduct or performance issue in question. Termination of an employee’s employment should never be considered unless an employer is clearly satisfied that its expectations are reasonable and are being met by other employees. In the case of performance-related issues, the employee must be given a reasonable period of time to demonstrate the required skills or improved performance. The employee must clearly understand the consequences of failure to improve. Many employers implement a formal Performance Improvement Plan (PIP) which provides a structured environment in which the employee can work with the employer to improve the employee’s performance. The employee must also be given a final opportunity to respond to the allegations or the lack of improvement in performance prior to termination. Once the employer forms a view that the performance problem or misconduct warrants termination of the employee’s employment, the employee must be advised of this assessment and be given a final opportunity to offer any alternatives to termination. Once a conclusion is reached, this decision must then be communicated to the affected individuals separately. Counselling the employee and Performance Improvement Plans Where possible, employees should be counselled to assist them in improving their performance and/or conduct to the desired level. In the early stages, except in serious cases, an employer’s focus should be on remedial action. The employee should be advised on how their performance or conduct can be improved and what the expectations of the employer are. If it is necessary and possible to do so, the employee should be provided with relevant training to help them reach the appropriate standard. In implementing a PIP, a representative of the employer should meet with the employee to discuss the performance issues and, in consultation with the employee, work out clearly defined performance goals which the employee will work towards. These goals should be concrete, for example: • achieving a certain level of sales

• following a certain number of leads in the next month, or • being able to demonstrate an ability to perform a particular task, rather than vague goals such as “working harder” or “calling more clients”. This allows the employer to measure improvements in the employee’s performance and clearly demonstrate whether the employee has improved or not. Goals should also be achievable. An employer will not be able to demonstrate that they have behaved in a procedurally fair manner if the goals that the employee is expected to achieve in the PIP are clearly unattainable. The employee should also be given an appropriate time period (in the circumstances) to reach the performance goals. An appropriate period for a PIP might be one month for an employee employed doing menial tasks or in a high turnover selling role. Equally, a period of three months might be more appropriate for a PIP of an employee who, for example, sells very expensive products with a low turnover. In setting a PIP process, it may also be necessary to take into account the business and economic environment in which the company is operating. For example, are the goals and time periods of the PIP fair when the company or the economy is suffering in an economic downturn? These factors may also impact more broadly. Is it fair to challenge the performance of a particular employee, or even terminate their employment, when economic performance is down across the company or the entire economy? During the PIP, the employer representative should meet with the employee on a regular basis, to provide guidance and training, to discuss the employee’s performance against the defined goals, and to reformulate the goals if appropriate. Counselling sessions should be fully recorded by the employer in writing at the conclusion of the session. It is also useful for the employee to sign the record of the counselling session. If the complaint relates to an allegation of unacceptable conduct, the employee should be given an opportunity to explain their conduct during the counselling session. If the employer does not accept the explanation given by the employee, this should be clearly explained to the employee. The employee should be advised of the seriousness of the situation and should be told that a failure to improve their performance will put continuing employment at risk. Warnings If the employee’s performance or conduct does not improve, the employer should monitor the situation, meet regularly with the employee to discuss progress, and issue several warnings (depending on the seriousness of the conduct or performance problem) before proceeding to more serious disciplinary action (eg demotion or termination of employment). These warnings must clearly indicate the consequences of failing to cease the offending conduct or to improve performance. Again, clear targets and deadlines should be set. The employee should also be given the opportunity to respond to the grounds for each warning. These warnings will usually take one of two forms. In less serious circumstances, an oral warning may be sufficient. However, generally, it is preferable that the employee receives at least one written warning prior to termination. Written warnings should be given in more serious circumstances. A recommended warning procedure should include: • a first, usually oral, warning given by a manager, which is recorded in the employee’s personnel file. This warning may be given in conjunction with the counselling process discussed previously • a second warning, in writing, with a copy placed on the employee’s personnel file • a third and final warning, in writing, which specifies that, if there is any further infringement, disciplinary action or termination action may be taken, and • termination action, in which the employee is given a final opportunity to respond to the allegations and is informed of the decision to terminate, prior to implementing the termination.

The number of warnings required will depend on the nature of the conduct or performance issue. In situations involving serious misconduct, no warnings may be required and the employer may simply give the employee a final opportunity to respond to the allegation. It should be noted that, while three warnings is a good rule of thumb, this is just a guideline and not a legal requirement. Simply giving an employee three warnings and then sacking them will not necessarily be considered procedurally fair. It is also not obligatory to provide a written warning. However, written warnings are important in establishing the seriousness of an issue, and provide good evidence in case of a dispute.

Case example The Shop, Distributive and Allied Employees’ Association of Western Australia v Katies Fashion In The Shop, Distributive and Allied Employees’ Association of Western Australia v Katies Fashion (1988) 69 WAIG 118, the Commission found that a shop assistant was unfairly dismissed because she had not been “spoken to” in such a manner as would ordinarily be regarded as a warning of poor performance. Grace Hosana Pty Ltd T/AS the Cheese Cake Shop v De Blank Similarly, in Grace Hosana Pty Ltd T/AS the Cheese Cake Shop v De Blank [2000] WADC 239, the court distinguished between “warnings” and “statements indicating dissatisfaction”, where the employer had not properly warned the employee because the written letters did not notify the employee that any failure to improve may result in termination, and were generally unspecific about the nature of the substandard performance. This contributed to a finding of unfair dismissal.

One of the factors taken into consideration by courts and tribunals in considering whether a termination of employment was harsh, unjust or unreasonable is whether the employee was given an opportunity to respond to the issues raised by the employer. Providing the employee with a written warning, which outlines the nature of the employer’s concern relating to the conduct or performance, and providing the employee with an opportunity to address this concern within a reasonable period, will assist in satisfying this issue. Where a written warning is given, it should specify: • the reason for the dissatisfaction with the employee’s conduct or poor performance, and the corrective action required • details of previous relevant counselling sessions, remedial action, assistance or warnings given (where relevant), and • in clear and unambiguous terms, a warning that the employee’s employment may be terminated unless the employee’s conduct or performance improves to a satisfactory standard by a specified date (the employee must be given a reasonable time in which to improve to the specified standard).

¶48-070 Consideration of issues prior to any disciplinary action — checklist Prior to taking disciplinary action, it is recommended that employers consider the following issues (see Table 48.1). Table 48.1: Checklist Considerations

Yes

No

Was the employee aware of the performance or conduct standards or the relevant company policy? Was the performance or misconduct issue discussed with the employee as soon as it arose? Was the employee given an opportunity to respond to the allegation of unacceptable conduct or poor performance? Was the employee’s response considered before any disciplinary action was taken? Was the employee given a reasonable opportunity to improve performance prior to disciplinary action being taken? Was the employee given sufficient information to enable the employee to respond to the performance issue or allegation? Was the employee given sufficient time to prepare a response? Have all relevant witnesses been interviewed? Have any issues raised by the employee in their defence/mitigation been properly explored/considered? Is the performance or conduct issue sufficiently serious to justify termination or disciplinary action? Does the employer have sufficient and direct evidence to substantiate the employee’s failure to meet the performance or conduct standard? Has the employer acted consistently on other similar occasions involving other employees? Has the employee had the opportunity to respond to both the reasons for the termination or disciplinary action, and to the decision as to the outcome?

¶48-080 Performance and misconduct management process — flowchart The flowchart in Figure 48.1 sets out a suggested management process for a serious performance or conduct issue, but not every step included in the flowchart is required to establish a fair process. For example, an employer can deal with a misconduct issue even though it may not be addressed in a company policy. It may be so obvious that certain conduct is unacceptable, that an employer does not need to spell it out in a company document. It is important also that employers maintain some flexibility in their internal review procedures, to ensure that they can deal with the exigencies of each situation. Figure 48.1: Performance and misconduct management process

¶48-090 Practical tips to consider The following practical tips are useful for employers to consider in their approach to employees regarding performance issues or work-related unacceptable conduct: • Performance standards and practices should be communicated in writing and regularly reviewed. They must also be reasonable and capable of being achieved. • Ensure that the organisation has in place a regular performance appraisal system and disciplinary procedures. These must be consistently applied without favouritism. • Do not give an employee a positive performance appraisal if, in fact, the employee’s performance is not satisfactory. • Diarise any dates relating to performance management. For example, if an employee is on probation, ensure that the employee’s performance is reviewed before a probationary period or minimum employment period expires. • Never surprise an employee with a serious discussion about performance or conduct. Tell them in advance about the nature of the meeting and, if it might involve termination, give them an opportunity to bring along a support person. • If the employee did not fully appreciate the performance standard required, provide the employee with guidance and, if necessary, training to assist the employee to reach the performance standard.

Formal warnings should be given only after this has been done. • Always consider the conduct or performance issue in the context of the employee’s entire employment history. • Only suspend an employee with pay if it is necessary to properly investigate a performance or conduct issue in the employee’s absence. Always check that you have right to suspend. The period of suspension should be as short as possible, and not exceed the period required to conduct this investigation. • Do not pre-judge the outcome of a disciplinary meeting and always openly consider the employee’s response. • When conducting an investigation, avoid asking leading questions. Such questions may prejudice the investigation and also create ill-feeling among other employees, making it difficult for the employee to return to work. • Do not give an employee a prepared termination letter and/or cheque for termination entitlements at the end of a final disciplinary meeting. Do not pre-prepare sub documents. This suggests that you have made the decision to terminate the employment prior to the end of the meeting and prior to hearing the employee’s response. • Have a witness present for all disciplinary or performance-related interviews. The role of this witness should simply be to keep notes of the conversation. The witness should not ask any questions. If the employee asks for a copy of any notes taken by a witness, then these should be given to the employee. • A forced resignation is a termination (constructive dismissal). • Do not threaten to call the police unless the employee resigns, or use a threat to report criminal conduct as leverage. • In situations where resignations have been tendered in the heat of the moment, the employer should clarify the matter, rather than merely accepting that the resignation has occurred. • Avoid terminating an employee’s employment several days before Christmas or immediately before a public holiday, weekend or period of annual leave. • If you tell an employee that they have a period of time in which to improve, do not then terminate the employee’s employment for lack of performance before the end of that period. • Do not advertise the employee’s position before you have terminated the employee’s employment. • Do not terminate an employee’s employment by inappropriate means (eg over the phone or by text messaging). • Do not terminate an employee’s employment when they are in hospital. • Be very careful when terminating the employment of an employee who is on either sick leave or workers compensation leave. • Do not give the employee a glowing reference after terminating their employment for poor performance. • Do not publicly escort terminated employees out of the building in front of other employees unless you have a very good reason for doing so. • Do not communicate the reasons why an employee’s employment was terminated to other

employees. They do not need to know. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

49. MANAGING GRIEVANCES AND CONFLICT Editorial information

Andrew Heys Lecturer, Macquarie Graduate School of Management

This chapter is taken from research undertaken in the author’s capacity as a staff member of Macquarie Graduate School of Management.

¶49-010 Introduction It can be said with some certainty that the nature of workplaces, and the interpersonal relationships within them, make some degree of conflict in the workplace inevitable. The systems that have been set up to handle conflicts and grievances, and how well managers and human resource (HR) professionals use these systems of conflict resolution, will largely determine whether the outcomes of workplace conflict are positive or negative. It has long been argued that if parties are able to adopt non-adversarial and communication-based approaches to conflict resolution, then conflict can potentially have a positive effect on interpersonal relationships. In teams, for example, some level of task-related conflict is probably quite healthy and may promote creativity and reflection. More broadly, organisational conflict (if resolved effectively), can provide an outlet for pent-up frustration and give people a sense of fairness and a sense and “voice” or participation in decision-making at their workplace. Conversely, if conflict is poorly handled and no agreed processes exist for how it should be resolved, then conflict can: • become destructive and cause workplace tension to escalate • cause people to disengage and become demotivated, and • in more extreme instances, lead to external interventions from discrimination tribunals or even negligence or criminal claims against a company for failing to put in place appropriate policies and systems. This chapter focuses on some of the reasons why conflict arises at work. It explores common sources of conflict in detail and suggests ways that managers may try to resolve the grievances and conflicts that may arise. Such conflicts may include conflicts a manager is personally involved in (ie they are a participant in the conflict). Or, the manager may be called on as a “third party” to help resolve a conflict among employees. The goal of conflict management and conflict resolution is to find equitable and workable solutions to interpersonal conflicts. The aim is to try to restore workplace harmony and productivity.

¶49-020 A typology of workplace conflict Generally speaking, four types of conflict occur within organisations:

(1) vertical conflict (2) horizontal conflict (3) conflict within teams, and (4) conflict between teams. These types are discussed in the following paragraphs. Vertical conflict Vertical conflict is that which occurs along the “chain of command”. For example, it may be between a manager and a team member, or between a manager and a more senior manager, or between a senior manager and an executive. Vertical conflict can be difficult to resolve for a number of obvious reasons. The most important of these is the impact that perceptions of unequal power tend to have on the dynamics of conflict and, further, how power may impact on each of the parties’ willingness to be open and honest in their communication. A perceived power imbalance may mean the less powerful party will feel a need to act in ways to neutralise power or alter their position of disadvantage. Conversely, the more powerful party may seek to preserve or enhance their existing sources of power. For this reason, an employee may seek union support or advocacy through the support of others by building a coalition or marshalling support. Similarly, managers may distance themselves from their team members by taking on the characteristics of the stereotypical “bossy” manager by issuing directives or cutting off communication about conflict as a way of avoiding, minimising or deflecting the problem. Managers may also withhold information here as a way of preserving the dominant position they hold. Workplace conflict might be manageable in this way in the short-term, but most conflicts will not be resolved through the overt use of positional power. A subordinate may accept a directive given by a manager when face to face, but then await the first opportunity to undermine the manager’s authority when the manager is not looking, perhaps by making a complaint or criticising the manager to others. Many workplaces have been poisoned by this unhealthy pattern of manager-subordinate relations. A manager would perhaps be much better advised to resist the use of positional power wherever possible and to rely instead on their legitimate authority by encouraging better communication across the organisational hierarchy. Managers should aim to develop collaborative and consistent relationships with subordinates and peers so their values and expectations are predictable and transparent to others. Horizontal conflict Horizontal conflict occurs between peers or people at approximately the same level in an organisation. Horizontal conflict is less likely to be resolved by the use of power. Rather, it will need to be resolved by the parties undertaking a collaborative process: by openly discussing the problems in their relationship and searching for mutually beneficial ways to resolve those problems. The involvement or intervention of a third party, that may be internal or external to the organisation, might also need to be considered in cases of entrenched horizontal conflict. The involvement of external parties in cases of conflict is generally only considered when the conflict becomes entrenched, or in cases involving more serious issues that require formal interventions (eg conflicts involving discrimination, bullying or threats of violence). External involvement may also occur when managers believe they are either “out of their depth” or not sufficiently impartial to the conflict to act effectively as a mediator. Horizontal conflict can also be difficult because peers are often working closely together and may rely heavily on the cooperation of others. When communication breaks down at this level, it is not only very damaging to the organisation’s productivity and teamwork; it can also be unpleasant for colleagues exposed to the “icy” atmosphere that unresolved conflict can sometimes create. When peers are working in a production capacity, they may also find it hard to take time out from their jobs to discuss their problems. A supervisor or manager can be very supportive in such instances by recognising that a problem exists, and by also allowing the parties the opportunity for time away from the “coalface” to try and resolve the problems that are manifest in their relationship. Managers may also choose to bring conflicting workers together and attempt to facilitate constructive communication and problem-solving.

Grievances are commonly thought of as complaints initiated by employees against an employer with the aim of appealing against actions or decisions that are perceived to be unfair. Examples might include, but are not limited to, the refusal or failure to award a pay increase, the preferential treatment or promotion of a less qualified/senior colleague, or they may centre on issues that fit a definition of harassment. While this is the common definition of the grievance concept, grievances can technically also be initiated by an organisation toward an employee. An employee might be abusive or breach their employment contract, with such behaviours leading the company to pursue a grievance against the employee. This may take the form of a disciplinary action, demotion (in rare instances), or even lead to legal action or dismissal. Conflict in and between teams Workplace conflict commonly occurs in the context of teams. Conflict can happen within a team (referred to as intra-group conflict) or between teams (inter-group conflict). Team-based conflict can be difficult to diagnose and resolve, and requires a good working understanding of group dynamics (ie how groups work), how groups form and become functional, and how group-related issues are dealt with in situations where there is formal or informal leadership. Indeed, much conflict resolution theory draws heavily on ideas developed from social scientists (eg social psychologists) and their theories about groups and group dynamics. Mismanagement of fundamental group processes can lead to something called “false conflict”. Team-based conflict and false conflict will be discussed in the following paragraphs. Intra-group conflict Intra-group conflict can occur for a wide range of reasons. For instance, teams may become bogged down in destructive bickering. Such conflict may occur when groups lack a clear vision or direction, or when the leaders lack credibility or expertise in the tasks faced by the group. Team-based conflict can also occur when a team is fractured, or very diverse culturally, or diverse in terms of differing levels of skill or different qualifications. Conflict may relate to substantive issues (eg a business decision, or around how to solve a problem), or perceptions of an individual’s performance or contribution, or around more intangible issues (eg different work values). For a third party (eg a manager or mediator), intervening successfully to resolve team conflict involves significant challenges. The first of these challenges involves gaining the trust of the team. A new manager seeking to resolve pre-existing problems might, for example, need to actively build trust with their team before tackling interpersonal conflicts. A consultant seeking to intervene as a third party might need to include a trust-building phase into their intervention plan. The team will also need to be in a position to take time out from their work to focus their collective effort to work towards a resolution to their problems. Finally, the third party (mentioned above) needs to try and pass on some skills of self-regulation to the group so that they may effectively resolve their own problems in the future (ie a third party shouldn’t make the group dependent on external help to solve their own problems but, rather, should try and transfer some conflict handling skills to the team). False conflict Sometimes groups report that they are “in conflict” and, on diagnosis of their problems, it turns out that they are not in conflict at all. They may certainly be experiencing problems, but to label their dilemma as conflict might be misleading. In fact, what they are experiencing is a phenomenon that may be called “false conflict” (Parker and Heys 1997). False conflict feels like conflict but, actually, it is more a consequence of people mismanaging fundamental group processes. In the 1960s, Bruce Tuckman identified that groups tend to pass through five stages in their life cycle; that is, they: (1) form (2) storm (3) norm (4) perform, and

(5) mourn. False conflict can be said to occur when groups do not effectively manage the “forming” and “norming” stages. Instead, when they come together, they are expected to immediately “perform”, often without building sufficient rapport or understanding of one another. The best approach to false conflict is to side-step the conflict and focus instead on addressing poor group dynamics. This involves getting the group to refocus on what they have in common, what they are trying to achieve together, and resetting some of the ground rules. If this doesn’t work, then perhaps there is some substantive conflict in the group that needs to be resolved. However, the process of analysing and revisiting group dynamics goes a long way to getting teams back on track. Inter-group conflict Inter-group (or inter-team) conflict is another problem in organisations. Typically (and ironically), this conflict occurs between teams who need to successfully interact at critical organisational “interfaces” (eg between waiters and chefs, marketing and finance, credit executives and bankers, back office (support) staff and customer (client) facing staff, doctors and nurses and so on). Why is this phenomenon so common and what can be done about it? The answer lies in simple facts about groups. Groups bond together for mutual support and to pursue collective interests, yet often the very process of defining who they are also involves defining who they are not. Scholars call this the in-group/out-group bias. A common problem in most groups is that, in forging group identity or creating the so-called “we” feeling that people find so enjoyable about being part of a group, they must also inevitably create a shared enemy (ie an “out-group”). In organisational life, this is very destructive to morale and effective intra-group or intra-team cooperation, especially when the outgroup are members of the same organisation who share the same overarching goal of making the organisation successful. Inter-group conflict de-escalates and resolves when teams begin learning more about each other and the unique challenges they face. Some organisations have formalised this process by creating crossfunctional teams, or by some rotation of staff between teams to create more personal links. One major bank, for example, has undertaken a restructuring of their credit process to help bankers and credit executives understand each other more effectively. The bank has conducted extensive credit training for all its bankers to demystify the credit approval process, which has helped to break down the barriers between the two groups. Team leaders are very important players as well and they need to help settle the conflict, rather than fuel it. Often their role in the resolution process is critical as they set a positive example for behaviours that are expected in their teams. Leaders also enforce agreements.

¶49-030 Common sources of conflict at work Personality clash Of all the reasons people cite for why conflict occurs at the workplace, personality clashes are perhaps the most common. Perhaps it is a quirk of the English language or culture, but “personality clashes” in the workplace are, to some extent, seen as inevitable. In some respects, this is true. The “conflict is inevitable” mindset can have both positive and negative repercussions in terms of how a conflict will then be approached. On the positive side, accepting the inevitability of conflict means that people begin to accept that conflict is an integral part of working life and may, therefore, lead employers to provide employees with training in conflict resolution skills. It may also encourage them to develop policies and set up systems (informal or formal) to deal with workplace conflict (eg establishing a grievance procedure). A negative repercussion of the “personality clash” label is that the cause of the conflict may be difficult to isolate and, in some respects, personality clashes are about everything and nothing at the same time. People sometimes respond to questions about the conflict with the answer that they do not like “everything” about the person, or that they object to a person’s managerial “style”. These types of generalisations can be quite unhelpful in terms of promoting conflict resolution. However, such labels are employed to blunt the harshness or directness of a specific criticism. A helpful way of looking at a personality clash is to essentially view them as individual differences arising from the way people

interpret others’ behaviours. The answer to resolving personality clashes often lies in uncovering whether two people are ascribing motivations or character traits to others that may be inaccurate. It is valuable then to try and clear up any misunderstandings that arise when there is a “disconnect” between the effect and intention of behaviour. The role of misunderstanding in conflict has been called “attribution error” and can be viewed as follows: “because the effect of your behaviour on me is negative, I assume that you intended your behaviour to have that effect (or at the least that you were negligent or careless about the outcomes of your behaviour). I then attribute additional intent — I make assumptions about the sort of person you are, based not only on what I see, but more importantly, on how I interpret the offending behaviour.” This can be translated to “He did X, because he is Y, or because he holds values that I disagree with or object to”. The attribution of the intent is where the misunderstanding often lies and seemingly where personality clashes begin. The final point about resolving a conflict relating to a personality clash is that such conflicts are often best dealt with (in the first instance) by changing the label that is put on them. Resolution may require a redefinition of such conflict. For example, instead of talking about personality clash, it may be more beneficial to discuss specific behaviours that cause offence or cause conflict. Some of these behaviours may be ones that can be changed or discontinued so that they cause fewer problems or minimal offence. By talking about behaviour, a person’s identity is not being attacked; rather, the focus shifts to something that the person is doing (consciously or unconsciously). This change of emphasis may take the sting out of the conversation. In other words, the feedback may be easier to accept and adjustments to behaviours a little easier to make. Another strategy that can be valuable for teams to adopt in dealing with personality-related disputes or tensions is to undertake some training or development around understanding one another’s personality types. A number of personality inventories (tests) are widely used in corporate training courses, two of the most popular being the Myers Briggs Type Indicator (MBTI) and the DISC profile. Licensed facilitators use these inventories in training courses on team building, communication, negotiation and leadership. When facilitated well, training in these ways of understanding personality provides valuable insights into jobrelated strengths and weaknesses (or traits), and can also provide insight into the personality types that different people may find challenging to work with closely or, indeed, the types of jobs that certain personality types would be good at or enjoy. This does not imply that people of different personality types should not work together, but this level of awareness can promote better communication and give employees a shared language through which they can discuss their differences and similarities. It can often open up and “make safe” a conversation about existing and potential conflict that may be linked to personalities. This reframes the notion of “difficult people” into one where there is discussion about the differences that exist between people. People may have the same positive intentions, but have very different ways of going about meeting their individual, or the company’s, goals. Different expectations Unmet or unmanaged expectations are another area of workplace relations that often cause conflict at work. Unmet expectations can occur as a result of a number of events, such as someone being passed over for an expected pay rise or bonus, a promotion or career advancement, or a worker and manager clashing over expectations around work performance or the type or variety of work that a role may offer. The simple answer to preventing this type of conflict is for managers to try to manage expectations more effectively and to keep them realistic. But, of course, managing expectations can lead to future challenges. A manager may want to enthuse or motivate an employee, or attract or retain a good candidate, and be tempted to make promises that become hard to keep. This may be due to something outside of the manager’s control, such as an economic downturn, a change of strategy, organisational structure or a decision from above. One common area of unmet expectations is when someone is acting in a role for a substantial period of time and then is not promoted permanently when the higher position is finally advertised or a permanent appointment takes place. This is a particularly uncomfortable situation for all concerned. For the person who is appointed to the role, it will be more difficult than normal to establish credibility and authority and, if the new hire is external and unknown to the team, the person’s every move is likely to be scrutinised. This

is often made worse if the person previously acting in the role is popular with the team, or has been acting in the role for a relatively long period of time. For all these reasons, it is extremely important to keep people’s expectations in check without dampening enthusiasm. Poorly managed expectations are a highly predictable precursor to conflict in the workplace. Performance management Most Australian organisations have some form of performance management system in place to measure and manage individual or team contributions. While performance management is considered a critical element of an effective HR management system, the performance management process (appraisals in particular) can also be a time when conflict arises. Conflict might occur as a result of a badly handled performance appraisal, a negative or angry reaction to criticism or negative feedback. Where an overtly political or ineffective performance management system is in place, there may also be cases where substandard performance has become entrenched or has been allowed to continue over a period of time. When this is the case, employees may face painful surprises when an accurate or honest review eventually takes place. While managers and employees may find a performance appraisal quite stressful, managing the process effectively and being honest and empathetic is critical in performance management. Bonuses and pay rises are often linked to performance management, and these are issues that require careful consideration when putting a system in place or making changes to existing systems. This type of workplace conflict is often linked to remuneration, recognition, self esteem and/or status. Perceived inequity A perception that there is inequity in the treatment, opportunities or remuneration that one employee receives relative to another is also a common source of conflict. When a manager is perceived to be “playing favourites”, resentment will often emerge. Resentments may manifest when a genuine “star” performer is seen to be getting the better pay or career opportunities than their peers, or perhaps when an employee who is generally considered less talented, competent or hardworking than others receives favourable treatment or an “easy ride”. This sort of problem is common at some level in most workplaces. Sometimes it is a genuine problem and sometimes it is the result of petty jealousies. However, conflict normally arises when the “favourite” or the “star” begins to be excluded from group activities by the group, either consciously or unconsciously, applying pressure to correct the situation. Examples might include a group of apprentices who hassle the perceived favourite, or a group of lawyers “forgetting” to ask the firm’s rising “star” out to drinks. In this type of situation, managers are best advised to adopt a practice known as “symbolic egalitarianism”. Symbolic egalitarianism involves work practices and policies designed to treat everyone (broadly speaking) “equally”. It can involve removing some of the more obvious status symbols, such as parking spots, through to calling all employees “associates” or moving the office to hot desking or open plan arrangements (Pfeffer 1995). With such arrangements in place, it is critical for managers to act consistently. For example, a statement such as “everyone gets the same base/award pay” is unlikely to be a wise one if it turns out to be untrue. Conflict with customers, clients or the community Conflict with customers, suppliers and partners can be distracting and costly for organisations. Disputes involving commercial or professional matters include issues relating to: • contracts • terms and conditions • timeliness of service • intellectual property • negotiations with suppliers that escalate into conflict, and • conflicts over business principles and practices (eg quality of goods, business ethics or consumer rights).

These types of disputes may often be settled through some form of mediation or arbitration through a tribunal, and can sometimes involve regulators or industry ombudsmen. There is ample literature available to help managers consider their obligations, rights and responsibilities in relation to the wide variety of disputes that can occur between an organisation and external parties in the course of doing business. It should be remembered that conflict can be both constructive and destructive, and when it occurs with external parties (particularly customers), it presents a good learning opportunity and may invigorate corporate values or promote improvements to a code of conduct. Disputes can help organisations define what behaviours they want their employees to demonstrate, what business activities they want to undertake, and what standards they wish to uphold. In short, some level of conflict can be a good thing for an organisation if the conflict is treated as a learning opportunity.

¶49-040 Pre-conditions to the effective resolution of conflict Tidwell (1999) has identified three necessary and sufficient conditions that are required for effective conflict resolution. These are relevant to managers who are seeking to resolve workplace conflict. The three conditions are: (1) opportunity (2) capacity, and (3) volition (will). Opportunity “Opportunity” refers to parties having the right environment in which to talk about their conflict. The right opportunity to resolve a conflict might be provided, for example, by parties to a conflict meeting somewhere that is private and conducive to conflict resolution, or by talking outside of the normal working hours when the phone is not ringing, or when other duties and priorities are acting as distractions. A manager can act in ways to assist conflict resolution by ensuring the right environment is available — allowing team members to “open up” about problems or unresolved conflicts. Sometimes, opportunities to talk are best handled off site. However, using the local pub as a venue to discuss conflicts is usually not the best idea (as tempting as a drink may seem in such circumstances), because the influence of alcohol can have unpredictable effects on people’s emotions and behaviour. Capacity Capacity refers to the parties’ ability to communicate effectively. Capacity can refer to the level of English language proficiency, the ability to see things from the other side’s perspective, or the ability to acknowledge one’s own contribution to a conflict. The ability to see things with a degree of rationality and cope with the expression of strong emotions from others, are also areas of capacity that should be fostered to promote conflict resolution. Training employees in conflict resolution, negotiation or communication is an effective way of promoting capacity in terms of conflict resolution. However, it is important not to confuse training in conflict resolution with conflict resolution itself. Managers sometimes send the parties off (at the same time) to a conflict resolution training course — hoping the conflict will resolve itself or that the situation can be dealt with indirectly. However, this will normally not work and may, in fact, make the situation worse. It will certainly be an unpleasant and unproductive learning experience for all concerned. Conflict resolution training (ie to build capacity for resolving conflict) can be a valuable investment for organisations. Conflict resolution training takes many forms. It may range from developmental workshops lead by consultants or training organisations focusing on building skills that participants may use to resolve their own conflicts, through to more formal accreditation programs (eg people seeking to be registered as mediators). Staff training in conflict resolution is usually conducted in a workshop format by skilled trainers over one or two days. Workshops will focus on skills such as: • diagnosing conflict

• understanding the causes of conflict • understanding the dynamics of conflict (how it escalates and de-escalates) • how to intervene in conflict situations as a third party or active participant • communication skills to handle strong emotions, and • how to manage difficult conversations. Volition (will) The willingness of parties to engage in the process of collaborating is perhaps the most important precondition to conflict resolution. However, volition cannot always be assumed. Parties may derive some benefit from the continuation of the conflict; it may be fulfilling some tangible interest (eg delaying a payment) or unconscious need (eg providing a sense of purpose). As strange as it may seem, one or both parties may actually like the conflict. The conflict may be a replacement for boredom at work, or it may provide an outlet for accumulated frustrations. Tillett and French (2006) have done some important work which emphasises the importance of effective conflict analysis prior to undertaking any form of intervention. This work opens up important points about building the will of parties to resolve, which can (in part) be achieved by identifying any psychological barriers that exist to resolution. When analysing a conflict, a critical step is to try and identify all the parties’ projections about the conflict; that is, how they see the conflict evolving, or what their fears are in relation to attempting resolution. Identifying these fears and making a rational assessment of them can sometimes help to allay them. This step can help to move parties from entrenched positions from which they are unwilling to move. When engaged in conflict resolution, it is important for parties to realise that, with some notable exceptions (eg a human rights or sexual harassment case), resolving conflict is rarely about winning or feeling vindicated. Winning is usually reserved for the political arena, or in a court or tribunal. By contrast, the aim of conflict resolution (or alternative dispute resolution (ADR)) is usually to ensure that both parties feel they can live with the outcome, and that it has been arrived at in a fair and open manner. The following three elements need to be in place before conflict may be resolved. The parties need: (1) an opportunity to try and resolve the conflict (2) the skills or personal traits to resolve their conflict (including communication skills, empathy with others, the ability to see things from other peoples’ perspective and so on), and (3) to want to resolve the conflict.

¶49-050 Methods of handling workplace conflict Managerial directive Coercion within conflict situations is when the manager relies on their position of power to force some form of solution onto the parties. Classic coercive responses to conflict issues include statements such as: “I’d better see a solution, or else!” or “Don’t force me to step in!”. At times it may be necessary for managers to use their authority (eg an obvious instance might be an employee conflict relating to a minor or petty squabble over something that could be easily sorted out via a clearer instruction). However, a constant reliance on managerial directives is unlikely to help parties find a workable solution to their conflict. In some disputes and conflicts, the issues are more far-reaching and disputants may have adopted entrenched positions. In this instance, a managerial directive is likely to be counter-productive. While it may be tempting for managers to use their power to issue directives, doing so is unlikely to resolve the underlying conflict because directives will only address the problem’s symptoms and not its underlying cause. A conflict handled with managerial directive is likely to simmer or fester — only to reemerge later. When it does re-emerge, it may be worse and plague the manager or the organisation for years. Managers should, therefore, think very carefully about the repercussions before they rely solely on

their positional power to resolve conflicts at work. Collaborative problem solving Effective managers are capable of dealing with disputes within the workplace in a competent and professional manner without having to resort to coercion. The parties taking ownership and adopting what might be termed a “collaborative approach” can resolve many conflicts. A collaborative approach implies that the parties redefine their problems as shared problems that can be analysed and for which they can negotiate a solution. By generating a solution on their own, or with the minimal participation of a manager or neutral third party, the parties are more likely to adhere to and implement their agreement. Because they were a part of generating the option, they are likely to feel as though they “own” the solution and that its particulars will be suited to their situation. Alternative dispute resolution ADR processes, such as facilitation, mediation, conciliation and (to a lesser extent) arbitration, are now widely used in Australian organisations to resolve a wide variety of workplace disputes. By using ADR, employers can save valuable time and money that might otherwise be wasted through adversarial or litigious methods of dispute resolution. Employees may also find it beneficial and less financially risky than taking a legal route to resolve their complaints. The term “ADR” is an umbrella term used to describe a variety of ways of dealing with workplace disputes that are typically based around either direct or assisted negotiation between the parties. ADR normally involves the use of a neutral third party who helps mediate a solution that is agreeable to both parties. When using ADR, a neutral and impartial third party assists the parties to resolve their conflicts by: • listening to all perspectives on the conflict • generating and helping the parties consider the merits and weaknesses of various options that emerge • helping to craft an agreement with the parties, and • generating commitment to the agreement. The involvement of a third party can assist with opening communication channels between the parties by helping to structure their interaction. ADR processes differ from adversarial approaches because settlement is often reached without the need to create clear winners and losers. Also, ADR processes are different to processes of adjudication in that they have the procedural flexibility to also involve other parties who have a vested interest in the outcome of the dispute. These groups are sometimes called “stakeholders”. Trade unions and employer groups sometimes fall into the stakeholder category. Many authors on workplace conflict recommend that organisations set up some form of internal HR program or dispute resolution system to handle workplace conflict. This program should be customised to suit the individual organisation and may be developed through consultation between employees and management. Enterprise bargaining agreements (EBAs) must contain dispute resolution clauses, although they tend to show an extraordinary degree of similarity, at least on paper. These formal and informal mechanisms would likely include ADR initiatives that would ensure employees and management were clear on what responses would be put into action should any commercial or personal conflict occur. This is a proactive approach to dealing with inevitable workplace disputes. Typically, EBAs advocate that disputes resolution processes reflect two core principles: (1) that the dispute is handled at the lowest possible level (ie that a line manager should initially be contacted and notified about the dispute, and should try and resolve it locally without resorting to formal channels or unnecessary escalation), and (2) that disputes should be handled as quickly as possible following notification, and should not be unreasonably delayed. These two principles are (broadly) sound ones for any form of dispute resolution.

The National Alternative Dispute Resolution Advisory Council In Australia, a national advisory board exists under the direction of the Commonwealth Attorney-General. It is known as the National Alternative Dispute Resolution Advisory Council (NADRAC). Due to its broad perspective and reach, NADRAC is well positioned to offer a clearer understanding of definitions and methods of dispute resolution within the Australian workforce. The council has articulated seven national Principles for Resolving Disputes: (1) Self-responsibility is the first step: Individuals should take responsibility for being clear about what is in dispute, should genuinely try to resolve the dispute, and should seek support when it is needed. (2) Early resolution is good resolution: Resolve your dispute in the simplest and most cost effective way and as early as you can. (3) Listen and participate: Show your commitment to the dispute resolution process by listening to other views and by putting forward and considering options to resolve your dispute. (4) Be informed when choosing an ADR process: Seek out information to help you understand what to expect from different processes and service providers, and chose an appropriate dispute resolution process. (5) Use ADR, then the courts: Try to reach agreement through ADR processes before thinking about the courts or tribunals. (6) Ask questions about ADR: Ask about (and expect) affordable and professional ADR services that meet acceptable standards. (7) Share knowledge about ADR accurately: Describe dispute resolution processes consistently to help other people understand and be confident about using ADR. Facilitation Facilitation is an informal process in which a third party (often someone familiar to the disputing parties, for example, a manager) attempts to facilitate communication and the development of an interest-based resolution to the dispute. Facilitation may involve as little as providing a comfortable and secure room or space for the disputants to work within, to facilitating funds and time to dedicate to resolving workplace disputes. In other cases, the manager’s role within ADR may be far more involved and require the manager to oversee and be involved in the entire dispute. For instance, a manager may have to facilitate an entire communication process where two parties are unable or unwilling to communicate with each other. The term “facilitation” is closely linked to the mediation process. The manager acts as a mediator to facilitate dispute resolution between two or more parties. Put simply, facilitation may be defined as “to make easier”. A conflict resolution facilitator makes communication about the conflict easier and less threatening. In situations where more than two parties are involved, the manager’s role as facilitator becomes more problematic in terms of ensuring equity between all parties. In these cases, the manager may have to make sure that no individual party is dominating or controlling the dialogue and maintain order within the process. Alternatively, the parties may choose to engage a professional facilitator. A professional body such as the Alternative Dispute Resolution Association (ADRA) is a good source of professional facilitators. Alternatively, a professional corporate trainer or management consultant may have the necessary skills to undertake such work, or provide a referral. Mediation

Mediation is one of the most discussed and written about processes within ADR. In Australia, there are specialised training courses that have been set up to train managers to mediate workplace conflict. In Sydney, the Australian Commercial Disputes Centre (ACDC) runs courses of this type throughout the year. The role of manager as mediator may involve establishing ground rules for negotiation, opening channels of communication, ensuring that the needs of each party are clarified, and identifying key issues. The mediators, on the whole, have no decision-making powers. Their role is to help disputing parties voluntarily settle conflicts or disputes. However, managers may be requested to make recommendations or observations that may or may not have some bearing on the outcome of the resolution. Of course, the important principle of the neutrality of the mediator may be difficult for a manager to achieve if the conflict involves one or more of the manager’s direct reports. One would have to question just how impartial a manager could be to the outcome in this situation. This does not mean, however, that a manager is never able to mediate conflicts between co-workers. Each situation needs to be assessed individually and the manager needs to make a call on how neutral they can be in the situation. A mediator’s role is to provide some sense of security and safety for the disputants. It requires many of the skills and attributes discussed in Chapter ¶60 (eg ¶60-080). These attributes would require the manager to be goal oriented, have an ability to display clear, rational and innovative thought processes and possess empathy, self-awareness and self-control, among other interpersonal and problem-solving skills. A working knowledge of legal implications and a grasp of ethical debates surrounding conflict resolution are also valuable arrows in a conflict resolver’s bow. Because of the complexity of this field and the artistry involved, the field of mediation is becoming increasingly professional, with university courses appearing at the University of Western Sydney and the University of Technology in Sydney, as well as accreditation bodies (eg Lawyers Engaged in Alternative Dispute Resolution and the Institute of Arbitrators and Mediators Australia) offering a high level of training and referral to professional mediators who are highly trained to deal with workplace conflicts. Conciliation Conciliation is another third-party process commonly used in Australia by industrial relations bodies, these being the industrial tribunals in each state and also the government bodies established to enforce antidiscrimination and human rights legislation. For example, in New South Wales, this would be the AntiDiscrimination Board and the Australian Human Rights Commission. Conciliators have a more investigative function in that they have the authority to investigate complaints brought against employers where an employee makes an allegation of a legislative breach. Conciliators make an initial assessment of the complaint and, should there be sufficient basis for the complaint to be pursued, they undertake investigation and may then compel an employer or another employee to attend a conciliation conference (similar to a mediation session) with the aggrieved party. The conciliator runs a meeting in which an attempt is made to reconcile the parties and address their conflict. Sometimes this results in a reinstatement subsequent to dismissal, sometimes a formal apology for the offence, sometimes an undertaking to change a culture or work practice (eg related to recruitment), or sometimes even to financial recompense being paid by the employer to compensate for the offence. If a conciliation conference fails, it may sometimes be taken to the next level where a formal tribunal is called to hear the case and issue a decision. In industrial tribunals, the commissioner will “switch hats” and the dispute will then be handled by arbitration. Arbitration Arbitration is a formal process in which a third party, which has been chosen by the disputing parties, renders a decision on the legal merits of the dispute. Arbitrators render this decision after a hearing that generally involves the presentation of evidence and oral argument. Conciliation, facilitation and mediation are interest-based processes; the disputing parties themselves craft a resolution that meets their needs. Arbitration is a rights-based process; that is, a third party determines the legal rights of the parties. Grievance handling What is a grievance? In simple terms a grievance may fall into two distinct categories: (1) breaches of state or commonwealth legislation that relate to unlawful discrimination, harassment or

bullying (This category of grievance may, in some instances, be handled internally or by the appropriate external agency which administers the legislation.), and (2) unfair or inappropriate behaviour that is not directly governed by specific legislation. This section will deal primarily with the second category of grievance with the goal being to outline a set of principles to guide practice. As the name suggests, grievance processes at work are normally initiated by people who feel aggrieved by either an action or a decision, or as a result of some inaction (eg denying the employee a performance appraisal or an opportunity to attend training). Workplace grievances often centre on how that action has substantively impacted on the complainant. For example, a grievance might centre on a claim by an employee that they were denied the opportunity to attend training and that this denial has resulted in impaired performance. Similarly, a grievance might centre on a company’s failure to offer an employee performance feedback, or to provide an annual appraisal. In such cases, a grievance might be lodged on the basis that these failures have negatively affected the person’s career progression. Grievances are investigative, almost quasi-judicial processes. They may involve a judgment by a committee as to the veracity of the complaint and a process of redress (eg a written apology, payment of unpaid loadings or increased duties allowances or overtime, reinstatement, revision of an existing policy or even demotion or discipline of the person who is the subject of the complaint). When a formal grievance is lodged by an employee, it normally implies that all other avenues of resolution, such as direct communication, have been exhausted and that, despite these efforts, the person continues to feel that justice has not been done, or that the issue has not been properly considered or resolved. If they are taken to their full conclusion and heard in a quasi-judicial manner, there is certainly scope for the grievance to be quite disruptive, particularly if the parties are expected to maintain an ongoing working relationship. Consequently, before a grievance is lodged, there is often a final effort by a member of the organisation (eg a supervisor or an appointee) to encourage the parties to try and resolve the complaint through some form of low level or “talking” strategy. This may involve offering the parties the services of an impartial and unbiased mediator/conflict resolver. Whether this option is taken up by the complainant is normally dependent on considerations, such as the likelihood of success of this approach, the period of time that the issue has been unresolved and so on. If parties do take up the offer of mediation, it does not necessarily mean that they forgo their right to continue with the more formal grievance process should the mediation fail. Despite their potentially disruptive nature, it is nevertheless wise for employers to develop appropriate channels for the airing and resolution of grievances, and also wise that the employees who serve as grievance officers receive adequate training to perform their role. Important principles govern the successful implementation of a grievance handling mechanism in an organisation. Both common sense and procedural fairness (natural justice) govern these principles. The five major principles to be followed are: (1) Procedural fairness: This principle means that the parties should feel that the process is fair and impartial, that all parties are given a fair hearing, and that the people running the process are not biased by their relationship with either of the parties. The respondent should also be advised beforehand as to the details of the complaint and what the implications will be if the complaint is upheld. (2) Confidentiality: This is a crucial element in the process and means that all parties should act to keep the details of the grievance confidential by not disclosing these details to third parties. Naturally, it also involves professional behaviour around keeping records secure (eg in locked filing cabinets and not on a desk). Confidentiality does not, however, mean that the complainant’s identity should be kept anonymous. Indeed, most grievance procedures (eg in EBAs) specifically require that the complainant’s identity should be made clear to the respondent. Anonymous complaints (unless they involve criminal actions) are not acted on in most workplace grievance handling systems. During the course of advising a respondent that a complaint has been lodged against them, the respondent should also be advised that any retaliatory action against the complainant will be treated as misconduct or serious misconduct and thus, could be grounds for instant dismissal.

(3) Timeliness: In handling a complaint, it is obviously important that the organisation should strive to resolve the complaint in as timely a fashion as possible. People should be advised that a complaint has been made and what the substance of the complaint is, and they should be kept informed along the way as to the progress in resolving the complaint. Specific time limits for grievance handling are often set out in EBAs. (4) Record-keeping: Grievance handlers should keep records of their meetings, but only the details that are necessary to resolve the dispute. These records should be returned to the appropriate place following the resolution of the grievance, such as with the HR manager or, where appropriate, with the manager of equal opportunity programs at the organisation. The area of record keeping should be adhered to stringently. It is advisable that grievance handling officers seek advice on the organisation’s policy in regard to this issue as it can have legal implications in terms of defamation. (5) Transparency: Parties to grievances should be made aware of policies and procedures and be given clear explanations as to judgments or actions taken. (Sources: Macquarie University Enterprise Bargaining Agreement 2003–2006, Section 14, and UTS website: www.uts.edu.au) There are sometimes concerns expressed by managers that, if the organisation sets up a grievance system, managers will be inundated with unsubstantiated (ie malicious, frivolous or vexatious) complaints, and people will stop communicating directly and constructively with one another when a problem arises. Clearly, this is a possibility, but would be most likely to eventuate in organisations where there are pronounced differences in power between managers and employees, or where large amounts of unresolved conflict exist. In such cases, there is a wider problem relating to the organisation’s culture, which needs to be addressed by the major stakeholders in a collaborative manner. It is not an argument against establishing a grievance mechanism, but it does highlight the need to have one, to communicate its aims and rules, and to administer it professionally.

¶49-060 Conclusion Potentially positive effects of well-handled conflict Many benefits arise from implementing dispute resolution processes in a workplace. Well-handled conflict can empower both managers and employees, and the process of conflict resolution increases employee accountability because outcomes reached in resolution can assume some form of binding contract to which both parties agree. Effective conflict resolution gives both disputants and mediators a sense of clear procedure and commitment that can foster increased loyalty and trust among employees, as well as improve manager-employee relationships. By handling conflict before it escalates, employers can reduce conflict-related absenteeism, and management is less likely to receive wrongful dismissal claims or other complaints regarding breaches of employees’ human rights. The purpose of well-handled conflict is to find some common ground where all parties feel motivated to reconcile their differences permanently. This may then create an environment in which former disputing parties can reestablish cooperative business and social relationships that might previously have existed. It is a far better option than dismissing or transferring one or more of the parties to the conflict, options that may be unavailable to an employer due to unfair dismissal rules or, perhaps, due to the size of the organisation. Another positive effect may be an increased understanding of what the disputing parties may need or be able to offer each other in an ongoing business relationship. Ideas that may be useful to resolve a dispute may also open doors that could be beneficial to both disputants. For example, positive ideas may include recommendations and introductions. New or more effective ways of working can also be a major benefit. Employees may develop a deeper sense of understanding and feeling of being in a relationship if they are able to resolve their conflicts effectively. They may even experience a deeper sense of cohesion. Who, for example, never had an argument with a sibling? Well-handled workplace conflict can engender the same sense of mutual respect that such childhood or teenage stoushes often produce. Well-managed conflict may at times improve employee performance and foster personal and organisational learning through mutual problem solving. It can also be a strong source of employees’ self-esteem as they learn to be

assertive about their needs. There is also a final point that all conflict may not necessarily need to be, or be able to be, resolved. This is not a comment on the failings of a manager; it is more a comment on the nature of conflict. Sometimes the best that can be done to address a conflict is to monitor it and trust that, in time, it will abate. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References Macquarie University Enterprise Bargaining Agreement 2003–2006, Section 14. Pfeffer J 1995, “Producing sustainable competitive advantage through the effective management of people”, Academy of Management Executive, vol 9(1), pp 55–69. Parker A and Heys A 1997, False conflict? Peak performance development, Peak Performance, see www.peakpd.com/Articles_pdf_format/False_Conflict.pdf. Tidwell AC 1999, Conflict Resolved? A Critical Assessment of Conflict Resolution, Pinter, London. Tillett G and French B 2006, Resolving Conflict: A Practical Approach, 3rd edn, Oxford University Press, Sydney. University of Technology Sydney, Grievance Handling, see www.uts.edu.au.

50. BULLYING Editorial information

Anthea Lowe Workplace Consultant and Manager, Anthea Lowe & Associates

¶50-010 Introduction

Case example Naidu v Group 4 Securitas Pty Ltd & Anor A security guard was subjected to five years of racial abuse, physical assault, indecent exposure and other forms of bullying by his immediate boss. This resulted in the security guard suffering chronic depression and post-traumatic stress disorder, and eventually resigning from his job. The employer’s policies had been breached by the manager, who was eventually sacked for his misconduct. In March 2006, the NSW Supreme Court awarded the guard a total of $1.95m in damages, lost earnings, medical costs and interest to be shared between his contracting company and the company where he was based (see Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144 (15 March 2006)). This award was later altered by the NSW Supreme Court of Appeal to make the company, where the guard (Mr Naidu) was based, pay him 100% of the award (see Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377 (21 December 2007)).

In the last few years, the media, various levels of government and many employers have finally started to pay attention to the problem of workplace bullying. There have been a number of widely publicised cases. Some of these cases have been fought (at least partially) in the media. The claimant or their lawyer has aired allegations of serious levels of abuse and intimidation, usually by an executive(s) at the highest level(s) of management within a major brand company. They have made it clear they are seeking millions of dollars in damages. Many such cases settle confidentially (ie outside of courts and tribunals), but not before serious damage has been caused to the employer, its brand, and the individuals involved. There has also been an increasing amount of research into the costs, extent and level of workplace bullying. There is no doubt that bullying is extremely costly for everyone involved. Griffith University research (McCarthy 2003) estimated that bullying costs employers between $600,000 and $840,000 per year for every 1,000 employees. More recent data from the Productivity Commission has estimated that workplace bullying costs the Australian economy between $6b and $36b annually (Productivity Commission 2010). There is also no doubt that workplace bullying is widespread. In November 2012, the federal parliamentary inquiry into workplace bullying published its report Workplace Bullying — we just want it to stop (Parliament of the Commonwealth of Australia 2012). The report collates a significant amount of

harrowing evidence about the nature and extent of workplace bullying and contains 23 recommendations. The most significant response by the federal government to this report was to amend the Fair Work Act 2009 (Cth) (FW Act) to enable workers experiencing bullying to apply to the Fair Work Commission (FWC) for an order to stop the bullying. It is a rare workplace that has no bullying. Indeed, most workplaces have a considerable level of bullying. Research conducted by academics, government, the Australian Council of Trade Unions (ACTU), individual employers and others within Australia, tends to reveal similar patterns no matter who is surveyed. Generally, over 85% of respondents report they have either been bullied themselves or have personally seen or heard others being bullied at work. Fifty per cent report they have been bullied at some point at work. Between 8% and 30% report they have been bullied within the last six months. See the “References” section at the end of this chapter where some of this research is listed. If bullying is happening in a workplace, this usually indicates a lack of appropriate control by management. At worst, management is complicit in the bullying, either by turning a blind eye to it (thereby effectively supporting and enabling it), or by actively encouraging bullying styles of behaviour. At best, management does not know what is going on and is not in control of the organisation. Most employers have taken at least some effective steps to help prevent not just sexual harassment, but all forms of unlawful harassment. Far fewer have taken effective steps to help prevent bullying. Yet bullying is a much more widespread workplace problem than unlawful harassment and both can be prevented simultaneously using similar strategies.

¶50-020 What is and is not bullying? Safe Work Australia’s Guide for Preventing and Responding to Workplace Bullying uses the following definition of bullying: “repeated and unreasonable behaviour directed towards a worker or a group of workers that creates a risk to health and safety”. Many of the state and territory government health and safety agencies (and, therefore, employers) have adopted a similar definition. The bullying provision inserted in the Fair Work Act 2009 (Cth) (FW Act), from 1 January 2014, provided the first Australia-wide statutory definition of bullying. It follows a similar line: “a worker is bullied at work if an individual, or group of individuals, repeatedly behaves unreasonably towards the worker, or a group of workers of which the worker is a member, and that behaviour creates a risk to health and safety”. I prefer a broader definition: one that does not require the behaviour to be repeated, and one that provides greater insight into the types of behaviours that are unacceptable at work. My definition of bullying is: “any behaviour, or series of similar or different behaviours, that unfairly or unreasonably puts down, belittles, undermines, controls, abuses, scares, intimidates, excludes, offends and/or embarrasses”. While bullying is usually repeated, and generally becomes significantly less safe and less healthy the longer it continues, it always starts somewhere. Even the first act of bullying, or the first point at which a pattern of behaviour is recognised as bullying, (sometimes, the first bullying act is such that it is not clear until the second or third act that bullying is actually going on), can cause significant harm. If you remove “repeated” from the definition of bullying, you send two important messages; that: (1) it is critical to do something effective to stop or contain the bullying as soon as the bullying behaviour starts, or is recognised as such, and (2) if a one-off act of bullying is not resolved between those involved, it can and should be dealt with by management in a fair and effective manner, and at an appropriate level for both what is alleged, and what is ultimately found to have occurred. One-off acts of bullying can also generally be managed much more easily and at a lesser level (ie generally with a lesser form of “punishment” for the act), than is likely to be necessary for a pattern or

series of bullying behaviours. The idea is to act quickly and stop the behaviour becoming entrenched. If effective action is not taken the first time bullying occurs (and/or is recognised as bullying), the bullying can and often will continue. To illustrate this point, consider this true story told to me in a training session I was conducting. A young woman, on the third day of a new job with a new employer, witnessed her manager throwing a heavy book towards a teammate. Neither she nor the victim (nor indeed anyone else who witnessed this act) did anything to challenge it. Two weeks later, the same manager threw the book at the new employee. At this point, the young woman did take effective action (action which led to appropriate measures being taken by the employer), but it made her reflect on what she and others could have done the first time she witnessed it so as to prevent it from happening again. In this connection, it is of note that Safe Work Australia’s Guide for Preventing and Responding to bullying, makes it absolutely clear that single instances of bullying should never be ignored. It is also important to note that, while the FW Act and the published guidance on bullying prevention issued by each of the various workplace health and safety government agencies across Australia all use the word “repeated” in their definitions of bullying, none of the other laws workers could use to get a remedy for an act of workplace bullying require the bullying to be either repeated or more than one act (see the section “The legal position” later in this section). In addition, rather than focusing on whether a health or safety risk has been created (or could be created), my definition expands on how the behaviour is experienced by the other person (ie as belittlement, control, intimidation and so on), while ensuring (as with the government definitions), that a test of reasonableness is applied. It also has the advantage of encompassing the types of harassment that are against anti-discrimination law. Providing this sort of focus in the definition of bullying, together with a lack of insistence on repetition, makes it easier to explain to the workforce what does and does not amount to bullying. In other words, it enables you to explain how bullying works. How bullying works The following five significant components of bullying, all of which are reflected in my definition, explain how bullying works: (1) Bullying is always unwelcome to someone. It has to make someone feel belittled, controlled, intimidated and so on. It is not bullying if the behaviour is welcome to everyone who’s around. Although of course, we still want all workplace behaviour to be safe and we do want work to be done. (2) Bullying is often done deliberately. It is an abuse of power the perpetrator has, or feels they have, over the target of their behaviour. Bullying is often done specifically and maliciously to control the target or keep the upper hand. The bully may hold power because they are a line manager, belong to a powerful, dominant or majority group, are older, longer-serving, a larger size, or more confident. The target is selected as someone who can be controlled because they have, or are thought to have, less power than the bully. For example, the victim may be lower in the hierarchy, younger, smaller, quiet, shy, in the minority in that part of the workplace in terms of their gender, age group, social background and so on, more vulnerable because of issues to do with their past history or home situation, or a new, casual or short-term employee. Sometimes the target is selected because they are someone the bully believes deserves to be bullied (eg because they work better or harder than the rest of the team or are underperforming). Alternatively, the target may not conform to the bully’s values (eg they are gay, or thought to be gay, or they practise a different religion than the bully). Deliberate bullying can be overt or covert. Some deliberate bullies are very good at covering their tracks. Some work with a “sidekick” and some show their bullying side only to a particular person or people. Deliberate bullies are often serial bullies, selecting more than one target, either at the same time or sequentially. My definition makes it clear that workers must never do anything they know full well will belittle,

control, intimidate (and so on), a particular person unless there is some justifiable, work-necessary reason for behaving in that manner. See “(5) The behaviour must be unfair or unreasonable to be considered ‘bullying’”. (3) Bullying can be done in a less deliberate, less thought-out or less conscious manner. For example, some line managers bully people in their team without realising the effect of what they are doing. They are simply poor people managers. They may be excessively controlling, they may constantly change their mind about what needs to be done or how it needs to be done, or they may excessively overload their staff. Other people play practical jokes, use language in certain ways, stand too close to others (and so on), without thinking about how this might be experienced by others. Workers must always consider who is around, and what they know or do not know about those people, and then try to not behave in a way that could easily be seen by anyone around as belittling, controlling, intimidating and so on — again, unless there is some justifiable, work-necessary reason for behaving in that manner. See section headed “(5) The behaviour must be unfair or unreasonable to be considered ‘bullying’”. In other words, what is necessary is for everyone to behave respectfully towards everyone else when involved in anything connected with work. To do this, workers need to treat everyone else in the way they themselves would like to be treated, while at the same time, adjusting their behaviour to suit the particular people who are around (within sight or hearing) at the time. We are all different. We each have different norms of what we consider to be “acceptable behaviour”. We each cope differently on different days. We each accept certain behaviours from some people, usually from those we are closer to, that we would not accept from other people. We each have different notions of what is funny and what is not and what is offensive and what is not. We each adjust our behaviour in our home lives to suit the people we are with. We should do the same at work. It is also important to state that some acts of bullying will be less serious/damaging than others, with less serious outcomes. If management is involved in resolving a less serious/damaging act of bullying, it is likely to attract a lesser punishment — for example, the bully apologising to their victim and then perhaps undergoing some compulsory counselling so they do not do it again, rather than a more serious form of disciplinary action, such as a written warning or employment termination. In conclusion, the critical message to get across is that no one should be behaving in a way that could make anyone else feel belittled, controlled, intimidated (and so on) unless there is some justifiable, work-necessary reason for behaving in that manner.

Case example Trapman v Sydney Water Corporation & Ors The following race discrimination case (decided by the Federal Magistrates Court in June 2011) is particularly interesting and relevant to the information discussed so far. In Trapman v Sydney Water Corporation & Ors [2011] FMCA 398 (2 June 2011), a Sydney Water supervisor, who asked permission of an Aboriginal subordinate before telling a racist joke, did not gain protection from the joke being ruled as a breach of the law. Sydney Water and the supervisor were ordered to pay the man $5,000 damages between them. What is being implied here is that the supervisor should have realised that the very fact he had to ask permission before telling the joke indicated that he already knew his subordinate might not appreciate it. In addition, he should have considered the power imbalance between himself and his subordinate and the fact that it is generally much harder to say “no” to someone who supervises you than it is to say “no” to a colleague at the same level in the organisation.

It is important to provide workers with a range of practical and effective strategies for resolving different levels of bullying. These strategies should include self-help, what bystanders or witnesses can and should do, informal resolution by management, and formal resolution by management. See ¶50-050 How to prevent bullying under the heading Step 4. (4) Bullying can be done by anyone to anyone. Bullying can be conducted upwards, downwards or across the hierarchy, or by or towards a customer, client, or anyone else a worker has to interact with during the course of their work. Bullying is committed by almost as many women as men. However, regardless of whether the bully is male or female, when the bullying is done deliberately, women are more likely to be bullied than men because women are often seen as easier targets. (5) The behaviour must be unfair or unreasonable to be considered “bullying”. Not every behaviour which ends up belittling, controlling, intimidating (and so on) someone else will count as bullying. For the behaviour to be counted as bullying, it must also be “unfair” or “unreasonable”. If there are justifiable, work-necessary reasons for the behaviour, then it is not bullying. The following behaviours are never considered to be bullying: • a reasonable and lawful supervisory or management direction — as long as it is given in a fair and courteous manner, and • performance management or counselling or disciplinary proceedings — as long as they are conducted in a fair and courteous manner, in line with both employment/industrial relations law and the organisation’s policies and procedures.

Case examples In Beasley v Comcare [2012] AATA 411 (3 July 2012), the Administrative Appeals Tribunal found that the way the Australian National University conducted Beasley’s performance appraisal did not constitute “reasonable administrative action”, and therefore Beasley was entitled to be compensated for his psychological injuries. In contrast, in Mac v Bank of Queensland Ltd; Locke; Thomspon; Hester; Van Den Heuvel; Newman [2015] FWC 774 (13 February 2015), the Fair Work Commission ruled that a lawyer had not been bullied when she was placed on a performance improvement plan given she had received a number of poor performance reviews previously. And similarly, in Tao Sun [2014] FWC 3839 (16 June 2014), a management direction to work on a project that was not specifically listed in an employee’s job description was ruled as fair and not bullying, in part because the employer conceded management had told him that if he found himself in difficulties with the project they would provide support.

The legal position There is only one law in Australia that specifically defines workplace bullying and that is the FW Act. However, this is not the only law that workers can use to challenge workplace bullying. There are many other laws that can and have been used, as described below. Anti-discrimination and equal opportunity law Every state and territory has its own anti-discrimination or equal opportunity law. There is also a suite of federal equal opportunity laws which have similar effect. The combined effect of these laws means that, throughout Australia, it is generally against the law to harass someone at work either sexually, or because of such characteristics as their gender, race, marital status, disability, age, religion, political opinion, social origin, family/carers responsibilities, or sexual preference/orientation. For more information on the specific

grounds listed in Commonwealth, state or territory law, see Chapter ¶13. The employer is legally liable for any such harassment, unless it has taken all reasonable steps to prevent it and to deal with any suspected or alleged harassment fairly and appropriately. The employer is taken to know about any such harassment if any line manager is aware of it. The employer is similarly legally liable for the victimisation (unfair targeting) of anyone who lodges, or says they intend to lodge, an internal or an external harassment complaint, or who supports, or says they will support, anyone involved in such a complaint. The bully and/or any relevant line manager may also be found to be legally liable for the harassment or related victimisation. Workplace/occupational health and safety law and workers compensation law Every state and territory has its own workplace health and safety (WHS) law or occupational health and safety (OHS) law as well as its own workers compensation law. However, most of these health and safety laws, except at the time of writing (November 2015) for Victoria and Western Australia’s laws, are now identical as part of the ongoing process to harmonise WHS laws across Australia. None of the new harmonised WHS laws, nor Victoria’s or Western Australia’s OHS laws, expressly prohibit bullying, but they do make it clear that the employer and its employees, and indeed anyone else who could influence the hazards of a workplace, all have a legal duty of care to do “everything reasonably practicable” to protect the health, safety and welfare of others at the workplace. This means that anything that makes the workplace unhealthy or unsafe for employees, or for those who visit it, could breach WHS/OHS law. Currently, each agency administering WHS/OHS has its own guidelines or code of practice that specifically covers or includes the prevention of workplace bullying. Meanwhile, the Australian Government’s work health and safety agency — Safe Work Australia — is, at the time of writing (November 2015), still considering comments received on its second draft model Code of Practice for the prevention of workplace bullying. The definition of bullying in this draft Code is almost identical to the one it uses in its existing Guide for Preventing and Responding to Bullying: “repeated, unreasonable behaviour directed towards a worker or group of workers, that creates a risk to health or safety”. Employers who do not assess and remove (or at least reduce) the risks of bullying, or who do not deal effectively with any suspicions or allegations of bullying, can be successfully prosecuted by the relevant WHS/OHS government agency and required to pay substantial fines. Employers can also be separately fined for victimising an employee who complains about a breach of WHS/OHS law. An individual bully and/or any relevant line manager can also be fined under WHS/OHS law. Many of the WHS/OHS agencies have successfully prosecuted bullying offences and are likely to become more vigorous in light of the development of the new national workplace bullying Code of Practice and the fact that the FWC can refer bullying allegations to the relevant WHS/OHS agency. There is absolutely no doubt that workplace bullying is now regarded as a WHS/OHS issue. An employer may also find its workers compensation premium rises following a successful physical or psychiatric injury claim for regular payments or damages under workers compensation. They may also have to “rehabilitate” a victim back into work. Workers compensation claims have been successful where the injury has resulted from an immediate supervisor’s inappropriate, bullying management style, and also from the manner in which an employee was dismissed.

Case examples Amato v NRG Pty Ltd [2006] SAWCT 100 In Amato v NRG Pty Ltd [2006] SAWCT 100, the court ruled that Mr Amato should be compensated for his personality disorder because it arose from the “personality conflict” with his supervisor, and Mr Amato was able to show that his disability did not result from reasonable administrative action or from reasonable counselling or disciplinary action. Cecere v Communication, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Health Services Union of Australia & Anor In Cecere v Communication, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied

Health Services Union of Australia & Anor [2008] VCC 445, a $367,000 compensation payout was awarded by the Victorian County Court against the Electrical Trades Union to the family of Mr Cecere. Mr Cecere committed suicide the day after he was dismissed.

Criminal law Every state and territory has its own criminal law. Again, each of these laws provide similar provisions in relation to serious forms of bullying. For example, the following types of bullying are crimes prosecutable by the police: • actual or threatened physical, sexual or indecent assault • deliberate damage to, interference with, or theft of someone else’s property • blackmail, and • stalking (In Victoria, “stalking” expressly includes — “making threats, using abusive or threatening words, performing abusive or offensive acts, or acting in a way that could reasonably be expected to cause the victim harm or self-harm”. Commonly referred to as “Brodie’s Law”, this amendment was enacted in response to the tragic case of the 19-year-old Melbourne café waitress, Brodie Panlock, who committed suicide as a result of being bullied by her colleagues. See ¶50-030 under the heading “Occupational/work health and safety law” for more details of the legal outcome of this case.) In addition, under Commonwealth criminal law, the following types of bullying are crimes prosecutable by the police: • harassing phone calls, and • cyber-bullying. Of course, these criminal prosecutions would be against the bully, not the employer — unless they are one and the same person.

Case example Police v Manuel Purauto In November 2007, in a New South Wales Local Court case, an employer boss (Mr Purauto) was jailed for two years for a “vicious and brutal” attack on a young employee. See www.smh.com.au/news/national/boss-smashed-worker-withhammer/2007/11/29/1196037056506.html. Although the judgment is not available online, some related information is available in a 2010 report by Fiona David titled Labour trafficking, which was published by the Australian Institute of Criminology. See page 30 of the report which refers to Samuel Kautai v Manuel Puruto, Leisl Puruto and Freliesma Guttering Pty Ltd No CIM 106709 of 2006: www.aic.gov.au/documents/A/9/0/%7BA90867A2-1558-4B01-A233-34B3381D2F6D%7Drpp108.pdf.

Defamation law It is notoriously difficult and expensive to mount a defamation case. However, it is possible that certain types of bullying would amount to defamation. Note that it is not defamation to genuinely try to resolve a complaint of bullying in line with a confidential and fair complaints or grievance procedure. Common law

Employers can be legally liable for their negligence or for their breach of a common law contractual term in allowing bullying to happen. They can have (often large amounts of) compensation awarded against them for any physical, mental or other injury suffered by the victim as a result of their negligence. Employment/industrial relations law There are several ways employment/industrial relations law can be used to challenge workplace bullying. Since 1 January 2014, any worker covered by Commonwealth employment law (the FW Act) has been able to apply to the FWC for an order to stop bullying that meets the following definition: “a worker is bullied at work if an individual, or group of individuals, repeatedly behaves unreasonably towards the worker, or a group of workers of which the worker is a member, and that behaviour creates a risk to health and safety”. The FWC must start responding to an application for an order to stop bullying within 14 days of the application being made. If the FWC is satisfied that a) bullying has occurred and b) there is a risk of it continuing, it can make any order (apart from reinstatement, compensation or damages) that it considers appropriate to prevent the bullying from continuing.1 The worker does not lose the right to use WHS/OHS law as well, and the FWC also has the power to refer a claim of bullying to the relevant WHS/OHS agency. An employer who contravenes a FWC bullying-related order can be made to pay a penalty. Victims who have been dismissed when it was the bully who should have been disciplined and/or dismissed are able to lodge an unfair dismissal claim with the FWC or, if not covered by federal employment law, with the relevant state or territory industrial tribunal. Similarly, victims who feel they have no alternative but to resign because of bullying and/or employer inaction in relation to the bullying may also be successful when lodging what is commonly called a “constructive dismissal” claim with any of the same agencies. Under employment/industrial relations law, an employer may also be found to have breached its duty of care towards an employee and, therefore, be ordered to pay damages. Naturally, when an employer disciplines or dismisses an employee for bullying, they must do so fairly and appropriately — otherwise the alleged bully may win a claim for reinstatement or damages. It is also possible for an employee covered by Commonwealth employment law to make a claim to the FWC of adverse action in relation to trying to enforce a workplace right. One such right is the right to be protected from a breach of WHS/OHS law. So, if a worker covered by Commonwealth employment law asserts they have experienced bullying that creates a risk to their health and safety, the employer must address it adequately or risk an adverse action claim. An employee may also be able to claim breach of employment contract (using common law) — particularly if the employer has a bullying prevention policy and/or a complaints/grievance procedure that it neglects to follow. See the following cases.

Case examples In Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784 (23 June 2006) (upheld by the Full Federal Court in Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120 (7 August 2007)), Goldman Sachs was ordered to pay damages of almost $516,000 to an employee for breach of contract, in addition to past and future loss of income. In Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177 (22 December 2014), the Full Federal Court ruled that an employee’s contract of employment was breached when a company failed to follow either its discrimination policy or complaints procedure and conducted a flawed investigation into alleged bullying. The issue of damages was remitted to a single judge.

Workers can also use either state or Commonwealth employment/industrial relations law, instead of anti-

discrimination/equal opportunity law, to try to remedy any bullying that breaks anti-discrimination/equal opportunity law (as defined in s 351 on “adverse action” in the FW Act, or within the discrimination part of the relevant state employment/industrial relations law). Some important points about all these laws It is important to note that, under all these laws, bullying behaviour: • often does not have to be repeated or be more than one act (It only has to be repeated or more than one act when applying for an order to stop the bullying under the FW Act, or when relying on WHS/OHS law.) • only has to hurt or upset one person who is there or hears it • does not have to be deliberate or intended • does not have to be said “no” to (The law recognises it is not always possible or safe to say “no”.) • does not have to happen at the workplace (Depending on the law being used and the state/territory the claim is being made in, bullying can happen on the journey to or from work, at work-organised social events, or offsite, such as when working or attending training sessions or conferences on behalf of the employer.), and • does not have to happen between employees; it can happen between employees and clients, customers and others with whom employees interact during their work. The main legal test is how the behaviour affects the victim(s), or those seeing or hearing it, within reason. In other words: • Did it, or could it, make the workplace unhealthy or unsafe for any of these people? If yes, then it will probably breach WHS/OHS law and the FW Act. • Has the victim suffered any form of loss or injury (including psychiatric or physical injury, publicly decreased reputation, loss of salary or wages, and/or loss of job) from the bullying? If yes, then claims may be made under the workers compensation law, common law (as negligence or a breach of employment contract), employment/industrial relations law, anti-discrimination/equal opportunity law and/or defamation law. The behaviour may also be prosecuted by the police as criminal behaviour, or prosecuted by the relevant WHS/OHS agency as a criminal breach of WHS/OHS law.

Case examples Tannock v State of New South Wales Mr Tannock was injured at work — his head was trapped in a lift door and it ended up at an abnormal angle. The workplace was one where there was a lot of joking around. Mr Tannock had indulged in much of the joking until he became the subject of some of it. He alleged that, following his injury, people made derogatory comments about him, and distributed offensive written and pictorial material about him. His complaint of disability discrimination failed at the New South Wales Administrative Decisions Tribunal in May 1999, largely due to his own prior indulgence in similar “practical jokes” (see Tannock v State of New South Wales [1999] NSWADT 31). However, the employer’s later (August 2000) application for costs against him also failed (see Tannock v Hunter Area Health Service [2000] NSWADT 112). The fact that Mr Tannock’s particular case failed at the Administrative Decisions Tribunal should not be taken as showing legal support for this behaviour. Inspector Nigel Ball v Bazzina and Price (Inghams Enterprises Pty Ltd) Workplaces where practical jokes are part of the culture could very easily lead to cases being

successful in this or other jurisdictions. For example, in another case, two male employees of a chicken processing plant threw a female co-worker into a tub of hot water as a farewell prank on her last day at work. She suffered serious burns. The employer and the two employees were prosecuted by WorkCover NSW. The employees were fined $700 each. However the employer escaped liability because it had stringent safety rules in place and had regularly issued safety bulletins warning against practical jokes. (Inspector Nigel Ball v Bazzina and Price (Inghams Enterprises Pty Ltd), Unreported, Chief Industrial Magistrate’s Court, 2 & 23 February 1998 — cited from WorkCover New South Wales 2003). See also Workcover (Insp Nigel Ball) v Kathryn MacMullan [1999] NSWCIMC 125 (11 October 1999).

Types of behaviour that could amount to bullying Depending on the particular circumstances, any of the following could be bullying, could cause damage and could be capable of attracting a legal remedy of some sort. Note that the following is not an exhaustive list: • any form of aggressive or frightening behaviour including shouting or swearing at someone, banging fists on a desk, stalking, and initiation rites that could (or do) harm someone • behaviour that is both unwanted and either sexual or based on a ground of discrimination under antidiscrimination/equal opportunity law • threatening to make, or actively making, a person’s work or home life difficult • abusive, belittling or intimidating phone calls, SMS text messages, emails, additions to social media sites, notes or graffiti • teasing, baiting or practical jokes • laughing in a manner designed to cause distress to someone else • sniggering or gossiping behind someone’s back, or spreading malicious/untrue rumours • constantly interrupting someone who is trying to work or speak • belittling someone’s opinions or dismissing their contribution • standing in someone’s way, or deliberately blocking their path or that of the vehicle they are driving • excessive work scrutiny • management by fear • inappropriate or unfair criticism or punishment • setting impossible deadlines, tasks or targets • constantly changing work goals • taking credit for someone else’s work • ignoring or isolating someone, or deliberately excluding them from consultation or communication about relevant work issues • unfairly blocking promotion, training and development, or other work opportunities • deliberately setting someone up to fail

• deliberately delaying requests for leave, training, travel away from the workplace, and • favouritism. Footnotes 1

It is worth noting that there have not been nearly as many applications to the FWC for bullying orders as anticipated. This may be partly due to the fact that to be able to apply for an order, the worker must still be employed by their employer and partly due to there being no compensatory relief. In 2014, there were just 701 applications, of which almost one third were withdrawn before or shortly after the FWC started their process. And while the FWC resolved some 40% of those that continued, only a handful resulted in formal orders being made and 15% were ultimately dismissed for lack of jurisdiction or merit — for example, the behaviour was ruled as not being sufficient to meet the bullying definition and/or the behaviour was not repeated, or the bullying was not (likely to be) ongoing. For some bullying order cases determined by the FWC — see ¶50-030 Costs of bullying, under Employment/industrial relations law.

¶50-030 Costs of bullying

Case example Carlile v Council of the Shire of Kilkivan and Brietkreutz A council employee’s supervisor subjected him to a series of harassing and humiliating behaviours, such as telling him he wasn’t much use, singling him out to perform menial, dangerous and seemingly unnecessary tasks, harassing him for eating an orange and for complaining of illness (despite the fact that he later lost consciousness). The employee eventually suffered a nervous breakdown and was psychiatrically assessed as being unlikely to ever be able to work again. The council was found to be vicariously liable for the supervisor’s actions and ordered to pay $200,000 in damages (see Carlile v Council of the Shire of Kilkivan and Brietkreutz ,unreported, District Court of Queensland, No 12 of 1992, Dodds J, 2 December 1995).

Costs to the employer or organisation Unchecked bullying can lead to any of the following costs: • absenteeism • an increase in the number of accidents or mistakes • rehabilitation costs • increased workers compensation premiums • low morale • decreased productivity or work quality • loss of reputation • unnecessary resignations

• breakdowns in communication and trust • industrial unrest • retaliatory sabotage or other forms of aggressive behaviour • the high cost of resolving (or attempting to resolve) internal complaints, and • legal costs, as described in the next section. Legal costs Anti-discrimination and equal opportunity law Under anti-discrimination or equal opportunity law, an employer found to be legally liable for unlawful harassment of an employee or client/customer can be made to pay compensation for all of the financial costs borne by the victim (eg lost salary and medical bills), compensation for distress and suffering caused to the victim, and increasingly may be made to pay the victim’s legal costs. See, for example, the case of Gilroy v Angelov (2001) EOC ¶93-118; [2000] FCA 1775. Case examples Lee v Smith & Ors (No 2) In Lee v Smith & Ors (No 2) [2007] FMCA 1092 (6 July 2007), an employer was ordered to pay more than $400,000 for compensation for hurt, humiliation, pain and suffering, special damages, past medical expenses, future medical expenses and future loss of income. Anti-discrimination/equal opportunity government bodies have settled harassment complaints confidentially under their investigation and conciliation processes for even more than the above amount. Fraser-Kirk v David Jones For example, the widely publicised 2010 claim by Kristy Fraser-Kirk against David Jones (see Fraser-Kirk v David Jones Limited [2010] FCA 1060) and its then Chief Executive Officer (CEO) reputedly resulted in a settlement through the Australian Human Rights Commission of $850,000. The majority of harassment cases that are taken on by anti-discrimination/equal opportunity government agencies are finalised at that level and never reach a tribunal or court. It is also possible for the harasser, a union, or anyone else who enabled the harassment (eg a manager who turned a blind eye) to be found either jointly legally liable with the employer, or possibly legally liable on their own; that is, where the employer can show that it took “all reasonable steps”. See, for example, the Victorian Equal Opportunity Board case of Bevacqua v Klinkert (1993) EOC ¶92-515 and Bevacqua v Klinkert (No 2) (1993) EOC ¶92-516; the New South Wales Anti-Discrimination Tribunal case of Gabryelczyk v Hundt [2005] NSWADT 94 (3 May 2005); the Western Australia Equal Opportunity Tribunal case of Horne v Press Clough Joint Venture (1994) EOC ¶92-556; and the Queensland AntiDiscrimination Tribunal case of Lulham v Shanahan, Watkins Steel and others (2003) EOC ¶93-296; [2003] QADT 11. Workplace/occupational health and safety law Under WHS/OHS law, a corporation can be fined up to $3m and an individual up to $600,000 and/or up to five years’ imprisonment for not doing “everything reasonably practicable” to provide a workplace that is safe and healthy (ie in this context, free from bullying).

Case examples In February 2010, the owner, manager and bullying colleagues at the small Melbourne café where Brodie Panlock worked as a waitress were criminally convicted in the Melbourne Magistrates Court and fined a total of almost $340,000 for the sustained campaign of bullying that led to her suicide (see www.news.com.au/business/worklife/men-who-tormented-suicide-waitress-brodie-panlock-

fined/story-e6frfm9r-1225827798866). In 2012, a Victorian magistrate fined the owner of a laundry $50,000 with $50,000 costs for two years of what he described as “disgusting and appalling” psychological and verbal bullying of his employees. This ranged from telling a woman she should have been drowned at birth, to calling another woman “porky”, “wog” and “a big fat bush pig”, to threatening to dissolve employees in acid, to telling a woman a rapist was waiting for her, to saying all women were dogs who were only good for one thing, to threatening to lock staff up with a dog, to striking employees’ desks with sticks, to throwing items. See www.theage.com.au/victoria/staff-found-boss-bullying-attacks-harrowing20121205-2avwc.html and www.theage.com.au/victoria/appeal-fails-in-high-water-mark-ofworkplace-abuse-20130815-2rzi3.html. In a case heard by the NT Work Health Court, a former policewoman was awarded $99,000 for mental injury as a result of long-term bullying, including unreasonable disciplinary action, taken by a female supervisor whose sexual advances she had previously rejected. (See www.abc.net.au/news/2011-07-13/20070713bully/2793590 and Barnett v Northern Territory of Australia [2010] NTMC 070 at www.nt.gov.au/justice/ntmc/judgements/2010NTMC070.htm.)

Common law Workers who have suffered significant physical or psychological damage have been increasingly engaging lawyers (many of whom take on such cases on a “no win, no fee” basis) to initiate claims under common law. Many such cases are settled out of court. If not, the amount of money that may be ordered to be paid to a bullying victim by an employer or anyone else found legally liable for negligence is up to the relatively high cap listed in the particular state or territory where the damages are being sought. Alternatively, the employer may have to pay substantial damages for a breach of an actual or implied contract term.

Case example McDonald v State of South Australia In McDonald v State of South Australia [2008] SASC 134 (21 May 2008), a teacher was awarded almost $400,000 for a breach of the implied common law term of “mutual trust and confidence”. See also the case examples in the boxes at the start of ¶50-010, the end of ¶50-020 and the start of ¶50050.

Employment/Industrial relations law Under employment/industrial relations law, an employer may have to reinstate an employee where a bullying-related dismissal or constructive dismissal (ie where the employee resigned because of bullying) is ruled as unfair. Or, the employer may have to pay the employee lost salary and associated costs, or pay a fine for adverse action.

Case examples Applicant v Respondent; Mr Bove Ulysse PR555329 In the case of Lebsanft v Oakey Abattoir Pty Ltd [2011] FWA 3717 (23 June 2011), the Fair Work Australia (FWA) Commissioner, in finding a dismissal for bullying unfair, said the employer had reached a hasty and unsustainable conclusion about who had been involved in booing at and making up claims about another worker. He also took into account the fact that management had not taken

any action about previous similar incidents they were aware of and, therefore, had not been properly enforcing their Workplace Harassment and Bullying Policy. Helen Lyberpoulos v Reidwell Investments BT Pty Ltd T/A Coco Cubano Blacktown In the case of Helen Lyberpoulos v Reidwell Investments BT Pty Ltd T/A Coco Cubano Blacktown [2015] FWC 4256 (10 July 2015), the Fair Work Commission awarded an assistant restaurant manager $36,267 in compensation for unfair dismissal — because of the intimidatory and aggressive behaviour of her manager. For example, he demanded she return her uniform shirt during the middle of a shift leaving her inadequately dressed for a cold winter’s night. He dismissed her in an offensive and aggressive manner that demonstrated a lack of ordinary decency and good manners by calling her a bitch and threatening that her entitlements would not be paid if she bad mouthed him.

On the other hand, those dismissed for bullying will have their unfair dismissal claims rejected as long as their dismissal is ruled as having been valid in the circumstances and the dismissal process itself was conducted in a fair and reasonable manner.

Case examples Reedy v Global Cranes Pty Ltd In July 2011, a woman, dismissed for spreading malicious rumours that her male managing director was having a sexual affair, had her claim rejected by FWA (see Reedy v Global Cranes Pty Ltd [2011] FWA 3037). Anning v Virgin Australia Airlines Pty Ltd In October 2012, a female safety specialist operations manager (dismissed by Virgin Australia for bullying) also had her unfair dismissal claim rejected by FWA. In the case of Anning v Virgin Australia Airlines Pty Ltd [2012] FWA 8414, FWA found the behaviour that merited dismissal included belittling others’ work, waving her arms in the air unnecessarily, engaging in loud and boisterous behaviour, speaking over other people, being opinionated and quick to express her view, storming off if she didn’t like someone’s response, banging her fists on the table, upbraiding others for noise (despite making much noise herself), and generally making it impossible for constructive discussion to be able to occur when she was present.

Despite the fact that such behaviour was ruled in the case immediately above as meriting dismissal, many of us know of employers who put up with similar behaviour — sometimes out of misplaced fear about the extent of the protection afforded by the unfair dismissal provisions of the law. Other employers see behaviour such as that mentioned in the case immediately above as simply a tough management style, or as a personality trait they have no way of controlling or no right to control. The behaviour is seen as something the other workers need to learn to manage, not, (as it needs to be), as something management needs to manage. How often have you heard a phrase such as — “Don’t worry, it’s just the way they are”? Yet, what is actually happening is bullying with all its potential adverse results. Since 1 January 2014, an employer subject to the FW Act may be ordered to take specific steps to stop bullying and may be subject to a penalty if they fail to follow the terms of a FWC order to stop bullying. At the time of writing, (November 2015), the FWC had not made many formal orders. However, the following give some idea of the types of “bullying order” decisions made by the FWC up to that point.

Case examples

Applicant v Respondent; Mr Bove Ulysse PR555329 The first substantive bullying order made by the FWC was revoked in December 2014 after the worker who had complained about bullying by her male colleague reported that their workplace conflict was now negligible. The revoked FWC order of 10 September 2014 Applicant v Respondent; Mr Bove Ulysse PR555329 amended the FWC orders granted by consent six months earlier. The revoked September 2014 order included several restrictions — that the person who had applied for the order must not arrive at work before 8.15 am, and that the person complained about must not exercise on a balcony in front of or near the desk of the person who had applied for the order, must not make any comments about the applicant’s clothes or appearance, must not send any non-work related emails to her unless they were also sent to two other named employees, and must not send any text messages or call her on her personal telephone unless there was a work emergency, and finally must not refer to her work ability or job performance without notifying the same two named employees. James Willis v Marie Gibson: Capital Radiology Pty Ltd T/A Capital Radiology; Peita Carroll In the case of James Willis v Marie Gibson: Capital Radiology Pty Ltd T/A Capital Radiology; Peita Carroll [2015] FWC 3538 (22 May 2015), the FWC decided not to make a bullying order because the employer reformed its behaviour following the FWC’s prior ruling that it was bullying for two managers to arrive unannounced to berate a new radiographer before initiating disciplinary proceedings. The employer’s reforms included withdrawing the disciplinary action, ensuring the two managers no longer directly interacted with the radiographer and using more senior managers to properly and fairly follow its management procedures in relation to the bullied employee. CF In the case of CF [2015] FWC 5272 (5 August 2015), the FWC issued the first stop bullying orders that were not made by consent of the parties. The employee victims of bullying and the manager who had bullied them were ordered not approach each other or attend the others’ business premises. The FWC also ordered the employer to more broadly address the organisation’s culture and “broader conduct within it” including establishing and implementing anti-bullying policies, procedures and training. The orders were to remain in place for two years. Mrs Rachel Roberts v VIEW Launceston Pty Ltd as a trustee for the VIEW Launceston Unit Trust T/A View Launceston; Ms Lisa Bird; Mr James Bird A real estate agency had a bullying order made against it even though it had implemented a new anti-bullying policy and manual because the FWC did not believe the agency truly understood that the behaviour complained of constituted bullying. That behaviour included “unfriending” on Facebook, not saying good morning, delivering work to other staff rather than the applicant, belittling and humiliation and speaking abruptly to her. See Mrs Rachel Roberts v VIEW Launceston Pty Ltd as a trustee for the VIEW Launceston Unit Trust T/A View Launceston; Ms Lisa Bird; Mr James Bird [2015] FWC 6556 (23 September 2015).

Legal costs generally In all cases, compensation for distress and suffering can be higher than one might expect due to a legal principle drawn from criminal law called the “egg shell skull” principle. This principle means that, if the victim happened to be more sensitive to the behaviour than someone else would be, those found to be legally liable may have to pay for the victim’s higher than anticipated level of suffering/distress (see the New South Wales Equal Opportunity Tribunal case of Judge v Durovic (1996) EOC ¶92-789). In addition, most employers defending any legal claim will also have to pay for the cost of hiring lawyers. If they then lose the case, they may also be made to pay the legal costs of the other party or parties. Costs to the individuals involved Some victims of workplace bullying never recover and are never able to work effectively again. Most victims suffer short to middle-term losses, such as:

• stress-related ill health (physical, psychological and/or psychiatric) • possible aggressive or violent responses • having to move jobs within or outside their current organisation to get away from the bully and/or the memory of what happened • relationship and other crises at home (eg turning to drink or drugs, relationship breakdown and so on) which can be directly attributed to the bullying-related stress they are suffering at work • loss of self-esteem • loss of trust in others, and • reduction in their work productivity and/or capability. Witnesses and team mates may suffer similar losses to those of the victim(s), as they worry about what they should do, watch the bullies getting away with it, worry if they will be the next target, try to avoid becoming the next target, and/or get drawn into the battle between the bullies and their victim(s). Because of this, some may also have legitimate legal claims they can make against the employer and/or bully. Bullies may: • be spending a significant amount of time bullying, rather than getting on with their job • have work or personal issues that are causing them to take their frustration out on others at work (ie they may be bullying because they themselves are being bullied by someone else) • be in a job that is beyond them or need guidance or training to make them more competent at (eg supervising staff) • have low self-esteem, and/or • not have realised the effects of what they were doing, or may need counselling, or may even need psychiatric help.

¶50-040 Is bullying taking place in your workplace? It is a rare workplace that has no bullying. A lack of formal complaints does not mean there is no bullying. There are many reasons why people do not complain formally, for example: • fear of work-related reprisals • distrust of management • not wanting to be seen as a troublemaker • wanting to fit in • no adequate or trusted complaint-handling procedure • guilt that something they did encouraged the behaviour • not trusting their own judgment • low self-esteem • social conditioning • differing cultural values about what they think is acceptable behaviour, or

• a feeling that bullying is a normal part of that workplace’s culture, and is actively or implicitly encouraged by management. Bullying is likely to be happening in the following instances: • Employees do not respect or value the benefits of difference: For example, some may believe they have a right to behave as they wish, with no consideration for how others might feel about that behaviour. • There is a culture of fear: What happens if people make a mistake? Are they publicly castigated? Or are mistakes seen as opportunities for learning? What is the response if someone makes a complaint to management? Is it listened to and, if necessary, acted on fairly and appropriately? Or is it buried, laughed at, reflected back as the complainant’s problem, or turned into an opportunity to victimise the complainant for daring to speak out? • Line managers do not know how to supervise effectively: Do line managers need to bully (or think they do) to get the work done to the standard required? Do they bully without realising what they are doing? How many of them feel threatened by the abilities of those they supervise to such an extent that they feel they need to keep them in their place by bullying them? Are all line managers willing and able to prevent workplace bullying and intervene appropriately if they suspect, see, hear or are told about any bullying? • Unhealthy, as opposed to healthy, competition is encouraged or rewarded: Are people rewarded for trampling over others? Are individuals or teams publicly criticised when they do not do as well as others? • People are under-worked or under-supervised: As the saying goes, “the devil makes work for idle hands” and that may mean they are using their free time to bully others. • There is too much work or excessive supervision: Over-worked or stressed employees may take their stress out on one another using various forms of bullying behaviour. Excessive supervision can be a form of bullying in itself. • The performance appraisal system is capable of being abused: How easy is it for the performance appraisal system to be manipulated? • Structural or work process changes are happening: If so, how is this change being managed? Change, particularly where the outcome is uncertain, can lead people to behave in an overly competitive and bullying manner towards one another. It can also lead to fear of speaking out against bullying behaviour in case this leads to missing out on opportunities in the change or even job loss. • Work communication channels are unclear or easy to abuse: Are work communication channels well known and operating well? How easy is it for people to be deliberately excluded from them? • There is an otherwise unexplained increase in other employee-related issues: For example, there is an increase in employee turnover, absenteeism, sick leave, stress claims, transfer requests, productivity downturn, poor work quality, employee complaints, or employees behaving differently to their usual behaviour.

¶50-050 How to prevent bullying

Case example State of New South Wales v Garry Donald Jeffery & Ors Mr Jeffery’s life at work was made miserable by his police-employed supervisor at a Police and Community Youth Club. This man found fault with Mr Jeffery’s work (which was not substantiated),

abused him in vulgar terms, frequently threatened him with dismissal so that (in his terms) his family “would end up in the gutter”, and made disparaging remarks about Mr Jeffery’s relationship with his wife. Mr Jeffery became highly stressed and anxious and ended up in hospital for stress-related reasons. He ultimately lost his job because of lengthy absences due to his stress-related problems. The New South Wales Court of Appeal upheld his original award of $35,000 damages (although it stated that the figure was low) because it was clear that “this was a concerted course of conduct” (see State of New South Wales v Garry Donald Jeffery & Ors [2000] NSWCA 171).

Bullying can be prevented in a similar way to unlawful harassment (ie behaviour that is against antidiscrimination/equal opportunity law), using much the same prevention methodology. It is foolish and arguably legally, ethically and financially negligent to implement a harassment prevention program and not tackle bullying at the same time. Bullying and harassment 12-step prevention program The following 12-step prevention program can be used in any organisation to help prevent both bullying and harassment. Step 1 — Get active support from the top Use the arguments contained in this chapter, plus the results of any survey conducted (see Step 2), to secure the board’s/CEO’s/senior management’s approval that something needs to be done. Those at the top of the organisation (including those in human resources (HR)) must: • “walk the talk” • follow the new behaviour rules themselves • not behave in a bullying manner — either intentionally or unintentionally • actively promote the importance of everyone else following the expected behaviour rules, and • follow through with an appropriate level of disciplinary action as and when appropriate. If these points are not followed, the entire prevention program will fail because employees will soon realise the CEO and/or senior management and/or HR are not serious about it. Nothing sends a more effective message that management is serious about getting rid of bullying than employees being disciplined or dismissed for it. Step 2 — Analyse the risk of bullying and harassment The analysis needs to determine the following: • How much and what types of bullying and harassment are happening? You can do this by checking formal and informal complaints statistics, conducting climate surveys and/or focus group discussions, and conducting exit interviews. The results of this exercise will also provide a benchmark from which to measure how well your prevention program succeeds — see Step 12. Note that climate surveys and focus group discussions must be done in a way that will encourage honest feedback. Employees must be confident that they will not be victimised or punished for what they report. Surveys can be collected from the entire workplace or a representative sample but must be conducted anonymously, and the results from surveys and focus group discussions must be presented in a way that does not reveal any identifying material. All staff should then be given the collated results of these surveys/discussions with solid information about what is going to be done and by when, to resolve any problems that have been identified in the survey. Of course, these actions must then happen. • When is bullying and harassment most likely to occur? Who is most likely to bully/harass? Who are

they likely to target? Employers can assess the organisation against the list of risk factors common to many organisations listed at ¶50-040. Employers should also consider whether their organisation, or a particular part of it, has any additional or particular risks. See, for example, the risks listed in Step 6. • What steps has the organisation taken so far to remove (or at least reduce) these risks? Would these steps satisfy the courts? In other words, have all reasonable steps been taken to prevent bullying and harassment from occurring and to deal effectively with any bullying or harassment that occurs? Employers may find the organisation needs to take many of the remaining steps listed in this section. Step 3 — Develop or revise both the written bullying and harassment prevention policy and the use of IT/social media policy Most organisations have an anti-harassment policy in place (as required by anti-discrimination/equal opportunity case law) or a more general code of conduct. Some of these documents mention bullying, but very few say enough to be able to show that everything reasonably practicable has been done to prevent it. It is sensible to have one policy that deals with all the different forms of bullying and harassment, rather than having two or more policies. It must be written in clear and simple English that everyone in the organisation will be able to understand. In addition, if there are employees from non-English-speaking backgrounds, or with visual impairments or low literacy levels, it is advisable to translate the policy, have it written in Braille or install software that can read the policy to the employee. The policy should include: • its rationale • what is and is not acceptable behaviour towards all employees, all customers/clients and all other workplace visitors • the rights of all employees • the responsibilities of different levels of employees, including what to do if they see, hear or otherwise find out about any bullying or harassment happening to someone else. This latter point is very important. First, it is rare for no-one but the victim to know what is going on. Second, it is generally much easier for bystanders to take appropriate action than it is for victims. Third, bystanders who do nothing are essentially giving permission for the bully to continue. Bystanders who are enabled and prepared to act appropriately to intervene to stop the behaviour, support the victim, and/or refer the matter to an appropriate internal manager or complaint handler (as appropriate to the situation), are one of the most effective tools in preventing bullying/harassment from being able to become entrenched. These instructions should also appear in the prevention policy (see Step 4). In brief, bystanders should be instructed to intervene to stop the bullying/harassment and/or to help prevent it from being able to continue. They must then either resolve the problem fairly and appropriately themselves, or ensure it is referred to the appropriate person for resolution — in line with the steps in the complaints procedure (see Step 4). For more detail about how bystanders should respond see Step 8 • a brief description of how any bullying or harassment complaints will be dealt with (in a way that encourages people to come forward), and a cross-reference to the written complaints procedure — see Step 4, and • what might be the end result of bullying or harassing someone, or of lodging a false or mischievous complaint about bullying or harassment. Given the prevalence of cyber-bullying (ie using the internet, intranet, email, text messaging, social media (eg Facebook) and so on), to bully or harass, it is also critical to have a good written policy on the use of the organisation’s electronic/IT resources and the use of social media more generally. Social media is covered in Chapter ¶24. Clearly, it makes sense for a policy on the use of social media to be much more extensive than how to

use these resources without bullying/harassing anyone. But, insofar as bullying and harassment are concerned, this policy should include: • its rationale • a list of all the organisation’s electronic/IT resources covered by the policy (eg hardware, software, laptops, notebooks, tablets, phones, intranet system(s), internet system(s), the organisation’s wifi and so on) in language that non-IT people can understand • information on when the policy applies (eg whenever the organisation’s electronic/IT resources are being used — whether within work time or not, whether on site or not, whether for work purposes or not) • what is and is not acceptable in relation to: – using the resources generally – internet/intranet access – emailing – printing – forwarding – storing – accessing, or – adding to social media sites and so on (Note: It is particularly important to list (with as much precision as possible) all the things that must never be done when using any of the organisation’s electronic/IT resources or when accessing or adding to social media sites.) • the responsibilities of different levels of employees, including what to do if they see, hear or otherwise find out about someone else misusing these resources/breaching this policy • a brief description of how any suspicions or allegations of misuse will be dealt with, and a crossreference to the written complaints, and/or disciplinary procedures (see Step 4), and • what might be the end result of being proven to have breached the policy. Step 4 — Make sure there is a fair and trusted, written complaints procedure Most complaints/grievance procedures in awards and agreements are inadequate to handle the sensitive issues of bullying and harassment. Bullying/harassment complaints must be encouraged, rather than buried, and must be handled in a way that follows “procedural fairness” or “natural justice” principles. This means that both the complaints process and the decision made at the end of the process must be scrupulously fair. The legal test that applies to the decision itself is the civil law test of “on the balance of probability”, not the criminal one of “beyond reasonable doubt”. This means, when making a decision at the end of a formal investigation, the evidence does not always have to be watertight. When the stories conflict, there do not necessarily have to be direct witnesses or other forms of definite evidence supporting one side or the other to be able to make a finding that something did or did not happen. Surrounding evidence, what seems most likely, the consistency of each party’s story, who was told what (by any of the parties), at what point about and what they say happened (and so on), can and should be taken into account. To enable the effective handling of bullying/harassment complaints, a written complaints procedure should address the following:

• The procedure should be written in language that is easy to understand. • It should provide reasonable, realistic time limits for each stage of the process. • The procedure should provide guidance on when and precisely how targets of bullying/harassment might be able to resolve the matter themselves by, for example, talking with the perpetrator. For example, this might be appropriate when the bullying/harassment has been relatively low level and the target thinks there is a good chance that talking with the person will resolve the problem. It should provide guidance on precisely what they should do to get the best result, how to prepare, what to say and so on, and state what the target should do if this conversation does not fix the problem. • It should strongly encourage employees, who cannot or do not want to attempt to resolve a matter themselves, to do something, rather than nothing. One of the main problems with bullying/harassment is that the “victim” quite understandably gives up. So, the more information an employer can provide within the complaints procedure to encourage the victims and targets of bullying to take some action, rather than no action, the better. At the very least, employees should be encouraged to get themselves as well informed as possible about their real options, by obtaining some independent and expert/professional advice or support around what to do if they think they have been bullied and they are unable to fix it themselves. In the procedure, employers can list potential internal and external sources of professional advice and support. It is important that the procedure states that they take some action before what is happening makes them unable to work, due to stress/illness and so on. • The procedure should provide an impartial and fair process by which management will resolve a complaint that is unable to be fixed by the affected person. For example, it should make it clear that: – both “sides” will get equal rights to tell their version of events, separately, before any decision is made about the best way of resolving it, and before any decision is made about whether witnesses need to be talked to, and – the person in charge of resolving the complaint will not be biased (or be seen to be so). • It should state that complaints are to be handled confidentially. Only those who need to know about any of the complaint details in order for it be resolved, or for the agreed outcome to be imposed, will be told anything about it or be able to find out about it. It should explain the individual responsibilities of complainants, respondents and complaint resolvers in relation to confidentiality and state that anyone who breaches these responsibilities may be disciplined. • It should state that management will do its best to ensure there is no victimisation, nor any unfair repercussions for anyone involved, including witnesses. This must then be enforced, and appropriate disciplinary penalties applied to any proven victimisation. • The procedure should provide a range of entry points (ie different types and levels of people to contact first), so everyone in the workforce is likely to feel comfortable in coming forward. This means there must be at least one trusted and carefully trained person outside each employee’s own hierarchy who can advise on, receive and/or help resolve complaints. • It should clarify that complaints do not have to be made in writing, as insisting on this would block some complainants from ever coming forward. In this connection, those complaints that need to be in writing (ie those that involve serious allegations that, if proven, could result in disciplinary action, and that therefore need to be able to be shown in writing to the other party), can be written up in statement form by the person in charge of resolving the complaint. The complainant can then be asked if they agree that the statement is an accurate representation of their version of events, and if so, be asked to sign the statement. • The procedure should set out precisely what steps will be taken, and in what order, by those who

resolve complaints. There should be separate, written guidelines for these people containing clear and detailed guidance on each of the steps they must take, including what to do if the complainant asks to remain anonymous or does not want them to do anything more. In relation to the latter point, case law indicates the organisation must investigate any allegation of bullying or harassment that could be disciplinary, if proven — even if the complainant is unwilling.

Case examples In the case of KW v BG Limited, DP & DF [2009] QADT 7 (21 April 2009) the tribunal found that the wishes of a complainant should not have been put ahead of the overriding responsibility of the employer to take control of alleged repeated, relatively serious sexual harassment claims. Swan v Monash Law Book Co-operative In the more recent case of Swan v Monash Law Book Co-operative [2013] VSC 326 (26 June 2013), a bullied retail worker was awarded almost $600,000 for management negligence despite the worker having initially told management she did not want them to act on the bullying.

• The procedure should explain what all line managers, all HR staff and all complaint resolvers must do if they suspect, see or hear any bullying or harassment occurring, or if they are told by someone other than the complainant that someone is being bullied/harassed. These instructions should also appear in the prevention policy (see Step 3). In brief, they should be instructed to intervene to stop the bullying/harassment and/or to help prevent it from being able to continue. They must then, either resolve the problem fairly and appropriately themselves, or ensure it is referred to the appropriate person for resolution — in line with the steps in the rest of the complaints procedure. For more detail about how bystanders should respond see Step 8. • It should ensure that complaint resolvers have the power to do this job. They must be practically capable of using that power, given the way the organisation functions. This means considering who will handle any complaints against senior management, board members or the CEO. These days, many organisations allow for the use of independent, external investigators for complaints that are complex or involve senior or powerful figures. Naturally, independent investigators must follow the same scrupulously fair organisational complaints procedure as internal investigators. • It should provide for all parties to the complaint to have access to additional support or advocacy (eg advice and support during the complaints process, interpreters, counselling, union and legal representation). • The procedure should set out the types of resolutions that may be expected. It is also important that: – resolutions are consistent across the organisation, no matter what level a proven bully/harasser comes from, or how important their work is to the organisation – resolutions match what case law indicates is appropriate for the particular level of the policy breach – it is made clear when it is appropriate for management to resolve a complaint informally (ie through conciliation, mediation or negotiation) and when it is not appropriate to do this, but instead to fully investigate the matter and then make a management decision about how to resolve it (Some less serious cases of alleged unintentional bullying or harassment may be suitable for informal resolution. Cases of alleged deliberate, repeated, or criminal types of bullying or harassment, including those allegedly or apparently capable of creating a health or safety risk, should always be resolved using a full investigation. Indeed, any allegation, if proven, ought to result in disciplinary action (unless there are mitigating circumstances). These more serious allegations should never be resolved using an informal method — no matter what the

complainant wants.) – it provides for all relevant evidence (and no irrelevant information) to be considered, particularly when the complaint could result in disciplinary action – it makes it clear that having no independent proof does not necessarily mean the complaint will not be decided in that person’s favour (as all the surrounding circumstances will be taken into account), and – it provides for any mitigating factors or previously proven (and only proven) policy breaches or work problems to be considered before the resolution is determined. • Indicate in the procedure who will keep complaint/grievance records and who will have access to these records. It is best to keep full records of the nature of the complaint, the parties involved, and the outcomes of all complaints in a central, confidential electronic complaints filing system. Doing this means: – there are central/organisational records in case any decision is externally challenged – employees who have previously been involved in such complaints can be tracked – the types of alleged bullying/harassment and the workplace location of complaints can be monitored, and – complaints can be monitored to see if they are being handled fairly, consistently and appropriately. A record should only be kept on someone’s personal file if they themselves were disciplined in relation to an incident, unless they ask for a record to be kept on their file. For example, people who have been accused of something, but later are found to be innocent, might ask for this. • Unless the organisation is very small, provide an internal appeal system to reduce the likelihood of people needing to make external complaints against the organisation. • As a matter of natural justice, list in the procedure where to go for independent advice or to pursue a complaint when dissatisfied with the internal resolution. Step 5 — Include bullying and harassment prevention and (where appropriate) effective complaints management in position descriptions or statements of duties, and in performance assessment core competencies or criteria All employees need to understand that the way in which they prevent bullying and harassment (and for line managers, the way in which they manage any suspicions of bullying or actual complaints of bullying), will be monitored in the same way the rest of their work performance is monitored. A good way of doing this is to include the need to comply with the bullying and harassment prevention policy and complaints procedure in statements of duties and in individual performance assessment criteria. Step 6 — Provide an appropriate physical and interactional environment Inappropriate pictures, calendars, cartoons, verses, computer screen savers, emails, graffiti and so on, create an intimidating atmosphere and make the organisation potentially legally liable. All potentially offensive or intimidating material must be removed from the workplace, and the employee(s) who placed the material there must be dealt with effectively and appropriately — in line with the bullying/harassment policy and complaints procedure. All employees need to have clear instructions (preferably every time they open the organisation’s computer system) about not using the organisation’s electronic/IT system to bully or harass others. It is also important to consider whether the workspace layout or work processes are such that they make it easier for bullying and harassment to occur. Ask employees for help in determining when bullying and harassment is most likely to happen, and what can be done to reduce the likelihood of it happening in

these situations. For example, consider the following questions: • Are the work screens so high that no one would know what was going on behind them? • How physically close do people have to get to one another in standard work procedures in order to get the work done? • Are people forced to share rooms when away on work trips? • How much alcohol is consumed during work social events? Is someone (in a sufficiently senior position) able to monitor consumption and step in if things appear to be going “over the top”? • Are there particular stress points in the work cycle, or particular work tasks that are more likely to result in bullying or harassment? If so, what could be done to reduce the likelihood of bullying or harassment occurring? • Could any employees be subjected to bullying or harassment by any of the organisation’s customers, clients, board members and so on? What procedures need to be put in place to protect employees from any such abuse? Step 7 — Distribute the bullying and harassment prevention policy, the use of electronic/IT resources and social media policy and complaints procedure to all employees, and continue to promote these policies in a variety of ways If employees do not know about their organisation’s policies and complaints procedures, the organisation could be held legally liable should there be an external, proven complaint.

Case examples Rugema v J Gadsten Pty Ltd (t/as Southcorp Packaging) In the Human Rights and Equal Opportunity Commission case of Rugema v J Gadsten Pty Ltd t/as Southcorp Packaging (1997) EOC ¶92-887, the employer was found liable in part because they had not instructed staff how to report complaints of racial abuse, and had no complaints system or guidelines about how to investigate complaints. Malinov v South Pacific Tyres In Malinov v South Pacific Tyres (1997) HREOCA 53, the employer was found liable for sexual harassment, in part because there had been inadequate communication and no training about their sexual harassment policy.

Policies and procedures should (ideally) be distributed together with some form of training session, or with a notice indicating when such sessions will be held (see Step 8). This information should also be distributed to all new employees when they start with the organisation. Alternative means of regularly promoting the new policies and complaints procedure should be considered to ensure all employees are regularly reminded of the existence of these documents and implications for them personally. Step 8 — Train all employees in bullying and harassment prevention, and in how complaints must and will be handled Case law indicates that, if employers want to be able to show they have taken all reasonable steps to prevent bullying and harassment, they must train all current employees and new employees (eg during induction) in their bullying and harassment-related policies and procedures. Employers must also provide regular refresher training and information sessions for those employees who have been with the organisation for longer periods of time. See for example the case of Malinov v South Pacific Tyres

referred to in Step 7. Employee training should include (at least) the following pieces of information: • what bullying and harassment is (and is not), and how to be able to assess the risk of different types of behaviour • why bullying and harassment are workplace and management problems • specific prevention and intervention responsibilities. For line managers, this would refer to their role in assessing the risk of bullying/harassment and then removing or reducing that risk. Everyone (line managers included) must also know what to do if they suspect, see, hear or are told about any bullying or harassment happening to someone else. As indicated earlier, the importance of bystanders being willing and able to act appropriately to prevent bullying/harassment from becoming entrenched cannot be overestimated. If bystanders do not act appropriately and effectively, the organisation’s bullying/harassment prevention program will fail, just as it will if the complaints procedure does not work effectively. Bystanders should be provided with specific instructions and training along the following lines: – Bystanders who have management or supervisory authority over the perpetrator need to be trained in the need to intervene effectively and immediately to stop any suspected bullying/harassment or any bullying/harassment they personally see or hear and in exactly how to do this. They also need to be trained in precisely what they need to do to ensure the behaviour is effectively resolved and less likely to happen again. – Bystanders who do not have the appropriate management or supervisory authority over the perpetrator need to be trained in how to consider which one of the following three actions to take and then be willing and able do this — (1) say they don’t like the behaviour, with the aim of stopping the bullying then and there, or (2) talk privately with the perpetrator, with the aim of convincing them to stop it and preferably also apologise to the target/victim of the behaviour, or (3) talk privately with the target/victim of the behaviour and offer them support and advice, with the aim of convincing them either to take direct action themselves, such as by talking with the perpetrator themselves, or to come forward to management using the complaints procedure with the bystander as a witness. If a bystander cannot convince the target/victim to do either of these, the rule should be that the bystander must now themselves refer the matter to management so that management can then take effective action — the first step of which would be for the relevant management representative to talk with the victim/target to check what they say has happened and then to provide appropriate support to ensure any bullying is effectively and fairly stopped and resolved • what employees should do if they are personally bullied or harassed (ie from self-help strategies through to getting advice and, if necessary, lodging a complaint as detailed in the organisation’s complaints procedure (in line with the information given at Step 4). The focus here should be on the critical importance of the victim/target taking at least one effective step to help stop the bullying from becoming entrenched, rather than suffering the (probable ongoing and escalating) consequences of being bullied, including not being able to work properly, wanting to resign, getting sick and so on • what will happen if an employee is suspected or accused of bullying or harassment, and • how the complaints procedure works and why it is important to trust it and use it when necessary, plus practical skills and/or “hand-holding” training for those who have a role in resolving complaints. Everyone needs to be willing and able to use and follow the complaints procedure. There is no point in having a complaints procedure, however good it is, if people are unwilling or unable to use it or follow it.

These days, many organisations use online training rather than face to face training as a means of saving money and time. While well designed online training can sometimes be effective, consideration needs to be given to the particular nature of this subject. Some, if not many, employees will be required to change the way they have behaved up to now — as perpetrators, victims and/or bystanders. Getting them willing and able to do this via online training is a tough ask. Well designed and well conducted face to face, practical and strategic training, using large and small group discussions about realistic situations, is likely to be considerably more effective in achieving the ultimate goal of preventing bullying, than online training where the individual interacts on their own with a computer (no matter how cleverly tailored that online interaction is). Further, if any alleged bullying or harassment is claimed externally, the organisation may be asked to demonstrate what their training covered, and in what manner, to escape or reduce legal liability for any bullying/harassment that is found to have occurred. Step 9 — Ensure all line managers are professionally competent people managers As indicated previously, bullying can be committed by line managers. In addition, bullying and/or harassment often occurs because a line manager allows it to occur. Ensuring that line managers always act appropriately themselves and can also effectively prevent bullying/harassment from being able to occur in their team is another key component in the success of the prevention program. If line managers do the wrong thing, the program will fail. To avoid such failure: • develop a series of core competencies and performance assessment criteria for people management which, at least in part, reflects the type of line management behaviour expected in relation to bullying and harassment prevention • appoint new line managers only if they have good people management skills or the potential to develop such skills (If this is not done, they are likely to deal inappropriately with suspected or actual bullying situations, and be more likely to resort to bullying themselves.) • develop ways of specifically testing for people management skills during the recruitment process, ensuring that reliable information is obtained about any past line management performance, from both their own line managers and people they have supervised • regularly assess line managers against the organisation’s people management core competencies and performance criteria • provide professional, practical people management training for existing line managers, as necessary, so they are capable of managing people in a professional, non-bullying manner, and can deal appropriately and effectively with any suspected or actual bullying • do not reward line managers in any way if they are suspected of achieving their results through any form of bullying or harassment • closely monitor and, if necessary, fairly investigate (using the complaints and/or disciplinary procedures) any line manager where there is good reason to suspect they use bullying or harassment tactics. Take action where it is proven that a line manager achieves their results through bullying/harassment. Provide counselling, train them in appropriate non-bullying/harassing people management practices and, if appropriate (given the level and extent of their bullying/harassing behaviour, whether they have been counselled before and whether or not it was deliberate), discipline them, move them out of a people management position or dismiss them, and • consider establishing awards, nominated by employees, for the best people manager in a given period. Step 10 — Monitor the type, amount and standard of work expected from everyone Everyone must have a clear idea of the type, amount and standard of output that is expected of them and of everyone else in their team. This should be made clear in regularly updated job descriptions, individual work plans and performance criteria. This helps to prevent:

• line managers being able to bully people to do more than is reasonable or possible • line managers being able to bully people by unreasonably or constantly changing the goals and outputs required • employees having too much time when they have not enough to do (and, therefore, time they can easily fill with bullying or harassing activities), and • employees being bullied about their work performance by their line manager or team mates. It is also vital to closely monitor any performance appraisal system that relies solely or mainly on the line manager’s opinion. Step 11 — Plan ahead, paying particular attention to events that could lead to bullying or harassment if not properly managed When making changes at work, it is important to not only plan the technical aspects of the change, but also to think about the people aspects and particularly whether bullying or harassment could become an issue. If bullying or harassment are potential outcomes, the situation should be managed to reduce the likelihood of such situations occurring, and to ensure immediate and appropriate action is taken if such activities do occur. For example, the following types of situations could lead to bullying or harassment if not properly managed: • the introduction of different types of people to the organisation or the team (eg through direct recruitment or via a merger/acquisition) • changes to the structure of the organisation or team, or to the work or work processes of any team or individual, or to the nature of the products/services offered to clients or customers, and • policy changes or management decisions that appear to give greater benefits to some employee or client/customer groups than others. Step 12 — Monitor the effects of prevention strategies and re-target as necessary There are various ways of monitoring the effects of prevention strategies following implementation: • Keep (confidential) statistical records of bullying and harassment complaints. • Keep a general eye on workplace behaviour, morale and cultural climate. • Gather other useful information and statistics to help determine where there might be problems (eg retention and turnover statistics, sick leave, and transfer requests can provide useful information). • Fully investigate anything that indicates that bullying or harassment might be occurring. • Ensure regular management information exchange and contact with employees who are likely to be targeted for bullying/harassment. • Conduct an exit interview with anyone who leaves. • Conduct regular climate surveys.

¶50-060 Conclusion Bullying has serious ethical, financial and legal implications for employers. It is management’s responsibility to prevent bullying, and to deal appropriately with people who are proven to have bullied others in the workplace. Bullies are never worth more to the organisation than the damage they cause. Further information

Agencies Anti-discrimination and equal opportunity agencies: The federal agency called the Australian Human Rights Commission is located in Sydney. There is also an anti-discrimination/equal opportunity agency for each state and territory. WHS/OHS agencies and workers compensation agencies: There is a national agency, Safe Work Australia, and then a separate agency in each state and territory responsible for WHS/OHS issues (eg WorkCover in New South Wales). In addition, Comcare is responsible for workplace safety, rehabilitation and compensation of Commonwealth public servants. Employment/Industrial relations agencies: The federal and relevant state or territory’s Employment/Industrial Relations Department, and the federal Fair Work agencies or relevant state or territory Industrial Relations Commission can also provide information. Other useful points of contact These can include: • employers who operate in the same or similar field • employer associations • professional associations, and • the Australian Council of Trade Unions (ACTU). Other useful references (including law and case law) The websites of the various government departments contain useful Australian law and case law, or links to where this may be found. The Australian Legal Information website (see www.austlii.edu.au) contains all federal, state and territory laws and many useful cases. CCH Australia Limited (see www.cch.com.au) has a range of loose leaf and online reporting services and books on law and practice in relation to equal opportunity, HR, industrial relations and WHS/OHS. Many other websites also provide research and background information on workplace bullying. Some significant websites, which will in turn lead to other related websites, information and training resources, include: • www.beyondbullying.com.au (Australia) • www.bullying.com.au (Australia) • www.bullyonline.org (United Kingdom), and • www.workdoctor.com (North America). 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 Lesbian & Gay Research 1999, The pink ceiling is too low, The University of Sydney. Australian Council of Trade Unions 2001, Being bossed around is bad for your health — the workplace is no place for bullying. See www.actu.org.au. Caponecchia C and Wyatt A 2011, Preventing workplace bullying, Allen & Unwin, Crows Nest. Ferris GR, Zinko R, Brouer RL, Buckley MR and Harvey G 2007, “Strategic bullying as a supplementary balanced perspective in destructive leadership”, The Leadership Quarterly, vol 18(3), pp 195–206. Field E M 2011, Strategies for surviving bullying at work, Australian Academic Press.

Lowe A 2001, Bullying and Harassment: Risk Prevention Guidelines for Employers, Anthea Lowe & Associates, Sydney. McCarthy P 2003, “Editorial: A letter to HR managers on workplace bullying”, Journal of Occupational Health and Safety, Australia and New Zealand, vol 19(4), pp 307–311. McDonald P, Backstrom S and Dear K 2008, “Reporting sexual harassment: claims and remedies”, Asia Pacific Journal of Human Resources, August, vol 46(2), pp 173–195. —— and Flood M 2012, Encourage. Support. Act! Bystander approaches to sexual harassment in the workplace, June, Australian Human Rights Commission, see www.humanrights.gov.au/publications/encourage-support-act-bystander-approaches-sexual-harassmentworkplace-2012. Michael R 2004, “Those who can, do. Those who can’t, bully! Workplace bullying”, Work Safe 2004 Forum, Perth. Parliament of the Commonwealth of Australia 2012, Workplace bullying — we just want it to stop, see www.aph.gov.au/parliamentary_business/committees/house_of_representatives_committees? url=ee/bullying/report.htm. Productivity Commission 2010, Performance Benchmarking of Australian Business Regulation: Occupational Health and Safety, 6 April. Public Service Commission NSW, 2012 People Matter Employee Survey. —— 2012, State of the NSW Public Service Report, see www.psc.nsw.gov.au/About-the-PublicSector/State-of-the-Sector-Report-2012. Riley D and Duncan D 2007, “Survey of Australian Teachers”, The Daily Telegraph, 30 November. State Services Authority 2006, People Matter Survey 2005. Strandmark M and Hallberg LR 2007, “The origin of workplace bullying: experiences from the perspectives of bully victims in the public service”, Journal of Nursing Management, vol 15, pp 332–241. Working Women’s Centre South Australia Inc (in conjunction with WorkCover (SA) and SA Health Unit) 1998, Workplace Bullying Project, Adelaide.

51. MISLEADING OR DECEPTIVE CONDUCT IN EMPLOYMENT Editorial information

Originally written by Rohan Price Assistant Professor, School of Law, City University of Hong Kong Expanded and updated in 2016 by Rufina Cheung, Wolters Kluwer Writer

¶51-010 Misleading or deceptive conduct in employment — introduction Background to jurisdiction in employment context Using the avenues of legal redress under the misleading or deceptive conduct legislation is a developing area in the employment context. These avenues provide options to those who have relied on misleading or deceptive conduct and suffered detriment but are not able to overcome the hurdles of establishing a claim in contract. The increase in litigants utilising the misleading or deceptive conduct legislation parallels the demise of alternative causes of action, particularly for employees — eg: • the restrictions of state unfair contract jurisdictions (first through jurisdictional thresholds such as income caps, and then through the takeover of industrial relations law by federal legislation which has closed those jurisdictions to the vast majority of Australian employees), and • the decision of the High Court of Australia that there is no term of mutual trust and confidence implied into all Australian employment contracts as a matter of law (Commonwealth Bank of Australia v Barker [2014] HCA 32). Main scenarios legislation used The main scenarios in the workplace context in which the misleading or deceptive conduct provisions have been used are: • consumers initiating actions against employees (and employers) when misled by the employee (summary table at ¶51-040) • employees initiating actions against recruiters or employers when misled at the recruitment stage (summary tables at ¶51-100 and ¶51-110), and • in a limited context, employees initiating actions against employers when misled during employment (such as renegotiating employment contracts) (summary table at ¶51-110). Establishing whether there is a remedy under the legislation is not without its difficulties and this commentary does not cover all aspects of the jurisdiction. However, by highlighting important issues, it assists the employer to determine the key circumstances in which its conduct and the conduct of its employees are likely to be caught by the prohibitions. This information can be used to educate employees about their obligations.

Key points • General prohibition: There is a general prohibition against a person (including employees, employers and recruiters) engaging in misleading or deceptive conduct “in trade or commerce”. – In trade or commerce: Not all conduct in the course of a company’s overall business is covered — only conduct which itself has a trading or commercial nature: ¶51-030, ¶51-040, ¶51-050, ¶51-090, ¶51-150, ¶51-160, ¶51-170. – Internal communications: Generally, internal communications intended for an internal audience will not be “in trade or commerce”: ¶51-030. • Specific pre-employment prohibition: A person (such as an employer or recruiter) must not, in relation to employment offers, engage in conduct that is liable to mislead job seekers about the availability, nature, terms or conditions of the employment; or any other matter relating to the employment. • The table at ¶51-020 compares and contrasts the general prohibition and the specific prohibition. • Employees: Employees can be personally liable for misleading or deceptive conduct in trade or commerce, eg misleading or deceiving their employer’s customers depending on the level of their involvement in the conduct: ¶51-040, ¶51-050, ¶51-055. • Employers: Employers can be liable for misleading or deceptive conduct in trade or commerce. An employer can also be liable to their employee for misleading or deceptive conduct in precommencement negotiation or renegotiations of employment conditions: ¶51-110, ¶51-120, ¶51-130, ¶51-160, ¶51-170. • Recruiters: It is illegal for a recruiter to make false or misleading statements to a prospective employee or to employers (eg falsely representing that they performed a background check on a candidate): ¶51-100. • Future matters: A representation about the future is taken to be misleading if the maker of the representation does not have reasonable grounds for making it: ¶51-035. • Remedies and penalties: Different remedies and penalties are available depending on whether the general prohibition or the specific prohibition was breached. See the table at ¶51-020.

¶51-020 Two prohibitions against misleading conduct in employment There are two prohibitions against misleading or deceptive conduct which are relevant in the employment context: • a general prohibition against misleading or deceptive conduct in trade or commerce, and • a specific prohibition relating to employment offers. Employers should note that whether there was an intention to mislead or deceive is not relevant to whether these prohibitions are breached (although an intention to mislead will likely result in a finding of deception). General prohibition The general prohibition states that: “A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”: s 18 of the Australian Consumer Law, Sch 2 of the Competition and Consumer Act 2010 (Cth). Specific prohibition The specific prohibition applies in relation to actual or potential employment offers, and it prohibits a person from engaging in conduct that is liable to mislead job seekers about the availability, nature, terms

or conditions of the employment; or any other matter relating to the employment: s 31 of the Australian Consumer Law. An employer or recruitment agent who misleads a job applicant about their salary, bonuses, other benefits, career progress, the existence of the job itself, or the employer’s financial position, is exposed to such a claim under the Australian Consumer Law. This specific prohibition recognises that representations about employment did not necessarily arise in trade and commerce (or the classification of goods and services). Following an increase in the number of people seeking employment and the growth of underhanded practices associated with the area, the previous legislation was broadened to catch “conduct” rather than the mere publication of advertisements. Oral representations and other practices potentially fall within the scope of the section. Remedy If a person misleads prospective employees, they could be liable to pay a pecuniary penalty of up to $1.1m (if they are a body corporate) or $220,000 (if they are a natural person): s 224(3). Comparison — general vs specific prohibition The table below compares the two prohibitions. Additional penalties and remedies are available in relation to the specific prohibition compared with the general prohibition. General prohibition

Specific prohibition

What is it?

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive

A person must not, in relation to employment offers, engage in conduct that is liable to mislead job seekers about the availability, nature, terms or conditions of the employment; or any other matter relating to the employment

What does it apply to?

Any conduct “in trade or commerce” Does not need to relate to employment

Conduct relating to actual or potential employment offers Does not need to be “in trade or commerce”

Which law?

Section 18 of the Australian Consumer Law

Section 31 of the Australian Consumer Law

Previous legislation*

Section 52 of the Trade Practices Act 1974 (Cth)

Section 53B of the Trade Practices Act

Pecuniary penalties (civil)

No pecuniary penalties

Body corporate — $1.1m Individuals — $220,000

Fines (criminal)

No equivalent criminal offence No fines

Body corporate — $1.1m Individuals — $220,000

Injunctions Damages Compensation orders Non-party redress orders Community service orders Compliance program orders Information disclosure orders Publication orders

Yes, these remedies are available

Yes, these remedies are available

Adverse publicity orders

No, these remedies are not

Yes, these remedies are also available

Orders disqualifying a person from managing corporations

available

*Many of the cases discussed in this chapter were decided under the previous legislation. These remain relevant to interpreting and applying the equivalent provisions in the current legislation.

¶51-030 Meaning of “in trade or commerce” The general prohibition on misleading or deceptive conduct depends on the conduct being “in trade or commerce”. However, the specific prohibition relating to employment offers does not depend on a connection with trade or commerce: ¶51-010. This means that, in some cases, a threshold for the liability of employers and employees is whether or not the conduct can properly be said to be “in trade or commerce”. There needs to be a sufficient connection between the conduct and a commercial or trading character. Conduct “in trade or commerce” does not include all conduct that a corporation might engage in, in the course of its overall commercial business. It is limited to conduct which is itself an element or aspect of activities which have a trading or commercial nature. To decide whether conduct is “in trade or commerce”, consider whether the conduct has a trading or commercial nature. This has been construed narrowly by the courts and key points are summarised below then discussed more fully in the case examples which follow. Internal communications Generally, the prohibition against misleading or deceptive conduct will not apply to internal communications between employees or within an organisation. This is because internal communications which are intended only to be read within the organisation generally do not have a trading or commercial character. Promotional conduct benefiting the business The prohibition does not apply to conduct which does not bear a trading or commercial character even if it may benefit the corporation’s business in some way or could be described as “promotional”. Litigant need not be a consumer It is not necessary for the person who is misled or deceived to be a “consumer” for the prohibition against misleading or deceptive conduct to apply. That is, it is possible for an employee to be misled if the conduct occurs in trade or commerce, regardless of the fact they are not a consumer. Negotiations between employers and employees Different judges have expressed different views about whether negotiations between employers and employees are made “in trade or commerce”, and therefore whether the general prohibition on misleading or deceptive conduct applies to such negotiations: ¶51-160. The cases turn on the circumstances of the representations — eg making an offer of the CEO position to an existing employee was held to be in trade or commerce, whereas offering a retention bonus to existing key employees in the context of a merger was not. In any event, it is best practice and minimises legal risk for an employer not to misrepresent matters (including by silence) which relate to employment (such as the current or likely future financial position of the employer, the longevity of a position, etc). It is best practice to have reasonable grounds for any representations about future matters (¶51-035) or not make such representations at all. Case examples The tables in the following commentary summarise a number of cases relating to the liability of employees (¶51-040), employers (¶51-110) and recruiters (¶51-100). These tables give a snapshot of whether the conduct in these cases was “in trade or commerce”.

Meaning of “in trade or commerce” and internal communications Concrete Constructions (NSW) Pty Ltd v Nelson (1990) ATPR ¶41-022; [1990] HCA 17 This case dealt with the general prohibition on misleading or deceptive conduct in s 52 of the Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law). An employee claimed damages for internal injuries that he sustained when he fell to the bottom of an air conditioning shaft. This occurred when he attempted to remove a grate, which was positioned at the top of it. The employer’s foreman wrongly informed him that the grates were fixed by three bolts on either side and that it was safe to remove them in the manner explained by the foreman. As it turned out, there were no bolts and he fell down the shaft and sustained internal injuries. The majority posed the question to be answered: “whether s 52’s prohibition of misleading or deceptive conduct by a corporation in trade or commerce extends to the internal affairs of the corporation or to purely internal communications between employees of a corporation in the course of their employment” (at ATPR 51,362). Does the person misled need to be a consumer? The majority held that s 52, on its proper interpretation, prohibited a corporation from engaging in misleading or deceptive conduct “in trade or commerce” regardless of whether the conduct misled or deceived a person in the capacity of consumer. (The minority judges each considered that s 52 was concerned with protecting persons in their capacity as consumers so that the employee could not bring a claim.) Was the conduct in trade or commerce? All members of the High Court held that the facts did not give rise to a cause of action under s 52 because the employer’s conduct was not in trade or commerce. The joint judgment considered that “in trade or commerce” in s 52 should be construed narrowly. The expression referred only to “conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”. The expression referred to the central concept of trade or commerce and not to the “immense field of activities” in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business (p 51,364). (The majority rejected the broader view that the expression would encompass “conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business” (pp 51,363–51,364).) The advice given to the employee “consisted of an internal communication by one employee to another in the course of their ordinary activities in and about the construction of a building. It was not conduct ‘in trade or commerce’ and would not, if established, constitute a contravention of s 52 of the [Trade Practices] Act” (at ATPR 51,365). On this basis, the employee’s claim failed. How to determine the nature of an “internal communication” was elaborated in a later case (see following).

Determining the nature of internal communications Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶46-198; [1999] FCA 761; (1999) 93 FCR 520 In assessing the character of a representation made by an employee of the Country Fire Authority circulated to fire stations alleging the low quality of a fire extinguisher, Goldberg J explained that: “An internal communication within an organisation which is intended to be read only by addressees within the organisation ordinarily is not a dissemination which has a trading or commercial character … Were it otherwise the whole of a corporation’s or organisation’s internal communications could be opened up to scrutiny under Pt V of the Trade Practices Act. In the ordinary course this is not an issue as such internal documents are not seen by consumers external to the organisation. However each case of an internal communication must be considered by reference to the reason why it comes into existence and the purpose it is intended to achieve” (at 543).

Promotional conduct benefiting the business not in trade or commerce Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) ATPR ¶42-019; [2004] FCAFC 240 The Full Court of the Federal Court in Village Building Co also considered the “in trade or commerce” issue. The applicant alleged that the respondent had made misleading representations as to the noise exposure charts applicable in the area of its airport. It was held that, although the first respondent made the representations with the aim of protecting its business interests, it could not be found that the representations were aspects or elements of activities or transactions which, of their nature, bore a trading or commercial character. It was observed: “Conduct by a corporation which does not otherwise bear a trading or commercial character is not brought within s 52 simply because it may be thought in some way to benefit the corporation’s business or because it can be labelled as ‘promotional’.” (at ATPR 48,992) The view in Village Building Co was that there needs to be a transactional context for conduct to be “in trade or commerce” and this approach was reiterated in Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2007] FCA 1069 at [55].

¶51-035 Which representations about the future could be misleading?

Predictions, promises and opinions are examples of representations about the future. The fact that a statement turns out to be incorrect does not always make it misleading or deceptive. The Australian Consumer Law clarifies that a representation about a future matter is taken to be misleading if the maker of the representation does not have reasonable grounds for making it: s 4(1). The maker of the representation is taken not to have had reasonable grounds for making it, unless evidence to the contrary is presented to court: s 4(2). However, the maker of the representation is not taken to have had reasonable grounds for making it, merely because such evidence is presented: s 4(3) (a). Subsection 4(2) does not place an onus on any person to prove that the maker of the representation had reasonable grounds: s 4(3)(b). Subsection 4(1) does not imply that a representation about the future is not misleading merely because the maker of the representation had reasonable grounds for making it: s 4(4). The former s 51A of the Trade Practices Act 1974 (Cth) also dealt with future representations. However there were differences introduced by s 4 of the Australian Consumer Law which clarify the burden of proof: “[Section 4] places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. When compared to section 51A, the new provision seeks to clarify that: • the burden of proof under this section is evidentiary in nature and does not place a legal burden on defendants to prove that representations were not misleading; • satisfying the burden of proof under this section does not constitute a substantive defence for breach of any other section of the [Australian Consumer Law]; and • the section can operate in proceedings against accessories to contraventions as well as primary contraveners.” (Paragraph 2.22 of the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010.) Examples of cases dealing with representations about the future include: • Morton v Interpro Australia Pty Ltd (2009) 61 AILR ¶101-008; [2009] FMCA 423, summarised at ¶51130 • Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430, summarised at ¶51-130, and • O’Neill v Medical Benefits Fund of Australia (2002) ATPR ¶41-882; (2002) 52 AILR ¶4-646; [2002] FCAFC 188, summarised at ¶51-120.

LIABILITY OF EMPLOYEES ¶51-040 Liability of employees for misleading or deceptive conduct Employees can be personally liable for their own misleading or deceptive conduct carried out in the course of their employer’s trade or commerce. For example, an employee can be separately and directly liable to their employer’s customers for misleading or deceptive conduct. Proprietary or managerial role not needed for employee liability Employees can be directly liable, even if they are not business owners, managers, senior officers or directors of their employer’s company (¶51-050). Level of involvement in conduct more than “ministerial” To be liable, the employee must have acted as more than a mere conduit of the misleading or deceptive conduct. This depends on their level of involvement in the conduct (¶51-055). An employee will not be

personally liable if their actions were “ministerial, as an organ of the Company or an agent of [a senior executive]”. Case examples This table summarises case examples in the following commentary which deal with misleading or deceptive conduct by employees (¶51-050, ¶51-055 and ¶51-090). Case

Facts — summary

Misleading? In trade or Liable? commerce?

Penalty?

For more details, see:

ASIC v Narain (2008) 26 ACLC 736; [2008] FCAFC 120 and related cases

Misleading Yes announcement to ASX: CEO helped write a misleading announcement, approved it, and directed the company secretary to send it to the ASX.

N/A

CEO was personally liable for the misleading announcement. However, the company secretary was not personally liable.

Pecuniary ¶51-055 penalty: $20,000. Disqualification: Seven years. Costs

Houghton v Arms (2007) ATPR ¶42143; [2006] HCA 59

Incorrectly Yes advising a customer: Employees gave incorrect information to their employer’s customer, relating to the ease of setting up an online payment facility for a commercial website.

Yes

Yes

Damages: $58,331. Costs

¶51-050

Astvilla Pty Ltd v Director of Consumer Affairs Victoria [2006] VSC 289

Misleading a Yes client: A property organisation misled a woman into quickly buying an overpriced house. The general manager (who was an employee) controlled and directed the sale.

Yes

Yes

Damages: $29,984 and $1,600. Interest Costs

¶51-055

Dataflow Computer Services Pty Ltd v Goodman

Statement about Yes employer: An employee made a false statement about his

No No He was a mischievous bystander commenting

No

¶51-090

(1999) ATPR ¶41730; [1999] FCA 1625

employer’s plans, and emailed it to his employer’s customers and the media. He did not have a commercial relationship with those customers.

on other’s trade or commerce.

¶51-050 Employee liability to customer for misleading or deceptive conduct It is possible for an individual employee to be liable directly to a customer for misleading or deceptive conduct even if an employee is not a senior officer or director of the company. This principle was decided by the High Court in Houghton v Arms. Case example

Employees liable for giving misleading information to employer’s customer Houghton v Arms (2007) ATPR ¶42-143; [2006] HCA 59 Facts: A customer (Mr Arms) engaged a company (WSA) to design a website for his new business of facilitating direct “cellar door” sales by wineries. An employee of WSA (Mr Houghton) advised the customer to use the “ANZ e-Gate” facility to handle the online payments. Either Mr Houghton or another WSA employee (Mr Student) told the customer that wineries could be added to the website (including the ANZ e-Gate facility) “by simply filling in a form” and paying a small fee. However, the process was actually more complicated and time-consuming, involving licences, credit card merchant facilities and an approvals process. Five days before the launch of the website, one of the employees told the customer about the mistake. It was impossible for the customer to complete the process for the 30 wineries within five days. To preserve goodwill, the customer continued with the business, using a different business structure, with the same limited commission that was originally planned and higher tax. The customer operated the business in this way, at a loss, for 12 months. The two employees were not business owners or managers. Mr Student was the “WSA Online project manager” and Mr Houghton was described as the “guru of interactive website design and development”. Misleading? Yes. In trade or commerce? Yes. The two employees engaged in conduct in the course of trade or commerce. It did not matter that the employees were not business proprietors or that their activities were an element of the trade or commerce of their employer (and their employer’s customer’s business) but not of “their” own trade or commerce: [35]. Liable? Yes, the employees breached the general prohibition against misleading or deceptive conduct in the now-repealed s 9 of the Fair Trading Act 1999 (Vic), which is the same as the general prohibition in s 18 of the Australian Consumer Law (see ¶51-020). Generally speaking, the fact that a person is an employee does not divest that person of personal liability for wrongful acts committed while they are an employee. The High Court decided that there was no good reason for treating the prohibition against misleading or deceptive conduct any differently: [40]. The prohibition applied to a “person”. If the word “person” was interpreted narrowly to exclude employees, this would not promote the purpose of the legislation, which was to encourage “fair trading practices”: [41]. Penalty? • Damages: Together, WSA and the two employees were ordered to pay the customer $58,331. • Costs: The employees had to pay the customer’s costs.

¶51-055 Employee liability for misleading or deceptive conduct depends on involvement For an employee to be personally liable for misleading or deceptive conduct, the employee must have acted as more than a mere conduit of that conduct. The court examines their level of involvement in the conduct to determine this.

Employee more than mere conduit — misled client into buying house Astvilla Pty Ltd v Director of Consumer Affairs Victoria [2006] VSC 289

Facts: The Cellante property organisation showed Ms Brown a house and sold it to her for $55,000 on the same day. Cellante falsely represented that the price was reasonable, the house was in high demand, and that it was the owner of the property. This created an atmosphere of urgency, suggesting that Cellante could quickly sell the house to somebody else. In fact, Cellante did not own the house. A few days earlier, Cellante had agreed orally to buy the house for $25,600. The house had been on the market for years. Ms Brown was a single mother receiving a pension, who had never bought a house and had limited education. Cellante knew she was inexperienced: [181], [185]–[189]. Mr Cellante was the general manager employed by two companies in the Cellante organisation. He controlled and directed the sale to Ms Brown. He was more than a mere conduit. He was the main player. Misleading? Yes. The Cellante companies and Mr Cellante engaged in misleading or deceptive conduct: [189]. In trade or commerce? Yes. Liable? Yes. Employees can be directly liable for their own misleading or deceptive conduct, if they engage in such conduct in their employer’s trade or commerce as something more than a mere conduit: [154], [168], [175], [190]. The Cellante companies and Mr Cellante breached the general prohibition on misleading or deceptive conduct in s 9(1) of the Fair Trading Act 1999 (Vic), which is identical to s 18 of the Australian Consumer Law. If the court were to limit s 9(1) to non-employees, it would have to narrowly interpret the word “person” to exclude employees and add a requirement that the trade or commerce be that of the person themselves. Such an interpretation would not promote the purposes of the legislation: [148]. The High Court concurred with this reasoning in Houghton at [41]. Penalty? • Damages: The Cellante companies and Mr Cellante were ordered to pay Ms Brown damages of $29,984 and interest of $5,679.76 and damages of $1,600 and interest of $303.06: footnote 1, [189]. • Costs.

Employee more than mere conduit despite being agent of employer Citibank Ltd v Liu; Abn Amro Bank Nv v Liu [2003] NSWSC 569 A similar finding, that an employee is liable for misleading or deceptive conduct under a state Fair Trading Act, was made in the case of Citibank Ltd v Liu; Abn Amro Bank Nv v Liu [2003] NSWSC 569. In that case, Justice Hamilton observed: “The FTA proscribes conduct by natural persons. If that conduct is in trade or commerce and cannot be said not to be misleading conduct of the person who engages in it by reason that that person is acting merely as a conduit, in my view the person is not removed from the purview of the Act by the fact he is engages [sic] in the conduct as the employee of another.” (at [53]) In the appeal (see Wong v Citibank Limited; Wong v ABN Amro Bank NV (2004) ATPR ¶42-037; [2004] NSWCA 396), the Court of Appeal affirmed that “… his Honour’s acceptance that relief could be granted against an employee for breach, in that case of s 52 of the Trade Practices Act, is clearly correct. As a matter of law, an employee acts as agent for the employer. There is no basis in principle why different rules should apply to agents who are appointed in different circumstances” (Beazley JA speaking for the court, at [19]). This view is similar to that stated in Standard Chartered Bank v Pakistan National Shipping Corporation [No 2] [2003] 1 AC 959 and accepted by the High Court in Houghton (¶51-050).

CEO was liable for misleading announcement, but the company secretary was not liable ASIC v Narain (2008) 26 ACLC 736; [2008] FCAFC 120 ASIC v Citrofresh International Ltd (No 2) (2010) 28 ACLC ¶10-002; [2010] FCA 27 ASIC v Citrofresh International Ltd (No 3) [2010] FCA 292 Full Federal Court, and Federal Court Facts: Citrofresh International Ltd sent an announcement to the ASX claiming that it believed it could offer “a global solution” to reduce and stop the spread of HIV using its disinfectant products. The announcement stated that its product was an effective solution to control and prevent HIV, human influenza A virus, the SARS virus and the human rhinovirus. The CEO participated in drafting the announcement, approved the announcement, and directed the company secretary to send it to the ASX. After the announcement was made, the share price rose from $0.225 to $0.70. Misleading? Yes. These representations were false. In trade or commerce? N/A. This case related to s 1041H(1) of the Corporations Act 2001 (Cth), which prohibited misleading or deceptive conduct in relation to financial products (including shares). This prohibition does not depend on a link to trade or commerce. Liable? The CEO was personally liable for the misleading or deceptive conduct: ASIC v Narain (2008) 26 ACLC 736; [2008] FCAFC 120 at [18]–[19], [21], [100]. The company secretary was not personally liable. His actions were “ministerial, as an organ of the Company or an agent of [the CEO]”: [19], [98]. He sent the misleading announcement to the ASX, but he was not the real culprit: [19]. Penalty?

• Pecuniary penalty: CEO $20,000. • Disqualification: CEO was disqualified from managing corporations for seven years. • Costs: CEO must pay ASIC’s costs.

¶51-090 Employee liability to employer for misleading statement about employer For an employee to be liable under the general prohibition (¶51-020) to their employer for misleading statements they have made about that employer and its business depends on whether the conduct was in trade or commerce. Where the employee merely comments as a bystander on the business of another, this is not in trade or commerce even if it may be connected to it, or in relation to it.

Employee’s false statement about his employer’s plans Dataflow Computer Services Pty Ltd v Goodman (1999) ATPR ¶41-730; [1999] FCA 1625 Federal Court Facts: An employee (Mr Goodman) sent an email about its employer (Dataflow) to its employer’s customers (Harvey Norman franchisees) and to journalists in the print media. The email represented that Dataflow intended to sell its software directly to consumers, and that retailers (including Harvey Norman franchisees), would suffer financially. In fact, Dataflow did not intend to sell software directly to consumers, nor did it intend to change its trading relations with the retailers of its software. Misleading? Yes, the employee engaged in misleading or deceptive conduct by sending the email. It was more than an idle musing. Even if it was an opinion, it was without factual foundation: [9]–[10]. In trade or commerce? No. The employee’s conduct was the conduct of a mischievous bystander falsely commenting on the trade or commerce in which others are engaged, rather than something done in that, or any other, trade or commerce. The conduct must have been “in” trade or commerce, not just “in connection with” or “in relation to” trade or commerce. Here, the relevant trade or commerce was the business dealings between Dataflow and Harvey Norman and other retailers. The sending of the email was not conduct which was engaged in as part of those business dealings, as opposed to being “in connection with” or “in relation to” those dealings. There was no evidence that Goodman was carrying on business. The employee did not have a commercial relationship with any of the email recipients, nor did he have any subsisting relationship with Dataflow. The fact that the conduct was not that of a participant in the relevant trade or commerce may be highly relevant in determining whether it is “in” trade or commerce, but it could not be conclusive: [6], [11], [12], [19], [22], [23]. Liable? No, the employee was not liable for misleading or deceptive conduct. The employer’s claim failed. Penalty? No.

LIABILITY OF RECRUITERS ¶51-100 Liability of recruiters for misleading or deceptive conduct A recruiter can be liable if it falsely states to potential employees that it has certain types of jobs available, or falsely advertises that the jobs will or can lead to particular outcomes, such as qualification for permanent residence in Australia. A false representation by a recruiter to an employer about the performance of background and employment checks on a candidate, can lead to an employer being owed damages for losses that arise later from that candidate’s placement. This table summarises two case examples in the following commentary which deal with misleading or deceptive conduct by recruiters. Case

Facts

Misleading?

In trade or Liable? commerce?

Penalty?

For more details, see:

ACCC v Clinica Internationale Pty Ltd (In

Recruiter promised jobs: Recruitment consultant

Yes

Yes

Refund Pecuniary penalties: Company

Below

Yes

Liquidation) (No 4) [2016] FCA 286 and a related case

promised jobs and permanent residency in Australia.

Driver Recruitment Pty Ltd (trading as Authorised Solutions) v Wedeco AVP Pty Ltd [2008] NSWCA 290

Recruiter said it Yes performed checks: Recruitment agency falsely represented to the employer that it had performed background and employment checks on a potential employee.

$700,000. Managing director $325,000. Disqualification: five years. Costs Not directly addressed, but presumably yes.

Yes

Damages: $164,224.

Below

Case examples

Recruitment consultant promised jobs and permanent residency ACCC v Clinica Internationale Pty Ltd (In Liquidation) (No 4) [2016] FCA 286 ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 at [129]–[138] Facts: Clinica falsely advertised that people could obtain jobs that would (or could) qualify them for permanent residence in Australia, by using Clinica as a recruitment consultant and taking a training course. Clinica falsely stated that it had cleaning jobs, with sponsoring employers in regional areas. Clients paid Clinica considerable amounts of money. In reality, Clinica provided few, if any, cleaning jobs to its clients. None of its clients qualified for permanent residence through Clinica. Misleading? Yes. In trade or commerce? Yes. Liable? Yes, liable under both the general prohibition and specific prohibition. Penalty? • Refund: Clinica and its managing director had to refund money to clients. • Pecuniary penalties: Clinica $700,000. Managing director $325,000. • Disqualification: Clinica’s managing director was disqualified from managing corporations for five years. • Costs: Clinica and its managing director had to pay the ACCC’s costs.

False representation to employer about background checks Driver Recruitment Pty Ltd (trading as Authorised Solutions) v Wedeco AVP Pty Ltd [2008] NSWCA 290 NSW Court of Appeal Facts: A recruitment agency falsely represented to the employer that it had performed background and employment checks on a candidate who was a potential employee. The employer employed the candidate. 18 months later, the employer discovered that his claimed qualifications were false, he was an undischarged bankrupt, and he engaged in fraudulent business practices. The recruitment agency either failed to speak to the referees, or to pass on the negative information from the referees to the employer. If the recruitment agency had not made its false representations, the employer would not have employed the candidate. Misleading? Yes. In trade or commerce? Not directly addressed, but presumably yes. Liable? Yes, the recruitment agency breached the general prohibition against misleading or deceptive conduct. Penalty? Damages totalling $164,224 were awarded, comprising losses arising from: • six months’ worth of salary and superannuation

• credit card fraud by the candidate • travel expenses incurred by the employee • travel and accommodation expenses incurred by executives dealing with problems arising out of the candidate’s employment • expenses incurred in relation to two projects, and • the recruitment agency’s fee for recruiting the candidate.

LIABILITY OF EMPLOYERS ¶51-110 Liability of employers for misleading or deceptive conduct Employer liability for conduct of employer Employers can be liable for misleading or deceptive conduct in trade or commerce. An employer can be liable to their employee for misleading or deceptive conduct in pre-commencement negotiation or renegotiations of employment conditions in certain circumstances. There have been many successful misleading or deceptive conduct claims concerning contract negotiations between employers and employees. Employers should be aware of and minimise their exposure to the legal risk arising from such claims when dealing with employees. For case examples: Patrick v Steel Mains Pty Ltd (1987) ATPR ¶40-794; (1987) 77 ALR 133 (Patrick) (see ¶51-120); Barto v GPR Management Services Pty Ltd (1992) ATPR ¶41-162; [1991] FCA 659 (Barto) (see ¶51-110 and ¶51-170); Stoelwinder v Southern Health Care Network [2000] FCA 444; (2000) 97 IR 76 (Stoelwinder) (see ¶51-170); O’Neill v Medical Benefits Fund of Australia (2002) ATPR ¶41-882; [2002] FCAFC 188 (O’Neill) (see ¶51-110 and ¶51-120) and Moss v Lowe Hunt & Partners Pty Ltd (2011) 63 AILR ¶101-291; [2010] FCA 1181 (Moss) (see ¶51-110 and ¶51-130). Employer liability for conduct of recruiter Employers may also be held responsible for misleading representations made by the recruitment agencies on their behalf, during the recruitment process: O’Neill v Medical Benefits Fund [2001] FMCA 61 at [142]. Case examples There have been many successful claims of misleading or deceptive conduct relating to contract negotiations between employers and employees, as can be seen in the table below. REPRESENTATIONS TO EMPLOYEES DURING RECRUITMENT Representations about job security Case

Facts

Misleading?

In trade or Liable? commerce?

Swindells v State of Victoria and Anor [2016] VSCA 9 at [60]–[61]

Possible abolition of position: Employer did not tell the prospective employee that his position might be abolished.

Not misleading. N/A The abolition was just a tentative, remote possibility.

Haros v Linfox Australia Pty Ltd (2012) 64

Implied representations about job security and role

None of the alleged representations were made out.

Penalty?

For more details, see:

No

No

¶51-120

No

No

¶51-120

AILR ¶101562; (2012) Aust Contract Reports ¶90365; [2012] FCAFC 42

exclusivity: The employer allegedly implied that it wanted to employ the employee for around three years, and it did not employ anybody other than the general manager to perform the Business Manager’s tasks.

Walker v Salomon Smith Barney Securities Pty Ltd & Anor (2003) ATPR (Digest) ¶46240; (2004) Aust Contract Reports ¶90183; [2003] FCA 1099 and related case

Employer Yes purchased by another company: A misleading representation was made that the employee would be employed on the same terms that had previously been agreed.

Yes

Yes

Damages: $2,346,553 (contract) $100,000 (general consequential damages)

¶51-120

O’Neill v Medical Benefits Fund of Australia (2002) ATPR ¶41-882; (2002) 52 AILR ¶4-646; [2002] FCAFC 188

The job will be secure: Employer told the employee that the job was secure and for the “long haul”.

Not directly addressed, but presumably yes.

Yes

Damages: remitted to the Federal Magistrate to assess damages

¶51-120

Yes

Damages: $333,422

¶51-130

Yes

Other representations to employees during recruitment Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430

Employer’s Yes profitability: The employer represented that it was probable that, for at least the next 12 months, it would remain as profitable as it had been in the previous two years: [29], [31], [47]–[49].

Yes

ACCC v Taxsmart Group Pty Ltd [2014] FCA 487

Graduate program to qualify as a tax agent: The employer advertised a graduate program that would enable accounting graduates to satisfy the requirements for registration as a tax agent and commence as franchisees.

Yes

Keays v J P Morgan Administrative Services Australia Limited (2012) 64 AILR ¶101673; [2012] FCAFC 100

Nature of the role: Not misleading The employer represented that the role would “public side”, with “wall-crossing” only as required.

Moss v Lowe Hunt & Partners Pty Ltd (2011) 63 AILR ¶101291; [2010] FCA 1181

Claim to be Yes financially successful: During the recruitment, the employer represented that it was financially successful and in a “very healthy financial position”.

ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124

Promise of jobs Yes and minimum salary: A company advertised jobs when it actually sold training. It promised jobs after its training course. It said it would pay its graduate trainees a minimum salary. It advertised nonexistent scholarships. It said it was a global company with a US

Yes

Yes

Compensation: ¶51-130 $260,400 Costs: $10,000

No

No

¶51-130

Yes

Yes

Damages: $306,740 Costs

¶51-130

Yes

Yes

Injunctions and ¶51-130 costs

office, which had developed software. ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124

“Employer’s” Yes claim about its size and credentials: Zanok also misleadingly stated that it was a global company which had an American office and had developed and sold functional IT software products.

Yes

Yes

Injunctions and ¶51-130 costs

Morton v Interpro Australia Pty Ltd [2009] FMCA 423

Bonus promised, Yes then revoked: During precontractual negotiations, the employer guaranteed the employee a bonus (1% of gross profit) in his second year of employment. Later, the employer decided to replace this with a less valuable bonus.

Yes

Yes

Damages: $19,158.76 plus interest $2,030.83 Costs, plus partial indemnity costs

¶51-130

In trade or Liable? commerce?

Penalty?

For more details, see:

No

¶51140, ¶51-160 and ¶51-170

REPRESENTATIONS TO EXISTING EMPLOYEES Case

Facts

Misleading?

Westpac Banking Corporation v Wittenberg [2016] FCAFC 33

Incentive payment: Employer offered a retention incentive payment.

No

No

Barto v GPR Management Services Pty Ltd (1992) ATPR ¶41162; [1991] FCA 659

Renegotiation: During a renegotiation of the employment contract, the employer allegedly offered a higher salary and new commissions, and

Yes

Capable of being liable

¶51-170

said it wanted the employee to keep working for many years. Employer allegedly made representations to the Department of Immigration about the employee’s position. Concrete Constructions (NSW) Pty Limited v Nelson (1990) ATPR ¶41022; (1990) 169 CLR 594; [1990] HCA 17

Internal communication about safety: Employee alleged that he was injured while working on a building site because another employee incorrectly told him that certain grates were fixed by bolts.

No

No

No

¶51-030

In trade or Liable? commerce?

Penalty?

For more details, see:

No

No

¶51-150

OTHER SITUATIONS Case

Facts

Barrick v Qantas Flight Catering Limited [2007] FCA 835 at [17], [80], [88], [91], [94], [96]

Statements about misconduct: The employer made statements to the AIRC, police, DPP and court about the employee’s misconduct.

Misleading?

No

¶51-120 Misleading or deceptive — representations about job security The following cases deal with representations about job security which are made to prospective employees during recruitment. These cases are summarised in a table in ¶51-110. Case examples

No disclosure that the employee’s position might be abolished Swindells v State of Victoria and Anor [2016] VSCA 9 at [60]–[61] Victorian Court of Appeal Facts: At the time that the employee, Mr Swindells, interviewed for the position of mining warden, the Victorian Government department contemplated that there would be a legislative review, which would possibly recommend that this position be abolished. The employee was appointed, and then removed after a difficult tenure. He claimed that he had not been told that the review might result in his position being abolished before the end of his three-year appointment. This case related to the now-repealed s 13 of the Fair Trading Act 1999 (Vic), which is equivalent to the specific prohibition in s 31 of the Australian Consumer Law.

Misleading? Not misleading. The abolition of the position was just a tentative, remote possibility. It was not expected. The review had not yet begun, and the Minister had no preconceived views about its impact on the position. Legislation would be needed to abolish the position. Nothing in the potential review needed to be disclosed to the employee to avoid misleading him. The possibilities were too remote to require disclosure. In any case, even if he had been told, he would still have accepted the appointment. In trade or commerce? N/A. Liable? No, the government did not breach of the specific prohibition relating to employment offers. Penalty? No.

Implied representations about job security and role exclusivity Haros v Linfox Australia Pty Ltd (2012) 64 AILR ¶101-562; (2012) Aust Contract Reports ¶90-365; [2012] FCAFC 42 Full Federal Court Facts: The employee (Mr Haros) claimed that the employer (Linfox) had induced him to leave his existing job and take up a position as a Business Manager at Avalon Airport, through the misleading or deceptive conduct set out below: • An implied representation that the employer wanted to employ him “for at least approximately three years” (the Security Representation). • An implied representation that, before appointing him, the employer did not employ anybody other than the general manager to perform the tasks required of the Business Manager (the Exclusivity Representation). • A failure to inform him that the employer might resile from the Security Representation if the general manager resigned (the Longevity Omission). • A failure to inform him that it already employed people in the management or performance of Avalon’s commercial activities (the Exclusivity Omission). Misleading? None of the alleged representations were made out. The use of words such as “potential”, “opportunity”, and “probably” in the pre-contract negotiations did not convey the promise of certainty. It had always been clear that the term of employment would depend on the employee’s performance. It could not reasonably be suggested that, by failing to mention to the employee that commercial work was ongoing at Avalon during the recruitment period, the employer had implied that nobody apart from the general manager was employed to perform such work. No occasion ever arose during the negotiations for these matters to be mentioned. Liable? No. Even if the employee could establish that the representations had been made, his claim would still fail because there was no evidence that he suffered loss and damage “by” or “because of” those representations. It was improbable that he believed he was being offered a job that would last for about three years, regardless of business fluctuations and satisfactory performance. This conclusion was strengthened by the fact that the employment contract contained terms for a probation period and termination on three months’ notice. Penalty? No.

Employer purchased by another company — assured employment on same terms Walker v Salomon Smith Barney Securities Pty Ltd & Anor (2003) ATPR (Digest) ¶46-240; (2004) Aust Contract Reports ¶90-183; [2003] FCA 1099 and Walker v Citigroup Global Markets Australia Pty Limited (formerly known as Salomon Smith Barney Australia Securities Pty Limited) (2006) 58 AILR ¶100-517; [2006] FCAFC 101 (appeal in relation to damages) Facts: The employee (Mr Walker) was a senior employee at ABN AMRO. He was approached by a head hunter and asked to join NatWest. After negotiations, the employee and NatWest entered an employment contract in January 1998. The signed letter was held confidentially by the head hunter, until the employee left ABN AMRO. The employment was to start no later than March. The delay was to enable the employee to receive a bonus from ABN AMRO. On 10 February, it was announced that Citigroup Australia had purchased NatWest. On 13 February, a misleading representation was made on behalf of Citigroup Australia that the employee would be employed by it after the purchase of NatWest on the same terms that had previously been agreed. There were no reasonable grounds for the representation. In late February, the employee negotiated and accepted a voluntary redundancy with ABN AMRO. However Natwest then refused to offer the employee any position. Misleading? Yes. In trade or commerce? Yes. Misleading conduct during employment negotiations may support a cause of action under the general prohibition against misleading or deceptive conduct “in trade or commerce”: Walker v Salomon Smith Barney Securities Pty Ltd & Anor [2003] FCA 1099 at [180], [181], [185]. Liable? Yes. The employer was liable under the general prohibition against misleading and deceptive conduct: [211], [217]. It was unnecessary to consider whether there was a breach of the specific prohibition relating to employment offers: [212], [217]. Penalty?

• Damages: The Full Federal Court awarded $2,346,553 for damages under contract law. Since there should not be double recovery for economic loss and since the contract damages exceeded the damages awarded by the primary judge in relation to misleading or deceptive conduct, those damages were academic. The employer’s appeal in relation to the precise methodology of calculating the damages did not need to be resolved. However, the employee successfully cross-appealed from the assessment of his loss from the misleading and deceptive conduct. $100,000 was awarded for general consequential damages: Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101 at [87]–[91].

Statement that job will be secure O’Neill v Medical Benefits Fund of Australia (2002) ATPR ¶41-882; (2002) 52 AILR ¶4-646; [2002] FCAFC 188 Facts: While recruiting the employee (Mr O’Neill), the executive “head hunting” recruitment agent said that the job would be secure. When asked about job security, the employer (MBF) also said the position was for the “long haul”. The employee left a secure job as a manager, and took up a job with the employer, but was made redundant two years later. The employee relied on the misleading representations. If it had not been for the misleading conduct, the employee would not have left his current secure job: [22], [23]. This was despite the fact that the employee agreed in his contract that the employment could be terminated on one month’s notice: [23]. Misleading? Yes. MBF did not establish that it had reasonable grounds for making the representations about job security. Therefore, MBF’s conduct was taken to be misleading: [20]. This was due to the former s 51A of the Trade Practices Act (now s 4 of the Australian Consumer Law), which stated that a representation about a future matter would be taken to be misleading if the corporation that made the representation did not have reasonable grounds for making it. In trade or commerce? This was not directly addressed, but presumably the court was satisfied that the conduct was in trade or commerce. Liable? Yes, the employer breached the general prohibition against misleading and deceptive conduct by representing to the employee that the employment would be secure and/or for the long term: [1], [21]. Interestingly, the employer was responsible for the representations made by the recruitment agent. The Federal Magistrate in the lower court (O’Neil v Medical Benefits Fund [2001] FMCA 61), said at [142] that “Corporations who engage ‘head hunting’ agencies must be responsible for representations made for and on their behalf during the course of that recruitment process”. This was quoted by the Full Federal Court, without disapproval: [7]. Penalty? • Damages: This case was remitted to the Federal Magistrate to assess damages. The Full Federal Court suggested the following method for calculating the damages (which was not in dispute): ascertain the difference (if any) between the income he would have earned with his former employer and his income at MBF and in his jobs after MBF made him redundant. The damages would be the difference over the period that it was likely that he would have stayed with his former employer: [29]. The Federal Magistrate had originally declared that MBF had engaged in misleading and deceptive conduct, but made no order for the payment of damages partly because of a lack of evidence. The Full Federal Court came to a different conclusion, deciding that the Federal Magistrate could have determined the employee’s salary at his former employer, based on the employee’s evidence. It was not essential for the employee to prove his income by submitting tax returns or pay slips to the court, although it would have been desirable: [31].

Offer of “permanent” employment Patrick v Steel Mains Pty Ltd (1987) ATPR ¶40-794; (1987) 77 ALR 133 Federal Court Two employees, Warbey and Patrick, worked in an industrial plant in Hexham operated by Steel Mains. They were told by their employer that they would have a secure future with the company if they accepted transfers to positions at a new plant to be built at Berkeley Vale. The employer’s exact words were that Berkeley Vale “was going to be the factory for New South Wales”. The company agreed to meet relocation expenses of the employees from East Maitland to Berkeley Vale. After commuting to the new plant for a period, both Warbey and Patrick relocated to Berkeley Vale together with their families. Unfortunately, the Berkeley Vale plant’s operations proved to be short-lived. Although Wilcox J found that a statement made during negotiations is capable of being conduct in trade and commerce, in this particular case, he found the s 52 argument to be untenable and he dismissed the employees’ claim under s 52 for want of evidence of the falsity of the statements when they were made. The company had been truthful and fully believed in the statements it had made to the men: “It is clear that, at all relevant times, Steel Mains intended to close down both Hexham and Regents Park and to concentrate its New South Wales pipe manufacturing activities at Berkeley Vale. There was nothing false in the statements to that effect made to Mr Warby and to Mr Patrick. In each case, the men were offered ‘permanent’ — that is indefinite, not temporary or casual — employment at Berkeley Vale. They were in fact employed on a permanent basis.” (at 48,665)

¶51-130 Misleading or deceptive — other representations during recruitment

In addition to cases which include misleading conduct which is expressly about job security or a job offer (¶51-120), other misleading representations which relate more indirectly to a person or applicant’s work prospects will be caught by the legislation. This includes representations about the profitability employer or the job qualifications available after attending a certain course. Case examples

Misleading representations about employer’s profitability Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430 Federal Court Facts: The employer, Johns Lyng, represented that it was probable that, for at least the next 12 months, it would remain as profitable as it had been in the previous two years. This was of interest to the prospective employee (Ms Rakic) because her remuneration would be partly calculated as a percentage of net profit: [2], [29], [31], [47]–[49]. Misleading? Yes. This representation was misleading. In the light of very poor performance over seven months, there were not reasonable grounds for the profitability prediction. There were very good reasons for thinking the contrary: [29], [48], [156]. In trade or commerce? Yes. Representations in pre-employment negotiations are capable of sustaining an action under the general prohibition on misleading or deceptive conduct in trade or commerce: [62]. See ¶51-160. Liable? The employer breached either the general prohibition on misleading or deceptive conduct, the specific prohibition relating to employment offers, or both: [156]. Penalty? • Damages: The employer was ordered to pay the employee $333,422 in damages. The court started with the most-likely scenario that would have occurred without the employer’s conduct and then subtracted the amount the employee actually earned together with the amount she would be likely earned after the hearing. Her compensable loss was $922,286 minus $588,864: [238], [248], [285].

Misleading representation graduate program led to tax agent qualification ACCC v Taxsmart Group Pty Ltd [2014] FCA 487 Federal Court Facts: The employer, Taxsmart, advertised that it was offering a graduate program and 12 months of employment to accounting graduates with no previous work experience in tax accounting that would enable them to satisfy the requirements for registration as a tax agent and commence as franchisees. Mr Andrews, a director/secretary of Taxsmart, knowingly devised the employment plan, determined the content of the advertisements, and caused the advertisements to be published. Five people became employees and paid Taxsmart hefty upfront franchise fees (up to $62,150), in reliance on the representation about the graduate program. However, Taxsmart terminated their employment within about four months without refunding the franchise fees. Misleading? Yes, this was misleading or deceptive. Taxsmart did not have reasonable grounds for making the representation because it had not properly enquired or adequately considered whether its graduate program would enable graduates with no prior experience to satisfy the legal requirements for tax agent registration, and because the program was not capable of enabling such graduates to satisfy these requirements. In trade or commerce? Yes. Liable? Yes. Taxsmart and Mr Andrews admitted that they breached the general prohibition on misleading or deceptive conduct. Penalty? • Compensation: Taxsmart and Scott Andrews were ordered to pay a total of $260,400, in monthly instalments over three years, to five former Taxsmart franchisees, as compensation for application fees and franchise fees. The franchise agreements were void. • Costs: Taxsmart and Mr Andrews were ordered to pay the ACCC’s costs of $10,000.

Misleading representation about nature of role Keays v JP Morgan Administrative Services Australia Limited (2012) 64 AILR ¶101-673; [2012] FCAFC 100 Full Federal Court Facts: The employee, Mr Keays, was an experienced senior executive who was recruited to work for the employer, JP Morgan. He argued that JP Morgan represented that the role would “public side”, with “wall-crossing” only as required. However, he alleged that JP Morgan always intended that his role would be (or become) a “private side” role, and therefore it did not have reasonable grounds for making its representation about the nature of the role: [56], [59], [108].

Misleading? Not misleading. Initially the job description stated that the role was a “private side” or “wall straddling” position. But this was abandoned and never took effect. Before Mr Keays’ employment started, both he and JP Morgan understood that the position was a “public side” role. This was borne out by the fact that he worked on the “public side” for two years, being wall-crossed only when required. Later, his new manager wanted him to move to the “private side”, but this was a new idea: [23]–[24], [37], [58], [110]–[111]. Liable? No, JP Morgan was not liable for misleading or deceptive conduct. Penalty? No.

Employer misrepresented it was financially successful Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181 Federal Court Facts: While recruiting the employee (Mr Moss), the employer (Lowe Hunt) represented that it was in a “very healthy financial position”. This was said as an answer when the employee specifically asked about the employer’s financial position. The employer also stated that it generated $300m in billings and had 150 offices worldwide. This statement was made to potential clients, in the employee’s presence while head hunting him. In context and without qualification, this amounted to a representation that the business was financially successful. However, the employer was not financial successful. It depended on its parent company’s financial support to continue trading because it was making a loss and its liabilities exceeded its assets. The employer also represented that it was in a great position, and “there is nothing stopping us now”. It also represented that its savings from earlier redundancies would turn a $1m loss into a $1m operating profit. However, the employee was made redundant within 18 months. It was most unlikely that the employee would have accepted the job offer without the employer’s repeated assurances about the business’s strength and financial security. It was likely that he accepted the job offer on the faith of misleading or deceptive representations about financial security: [2], [7]–[9], [12], [14], [33], [52]–[54], [65], [68], [98]. Misleading? Yes. It was misleading for the employer to make the kind of unqualified, glowing statements that it did during the recruitment process, especially when one of them (the statement about the 150 offices) was admittedly false. In this situation, silence was apt to mislead. Candid disclosure was required, and continued to be required after the employee was hired, particularly when he made specific inquiries. Keeping him in the dark was apt to lead him into an incorrect view about his job security: [63], [82]. In trade or commerce? Yes. Trade or commerce includes “any business or professional activity” (Fair Trading Act 1987 (NSW), now see s 2 of the Australian Consumer Law). This was wide enough to cover the employer’s conduct. It was not in dispute that staff management and conduct undertaken to retain staff were necessarily activities undertaken by a business: [84]. Liable? Yes. The employer breached the general prohibition on misleading or deceptive conduct. The employer conceded that it breached the specific prohibition relating to employment offers: [14], [64]. Penalty? • Damages: $306,740 was awarded to the employee’s company which ran his own consultancy business. He was lured away from his own business by the employer, and later returned to running his own business. It was likely that the company lost a valuable commercial opportunity to continuously grow its business. • Costs: Costs reserved, with the court indicating that it was inclined to order to pay the employee’s company’s costs.

Training provider misrepresented jobs, minimum salary and scholarships ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124 Federal Court Facts: Zanok advertised that it offered paid employment opportunities in the IT sector, when in fact it offered IT training for a fee of up to $4,700. Zanok advertised that it guaranteed paid employment after its training course, despite not being in a position to do so, and despite partly excluding the guarantee in its contract. Zanok said in interviews that it would pay its graduate trainees a minimum salary of $45,000 pa, when it was not in a position to guarantee this. Zanok also advertised non-existent “IT scholarships”. Zanok also misleadingly stated that it was a global company which had an American office and had developed and sold functional IT software products. Zanok’s advertisements targeted temporary residents, who needed employment to become permanent residents in Australia. Misleading? Yes, the statements were misleading or deceptive. In trade or commerce? Yes. Liable? Yes, Zanok breached both the general prohibition on misleading or deceptive conduct and the specific prohibition relating to employment offers. The directors were knowingly concerned in Zanok’s breaches. Penalty? Injunctions and costs.

Bonuses revoked after start of employment Morton v Interpro Australia Pty Ltd (2009) 61 AILR ¶101-008; [2009] FMCA 423 Facts: In the pre-contractual negotiations, the employer (Interpro) guaranteed to the employee (Mr Morton, a sales manager) that he would be paid a 1% commission override on gross profit in his second year of employment. In other words, he would get 1% of gross profit, as a bonus. This was a clear unambiguous representation, which became a contractual promise, and was never qualified. The employee relied on the representation. He would never have taken the job and moved from England to Australia without the representation. The employer dishonoured the representation before it could be applied. A new manager decided to replace this generous bonus with a series of more conditional payments: [31], [70], [85]–[86], [93]–[94]. The employee alleged that the employer also represented that the contract would last for two years, but the court found that the employer never guaranteed a two-year term: [30]. It was unlikely that this particular employee would have received a two-year guarantee without demanding a written record. Further, the contract was terminable on extremely short notice (at first one week’s notice, and later four weeks), which made it entirely improbable that the employer had already promised a two-year term. Misleading? Yes. It is misleading and deceptive for an employer to tell a prospective employee who is based in another country that a particular amount will be paid in the second year of their employment (even if this depends on him performing well) and then simply not to provide it because the employer purported to unilaterally remove that benefit: [96]. The employer did not have reasonable grounds for making the representation. In trade or commerce? Yes, the representation guaranteeing the 1% override bonus was made in trade and commerce: [92]. Liable? Yes, the employer breached the specific prohibition in relation to employment offers by trying to remove the 1% override bonus. Penalty? • Damages: The employer was ordered to pay the employee $19,158.76 in damages, plus $2,030.83 in interest. His losses were small because he found a new job shortly after his dismissal. Damages were calculated based on the income he would have received during the four-week notice period: [107]. • Costs: The employer was ordered to pay the employee’s costs, plus indemnity costs in relation to the employer’s counterclaim.

No misleading conduct — no vacancy because incumbent did not leave Y Saad v TWT Ltd 1995 AILR ¶5-038 Supreme Court of New South Wales Ms Saad sold television airtime to advertisers. While working at Channel 9 in Melbourne in 1990, she was approached by Interscreen and offered a job to promote the company to businesses in that city. She was offered a salary of $60,000 per year (including a car). Saad’s husband-to-be was a solicitor in Wollongong who was preparing to practise at the Melbourne Bar so that he could be with his fiancée. At this time, a representative of TWT offered her a job in Wollongong (in fact, it was the representative’s old job). She was only offered a salary of $24,000 per year plus a motor vehicle. Ms Saad advised TWT that she could not accept the offer because Interscreen had offered her a better role. TWT told her that their new commission structure would enable her, like the incumbent employee who was leaving the position, to earn approximately $68,000 per year on a part-time basis. Ms Saad resigned from Interscreen after having worked there a week. The incumbent employee in the TWT position had indicated an intention to leave, but ultimately opted to stay on in the role and Ms Saad did not have the opportunity to take up the job. She claimed that the representations made to her breached s 52. Justice Ireland found that: “in light of these cases the pre-employment negotiations which are the subject of present proceedings are capable of being ‘in trade or commerce’”. However, having regard to the particular circumstances of the case Ireland J found that, at the time the statements regarding the role were made to Ms Saad, they were made in good faith. In his Honour’s view, the possibility that the incumbent employee would change their mind was not a consideration the employer could reasonably have kept in mind as requiring a qualification at the time the representations were made to the plaintiff. This point was supported by the Court of Appeal in Saad v Twt Limited Matter No Ca 40373/95 [1998] NSWSC 282, which Ms Saad won on other grounds. In the appeal, Ms Saad contended that the representation that the incumbent employee had resigned from the position and that they were making preparations to relocate to New Zealand were in breach of s 52 because they should have been qualified. Associate Justice Handley found that, as a matter of fact, the employer did not need to qualify the statements because, at the time they were made, he had no reasonable ground for believing that the incumbent employee would change their mind and want their old job back. Generally, pre-employment negotiations will be found to be in trade or commerce and so actionable under s 18.

No misleading conduct — employer did not challenge employee assumptions about future career path Roddy v Sydney Adventist Hospital Ltd (2013) 65 AILR ¶101-807; [2012] FMCA 1199 In this case, not correcting a prospective employee’s assumptions about his future career path was not considered misleading and deceptive conduct. The employee submitted to the Federal Magistrates Court that representations were made about his future with

the employer at the time of interviewing for the role. During trial, this was not made out and the employee claimed that he had made statements regarding his assessment of his own prospects for promotion in the organisation in the future. These were not challenged at interview. Federal Magistrate Nicholls found that the employer’s representatives had probably acquiesced in the statement by not disabusing the employee of these expectations, but that this did not amount to a representation.

¶51-140 Misleading or deceptive — representations to existing employees Establishing whether an employer is liable for representations made to existing employees usually turns on whether the representation was made in trade or commerce (s 18 of the Australian Consumer Law, see ¶51-020, ¶51-030). While judges have differing opinions about the commercial nature of such representations, there are a number of cases where liability was found (see the more detailed discussion at ¶51-160). It is best practice to be aware of the legal risks (eg in renegotiation of employment contract scenarios) and ensure they are minimised. Case examples

Retention incentive payment Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 Facts: The employer, St George Bank, offered key employees a retention incentive payment if targets were met and the employees stayed with the employer (in the context of a merger). The employees claimed they were misled about the bank’s intentions, because it intended to impose a higher target (which was not met). The payment was initially withheld but ultimately paid. However, the employees claimed that if they had known about the intentions of the bank, they would not have stayed and would have taken up other opportunities. In trade or commerce? No. The offers of a retention incentive payment related to the internal affairs and management of the bank: [195].1 Liable? No, the bank was not liable under the general prohibition. Penalty? No. This case is discussed further in ¶51-160. Renegotiations of employment contract Barto v GPR Management Services Pty Ltd (1992) ATPR ¶41-162; [1991] FCA 659 See ¶51-110 and ¶51-170. Internal communication about safety Concrete Constructions (NSW) Pty Limited v Nelson (1990) ATPR ¶41-022; (1990) 169 CLR 594; [1990] HCA 17 See ¶51-030.

Footnotes 1

This was decided by one judge, and a second judge agreed: [340]. The third judge preferred not to decide this issue: [346]–[347].

¶51-150 Misleading or deceptive — representations by employers about employees Establishing whether an employer is liable representations made about existing employees usually turns on whether the representation was made in trade or commerce (s 18 of the Australian Consumer Law, see ¶51-020, ¶51-030). In the context of criminal investigations, it is unlikely representations made by an employer will be in trade or commerce. Case example

Employer’s statements to the AIRC about employee’s misconduct Barrick v Qantas Flight Catering Limited [2007] FCA 835 at [17], [80], [88], [91], [94], [96] Facts: The employer, Qantas Catering, summarily terminated the employee’s (Mrs Barrick’s) employment for misconduct. There was extensive payroll fraud by the pay-mistress, which led to the employee being overpaid. The employer said that the employee acted dishonestly, together with the pay-mistress. The employee complained in the Australian Industrial Relations Commission (AIRC) that the termination of her employment was harsh, or unjust, or unreasonable. The employer resisted her application. The AIRC found that the employee was complicit in the fraud, and therefore the termination was not harsh. Criminal charges were also brought against the employee. Other employees gave evidence in court in relation the criminal charges. In trade or commerce? No. The employer’s statement to the AIRC, police, DPP and court that the employee had engaged in misconduct was not made “in trade or commerce”. Also, her involvement in the fraud undermined that the misrepresentations had occurred. The evidence given by other employees in court, did not constitute the making of representations by the employer in trade or commerce to the court. Liable? No. The employer was not liable. Penalty? No.

¶51-160 Are employment negotiations “in trade or commerce”? As indicated at ¶51-150, there is differing judicial opinion about whether representations made by an employer in negotiations with prospective employees (or renegotiations with existing employees) are made “in trade or commerce”, and therefore capable of breaching the general prohibition on misleading or deceptive conduct (s 18 of the Australian Consumer Law, see ¶51-020). However, there are a number of cases where liability was found against an employer under the general provisions. Because the contrary views questioning the application of the general prohibition are opinions which have not formed the actual reasons for a decision, they are not legally binding. It remains best practice to be aware of the legal risks (eg in renegotiation of employment contract scenarios) and ensure they are minimised. The judges’ opinions are included here for reference purposes as the law develops.

Judges doubt general prohibition can apply in pre-employment negotiations In Westpac Banking Corporation v Wittenberg [2016] FCAFC 33, a judge of the Full Federal Court expressed the view that preemployment negotiations are fully covered by the specific prohibition relating to employment offers (s 31 of the Australian Consumer Law), and interpreted the general prohibition in a limited way. This comment is noteworthy, but it is not legally binding, because it was unnecessary to decide this issue. A second judge agreed with the first judge, but a third judge preferred not to decide. The third judge left open the possibility that an employer’s statements in pre-employment negotiations or in relation to the retention of existing employees could be in trade or commerce. See the case summary at ¶51-170 for more details.

Judge rejects narrow view of general prohibition In Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430 at [58] and [62], another Federal Court judge echoed the reservation of the third judge in Westpac v Wittenberg, and preferred not to follow the obiter views expressed by the first two judges in Westpac v Wittenberg. Instead the judge in Rakic v Johns Lyng preferred to follow Walker v Salomon Smith Barney Securities Pty Ltd (2003) ATPR (Digest) ¶46-240; (2004) Aust Contract Reports ¶90-183; [2003] FCA 1099 which held, as a key part of its decision, that representations in pre-employment negotiations were capable of sustaining an action under the general prohibition on misleading or deceptive conduct in trade or commerce (see ¶51-120). See the case summary at ¶51-170 for more details.

Earlier cases in favour of application of general prohibition to employment context In various earlier cases, courts have either presumed or expressly decided that representations made by employers to employees during recruitment were made “in trade or commerce”. This can be seen from the table in ¶51-110.

In Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181, the employer represented that it was financially successful and in a “very healthy financial position” during the recruitment process. The Federal Court noted that trade or commerce includes “any business or professional activity”. This was wide enough to cover the employer’s conduct: [84]. See ¶51-130 for more details.

In Morton v Interpro Australia Pty Ltd (2009) 61 AILR ¶101-008; [2009] FMCA 423 at [92], the Federal Magistrates Court held that a representation guaranteeing a bonus was made in trade and commerce. The representation was made by the employer in precontractual negotiations.

In O’Neill v Medical Benefits Fund of Australia (2002) ATPR ¶41-882; (2002) 52 AILR ¶4-646; [2002] FCAFC 188 at [1], [21], the Full Federal Court decided that an employer breached the general prohibition on misleading or deceptive conduct by representing to the employee during the recruitment process that the job would be secure. The issue of “trade or commerce” was not directly addressed, but presumably the court was satisfied that the conduct was in trade or commerce, since the general prohibition depends on the conduct being “in trade or commerce”.

¶51-170 Case examples — differing opinion about employment negotiations “in trade or commerce” The highlights of the following cases are set out at ¶51-160. The following case summaries are provided for practitioners needing more detail about whether the general prohibition under s 18 can apply in the context of employment negotiations. For representations made in the course of employment negotiations to come within the ambit of s 52 (now s 18 of the Australian Consumer Law), it turns on whether or not the negotiations are able to be identified as being “in trade or commerce” (see ¶51-030). It was held by the majority judges in Concrete Constructions that conduct “in trade and commerce” in s 52 refers to: “… conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character” (at ATPR 51,364).

Mixed views from Full Federal Court Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 Matters arising within an existing employment relationship are unlikely to meet the requirements of the general prohibition on misleading or deceptive conduct: [186]. This was the view of one judge of the Full Federal Court (Buchanan J), and a second judge agreed with him (McKerracher J): [340]. These judges also expressed the view that the specific prohibition relating to employment offers “did all the work that was necessary with respect to pre-employment negotiations” and interpreted the general prohibition in a more limited way: [195]. This comment is noteworthy, but it is not legally binding as a precedent, because it was not necessary for the court to decide this issue. In this case, they decided that offers of a retention incentive payment were concerned with the internal affairs and management of the company. Therefore, the general prohibition did not apply: [195]–[196]. However, a third judge (White J) preferred not to decide whether an employer’s statements to a prospective employee (relating to possible employment) or to an existing employee (relating to retention), may be conduct which had a trading or commercial character. His Honour did not want to rule out the possibility that these kinds of statements could be treated differently from an employer’s statements within an existing employment relationship about the place, manner or circumstances of an employee’s work (which generally do not have a commercial character): [347].

This case is also summarised in ¶51-140. It should be considered together with the other cases summarised in table in ¶51-110, in which courts have either presumed or expressly decided that representations made by employers to employees during recruitment were made “in trade or commerce”.

Employer’s statements in employment negotiations can be misleading or deceptive conduct Barto v GPR Management Services Pty Ltd (1992) ATPR ¶41-162; [1991] FCA 659 In this case, statements made by an employer to an employee in pre-commencement negotiations and renegotiations were considered capable of being misleading or deceptive conduct under the general prohibition in the former s 52 of the Trade Practices Act. However, this was merely a strike-out case by a single judge, meaning that the judge simply ruled that claims under s 52 arising out of employment should not be struck out on a summary basis because of Concrete Constructions (which was discussed in ¶51-030). It was alleged that the breaches of the Trade Practices Act (as it then was) occurred via a number of oral undertakings made to Barto by his employer Solbrant (GPR Management) when he was chief project manager of GPR. These undertakings were that he would be made general manager from 1 December 1990 with operational responsibility for Australia and New Zealand and, with this, there would be an increased salary and a new commission arrangement.

Barto commenced duty as general manager, but was not paid the increased amounts. His employment was terminated in February 1991. He received no notice and was given no reason for the termination. Justice Wilcox, sitting as a single judge in the Federal Court, said that: “… it seems to me that the better view is that conduct of a corporation which occurs in the course of negotiations with a prospective or present employee in respect of that person’s employment contract is conduct capable of falling within s 52 of the Trade Practices Act. Certainly, it cannot be said, without an investigation of the facts, that this proposition is so clearly untenable as to justify striking out a pleading that relies upon it” (at ATPR 40,210). In part, GPR’s argument was based on a view that Concrete Constructions held that the operation of s 52 was confined to conduct engaged in by a corporation vis-à-vis a consumer. Thus went the argument, Barto was not a consumer of goods or services supplied by GPR, and the action based on s 52 was not available to him. Justice Wilcox rejected GPR’s argument and pointed to the joint judgment in Concrete Constructions (at 601–602), which he noted “expressly rejects the notion that the prohibition of s 52 extends only to conduct affecting a consumer” (at ATPR 40,207). However, the High Court was clear that unless an employee is party to a transaction with their employer which, in a clear and bona fide sense, can be characterised as being “in trade and commerce”, no claim will lie under s 52. His Honour noted that the derivation of income is not to be regarded as a key indicium in finding whether conduct is of trading or commercial character. His Honour went on to say: “If the above analysis is correct, it seems to me correct to hold that the conduct of a corporation in the course of negotiations for the employment of senior staff is conduct potentially falling within s 52. It is true that an employment contract does not directly produce income, but the making of such a contract is part of the total activities in trade or commerce of the corporation. Critically, it is intrinsically commercial conduct. It is directed to the creation of a contractual relationship.” (at ATPR 40,209– 40,210) Justice Wilcox held that a statement made in the course of employment negotiations was capable of being conduct “in trade or commerce” (¶51-030). His Honour noted: “It is clear enough, on the one extreme, that conduct which is not inherently a commercial activity, such as driving a truck or giving information about the safety of a building site, is not conduct ‘in trade or commerce’ simply because, in the particular case, it is performed in the course of a larger activity for commercial gain. It seems equally clear, on the other extreme, that conduct which would plainly be conduct ‘in trade or commerce’ if carried out vis-à-vis a stranger does not lose that characteristic simply because the party with whom the corporation is dealing happens to be an employee.” (at ATPR 40,208)

Making of employment contract was not “in trade or commerce” Wright v TNT Australia Pty Ltd (1988) ATPR ¶40-864; (1988) 15 NSWLR 662 In this older case, Lee J held that: “The making of the contract of employment and the discharge by the employer of his obligations under the contract, is not, as a matter of ordinary English, within the expression ‘conduct in trade or commerce’.” (at ATPR 49,362; NSWLR 676) This was affirmed on appeal by Mahoney, McHugh and Clarke JJA in Wright v TNT Management Australia Pty Ltd (1989) ATPR ¶40-929; (1989) 15 NSWLR 679.

Reason given for termination was not “in trade or commerce” Steven David Martin v Tasmania Development and Resources [1999] FCA 593; (1999) 163 ALR 79 (Martin) In this case, Heerey J said that the majority in Concrete Constructions (see ¶51-030) needed to be taken to prefer a view of trade or commerce that was limited to: “conduct ‘which itself is an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character’” and not to “the immense field of activities; in which corporations may engage in the course of, or for the purpose of, carrying on some overall trading or commercial business” (at [72]). On this basis the employee’s claim failed. The reason given to him for the termination of his employment did not come within the meaning of “in trade or commerce”.

Statement about superannuation not “in trade or commerce” His Honour Heerey J adopted a similar line in Mulcahy v Hydro-Electric Commission (1998) 44 AILR ¶3-837; (1998) 85 FCR 170 in relation to a statement made to an entitlement under a superannuation scheme.

Engagement of a CEO may be an aspect of trading activities Stoelwinder v Southern Health Care Network [2000] FCA 444; (2000) 97 IR 76 The applicant, Professor Stoelwinder, alleged that his employer engaged in misleading conduct when it negotiated with him the terms of a new contract as CEO of Southern Health Care Network. Justice Finkelstein said in relation to the s 52 pleading that: “It is by no means clear precisely when an employee can bring a claim based upon a contravention of s 52 of the Trade Practices Act 1974 (Cth) in respect of false and misleading conduct that led to the making of his or her contract of employment.”

(at 76) His Honour found in Stoelwinder that: “there is a reasonable argument that can be put in favour of the proposition that the engagement of a CEO is an aspect of the general trading activities of the respondent” (at 78).

¶51-180 Misleading or deceptive conduct in employment — conclusion The use of the Australian Consumer Law for applications against employees, employers or recruitment agencies is a developing area. While many cases finding liability have been decided, there is some divergence of judicial thought, particularly about whether the general prohibition at s 18 of the Australian Consumer Law is available in the pre-employment context given the specific prohibition at s 31. (See discussion at ¶51-160 and ¶51170, and ¶51-020 for a summary of the different prohibitions.) In any event, there are cases which have led to findings of liability under the general prohibition. To limit exposure to legal claims, it is best practice for employers and recruiters (¶51-100) to train themselves and their employees in consumer law with respect to: • their conduct towards customers (¶51-040 summary table) • their conduct toward job applicants (¶51-110 summary table), and • their conduct toward employees, particularly when renegotiating employment contracts (¶51-110 summary table).

52. EMPLOYEES AND INTELLECTUAL PROPERTY Editorial information

Originally written by Leanne Rich, Special Counsel, Baker & McKenzie Reviewed in 2016 by Michael Michalandos, Partner, Baker & McKenzie

¶52-010 Introduction It is essential for every employer to understand when it is entitled to the benefit of any intellectual property made or created by one of its employees. The ownership of intellectual property can have important financial and practical consequences for an employer’s business. This chapter provides an overview of the ownership of intellectual property rights in the areas of patents, designs and copyright within the employment relationship. It discusses whether an employer is entitled to the benefit of an invention, a design, or copyright subsisting in a literary, dramatic, musical or artistic work made by an employee. As a matter of general principle, an employer will be entitled to the benefit of such intellectual property created by its employee if it was made in the course of the employee’s employment with the employer. However, the application of this general principle can often be difficult in any given case and may be varied or excluded by agreement between an employer and employee.

¶52-020 Patents and employees Patent law applies to inventions. A patent gives the patentee exclusive rights within the patent area to exploit an invention and to authorise another person to exploit the invention during the term of the patent, which is usually for a period of 20 years (see Patents Act 1990 (Cth) (Patents Act), s 13, 67 and 68). Generally, the person who will be entitled to be granted a patent over the invention is the inventor. However, the employer of the inventor may, in certain circumstances, be entitled to be granted a patent over the invention. The Patents Act does not deal expressly with the circumstances in which an employer of an inventor is entitled to the grant of a patent. It is generally accepted, however, that an employer will be entitled to the grant of a patent under s 15(1)(b) of the Patents Act where it would have the right to have the patent assigned to it by the employee. This “right” should arise where the invention was made by an employee during the course of their employment, unless the employer and employee have entered into an agreement which vests ownership of the invention in the employee. It is an implied term of all employment contracts that the employer will be entitled to the benefit of any invention made by an employee in the course of their employment (see Sterling Engineering Co Ltd v Patchett [1955] 1 All ER 369; Eddie Kwan, John Pierre Le Sands and Paul N Van Draanen v The Queensland Corrective Services Commission and The Queensland Spastic Welfare League [1994] APO 53; (1994) 31 IPR 25; and Aneeta Window Systems (Vic) Pty Ltd v K Shugg Industries Pty Ltd [1996] APO 8; (1996) 34 IPR 95). In other words, it is “inherent in the legal relationship of master and servant that any product of the work which the servant is paid to do belongs to the master” (Sterling Engineering Co Ltd v Patchett [1955] 1 All ER 369 per Lord Reid at 376). However, where the invention is not made during the course of the employee’s employment, or is not the product of work the employee is paid to do,

then the employer will generally not be entitled to be granted a patent over the invention. This implied term, or general legal principle, can be altered, varied or excluded by an express or implied agreement between the employer and employee. Importantly, an “understanding” reached between an employer and an employee relating to inventions will not be sufficient to oust the general legal principle that the benefit of inventions made by employees in the course of their employment belongs to the employer. An employee would have to establish the existence of an actual agreement, express or implied, inconsistent with the general principle (see Sterling Engineering Co Ltd v Patchett [1955] 1 All ER 369). What is meant by “in the course of employment”? The following cases explore the meaning of “in the course of employment”.

Case examples Spencer Industries Pty Limited v Collins In Spencer Industries Pty Limited v Collins [2003] FCA 542, Branson J considered the factors necessary to take into account when determining whether an invention was made by an employee during the course of their employment. In that case an employee, who held the position of sales manager in a company which manufactured equipment used in the tyre retreading business, invented a rasp blade. The employee, Mr Collins, did not have a written contract of employment and had not entered into any agreement with the employer relating to patents or inventions. Branson J held that, in the absence of a contractual term, the question was: What was Mr Collins paid to do? Was the invention made within the course and scope of his employment, having regard to the nature and seniority of his position and the nature of his duties? Did he receive a direction from the employer relating to the invention? Justice Branson held that the invention was not created in the course of Mr Collins’s employment and hence, Mr Collins, and not Spencer Industries, was entitled to the benefit of the invention. Mr Collins’s position was principally a sales position and it was not part of Mr Collins’s ongoing duties to invent products for Spencer Industries. Even though Spencer Industries was entitled to direct Mr Collins to use his skills towards creating an invention, in this instance, Mr Collins had not acted on any direction of his employer but rather, had created the invention in his spare time. Branson J held that, although Mr Collins’s position included a duty to advance the sales of Spencer Industries, this did not mean that any invention made by him, which was capable of advancing the sales of Spencer Industries, was an invention made within the course and scope of his employment. Such a result would have been “unacceptably broad in ambit”. Victoria University of Technology v Wilson Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 392 (Wilson) also considered the issue of whether an invention was made by an employee in the course of their employment. This case is significant for its finding that, where an employee owes fiduciary duties to its employer, the employer may be entitled to the benefit of an invention made by that employee, even where the invention was not made within the course of the employment, and where no agreement granting ownership of the invention to the employer had been entered into. In Wilson, Nettle J held that the University was entitled to the benefit of an invention concerning internet-based e-commerce systems and associated software developed by senior economics academics employed by the University on the basis that the academics had acted in breach of their fiduciary duties to the University in developing the invention on their own account without obtaining the University’s informed consent. Nettle J held that whether the invention had been created in the course of their employment depended on the nature of the research the academics were engaged to perform. The academics had been retained to perform academic research and not internet or software research. It was within the power of the academics to determine their research projects and, consequently, alter the work within the scope of their employment. However, while they had commenced the project on behalf of the University, they then determined to undertake the project on their own account. Therefore, Nettle J held that the invention was not created in the course of the

academics’ employment. However, Nettle J held that the academics owed the University fiduciary duties not to profit from their position at the expense of the University and to avoid conflicts of interest and duty. His Honour stated (at 149): “in the absence of full and frank disclosure and consent, a professional employee remains bound to account to the employer for gains derived as a result of the employee’s fiduciary position and for opportunities of which the employee may learn in the course of employment; lest the employee otherwise be swayed by considerations of personal interest”. Nettle J held that because the opportunity to develop the invention arose out of their position at the University, and the University was in a position to develop the invention, and because they had not obtained the informed consent of the University, the academics had taken away the opportunity to develop the invention from the University in breach of their fiduciary duties. Consequently, the academics were held liable to account to the University for the gains they had made in breach of their fiduciary duty. The academics were, however, entitled to be paid an allowance for the time, effort and resources that they had devoted to the project (see Victoria University of Technology v Wilson & Ors [2006] VSC 186; (2006) 68 IPR 597). Oates v Consolidated Capital Services Ltd In Oates v Consolidated Capital Services Ltd [2009] NSWCA 183 , the NSW Court of Appeal noted that — where an employee is seconded by an employer to another company, even if the employer is entitled as against the employee to the ownership of intellectual property rights, it will be necessary to have regard to the terms of the employer’s agreement with the other party, pursuant to which the employee’s services are made available to that party. In this case, the court stated that it was not at all uncommon when the services of an employee are lent for the work product of the employee during the period of the loan to belong to the party to which the services have been loaned. University of Western Australia v Gray In University of Western Australia v Gray [2009] FCAFC 116 (Gray), a Full Court of the Federal Court held that the University was not entitled to the benefit of patentable research undertaken by a professor employed by the University (special leave to appeal to the High Court was refused on the basis that it was not the appropriate factual situation for the court to consider the questions of law said to arise by the University) (see University of Western Australia v Gray [2010] HCATrans 11; and also the decision at first instance by French J in University of Western Australia v Gray [2008] FCA 498, which was upheld by the full court). The inventions in question concerned the production and use of microparticles or microspheres for the targeted treatment of cancerous tumours in humans, particularly in the liver. Dr Gray’s research was concerned with designing the microspheres and ensuring the effective delivery of anti-cancer agents selectively to the sites of tumours in the liver. The full court (comprising Lindgren, Finn and Bennett JJ) held that, while the professor was under a duty to undertake research, it was not part of his duties to “invent” patentable material. Some of the relevant facts which led to the decision of the court were that: • the University only paid 70% of Dr Gray’s salary • Dr Gray had undertaken part of the research prior to his appointment at the University • Dr Gray only worked part-time for the University from 1997 to the date of his departure in 1999 • the University was aware that Dr Gray worked with an external company in the late 1990s • the research undertaken involved a team of researchers (including in other institutions) and was the result of extensive collaboration • Dr Gray and his team applied for and were granted research grants from a myriad of funding bodies • Dr Gray was free to decide the nature and purpose of his research, and • Dr Gray was free to, and did, publish his research results without any concern that such

publication may impact upon intellectual property rights. The court held that there was no implied term in Dr Gray’s contract of employment that intellectual property developed belonged to the University. In so holding, the court stated that the question of ownership of the invention depended on whether the employee’s invention was a product of what they were employed to do. If so, the invention belonged to the employer unless otherwise agreed. The court noted that it can be factually difficult to determine whether it was within the employee’s responsibilities to develop the particular invention, and that regard needed to be had to whether the employee owed fiduciary duties such that they were obliged to hold the benefit of the invention on behalf of the employer. The full court held in Gray that the professor was not under a fiduciary obligation of the kind and scope which would have made the professor liable to account to the University for the invention or patents. In so holding, the court distinguished the case from the Wilson case. The pleaded fiduciary duty case in Gray depended upon the existence of the implied term alleged by the University that it owned the relevant inventions, and the University did not plead that Dr Gray had misappropriated an opportunity offered to the University without the University’s consent as was the basis of the case in Wilson. The court noted that the University also did not plead that Dr Gray’s contract of employment included an implied term that he owed the University a duty of good faith and fidelity. In Gray, the full court agreed with French J at first instance that the position of an academic staff member at a university differed from a normal commercial employment relationship, such that, in the absence of an express agreement to the contrary, rights in relation to inventions made by academic staff in the course of research (as opposed to in the course of performing a duty to invent), whether or not made with the use of the universities resources, ordinarily belong to the academic staff as the inventors. The court held that the University and academic staff relationship had distinctive characteristics such that it was inappropriate to accept as a general proposition that there is a presumption at law that the University will be entitled to the rights to inventions developed by academic staff in the course of undertaking research. These distinctive characteristics are that: • universities (in contrast to private businesses), while engaged in commercial activities, were primarily created to serve a public purpose • academic staff are not just employees, but are also members of the University, and • academic staff are free to choose the nature and manner of their research and are free to publish the results of that research, factors which are inconsistent with an implied duty to obey all lawful and reasonable instructions of an employer or to maintain the secrecy of confidential information generated in the course of employment. The above characteristics, combined with the particular circumstances of Dr Gray’s employment, including the absence of an express duty to invent any matter (as opposed to a duty to undertake research), the requirement for Dr Gray to solicit his own funds for the research, and the collaborative arrangements with external organisations, were such that the court concluded that the University did not have the right to the benefit of the relevant inventions.

For further case examples see: MacKay v McKay [2004] APO 29; (2004) 63 IPR 441 (at 462 to 463); Pancreas Technologies Pty Ltd v The State of Queensland acting through Queensland Health [2005] APO 9; (2005) 64 IPR 577; [2005] APO 1; Airsense Technology Limited v Vision Systems Limited [2005] APO 7; (2005) 65 IPR 120; and Royal Childrens Hospital v Alexander [2011] APO 94. In any given case, matters which need to be considered are whether the: • inventor is an employee • invention was made in the course of the employee’s employment, having regard to such things as: – the nature and seniority of the position, including whether the employee is under a special

obligation to further the interests of the employer’s business – the normal duties of the employee – any specific directions or assignments provided by the employer, and – whether the making of an invention was an expectation • application of the general principle has been ousted by an agreement entered into between the employee and the employer, and • employee owes any fiduciary duties to the employer or a duty of good faith and fidelity (if the employee is a senior or professional employee). What should employers do? In relation to patents, employers should: • include in their contracts of employment express terms providing that ownership of any invention made by an employee during the course of their employment shall vest in the employer. Care needs to be taken, however, in the drafting of such a clause. If the clause is too broad, in that it purports to render ownership to the employer of all inventions made by an employee — whether or not made in the course of their employment — it may be found unenforceable by reason of being an unreasonable restraint of trade (see Electrolux Ltd v Hudson [1977] FSR 312). While such a clause really goes no further than the implied term discussed before, the existence of an express term will create certainty in the employment relationship on this issue and will avoid the implication of inconsistent terms. For example, where an employer has a policy or practice of obtaining patents in joint names of employer and employee or of sharing any profits gained from obtaining a patent, such a policy or practice could create an implied term to this effect in an employee’s contract of employment. • define in their contracts of employment the duties and responsibilities of the employee, including whether the employee is expected to invent any matter for the benefit of the employer. • (when contracting with independent contractors) ensure that they include an express term providing that ownership of any invention made by the independent contractor during the course of performing the contract will vest in the business. Importantly, this is because the general legal principle discussed above applies only to employees. It does not apply to independent contractors. Consequently, in the absence of a valid agreement between a business and an independent contractor, the independent contractor will be entitled to ownership of any invention made in the course of performing the tasks required under the contract with the business.

¶52-030 Designs and employees Design law protects distinctive visual features of products. Registration of a design gives the owner of the design certain exclusive rights in relation to the design during the term of registration, such as the right to use the design and to authorise another person to use the design (Designs Act 2003 (Cth) (Designs Act), s 10). Generally, the creator of a design is entitled to apply to be the registered owner of the design (Designs Act, s 13). However, where a design is made by an employee in the course of their employment with an employer, the employer is entitled to be the registered owner of the design, unless the employee and employer have agreed to the contrary (Designs Act, s 13(1)(b)). Where the design is made under a contract, such as by an independent contractor, the person who engaged the designer or independent contractor is entitled to be the registered owner of the design, unless the designer and the other person have agreed to the contrary (Designs Act, s 13(1)(b)). Further, a designer may assign their interest in the design to another in writing (Designs Act, s 11 and 13). This means that an employer will be entitled to be the registered owner of a design conceived by its employee if the design was created during the course of the employee’s employment (provided no

agreement has been reached between the employer and employee to the contrary), or if the employer has entered into an agreement with the employee to have the design assigned to it. There is limited authority dealing with the meaning of “in the course of employment” in relation to designs. However, the same principles as for patents (discussed previously) should apply (see Collymore v Courier Pete Pty Ltd [2008] ADO 9; (2008) 79 IPR 608).

Case example Collymore v Courier Pete Pty Ltd In Collymore v Courier Pete Pty Ltd [2008] ADO 9; (2008) 79 IPR 608, the Deputy Registrar of Designs held that the employer was entitled to be registered as the owner of the designs made by its employee of two rain water tanks, but not a third. The third design had been developed first by the employee in his own time at his own home. The other two, however, had been developed at work pursuant to a direction by the employer that the employee design them. In so holding, the registrar held that for the employer to establish ownership, it was necessary for it to establish (as in a patent case) either that the employee’s normal duties included an ongoing expectation that they would be engaged in authoring designs (or at least be involved in a creative activity that might result in the creation of a design right), or that there was a relevant direction that the employee perform certain tasks which led to the creation of the design right. The contract of employment in this case was silent on the ownership of intellectual property rights and did not include any duty or obligation on the part of the employee to be involved in any creativity in the design of tanks. The employee was, therefore, entitled to the benefit of the design created in his own time. In relation to the other two designs, however, the employer was entitled to the benefit of them as the employer had directed the employee to design the water tanks in question. This decision was appealed. In 2010, in the case of Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735, Spender J of the Federal Court held that the employee was entitled to be the registered owner of all three designs. Spender J stated that the approach of the courts to the question whether an invention is created in the course of employment is to ascertain what the employee was employed to do. If the employee was employed to make or discover inventions of the type ultimately produced, then any design produced is work for which the employer has paid and the employer is entitled to the benefit of the invention. If the employee does not have any general duty to invent or duty of creativity under their employment agreement with the employer, then the only basis on which an invention can be said to have been created “in the course of employment” is if it has been created pursuant to a specific direction by the employer to undertake work which results in the creation of the invention. Spender J found that the first design was not created pursuant to any direction by the employer, and thus belonged to the employee. Further, Spender J found that the second and third designs belonged to the employee because they were not produced as the result of a direction or instruction by the employer, and that an agreement between the employer and the employee that the employee would remain the owner of the designs should be inferred from the conduct of the employer. Unlike patent law, a company will be entitled to be the registered owner of a design conceived by an independent contractor in the absence of an agreement between the company and the contractor relating to ownership of the design. This is provided that there is a contract between the company and the independent contractor, and that the design was created under that contract. That is, the design was created by the independent contractor within the course of performing the work being the subject of the relevant agreement.

What should employers do? In relation to designs, employers should:

• include express terms in their contracts of employment providing that the employer is entitled to be the registered owner of any design created by an employee during the course of their employment, or providing for an express assignment. • define in their contracts of employment the duties and responsibilities of the employee, including whether the employee is expected to design any matter for the benefit of the employer. • (when contracting with independent contractors) include an express term providing that the right to be the registered owner of any design created by the independent contractor during the course of performing the contract will vest in the business.

¶52-040 Copyright and employees Copyright protects literary, dramatic, musical and artistic works, including computer programs. Copyright generally lasts for a period of 70 years after the expiration of the calendar year in which the author of the work dies (see Copyright Act 1968 (Cth) (Copyright Act), s 33). The general rule of copyright is that the author of the work (ie a literary, dramatic, musical or artistic work) is the owner of the copyright subsisting in the work (Copyright Act, s 35(2)). The author is the person who actually creates the work, originates it and first reduces it to material form. However, an exception to the general rule exists in relation to works that have been made by an author in pursuance of the terms of their employment by another person under a contract of service. In such circumstances, the employer is deemed to be the owner of the copyright subsisting in the work (Copyright Act, s 35(6)). This exception to the general rule, however, may be excluded or modified by agreement (Copyright Act, s 35(3)). Consequently, whether the copyright subsisting in a work created by an employee is owned by the employee or by the employer is determined either by the terms of an agreement entered into between the employer and the employee (Copyright Act, s 35(3)) or by whether the work in which copyright subsists was made by the employee in pursuance of the terms of their employment (Copyright Act, s 35(6)). Whether a work was created in pursuance of the terms of an employee’s employment is essentially the same question as must be considered for patents and designs and, consequently, the same principles should apply (see Byrne v Statist Co [1914] 1 KB 622; Stevenson, Jordan & Harrison Ltd v MacDonald & Evans (1952) 69 RPC 10).

Case examples Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley The case of Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley [2001] VSC 91; (2001) 50 IPR 565 (Redrock) (Harper J, SCVic) considered the issue of copyright ownership between an employer and an employee. It concerned copyright in complex computer programs created by Mr Hinkley, an employee of Redrock. Prior to commencing his employment, Mr Hinkley developed a code library which he continued to use and develop when creating programs for Redrock. Many of the programs developed by Mr Hinkley for Redrock depended on this code library to function. When Mr Hinkley resigned, he sought to deny Redrock the right to use the code library and asserted that he retained copyright ownership in the library. Harper J held that the code library was so altered that it was in fact a new literary work. Harper J found that Mr Hinkley had worked on the code library during working hours and that the library was integral to the development of computer programs he was required to develop as an employee of Redrock. Consequently, Harper J held that Redrock owned the copyright in the library on the basis that it was made during the course of Mr Hinkley’s employment with Redrock. In relation to a certain range of software, however, Harper J held that copyright ownership vested in Mr Hinkley, as the evidence showed that it was developed in his spare time and was not made in pursuance of his employment contract with Redrock.

Intelmail Explorenet Pty Ltd v Vardanian In Intelmail Explorenet Pty Limited v Vardanian (No 2) [2009] FCA 1018; (2009) 82 IPR 281 (Intelmail), Moore J had to consider which company was entitled to the benefit of the copyright in computer software developed by Mr Vardanian, as the sole director and shareholder of a company, Controlmech, which had contracted to do business with another company, Intelmail. No express agreement had been made between the parties concerning the copyright in the computer software. Moore J held that a term was to be implied in the agreement between Intelmail and Controlmech to the effect that Intelmail owned the copyright. The case demonstrates the need for parties to ensure that the ownership of copyright or other intellectual property rights arising from any matters to be developed in the course of their relationship is dealt with by express agreement between the parties. For a further case example, see Woolworths Limited v Mark Konrad Olson [2004] NSWSC 849; (2004) 63 IPR 258 (at 309 to 324).

Separate rules exist in relation to newspapers, magazines, periodicals, photographs, portraits and engravings (Copyright Act, s 35(4) and (5)), however, these are not discussed in this chapter. In addition, this chapter does not discuss actions and remedies employers may have against their employees or third parties where those employees or third parties have infringed the employer’s copyright or other intellectual property rights. A recent example of this, however, can be found in the case of Foxtel Management Pty Limited v The Mod Shop Pty Limited [2007] FCA 463; (2007) 72 IPR 1 (an appeal having been dismissed in Haddad v Foxtel Management Pty Ltd [2008] FCAFC 11). What should employers do? Redrock demonstrates that the issue of copyright ownership in the employment context can be a complex one, particularly where the nature of an employee’s duties is not defined clearly or is difficult to determine. Similarly, Intelmail demonstrates that businesses need to have appropriate intellectual property agreements in place when dealing with other businesses and independent contractors. Consequently, in relation to copyright, employers should: • include a contractual term in their employment contracts vesting ownership of copyright in the employer in relation to works made by an employee while performing certain defined duties or tasks. • define in their contracts of employment the duties and responsibilities of the employee, including whether the employee is expected to develop any copyright material for the benefit of the employer. • (when contracting with independent contractors) enter into a written agreement, which includes a term vesting in the business ownership of any works created by the independent contractor while performing the contract. This is because (in relation to copyright) it must also be determined whether the work was made by an employee or an independent contractor. Under the Copyright Act, it is only employees under a contract of service whose works will be owned by the employer. A company will only be the owner of works completed by independent contractors if a written agreement assigning copyright to the company is entered into (see Redrock, TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151 and Centrestage Management Pty Ltd v Riedle [2007] FMCA 1147).

¶52-050 Moral rights and employees Moral rights exist in respect of copyright, but have not been recognised in relation to patents or designs. They came into force in 2000 with the enactment of Pt IX of the Copyright Act. Moral rights belong only to individuals and to the author of the work, as opposed to the owner (see South State Food & Beverage Pty Ltd v Chanda Kaur t/as Desaron Singapore [2005] FCA 587 at 49). They are in addition to any other rights in relation to the work that the author or anyone else has under the Copyright Act (s 190 and 192).

Moral rights are not transferable in nature and cannot be assigned (s 195AN). Moral rights continue in force until the copyright ceases to exist in the work (s 195AM). There are three types of moral rights for authors of literary, dramatic, musical and artistic works which are protected by the moral rights provisions in the Copyright Act. These include: (1) right of attribution of authorship — that is, the right to be identified as the author of the work (s 193 and 194) (2) right not to have authorship of a work falsely attributed — that is, the right not to have the work falsely attributed to another person or to have an altered version of the work dealt with as an unaltered work of the author (s 195AC, 195AD and 195AG), and (3) right of integrity of authorship — that is, the right not to have the work subject to derogatory treatment, including anything that results in a material distortion, mutilation or alteration that is prejudicial to the author’s honour or reputation (s 195AI and 195AJ). The available remedies for infringement of moral rights include an injunction: • an injunction • damages for loss resulting from the infringement • a declaration that a moral right has been infringed • an order for a public apology, or • an order that any false attribution or derogatory treatment of the work be removed or reversed (s 195AZA). There will be no infringement, however, of a moral right of attribution of authorship and the right of integrity of authorship where the defendant establishes that it was reasonable in the circumstances not to identify the author or to subject the work to derogatory treatment. There are specified factors the court must take into account in determining what was reasonable in the circumstances. These factors include whether the work was made in the course of the author’s employment (Copyright Act, s 195AR).

Case examples Meskenas v ACP Publishing Pty Ltd The moral rights provisions were discussed in the case of Meskenas v ACP Publishing Pty Ltd [2006] FMCA 1136; (2006) 70 IPR 172 (Meskenas). In this case, the publisher of Woman’s Day magazine stated, underneath a photograph of Princess Mary, the wife of the Crown Prince of Denmark that the princess was standing beside a portrait painted by a painter who was not in fact the painter of the portrait. The real painter was Mr Meskenas. Mr Meskenas sought a correction and an apology from the publisher. Neither was provided until more than 15 months after the publication. Mr Meskenas commenced proceedings under the moral rights provisions of the Copyright Act seeking damages. The court held that the publisher had infringed Mr Meskenas’s moral rights by not attributing him as the author, and by falsely attributing another as the author of the artistic work. The court held that it was not reasonable in the circumstances for the publisher to have so acted. The court awarded Mr Meskenas $9,100 in damages and $10,000 in costs (see Meskenas v ACP Publishing Pty Ltd (No 2) [2006] FMCA 1461). Discussions regarding moral rights and authorship attribution The United Kingdom’s moral rights provisions are discussed in the cases of Tidy v Trustees of the

Natural History Museum (1995) 39 IPR 501 and Clark v Associated Newspapers Ltd (1998) 40 IPR 262. The former Australian provision relating to attribution of authorship was discussed in Adams v Quasar Management Services Pty Ltd & Ors [2002] QSC 223; (2002) 56 IPR 385 (at 125 to 133).

What should employers do? A written consent genuinely obtained will prevent an act or omission from being an infringement of a person’s moral rights. In the case of an employee, a general consent may be given relating to all works made or to be made in the course of their employment. In the case of an independent contractor, however, the acts or omissions as well as the works themselves must be specified in the written consent (Copyright Act, s 195AWA and 195AWB). Employers should review their existing contracts and all new contracts and ensure that they obtain written consents from their employees that are broad in ambit, consenting to any infringement of their moral rights by the employer. In seeking to obtain the consent of employees, it must be borne in mind that the employee’s consent must be in writing, must be genuinely given and must not result from duress or misleading or deceptive conduct (Copyright Act, s 195AWB). Independent contractor agreements should similarly be reviewed.

¶52-060 Conclusion It is imperative that employers and businesses review their contracts with their employees and independent contractors and ensure that intellectual property rights are expressly dealt with so that the issue of intellectual property ownership is clear and the wishes of both parties are maintained. From a policy perspective, it should also be borne in mind that intellectual property rights exist to encourage innovation, design and creativity and that it may be in the best interests of an employer or business to similarly encourage or reward employees and contractors who innovate, design and create when performing their duties.

53. PRIVACY Editorial information

Kerryn Kahler Senior Associate, Baker & McKenzie

¶53-010 Introduction Privacy in the workplace is becoming a significant issue for employers. More information about employees is being collected by employers as a result of increased email and internet usage and improved information storage. However, employees are also becoming more protective and aware of privacy issues at work. Background to a “right” to privacy There is no constitutional or common law “right” to privacy in Australia, although in 2003 an Australian court recognised, for the first time, a right of action for invasion of privacy. In Grosse v Purvis [2003] QDC 151, the Queensland District Court cited High Court authority as providing a basis on which to recognise a right of action for invasion of privacy. It was suggested that the essential elements of the cause of action were: • a wilful act by the defendant • which intruded on the privacy of the plaintiff • in a manner which would be considered highly offensive to a reasonable person, and • which caused the plaintiff detriment in the form of emotional harm or distress. Significant damages were awarded in the case. Existing legislation imposes privacy obligations on some federal and state government agencies in relation to public sector employees (eg the Privacy and Personal Information Protection Act 1988) (NSW). Other laws impose specific privacy obligations in relation to specific industry sectors and technologies. The federal Office of the Privacy Commissioner (since amalgamated into the new Office of the Australian Information Commissioner) has said: “The Office … receives many inquiries regarding the privacy of workplace email and web-browsing activities. It is apparent from these calls that there is a general expectation, by employees, that law exists which protects their privacy in the workplace. There is no general constitutional or common law right to privacy in Australia.” (Office of the Privacy Commissioner 2000) In Australia, privacy legislation has developed in a slow and piecemeal way. For some time there existed federal and state (ie New South Wales and Victoria) legislation protecting employees of and individuals dealing with federal and state agencies. This changed in December 2001 with the commencement of the Privacy Amendment (Private Sector) Act 2000 (Cth), which amended the Privacy Act 1988 (Cth) (the Act) and, subject to certain exemptions, extends privacy obligations to most private entities. The Act was subsequently amended by the Privacy Amendment (Enhancing Privacy Protection) Act 2012 (Cth) (Privacy Amendment Act), which commenced operation in March 2014. The following information outlines the existing privacy legislation.

¶53-020 Privacy Act 1988 (Cth) Previously under the Act, Commonwealth and Australian Capital Territory government agencies (as defined in the Act) were required to comply with 10 “Information Privacy Principles” (IPPs), and Organisations were required to comply with the National Privacy Principles (NPPs). In March 2014, the Privacy Amendment Act came into operation, amending the Act and introducing a new, uniform “Australian Privacy Principle” (APP) regime applying to both public and private sector organisations. As a result of these amendments, the existing NPPs and IPPS were replaced by 13 APPs contained at Sch 1 to the Act, with increased obligation and regulation regarding cross-border disclosure of personal information and using information for direct marketing. Generally speaking, the APPs (which are mostly based on Organisation for Economic Cooperation and Development (OECD) guidelines (OECD 1981)) impose obligations on most organisations in relation to the collection, use and storage of personal information. The Act has two main objectives. These are to: (1) protect personal information in the possession of organisations and government agencies, and (2) ensure there are safeguards in place for the collection and use of tax file numbers (TFNs). However, the new APPs include an increased obligation and regulation regarding cross-border disclosure of personal information and using information for direct marketing. The Act now also gives individuals access and correction rights in relation to personal information held by organisations and agencies. Office of the Australian Information Commissioner Prior to the operation of the Australian Information Commissioner Act 2010 (the AIC Act), the Act provided for the creation of the Office of the Privacy Commissioner and imbued the Privacy Commissioner with a number of responsibilities and powers. With the introduction of the AIC Act, the Office of the Privacy Commissioner was amalgamated into the Office of the Australian Information Commissioner. The AIC Act provides for the appointment of the Australian Information Commissioner (Information Commissioner), the Privacy Commissioner (previously appointed under the Act) and the Freedom of Information Commissioner (FOI Commissioner). Each of these Commissioners can exercise privacy functions (along with other functions, such as freedom of information). The privacy functions include, but are not limited to, the provisions in Div 2 of Pt IV of the Act. For example, the Act (as amended by the Privacy Amendment (Private Sector) Act 2000 (Cth)) provides for privacy related functions, including the ability to issue guidelines relating to privacy issues. Government and Private sector agencies While the courts recognise an employer’s right to monitor and regulate its computer network, the broadening of existing privacy legislation now requires all employers to carefully consider their approach to employee information, including email. The Privacy Amendment (Private Sector) Act 2000 (Cth), which took effect from 21 December 2001, amended the Act to apply the NPPs (now APPs) to the private sector, giving basic protection to personal information and extra protection to sensitive and health information held by private sector organisations. There are a number of gateway issues for organisations and employers to assess in terms of the application or not of the APPs to various functions and activities of the business. Figure 53.1 sets out the key questions which should be considered in assessing the applicability or not of the APPs for most organisations and businesses. For employers, there will generally be three main issues to assess to determine the application of the Act: (1) Is the information under consideration “personal information” as defined under the Act? (2) Is the employer covered by the “small business” exemption? (3) Is the personal information covered by the employee records exemption?

The Act also contains exemptions which relate to journalism, prescribed state/territory instrumentalities and government contracts. This chapter focuses on exemptions which are likely to affect most businesses. Figure 53.1: Key questions to be considered in assessing the applicability of APPs

Is the information “personal information”? “Personal information” is defined in s 6(1) of the Act. It means “information or an opinion about an identified individual, or an individual who is reasonably identifiable: (a) whether the information or opinion is true or not; and (b) whether the information or opinion is recorded in a material form or not.” In other words, information will be “personal information” where it is about an “identified” individual, as well as where the information relates to a person whose “identity” is apparent. This definition appears to capture information that “singles out” an individual from everyone else, even if the information cannot be linked to the identity of the individual, eg unique identifiers, such as a SIM card on a mobile phone, computer cookie, IP address, or driver’s licence number. In practice, this means a broader range of information may be regulated by the Act than previously. The definition is intended to be broad and will be applied as such. The fact that a record does not identify a person by name will not necessarily mean that the record is not personal information. The approach of businesses and employers should be to ask whether the record (defined as a document, database (however kept), or a photograph or other pictorial representation of a person) contains information which could in some way enable identification of an individual, or contains information which is linked to a particular individual. Is email “personal information”? Some commentators have questioned whether the definition of personal information includes email as, arguably, it will not always be the case that an email can identify a certain individual. In relation to an

email address which includes an individual’s name as part of the email address, identification is possible. However, many email addresses bear no real connection to an individual’s identity, unless the recipient knows the sender’s email address (eg Hotmail addresses). For the purposes of internal records, however, most employers will be able to identify an individual employee from an email. This definition will also include logs of internet information (provided of course the log identifies an individual employee). Much of the content of email may, however, be personal information and could cause issues under the Act. Need to apply for small business exemption In an attempt to avoid unnecessary costs for “small” businesses in complying with the legislation, the Act includes a limited exemption for small businesses. It is interesting to note that the exemption for small business is not based on the number of employees, but on the turnover of the business ($3m or less). However, this exemption is limited and does not include small businesses involved in high-risk activities, namely, maintaining health information records (other than in employment records). Further, a review of federal privacy laws by the Australian Law Reform Commission (ALRC) suggested removal of the exemption. Employee records exemption The private sector amendments to the federal Act differ from privacy legislation in other jurisdictions because they aim to specifically exclude from their application most information that employers will collect relating to their employees. Employers should remain wary of the actual extent to which the employee records exemption contained in the Act permits employers to avoid complying with the APPs. While the exemption explicitly excludes most employee information usage from its coverage, its application in certain situations is unclear (see Figure 53.2). Further, a review of federal privacy laws by the ALRC suggested removal of the exemption. Section 7B(3) of the Act provides: “an act done, or practice engaged in, by an organisation that is or was an employer of an individual, is exempt for the purposes of paragraph 7(1)(ee) if the act or practice is directly related to: (a) a current or former employment relationship between the employer and the individual, and (b) an employee record held by the organisation and relating to the individual”. As such, the Act does not cover employee records when they are used within the context of the employment relationship in the private sector. Therefore, public sector employees currently enjoy different privacy standards to private sector employees. Figure 53.2: Application of employee records exemption

To qualify for the exemption, an employer’s act or practice must be directly related to: • a current or former employment relationship between the employer and the individual, and • an employee record held by the organisation and relating to the individual. Is the “personal information” part of an “employee record”? If the information identifies an individual employee or is capable of so doing (ie it is personal information), the next step in assessing whether the employee records exemption can be relied on is to establish whether the information is part of an “employee record”. Section 6(1) of the Act provides: “… ‘employee record’, in relation to an employee, means a record of personal information relating to the employment of the employee”. Examples are health and personal information about all or any of the following in relation to the employee: • engagement • training • disciplining • resignation • termination • employment terms and conditions • personal and emergency contact details • performance or conduct • hours of employment • salary or wages

• membership of professional or trade associations, including trade unions • all leave entitlements, and • taxation, banking or superannuation affairs. The Act provides that this list is not exhaustive, but merely illustrative. The exemption, therefore, applies to personal information an employer holds as part of an employment record relating to a current or former employee. Where an employee records exemption will not apply Although apparently wide, it is important to note that there are limitations to the employee records exemption. These are where: • there is no current or former employment relationship (eg prospective employees, job applicants and contractors) • an act or practice is not directly related to the employment relationship (eg disclosure of personal information to a third party for purposes outside the employment relationship, such as marketing), or disclosing an employee’s personal information to a personal creditor of the employee (see B v Cleaning Company [2009] Priv Cmr A2), and • the exemption relates only to the employer (any third party contractor who receives personal information on an organisation’s employees must comply with the APPs). Application of the exemption The application of the employee records exemption to an employer’s monitoring of employee email and internet use is potentially problematic. One issue is the form of the information. Information will come within the application of the APPs if it: • is able to identify an individual employee • is recorded • does not directly relate to a current or former employment relationship, and • does not relate to the employment of the employee. The APPs also contain guidelines for the collection and use of sensitive information about an individual. “Sensitive information” means personal information, or an opinion about an individual’s: • racial or ethnic origin • political opinions • membership of a political association • religious beliefs or affiliations • philosophical beliefs • membership of a professional or trade association • membership of a trade union • sexual preferences or practices • criminal record, or health information, genetic information (that is not otherwise health information), biometric information

that is to be used for the purpose of automated biometric verification (or biometric identification) or biometric templates. As such, it is preferable that an employer has an employee privacy policy that sets employees’ expectations about how their personal information might be used. In the event of any ambiguity about whether the employee records exemption applies, demonstrating consent for a particular use is also preferable. Ongoing Privacy Law reforms There is still, however, potential for other reforms recommended by the ALRC to be implemented in the future. The federal government had previously indicated that it would look to introduce reforms in tranches, with exemption reforms to fall in the second tranche. If the employee records exemption is removed, employers will need to comply with statutory privacy obligations when dealing with employees’ personal information, and particularly when dealing with other common employee-related issues, such as negotiating unions’ rights of entry, investigating harassment or discrimination complaints, and performance management. For example, employees may have new rights of access to, and to correct, information held about them on personnel files if the ALRC’s recommendations are adopted. Required disclosure of some employee records on request Notwithstanding the employee records exemption (which extends to exclude APP 12 and 13 regarding access and correction rights respectively), employees do have rights to view some “employees records” under the Fair Work Regulations 2009 (Cth) (FW Regulations). Regulation 3.42 requires an employer to make available a copy of employee records required to be kept under the Fair Work Act 2009 (Cth) and the FW Regulations on request of an employee or former employee to whom the records relate. Employer’s right to monitor As noted at the outset, the Act itself does not impact on an employer’s right to monitor. However, it may well impact on what action an employer can take in respect of the information and what obligations, if any, an employer may owe its employees if the information does not fall within the employee records exemption. Much information contained in email communications may or may not be related to the employment relationship or an employee record. For example, information about the health of an employee disclosed by the employee to a co-worker in an email may not be related to the employment relationship. An employer may argue that such information is not “collected” by the employer, given that it was sent to the employer’s network and not solicited. Given that APPs 3–5 relate only to the “collection” of personal information, there is some argument that APPs 3–5 will not apply (APP 3 requires personal information to be collected fairly, lawfully and without being intrusive, APP 4 relates to dealing with unsolicited personal information, and APP 5 requires an entity which collects personal information to notify the individual (or otherwise take reasonable steps to ensure they are aware) of various matters, including that the information has been collected, from whom and for what purpose). It is not clear, however, whether storing such information (eg on backup tapes, or even in individual employee files) would then be “collection”. These are issues which the Privacy Commissioner may be forced to address if complaints are received based on employer misuse of personal information. While the Act may not prohibit monitoring of email and internet usage, employers should not consider that the employee records exemption will always apply. For example, internet site logs compiled by companies to record what sites are visited by its employees, may fall outside the exemption on the basis that, although it is a record of personal information, such activity may not relate to the employment of the employee. Employers in New South Wales must comply with limits on computer surveillance imposed by the Workplace Surveillance Act 2005 (NSW) (see Chapter ¶55). The Guidelines on Workplace E-mail, Web Browsing and Privacy (OAIC 2013) emphasise that most employees do not expect to completely sacrifice their privacy while at work. The guidelines note that (in relation to the public sector) email communications which contain personal information are records for the purposes of the Act. This suggests that employers in states other than New South Wales should certainly make employees aware of the extent of any monitoring and what, if any, material is logged or stored. In addition, it appears

likely that information, which could lead to disciplinary action, may not be able to be used against an employee who was not aware of monitoring because, arguably, this would breach APP 6, which limits the use of information for secondary purposes. Exemption applies only to “records” As noted previously, the employee records exemption specifically relates to acts or practices directly related to “records”. However, the definition of “personal information” in the Act includes information “whether recorded in a material form or not”. Meaning of “employment relationship” and “directly related to” The Act does not include a definition of either “employment relationship” or “directly related to”. The Privacy Commissioner has indicated that the employee records exemption is intended to limit the degree to which an employer can disclose information to a third party for commercial purposes, such as direct marketing (Office of the Privacy Commissioner 2001). However, it is foreseeable that there will be occasions where an employer and employee take a different view of whether the information, record, act or practice is directly related to the employment relationship. For example, if an employee’s email (intercepted as part of routine monitoring by an employer) discloses activity outside of the workplace to which an employer takes exception, but which does not in any way impact on the employee’s performance or ability to perform in their role, to what extent could that information be used by the employer? This question was considered in the following case.

Case example B Rose v Telstra Corporation Limited In B Rose v Telstra Corporation Limited (1444/98 N Print Q9292 [1998] AIRC 1592 (4 December 1998), Ross VP held that Telstra’s decision to dismiss Rose for fighting after hours with a colleague was unfair. The Commission considered that, although the incident occurred while away on assignment, given that the identity of the employer could not be gauged by anyone who had witnessed the altercation, it did not affect the employment relationship.

Although, other decisions of both the (previous) Australian Industrial Relations Commission and federal courts have found out-of-work conduct to nonetheless fall within the ambit of the employment relationship (see Lee v Smith & Ors [2007] FMCA 59). As such, it is possible, although not settled, that such information (found through email monitoring) if kept by an employer would be subject to the APPs. If an employer were to become privy to this information through email monitoring, and kept the email as part of an employee file without the employee’s knowledge, this would breach APP 6 relating to use and disclosure of personal information. Job applicants As noted previously, the employee records exemption will not apply to any records that are created from information regarding job applicants, nor will it apply to non-recorded information or opinions about a job applicant. Human resources (HR) professionals must carefully consider the APPs in terms of matters such as job application forms and questions asked during the interview process. The definition of “employee record” specifically refers to personal information relating to the employment of the employee, including information about the employee’s “engagement”. It is, therefore, arguable that records relating to successful job applicants come within the employee records exemption, on the basis that it is personal information in an employee record relating to the engagement of the employee at the time of engagement.

¶53-030 Practical impact of Australian Privacy Principles

APP 1 — data handling practices APP 1 requires an APP entity to take reasonable steps to implement practices, procedures and systems to ensure they comply with the APPs and can deal with inquiries or complaints about their compliance with the APPs (APP 1.2). APP Entities must include additional information in their privacy policies (eg how they handle privacy complaints; whether they disclose personal information to recipients out of Australia, etc) and such policies must be clearly expressed and up-to-date and made available free of charge and provided in an appropriate form (eg via the intranet) (APP 1.3–1.6). APPs 3, 4 and 5 — collection The requirement that personal information must be collected fairly, lawfully and non-intrusively under APP 3 must be considered by HR professionals during the interview and job application process. Job application forms should be limited to seeking information which is fair and not intrusive. However, it is the requirement that collection of personal information be lawful which has the greatest impact. For example, questions relating to matters which constitute a ground for discrimination under various forms of discrimination legislation may be discriminatory and, therefore, unlawful. In particular, under APP 3, where possible, information should be collected directly from the individual. In a job application or interviewing situation, this would limit HR professionals from seeking information from previous employers (unless it is not practicable to seek the information from the individual or unless the individual consents to that collection). Consent should be obtained for the collection of personal information from former employers, such as for reference purposes. The job applicant should be informed if personal information is to be given to any third party contractor. Consent may not be necessarily required in this situation, but it is important that the applicant is notified of the prospective employer’s information practices. This may be of increasing importance in relation to background checks and curriculum vitae verification checking undertaken by third party contractors. APP 11 — destroying or de-identify obsolete personal information Under APP 11.2, an employer has an obligation to destroy or de-identify personal information which no longer needs to be kept. Accordingly, an employer should not retain information relating to unsuccessful job applicants for longer than is necessary. As such, unless an employer has express or implied consent from an applicant to retain material relating to their application, the retention of curricula vitae, interview notes, or other correspondence relating to the application may involve an unlawful interference with privacy. Where consent to the retention of such material is obtained, or where personal information relating to an application is retained, the applicant will have, pursuant to APPs 12 and 13, rights of access and correction to the personal information. In particular, it is foreseeable that under APP 12 an applicant could request information held by a company, such as interview notes. Arguably, for applicants this is a powerful tool should they consider they were not given a role due to a discriminatory or other unlawful reason. It is also a good reason for businesses to carefully assess the information held and retained about job applicants. Penalties There is a new civil penalty provision that applies if an entity engages in an act that is a serious interference with an individual's privacy or if it repeatedly does an act that is an interference with one or more individual’s privacy (see s 13G of the Act). For a corporation, the maximum penalty that may be imposed under this provision is $1.8m. Contractors The fact that contractors will not be included within the employee records exemption means that employers who engage independent contractors, and outsource functions within their businesses, will have to comply with the APPs in relation to those individuals. In terms of email monitoring and internet usage, this means that, in the context of contractors, it is even more important for an employer to develop, maintain and actively inform contractors about the company’s email and internet usage and monitoring policy.

Personal information retained by an employer through monitoring must be handled by the employer in accordance with the APPs. In this regard, APP 12 may be the most relevant principle. It requires organisations (other than in certain circumstances) to give an individual access to personal information held by the organisation at the individual’s request. Best practice As a basic standard, other than where it would cause unreasonable cost or hardship, employers are best advised to comply with the APPs under the Act, irrespective of the likely application of the employee records exemption. The complexity of the exemption and the prospect of its future modification suggest that, except where it imposes substantial costs, compliance with the APPs for all personal information may be the most appropriate course of action. Email and internet policies should clearly explain the extent to which monitoring is undertaken, what records and information are kept and who has access to such records. Employees should acknowledge and consent to such monitoring. In relation to online employee databases, the same approach is advisable in light of the potential complexities in the application of the employee records exemption and surveillance legislation in New South Wales. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶38-000. References ALRC 2008, “For Your Information — Australian Privacy Law and Practice”, ALRC Report 108, 12 August, see www.alrc.gov.au/publications/report-108. NSW Law Reform Commission 2001, Surveillance: An Interim Report, NSW Law Reform Commission, Sydney. OAIC 2013, Guidelines on Workplace E-mail, Web Browsing and Privacy, accessed July, see www.oaic.gov.au/privacy/privacy-archive/privacy-guidelines-archive/guidelines-on-workplace-email-webbrowsing-and-privacy. OECD 1981, OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data, see www.oecd.org/internet/ieconomy/oecdguidelinesontheprotectionofprivacyandtransborderflowsofpersonaldata.htm Office of the Privacy Commissioner 2010, Australian Privacy Principles Companion Guide, June, Cabinet Secretary Hon Joe Ludwig. —— 2008, “For Your Information, Australian Privacy Law and Practice”, ALRC Report 108, 11 August, Australian Law Reform Commission. See www.alrc.gov.au/publications/report-108. —— 2007, “Review of Australian Privacy Law”, DP 72, September, Australian Law Reform Commission. See www.alrc.gov.au/dp-72. —— 2001, Guidelines to the National Privacy Principles, Office of the Federal Privacy Commissioner, Canberra. See www.oaic.gov.au/privacy/privacy-resources/privacy-guides/guidelines-to-the-nationalprivacy-principles. —— 2000, Guidelines in Workplace Email, Web Browsing and Privacy, Office of the Privacy Commissioner, Canberra. See www.oaic.gov.au/privacy/privacy-archive/privacy-guidelinesarchive/guidelines-on-workplace-email-web-browsing-and-privacy. —— 2013, Australian Privacy Principles and National Privacy Principles — Comparison Guide, Office of the Australian Information Commissioner, Canberra. See www.oaic.gov.au/agencies-andorganisations/guides/australian-privacy-principles-and-national-privacy-principles-comparison-guide. —— 2015, APP guidelines, Office of the Australian Information Commissioner, Canberra. See www.oaic.gov.au/resources/agencies-and-organisations/appguidelines/APP_guidelines_complete_version_1_April_2015.pdf.

54. EMAIL AND INTERNET USE Editorial information

Maria Hurley-Smith Special Counsel, Baker & McKenzie

The original version of this article was written by Kathleen Thornton, a Senior Associate of Baker & McKenzie. Kathleen passed away in March 2006. We are grateful for her various valuable contributions to this Guide.

¶54-010 Introduction

“With email, our impulse is not to file and save, but to click and send. Our errors are often compounded by adding other recipients to the ‘cc’ list, and, even worse, the ‘bcc’ list.” — Michael Eisner, chairman of Walt Disney Company, explaining how email has increased the intensity of emotion in his company and become the principal cause of workplace warfare (James 2000).

Since the mid-1990s, email and the internet have had a dramatic impact on business and, in particular, on the volume and speed of communications, both inside and outside organisations. Researchers and managers alike have recognised the internet’s potential to transform business. The former Chief Executive Officer of General Electric (GE), Jack Welch, said of the internet: “Any company, old or new, that does not see this technology literally as important as breathing, could be on its last breath. But for those of us, including GE, who are capturing it, are energised by it and see it as the greatest opportunity in our history, the excitement is like nothing we’ve ever experienced.” However, internet and email use within organisations have also created new problems. Organisations can be exposed to litigation through inappropriate employee use of the internet and email. Email also has the potential to be an enormous drain on the time of employees by creating large numbers of unwanted or inappropriate emails and causing unproductive conflicts resulting from “flame mail” (ie abusive emails). Employee use of the internet for shopping, browsing and personal email creates a potential for “cyberslacking”, wasting employee time and server resources. Contact with customers by email can add unforeseen expenses in employee time, and require major changes in employee time allocation. For example, a major Australian bank estimates that responding to an email query is more than twice as expensive as dealing with the same query through a call centre. In this chapter, legal and human resources (HR) issues for organisations (created by the formal and informal use of the internet and email by employees) are discussed. The key legal issues for employers that relate to the use of the internet and email are:

• protection of information technology (IT) infrastructure • protection of confidential information and intellectual property, and • monitoring employee use of the internet and email. The issues to be examined are the: • specific legal risks for employers created by internet and email use in the workplace, and • responsibilities of an employer in relation to its employees, the complex issue of monitoring employee email and internet usage, and the extent to which employees have a right to privacy of email or internet use. The HR perspective addresses attempts by organisations to minimise the disadvantages of internet and email use, and offers guidelines for managers on managing their corporate internet operations. Employees’ right to privacy is discussed in Chapter ¶53. The right to monitor employees’ email use through computer surveillance is dealt with in Chapter ¶55. In particular, employers with operations or employees in New South Wales should be mindful of the enactment of the Workplace Surveillance Act 2005 (NSW).

¶54-020 Protecting IT information Business and employee use of email and the internet exposes businesses to a number of liabilities. A British survey conducted in 1999 found that 31% of all email messages endanger corporate information assets, employee productivity or messaging systems (Drake 2001). In particular: • 10% of all emails were unsolicited commercial communications • 9% disclosed confidential information, were defamatory or were otherwise unlawful • 4% were bulk mail • 4% contained profanities • 2% carried jokes, and • 2% spread viruses. Computer viruses and other “malware” Everyone who has used the internet or email regularly knows about the increasing number of viruses. A hacker’s “Loveletter” virus, transferred via email in late 2000, crippled communications within a number of businesses worldwide, affecting even the Pentagon. On 26 January 2004 the “Mydoom” virus was estimated to have infected 250,000 computers in a single day, and to have been responsible for up to 10% of all email traffic on that day. In addition, there are increasing numbers of “malware” such as web bugs, worms and trojans. “Web bugging” is a term used to refer to various techniques whereby an outsider can track information, such as if a web page or email has been read, who reads it, what the timing and location was of such access, and also (in the case of email) if it was forwarded to others. An example of this is where a small amount of coding (known as Java Script) embedded into an email message makes messages vulnerable to the point of being equivalent of email wire-tapping. Trojans are a type of computer program which forms part of an application downloaded for one purpose (eg a game or screensaver) which allows an external party to access or control the computer. Surveys of Australia’s top businesses undertaken by the Australian National Computer Emergency Response Team, the Australian High Tech Crime Centre (AHTCC) and various Australian police agencies, have revealed that over 60% of companies surveyed have experienced a virus or a trojan

infection of the company’s computer systems (AHTCC 2006; see also the AusCERT website for other publications and survey information at www.auscert.org.au). Unfortunately, in many ways, there is little that a business can do to protect itself from such malware, other than ensuring IT systems have adequate virus checks for all incoming messages, and educating employees about other kinds of malware. Cyber crime Significant damage to businesses can occur from unauthorised access to company computer systems. The survey referred to above revealed that (AHTCC 2006): • 35% of companies surveyed reported unauthorised access incidents which damaged the confidentiality, integrity or availability of data in 2005, although this dropped to 22% in 2006 (consistent with long-term trends), and • more than 30% of the surveyed companies experienced computer system abuse which originated within the company. In 2008, one group based in Eastern Europe stole tens of millions of confidential credit card numbers from nine of the biggest retailers in the United States, which were then used for fraudulent transactions. Other examples of cyber crime include online scams or “phishing”. Phishing is where an electronic communication is sent, pretending to be a trustworthy source, in an attempt to acquire sensitive information, such as usernames, passwords, and credit card details. Experts at the 2009 World Economic Forum in Davos estimated that online theft of various kinds cost over US$1 trillion per year worldwide. Legal remedies In practice, it is often very difficult to trace and then take legal action in relation to damage caused to a computer network by a virus or infected email, or financial loss caused by cyber crime. As noted in ¶54030 under “Protecting networks from infiltration”, the destruction of data through infiltration of a computer is a criminal offence. In reality, however, prevention is the best remedy. An employer may take action against an employee where loss or damage occurs as a result of the misconduct of an employee. In New South Wales, the action would need to amount to serious and wilful misconduct pursuant to the Employees Liability Act 1991 (NSW) (eg opening a virus-infected email when explicitly warned against doing so).

¶54-030 Protection of information and intellectual property Protecting networks from infiltration One relatively well known risk for employers from increased internet and email use is unauthorised access to networks, or hacking. Specifically, the risks for employers are: • unauthorised access of computer systems (hacking) • unauthorised acquisition, copying, alteration, corruption and destruction of data, and • interference among systems that regulate communications between computers. Every state in Australia now has specific legislation dealing with cyber crime. Although approaches differ, at the very least, each state has legislation making hacking and the alteration, destruction or deletion of data a criminal offence. See Table 54.1. Table 54.1: Legislation dealing with cyber crime Jurisdiction

Legislation

Federal

• Criminal Code Act 1995 (Cth)

• Telecommunications (Interception and Access) Act 1979 (Cth) Australian Capital Territory

• Criminal Code Act 2002 (ACT), Ch 4, Pt 4.2

New South Wales

• Crimes Act 1900 (NSW), s 308–308I

Northern Territory

• Criminal Code Act 1983 (NT), s 222 and 276–276F

Queensland

• Criminal Code Act 1899 (Qld), s 408D and 408E

South Australia

• Summary Offences Act 1953 (SA), s 44 and 44A

Tasmania

• Criminal Code Act 1924 (Tas)

Victoria

• Crimes Act 1958 (Vic), s 247A–247L

Western Australia

• Criminal Code 1913 (WA), s 440A

Any business connected to the internet must be fully aware of the risks involved with computer networks and take measures to protect them, such as: • ensuring all files downloaded from the internet are checked for viruses • ensuring employees are instructed that they should never provide any other person with information, such as dial-up numbers for external computer access, or passwords for access to networks • building appropriate firewalls and safety measures into computer networks, and • ensuring regular monitoring of systems to locate unauthorised access as soon as possible. New security concerns Email and, to an extent, internet use, are often mistaken to be safe and direct forms of communication between parties, perhaps in part because they occur in an intimate setting. The internet has often been referred to as an “information superhighway”. However, unlike a highway, information travelling over the internet is not ordered, nor is it flowing in the same directions. The analogy of the information superhighway can lead to the erroneous and potentially very damaging belief that information sent via the internet or email travels more or less directly from sender to recipient. Both employers and employees must be aware of the technical realities of email use and privacy. In particular, that: • email is not secure unless it has been encoded or encrypted (even then it is usually able to be accessed) • email is difficult to destroy • email and internet use leaves an easily recoverable trail — most software used to operate networks, including web servers, mail servers and gateways, is able to log transactions and communications, and • email can be “bugged” (or tagged) to track all future recipients. The internet also presents security risks such as: • “cookies” — records stored on an internet user’s machine as a result of an electronic signal sent by a web server to a web browser and used by web servers to build profiles of an individual’s web use • infection by malware such as viruses, trojans and worms, and • breaches of security from information provided to unsecured internet sites. As noted before, where employers do not have appropriate security measures in place to protect their networks, the information stored on those networks may be vulnerable to access from outside of the

employer’s place of business. Valuable commercial information, intellectual property or other forms of material are usually stored on computer networks, and employers should carefully assess the risks involved with such storage and put in place appropriate safeguards. In terms of what, if any, legal protection is available, arguably email bugs, trojans and cookies represent a trespass (provided the damage is direct and immediate), given that storage on an employer’s computer is “interference with a chattel”. In practice, however, IT remedies such as installing tracking programs which detect and advise when cookies are being downloaded, or which disable such devices, are more beneficial than any attempts at enforcement of any applicable legal rights. Intellectual property rights The wide audience able to be reached through the internet is something of a double-edged sword when it comes to protecting intellectual property such as copyright information and trademarks. This is because, while a wider audience and ease of access to a business’s copyright-protected works (text, pictures, films, music and software) increase the risk of infringement of copyright, they also permit easier detection of infringement. Employers must carefully consider what information or copyright-protected material is placed on their websites. Employees must also be alerted to what information and material is copyright protected, and restrictions placed on the transfer of such information or material. Protection of confidential/sensitive information Increased email and internet use also exposes employers to greater risk of disclosure by employees of confidential or commercially sensitive information. The potential damage is increased as a result of virtually instantaneous distribution to a wide range of recipients. More than ever, a disgruntled employee could ensure disclosure that achieves maximum damage to a business. One issue of particular and increasing concern is the use of social networking websites, such as Facebook, and other communication services, such as Twitter. Such websites and services often involve individuals broadcasting to a very wide audience what they are doing and what has happened that day (Simon is working on a big new project for Happy Corp), some of which may be confidential information of their employer. In addition, the informality and “share everything” nature of such websites often means that employees will disclose confidential information on the internet which they would never consider sending by email or telling someone on the telephone. (See Chapter ¶24 for more information on social media, networking and the workplace.) In terms of legal protections, the courts will imply into the employment contract an obligation that information relating to a trade secret or constituting confidential information cannot be used or disclosed by an employee without the consent of the employer. It is also common for employers to insert into their employment contracts restrictions on the use and disclosure of confidential information. However, before a court considers information to be confidential, it will look at the nature of the information. One of the important factors it will focus on is whether or not the employer has taken steps to guard the secrecy of this information. For example, if the employer has given general access to confidential information to all employees within its organisation, it is unlikely that this information would be regarded as confidential. Confidential information should be disclosed only to those employees who “need to know” for the purpose of undertaking their work. In larger organisations, company intranets (internal email and internet access systems) that might contain confidential or sensitive information should be password protected. Failure by an employer to clearly identify as confidential any material that could be forwarded in emails to a number of recipients could restrict the remedies available to it against persons who disclose such information. Employers, like employees, must not be lulled into any false sense of security by the seemingly secure and intimate nature of email and internal bulletin boards or intranets. Employers need to maintain and encourage exactly the same (and in some cases — more advanced) security measures as those required of hard copy confidential information. Therefore, it is important that employers do not grant all employees computer access to all business documents. Employers should set up passwords in respect of documents they regard as confidential and

ensure that they are marked confidential. Employers should also ensure that their email and internet policies contain provisions that prohibit the disclosure or exchange of passwords among employees. Obligations of confidentiality subsist after the employment has been terminated. If an employer is aware that information is about to be used or disclosed by an employee (or former employee) for an illegitimate purpose, an employer may often obtain an injunction to prevent such use or disclosure. If the information has been used or disclosed, then an employer may also be able to obtain damages or an account of profits earned by the employee or, in some cases, the employee’s new employer. If the employee is still employed at the time of the disclosure or the abuse, then the employer may have a right to summarily dismiss the employee or take other disciplinary action. In reality though, the disclosure could take only seconds and be received by, or accessible to, an enormous audience. Effort should, therefore, be put into the front end, through prevention and risk management. Even where it is impossible to restrict access to valuable information stored on a computer network, employers should consider “tracking” access to such information, to enable them to determine who had access to the information if it is misused, thereby making any investigation much easier. More information on monitoring employee computer use is dealt with in Chapter ¶55. It should be made very clear to employees that all information sent via email is not secure, and an employer should consider alternative means of distributing confidential information, rather than sending it via email. If confidential information is sent, it should be encrypted or password protected. In addition, all employers should maintain and regularly test their computer and data backup systems to ensure these are protected in the event that networks are affected by viruses or other problems related to internet or email usage.

¶54-040 Protection from liability resulting from employee action Employee breaches of copyright Employers must remain aware that not only is their own copyright material vulnerable via the internet or email, but also that employees may breach other people’s copyright through their use of the internet. As users of the internet, businesses are also using copyright works owned by others. Reproduction of such material is much easier with advances in digital technology; however, ease of reproduction does not dilute the protection many works have under the law of copyright. For example, images, screensavers or documents which are copied and/or printed from the internet may in fact be subject to copyright, which prevents the substantial reproduction of a work. The Australian Copyright Council publishes various information sheets on copyright issues relating to internet use. The Copyright Act 1968 (Cth) creates a statutory right which vests in the creator of a work when the work is produced in a material (printed) form. Publications on the internet are covered by the law of copyright. Downloading or reproducing such material without express or implied authorisation is an infringement of copyright. Persons may be found liable for breach of copyright where they have “authorised” the infringement. Publishing or posting copyright-protected material on an internet (or intranet) site also infringes copyright. Of greater potential risk is the fact that a business will be liable for authorising additional infringement of copyright every time an employer’s site, which may contain copyright material is viewed, printed or downloaded by a user.

Case example University of New South Wales v Moorhouse University of New South Wales v Moorhouse [1975] HCA 26 (Moorhouse) is, arguably, authority for the view that employers will generally be liable for a copyright infringement by an employee only where an infringement occurs within the scope of the employee’s employment, or has, in some way, been authorised by the employer. The case alleged that the university, by providing a photocopier in the library for students’ use, had authorised students’ breach of copyright. It is important to note that

authorisation does not necessarily mean specific action constituting authorisation, and can include a party’s inactivity in the face of the potential for infringement of copyright.

The Copyright Act 1968 (Cth) includes provisions requiring courts to have regard to certain matters when looking at the issue of whether a person has authorised an infringement of copyright (s 36(1A) and 101(1A)). These matters include: • the extent (if any) of the person’s power to prevent the doing of the act involved • the nature of any relationship existing between the person and the persons who did the act concerned, and • whether the persons took any reasonable steps to prevent or avoid the doing of the act. It does not appear likely that an employer would incur liability for an employee’s copyright infringements over the internet or email for non-work-related use. It is clear that merely permitting employees to access the internet will not necessarily result (in the case of a subsequent infringement of copyright by an employee) in the employer being found to have authorised the infringement. However, the Moorhouse decision does demonstrate that inaction can, in circumstances where the failure to take certain steps amounts to encouragement to infringe copyright, amount to authorisation. For these reasons, any internet and email policy should include a clear statement against reproducing copyright works. Employees should also be educated as to what amounts to activity that may breach copyright or trademark rights. Employers should be able to demonstrate that these statements are not merely perfunctory, but are regularly promulgated and understood by employees. Defamation Increased internet and email use has led to increased potential for employers to be held liable for defamatory statements made by their employees. Internet chat rooms and bulletin boards, blogging websites and social networking websites (eg Facebook) can be frequented by employees. As noted earlier, the ease of email use, together with its deceptively intimate format, makes it dangerous in the hands of destructive, disgruntled or simply ignorant employees. The case of English insurer, Norwich Union, which was ordered to pay out £50,000 after employees sent emails externally claiming that their rival Western Provident was in financial difficulties, is a reminder of the need to inform employees of the dangers and to impose restrictions and policies. The contents of an email sent from a business by an employee, or appearing on an employer’s website or internet, could expose the business to a defamation claim. The law of defamation differs from state to state. Generally, defamation is considered to occur where a person publishes material concerning another person which damages that person’s reputation. Any person who publishes a defamatory statement (including forwarding a defamatory email), or controls the site on which a defamatory statement appears (including, in certain circumstances, internet service providers or ISPs which “host” people’s websites) may be liable in defamation.

Case example Rindos v Hardwick Defamation via the internet has been considered judicially by the Supreme Court of Western Australia in the case of Rindos v Hardwick (unreported, Supreme Court of Western Australia, 21 March 1994). In this case, Dr Rindos, a noted anthropologist, was awarded substantial damages when the court found that he had been defamed by another anthropologist, Dr Hardwick. Dr Hardwick had published a statement about him on a university bulletin board with a wide international readership. The court found that the defamation caused serious harm to Dr Rindos’s personal and professional

reputation and ordered Dr Hardwick to pay Dr Rindos $40,000. This case illustrates that internet use is a potential area of liability for employers whose employees post defamatory statements.

Most state legislation provides a defence to proceedings for defamation of “innocent dissemination”. As such, the potential for employer liability for defamatory statements depends largely on how much control a business had over the defamatory statement.

Case examples The Supreme Court of NSW has made non-binding statements in the case of McPhersons Ltd v Hickie (1995) Aust Torts Reports ¶81-348, to the effect that an employer could, in such circumstances, rely on the defence of innocent dissemination. This can be contrasted with the approach of the High Court of Australia in Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574 (Thompson), which considered that a defendant, who was aware or ought to have been aware of defamatory content published (through, in that case, their broadcasting system), had an obligation to remove it or prevent its publication.

The Thompson case involved a live interview by Channel 9, New South Wales, with the daughter of the plaintiff, who made defamatory statements during the interview. The interview was screened simultaneously in the Australian Capital Territory by Capital Television (Capital TV). Capital TV argued that they were the “innocent disseminators” of the information, but were found equally liable. The case is a good example of the increasing inability of law (such as that relating to defamation) which was made primarily with respect to print media, to deal with electronic media. Although the reasoning in Thompson suggests that the defence of innocent dissemination would not be available to internet service providers, cl 91(1) of Sch 5 of the Broadcasting Act 1992 (Cth) may address this. Under this provision, no state or territory law or any common law rule has effect to the extent that it subjects an internet service provider to civil or criminal liability. Although this clause was enacted to protect internet intermediaries from criminal or civil liability for carrying pornographic and other offensive material, it is arguably broad enough to operate as a defence to defamation. The internet and email have presented difficulties for the law of defamation.

Case example Dow Jones and Company Inc v Gutnick The issue of the place of publication in the context of a defamatory statement published on the internet has been considered by the High Court in Dow Jones and Company Inc v Gutnick [2002] HCA 56 (Gutnick). Dow Jones published a weekly financial review magazine called Barrons Magazine in New Jersey, NY. The magazine had substantial circulation in the United States. A very small number of the actual print copies were available and sold in Australia. However, the magazine was also published online on Dow Jones’ website, which had some 550,000 subscribers globally. Mr Gutnick claimed that an article published in the magazine imputed that he was masquerading as a reputable businessman when he was in fact a tax evader, who had laundered large amounts of money for another individual who had been implicated in the United States in money laundering and tax evasion. Dow Jones sought to have the claim in Australia struck out on the basis that the article had been

“published” on its website in New Jersey, NY, and accordingly, that Mr Gutnick should be required to commence proceedings in the United States. Dow Jones argued that, unless it could be shown that a choice of location was purely “opportunistic”, a publisher who distributes information on the web ought to be able to govern its conduct according to the law of the place where it stored and maintained its data. Given the unique nature of the internet as an unrestricted medium for disseminating information, Dow Jones argued that the alternative would force web publishers to take the law of every country in the world into account before making any material whatsoever available. This argument was rejected by the High Court. The High Court held that the cause of action will arise at the place where the damage to reputation occurs, and this will ordinarily be wherever the defamatory material is available in comprehensible form. Crucially, web-based information is not available in comprehensible form until it has been downloaded from a server onto the computer of a person who wishes to view it. In granting jurisdiction to the courts in Victoria, the High Court considered that, since the material defamed Mr Gutnick in Victoria, the tort had been committed in Victoria.

The issue of the place of publication in the context of a defamatory statement published on the internet has been considered by the High Court in Gutnick v Dow Jones & Co Inc [2002] HCA 56. Dow Jones published a weekly financial review magazine called Barrons Magazine in New Jersey, NY. The magazine had substantial circulation in the United States. A very small number of the actual print copies were available and sold in Australia. However, the magazine was also published online on Dow Jones’ website, which had some 550,000 subscribers globally. Mr Gutnick claimed that an article published in the magazine imputed that he was masquerading as a reputable businessman when he was in fact a tax evader, who had laundered large amounts of money for another individual who had been implicated in the United States in money laundering and tax evasion. Dow Jones sought to have the claim in Australia struck out on the basis that the article had been “published” on its website in New Jersey, NY, and accordingly that Mr Gutnick should be required to commence proceedings in the United States. Dow argued that unless it could be shown that a choice of location was purely “opportunistic”, a publisher who distributes information on the web ought to be able to govern its conduct according to the law of the place where it stored and maintained its data. Given the unique nature of the internet as an unrestricted medium for disseminating information, Dow argued that the alternative would force web publishers to take the law of every country in the world into account before making any material whatsoever available. This argument was rejected by the High Court. The High Court held that the cause of action will arise at the place where the damage to reputation occurs, and this will ordinarily be wherever the defamatory material is available in comprehensible form. Crucially, web-based information is not available in comprehensible form until it has been downloaded from a server onto the computer of a person who wishes to view it. In granting jurisdiction to the courts in Victoria, the High Court considered that, since the material defamed Mr Gutnick in Victoria, the tort had been committed in Victoria. Direct and vicarious liability The liability of employers for the defamatory statements of their employees may arise either directly or vicariously. Direct liability occurs where the defamatory statement is made by an employee “as the employer”. For example, in the United Kingdom, Western Provident sued not only the individual employees, but also Norwich Union as the employer, for defamatory statements made by its senior-level employees. It is not clear yet in Australia whether an employer with a high level of control over its email or computer network will be more likely to be considered directly liable for defamatory statements by employees. At present in Australia, internet service providers (ISPs), which “host” websites, may not be liable under state or territory law for content where they are not aware of its nature. Nor may they be required to monitor, make inquiries, or keep records of internet content that they host or carry. This is quite different to the approach of courts in the United States, which have taken the view that direct

liability depends on the degree of editorial control and/or monitoring by an ISP. In the United States, liability for defamatory statements will attach where the ISP does have a certain degree of editorial control and monitoring. It is yet to be seen whether a court in Australia would require more stringent control of email or internet content by an employer. However, the approach of the High Court in Thompson could be applied to employers. The fact that employers may incur liability if they exercise a high level of control over employee email content gives rise to a perverse disincentive. In the United States, some larger companies have come full circle in relation to employee email use. Some employers permit and encourage employees to use external email systems (eg Hotmail) for all personal email. This is despite the possible security risks to an employer’s own system. The rationale behind such a policy is that, because an employer has no ability to monitor or control the content of email on an external email system (because such use is passwordprotected by the account holder), employers do not have the requisite editorial or content control and, therefore, cannot be held liable for dissemination or publication of defamatory or otherwise communications. This is another area which remains to be decided by the courts. Best practice is for employers to make it abundantly clear to employees that such activity puts the employer at risk and amounts to gross misconduct. The Gutnick case also serves as a timely reminder of the global nature of the internet and email, and the possible wide-ranging ramifications of a defamatory statement able to be accessed by persons situated outside Australia. Criminal activities Of increasing concern to employers on a number of levels is the scope for businesses to be criminally liable for the possession, dissemination, publication and supply of pornographic material. Some states have legislation making it an offence to supply or possess objectionable publications. Table 54.2: Legislation regarding objectionable publications Jurisdiction

Legislation

Australian Capital Territory

• Crimes Act 1900 (ACT), s 64–65

New South Wales

• Crimes Act 1900 (NSW), s 578C

Northern Territory

• Criminal Code Act (NT), s 125B–125E

Queensland

• Criminal Code Act 1899 (Qld), s 227A–228H

South Australia

• Summary Offences Act 1953 (SA), s 33

Tasmania

• Criminal Code Act 1924 (Tas), s 130–130G

Victoria

• Crimes Act 1958 (Vic), s 68–70

Employers should be aware of such legislation. Employer liability may be established where there is evidence that the employer had knowledge of the publication. Termination of employment — email, internet and pornography There are a number of cases where the courts have indicated that a zero tolerance approach is permissible from employers towards pornography from the internet, regardless of whether or not such activity is considered to have occurred in company time or not. The Australian Industrial Relations Commission (AIRC) (since renamed) has also previously indicated that the viewing of pornographic material through the internet “constitutes sufficient reason for instant dismissal from the workplace” (see M Smith v Western Hospital 602/98 M Print Q1359; [1998] AIRC 722 (2 June 1998).

Case example Hodgson v The Warehouse Ltd [1998] 3 ERNZ 76

In New Zealand, the Employment Court upheld an employer’s decision to summarily terminate an employee who pleaded guilty to charges of possession and distribution of objectionable material, despite it occurring in the employee’s own time. The charges related to still-graphic or text images that the employee had downloaded from the internet at home. The employer learnt of the conviction (which related to child pornography) from a local paper. The employee’s manager met with the employee and advised him that the company considered the conviction had serious implications for the employee as a manager. The employer later advised the employee that he was to be dismissed because the employer expected its management staff to be role models for staff, and considered his behaviour unprofessional and unbecoming. The Employment Court declined an application to reinstate the employee, stating that it did not accept that because the activities occurred outside the workplace they did not constitute misconduct.

The court appears willing to back severe disciplinary action in the case of pornography from the internet in relation to the workplace. There have now been a number of unfair dismissal cases at both state and federal levels, which have considered when an employer can justifiably dismiss an employee for breaches of email or internet policies. Table 54.3 sets out a number of examples of judgments involving termination of employment as a result of breaches of email or internet policies. See ¶54-060 for a summary of the general principles arising from these cases. Table 54.3: Judgments involving termination of employment as a result of breaches of email or internet policies Case name, citation and date

Jurisdiction

Reasons for dismissal

Relevant facts

Orders of court

Reasons for decision

Mr Peter Bates v Commonwealth of Australia (Department of Defence) [2009] AIRC 899 (26 October 2009)

Australian Industrial Relations Commission

An employee was terminated for allegedly breaching the Australian Public Service Code of Conduct by saving “inappropriate material” to one of the drives of his computer and in allegedly being dishonest in the course of the investigation conducted by the employer.

The employee had been engaged by the employer for 25 years, and had suffered a series of illnesses. He had been unable to obtain other work. He admitted that the material had been saved on his computer and the Commission considered that he was genuinely contrite.

Employee reinstated to his position with continuity of service. However, the employer was not required to pay for remuneration during the period from termination to reinstatement.

While there was no denial of procedural fairness in the investigation, various factors (including the significant length of the employee’s service (during which there were no other conduct issues), the series of illnesses which he had suffered, and his contrition for his actions) meant that the termination was harsh — both because it was disproportionate to the gravity of the employee’s

misconduct and because of the consequences for the personal situation of the employee. Lane v Northern Sydney Central Coast Area Health Service [2006] NSWIRComm 380 (8 December 2006)

NSW Industrial Relations Commission (Full Bench)

An employee was terminated for allegedly improperly using the employer’s email system to send, receive and store inappropriate material, including sexually explicit material and graphic images of victims of violence.

A single member of the Commission had rejected the employee’s claim for orders arising from unfair dismissal.

Appeal granted and matter remitted to a member of the Commission for hearing.

A finding by the Commission that there was a lawful termination of the employment was not sufficient to deny an unfair dismissal claim without a corresponding finding that the termination was not “harsh, unreasonable or unjust”. Cases involving the handling of pornographic material need to be assessed in the light of a broad range of considerations “such as length of service; the consequences for the personal and economic situation of the appellant; whether the Policy was applied inflexibly; the disparity in disciplinary action taken in respect of the appellant by comparison to other employees; the subject of investigation; the appellant’s age; the very specialised skills and impaired eyesight and hearing of the appellant; the

likelihood of the appellant securing future employment and other relevant considerations”. Budlong v NCR Australia Pty Limited [2006] NSWIRComm 288 (3 November 2006)

NSW Industrial Relations Commission (Full Bench)

An employee was terminated for storing and accessing pornographic material on his work computer.

The employer had a policy prohibiting access and storage of pornographic materials. The material stored was at the “extreme” end of pornographic material. Other employees had been involved in sending emails with inappropriate material.

The employee was reinstated, but on the basis that he was to provide an undertaking to abide by the employer’s policy and an acknowledgement that any failure to abide by the policy may constitute grounds for summary termination. The employee was not granted back pay, to recognise that the employee should bear some responsibility for his misconduct.

It was grossly inappropriate for the employee to access or store pornographic material on an employer’s computer system, and the decision as to whether the dismissal was harsh was a “very fine matter of judgment”. However, there was a culture of acceptance of such conduct and the employee had been treated less favourably than other employees who had engaged in inappropriate conduct. The employer’s policy had been signed by employees with an “air of automaticity”. As such, the conduct did not justify summary termination of the employment.

J Williams v Centrelink PR942762; (2004) 54 AILR ¶100-179 (15 January 2004)

Australian Industrial Relations Commission

An employee was terminated for breaching APS Code of Conduct in sending pornographic emails to other employees and external recipients.

The employee was one of a group of employees investigated for breaches of the Code of Conduct resulting from a complaint by an employee who received an email from the applicant.

Application dismissed. Termination of employment was not harsh, unjust or unreasonable.

The employer had a clear policy, which was easily available and was explicit about sanctions for breach. All computers contained screensavers referring to the Code of Conduct and Acceptable Use Policy.

The applicant, who was the harassment contact officer at Centrelink contended he was never told at the time of his induction about Centrelink’s guidelines on the misuse of email and that he was not aware of material circulated internally to staff about the guidelines. The applicant had attended a two-day seminar as part of training for the harassment contact role. The applicant also argued that he was not offended by any of the material received, and had never received complaints about any emails, and that other employees more senior than him had not been dismissed. Public Service Association of NSW (on behalf of Trapp and Mayhew) and the Roads & Traffic Authority of

New South Wales Industrial Relations Commission

Employees were summarily dismissed for breaches of RTA Code of Conduct and Ethics. Sent and received

Employees argued that their behaviour was inappropriate, but that the penalty was too harsh; that

It was found that the employee had time to download and send pornographic material, but did not have the time to read a policy document that would have alerted him to the dangers of doing so.

The employees were reinstated.

Both employees had received inappropriate Penalty for their emails from a behaviour was supervisor, and the loss of income there was a during the period workplace culture of their dismissal. of inappropriate

New South Wales [2002] NSWIRComm 1030 (14 June 2002)

inappropriate and offensive material via email system, and also stored pornographic material.

they had not read the policy documents, although aware of their existence; the RTA had not taken steps to bring policy to employees’ attention.

material. The employees had not seen the documents, nor received adequate training. Both employees admitted wrongdoing and had not reoffended since the matter was raised with them. There were other options available to the RTA under the plan, including demotion and warnings.

M Smith v Western Hospital 602/98 M Print Q1359[1998] AIRC 722 (2 June 1998)

Australian Industrial Relations Commission

An employee was dismissed summarily when found to have neglected his supervising duties on a number of occasions to view pornographic material via internet in the hospital’s audiovisual room.

The applicant was caught by surveillance, of which employees were not aware, which the Commissioner found problematic, though ultimately justified. The applicant was given the opportunity to respond to the allegations before being terminated.

The application was dismissed.

The employee was in the senior position of a It was held that superintendent the hospital and should have should provide a been setting an reference which example for other detailed some of employees as the positive points well as of his work. supervising them.

Harrington v Philip Morris Limited PR915206; (2002) 51 AILR ¶4-593 (13 March 2002) before Commissioner Simmonds

Australian Industrial Relations Commission

An employee was dismissed for serious misconduct, and breaching his employment contract. The decision was based on allegations that

It was found that there was widespread sharing of passwords to access the internet (employees used shared computer

Application upheld. Dismissal harsh, unjust and unfair. The employee was reinstated. The employee was not guilty of accessing

Evidence that the employee had accessed the material was not convincing. The employee’s version of how others may have accessed his

the employee had made unauthorised and inappropriate use of the internet, breaching company internet usage and the equal employment opportunity (EEO) policy.

facilities). The company claimed that the employee accessed inappropriate websites (there were printouts of the cookies records); had unauthorised use of the internet; and had not prevented or reported any suspected breach by other employees to management. There was confusion as to whether the employee had accessed the inappropriate sites. The alleged breaches occurred on different dates and on different computers to which the employee had access. The employee denied accessing inappropriate sites during the investigation and maintained that he only ever looked at innocent sites; that other employees had used his login to look at

inappropriate sites. Unreasonable as it was out of proportion with the alleged offence. The employee had 16 years of service with the employer.

login is not implausible and not unlikely given the circumstances of the company. Even if he had accessed the sites, the court held that there was no breach of the EEO policy because there was no transmission of inappropriate material or showing of inappropriate material to other people. There was a culture of significant access to inappropriate material. The court also found the company had not given the employee sufficient opportunity to respond to the allegations.

pornographic material; that the evidence was all circumstantial, and it was not possible to draw a conclusion that he was guilty of the misconduct. He also argued that there was disparate treatment between different employees, widespread breach of the computer and internet policy, and that any misconduct of his was not a breach of the EEO policy. The company argued that the employee had accessed inappropriate sites and this breached both the computer and EEO policies. Wilmott v Bank of Western Australia Ltd (2001) 50 AILR ¶13-238 (13 June 2001) before Commissioner Smith

Western Australian Industrial Relations Commission

Employee summarily dismissed for misconduct based on the receipt and storing of inappropriate emails.

The employee was a computer programmer who worked first as a consultant, and then as an employee. Internal emails were received from an employee of the company containing

Application upheld. Reinstatement was not possible. It was held that the termination was not justified because the breach was trivial. A severe warning or reprimand would have been more appropriate. The employee was awarded

Emails were of a “dirty jokes” nature. They were not forwarded on; no person except the persons investigating the conduct viewed the emails; the applicant was given no warning regarding the offensive or

inappropriate $3,019.23 as cartoons. The compensation. employee opened and stored them in a file on his computer. The issue was whether or not the emails were sexually explicit and constituted a serious breach of the company’s policies. The employee did not believe that he had any pornographic or inappropriate material stored in his personal folders in email. The employee was asked about the emails and suspended on full pay, and asked to raise any mitigating circumstances.

inappropriate material, as opposed to the pornographic material; and this did not justify summarily dismissing the employee. The fact that the employee had only stored the email and did not send it on suggested that it was a less severe breach than otherwise, and it was harsh for the employer to impose the same penalty on the employee as it would for other employees with far more serious breaches.

Human resources considered that the emails were of a sexual nature and there were no mitigating circumstances raised, and thus termination was justified. Isabel Robles v Colonial Services Pty Ltd T3229; [2000] AIRC

Australian Industrial Relations Commission

Summary dismissal for sending a sexually explicit email contrary

During the investigation process, the employee denied

Application upheld. Reinstatement ordered in addition to

Standard of proof is the balance of probabilities. The Commission was not satisfied that

528 (8 November 2000)

Toyota Motor Corporation v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union T4675; (2002) 51 AILR ¶4-541 (18 December 2000)

Australian Industrial Relations Commission

to company’s policies.

sending the email. The employee was aware of the policies and that to send sexually explicit material would breach them, but did not know summary dismissal may be the consequence. The employee argued that she was not given an adequate opportunity to respond and that the investigation was not carried out appropriately.

compensation. the employee The evidence as sent the email. to the employee’s alleged misconduct was circumstantial and insufficient to establish that the employee was guilty of misconduct. No valid reason to terminate, and hence dismissal was not upheld.

Summary dismissal of two employees for alleged breaches of Equal Opportunity (EO)/Diversity policy.

Employees with 18 and 20 years’ service respectively were terminated for serious misconduct after a complaint about a sexually explicit email. Investigation of the complaint resulted in broader investigations which disclosed conduct by applicants resulting in the termination of their employment.

Application dismissed. Termination not harsh, unjust or unreasonable, notwithstanding the long service of the employees.

Employees acknowledged the receipt, storage and transmission of pornographic images on Toyota’s email system. Such action breached company policy, the consequences of which were evident in the policy. Employees were, or should have been, aware of the policy. Failure to disclose all emails later relied on during

investigation process did not make termination unfair.

Toyota’s EO/Diversity policy explicitly prohibited access to and dissemination of offensive material and provided examples. The policy promulgated initially through a pop-up screen which appeared every day and later on the first of every month noting that all employees were expected to read and adhere to the policy. It was also communicated in a series of emails to all employees.

Markland v Colonial Services Pty Ltd t/a Colonial State Bank PR903570; (2001) 50 AILR ¶4-508(22) (26 April 2001)

Australian Industrial Relations Commission

Dismissal based on transmission of pornographic emails in breach of stated company policy.

Bank policy prohibited sending, receiving or transmission of offensive emails. Disciplinary action was determined by grading of the material in question. An employee transmitted

A full investigation was undertaken, the seriousness of issues were made clear, and employees were afforded the opportunity for union representation and to respond prior to a decision to terminate being made. Cessation by employees of conduct on allegedly becoming aware of policy (and other terminations) did not render termination unfair in the circumstances of admitted conduct which employees understood to be inappropriate and potentially offensive. Application dismissed. Employee admitted receipt and transmission of emails which was in breach of clear company policy. Dismissal was not harsh, unjust or unfair.

The employee was aware of the policy. She attended a meeting where the policy was explained and was counselled by her manager regarding conduct and received an email attaching the policy. Although it may

“high level” offensive email to another employee who complained. An investigation was undertaken. Applicant admitted to sending emails and receipt of policy. Emails regarding policy were sent prior to incident to all bank staff, including the applicant. The employee acknowledged receiving the emails, but claimed not to have understood the policy. The employee was also counselled by the line manager and attended staff meetings where the Code of Conduct was explained. Massoud v SITEL Corporation Australia Pty Limited (2002) 51 AILR ¶5385(43); [2001] NSWIRComm 218 (21 September 2001)

New South Wales Industrial Relations Commission

Dismissal for alleged fraud and embezzlement. The employer subsequently found sexually explicit material on employee’s PC after termination.

An employee Application was allegedly dismissed. involved with two other employees in embezzlement of amounts through a company credit card. A criminal investigation was held at

have been possible that the employee did not recall policies, the possibility of not understanding them and the consequences of breach were remote. The employee was afforded the opportunity to respond and explain her conduct. Refusal to enter into discussion of whether email was high grade, email to be assessed against employer’s own policy, not for court to make value judgment.

SITEL had a clear company policy that prohibited the downloading, retrieving and sending of offensive material. The policy also warned of the consequences of a breach.

the same time as the company investigation. The employee was terminated for serious misconduct. Subsequently, pornographic material was discovered on the employee’s computer and this was relied on by the company during proceedings as further evidence of serious misconduct. Murray v Department of Family and Community Services (2002) 52 AILR ¶4-616(168); PR913897 (1 February 2002)

Australian Industrial Relations Commission

An employee was dismissed for breach of the company internet and email policy after accessing pornographic websites.

The employee was a computer programmer who admitted entering websites which advertised pornographic “banners”, which the employee claimed were beyond his control and which he “minimised” without viewing. The employee claimed that this was not in contravention of the department’s policy. The employer’s

There was a high degree of probability that the employee sent/stored offensive material as alleged, and that she was aware of the policy and knew it precluded trafficking in sexually explicit material.

Application dismissed. In light of employee’s continued access to the sites, in full knowledge of the policy and the consequences of his actions, the dismissal was warranted.

The employer had a clear policy outlining prohibited conduct and the consequences, of which the employee admitted being aware. The employee was aware that certain sites he visited contained or generated images of a pornographic nature. The fact that the employee did not access links on the site to more pornographic sites did not mean he had not “accessed” pornography for the purposes of the employer’s

policy prohibited use of internet services for unauthorised uses including accessing and downloading of offensive or pornographic material.

policy. There was evidence that the employee had installed a product designed to avoid tracking sites he visited. The employee was found to have deliberately contravened the department’s policy.

The department’s policy was promulgated through a “pop-up” displayed when any employee logged-on. A further memorandum was sent to all employees concerning the consequences of a breach of policy. Micallef v Holden Ltd (2001) 49 AILR ¶4-429(147); unreported, U No. 32791 of 2000 (25 January 2001)

Australian Industrial Relations Commission

Applicant found to have used Holden’s email system to transmit emails with pornographic attachments, in the context of a clear policy against such conduct setting out the consequences of such conduct.

The employee admitted receiving and sending inappropriate emails to persons outside Holden. No attempt was made by the employee to dissuade his friends outside Holden from sending him inappropriate emails. Conduct was in breach of a clear company diversity policy, the content and

Application dismissed. Termination not harsh, unjust or unreasonable.

The company took reasonable steps to convey the policy and its implication to the employee. The fact that the employee did not take the policy presentation seriously was found to compound, rather than justify, the inappropriate conduct. The failure of Holden to put all material to the employee did not render the termination unfair.

implications of which were made clear to the employee at a company video presentation attended by the employee. A proper investigation was undertaken, the employee had specific materials put before him and the conduct leading to the termination was specified. Griffiths v Rose Federal [2011] FCA 30 Court (31 January 2011)

An employee was terminated for allegedly breaching the Australian Public Service Code of Conduct by using a Departmental laptop to “access a number of websites which contained pornographic images”, for failing to use “Commonwealth resources in a proper manner” and for attempting to “disguise his usage”.

The employee Application had been dismissed. engaged by the Australian Public Service for 25 years. In accessing the material the employee relevantly argued that the principal policy against viewing pornography did not apply to the laptop, his actions were not relevant to his employment (the activity had occurred on the weekend, away from the workplace) and that his employer had breached the Privacy Act 1988 (Cth).

It was alleged that there was a “culture” of acceptance of sexually explicit material at Holden, the manifestations of which Holden made clear were not acceptable and did not diminish the inappropriateness of the conduct.

The laptop was an IT facility within the Department’s IT use policy. The Department’s collection of information was lawful and reasonable given that the Department had a “legitimate interest in ensuring that its computers were free from pornography” and the employee’s privacy had not been breached.

¶54-050 Security of employees Harassment, vilification, discrimination Many employers are aware of the potential for internet and email use to increase employer exposure to discrimination and unlawful harassment claims. Jokes, images, video files, sound bites, screensavers and use of internet chat rooms, bulletin boards and social networking websites have enormous potential to be discriminatory. It is in this context that the employee’s misuse of internet and email has gained the greatest exposure. In the United States, where employers face potentially high damages awards in discrimination or unlawful harassment claims, there have been numerous mass terminations of employees found to have been distributing discriminating material, or sending discriminatory emails to colleagues or external business contacts. In one case (referred to as Chevron), the Chevron Oil Company paid out approximately US$2m in an out-of-court settlement to a number of its female employees who received an email “joke” from an employee entitled “25 reasons why beer is better than a woman”. The content of the email had been downloaded from the internet. Every state in Australia has legislated against discriminatory behaviour and harassment (see Chapter ¶13). Offensive emails sent within an organisation, or postings on the internet (including social networking sites) have the potential to be discriminatory or amount to unlawful harassment (or both). Discriminatory behaviour can be either direct or indirect. Direct discrimination occurs when a person treats someone less favourably than another person on the basis of a specified ground of discrimination in circumstances which are the same or not materially different. The intention of the person acting is not relevant; the test is an objective one. Indirect discrimination occurs where an act or a practice that is not directly discriminatory nevertheless has an effect or impact which is discriminatory. For example, in the United States, Firestone was held to have been indirectly discriminatory in its hiring practices by requiring all employees to have a certain minimum education qualification (not actually necessary for the work), which had the effect of discriminating against a particular race. It is important that employers and employees are aware that there does not have to be a continuous or repeated course of behaviour for conduct to amount to unlawful harassment. A single joke or comment is sufficient. In addition, Australian cases have recognised that permeation of the work environment with offensive internet material may amount to both unlawful harassment and discrimination if it causes a person’s work environment to be less favourable than other employees’ (see Horne & Anor v Press Clough Joint Venture & Anor (1994) EOC ¶92-591). For example, jokes that are racist or sexist are likely to be said to create a less favourable working environment for employees of that particular race or sex. The Chevron case is an example of such discrimination. Sexual harassment occurs, for example, if an individual: • subjects another individual to an unsolicited act of physical intimacy • demands or requests (directly or implicitly) sexual favours from another individual • makes sexually connotative remarks or statements relating to another person, or • engages in any other unwelcome conduct of a sexual nature in relation to another individual. Unlawful harassment may also occur on other protected grounds, such as on the basis of a person’s race. These acts must be done in circumstances in which a reasonable person, having regard to all the circumstances, would have anticipated the possibility that a person who bears witness to the conduct (regardless of whether they were the intended recipient) would be offended, humiliated or intimidated. A number of cases have held that employers are both directly and vicariously liable for sex discrimination, victimisation and sexual harassment where an employee has been exposed to pornographic material

displayed by another employee in the workplace. Employers should remember that not only can inappropriate behaviour related to the internet or emails give rise to a liability on their part, but also that they have a responsibility to protect their employees from such behaviour and ensure their employees have a safe and harassment-free workplace. Inappropriate conduct, including bullying and harassment, is increasingly arising from postings on social networking websites (eg Facebook). This can include employees complaining about work or fellow employees or managers, referring to other employees using offensive nicknames or terms, or posting inappropriate photos (eg offensive material, or pictures of coworkers or themselves taken when they are drunk or at private social functions). This conduct can be particularly damaging and dangerous because social networking sites often send out alerts to all of an individual’s “friends” when they post, meaning that the inappropriate postings are immediately drawn to the attention of a wide number of people, which often includes people who work with the original poster. Employers can only avoid vicarious liability if they can demonstrate that they took reasonable steps to prevent the discrimination or unlawful harassment from occurring. It is not enough to have a policy; an employer must effectively communicate the policy in order to be seen to have taken “reasonable steps” (see Evans v Lee (1996) EOC ¶92-822; [1996] HREOCA 8).

¶54-060 Employer’s right to terminate The legal principles which the courts in Australia have applied to date, in relation to termination of an employee for breach of the employer’s policies on internet use or email, are: • the employer must be able to demonstrate, on an appropriate evidentiary basis, that the employee was responsible for the downloading, sending or storage of the material • policies must clearly outline what behaviour or conduct is unacceptable • policies must be clear and unambiguous • policies must be frequently and effectively communicated and, preferably, included in the contract of employment • policies must be consistently applied • policies must spell out penalties, but stop short of a complete prohibition on personal use of email, because dismissal on that basis alone may be considered harsh, unjust and unreasonable, and • employers should be able to provide evidence that the employee attended any training sessions by including attendance sheets or other evidence that employees received instruction. Organisations should carefully review internet and email usage policies to ensure that they will be enforceable should the need arise to rely on the policy as justification for termination of employment. As a guideline, a policy will be considered unenforceable where: • it is not explicit as to usage (eg it does not properly detail all the different forms of use of an email system) (Reference should be made not only to “sending” of offensive material, but also to “receipt, storage, transmission and access”.) • it is not explicit as to the nature of prohibited material (ie policies should clearly explain exactly what is meant by “offensive” or “pornographic” material) • it has not been properly promulgated and it can be shown that the individual was not aware of the policy • it can be demonstrated that the employer has not enforced the policy in other similar circumstances or where there has been disparate treatment of employees who have engaged in similar conduct

• there have been flaws in the investigation or any misconduct or procedural unfairness in undertaking an investigation into breaches of the policy, and • the policy does not identify the particular sanction sought to be taken by an employer, for example, summary dismissal. Employers must also be able to establish with sufficient certainty that the employee did in fact commit a breach of the policy (eg that the employee was the only person with access to a particular machine). In the above circumstances, a court may regard a termination as unfair, even where the employee has engaged in conduct which would generally be unacceptable. In addition, where the employee has particular characteristics (eg significant length of service), the court may regard a termination as unfair, even where the employee has engaged in blatant and ongoing breaches of the employer’s email and internet policies. Employers with employees in New South Wales will also need to ensure policies comply with the provisions of the Workplace Surveillance Act 2005 (NSW) (see Chapter ¶55).

¶54-070 Human resources aspects of email and internet use Over the past 20-plus years, daily use of a computer has become normal for the majority of workers in most organisations. In 2001, more than half of all workers in one United States study used a computer at work (with the percentage using a computer exceeding 80% among professional employees), and the most common use of a computer was reported to be for connecting to the internet or accessing email (Hipple and Kosanovich 2003). According to another study, approximately 98% of workers who had internet access at work used email at their site of employment (Fallows 2002). The rapid growth of organisational internet and email use and the use of social networking sites have required HR departments to respond by developing policies and procedures to maximise the efficiency of such use and to protect the organisation from legal risk. While email and internet communication has obvious benefits for business, the disadvantages of the medium are also becoming apparent. The problems of computer viruses are well known to most computer users; however, a larger everyday problem now for most managers is the proliferation of email messages and social networking use. The ease of message composition and transmission to multiple recipients at the push of a button can result in excessive numbers of emails for organisations and individuals. Messages (and attachments) and social networking postings can be circulated to a variety of people with only peripheral interest in, or relevance to, the issue being communicated — purely because it is easy to do. It has been estimated that managers can spend two to three hours each day reading, sending and responding to emails (Hymowitz 2000). With increasing use of email and the advent of social networking websites, it may be that this estimate is now quite low. Even if an individual does not receive large numbers of emails, the ease of attaching documents can mean that individuals without the need, time or interest to be informed on a particular matter may still be swamped with unnecessary background information. Most people who regularly use email have witnessed a heated exchange of emails, or “flame mail”. The ease of use and the impersonal nature of emails or social networking postings can reduce the attention given to the potential consequences of a message and, thus, increase the likelihood for misinterpretation. Emails and social networking postings are often composed in a casual manner, especially when making quick responses to received email. Lack of attention to message construction can detract from the clarity and meaning of the communication. Since the recipient is separated from the sender geographically and possibly temporally, the feedback usually available in a telephone or personal communication is not available. This lack of body language and direct feedback context means that messages can easily be misinterpreted. Furthermore, offending email can be stored, presenting the opportunity for re-reading, reinterpretation and quotation out of context, thereby increasing the likelihood of emotional reactions. Compounding the problem of lack of care with email content and inappropriate message and posting construction is the mistaken view that email is temporary in nature. An email disappears from the sender’s screen after being sent, and recipients can easily delete an email even before reading the message. Thus, the perception of the fleeting nature of email messages can result in users feeling a greater sense

of freedom in expression and self-disclosure than in traditional paper-based communications (Sipior and Ward 1999). Similarly, the informality and “share everything” nature of social networking websites often means that employees will post messages and information about themselves, other employees and their workplace which they would not disclose in other circumstances, and which may amount to bullying or damage the reputation of the employer. Indeed, careless wording or misinterpretation of an email or internet posting can result in an emotionallyworded reply that may spiral into an ongoing email or Facebook battle involving a number of people. Such situations can present substantial threats to team and co-worker collaboration in the future (Mills et al 2000) and expose the organisation to legal liability. Inappropriate use of email and internet There has also been concern over inappropriate use of organisational email resources (Leibowitz 1999). Personal and commercial email accounts can operate using common software and the same server, and work emails can be sent from home, thus blurring the distinction between personal and work-related communication (ie the increasing use of email and the internet for non-job-related purposes presents challenges for organisations). Employees may use company resources for personal ends, ranging from shopping online to running a business using company resources and time (McCarthy 1999), and (more recently) spending significant amounts of time checking and posting on social networking sites. Even though abuse of company resources is not new, the pervasive, and often absorbing, nature of the internet can blur the distinction between what is work and what is personal, resulting in much greater loss of employee time than with older technologies. Personal emails received at work consume employee time, server resources, and present a risk of virus transmission. The use of social networking sites can also become a significant time waster, with employees continually logging on to post or update their status. The possibility that employees are using email and internet resources for primarily personal uses presents management with the dilemma of whether to ignore it, or risk alienating employees by trying to monitor and control it (Hays 1999; Adams et al 2000). Email and internet use, therefore, represents a double-edged sword for most organisations. On one hand, it offers the ability to foster communication within and outside the organisation at relatively low cost, across borders and time. On the other hand, email and internet use can present a potentially enormous drain on the time of employees, contribute to employee conflict, reduce employee productivity and expose the organisation to litigation. One study of managers in Australia and Hong Kong suggested that managers consider that more than 20% of the emails that they receive are of little interest to them (Burton and Nesbit 2001). If individuals increasingly find that a large percentage of the emails that they receive are of little interest, the medium is likely to become less effective for corporate communication purposes. While email has the potential to be less disruptive than phone calls or face-to-face interaction (because it does not require immediate attention), one study has shown that most users opened messages, on average, one minute and 44 seconds after arrival, followed by a period of interruption before the recipient returned to their pre-email activity at the former rate (Jackson et al 2003). Educating employees about the negative effect of these interruptions, decreasing the frequency of automatic email checking, and encouraging employees to turn off auditory alerts, so emails are more likely to be done in batches, is likely to reduce the interruption effect of email (Jackson et al 2003). The practice of using one email account for personal and work use results in a blurring of the distinction between social and work emails. Even the most conscientious employee can easily be distracted by social emails interspersed with work emails. One way of minimising this distraction and creating a distinction between personal life and work life is to encourage employees to obtain, and use, a personal email account for social matters. Training employees in efficient use of email and internet use, and in recognising the limitations of email as a form of communication, can also help to reduce excessive and irrelevant emails or inappropriate internet use. For example, many organisations are developing guidelines on issues such as — the appropriateness of emails, length of emails and use of attachments — and are providing protocols and suggested strategies for distribution and reply. Such policies can be supported by information technology

measures, such as barring email transmission of very large file sizes, thus decreasing the strain on server resources, and blocking transmission of files which are more likely to carry viruses, such as executable files. Similarly, many employers prohibit the use of Facebook during working hours, or have policies specifically addressing the appropriate use of such social networking sites. Imposition of such policies without communication and adequate training of employees can, however, create resentment from employees if they do not understand the reasons behind such a seemingly autocratic approach and may not address after hours conduct. Case example Fitzgerald v Dianna Smith T/A Escape Hair Design In the decision of Fitzgerald v Dianna Smith T/A Escape Hair Design [2010] FWA 7358 Commissioner Bissett of Fair Work Australia at paragraph 50 of the decision made the following observations about the use of Facebook by employees: “Postings on Facebook and the general use of social networking sites by individuals to display their displeasure with their employer or a co-worker are becoming more common. What might previously have been a grumble about their employer over a coffee or drinks with friends has turned into a posting on a website that, in some cases, may be seen by an unlimited number of people. Posting comments about an employer on a website (Facebook) that can be seen by an uncontrollable number of people is no longer a private matter but a public comment.” While a Facebook posting may initially be undertaken outside working hours and not using an employer’s facilities, the comment does not stop once work has recommenced, and may be relevant to the employee’s employment. The comment remains a public comment until the Facebook posting has been removed from Facebook. The use by employees of social networking sites presents real challenges for employers in managing their employees in the workplace. The rapid growth in the number of organisational emails, particularly for senior managers, will increasingly require them to reconsider the way they manage their inbox. Perhaps because the use of email has accelerated relatively recently, email is largely seen as a personalised communication device. As a result, many senior managers, especially those who have used email for many years, open their own emails. However, given that email consumes a large amount of a manager’s time, organisations may need to consider whether it might be better for senior managers to have an assistant screen their email, just as their postal mail may be routinely screened. Organisations can also address the problem of excessive email by initiating alternative avenues for interorganisational communication (eg by providing facilities on employee websites for broadcast messages which are not always work-related, such as sales, solicitations and jokes). Provision of an alternative avenue for electronic communication can decrease email traffic and workplace interruptions, while preserving the advantages of emails for social purposes.

¶54-080 Developing an internet and email policy While training in efficient email use is an important part of developing effective use of the technology, the inherent problems of email for organisations mean that they should have a clear email policy in place, and that all employees are aware of it. Organisational policies generally aim to: • protect the organisation from legal risk by specifying the type of messages which are unacceptable • protect the organisation from business risk (eg by preventing employees from importing viruses, and/or disseminating material which will risk the intellectual capital of the organisation), and • limit the proliferation of time-wasting emails, and/or private use of the email by individuals on company time. A comprehensive email policy should contain some or all of the following elements (based on Jones 1998):

• Purpose: There should be an explanation of the purpose of the policy. • Responsibility: The person or department responsible for administering the policy should be identified. A statement on employee responsibility for adhering to the policy, and details of the consequences of not doing so, should also be made available. • Potential longevity: Employees should be reminded that deleting an email does not mean it cannot be recovered. • Records management and retention: Procedures for storing important emails (either in hard copy or electronically) should be clarified. Either system creates storage issues, so the ideal manner will vary between organisations. • Privacy issues: If employees are allowed to use email for private purposes, it should be made clear that emails remain the property of the organisation, and may be monitored to protect the organisation. This should be subject to any state legislation which may protect employees from unauthorised monitoring of personal emails (see Chapters ¶53 and ¶55). The federal Office of the Australian Information Commissioner publishes Guidelines on Workplace E-mail, Web browsing and Privacy (see www.oaic.gov.au/privacy/privacy-archive/privacy-guidelines-archive/guidelines-onworkplace-email-web-browsing-and-privacy). • Content: The type of messages which are inappropriate should be clearly identified. This will include defamatory or pornographic material, but should also include sensitive company material, such as trade secrets or other commercially sensitive material. • Security: Users should be educated about security issues (eg password changes). • Permitted uses: The organisation should indicate the extent to which the internet and email may be used for private purposes. If private use is not permitted, the consequences of failure to comply with the policy should be clarified. • Labelling: Instructions for transmission of confidential and proprietary information should be provided. If confidential material is to be sent by email, the organisation should develop appropriate labelling for such emails, to address problems of incorrect transmission, and employees should be instructed in the use of appropriate labelling. • Forwarding procedures: An email forwarded from a source other than the sender should be identified as such. Any changes to the forwarded material should be clearly identified and, for sensitive material, the sender’s permission should be obtained before forwarding the email. • Suggested use: The policy should also contain suggestions to restrict unnecessary proliferation of emails, such as limiting the number of people to whom a message is copied, and minimising the number and size of attachments. Employers with employees in New South Wales will also need to ensure policies comply with the provisions of the Workplace Surveillance Act 2005 (NSW) (see Chapter ¶55). Some organisations have attempted to limit the time cost of emails and internet surfing by having a policy which prohibits private emails or personal use of the internet. Such a strict policy is relatively unusual, particularly in Australian organisations, and it is likely to be viewed as draconian by employees. Instead, most organisations attempt to minimise employee time spent on email or recommend that they: • use email only when necessary (a phone call may be faster and more appropriate) • set aside specific times of the day for handling emails • use a personal email address for social matters, rather than the company address • use email and the internet for personal use only as long as it does not detract from work role

responsibilities, and • filter out junk mail and chain letters. Internet policies should also explicitly deal with the kinds of materials which employees are prohibited from accessing on the internet (eg pornographic and racist material). Further, it may be appropriate to specifically address the issue of social networking sites, including the kinds of postings which are inappropriate, and how such postings may constitute breaches of discrimination, harassment or bullying policies of the organisation. It is important that employees understand the reasons behind an email and internet policy, in order to increase compliance with the policy. For example, a new employee coming from a small to a large organisation may consider that copying an email to multiple people increases communication. Employees who have suffered a large amount of irrelevant emails copied to them may see the same behaviour as irritating, time-consuming, or reflective of an inability to make a decision.

¶54-090 Email and internet policy development, training and enforcement In developing (or reviewing) email and internet policies it is helpful to consider the following points: • Policy — – details the company policy on personal use of email and internet (including social networking sites) at work – identifies prohibited actions and material – sets out clearly the penalties for breaches, and – in New South Wales, complies with Workplace Surveillance Act 2005 (NSW). • Promulgation/training — – occurs at induction and then regularly throughout employment – attendance is recorded at training and receipts are signed for hard copy policies, and – pop-up screens or access screens are provided for all computer users. • Enforcement — – procedural fairness, and – consistency of application.

¶54-100 Conclusion The internet and email offer substantial potential business benefits to organisations. However, they also present new challenges to managers. Organisational use of email presents particular challenges for organisations. It has the potential to consume large amounts of employee time, and to expose the organisation to risk if inappropriate material is sent by email. Managers may increasingly find that they are receiving more email than they can respond to, while continuing to perform their normal duties. The internet may also provide significant benefits in terms of research and access to information. However, it also provides significant opportunities for employees to access inappropriate material and post communications which are inappropriate, discriminatory or bullying, or which can damage the reputation of the employer. The challenge for organisations is to develop and communicate policies which prevent inappropriate use

of email and the internet, while drawing on the significant advantages of this medium for information flow within the organisation. For more information on topics covered in this chapter, refer to Chapters ¶24, ¶53 and ¶55 of this Guide. See also the CCH Human Resources Management subscription information service, section commencing at ¶38-000. References Adams III H, Scheuing SM and Feeley SA 2000, “Email monitoring in the workplace: The good, the bad and the ugly”, Defense Counsel Journal, January, pp 32–46, Chicago. Australian High Tech Crime Centre (AHTCC) 2006, “Australian Computer Crime and Security Survey 2006”. Burton S and Nesbit PL 2001, “Managerial use of email and implications for policy: A cross-cultural comparison”, Proceedings, Decision Sciences International 32nd Annual Meeting, San Francisco. Drake A 2001, “Technology and employment: Managing e-mail and internet abuse”, Paper delivered to the 14th Annual New Zealand Employment Law Conference, IIR (NZ), 7–8 March 2001. Fallows D 2002, “E-mail at Work”, see www.pewinternet.org. Hays S 1999, “To snoop or not to snoop?”, Workforce, October. Hipple S and Kosanovich K 2003, “Computer and internet use at work in 2001”, Monthly Labor Review, vol 126(2), pp 26–35, Washington. Hymowitz C 2000, “Flooded with e-mail? Try screening, sorting, or maybe just phoning”, Wall Street Journal, 26 September, p B1. Jackson T, Dawson R and Wilson D 2003, “Reducing the effect of email interruptions on employees”, International Journal of Information Management, vol 23(1), pp 55–65. James D 2000, “Virtual unreality”, Business Review Weekly, 8 December, p 30. Jones VA 1998, “Developing an e-mail policy”, Office Systems, Georgetown, October. Leibowitz WR 1999, “E-mail uses abound”, National Law Journal, 11 January, p A21. McCarthy MJ 1999, “Virtual mortality: A new workplace quandary”, Wall Street Journal, 21 October. Mills JE, Clay JM and Mortensen M 2000, “You’ve got trouble! Managing e-mail liability”, Cornell Hotel and Restaurant Administration Quarterly, vol 41(5), pp 64–71. Sipior JC and Ward BT 1999, “The dark side of employee email”, Communications of the ACM, Association for Computing Machinery, July, New York.

55. WORKPLACE SURVEILLANCE Editorial information

Kerryn Kahler Senior Associate, Baker & McKenzie

¶55-010 Introduction Over successive decades, cumulative legislative changes have tenaciously whittled away an employer’s discretion to conduct its business in the manner it chooses. Through the legislative and common law imposition of obligations of fairness, an employer is obliged to conduct thorough and open investigations of its concerns, before considering termination of employment as a final sanction when no other reasonable alternatives exist. At the same time, in our increasingly Orwellian society we appear to have become seemingly comfortable walking a tightrope between beneficial and socially intolerable forms of surveillance. Although no one would tolerate someone looking over their shoulder in the bathroom, step outside the bathroom and you would be excused for thinking that surveillance had become the rule, rather than the exception. For example, it seems to have become an accepted (if not expected) norm to be monitored in almost all public settings, including banks, service stations, supermarkets, ATM areas, sporting venues, public areas, pubs and clubs, and even in court rooms. Travelling to work, we listen religiously for the latest realtime traffic information. At home we sit glued to the lounge as we devour all of the reality TV that is thrown our way. But, when we step inside the workplace, everything changes. It seems the workplace is a different world where surveillance is perceived as a potentially invasive abuse of an employer’s power. It is in the workplace more than any other place in our social or private lives that the tension between the pros and cons of surveillance becomes a critical and sometimes destructive issue.

¶55-020 National overview At the federal level, the Telecommunication (Interception) Act 1979 (Cth) prohibits any person from intercepting a communication passing over a telecommunications system. Otherwise, for the most part, surveillance in the private sector workplace is regulated by the industrial laws of each state and territory. Although surveillance legislation appears to be undergoing review and expansion in many states and territories, Table 55.1 provides a useful overview of the scope of coverage as at the time of printing. Table 55.1: Coverage of state surveillance legislation Camera

Computer

Tracking

Listening

Australian Capital Territory

✓

✓

✓

✓

New South Wales

✓

✓

✓

✓

Northern Territory

✓

-

✓

✓

Queensland

-

-

-

✓

South Australia

✓

✓

✓

✓

Tasmania

-

-

-

✓

Victoria

✓

-

✓

✓

Western Australia

✓

-

✓

✓

OVERVIEW OF REQUIREMENTS STATE BY STATE ¶55-030 Australian Capital Territory The regulation of surveillance devices in the Australian Capital Territory is achieved through similar legislation to that in New South Wales (see ¶55-040). These two are the only Australian state and territory to have enacted specific workplace surveillance legislation. In the Australian Capital Territory, the use of camera, tracking and data surveillance is regulated by the Workplace Privacy Act 2011 (ACT) (WPA (ACT)). The installation and use of listening devices are governed by the Listening Devices Act 1992 (ACT) (LDA (ACT)). General application The WPA (ACT) relates to the surveillance of workers in workplaces by employers, and broadly defines all of these terms. Crucially, “worker” includes anyone who carries out work in relation to a business or undertaking, whether or not they are rewarded for their services. “Employer” includes related bodies corporate and a “workplace” is any place where work is, has been, or is to be carried out. The application of the WPA (ACT) is, therefore, quite broad. Notification An employer cannot conduct surveillance of their workers, by camera, computer or tracking, unless they have provided notification to each affected employee in writing at least 14 days in advance. An employee may agree to a lesser period. New employees, however, must be informed of existing surveillance practices prior to commencing work with an employer. For the purposes of the WPA (ACT), notification must include: • the kind of surveillance device used • how the surveillance will be conducted • when the surveillance will start • whether it will be continuous or intermittent, for a specified period or ongoing • the uses and disclosure an employer may make with the information obtained, and • workers’ rights to consult with the employer about the surveillance. Notification may be effected in the form of a policy, so long as it incorporates these requisite elements. Optical surveillance In addition, an employer wishing to use camera surveillance must ensure that: • cameras are clearly visible in the place where the surveillance is conducted, and • a sign is clearly visible at each entrance to the workplace, notifying people that they may be under surveillance when entering. Data surveillance The WPA (ACT) makes provision for the monitoring of computer data by employers, including information

about internet usage and electronic communication. However, an employer may only conduct data surveillance where: • such surveillance is in accordance with a policy of the employer on computer surveillance of workers in the workplace, and • the employer has notified the worker in such a way that it is reasonable to assume that they are aware of and understand the policy. To comply with the WPA (ACT), a policy must state the: • permitted and non-permitted uses of the employer’s computer resources • information about computer and internet usage which is logged by the employer and the people who have access to this information, and • means by which an employer may audit and monitor a worker’s compliance with the policy. Tracking surveillance Although the WPA (ACT) allows an employer to use tracking surveillance, such as Global Positioning System tracking services, to monitor the location of a vehicle or other object, it places limitations on the circumstances in which such surveillance will be permitted. An employer may only use tracking surveillance where a notice is clearly visible on the vehicle or other item which indicates that the vehicle or item is the subject of tracking surveillance. Restrictions on blocking emails or internet access An employer must not prevent delivery of an email sent to an employee or access to an internet website unless: • the employer is acting in accordance with a policy on email and internet access that has been notified in advance to the employee in such a way that it is reasonable to assume that the employee is aware of and understands the policy, and • in the case of preventing delivery of an email, the employee is given a preventive delivery notice as soon as practicable. An employer is not required to provide an employee with a preventive delivery notice if delivery of the email was prevented in the belief that, or by the operation of, a program intended to prevent the delivery of an email on the basis that the: • email was a commercial or electronic message within the meaning of the Spam Act 2003 (Cth) • content of the email, or any attachment would or might have resulted in the unauthorised interference with, damage to, or operation of a computer or computer network operated by the employer, or of any program run or data stored on such a computer or computer network, or • email or any attachment to the email would be regarded by reasonable persons as being, in all the circumstances, menacing, harassing or offensive. Use and disclosure of surveillance records Information and records created by the use of notified surveillance (and not covert surveillance) must not be used or disclosed unless that use or disclosure is: • for a legitimate purpose related to the employment of the employees or the legitimate business activities or functions of the employer • to a member or officer of a law enforcement agency for use in connection with the detection, investigation or prosecution of an offence • for a purpose that is directly or indirectly related to taking civil or criminal proceedings, or

• reasonably believed to be necessary to avert an imminent threat or serious violence to persons, or substantial damage to property. Covert surveillance Covert surveillance is any surveillance of an employee that is not carried out in compliance with the requirements for overt or notified surveillance. Where an employer carries out covert surveillance without an appropriate authority, the employer may be liable for a fine up to 50 penalty units ($7,500 for individuals; $37,500 for corporations) per offence. Under the WPA (ACT), an employer may seek a covert surveillance authority from a magistrate which authorises the employer (or a representative of the employer) to conduct covert surveillance for the purpose of establishing whether one or more particular employees are involved in an unlawful activity while at work for the employer. Listening devices A person must not use a listening device to record a private conversation to which the person is a party. Where an individual breaches this provision, the person may be liable to a fine of 50 penalty units ($7,500). Where the offence is committed by a corporation, the corporation may be liable to a fine of 50 penalty units ($37,500). Despite this, the prohibition does not apply to the use of a listening device by, or on behalf of, a party to a private conversation if: • each party to the conversation consents to the use of the listening device, or • a principal party to the conversation consents to the listening device being so used, and – the recording of the conversation is considered by that principal party, on reasonable grounds, to be necessary for the protection of that principal party’s lawful interests, or – the recording is not made for the purpose of communicating or publishing the conversation, or a report of the conversation, to any person who is not a party to the conversation. Communication and publication of records The LDA (ACT) prohibits a party to a private conversation from divulging or communicating a record of the conversation where that record was made directly or indirectly using a listening device. Where this provision is breached by an individual, the individual may be liable to a fine of 50 penalty units ($7,500) and imprisonment for up to six months. Where the prohibition is breached by a corporation, a fine of up to 50 penalty units ($37,500) may be imposed. Despite this, the prohibition does not apply if the communication or publication is: • made to another party to the conversation • made with the consent of each principal party to the conversation • made in the course of civil or criminal proceedings • considered by the party making it, on reasonable grounds, to be necessary for the protection of that party’s lawful interests • made to a person who is believed by the party “on reasonable grounds” to have such an interest in the conversation as to make the communication or publication reasonable in the circumstances, or • made under an authority granted by or under a law of the Commonwealth.

¶55-040 New South Wales In New South Wales, the use of camera, tracking and computer surveillance is regulated by the

provisions of the Workplace Surveillance Act 2005 (NSW) (WSA (NSW)). The installation and use of surveillance devices (eg the use of listening devices) is regulated by the Surveillance Devices Act 2007 (NSW) which repealed and replaced the Listening Devices Act 1984 (NSW). General application The WSA (NSW) adopts the same definition of “employee” as contained in the Industrial Relations Act 1996 (NSW). Importantly, this definition includes contract carriers and persons performing voluntary work. It also includes grouping provisions, such that an employee of any entity in a group of companies is deemed to be an employee of the other companies for the purposes of the WSA (NSW). The WSA (NSW) applies to employees while they are “at work”, which expressly includes at: • a workplace of the employer (or a related corporation of the employer), whether the employee is actually performing work at the time, or • any other place while performing work for the employer (or a related corporation of the employer). Notification Under the WSA (NSW), surveillance by means of camera, computer or tracking, can only commence after an employer has notified each employee in writing at least 14 days before the surveillance commences. An employee may agree to a lesser period. For new employees, notification of existing surveillance must be given prior to the employee commencing work. Importantly, the notice must specify: • the type of surveillance (ie camera, computer or tracking) • how the surveillance will be carried out • when the surveillance will start • whether the surveillance will be continuous or intermittent, and • whether the surveillance will be for a specified limited period or ongoing. Camera surveillance In addition to the notification requirement, an employer cannot carry out camera surveillance of an employee unless: • the cameras are clearly visible in the place where the surveillance is taking place, and • signs notifying people that they may be under surveillance at that place are clearly visible at each entrance to that place. Computer surveillance The WSA (NSW) defines computer surveillance as surveillance by means of software or other equipment that monitors or records the information input, output, or other use, of a computer (including, but not limited to, the sending and receipt of emails and the accessing of internet websites). In addition to the general notification requirements, an employer cannot carry out computer surveillance unless: • the surveillance is carried out in accordance with a policy of the employer on computer surveillance of employees at work, and • employees were notified in advance of the policy in such a way that it is reasonable to assume that the specific employee is aware of and understands the policy. Tracking surveillance Tracking surveillance is defined as surveillance by means of an electronic device, the primary purpose of which is to monitor or record geographical location or movement (eg a Global Positioning System tracking

device). In addition to the general notification requirements, tracking surveillance must not be carried out unless there is a clearly visible notice on the vehicle or other item which indicates that the vehicle or item is the subject of tracking surveillance. Restrictions on blocking emails or internet access An employer must not prevent delivery of an email sent to an employee or access to an internet website unless: • the employer is acting in accordance with a policy on email and internet access that has been notified in advance to the employee in such a way that it is reasonable to assume that the employee is aware of and understands the policy, and • in the case of preventing delivery of an email, the employee is given a preventive delivery notice as soon as practicable. An employer is not required to provide an employee with a preventive delivery notice if delivery of the email was prevented in the belief that, or by the operation of, a program intended to prevent the delivery of an email on the basis that the: • email was a commercial or electronic message within the meaning of the Spam Act 2003 (Cth) • content of the email, or any attachment would or might have resulted in the unauthorised interference with, damage to, or operation of a computer or computer network operated by the employer, or of any program run or data stored on such a computer or computer network, or • email or any attachment to the email would be regarded by reasonable persons as being, in all the circumstances, menacing, harassing or offensive. Use and disclosure of surveillance records Information and records created by the use of notified surveillance (and not covert surveillance) must not be used or disclosed unless that use or disclosure is: • for a legitimate purpose related to the employment of the employees or the legitimate business activities or functions of the employer • to a member or officer of a law enforcement agency for use in connection with the detection, investigation or prosecution of an offence • for a purpose that is directly or indirectly related to taking civil or criminal proceedings, or • reasonably believed to be necessary to avert an imminent threat or serious violence to persons, or substantial damage to property. Covert surveillance Covert surveillance is any surveillance of an employee that is not carried out in compliance with the requirements for overt or notified surveillance. Where an employer carries out covert surveillance without an appropriate authority, the employer may be liable for a fine up to 50 penalty units ($5,500) per offence. Under the WSA (NSW), an employer may seek a covert surveillance authority from a magistrate which authorises the employer (or a representative of the employer) to conduct covert surveillance for the purpose of establishing whether one or more particular employees are involved in an unlawful activity while at work for the employer.

¶55-050 Northern Territory The Surveillance Devices Act 2007 (NT) (SDA (NT)) regulates the use of listening, data, optical and tracking surveillance devices.

Listening devices A listening device is an apparatus, device, instrument, machine or piece of equipment capable of being used to listen to, monitor or record a conversation or words spoken to or by a person in a conversation. The SDA (NT) provides that a person must not install, use or maintain a listening device to listen to, monitor or record a private conversation to which the person is not a party if the person knows the device was installed, used or maintained without the express or implied consent of each party to the conversation. Optical surveillance devices An optical surveillance device is an apparatus, device, instrument, machine or piece of equipment capable of being used to visually record, monitor or observe a private activity. The SDA (NT) provides that a person must not install, use or maintain an optical surveillance device to monitor, visually record or observe a private activity to which the person is not a party if the person knows the device was installed, used or maintained without the express or implied consent of each party to the activity. Tracking devices A tracking device is an apparatus, device, instrument, machine or piece of equipment capable of being used to determine the geographical location of a person or thing. The SDA (NT) provides that a person must not install, use or maintain a tracking device to determine the geographical location of a person or thing if the person knows the device to determine the location was installed, used or maintained without the express or implied consent of: • (for a device to determine the location of a person) the person, or • (for a device to determine the location of a thing) a person in lawful possession or having lawful control of the thing. Data surveillance devices A data surveillance device is an apparatus, device, instrument, machine or piece of equipment capable of being used to record or monitor the information being put onto or retrieved from a computer. A computer is any electronic device for storing or processing information. The SDA (NT) also prescribes offences with respect to the installation, use or maintenance of a data surveillance device by a law enforcement officer. The SDA (NT) also makes provision for the issue and regulation of warrants. Publication of information The SDA (NT) also provides that a person must not communicate or publish a record or report of a private conversation or private activity if the person knows the record or report has been made as a direct or indirect result of the use of a listening device, optical surveillance device or tracking device. A private conversation is a conversation carried on in circumstances that may reasonably be taken to indicate that the parties to the conversation desire it to be listened to only by them. However, it does not include a conversation carried on in circumstances in which the parties to the conversation ought reasonably to expect the conversation may be overheard by someone else. A private activity is an activity carried on in circumstances that may reasonably be taken to indicate that the parties to the activity desire it to be observed only by them. However, it does not include an activity carried on in circumstances in which the parties to the activity ought reasonably to expect that the activity may be observed by someone else. A breach of the provisions may result in a penalty to an individual of 250 penalty units ($38,250) or imprisonment for two years in respect of each offence.

¶55-060 Queensland

Listening devices The use of listening devices is regulated by the Invasion of Privacy Act 1971 (Qld) (IPA (Qld)). The IPA (Qld) provides that a person must not use a listening device to overhear, record, monitor or listen to a private conversation. However, this prohibition does not apply where the person using the listening device is a party to a private conversation. A breach of this prohibition can result in a penalty of up to 40 penalty units ($4,400) or imprisonment of two years. Publication of information Where a person, who is a party to a private conversation, has used a listening device to overhear, record, monitor or listen to that conversation, the person must not communicate or publish any record of the conversation made or any statement prepared from such record. The prohibition does not apply where the communication or publication is: • made to another party to the private conversation or with the express or implied consent of all other parties to the conversation • made in the course of legal proceedings • no more than is reasonably necessary: – in the public interest – in the performance of a duty of the person making the communication or publication – for the protection of the lawful interests of that person, or • made to a person who has, or is believed (on reasonable grounds by the person making the communication or publication) to have, such an interest in the private conversation as to make the communication or publication reasonable under the circumstances in which it is made. The IPA (Qld) also regulates the admissibility of evidence obtained by listening devices.

¶55-070 South Australia The use of surveillance devices in South Australia is regulated by the Surveillance Devices Act 2016 (SA) (SDA (SA)), which replaced the Listening and Surveillance Devices Act 1972 (SA) (LSDA (SA)). The SDA (SA) also makes provision for the issue of warrants for the entry to premises, vehicles or objects for the purposes of installing, using, maintaining or retrieving one or more listening or surveillance devices. Listening devices — installation, use and maintenance A person must not knowingly install, use or cause to be used, or maintain any listening device to overhear, record, monitor or listen to any private conversation whether or not the person is a party to the conversation without the express or implied consent of the parties to that conversation and provided that the use of the device is reasonably necessary for the protection of the lawful interests of that person. A person who contravenes this provision may be liable to a maximum penalty of up to $15,000 or imprisonment of three years. There are exemptions to this offence, including: • in relation to the installation, use or maintenance of a listening device on or within premises or a vehicle if — where the owner or occupier of a premises or vehicle in which a device is used consents and the use of the device is reasonably necessary for the protection of lawful interests • where a private conversation is unintentionally heard by means of a listening device, or • for approved investigatory or criminal purposes. There is also a limited exemption where the use of the device is in the public interest.

Optical Surveillance Devices — installation, use and maintenance A person must not knowingly install, use or cause to be used, or maintain any optical surveillance device on or in premises (including a vehicle) to record visually or observe the carrying on of a private activity without the express or implied consent of each party to the activity, whether or not the person has lawful possession or lawful control of the premises, vehicle or thing. A person who contravenes this provision may be liable to a maximum penalty of up to $15,000 or imprisonment of three years. There are exemptions to this offence, including: • in relation to the installation, use or maintenance of an optical surveillance device on or within premises or a vehicle if — where the owner or occupier of a premises or vehicle in which a device is used consents and the use of the device is reasonably necessary for the protection of lawful interests, or • for approved investigatory or criminal purposes. There is also a limited exemption where the use of the device is in the public interest. Tracking Devices — installation, use and maintenance A person must not knowingly install, use or cause to be used, or maintain a tracking device to determine the geographic location of: • a person without the express or implied consent of that person, or • a vehicle or thing without the express or implied consent of the owner, or a person in lawful possession or lawful control, of that vehicle or thing except in limited circumstances, including where the device is installed, used or maintained for approved investigatory or criminal purposes. Data surveillance devices A person must not knowingly install, use or maintaining a data surveillance device to access, track, monitor or record the input or output of information from a computer, without the express or implied consent of the owner or person with lawful control of the computer. Communication or Publication of information or material — lawful interest Under s 9 of the SDA (SA), a person must not knowingly use, communicate or publish information or material derived from the use of a listening device or an optical surveillance device in circumstances where the device was used to protect the lawful interests of that person except: • to a person who is a party to the conversation or activity to which the information or material relates • with the consent of each party to the conversation or activity to which the information or material relates • to an officer of an investigating agency for the purposes of a relevant investigation or relevant action or proceeding • in the course, or for the purposes, of a relevant action or proceedings • in relation to a situation where — (i) a person is being subjected to violence (ii) there is an imminent threat of violence to a person • to a media organisation • in accordance with an order of a judge under this Division, or

• otherwise in the course of duty or as required or authorised by law. A person who contravenes this provision may be liable to a maximum penalty of up to $10,000 (or $50,000 for a corporation). Communication or publication of information or material — public interest Under s 10 of the SDA (SA), a person must not knowingly use, communicate or publish information or material derived from the use of a listening device or an optical surveillance device in circumstances where the device was used in the public interest except in accordance with an order of a judge, except where: • the use, communication or publication of the information or material is made to a media organisation, or • the use, communication or publication of the information or material is made by a media organisation and the information or material is in the public interest. Prohibition on communication or publication derived from use of surveillance device Under the SDA (SA), a person must not knowingly use, communicate or publish information or material derived from the use of a surveillance device in contravention of the above prohibitions. However, this provision will not prevent the use, communication or publication of material: • to a person who was a party to the conversation or activity • with the consent of all parties to the conversation or activity, or • for approved investigatory purposes or as part of legal proceedings. The LSDA (SA) also regulates the issue of various warrants and the SDA (SA) will continue to fulfil this function. Penalties The SDA (SA) stands to significantly increase the penalties relating to misuse of surveillance equipment and information. For all of the offences outlined above, the revised maximum penalty is $75,000 in the case of a body corporate, and $15,000 or imprisonment for three years in the case of a natural person.

¶55-080 Tasmania Listening devices In Tasmania the use of listening devices is regulated by the Listening Devices Act 1991 (TAS) (LDA (Tas)). Under the LDA (Tas), a person must not use or cause or permit a listening device to be used to: • record or listen to a private conversation to which the person is not a party, or • record a private conversation to which the person is a party. The prohibition does not apply to the use of a listening device to obtain evidence or information in connection with an imminent threat of serious violence to persons, or of substantial damage to property, provided that the person using the listening device believes on reasonable grounds that it was necessary to use the device immediately to obtain that evidence or information. Where the person is a party to the conversation, the prohibition will not apply if: • all of the principal parties to the conversation consent, expressly or impliedly, to that listening device being so used, or • a principal party to the conversation consents to the listening device being so used, and the recording of the conversation is — – reasonably necessary for the protection of the lawful interests of that party, or

– not made for the purpose of communicating or publishing the conversation, or a report of it, to persons who are not parties to the conversation. Penalties A person who contravenes the LDA (Tas) may be liable to a fine of up to 40 penalty units ($4,800) or imprisonment for a term of up to two years or both. If a corporation breaches the LDA (Tas), it may be liable for a fine of up to 500 penalty units ($60,000).

¶55-090 Victoria Surveillance by means of camera, data, tracking or listening devices in Victoria is regulated by the Surveillance Devices Act 1999 (Vic) (SDA (Vic)). The SDA (Vic) prescribes the following in respect of each form of surveillance. Listening devices A person must not knowingly install, use or maintain a listening device to overhear, record, monitor or listen to a private conversation to which the person is not a party, without the express or implied consent of each party to that conversation. Optical surveillance devices A person must not knowingly install, use or maintain an optical surveillance device to record visually or observe a private activity to which the person is not a party, without the express or implied consent of each party to the activity. Tracking devices A person must not knowingly install, use or maintain a tracking device to determine the geographical location of a person or object: • (in the case of a device to determine the location of a person) without the express or implied consent of that person, or • (in the case of a device to determine the location of an object) without the express or implied consent of a person in the full possession or having lawful control over that object. Data surveillance The SDA (Vic) imposes various restrictions on the ability of law enforcement officers to use data surveillance devices. At the time of printing, there were no such provisions which apply to employers. Publication of information The SDA (Vic) provides that a person must not knowingly communicate or publish a record or report of a private conversation or private activity that has been made as a direct or indirect result of the use of a listening device, an optical surveillance device or a tracking device. Despite this, a person may communicate or publish such a record if it is: • made with the express or implied consent of each party to the private conversation or private activity • no more than reasonably necessary — – in the public interest, or – for the protection of the lawful interests of the person making it, or • made in the course of legal proceedings or disciplinary proceedings. Warrants The SDA (Vic) makes provision for warrants to be issued by authorised courts which permit the use of each of the forms of surveillance device without otherwise complying with the terms of the SDA (Vic).

Penalties Where a body corporate (eg a company) breaches the provisions relating to the use and maintenance of surveillance devices, the body corporate is liable to a penalty of 1,200 penalty units ($181,968). Where the person in breach is a natural person, that person may be liable to two years’ imprisonment and a fine of up to 240 penalty units ($36,400.80). The same fines and penalties apply in respect of breaches relating to the publication of such information.

¶55-100 Western Australia The Surveillance Devices Act 1998 (WA) (SDA (WA)) regulates the use of listening, optical surveillance and tracking devices. Listening devices A person must not install, use, maintain or cause to be installed, used or maintained a listening device to: • record, monitor or listen to a private conversation to which the person is not a party, or • record a private conversation to which the person is a party. This prohibition will not apply if: • each principal party to the private conversation consents, or • a principal party to the private conversation consents and the listening device is reasonably necessary for the protection of the lawful interests of that principal party. Where an individual breaches the provisions, they may be liable to a penalty of up to $5,000 and/or imprisonment for 12 months. Where the breach occurs in respect of a body corporate, the body corporate may be liable for a penalty of up to $50,000. Optical surveillance devices An optical surveillance device is any instrument, apparatus, equipment or other device capable of being used to record visually or observe a private activity. A person must not install, use, maintain or cause to be installed, used or maintained an optical surveillance device to: • record visually or observe a private activity to which that person is not a party, or • record visually a private activity to which that person is a party. The prohibition does not apply if: • each principal party to the private activity consents, or • a principal party to the private activity consents and the optical surveillance device is reasonably necessary for the protection of the lawful interests of that principal party. Tracking devices A tracking device is any instrument, apparatus, equipment or other device capable of being used to determine the geographical location of a person or object. A person must not attach, install, use, maintain (or cause to be installed, used or maintained) a tracking device to determine the geographical location of a person or object, without the express or implied consent of that person or, in the case of a device used or intended to be used to determine the location of an object, without the express or implied consent of the person in possession or having control of that object. Publication or communication The SDA (WA) provides that a person must not knowingly publish or communicate a private conversation,

a report/record of a private conversation, or a record of a private activity that has come to the person’s knowledge as a direct or indirect result of the use of a listening device or an optical surveillance device. This prohibition does not apply if the use of a listening device or optical surveillance device was carried out in the course of reasonable action taken by the individual to protect the lawful interests of a principal party to the conversation, or if a principal party consented to the use of the device. It will also not apply to the use of such information in the course of any legal proceedings. Penalties Where an individual breaches the SDA (WA), the individual can be liable to a fine of up to $5,000 and/or imprisonment for 12 months. Where a body corporate breaches the SDA (WA), it may be liable to a fine of up to $50,000. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶38-000.

56. WORKPLACE INCIDENT NOTIFICATION AND INVESTIGATION Editorial information

Originally written by Michelle Lam Updated in 2016 by Geeta Shyam, Wolters Kluwer Writer

¶56-010 Introduction An “incident” refers to an unplanned and undesired event that results in human injury, damage to property, or the possibility of such injury or damage. Sometimes such events are referred to in work health and safety (WHS) literature as “accidents”. However, the term “accident” tends to imply that the event was neither foreseeable nor preventable. Incidents can be referred to as “near misses”, “near hits” or “dangerous occurrences”. A “critical incident” generally refers to an abnormally stressful incident or event in the workplace which can be psychologically traumatic for the people involved, such as a fire, death, serious injury or bomb threat. Health and safety legislation in all Australian jurisdictions requires all workplace incidents resulting in injury, damage or exposure to serious illnesses to be reported to the relevant workplace safety authority. Notification must be within a designated time frame and in a prescribed manner. The incident site must also be preserved following an incident to allow regulators to conduct their investigations. Internal investigations are usually also carried out following notification of an incident. The investigation should not be used to attribute blame, but to discover the causes of the incident and what can be done to prevent a similar incident from occurring in the future. This provides an opportunity to consider what corrective and preventative action needs to be taken. Results from the investigation should be used to reassess control measures, or make changes to safe work procedures or training policies.

¶56-020 Incident notification All Australian jurisdictions, other than Victoria and Western Australia, have now adopted the model work health and safety legislation. This means that most Australian jurisdictions now have similar requirements for incident notification. Sections 38 to 39 under Pt 3 of the model Work Health and Safety Act 2011 (Cth) (WHS Act) require: • a person who conducts a business or undertaking (PCBU) to notify the relevant regulator immediately after becoming aware of a notifiable incident at the workplace, and • the incident site to be preserved until an inspector arrives or directs. The type of incidents that need to be reported generally include workplace deaths and serious injuries or illnesses requiring immediate hospitalisation or medical treatment. Notification is also required for incidents where immediate or imminent exposure to certain materials or circumstances results in a serious health or safety risk. Notification can be given by telephone, facsimile, email or other electronic means. If notifying by

telephone, the regulator may require a written notice within 48 hours. An approved form is usually used for written notification. A record of each notifiable incident must be kept for at least five years from when it is given to the relevant regulator. Similar requirements exist in Victoria with respect to incident notification and site preservation. The relevant provisions appear under Pt 5 of the Occupational Health and Safety Act 2004 (Vic). In Western Australia the relevant provisions are contained under Pt III Div 5 of the Occupational Safety and Health Act 1984 (WA) and Pt 2 of the Occupational Safety and Health Regulations 1996 (WA). An employer is required to notify the WorkSafe Commissioner of deaths, injuries and exposure to prescribed diseases by telephone or via the approved form. There is no requirement for site preservation under this legislation. Aside from legislative requirements, it is good workplace practice and an essential element of efficient WHS management to record the details of all work-related incidents, even those which appear minor. It is also crucial to investigate every incident, whether this is a lengthy formal process (in the case of a major incident) or a quick, informal check (following up a minor incident). Whatever the outcome of the investigation, this should be recorded and filed with the incident report.

¶56-030 Right of entry to investigate suspected health and safety breaches Part 7 of the model WHS Act regulates workplace entry by WHS entry permit holders. Under these laws, authorised union representatives can apply for WHS entry permits for the purpose of investigating suspected breaches of WHS laws. Generally, WHS entry permit holders can enter a workplace where the union has members or people who may be eligible to be its members. Entry should be during the usual work hours for a workplace, and at least 24 hours’ notice must be given to the relevant PCBU regarding the proposed entry. Once on the premises, permit holders may carry out inspections, interview workers, require the occupier to provide reasonable assistance in carrying out their functions, inspect documents that affect WHS and make copies of those documents (subject to privacy laws). For constitutional corporations and Commonwealth workplaces, this right of entry is tempered by the Fair Work Act 2009 (FW Act) right of entry laws. In such cases, a person who has a permit under state or territory WHS laws to enter and inspect a workplace must also have a permit under the FW Act. The FW Act also requires that 24-hour notice be given to the employer before entry into the workplace if permit holders want to inspect employment records. Permit holders must also give reasons for exercising their right of entry under WHS law. Permit holders must always produce their permit for inspection when requested to do so by the occupier. They must comply with the workplace’s WHS requirements when on the premises. The relevant provisions for Victoria appear under Pt 8 of the Occupational Health and Safety Act 2004 (Vic). In Western Australia, the right of entry provisions are contained in the Industrial Relations Act 1979 (WA), under Pt II Div 2G.

¶56-040 Incident investigation Type of investigation There can be two types of investigations after a workplace incident: (1) internal, and (2) external. Internal investigations Internal investigations can be conducted by the safety officer or WHS representative. Alternatively, investigations can be conducted by a consultant who has been commissioned by the employer’s solicitors. In such situations, the report will be covered by legal professional privilege.

External investigations External investigations can be conducted by safety inspectors, the police (when there is a death), emergency officers, private inquiry agents or consultants (representing the workers compensation or public liability insurer). Safety inspectors, the police and emergency officers usually have a legal right to be at the site, interview witnesses, collect evidence and sometimes even stop work. Inquiry agents do not have the same rights. Workplace safety inspectors’ investigations Inspectors from workplace safety authorities, once notified, will attend the workplace to investigate the breach. Inspectors may take certain action, including (in some cases) stopping work if they believe on reasonable grounds, that there is imminent risk to health and safety in a workplace. In general, workplace safety inspectors are empowered to do several things while investigating an incident, including: • making searches, inspections, examinations and tests • taking samples for analysis • requiring persons to answer questions • requiring the occupier to provide assistance and facilities to exercise their functions, and • requiring the production of, and inspect or make copies of, any documents on the premises. It is an offence in all jurisdictions to hinder or obstruct inspectors in their investigations. It may also be an offence to supply false or misleading information. There are also penalties in place for impersonating workplace safety inspectors. Conducting your own investigations Generally, it is a good idea to conduct your own incident investigation, particularly in cases of near-misses or near-hits. Incident investigation is an important part of good WHS management. The initial incident report, together with the results of any subsequent investigations, will form the basis for the preventive action that will be taken to ensure that the incident does not recur in the workplace. The report and investigation results will also provide an impetus for reassessing the risk control measures in place for the area or task involved. This follow-up is a key element in WHS management. The fact that an incident occurred nearly always means that something unforeseen happened or went wrong in the management system. There was an omission, an oversight or a lack of control of circumstances that permitted the incident to occur. As the management system improves, the overall health and safety performance of the organisation will also improve. Good investigations yield essential information which will assist in: • determining injury rates • identifying trends and problem areas • making comparisons • complying with legal requirements • identifying the basic cause that contributed directly, or indirectly, to each incident • identifying deficiencies in the production and management system that permitted the incident to occur, and • suggesting specific corrective and preventative action for the management system. Aim of incident investigation

Identifying the real cause of a workplace incident is the main aim of an incident investigation. It can be a complicated process. Investigating an incident may reveal several coincidental causes that create a chain of causation factors, none of which would have resulted in an incident by itself. Therefore, a basic concept of incident prevention is that incidents can have several causes, each of which can be identified and controlled. When investigating an incident, it is important to focus on all the links in the chain of events that led to the unsafe acts or conditions, rather than just the consequences (ie the injury or damage). Among the most common underlying causes are: • lack of attention to health and safety procedures and practices • failing to use health and safety equipment when supplied • using poor quality health and safety equipment • providing inadequate training, instruction and supervision of employees • management neglecting its legal obligations to provide a safe system of work, a safe place of work, competent staff, a sufficient number of workers, and proper plant and equipment • inadequate attention to maintenance and “housekeeping”, and • failing to provide adequate safeguards and/or suitable equipment for potentially dangerous situations. Attention should also be paid to psychological factors and job demands. The solution to these problems will involve an examination of job design and the match of employees’ capabilities to suitable tasks. Remember, an investigation must be impartial and objective rather than looking to allocate blame for the incident. If attempts are made to apportion blame, people who might otherwise provide useful information and guidance on necessary remedial action may simply become defensive.

¶56-050 Steps in an incident investigation Following a serious workplace incident, the action(s) an organisation takes can make a substantial difference to both its corporate standing and its treatment by the courts in cases where there is a subsequent prosecution. Good workplace practice after an incident can also have a major impact on workplace morale and productivity. Incident investigation procedures need to be systematic. For this reason, any steps that can be taken in preparation should be taken. Preparation enables the investigator to reach the incident site as soon as possible after the event and have all the equipment available to conduct the investigation. The basic equipment that an investigator may require will depend on the nature of the workplace and the incident, and could include: • a mobile phone with important contact numbers (eg emergency services) • a camera • recording equipment • writing/sketching materials and any applicable forms/handouts • containers for taking or storing samples • protective equipment, or • other applicable tools (eg a torch, tape measure and so on). The following steps are guidelines on how to conduct an incident investigation. Step 1 — Provide first aid and other medical attention, and make the area safe

First aid and other medical attention to injured parties should be given top priority after an incident. Employers should ensure that first aid facilities comply with legislative requirements and are suitable for the contingencies that arise. Being able to provide transport for injured people and having up-to-date emergency contact numbers are also important. It may also be necessary to make the area safe before commencing first aid on the injured person. Emergency procedures for the relevant site may need to be activated for this reason. Investigators should remember to ensure their own safety first when conducting their investigations and injured workers should only be approached if the site conditions are safe. Step 2 — Preserve the incident site In most jurisdictions, an incident site must not be disturbed after a serious incident. Any plant or equipment, substance or material at the site should not be used, moved or interfered with after it has been involved in a serious incident, nor should the surrounding area. Note, however, that the non-disturbance provisions should not prevent any action aimed at helping or removing a trapped or injured person or a body. Nor should they prevent anything being done to avoid injury to a person or damage to property, or any essential action to make the scene safe or prevent a further incident. If the incident site needs to be disturbed for whatever reason, it is advisable to first take a video recording or photographs, or make a note or sketch of what the scene looked like prior to the changes. This will establish the physical location of people and plant/equipment prior to, at the time of, and after, the incident. A visual record may assist later in identifying any contributory factors. Step 3 — Interview witnesses A good investigation needs to establish the events and circumstances leading up to the incident, facts of the incident, and any relevant facts relating to the time immediately after the incident. Most of this information can be obtained from witnesses. Interviews should be conducted with everyone who was involved or who can provide information. Eyewitnesses are those people who actually saw the incident occurring and can provide information on the incident itself and surrounding circumstances. Informed witnesses are those who did not actually see the incident, but who can contribute valuable background information. In light of the fragility of human memory, it is best to conduct eyewitness interviews as soon as reasonably possible. Witnesses should be interviewed individually so that the comments of one do not influence the others. The investigator should also be careful not to influence the witnesses through leading questions, their mannerisms and so on. Some useful tips on interviewing witnesses include: • limiting the questions to facts (eg “Where did the incident happen?”, “Who else was there?”) • asking “open” questions (ie ones that cannot be answered with a “yes” or “no”, such as those beginning with “who”, “what”, “when”, “why”, “where” and “how”. These encourage the interviewee to provide more information) • waiting until all of the factual information has been provided before asking “why” questions, as these prompt subjective answers • not interrupting or distracting the witness • repeating the story as understood to ensure accuracy, as well as making sure that the interviewee has an opportunity to appreciate fully what has been said and, if necessary, make corrections, and • (before closing the interview) checking that everything has been covered and observing that the purpose of the interview is to promote further cooperation should a follow-up interview be required. Informed witnesses may not have witnessed the incident, but they can provide background information on work systems, training, supervision and, importantly, whether safe work procedures were followed. They

may also be able to provide information on whether there have been any previous similar incidents, and any steps taken to remedy identified breaches. The interview should be recorded in some way (written notes or using electronic media) and dated. External investigators may also require that statements be signed as they may be used later for an insurance or workers compensation claims or in a prosecution. Investigators should be aware of the provisions of the Privacy Act 1988 (Cth) in relation to the use of any information gained in the interview (outside of the stated purpose of preparing an incident investigation report). See Chapter ¶53 on Privacy. Sometimes during an interview, a witness may provide information that has not been previously identified or recorded. It may then be necessary to re-interview previous witnesses to corroborate the facts or obtain further information. Step 4 — Collect physical evidence There may be instances where physical evidence from the site of the incident need to be collected (eg chemicals from a spill). This is usually only done by safety inspectors, the police, emergency officers and so on. Investigators should always ensure their own safety when collecting samples (ie they should wear/use appropriate personal protective equipment). Samples should be stored in appropriately labelled containers. In addition, the investigator may want to obtain documentary evidence. Documentary evidence might include job standards, safe work procedures, operating instructions, maintenance manuals, maintenance logs, induction records, training records, workers’ qualifications, certificates of competency, contracts, quotes and so on. Step 5 — Carry out research Once the field work has been completed, the investigator will have to research the company’s work procedures and safety background. The former may simply involve analysing the company’s written safety procedures and comparing them with witness statements of what actually happens on the floor. This will allow the investigator to determine any weaknesses in the system and perhaps even compare it with practices in other companies in the same industry. The latter may involve going through the company’s records on previous incidents, or researching databases of incident reports or similar cases that have resulted in prosecution. Lessons from previous similar incidents may be applied to the investigator’s current case. Step 6 — Analyse information collected The information collected from witness interviews, site visits, documents and the investigator’s own research will then have to be analysed before a report can be generated. It is at this stage that the investigator determines the causes of the incident and develops recommendations for appropriate remedial action. The immediate cause of the incident may be fairly obvious and would be gleaned from witness statements. The investigator’s research of the company’s safety procedures and whether they were followed should reveal the underlying causes. Based on their analysis of the incident, investigators will then be able to make useful recommendations and provide preventive strategies as part of their report. Investigators should base their recommendations on the hierarchy of controls that characterise the risk management process in WHS. Step 7 — Write the report When writing the report, it should be assumed that the reader has no prior knowledge of the incident. The report should explain in detail what happened before, during and after the incident, and it should include a detailed description of the immediate surroundings of the site, with pictorial representations (ie photographs, video recordings and so on). It should also contain sufficient information so that a decisionmaker can act on the recommendations. The report should be clear and concise, with headings and dot-points where appropriate so that each section is clearly set out and each point defined. Photographs and documents should be clearly labelled and referenced appropriately in the report.

The following report format is suggested: • Introduction: This acts as an executive summary where the incident is described in brief, including the date, time and location. It should also include a list of witnesses interviewed and any attachments (eg documents) accompanying the report. • Background of workplace: This describes the workplace’s safe working procedures, how the work is actually carried out, and provides any other relevant information. For example, this section can include photographs of plant/equipment usually used by workers to illustrate the investigator’s descriptions of them. • Events leading up to the incident: This section should describe the events immediately before the incident. It should include what each witness was doing, how they were doing it, where they were in relation to the injured worker/incident site and any relevant environmental factors (eg wind, rain, oil on the floor and so on). • The incident: This describes the incident (ie where it happened, when it happened, how the worker was injured), whether any external agent was involved (eg plant/equipment, chemicals and so on), and the seriousness of the injury. • Events immediately after the incident: This section should address the issue of first aid, whether an incident report was filed, how the injured worker was after the incident (eg conscious, walked away with no seeming injury and so on), as well as any remedial action taken. • Discussion and recommendations: This section should discuss the issues arising from the incident that need to be addressed. Based on the information already gathered, this is where the investigator makes their recommendations on how to improve workplace safety. This is perhaps the most important section of the report as it is where preventive/remedial strategies can be discussed to ensure similar incidents do not occur in the future. • Appendices: This section would include any relevant documents (eg witness statements, safe work procedures, company safety policy and so on) and evidence. If the investigator has done their work, all the information contained in the report should be either gained from witness statements or the relevant safety documentation. Recommendations for remedial action should be based on the investigator’s research of similar cases and how those solutions may apply to the current incident. For an internal investigation report, it is important for senior management to sign off on it to ensure recommendations are implemented. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

57. HEALTH AND SAFETY RISK MANAGEMENT AND COMPLIANCE Editorial information

Originally written by Harold Downes, Partner and Simon Dewberry, Senior Associate — Freehills, Brisbane Updated in 2016 by Geeta Shyam, Wolters Kluwer Writer

¶57-010 Introduction Why have a risk management system? There are a number of good reasons why every business should invest in an effective risk management system. These reasons include: • avoiding the task and cost of having to deal with a workplace fatality or injury • pursuing an objective of zero harm to people affected by the business (eg employees, contractors, the public, customers and so on) • reducing the risk of a temporary shutdown as a result of a serious incident • reducing workers compensation and public liability premiums • avoiding personal injury claims by employees of contractors on the work site • reducing the risk of prosecution and penalties against the business and its executive officers (Note: Individuals can be imprisoned for breaches of statutory safety obligations. Some incidents may attract criminal prosecution.) • increasing productivity and morale in the workplace • obtaining a competitive edge if tendering for work. You may want to demonstrate an appreciation of work health and safety (WHS) to a principal who may be relying on you to get it right so as to reduce its own exposure to prosecution, and • not attracting a reputation as an employer with a low regard for worker safety, which may detrimentally impact employee attraction and retention. An effective risk management system should be regarded as a “value add” to every business. Most pieces of safety legislation require that obligation holders to protect workers from the risk of harm. An obligation holder can be prosecuted even if no injury has occurred. While prosecution is generally initiated after an injury or fatality has occurred (based on a risk having manifested itself through an incident), this is not what is required for there to be a prosecution. The legal requirements of risk management Risk management is the generally accepted method of systematically managing WHS. Risk management

systems can be contrasted to an ad hoc approach or one that considers WHS only in response to an incident. Crucially, there are now broad and very specific obligations imposed by law to implement risk management. The model Work Health and Safety Act 2011 (WHS Act) adopted in most Australian jurisdictions (except Victoria and Western Australia) impose a primary duty of care on persons conducting a business or undertaking (PCBU) to ensure the safety of workers and other persons. Section 17 of the WHS Act explains that this duty requires the PCBU to eliminate risks to health and safety so far as is reasonably practicable. If that is not reasonably practicable, the risks must be minimised to the extent reasonably practicable. To determine what is “reasonably practicable”, the following factors must be taken into account and weighed up: • the likelihood of the hazard or risk occurring • the degree of harm that may result • what the PCBU knows or ought reasonably to know about the hazard or risk • the availability and suitability of methods of eliminating or minimising the risks • the costs of eliminating or minimising the risk (this must be considered only after assessing the extent of the risk and available methods of eliminating or minimising the risks). Chapter 3 of the model Work Health and Safety Regulations details more specific requirements in relation to risk management. This includes requirements with respect to the hierarchy of control measures to be used, and requirements in connection with maintaining and reviewing control measures. If a WHS incident occurs in a workplace and the business cannot demonstrate that an effective risk management system is in operation, the business will not be able to defend itself during the regulator’s investigation and will significantly increase its prospect of being prosecuted. The business’ responsible managers will also have no defence to such a prosecution if a risk management system is not in place. It is not enough to employ competent and experienced workers or contractors and leave them to develop safe work methods. Management might be vigilant about WHS and make sensible decisions, but this will not be enough if the approach is haphazard. Having a risk management system in place demonstrates the first steps towards showing that any applicable code or standard has been complied with, and that a “reasonable precaution and proper diligence” type of defence exists. The absence of a risk management system will be an aggravating circumstance in the event of a prosecution against a business and will increase the likelihood of senior managers being prosecuted in their personal capacities. This chapter sets out the fundamentals of risk management for WHS. It is a guide for persons with WHS obligations (eg HR practitioners) and will: • describe the risk management process, and • set out the fundamentals of risk management systems, with emphasis placed on the common faults. This chapter should be read in conjunction with applicable state and territory legislation and regulations. Note that industry-specific legislation can also require risk management to be carried out. For instance, the Dangerous Goods (Storage and Handling) Regulations 2000 (Vic) explicitly set out requirements with respect to hazard identification, risk assessments and risk controls.

¶57-020 What does risk management involve? All WHS risk management systems involve a combination of the following five elements: (1) identifying hazards (2) assessing risk

(3) deciding on control measures (4) implementing the control measures, and (5) monitoring and reviewing the system. These steps broadly reflect the requirements of the model WHS Regulations (see Ch 3). Risk management should result in a comprehensive, documented system to manage WHS risk. Risk assessments Risk assessments are practical applications of risk management principles, using the five aspects set out previously. Before a new machine is installed a risk assessment should be conducted on it. Following is an example summary of what the risk assessment might look like. Figure 57.1: Summary risk assessment

Step 1 — Identifying the hazards and risks with using the machine: • crush injuries from moving parts, and • hearing loss from noise. Step 2 — Assessing the risk from the hazards: • a low risk of crush injuries because it is a new plant with state-of-the-art guarding, and • a medium risk of hearing loss because of close proximity of workers to the machine for long periods. Step 3 — Deciding on controls: • a safe work practice, training and supervision (to complement existing controls), and • hearing protection and job rotation to assist with noise exposure. Step 4 — Implementing the control measures: • develop the safe work practice and ensure operators are trained in the practice • provide the hearing protection to operators and introduce a system to reinforce the importance of using the hearing protection, and • develop rosters to rotate operators out of the area. Step 5 — Monitoring and reviewing the effectiveness of the new control measures: • conduct regular inspections to ensure the controls have been implemented and workers are using the hearing protection devices in accordance with the instructions provided • consult with workers about the effectiveness of the control measures • monitor and investigate any incidents or near-misses involving the machine.

Conducting risk assessments for all aspects of a workplace and its activities is a fundamental part of a risk management system. Some of the other important aspects of a risk management system are:

• familiarisation with the workplace • continual review of the system • consultation • documentation, and • training. These steps are discussed further in the following sections. Familiarisation with the workplace Before undertaking risk management, it is important to familiarise oneself with the workplace. Examples of questions that should be asked include: • How is work undertaken? • Who is involved in the work (eg employees, contractors, students on work experience)? • What plant is used at the workplace? • What are the existing systems to manage WHS? • What safety legislation applies? Continual review Risk management must be ongoing so that the system is continually reviewed and updated. Examples of when to update the system include: • when changes are made at the workplace (eg installing a new plant) • after a safety incident • at regular intervals (eg yearly audits), and • after a change in standards (eg legislation, codes of practice or Australian standards). Consultation It is generally accepted that safety is best addressed at a level closest to where the work will be performed. Therefore, WHS legislation generally requires consultation with affected workers as part of the risk management process. The affected workers will have a vested interest in making the tasks they are to perform as safe as possible. Their constructive participation, experience and intellectual and emotional investment in the risk management process should be encouraged and facilitated. Consultation may involve established groups, informal discussions with workers and obtaining input from independent experts, the regulator, manufacturers and suppliers of plant and other obligation holders. Document the system The risk management system must be documented and the documented system must be continually updated. For example, copies of new risk assessments and work instructions must be kept and be easily accessible to workers. There is no value in developing a safety procedure if the only copy is kept in a locked cupboard in the manager’s office. While risk assessments can be unwritten, not having written records will pose a problem if an incident occurs and the system is tested in court. It is likely to be raised as an aggravating circumstance in the event of a prosecution. Training

It is common for inspectors investigating an incident to request documents in respect of three aspects of the business: (1) induction (2) training, and (3) supervision. An aspect of risk management that is often neglected is training in: • the system, and • conducting risk assessments. Where possible, risk assessments should be conducted by trained and qualified persons. However, this may not be possible, particularly for unplanned risk assessments. For example, if a worker makes a mistake on a job, they may have to start again. The procedure for the job may not contemplate undoing what has been done, and there may be previously unforeseen hazards (eg crush injuries when dismantling the job). If the task cannot be delayed and a qualified person is not available to conduct a risk assessment, it may be left to the worker. Without training, the worker is unlikely to conduct the risk assessment properly. Indeed, the worker may not be aware that a risk assessment is necessary. The most comprehensive, documented system will fail without adequate training. In fact, many prosecutions involve a failure to train workers adequately in a procedure. Thus, workers should be trained so that they are able to identify when a risk assessment is needed and to actually conduct risk assessment. Having described risk management for WHS, the following sections will set out the fundamental steps of risk management.

¶57-030 Step 1 — Identifying the hazards What is a hazard? The first step in most risk management systems is identifying hazards at the workplace. This step should produce a list of hazards. A hazard is something that may harm life, health or property. While there are many sources of workplace hazards, most fit into six broad categories: (1) the work environment (eg confined spaces, noise, ergonomics) (2) energy (eg electricity, motion, radiation, thermal, lighting) (3) work processes (eg manual handling, working at heights) (4) hazardous substances (eg chemicals, dusts, gases) (5) plant (eg machinery, equipment, tools), and (6) people-based (eg workplace violence, harassment and bullying, fatigue, stress). Hazards may not be obvious. For example, prolonged exposure to noise may result in injury. The process of identifying hazards There are many ways to identify hazards, including: • inspections • hazard reporting

• engaging independent experts to conduct reviews • reviewing incident reports • maintaining an awareness of compliance improvements (eg through relevant codes of practice) • reviewing existing risk assessments, and • consulting with workers. It is unlikely that a single method will be sufficient to identify all hazards at a workplace. It is best to use as many different methods as possible. A practical matter to consider is how the identification of hazards should be recorded so that the risk of a self-generated list of possible breaches of statutory or common law obligations is protected from becoming discoverable during any legal proceedings. Inspections Planned or random workplace inspections (or audits) involve observing the workplace to identify hazards. During the inspection, simple questions may be asked, such as: • Could this activity harm the worker? • What if someone walked into this area? Regular, planned inspections ensure risk management is ongoing. The risk management system should also include random inspections because workers may cover up poor work practices before planned inspections. For example, there may be a practice of removing guards from a machine to make the work easier. This practice may not be detected during a planned inspection. Hazard reporting The risk management system should include a mechanism for workers to report hazards. Incident reports Reports of incidents and their subsequent investigation can assist in identifying hazards. For example, an incident report may reveal previous crush injuries suffered by operators of a printing press. This will be relevant when identifying the hazards associated with the printing press (which should include crush injuries). A practical matter to consider is whether performance bonuses are dependent on safety statistics. The argument is often heard that by doing this, employers create a disincentive to incident reporting. A further practical matter to be mindful of, and arising out of many incident reports, is the error that they include a list of every possible “cause” for the contravention or incident that gave rise to the investigation in the first place. In many instances, “causation” is a relevant matter to be taken into account. As a practical example, “horseplay” should not be listed as a cause for an incident unless the members of the investigation team are satisfied that horseplay significantly contributed to the incident. If the list of causes is unnecessarily long it dilutes the ability to achieve the best safety outcome. This is because the real cause may be hidden among other issues, resulting in a delay in rectification. Also, including causes incorrectly may have an impact on a range of matters not immediately apparent to the investigation team. The report may be raised in a range of forums (eg a safety prosecution against the employer or its executive officers, a coronial investigation, criminal proceedings, personal injury claims, disciplinary proceedings, a due diligence in the event of a merger or takeover, or as part of a tender process being undertaken to appoint a contractor). Internal investigation reports are also increasingly being accessed via Freedom of Information (FOI) applications by newspapers if there is public interest in the incident or the business.

¶57-040 Step 2 — Assessing the risk After identifying the hazards in a workplace, the next step is to assess the risk associated with the hazards. Risk is the likelihood of harm because of exposure to the hazard. There are several methods for assessing risk. A common approach is to take account of both the: • likelihood of an incident arising from the hazard, and • severity of the consequences that could result from an incident. This approach can be expressed as:

Risk = likelihood of occurrence x severity of consequences

Assessing the likelihood of occurrence A number of factors can affect the likelihood of an incident occurring, including: • Frequency with which the hazardous situation may occur: Generally, the greater the frequency of exposure, the more likely an incident will occur. • Number of persons exposed to the situation or event: Generally, the greater the number of people exposed, the more likely an incident will occur. • Level of skill and experience of persons exposed to the hazard. • Duration of the exposure. • Physical location of the hazard: For example, fumes released into fume hoods are less likely to cause harm. • Other external factors and influences: For example, pressure on workers to meet production targets may increase the risk that workers will not follow procedures. • Exposure to environmental conditions: For example, this could include exposure to the sun for outdoor workers. • Quality of plant and equipment: This might including any: – wear and tear – corrosion – loose or worn plant parts, or – damaged parts. Australian standards and specifications for materials should be complied with where they exist. Establish the severity of consequences The following are examples of factors that may affect the severity of the harm suffered from a hazard: • Is there potential for a chain reaction?: A less serious hazard may develop into an even more dangerous situation. • How concentrated is the substance?: A minor injury may result from contact with a diluted chemical,

while a fatality may result from a concentrated form of the same chemical. • Volumes of material: The leak of a small amount of a chemical may be minor, compared with the release of a significant amount. • Speeds of projectiles and moving parts. • Heights: The force with which a falling object hits a person (and the potential injury) will generally increase the greater the distance it falls. Similarly, a person will generally sustain greater injuries if falling from a greater height. • Position of workers relative to a hazard: Workers closer to a noisy machine are likely to incur greater hearing damage than those further away. • Forces and energy levels: The higher the voltage of electricity and the possibility of high current flowing through a person, the more severe the consequences of electrocution. Rating the risks Risk management systems may include a risk rating mechanism to assist in deciding on appropriate control measures and the urgency of implementing the controls. Some risk rating mechanisms use a numeric scale (eg 1–5) to rate the risk. Another option is to use a standard such as: low, medium or high. An example of a three-level risk assessment classification is presented in Table 57.1. Table 57.1: Three-level risk assessment Category 1 — Low risk

The risk is considered minimal or insignificant. Adequate safeguards are in place and no further action is necessary at this stage.

Category 2 — Medium risk

It is considered unlikely, though still possible, that a consequence may flow from an unattended hazard. While adequate controls are in place, they should be reinforced through training and supervision.

Category 3 — High This is an unacceptable level of risk. Control measures must be developed and risk implemented immediately.

¶57-050 Step 3 — Deciding on control measures The hierarchy of control measures Once it is determined that a risk requires further control measures, the next step is to decide on the most appropriate controls. WHS legislation generally requires that a control measure is chosen at the highest possible point in a hierarchy of control measures (see reg 36 of the model WHS Regulations). From the most preferred to the least preferred control measure, they are: Level 1: Elimination Eliminating the hazard, that is removing the hazard at its source, is the first option to be considered. Here, it is important to consider the workplace design, workforce, work processes and equipment used at the workplace when determining whether a hazard can be eliminated. Some changes to the premises, processes or tools can eliminate the hazards. Examples of eliminating a hazard are: • using contract labour with specialised skills to perform a hazardous task, or • mechanising the task to eliminate the exposure to worker intervention. Other control measures should only be considered if the hazard cannot be eliminated.

Level 2: Substitution Where it is not possible to eliminate the hazard, a substitute that carries a lesser hazard should be considered. An example of substitution to prevent or minimise a risk is to substitute less dangerous chemicals for highly dangerous chemicals. When looking to make a substitution, it is essential to carefully review the substitute option being considered. New plant, for example, can introduce new hazards to the workplace. Level 3: Engineering Engineering controls may involve redesigning equipment or processes, or isolating hazards. Examples of redesigning are: • modifying a machine (eg installing an emergency stop button within the operator’s reach), or • installing a hoist to reduce manual handling. Again, it is important to take care when redesigning to ensure the change does not create new hazards. A risk assessment should be done on the redesign before work recommences. Examples of isolation to prevent or minimise a risk are: • installing screens or barriers around hazardous areas • guarding moving parts • using remote handling equipment for hazardous substances, and • installing acoustic booths around noisy equipment. Level 4: Administrative controls and personal protective equipment (PPE) These are generally the least effective form of control in the hierarchy of controls. They involve human factors and are often dependent on human behaviour. Safe Work Procedures, for example, are an important risk control measure. However, workers may for various reasons fail to follow the procedures. Other examples of administrative controls are: • job rotation to reduce exposure • limiting entry or time allowed in hazardous areas (eg entry permits) • up-skilling strategies to ensure adequate supervision • training in safe work procedures • preventive maintenance and housekeeping procedures, and • introducing safety warning signs. Where policies, procedures and training modules are being drafted, care must be taken to ensure that a process of due diligence is followed to scrutinise the qualifications of the person or agency drafting the documents. Examples of PPE are: • protective hearing devices (eg ear plugs) • respirators • protective eyewear (eg goggles and safety shields) • safety helmets

• wide-brim sun hats • aprons • safety harnesses • gloves, and • safety boots. Many prosecutions involve the failure to choose an appropriate control measure. Often, administrative controls are used where the hazard could have been eliminated or exposure to the hazard minimised. The following examples are from prosecutions:

Case examples Control could have been a safety switch A dough-dividing machine has a sharp blade at the bottom of its hopper. Using the machine carries the risk of finger amputation if the operator’s hand is placed in the hopper. Workers are instructed not to place their hands in the hopper. A worker ignored the instruction and was injured. In Newman v Aldo’s Fine Foods Pty Ltd (2002) 169 QGIG 151, the court found that the risk would have been better controlled by installing a safety switch that stopped the blades moving when the hopper was open. Duty owed to those who disregard their own safety A mine manager used welding equipment obtained on site to fabricate a fuel tank. He was unqualified to weld. He pressurised the tank to check the job. The diesel vapours ignited and the tank exploded, killing him. In Morrison v Normandy Industrial Minerals Ltd [2003] NSWIRComm 165, Petersen J said that the Occupational Health and Safety Act is in place to protect employees, even those who have a “foolish disregard for their own safety”. Modified ladder may have controlled risk of roof access and falls A school building with a fixed external ladder carries the risk of students accessing the roof and falling. The school provides written instructions to students to stay off the roof. A student ignored the instruction, climbed the ladder and fell from the roof. In Lutheran Church of Australia Qld v Newman [2002] QIC 30; (2002) 170 QGIG 247, the court found the risk would have been better controlled by removing the lower rungs from the ladder. These cases show that it is best to eliminate the risk, because administrative controls will not protect against the inadvertence, disobedience or foolishness of workers or others.

¶57-060 Step 4 — Implementing the controls Once appropriate control measures have been identified, the next step is to implement the control measures. The following measures can be taken to ensure the control measures are properly implemented: • develop an implementation plan • develop safe work procedures

• communicate with workers about the new controls • provide training and instruction in the new controls, and • involve supervisors in ensuring workers are aware of and use the new control measures.

¶57-070 Step 5 — Monitor and review Once the control measures are in place, it is important to monitor and review their effectiveness. Examples of questions that might be asked are set out in the following table. Table 57.2: Example questions to assist with monitoring and review Questions

Yes

No

Question 1 — Have the chosen control measures been implemented as planned? • Are chosen control measures in place? • Are these measures being used? • Are these measures being used correctly? Question 2 — Are the chosen control measures working? • Have the changes resulted in what was intended? • Has the exposure to the assessed risks been eliminated or adequately reduced? Question 3 — Are there any new problems arising from these processes? • Have implemented control measures introduced any new problems? • Have implemented control measures worsened any existing problems? If the review highlights deficiencies or room for improvement, the risk control measures must be revised. It is important to remember, however, that the risk management process must be carried out each time there is a modification to work practices or operations.

¶57-080 Conclusion Risk management should result in a comprehensive, documented system drafted by competent people on a consultative basis with the system’s intended users to manage WHS risk. Most risk management systems involve the following primary activities: • identifying hazards • assessing risks • deciding on control measures • implementing the control measures, and • monitoring and reviewing the system. The important aspects of having a risk management system include the following: • the system must be continually reviewed and updated • workers must be consulted at each stage • the system must be documented, and

• workers must be trained in the system. Introducing, documenting and continually updating an effective risk management system has many benefits. For instance, it is a significant step in ensuring the workplace is safe, and that the risk of prosecution of the business and its managers is diminished. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

58. PLANNING FOR INCIDENTS IN THE GLOBAL WORKPLACE Editorial information

Originally written by Moira O’Meley, Risk Management practitioner Updated in 2016 by Geeta Shyam, Wolters Kluwer Writer

¶58-010 Introduction Organisations in the 21st century operate in an environment that is consistently changing. With this change comes new risks and threats, such as terrorism, serious crime, pandemics and natural disasters. Each new risk or threat has the potential to impact significantly on employees’ and business resilience, which has highlighted the need for human resources (HR) practitioners and line managers to direct their focus to the safety and wellbeing of their employees working nationally and internationally. Such an environment raises the question: What factors need to be considered when deploying personnel overseas or, for that matter, interstate? This chapter provides guidance around this question, presents a snapshot of the environment that large and small organisations are operating within, and discusses legal obligations. These obligations are aligned to an organisation’s non-delegable duty of care, which is outlined in Pt 2 of the model Work Health and Safety Act 2011 (WHS Act) (adopted in most Australian jurisdictions). Failure to adhere to these laws (and other legislation), or our common law duty of care, can potentially result in prosecution. Two specific cases are cited to reinforce the importance of an organisation’s duty of care. What will also be stressed is the role of an organisation’s culture in mitigating these risks. Organisations must strive to attain a culture that: • understands and accepts the importance of risk identification • understands the role that effective planning plays, and • understands the necessity to test the business continuity response. This chapter provides a guide on key considerations and actions and gives some sample forms that any organisation, irrespective of size, can implement to ensure the wellbeing of its employees. Finally, it draws on the London bombings as a case study to illustrate how the recommended actions can be (and were) utilised in a real-life situation. Ultimately, the protection of employees is fundamental to driving the sustainability of operations and the success of the business.

¶58-020 Operational environment The harsh reality for businesses and organisations operating globally is that the environment in which they operate has become more complex. Understanding this environment will be critical to their continued

success. In the report Prospering in the Secure Economy, Deloitte Touche Tohmatsu (2005) highlights the complexities of the operating environment and argues that the environment is driven by five new realities: (1) A rapid change in the operating environment: The global business climate has been nothing but tumultuous in recent years. (2) New regulatory requirements: These have seen many multinationals spending billions of dollars complying with governance regulations (eg Sarbanes-Oxley). They are now finding themselves confronted by a host of new government security requirements. (3) Heightened threat levels and greater business uncertainty: Many companies are unclear as to what kind of threats warrant the greatest concern, how they would be affected if a particular kind of attack occurred, what marketplace conditions would follow particular kinds of attacks, and when the heightened threat will pass. These are, of course, considerations from a business continuity perspective as this knowledge will assist in the overall response. (4) The complexity and interdependent nature of risk: The advantages of the extended enterprise and its interdependent supply chains are many. However, this model puts businesses at greater security risk due to multiple partners and handoffs in both production and distribution. (5) The impact of media globalisation: The 24/7 news cycle means companies now have literally only minutes to respond to a security or threat incident before risking possible damage to their brand and reputation. This also enables terrorists to actively spread their message quickly around the globe. For example, few people would forget where they were when they first saw the live images of the attack on the World Trade Centre in New York. This operating environment has added a layer of complexity to our business responses and has required HR, management and internal security departments to intervene to protect employees and drive sustainability. The following section (¶58-030) considers the types of incidents that might eventuate, and what complexities and considerations are created for an HR manager or a line manager responsible for monitoring staff movements through locations within and outside Australia.

¶58-030 Types of incidents Terrorism While 11 September 2001 changed the dynamics of terrorism, such incidents have been striking closer to home with regional events occurring in Indonesia (specifically, the Bali incidents in 2002 and 2005, and the Australian Embassy bombing in 2004). Businesses with operational interests in the United Kingdom and France have also needed to respond to terrorist attacks in more recent times. HR considerations • How do you identify employees who are travelling for business or deployed on the ground? • What is the mechanism for determining the correct protective steps to take? • What and how is the best way to contact these employees, particularly if phone lines are down? Civil unrest Civil unrest is on the increase in the South Pacific, as exhibited in the Solomon Islands and the coup in Fiji, which saw Australian multinationals actively preparing for the protection and potential evacuation of personnel. HR considerations • How do you protect employees and their families? • How do you determine when and how they should be evacuated?

Natural disaster Boxing Day 2004 lives on in the memories of us all. A tsunami struck Thailand, Sri Lanka and Indonesia, resulting in a death toll in excess of 250,000. More recently, Christchurch in New Zealand experienced a destructive earthquake. Although Australian businesses may not have been directly impacted, companies responded by ensuring the wellbeing of personnel (working and on holidays) and repatriating as required. While organisations may not have an obligation to employees who are holidaying, it is the actions in these circumstances that will often define their values and ethical stance. HR considerations • How do you locate employees after a loss of major infrastructure and with limited telecommunications? • If an employee’s life has been lost, what is the best way to assist in the identification process and notify next of kin? • What should you do if you have employees on the ground? Criminal activities Australian businesses operate in many dangerous environments, such as Papua New Guinea (PNG). In PNG, crime is a daily occurrence, and organisations need to adapt to the environment and ensure that the employees based there (and visitors) are afforded appropriate protection in line with an organisation’s duty of care. HR considerations • How do you respond to the security issues in a highly complex crime environment? • How do you monitor the environment to ensure that emerging threats and risks are identified? • How do you educate your employees to ensure that they are aware of the dangers? Pandemics The outbreak of Severe Acute Respiratory Syndrome (SARS) in 2004, the threat posed by Avian Flu, the “swine flu” and more recently the Ebola virus have all highlighted how diseases can spread rapidly. Events like these (particularly where there is loss of life) create a potential exposure for businesses, and cause difficulties when conducting business and travelling to or within affected areas. See Appendix 3 for an example pandemic checklist. HR considerations • How can you protect organisations from the impact of such viruses and maintain the critical functions of the business, should they be impacted? • How can you support your employees to deal with the broader ramifications resulting from such incidents (eg caring for family members, fear of attending the workplace and so on)? A response can be driven through effective policy development, operational planning, and validation of the effectiveness of the planned response. These issues are discussed later in the chapter.

¶58-040 Legal requirements Before addressing strategies to respond to these potential incidents, it is important to briefly examine an organisation’s legal obligations. Apart from moral and ethical considerations, organisations have a legal duty of care. At common law lies the non-delegable duty of care that an organisation has to its employees. These obligations have been demonstrated in the following two cases, which also highlight the need to understand and plan for the deployment of personnel to potentially “risky” environments.

Case examples Pacific Access Pty Limited v Davies Pacific Access Pty Limited v Davies [2001] NSWCA 218 (12 July 2001) dealt with the temporary deployment of an employee to a high-risk location and the failure of Pacific Access in meeting its duty of care by not briefing the employee on the risks of the particular environment. The employee was sent to PNG with insufficient guidance on security aspects or the potential dangers and, while in the country, was subjected to a violent attack. Pacific Access was found to be negligent and damages in excess of $570,000 were awarded to the plaintiff. An interesting dynamic in this case was that, in the New South Wales Court of Appeal, the justices confirmed that, although there is no statutory obligation placed on companies with expatriates abroad to provide safe workplaces, companies can in fact breach their common law duty of care owed to employees (ABL 2001). This is important to understand when considering employee relocations to any high-risk areas. Sargeant v Tyre Marketers (Aust) Pty Ltd and Anor The second case, again from PNG, is Sargeant v Tyre Marketers (Aust) Pty Ltd and Anor [1995] NSWSC (unreported) (15 November 1995), Court file no 400094/93, in which the duty to provide adequate physical protection for an employee in a high-risk environment was argued after a serious injury was sustained. In this situation, the employee was an expatriate in PNG who was posted to the PNG Highlands. Numerous security incidents occurred which affected the business, and the company failed to adequately respond to the developing situation. Ultimately, this resulted in the plaintiff being seriously injured in a violent attack. The company was found to be negligent and a payment in excess of $270,000 was awarded.

What these cases highlight is that organisations have a duty to ensure that the risks an employee may face are identified (when they are travelling and representing the organisation). The cases also illustrate that organisations should provide practicable mechanisms to mitigate risks that might reasonably be encountered while employees are working overseas. While subjective, the listed case law paints a clear picture of expectation by the courts in this regard. Work health and safety legislation In addition to their common law duties, employers must also be mindful of their statutory duties. Model work health and safety (WHS) laws that have been implemented throughout Australia (except Victoria and Western Australia) do not prescribe any specific requirements for business travel. However, the legislation does not exclude or exempt business travel from the application of the WHS laws either. The model WHS Act imposes a general duty on a person conducting a business or undertaking (PCBU) to ensure, so far as is reasonably practicable, the health and safety of its workers. This applies to workers directly engaged to carry out work for the PCBU, as well as workers influenced or directed by the PCBU in carrying out their work duties. The duty attaches to work activities carried out as part of the business or undertaking and, therefore, is not limited to the physical confines of the particular business or undertaking. Overseas travel for business would, accordingly, be captured under this duty. A PCBU is only required to eliminate a risk, or if that is not possible, then to minimise a risk, so far as is reasonably practicable. Thus, in meeting the requisite standard of care, PCBUs must take into account the likelihood of a particular hazard or risk occurring and the PCBU’s knowledge about the risk or hazard. The PCBU will need to show that they assessed the likelihood of an adverse event occurring in light of historical incidents, current affairs and reliable future predictions associated with the destination country and region. The more frequently a PCBU directs its workers to travel, the greater the standard of care will be imposed on the PCBU. Such PCBUs will be more likely to incur higher penalties as well, therefore, an adequate system for managing travel risks is absolutely necessary in these circumstances.

¶58-050 Organisational culture The cases in ¶58-040 illustrate the importance of an organisation’s culture and pose the question: What steps can be taken to ensure the necessary protection of employees and organisations? Aligned with this is a culture that understands threats and risks and the role of emergency response, crisis management and business continuity plans. Organisations are accountable for their own security and business continuity needs and may, if seeking to become more risk aware, need to fundamentally change their culture. This is important, because a culture that is security, risk and business continuity aware will be more readily able to respond to the challenges created by the threat of terrorism, pandemics and other major events. The issue confronting organisations is that a structured and interrelated response does not manifest itself overnight (Knight 2006). Organisations need to establish and maintain policies that are endorsed by executive management and supported by operational programs, education and awareness strategies. If an organisation’s culture does not embrace protective strategies and behavioural change, no matter how good the supporting framework is, the process will be ineffective. There must be a mindset whereby these processes are accepted as the responsibility of all employees. This is achieved by establishing a framework that has executive endorsement, leadership and support, and which is driven from the “top down”. Where a framework is in place that is supported by awareness and training strategies, ownership and accountability will flow. The challenge for practitioners is to enhance employee understanding of the importance of security, risk management and business continuity, and to ensure that initiatives are aligned with the values and objectives of the organisation. In many organisations, this may require a fundamental change with significant time being spent on the change activities. Change takes time as organisational culture is not a physical entity. Organisational cultures are essentially “a human product not a natural product. People create them, people sustain them and people change them” (Buchanan and Huczynki 1985). This is where education and awareness of risk management, security, crisis management and business continuity come into play as it is the “process of acquiring knowledge through experience which leads to a change in behaviour” (Bate 1994). Cultural change involves changing individual, team and business attitudes while providing experience and examples of success to aid in this process. Numerous communication techniques can be used when undertaking change management initiatives. Some examples include communication via the intranet, induction training, awareness videos, and presentations during management development programs. As a total package, these assist in developing a security culture that promotes ownership. Best practice and full integration of security, risk management and business continuity with the values and objectives of the business can be attained in any industry. What needs to occur is the ingraining of these protective measures into every aspect of corporate culture.

Example — Prudential If we look at the protective/security components of, for example, Prudential in the United States, this organisation was transformed from one that had a perception that security was someone else’s problem to a culture where security was viewed as being everyone’s responsibility. Prudential did this by developing lines of communication, awareness and education programs, and having clear policies and procedures that were aligned with the standards, and more clearly defined roles and responsibilities throughout the corporate hierarchy. As Leibowitz (cited in Knight 2006), the Senior Vice President for Corporate Operations and Systems, noted: “We understand the risk, and tailor the policy to address that risk … It’s not one size fits all. Just doing things like that — walking the walk — lets employees know it’s important to do it.”

It is the security, risk management and business continuity culture that defines the value-based stance employees are expected to take in any situation where they, or the organisation’s assets, are at potential

risk: instances that are too numerous to predict or outline in policies and plans alone. Culture is difficult to enforce. It needs to grow and develop — primarily through positive reinforcement and role models. A poor culture can allow lackadaisical responses and no accountability. Therefore, it is important to get the culture right to ensure the protection of the business’ assets and infrastructure, and ultimately drive sustainability.

¶58-060 What can be implemented? Policies and plans Any response should be driven by business policies and supported by operational plans. Obviously, the size of the organisation and available budget will drive response capability. However, there are a number of low-cost activities that can be undertaken to address these risks and ensure the safety of employees. The strategy should be driven by sound policies that address the safety of employees, both within Australia and offshore (ie expatriate employees). Key policies should include: • WHS policy: The policy and supporting guides should clearly outline the obligations of the employer and the employee. • Security policy: This policy and supporting guidelines should articulate strategies for the protection of all assets, including the personal safety of employees. This document needs to be aligned with safety tips and strategies in the travel policy. • Travel policy: In addition to detailing employee obligations relating to travel, this document needs to outline security requirements and be aligned with relevant emergency plans. These policies should be supported by detailed incident plans, which are aligned to the specific needs of the business. These could include: • Key personnel evacuation plan: This plan is designed to guide a business response in a high-risk area should operational conditions deteriorate to a point where evacuating employees is required. It should document escalation phases, accountabilities, roles and responsibilities, mechanisms for evacuations and, critically, who makes the ultimate decision. • Medical evacuation plans: This plan responds to the medical needs of employees and is specifically relevant where a business is operating in, or an employee is travelling to, a destination with limited medical capabilities (eg PNG). • Business continuity plans (BCP): The BCP should focus on the key processes that are operating in the business unit and contain strategies for responding to the issues that have emerged, thereby driving business sustainability. • Crisis management plans (CMP): A CMP outlines the management procedures for dealing with the incident that has arisen. It is the document that drives the direction of the crisis team, which should consist of senior managers in the organisation who evaluate the situation and drive the strategic and oversight operational response. • Kidnap response plans: This plan is relevant for any business that has a kidnap and ransom insurance policy. As such, it should be aligned to the requirements of the insurance policy and the management mechanisms detailed in the CMP. This is not an exhaustive list. Other plans may be implemented depending on the nature of the business. While policies and plans are vital to the protection of employees, it is important that they are tested and updated in response to changes in the environment. Continual monitoring is critical, and testing can be carried out using desktop simulations to validate that such policies and plans are effective. Training should occur on an annual basis. Critical to bringing this all together is the nomination of a manager who has full responsibility. This person needs to ensure that they have the tools and mechanisms to monitor changes in the environment and

identify emerging risks and changes to threat levels. The identity of this person needs to be well communicated throughout the organisation, which will avoid a situation of having well-documented and rehearsed plans, but employees not knowing who to contact and when in the event of an incident. The practitioner in this field should consider: • referring to email alerts from the Department of Foreign Affairs and Trade (DFAT) (www.smartraveller.gov.au), British Foreign Office (www.gov.uk/government/organisations/foreigncommonwealth-office) and the US Department of State (www.state.gov/countries) for changes in risk ratings and information on developments relating to incidents • monitoring the web pages of the agencies mentioned for traveller safety trends • referring to news alert services from news sites such as CNN (edition.cnn.com) (A search on key words such as “terror attack” or “civil unrest” will provide details on the current environment. These sites also have a subscription service that sends updates to registered email addresses.) • joining or subscribing to a security provider that provides an “alert” service specific to the organisation (eg International SOS (see www.internationalsos.com) and Control Risks (see www.controlrisks.com)) • having a system in place that provides visibility of employee movements • having a debrief process for when employees return from high-risk locations (They can be asked to provide feedback on the location, risks they may have faced, security procedures, and the relevance of security measures that were in place at the time. The feedback received can then be used to refine and update the personnel security program.), and • regularly checking for updates on the level of Australia’s National Counter-Terrorism Alert (www.nationalsecurity.gov.au). A key point to note is that policies, plans and alerts are all vital, but they cannot work if people are unaware of the incident. The crucial elements to the success of an organisation’s plan include the notification of employees that there has been an incident, what they need to do and who they need to contact in the first instance. An effective way to ensure that this is done is to distribute emergency contact cards to travellers that they can carry with them, and implement an incident reporting protocol. See Appendix 4 for an incident response flowchart.

¶58-070 Practical steps to ensure the wellbeing of employees There are a number of steps that can be taken by managers to ensure the wellbeing of employees when travelling or if deployed overseas: • Policies (travel, safety and security policies): Ensure that these policies are regularly updated (and dated), circulated and easily accessible to staff. Use of the company’s intranet or email to keep staff updated is recommended. Supplement the policies with information from relevant government web pages. • Develop and maintain relevant business continuity and response plans: Ensure that plans are regularly reviewed, updated and include references to relevant government web pages. Monitor these sites for the latest information on planning for incidents. The Australian Government’s business resource — www.business.gov.au — contains useful pandemic-related information (search “pandemic”). In addition, ensure that key personnel are aware of their roles and the required responses should plans have to be implemented. • Test and monitor plans: Ensure that all plans are tested and monitored regularly. This can be done simply through desktop scenarios with appropriate staff. Any updates should be implemented immediately.

• Implement a traveller locator system: While there are a number of businesses that offer an automated service of this nature, for smaller businesses, a simple Excel spreadsheet containing traveller details (eg flights and hotels) will assist in identifying who is travelling and where. In the event of an incident overseas, this is the principle resource for ascertaining whether an organisation has any employees in the incident area. Expatriate employees should have their details registered, along with insurance policies, passport details and working permits. • Implement a travel awareness program: Examine the most effective way to send out the message about the practices that are in place to ensure the safety and wellbeing of employees. Many companies are using their intranet to document travel warnings, reporting requirements and approval mechanisms for high-risk locations. The trick is to get employees to visit this site. Sending employees and their families some general safe travelling tips that contain links to relevant websites can also encourage broader searching and education. Where an intranet is not available, consider the use of the organisation’s email system as a regular reminder. Alternatively, cultivate a business relationship with travel agents and have them include key data and policy requirements on the itinerary, or generate a newsletter. These are all low cost alternatives. • Monitor and ensure compliance with WHS obligations: Having good systems in place to track and ensure compliance with all potentially relevant WHS duties may help avoid prosecutions under WHS legislation. This can be included in the overall health and safety management system of a business. • Maintain a personal particulars register: If a business has a high number of frequent international travellers, establish a personal particulars register. This includes copies of key data (eg passports) and personal details (eg doctors, dentists, next of kin and so on). This material is highly sensitive and should be secured by the HR team in a sealed envelope. In the event of an incident occurring overseas, this can then assist with any necessary identification processes and reduce intrusion and further distress on an employee’s family. An example form is located in Appendix 1. • Implement an incident reporting mechanism: As noted earlier, employees need to know who to notify, when to notify and what to notify. Establish a central point for initial contact so that the information can be reported and escalated to appropriate personnel. An example form for capturing this information is located in Appendix 2. Ensure that the process of reporting incidents is conveyed to all employees before travelling and it can easily be incorporated onto the itinerary produced by the travel agent, including all contact details (as necessary). • Crisis management system (CMS): A CMS incorporates a team of senior managers who report directly to the managing director/CEO. These people can make decisions if incidents occur. Concerns might arise in relation to the reputation of the business; therefore, it is critical that the Corporate Affairs contact person or a company specialising in these services is used for communicating these incidents. A CMP establishes the management and communication framework to respond to a serious matter impacting on the organisation. The plan should: – identify how and when issues are reported – identify reporting and escalation lines – ensure the protection and welfare of employees and assets – ensure that the situation is managed efficiently, involving continual monitoring of the environment, and – ensure that key decision-makers and stakeholders receive timely notification. • Training: Ensure that those required to travel are trained in any travel policies and plans. Employees should be educated about their destination country so that they are aware of any known risks and threats. The relevant manager should take the employee through the procedures and inform them

about the steps to take in case of an adverse event, including who to contact at first instance. It is important that everything is documented and recorded as appropriate, including: • policies, procedures and plans in place • information tracked and received regarding particular travel destinations and regions • any training provided to travellers • risk and hazard assessments associated with business travel to specific locations, and • any special requirements for travel to particular (eg high risk) locations. Everything should be dated to demonstrate the frequency at which the above systems are updated. It will help establish that an organisation is constantly monitoring the present and future safety of travellers at overseas locations. This will also assist in demonstrating that the organisation has adequate systems and processes in place to ensure the safety of business travellers. A PCBU can rely on these to show that it complied with its duty of care.

¶58-080 A case in point — London bombings, 7 July 2005 Let us consider how some of the strategies would work when applied to a real scenario. Consider the scenario of an Australian-based company operating in London at the time of the 2005 terrorist attack. In this case, expatriates, local employees and visitors needed to be considered. On 7 July 2005, London’s public transport system was struck by a series of coordinated bomb blasts during the morning rush hour. Just before 9 am, three bombs exploded within 50 seconds of each other on three London Underground trains. A fourth bomb exploded on a bus nearly an hour later in Tavistock Square. The bombings killed 52 commuters and four suicide bombers, and caused a severe, day-long disruption of the city’s transport and mobile telecommunications infrastructure. In this instance, identification of the incident might appear in a CNN “alert” notification to the key person in the company responsible for monitoring these alert services, or even to the head office in Australia. The CMP would be activated immediately and the crisis arrangements in place would dictate that a local team be organised in the London office. It would report to a group office team (GOT). The crisis management team (CMT) would consider a number of factors, depending on the nature of the business: • Are any of our employees victims of the attack? • If employees were killed or injured, what can we do for the families of the deceased or those injured? • Do we have travellers on the ground? If they were a victim in the incident, the personal particulars register should be accessed to assist in the identification process. • What do we tell our travellers on the ground to do? Considerations might be to stay in the hotel or pull them out of the country. Again, this is driven by the nature of the business. • What do we do in relation to upcoming travel? Do we allow business-critical travel or do we cancel all travel to that area? • How has the incident impacted on the ability of our people to move around London and how does this affect our ability to continue business? • What action do we take relating to employee safety and what internal communications do we send out?

• How has the incident impacted on our ability to supply our services (bearing in mind transport restrictions, heightened security, jammed communication networks, and remembering the lessons from previous incidents where communications have been inundated with additional unplanned traffic)? • Which components of the BCP do we need to activate and how do we communicate this? • Who do we need to tell in the business and what is the communication? It is important to note that, through the provision of emergency cards (issued by a provider of medical assistance, international healthcare or security services, eg International SOS) to travellers, the relevant manager can reasonably expect to receive questions from the travellers relating to what they should do. The central team would also have access to data in respect of travellers based on systems already in place throughout the company. This data will assist in the processes for identification, location and assistance given to employees caught up in the incident. Based on the above scenario, the following would have occurred: • activation of relevant plans (CMP, BCP, personnel evacuation and medical evacuation plans) • activation of the travel locator system to assist with the identification of travelling employees who need to be accounted for • local business units contacted to obtain names, addresses and contact details of employees who might have travelled through that area on that day • use of the personal particulars register to assist in the identification of any employees who were victims of the incident. While this list is not exhaustive, it does illustrate a number of the questions and response considerations for the management team. The key lesson here is that, if plans are in place, understood and well rehearsed, a management team can effectively respond to an incident and ensure that, not only are employees safe, but the organisation has the flexibility to respond to the incident and ensure that business continuity is sustained.

¶58-090 Conclusion To protect employees and drive business resilience, a number of factors need to exist. As outlined previously, these include policies, plans and procedures. Ultimately though, culture is the most important aspect. The reality is that, in the context of risk management, employee security and business continuity within the current business environment, culture can be considered as being of paramount importance. By implementing clear and concise policies and procedures, and investing time and management skills into cultivating a culture that takes risk management, employee security and business continuity seriously, a company can be confident that, in times of trouble, it will be positioned in such a way as to best deal with the evolving incident, and will be able to successfully mitigate the impact on the business and its employees. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. Bibliography ABL 2001, HR Link Email Service, issue no 92/2001, 21 August. Bate P 1994, Strategies for Cultural Change, Butterworth-Heinemann Ltd, Oxford. Buchanan D and Huczynki A 1985, Organizational Behaviour, Prentice Hall, London, p 5. Deloitte Touche Tohmatsu 2005, Prospering in the Secure Economy, p 5. Information received from the Department of Health and Human Services, United States.

Knight GC 2006, “Securing Infrastructure Critical to the Future of the Organisation”, paper presented to the Australian Financial Review, Counter Terrorism Summit, Melbourne, October 24, p 7.

¶58-100 Appendices APPENDIX 1 — Personal details and emergency identification form (example)

This form is used to maintain details of employees who regularly travel interstate or overseas as part of their employment. The details provided are for use in the event of injury, illness or death that occurs in the course of employment, and are retained in accordance with relevant privacy legislation. This information will be held in a sealed envelope, secured by the HR department and only used as lawfully required to assist forensic and law enforcement investigations. On completion of the form, please place it in the attached envelope, then seal the envelope and sign across the sealed edge. The envelope will be returned to you on request or destroyed on finalisation of employment with the organisation. Please direct any enquiries regarding this form to HR. PERSONAL DETAILS Surname: First name: Middle name: Address: Telephone number (home): Telephone number (mobile): Telephone number (other): Date and place of birth: Height: Weight: Eye colour: Hair colour: Tattoos/distinguishing features:

Position and office location:

EMERGENCY CONTACTS Emergency contact name: Relationship to employee: Contact

telephone number:

MEDICAL CONTACTS Doctor’s name: Doctor’s telephone number: Dentist’s name: Dentist’s telephone number:

DOCUMENTS ATTACHED Copy of passport(s):

Yes ☐

No  ☐

Copy of drivers’ licence: Yes ☐

No  ☐

Copy of credit cards:

No  ☐

Yes ☐

CONSENT I am aware that [Business Name] will use this information only in the event of an incident occurring and to assist in lawful processes of identification. Signature:              Print name:            

Date:        

APPENDIX 2 — Incident report form (example)

This form is an example of an incident report form that can be used to capture critical information at the time of an incident occurring. Incident details

Person reporting incident

Date: XX/XX/20XX Time:

Surname:

Type of incident (please tick as applicable):

First name: Address:

Minor accident

☐

Major accident

☐

Assault

☐

Emergency at site

☐

Telephone number (home):

Terrorist incident

☐

Telephone number (work):

Security breach

☐

Telephone number (mobile):

Other

☐

Employee position and department:

Details of incident and names of employees involved:

Police attended: Yes ☐   No ☐

Ambulance attended: Yes ☐   No ☐

Station: Names: Event number: Details of injuries sustained:

Advised (please tick as applicable):

Date advised:

HR manager

☐

WHS manager

☐

Security manager

☐

Risk manager

☐

Escalated to crisis team

☐

Report completed by:

Signature:

Date:

APPENDIX 3 — Pandemic checklist (example) This is an example of a pandemic checklist, which identifies important, specific activities that large businesses can undertake to prepare for a pandemic. The checklist may also be used for other emergency planning. (1) Plan for the impact of a pandemic on the business Completed

In Not progress started

☐

☐

☐

Identify a pandemic coordinator and/or team with defined roles and responsibilities for preparedness and response planning. This planning process should include input from all key staff in various areas and roles in the business.

☐

☐

☐

Identify essential employees and other critical inputs required to maintain business operations by location and function during a

Activities

pandemic. ☐

☐

☐

Train and prepare additional workforce.

☐

☐

☐

Determine potential impact of a pandemic on business financials using multiple possible scenarios that affect different areas of business.

☐

☐

☐

Determine potential impact of a pandemic on business-related domestic and international travel (eg border closures, quarantines and so on).

☐

☐

☐

Find up-to-date, reliable pandemic information from community public health, emergency management and other sources and make sustainable links.

☐

☐

☐

Develop and plan for scenarios likely to result in an increase or decrease in demand for products/services during a pandemic.

☐

☐

☐

Establish an emergency communications plan and revise periodically. This plan includes identification of key contacts (with backups), chain of communications (including suppliers and customers) and processes.

☐

☐

☐

Implement a testing and monitoring process for the plan and revise and update periodically.

(2) Plan for the impact of a pandemic on employees and customers Completed

In Not progress started

☐

☐

☐

Forecast and allow for employee absences during a pandemic due to factors such as personal illness, family member illness, community containment measures and quarantines, school and/or business closures, and public transport closures.

☐

☐

☐

Implement guidelines to modify the frequency and type of face-toface contact (eg handshakes, seating in meetings, office layout, shared workstations) among employees and between employees and customers.

☐

☐

☐

Encourage and track vaccinations for employees.

☐

☐

☐

Evaluate employee access to and availability of healthcare services during a pandemic. Improve services if needed.

☐

☐

☐

Evaluate employee access to and availability of mental health and social services during a pandemic, including corporate and community resources. Improve services as necessary.

☐

☐

☐

Identify employees and key customers with special needs, and incorporate the requirements of such persons into the preparedness plan.

Activities

(3) Establish policies to be implemented during a pandemic Completed

In Not progress started

☐

☐

☐

Activities Establish policies for employee compensation and sick-leave absences unique to a pandemic, including policies for returning to work.

☐

☐

☐

Establish policies for flexible worksite/work hours.

☐

☐

☐

Establish policies for preventing influenza spread (eg promote respiratory hygiene and promptly exclude people exhibiting influenza symptoms).

☐

☐

☐

Establish policies for employees who have been exposed, are suspected to be ill, or become ill at the worksite (eg infection control response, immediate mandatory sick leave).

☐

☐

☐

Establish policies for restricting travel to affected geographical areas (consider both domestic and international sites) and evacuating employees working in or near an affected area when an outbreak begins. Provide guidance for employees returning from affected areas. Refer to the DFAT web page for travel recommendations.

☐

☐

☐

Set up authorities, triggers and procedures for activating and terminating the company’s response plan, altering business operations (eg shutting down operations in affected areas) and transferring business knowledge to key employees.

(4) Allocate resources to protect employees during a pandemic Completed

In Not progress started

☐

☐

☐

Provide sufficient and accessible infection control supplies (eg hand hygiene products, tissues and specific receptacles for their disposal) in all business locations.

☐

☐

☐

Enhance communications and information technology infrastructures as needed to support employee telecommuting and remote customer access.

☐

☐

☐

Ensure availability of medical consultation and advice for emergency response.

Activities

(5) Communicate and educate employees Completed

In Not progress started

☐

☐

☐

Develop and distribute programs and materials covering pandemic fundamentals (eg signs and symptoms of influenza, modes of transmission and so on), personal and family protection, and response strategies (eg hand hygiene, coughing/sneezing etiquette, contingency plans).

☐

☐

☐

Anticipate employee fear and anxiety, rumours and misinformation and plan communications accordingly.

☐

☐

☐

Ensure that communications are culturally and linguistically appropriate.

☐

☐

☐

Distribute information to employees about the pandemic preparedness and response plan.

☐

☐

☐

Provide information for the at-home care of ill employees and family members.

☐

☐

☐

Develop platforms (eg hotlines, dedicated web sites) for

Activities

communicating pandemic status and actions to employees, vendors, suppliers and customers inside and outside of the worksite in a consistent and timely manner, including redundancies in the emergency contact system. ☐

☐

☐

Identify community sources for timely and accurate pandemic information (domestic and international) and resources for obtaining counter-measures (eg anti-virals, vaccines).

(6) Coordinate with external organisations Completed

In Not progress started

☐

☐

☐

Collaborate with insurers and major healthcare facilities to share and understand each other’s capabilities and pandemic plans.

☐

☐

☐

Collaborate with federal, state and local public health agencies and/or emergency responders to participate in their planning processes, and share and understand each other’s capabilities and pandemic plans.

☐

☐

☐

Communicate with local and/or state public health agencies and/or emergency responders about the organisation’s assets and/or services that could be contributed to the community.

☐

☐

☐

Share leading practices with other businesses, chambers of commerce, and associations to improve community response efforts.

Activities

Source: Modified Business Pandemic Influenza Planning Checklist — Department of Health and Human Services, United States. APPENDIX 4 — Incident response flow chart

59. WORKERS COMPENSATION Editorial information

Originally written by Warwick McDonald, Principal, Warwick McDonald Consulting (formerly Acting General Manager WorkCover NSW) Significantly rewritten in 2013 by David Dickinson, Solicitor, DJ Dickinson Lawyers and by Janet Wood, Workplace Relations Writer and Consultant, in 2015 and 2016

¶59-010 Workers compensation — introduction Compensation for workplace injury or illness is accepted as a reasonable tenet of an equitable and democratic society. Workers compensation should not be considered in isolation, though. It is closely related to the requirement to keep a safe workplace, as well as to provide supportive rehabilitation and return-to-work strategies for those workers unfortunate enough to suffer a workplace-related injury or illness. Achieving a safer workplace is the only long-term means of reducing compensation and rehabilitation costs. This is consistent with the need to ensure adequate support, both financial and otherwise, to injured workers and to ensure that the cost of such support is borne by those responsible for causing the harm, rather than the community in general through the social security safety net. This chapter proceeds on that assumption. Proactive safety policies and consciousness not only make workplaces safer; they also represent the best means of limiting workplace injury costs, saving both employers and the community from what can be a substantial amount of money for the costs arising from the sometimes permanent disablement of injured workers. It is important to note that this chapter provides only a general introduction to workers compensation and the related topic of workplace health and safety (WHS). It is certainly not a comprehensive treatise on the legal obligations on employers in these areas. For additional information, readers should refer to Chapters ¶12 and ¶48 in this Guide, and also consult with their lawyers and OHS/WHS advisers.

¶59-020 The current system in simple terms History The current system of compensation for workplace injury or illness had its beginnings in Australia in the decade following World War I. Trade unions had always regarded it as morally unjust that workers could suffer debilitating injury or illness at work and effectively be cast aside as a problem for their families or the wider society to deal with. Most households only had one breadwinner, and a major injury or breakdown would often lead the whole family into financial ruin. Following World War I, unions became stronger in the industries in which they had traditionally been organised and also quickly established themselves in newer, white-collar occupations and the public sector. These developments gave unions much greater bargaining strength, which they used to pressure governments, particularly Labor Party governments, to enact systems of compensation for injured workers. State and territory governments followed one another in introducing such worker protection.

Compensation costs could be insured against protecting individual employers from the sudden impact of substantial costs in assisting workers. The emphasis was on providing monetary compensation for the loss rather than preventing injury. While there were early attempts at preventing injury from specific hazards (eg unguarded machinery in the various Factories Shops and Industries Acts), there was an underlying assumption that certain industries were inherently dangerous, and that the risk of harm was an unavoidable and inherent risk of employment in those industries. Unions prided themselves on their ability to have members’ compensation applications processed efficiently — usually by the union’s preferred solicitors. Indeed, union campaigns for improvements to working conditions usually included claims for increased monetary allowances to compensate for dangers inherent in the workplace. Allowances for “danger money” and for work performed at heights, or in wet, hot or cold conditions or confined spaces were common in industrial awards. Little regard (and certainly no systematic attention) was given to the causes of such injury and illness. Even less regard was given to the design of safer working conditions. These values were challenged in the 1970s and 1980s with the enactment by most states and territories of OHS/WHS legislation, based largely on a model developed in Great Britain in the early 1970s. For the first time, emphasis was given to systematically taking steps to prevent (or at least reduce) industrial accidents. Major new responsibilities were placed on employers who were officially said to owe a “duty of care” to their employees to provide a safe workplace. Heavy penalties for non-compliance were part of the package. Worker safety delegates and safety committees were recognised. In the last years of the 20th century, this more sophisticated (and economically more rational) approach was further augmented by legislation that insisted on the rehabilitation of workers and their speedy return to work. These developments continue in the current century, with recent legislative changes further emphasising rehabilitation and return to work. National WHS Strategy and creation of Safe Work Australia In May 2002, all Australian governments agreed to a 10-year National OHS Strategy designed to dramatically improve OHS performance in Australian workplaces and significantly reduce the number of people hurt or killed. The strategy was agreed to by the Australian Chamber of Commerce and Industry (ACCI) and the Australian Council of Trade Unions (ACTU) — the principal representatives of national employers and unions (Safe Work Australia 2002). The Australian Work Health and Safety Strategy 2012–2022 builds on the National Occupational Health and Safety Strategy 2002–2012. The 2012–2022 Strategy includes the following targets for 2022: • a reduction in the number of worker fatalities due to injury of at least 20% • a reduction in the incidence rate of claims resulting in one or more weeks off work of at least 30%, and • a reduction in the incidence rate of claims for musculoskeletal disorders resulting in one or more weeks off work of at least 30%. Safe Work Australia The decision in 2009 to replace the Australian Safety and Compensation Council (ASCC) with Safe Work Australia was made in order to establish an Executive Agency, as prescribed under the Financial Management and Accountability Act 1997 (Cth). The establishment of Safe Work Australia (administratively) was considered necessary to ensure that the timetable for OHS/WHS harmonisation (to be determined by the Council of Australian Governments (COAG)) was not further jeopardised. The harmonisation process is discussed below. Safe Work Australia is comprised of an independent Chair and representatives from the Commonwealth, each state and territory, two members representing the interests of workers, two representing the interests of employers and the Chief Executive Officer of Safe Work Australia. The organisation aims to drive national policy development on OHS/WHS and workers compensation matters, such as continual reductions in the incidence of death, injury and disease in the workplace, national uniformity of the OHS legislative framework complemented by a nationally consistent approach to compliance policy and enforcement policy, and improvement of national workers compensation arrangements.

A move to model legislation For businesses operating across more than one state in a federation — each having different health and safety laws — life can be made more difficult than it ought to be by having to comply with different regulatory frameworks. For this and other reasons, in July 2008 (as set out in the Consultation Regulation Impact Statement for National Harmonisation of Work Health and Safety Regulations and Codes of Practice, prepared by Access Economics and published on 10 January 2011): “the Council of Australian Governments (‘COAG’) committed to the harmonisation of work Health and safety legislation by signing an intergovernmental agreement for regulatory and operational reform in occupational health and safety. Each jurisdiction committed to implementing the new harmonised framework by January 2012”. The task of preparing a draft model for the legislation was taken up by Safe Work Australia and a draft code was released in December 2010 for public discussion and comment. Each of the states and territories (with the exception of Victoria and Western Australia) has enacted legislation in conformity with the harmonised model (see, for example, the Work Health and Safety Act 2011 (NSW)). No fault Systems of compensation for workers suffering work-based injury or illness exist in every Australian state and territory. They are all “no fault” schemes. This means compensation will be paid whether or not the employer was negligent or breached another law. Any fault on the part of the injured worker will also generally be disregarded. What will not be disregarded, however, is where the injury resulted from the serious and wilful misconduct of the worker, including cases of intoxication resulting from the voluntary consumption of alcohol, unless the injury resulted in death or serious and permanent disablement. Compensation is not payable in respect of any injury to or death of a worker caused by an intentional selfinflicted injury. See, for example, s 40 of the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic). The rights given to workers by this legislation cannot be limited, excluded or removed by an individual contract or other arrangement. Principal legislative provisions Every employer must take out and maintain a workers compensation policy covering its employees. If the size of the workforce alters, or the nature of its business changes, the insurer must be notified. The relevant legislation is state/territory-based. The agencies and legislation (as at December 2015) are shown in Table 59.1. Table 59.1: Agencies and state/territory workers compensation legislation Agency/area

Relevant legislation

Comcare Australia (federal Safety, Rehabilitation and Compensation Act 1988 (Cth) government employees and employees of some now privatised Commonwealth corporations, such as the Commonwealth Bank of Australia and Telstra who effectively become self insurers under licence) Seacare (seafarers), Commonwealth

Seafarers Rehabilitation and Compensation Act 1992 (Cth)

Australian Capital Territory WorkCover

Workers Compensation Act 1951 (ACT)

Insurance & Care NSW (icare)

Workplace Injury Management and Workers Compensation Act 1998 (NSW)

State Insurance Regulatory Authority (Workers Compensation Regulation)

Workers Compensation Act 1987 (NSW) Sporting Injuries Insurance Act 1978 (NSW) Workers Compensation (Dust Diseases) Act 1942 (NSW) Workers Compensation (Bush Fire, Emergency and Rescue Services) Act 1987 (NSW) NT WorkSafe

Return to Work Act (NT)

WorkCover Queensland

Workers Compensation and Rehabilitation Act 2003 (Qld)

ReturnToWorkSA

Return to Work Act 2014 (SA) Return to Work Corporation of South Australia Act 1994

WorkSafe Tasmania

Workers Rehabilitation and Compensation Act 1988 (Tas)

WorkSafe Victoria

Workplace Injury Rehabilitation and Compensation Act 2013 Accident Compensation (Occupational Health and Safety) Act 1996 (Vic) Accident Compensation Act 1985 (Vic) Workers Compensation Act 1958 (Vic)

WorkCover WA

Employers Indemnity Supplementation Act Fund 1980 (WA) Workers Compensation and Injury Management Act 1981 (WA) Employers Indemnity Policies (Premium Rates) Act 1990 (WA) Workers Compensation and Injury Management (Acts of Terrorism) Act 2001 (WA) Waterfront Workers (Compensation for Asbestos Related Diseases) Act 1986 (WA)

Penalties for non-compliance with legislation Financial penalties for non-compliance are severe. For the schemes to run equitably and efficiently in the interests of all employers, it is essential for all employers to be insured. Provision is available for the (generally larger) employers to become self-insurers. Contact should be made with the local workers compensation authority for detailed requirements. Failure to comply with legislation is a serious offence, punishable by heavy fines and/or jail terms. Penalties also include doubled premiums and liability for all costs of uninsured claims. In certain circumstances, where the company cannot pay the fine or meet the costs of the uninsured claim, the directors of the company may be held personally liable for the conduct of the company.

¶59-030 Insurance systems for workers compensation Premiums Most insurance systems for workers compensation incorporate elements of industry risk and individual claims performance. The price employers pay for workers compensation policies in most parts of Australia is based on the: • size of the employer’s payroll (including superannuation and fringe benefits) • claims history or experience of the employer (ie the historical cost of the employer’s workers compensation claims) (Note: the period measured differs between the states and territories.), and/or • risks associated with the industry — often referred to as the premium (levy) rate or order. (The base

industry premium rate usually reflects the cost of all compensation claims that have occurred in this industry. Industries such as agriculture, underground mining, building and construction are the most highly rated, while administrative or office-based industries are usually among the lowest rated.) The premium (levy) rate is a percentage of the organisation’s payroll and is based on an industry classification (usually the Australian and New Zealand Standard Industrial Classification (ANZSIC) system). The insurance company contracted will normally take the following steps in calculating an employer’s premium: • estimate the gross wages cost (Note: “Wages” usually include salary, overtime, shift allowances, overaward payments, bonuses, commissions, payments to working directors (including director’s fees), payments for public and annual holidays (including loadings), payments for sick leave, the value of any board lodging provided, superannuation contributions, the grossed-up value of fringe benefits, long service leave payments and termination payments.) • classify the business into an industry classification and assign an industry rate, and • calculate the base premium and make any appropriate adjustments for the business’ past workers compensation claims experience. The outcome of some employers evading appropriate payment of premiums (levies) will mean that complying employers end up carrying costs that would otherwise be distributed to all employers. The most appropriate method of reducing workers compensation costs is to improve the enterprise’s OHS/WHS and rehabilitation performance. An industry association, union or similar organisation can instigate a cooperative, industry-wide program to improve OHS/WHS and rehabilitation performance. In time, risk management strategies leading to injury prevention, and improved rehabilitation leading to a more rapid return to work of injured or ill workers, will decrease the industry’s workers compensation costs. This in turn will usually decrease the industry’s risk rating and, therefore, decrease the premium (levy) rate. Individual employers can implement risk management programs within their own workplaces that will improve OHS/WHS performance and injury rehabilitation. Over time, employers should experience a decrease in workers compensation costs because there will be a decrease in claims experience. Because there is a history of reduced claims, employers should be in a stronger position to negotiate with an insurer or government agency to decrease the cost of their workers compensation premiums. Ultimately, all improvements in workplace safety should produce financial benefits to the employer. As indicated, premiums are based on the: • size of the payroll • claims history of the employer, and • industry premium (levy) rate or order applicable in each state or territory. High-risk industries pay higher premiums than lower risk industries. Safe Work Australia’s 2015 report, Comparative Performance Monitoring Report: Comparison of work health and safety and workers’ compensation schemes in Australia and New Zealand, 17th edition, reported that the Australian standardised average premium rate fell 4% from 1.55% of payroll in 2009–10 to 1.48% of payroll in 2013– 14. All Australian jurisdictions with the exception of Queensland, the federal government, Tasmania and the Northern Territory recorded falls in premium rates over this period. Comcare scheme recorded the lowest premium rate of all jurisdictions at 1.19% of payroll in 2013–14, while the Seacare scheme recorded the highest at 2.71%. High-risk industries (eg building and construction or meat processing) attract rates approaching four times as high, while low-risk industries (eg office administration) can be less than half the average rate. In addition, compensation schemes in most states and territories may impose further penalty rates (or

provide bonuses) to premiums based on organisational performance. Accuracy in providing (to the insurer or government agency) estimates of claims experience, cost and frequency of any accidents, employee numbers and payroll data, is essential. Employers are required to complete forms or statutory declarations in relation to payroll, claims experience and accident information. This information is legally binding, and if there is any significant variation between the statements made by the employer and actual fact, it may be used against the employer in legal proceedings. Underestimating these figures may lower an employer’s premium (levy) in the short-term, but larger fines and penalties will be applied to employers found engaging in such practices. Premium discounts and penalty schemes Increasingly, the varying jurisdictions have introduced, or are planning to introduce, premium discount and penalty schemes. Such schemes enable discounts for employers who have reduced their injury rate (and, therefore, their claims experience), and impose penalties on those who continue to incur injuries and have a higher claims experience as a consequence. WorkCover NSW, for example, provides a range of initiatives that act as incentives and support to small employers, including: • a 10% premium discount upfront for each policy period, which small employers retain if they have no injured worker off work for more than four weeks • a 10% reduction on their premium if the injured worker returns to work within 13 weeks • a 5% discount for the annual payment of premiums • eliminating the requirement to estimate wages, increasing the time to report actual wages, and aligning all renewal dates to a calendar month-end, and • for claims against a policy commencing or renewing on or after 30 June 2015, a return to work incentive discount (5, 10 or 15%) applied to the cost of each claim with a sustainable return to work outcome up to 52 weeks. The higher discounts apply to shorter return to work outcomes. How to get cover In some states and territories, employers obtain workers compensation insurance by taking out policies with insurance companies that are licensed by, or act on behalf of, the state or territory workers compensation agency. Lists of such companies and their contact points are available from each agency. In some states, an employer can obtain a policy direct from the relevant workers compensation agency. Self-insurance All workers’ compensation jurisdictions in Australia and New Zealand, except Seacare and the Department of Veterans’ Affairs, allow employers to self-insure if they meet certain requirements, the most critical of which is the financial capacity to fully fund future liabilities. Employers which choose to become self-insurers must accept all of the financial costs and liabilities for workers compensation and rehabilitation programs. This status is normally available only to large employers because of the strict compliance requirements. To these economic requirements other criteria are added, including the number of workers covered and the employer’s demonstrated commitment to OHS/WHS and rehabilitation through having appropriate plans. The number of self-insurers varies between states and territories, but is generally less than 0.5% of total employers (with the exception of the Commonwealth and Northern Territory schemes where government and semi-government employment is higher than average). Self-insurer application details are available from the relevant workers compensation authority. Cross border issues Each of the states and territories have enacted cross-border or “state of connection” legislated provisions. In the case of a worker who may undertake work across more than one state or territory, these provisions determine the jurisdiction in which an employer is required to obtain workers compensation insurance for that worker. While large businesses carrying out business regularly and based in more than one state will still be required to have insurance in the states in which they operate, these provisions may assist employers where their workers have a more tangential relationship with other states. The determination of

the state of connection involves the following tests which are applied in descending order (courtesy of WorkCover New South Wales). Table 59.2: Test steps to determine state of connection A worker’s employment is connected with: Test A

• the state/territory in which the worker usually works in that employment, or

Test B

• (if no single state/territory is identified by Test A) the state/territory in which the worker is usually based for the purposes of that employment, or

Test C

• (if no single state/territory is identified by Test A or Test B) the state/territory in which the employer’s principal place of business in Australia is located, or

Test D

• (in the case of a worker working on a ship, if no single state/territory is identified by Test A, Test B or Test C) the state/territory in which the ship is registered, or (if the ship is registered in more than one jurisdiction) the state/territory in which the ship most recently became registered, or

Test E

• (if no single state/territory is identified by Test A, B, C or D) (if applicable) a state/territory if the worker is in that state/territory when an injury happens to that worker and there is no place outside Australia under the legislation of which the worker may be entitled to compensation for the same matter. If a worker temporarily works outside their “state of connection” for up to six months for the same employer and under the same term or contract of employment, then the existing workers compensation cover will apply.

¶59-035 Workers entitled to workers compensation Workers compensation coverage differs between each jurisdiction. Determining whether a person is covered by workers’ compensation legislation depends on the definitions of: • workers/employees • deemed workers/employees • the injury, and • the workplace. Employers need to be aware of which types of workers are covered as penalties can apply if they do not insure their workers. Deemed workers As new working arrangements have emerged, and employment under traditional arrangements has declined, jurisdictions have modified the definition of “worker” to deem some workers to be properly covered by workers’ compensation. A deemed worker for workers’ compensation purposes is a person who performs work for another in circumstances that fall outside of the general statutory definition of worker in a jurisdiction, but who is deemed by legislation to be a worker in order to receive a workers’ compensation benefit. Volunteers In most jurisdictions, the workers compensation legislation provides for coverage for volunteers, such as firefighters, emergency service volunteers and persons performing community services or unpaid duties. The exception is Western Australia where some volunteers are covered for personal injury under private insurance. Sportspersons

All jurisdictions that cover sporting activities in their workers’ compensation legislation refer to the professional side of the sport only. Comcare, Seacare and DVA have no direct reference to sport-related injuries. In NSW, coverage for workers compensation depends on whether the person is within the definition of a “worker”, it being noted that persons who might otherwise be workers are excluded where they are covered by the Sporting Injuries Insurance Act 1978.

¶59-040 Defining injury and compensation The notion of “injury” is quite broadly defined and can extend to items of personal property, such as clothing or spectacles, which might have been damaged as a result of a personal injury. The definition of injury also clearly extends beyond physical injury to encompass psychological injury. However, governments have moved to exclude stress-related injury from workers compensation coverage where such stress is alleged to have resulted from reasonable management action, such as restructuring the business, or decisions to promote or not promote, demote, retrench or discipline a worker. Specific provisions of legislation may deal with recognised occupational hazards, such as industrial deafness, brucellosis (and some other zoonotic diseases) and asbestos-related conditions. An injury can be either physical or psychological. It can include a disease contracted while at work, where the employment was a significant contributing factor, and also include the aggravation, acceleration, exacerbation or deterioration of a disease, where the employment was a significant contributing factor. Compensation covers an injured worker’s: • medical and related expenses (including rehabilitation) • incidental travel expenses, and • loss of earnings. The employer will generally be required to meet these expenses, and will be reimbursed under its workers compensation insurance policy. It should be emphasised that an employer will not be regarded as admitting liability simply by making these initial payments. Weekly compensation payments must commence within a short time (usually up to 14 days, depending on the state or territory) from the time a claim is received, and the worker may be entitled to interest on late payments. If the worker’s injury or illness is permanent, an additional amount is generally payable. Traditionally, this additional amount was stipulated in a “Table of Maims” — an exhaustive list of particular disabilities with different compensation amounts ascribed to each. Now, most jurisdictions have moved to a system based on the assessment of the percentage of whole person impairment (WPI) resulting from the injury. The employer is liable to provide compensation payments directly to the injured worker during the initial stages of the injury. This period varies between jurisdictions, but is commonly up to “the first 10 days”. This direct payment represents the employer’s “excess” for the claim. The amount specified to be payable to the injured worker varies between the states, territories and the Commonwealth. Table 59.3 summarises weekly employee payment rates under the various schemes. Table 59.3: Employee weekly payment rates by jurisdiction Jurisdiction

Payment rates

Commonwealth and Seacare Authority

For the first 45 weeks of incapacity (whether total or partial) the worker will receive their normal weekly earnings (NWE) less any amount actually earned by the worker. NWE includes average regular overtime, but excludes expenditure reimbursement or allowances. After 45 weeks, the worker will receive payments in accordance with the following table (Courtesy of Comcare Guide for injured employees; see www.comcare.gov.au and www.seacare.gov.au). (Note: Where the amount so arrived at is more than 150% of the amount called the

Average Weekly Ordinary Time Earnings of Full-time Adults, as published from time to time by the Australian Bureau of Statistics (ABS), the amount so worked out must be reduced by the excess amount.)

Australian Capital Territory

% Normal Weekly Hours Worked

% Normal Weekly Earnings (NWE)

Compensation Payable

Not working

75%

75% NWE

25% or less

80%

80% NWE – Actual Earnings (AE)

More than 25%, but not more than 50%

85%

85% NWE – AE

More than 50%, but not more than 75%

90%

90% NWE – AE

More than 75%, but less than 100%

95%

95% NWE – AE

100%

100%

100% NWE – AE

Total incapacity: For the first 26 weeks, the worker will receive the workers average pre-injury earnings. This may include overtime and other allowances where there was no pre-existing regular pattern. After 26 weeks, the worker will receive payments in accordance with s 41 of the Act. A worker whose average pre-incapacity weekly earnings is less than the “pre-incapacity floor” (see later definition), or where 65% of those earnings is less than the pre-incapacity floor for the worker, the worker in each case will receive the “statutory floor” (see later definition). If 65% of the workers earnings are more than the pre-incapacity floor, the worker is entitled to either 65% of their average pre-incapacity weekly earnings or the statutory floor, whichever is the greater amount. Definitions: The “pre-incapacity floor” means the statutory floor that applied immediately before the initial incapacity date for the worker in relation to the injury. The “statutory floor” means the national minimum wage applicable as adjusted from time to time. Partial incapacity: Pursuant to s 42 of the Act, the worker receives the difference between the weekly amount the worker is being paid for working (or could earn in reasonably available suitable employment) and the relevant amounts — according to the formula set out in that section.

New South Wales

Total incapacity: For the first entitlement period (not exceeding 13 weeks) the worker will receive compensation at the rate arrived at using the formula (AWE x 95%) – D or MAX – D (whichever is the lesser). An “explanation of terms” in this formula appears towards the end of this section on New South Wales. For the second entitlement period (from weeks 14–130) the worker will receive compensation at the rate arrived at using the formula (AWE x 80%) – D or MAX – D (whichever is the lesser). After the expiration of this second entitlement period, the worker’s entitlements to weekly payments will cease unless the worker is assessed as having no current work capacity and is likely to continue indefinitely to have no current

work capacity. A worker whose benefits continue under this provision will be paid according to the formula applicable to the second entitlement period. For the purpose of assessing an entitlement to continued benefits, the worker must undergo work capacity assessments as provided under the Act, except if the worker is classified as a seriously injured worker (ie a worker who has or is likely to have a permanent impairment of more than 30% whole person impairment). Partial incapacity: In the first entitlement period of 13 weeks where a worker has current work capacity, the worker is entitled to payment at the rate prescribed under the formulae (AWE x 95%) – (E + D) or MAX – (E + D) (whichever is the lesser). In the second entitlement period (weeks 14–130) the worker will receive compensation under the formulae (AWE x 95%) – (E + D) or MAX – (E + D) (whichever is the lesser), where the worker has returned to work for not less than 15 hours per week. If the worker has returned to work for less than 15 hours per week (or who has not returned to work), the worker is entitled during this period to receive compensation under the formulae (AWE x 80%) – (E + D) or MAX – (E + D) (whichever is the lesser). A partially incapacitated worker can receive payment after the 130-week period in circumstances where they apply to the insurer before the end of the second entitlement period for continuation of such payments, and have returned to work for a period of not less than 15 hours per week, and are in receipt of a minimum amount (currently weekly earnings of at least $183.00 per week, indexed annually), and are assessed as being, and as likely to continue indefinitely to be, incapable of undertaking further or additional employment or work that would increase the workers current weekly earnings. Under provisions of the Workers Compensation Amendment Act 2015, an injured worker with work capacity and more than 20% permanent impairment (that is, a worker with high needs) is no longer required to work for a minimum number of 15 hours and earn a minimum amount per week to be eligible to receive weekly payments of compensation after a period of 130 weeks during which weekly payments have been paid or payable. Explanation of terms: AWE

This refers to the worker’s pre-injury average weekly earnings.

D

This refers the deductible amount, which is the sum of the value of each non-pecuniary benefit (if any) provided by the employer to a worker for the benefit of the worker or a member of the family of the worker.

MAX

E

This means the maximum weekly compensation amount prescribed from time to time (currently $1,838.70 per week). This refers to the worker’s current weekly earnings post injury or the amount the worker is able to earn in suitable employment.

Entitlements cease after five years: Except in the case of an injured worker whose injury results in a permanent whole person impairment of more than 20%, a worker has no entitlement to weekly payments of compensation after an aggregate period of five years (260 weeks). Northern Territory

Total incapacity: For the first 26 weeks, a worker is entitled to receive the worker’s normal weekly earnings. After 26 weeks, the worker will receive an amount of money equivalent to 75% of their normal weekly earnings — subject to a cap of 150% of their average weekly earnings. This provision only affects very high income earners, and in such cases provides an incentive, for both the worker and the employer, to focus on return to work. Partial incapacity: In the first 26 weeks, if the worker has returned to work on limited hours, or is being paid a lesser rate of pay by reason of the worker’s injury, the worker will receive the difference between what the worker is earning at that time and their normal weekly earnings preinjury. After that time, if the worker is assessed as being partially incapacitated, then they will receive the difference between what they are now capable of earning and 75% of the worker’s pre-injury normal weekly earnings.

Queensland

For workers covered by an industrial instrument, for the first 26 weeks — a worker is entitled to receive the greater of 85% normal weekly earnings (NWE) or the amount payable under the industrial instrument. After 26 weeks and up to two years, a worker is entitled to receive the greater of 75% of NWE or 70% of Queensland ordinary time earnings (QOTE). From the end of the first two years of the incapacity until the end of the first five years of the incapacity, the worker is entitled to receive the greater of 75% of their NWE or 70% of QOTE, where the worker can demonstrate to the insurer that the injury could result in a work-related impairment (WRI) of more than 15%. Otherwise an amount equal to the single pension rate would be provided. For others not covered by an industrial instrument: For the first 26 weeks, a worker is entitled to receive 80% of QOTE or 85% NWE (whichever is the greater). After 26 weeks, and up to 104 weeks, the worker is entitled to the greater of 75% of NWE or 70% of QOTE. Explanation of term: NWE includes salary, regular overtime and any regular non-cash entitlements (eg higher duties allowances or penalties). It does not include one-off periods of overtime, travelling, car, relocation, education and other allowances not regularly paid. Employer superannuation contributions are also not included in calculating NWE. From the end of the first two years of the incapacity until the end of the first five years of the incapacity, the greater of 75% of the worker’s NWE or 70% of QOTE will be provided where the worker can demonstrate to the insurer that the injury could result in a work-related impairment (WRI) of more than 15%. Otherwise an amount equal to the single pension rate would be provided. Partial incapacity: In the case of partial incapacity, the worker’s entitlement is calculated using the following formula: PC (the weekly compensation payable for the injury on account of the partial incapacity) = MC (the maximum weekly compensation that would have been payable had total incapacity of the worker resulted from the injury) × LE (the worker’s weekly loss of earnings by reason of the injury

and is the difference between what the worker is actually earning or is able to be earned by the worker divided by NWE). (Note: PC cannot exceed MC.) Also note that there is no entitlement to compensation after the worker has received weekly payments for five years, or where the total of weekly compensation exceeds $200,000. South Australia

Non-seriously injured workers are entitled to: • 100% of notional weekly earnings* (NWE) from 0–52 weeks • 80% of NWE* from 53–104 weeks. Notional weekly earnings are capped at twice the state average weekly earnings. The Corporation can determine a weekly amount that a worker could be earning based on their capacity to perform work. This amount will be deducted from the NWE* after six months’ notice. Seriously injured workers are entitled to: • 100% NWE* from 0–52 weeks • 80% of NWE from 53 weeks to retirement age. Seriously injured workers are those with a whole person impairment assessment of 30% or more.

Tasmania

For the first 26 weeks of incapacity, the worker receives weekly payments at the rate of either their normal weekly earnings (NWE) or the ordinary time rate of pay of the worker for the work in which, and for the hours during which, they were engaged immediately before the period of the incapacity (whichever is the greater). If the worker is partially incapacitated, they will receive their normal rate of pay less the amount that they are earning or would be able to earn in suitable employment or business during that period. After 26 Weeks: After this period there are two “step downs” in weekly payments: (1) For periods in excess of 26 weeks, but up to and not exceeding 78 weeks, weekly payments are paid at 90% of the worker’s NWE. If the worker is able to return to some form of work, but if the worker’s employer is unwilling or unable to provide suitable alternative duties, then the worker will receive 95% of NWE. (2) If the worker’s incapacity exceeds 78 weeks, weekly payments are reduced to 80%. However, if the worker is able to return to some form of work, but their employer is unwilling or unable to provide suitable alternative duties, then the worker will receive 85% of NWE. These step downs will not apply if the worker is back at work for 50% or more of the worker’s normal weekly hours. If the worker is back at work for less than 50% of the worker’s normal working hours then the step down only applies to the difference between what the worker is earning for the duties the worker is performing and the worker’s NWE. There is also a safety net for low income earners — they must not receive less than 70% of the basic salary or 100% of their NWE, whichever is the lower amount. Maximum period of entitlement: There are limits placed on the period

for which a worker can receive weekly payments, depending on the assessed level of WPI, namely: • less than 15% WPI — nine years • between 15%–20% WPI — 12 years • between 20%–30% WPI — 20 years • 30% or more WPI — the worker is entitled to weekly payments until the worker reaches the age of 65. Victoria

Total incapacity: For injuries sustained on or after 5 April 2010, the worker receives 95% of the pre-injury average weekly earnings (PIAWE) for the number of hours they worked for the first 13 weeks, and up to a maximum of twice the state average weekly earnings (AWE) (currently in excess of $3,000 a week). Thereafter, from 14–130 weeks, the worker will receive 80% of their PIAWE and up to a maximum of twice the state AWE. Thereafter, 80% of their PIAWE to a maximum of twice the state AWE will be paid. If they still cannot work, and this is not likely to change, payments may continue until retirement age, unless there is a change in the worker’s capacity. Partial incapacity: If the worker has returned to work during the first 13 weeks (other than to their normal duties) and is still suffering a partial incapacity, the worker will receive 95% of the PIAWE up to a maximum of twice the state AWE, less what they are currently earning a week. If the worker has not yet returned to work, 95% of the worker’s PIAWE to a maximum of twice the state AWE will be provided. From 14–130 weeks, if the worker has returned to work, the worker will receive 80% of the PIAWE, to a maximum of twice the state AWE, less 80% of what the worker is currently earning a week. If the worker has not returned to work, the worker will receive 80% of the PIAWE, to a maximum of twice the state AWE. After 130 weeks, payments will cease unless the worker has returned to work and is working at least 15 hours a week and earning $172.00 or more a week; and because of the worker’s injuries, the worker is likely to remain physically or mentally incapable of working beyond this level in any job. In such cases, the worker will receive 80% of the workers PIAWE, to a maximum of twice the state AWE, less 80% of what the worker is currently earning a week.

Western Australia

For those workers whose earnings are covered by an industrial award, for the first 13 weeks they will be paid their weekly award rates plus over award or other regular payments, including overtime, bonuses or allowances. From 14 weeks, overtime, bonuses and allowances are excluded from this amount. For those workers whose earnings are not covered by an industrial award, for the first 13 weeks they will receive their average weekly payments averaged over the preceding 12 months, including overtime, allowances and bonuses and, after 13 weeks, 85% of their average weekly payments. The maximum weekly amount receivable is capped at twice the rate of AWE (calculated by the ABS). A limit also applies to the amount of compensation that a worker can receive in total for the life of the claim in terms of weekly payments for loss of earnings. This is called the prescribed amount. In certain circumstances this prescribed amount can be increased by an arbitrator under s 217 of the Workers Compensation

and Injury Management Act 1981 (WA). Where the arbitrator considers that an injury to a worker has resulted in the permanent total incapacity for work of the worker, and the payments to the worker have reached the prescribed amount, the arbitrator may make an order increasing the total liability of the employer that is thought proper in the circumstances — having regard to the social and financial circumstances and the reasonable financial needs of the worker. The total liability ordered under this provision cannot exceed an amount equal to 75% of the prescribed amount or weekly payments — extended for the period of the worker’s life expectancy, or up to the date when weekly payments would cease by reason of age (whichever is the lesser amount). For those who are partially incapacitated from their pre-injury employment, they will receive the difference between the amounts above and what they are earning or able to earn in suitable employment or business, having regard to their ongoing incapacity.

¶59-050 Workers compensation — common law rights Workers compensation and rights to sue at common law for damages are distinctly different things. For common law damages claims to be a success, they generally require the proving of employer negligence or that of the employer’s servants and/or agents. In the past, if this was proven, a worker would be entitled to damages for pain and suffering and the loss of the amenities of life (General Damages), past loss of earnings, out of pocket expenses (including medical expenses), damages for loss of future earning capacity, and damages for future medical care expenses, where applicable. From that award of damages, the defended employer or the employer’s workers compensation insurer would be entitled to a deduction from the awarded sum for monies paid to or on behalf of the worker, including weekly payments of compensation and medical expenses. The right to sue for damages at common law has now been severely restricted. For example, in New South Wales, the injured worker must have at least 15% permanent impairment. Court proceedings can only be started at least six months after the injury is reported to the employer and must start within three years of the date of injury. The worker must have received all statutory lump sum entitlements for permanent impairment to which they are entitled before a claim can be settled. A work injury damages settlement cancels all further entitlements to workers compensation benefits including weekly payments, medical, hospital and rehabilitation expenses in respect of that injury. The amount of weekly compensation that has already been paid to the worker must be repaid out of the settlement amount agreed or awarded. The amount of damages can also be reduced if the worker’s own negligence contributed to the injury. It is common for work injury damages matters to settle “inclusive of costs”. This means that if a worker enters into an individual costs agreement with their solicitor, then these legal costs are deducted from the worker’s settlement amount.

¶59-060 Lodging claims for workers compensation Claims procedures vary between the states and territories, but generally require that: • the worker notifies the employer as soon as possible after suffering an injury or detecting an illness • the worker sees an accredited medical practitioner • the medical practitioner completes a workers compensation medical certificate in an approved format • (in the case of a serious injury or accident) the employer notifies the local OHS/WHS agency and insurer as soon as practicable (usually 48 hours) (“Serious injury” includes: one needing medical treatment within 48 hours of being exposed to a substance; the need for hospitalisation as an inpatient; amputation; serious head or eye injury; separation of skin from underlying tissue; electric

shock; spinal injury or a serious laceration.) • the insurer is notified of a minor claim, even though the employer is usually fully liable for the associated costs • the worker completes a prescribed claim form and submits it with a medical certificate and supporting documentation to the employer (after retaining copies) • the employer accepts and acknowledges the worker’s claim in writing • the employer sends the claim form, medical certificate and attached documents to the insurer, who assesses the claim • the insurer notifies the employer if liability for the claim is accepted (If it is accepted, the employer is required to make payments to the worker up to the amount of the excess specified in the insurance policy.) • the insurer continues payment from the “excess threshold” for wages and medical costs, and may be liable to pay compensation for specific permanent injury or disease • the insurer, at its own expense, requires the worker to attend medical examinations • the insurer advises the worker, within a specified time limit, whether the claim is to be refused • the employee has the right to have their case refusal considered by a conciliation tribunal in some jurisdictions, and • once the insurer has accepted the claim, the worker receives appropriate financial compensation and, when the worker is fit to do so, they enter into an appropriate rehabilitation program leading to a return to work (if necessary, in stages).

¶59-070 Return to work/rehabilitation Of increasing importance is the emphasis given in modern workers compensation schemes to the rehabilitation of injured workers and the development of strategies to assist them to return to work. In two jurisdictions (South Australia and the Northern Territory), the principal Act has been renamed the “Return to Work Act”. In some jurisdictions, compensation will extend to the modification of injured or ill workers’ homes or motor vehicles to accommodate a disability. The aim of the return to work/rehabilitation provisions in legislation is to provide for the safe and durable return to work of the injured worker as early as possible with regard to the worker’s injury. An injured worker’s return to work involves the employer and the injured worker and, depending on the legislation in each jurisdiction and the severity of the injury, may also involve workplace rehabilitation coordinators, workplace rehabilitation providers, medical and other health professionals and the insurer. In some jurisdictions, workers compensation authorities operate injured worker placement incentive schemes to encourage employers to employ workers who have had an injury and are not able to return to work with their pre-injury employer. A successful return to work is usually the result of four main factors: early intervention, an effective workplace-based rehabilitation program, effective claims management and cooperation, collaboration and consultation between stakeholders. To ensure rehabilitation and return to work is achieved effectively, a workplace should develop a returnto-work policy. The policy should: • outline the employer’s commitment • designate appropriate resources for the process, and

• set out procedures to be observed. Rehabilitation should be undertaken safely without risk of causing further injury or illness. The process must be tailored to the needs of the affected worker and may involve them initially returning to work on shorter hours or on lighter duties. Thus, in considering their workers compensation responsibilities, managers must understand that these statutory requirements are inextricably linked to proactive, preventative OHS/WHS policies. Appropriate rehabilitation responsibilities may also arise following a workplace injury or work-related illness. Safe Work Australia’s 2015 report, Comparative Performance Monitoring Report: Comparison of work health and safety and workers’ compensation schemes in Australia and New Zealand, 17th edition, reported that the 2013–14 Current Return to Work rate was 77%. This is the same as in 2012–13. South Australia recorded the same Current Return to Work rate as in the previous year, while New South Wales, Victoria and Tasmania recorded decreases and the rest of the jurisdictions recorded increases. Rehabilitation All Australian governments have incorporated into their legislation a requirement to rehabilitate workers following occupational illness or injury. While details of these requirements may vary, all recognise that the employer needs to make some effort to assist employees to return to their previous work, or to find other work for which they are suitable following injury or illness. This includes developing an individual action plan that is supported by an organisation-wide policy and program. Effective rehabilitation reduces the cost and improves the efficiency of the workers compensation system for employers and employees. Often, the greatest financial cost of a major work-related injury or illness is the incapacity payment. This is the salary replacement for the employee not able to return to work. An efficient scheme of occupational rehabilitation will minimise the worker’s absence from work and, thus, reduce costs in both human and economic terms. It is useful to reflect on the psychological predisposition of the worker. No one enjoys being sick or being off work through an injury. Until the last two decades, however, workers suffering major injuries (in particular) were given no systematic encouragement to make an early return to work. Greater emphasis is now given to developing better rehabilitation regimes with the objective of assisting workers back to the full-time workforce as quickly as possible. Additionally, an increased focus on rehabilitation will tend to raise greater concern for the prevention of injury or illness. In some legislative frameworks, there is an explicit recognition of the close connection between preventing work-related injury and illness, and reducing the need for, and the cost of, rehabilitation. It seems very likely that there will follow a greater use of “experience rating” in workers compensation insurance. A form of “user pays” approach will result in employers with poor OHS/WHS records paying higher compensation premiums. Reducing costs Positive rehabilitation systems also save costs to employers by reducing the loss of a skilled employee from work. Such savings can reduce the costs of: • lost business • advertising for and recruiting replacement employees with suitable skills, and • training replacement employees in workplace procedures. The benefits of successful rehabilitation can include: • increased employee loyalty • a reduction in disruption to work • more willing compliance with legal requirements • lower absenteeism and downtime caused by injury or illness

• reduction in employee replacement costs • fewer long-lasting compensation claims • a better industrial relations climate • enhanced morale and an increased confidence in the organisation’s competence • gains from the worker’s return to full productivity through successful and speedy rehabilitation, and • eventual reduced compensation costs. Claims management The establishment of OHS/WHS plans, efficient processing of workers compensation claims, and provision of an efficient rehabilitation program are inextricably linked if positive human resources policies are to be pursued. Efficient claims processing and management are the final requirements. When an employee lodges a claim for compensation for a workplace-related injury or illness, the claim is processed by the employer, the employer’s insurer or by a government authority. If the claim is accepted, the insurer will cover the costs of the worker’s wage or salary while they are off work, applicable medical and related expenses, and the cost of rehabilitation. Compensation claims management and the occupational rehabilitation program must, therefore, be seen as linked, and the claims manager and rehabilitation provider should work closely together on this basis. The claims manager must be aware of the purpose and the progress of the return-to-work endeavours. The rehabilitation coordinator needs to comprehend all the compensation issues directly impacting on the employee’s wage or salary arrangements and the incentives for a return to work. An employee’s entitlement to compensation benefits may be jeopardised if the employee unreasonably refuses to cooperate in the rehabilitation program. Close personal liaison between these parties, including the exchange of written reports and other documents, is highly recommended. Responsibilities Workers compensation schemes impose legal obligations on employers, workers, the body that administers the compensation scheme, insurers and self-insuring employers. Most of the responsibilities that fall to each are obligations to provide information, including exchanging information with other state and territory schemes. Workers, for example, are required to report injuries promptly to their employer and to make a claim for compensation within six months of their injury. There are exceptions to this requirement involving serious occupational diseases such as mesothelioma, which have long latency periods of up to 40 years. Workers are usually also required to disclose pre-existing disabilities and/or illnesses at the point of employment. Failure to do so may mean losing rights to further compensation in relation to aggravation of undisclosed pre-existing conditions. Workers must act honestly when making a claim. Misleading or fraudulent claims carry heavy penalties. Employer responsibilities are more far-reaching. They are, after all, in charge of the workplace and can, therefore, control the OHS/WHS environment and values of the organisation. Copies of the relevant workers compensation and OHS/WHS legislation must be available and, in some jurisdictions, displayed in the workplace. Comprehensive time and wages records required by other industrial legislation must also be maintained for potential workers compensation purposes for the preceding seven years. To do so will, among other things, enable the employer to provide comparable earnings to injured workers and enable their AWE to be readily calculated. When (or if) an employer receives a workers compensation claim, it cannot be refused. If a worker is injured, the employer must notify the insurer swiftly (in most jurisdictions — within 48 hours) of the injury taking place if the injury seems “significant”. A significant injury is one that is likely to result in the worker being unfit for duty for more than seven days. Lesser injuries must still be reported to the insurer, but usually that notification period is within seven days.

Claim forms completed by the injured worker must be forwarded expeditiously (usually within seven days) to the insurer. Employers are generally required to disclose the name of their insurer on request and to provide their workers with information relating to their rights and the making of claims. As mentioned, when a new employee commences work, it is advisable for the employer to seek information from them about any pre-existing disabilities, illnesses or conditions that might have an impact on potential workers compensation claims. Care should be exercised when seeking this information that the employer is not transgressing anti-discrimination/equal opportunity legislation, which forbids discrimination on the basis of disability. Injury management plan Some schemes require an injury management plan to be established for the worker that requires the active cooperation of the employer. This plan will usually include information on enabling a worker to return to work on selected or lighter duties, where applicable. This will involve planning to provide suitable employment for the injured worker as far as it is reasonably practicable to do so. The employment to be provided must be both suitable and the same as, or equivalent to, that which the worker was engaged in at the time of the injury. If an employer is not able to provide suitable employment when requested by an injured worker, either at all or immediately, this contention must also be reported to the insurer. For injury management purposes, the employer must display a return-to-work program in the workplace or, in the case of a smaller employer, make it available to any workers who wish to view it and to workers who are injured. Enforcement The workers compensation authorities all employ inspectors to police not only OHS/WHS, but also accidents and the basic requirements of their particular workers compensation scheme. They have various powers, which can include the right to demand and inspect a variety of documents, and to bring charges and commence proceedings against employers they suspect are transgressing any part of the workers compensation legislation. Dispute resolution Disputed claims by workers are argued out between the representatives of the worker and the representatives of the insurer. If a compensation claim is disputed, in most jurisdictions some form of conciliation is compulsory before formal legal proceedings can take place. Even where this does not occur as a matter of course, the appropriate tribunal may order that conciliation is first attempted. Each of the workers compensation schemes also allow medical questions to be referred, and most schemes have established medical panels for this purpose. Safe Work Australia’s 2015 report, Comparative Performance Monitoring Report: Comparison of work health and safety and workers’ compensation schemes in Australia and New Zealand, 17th edition, reported that the rate of disputation on claims decreased to 5.4% of all claims lodged in 2013–14, compared to 6.6% in 2012–13. The percentage of disputes resolved within one month increased (up 7%) while the percentage of disputes resolved within three, six and nine months decreased between 2009–10 and 2013–14. Return-to-work and rehabilitation strategies A return-to-work program consists of the formal policy an organisation must have to assist injured workers to recover and return to the workplace. It outlines the employer’s commitment to assist injured workers to access necessary treatment and rehabilitation, and specifies the steps to be taken to achieve a safe, timely and durable return to work. The rehabilitation and return-to-work functions are closely linked to workers compensation. When a worker lodges a claim, it is processed by either the employer, the employer’s insurer or by the appropriate government authority. When accepted, the insurer will meet the costs of the worker’s salary during their time off work, the medical expenses and the cost of rehabilitating the worker. As mentioned earlier, it is essential that workers compensation claims management and the occupational rehabilitation function are linked by means of the insurer or claims manager liaising closely with the rehabilitation provider or coordinator. The claims manager must be aware of the purpose and progress of return-to-work activities. Similarly, the

rehabilitation coordinator needs to understand the compensation issues that directly impact on the employee’s salary arrangements and return-to-work incentives. The employee’s entitlement to compensation benefits may be jeopardised if the employee unreasonably refuses to cooperate in a rehabilitation program. Therefore, there needs to be ongoing personal contact and exchange of written progress reports between the parties responsible for the two processes. A satisfactory return-to-work program: • ensures expeditious return to work • ensures early and easy access to rehabilitation providers • provides suitable duties • consults with the worker’s doctor about the return to work • ensures that the return-to-work program is smooth and effective • provides an injury management plan for a worker with a significant injury • informs workers of the right to choose their rehabilitation provider • provides access to interpreter services, where needed • ensures workers are not dismissed because of their injury, and • advises workers that refusing to cooperate with their injury management plan may result in the suspension of their weekly benefits.

¶59-080 Preventative OHS/WHS — a managerial responsibility Workers compensation schemes continue to be costly because insufficient attention is given to the implementation, maintenance and enforcement of preventative OHS/WHS systems in the workplace. To minimise costs, it is essential that all employers develop clear OHS/WHS policies that suit their unique circumstances. These policies should state the employer’s commitment to a positive OHS/WHS program, ensuring and emphasising managerial accountability. The policies should also be clearly communicated to, and understood by, all employees as each employee also has a responsibility to follow safe working practices. Ideally, policies should be developed with involvement from employees and/or a workplace health and safety committee. Policies should provide for: • the identification and listing of hazards (eg for manual handling) • involve continuing employee consultation • give an outline of safe methods of work • outline clearly supervisory and managerial responsibilities, and • commit to a timetable for implementation. It is crucial that managers understand that they are responsible for ensuring these policies and programs are effectively implemented in their areas of control, and for supporting their supervisory staff and holding them accountable for their specific areas of OHS/WHS responsibility. Failure to comply fully with the legislation appropriate to a business carries heavy non-compliance penalties. Employers should ensure they understand their legislative responsibilities. Psychological injury Proper concern for safety in the workplace should not be confined to the prevention of physical injury or organic disease. Psychological injury, whether caused by bullying in the workplace (see Chapter ¶50) or

other inappropriate workplace practices, is a matter of increasing concern and requires management to critically evaluate the workplace culture to eliminate (insofar as it is practical to do so) stress-related psychological conditions. Statutory threshold requirements for psychological injuries vary significantly from physical injuries. To be eligible for compensation, the claimant of a psychological injury must be able to demonstrate that the injury was not related to any reasonable action taken by their employer in relation to a dismissal, retrenchment, transfer, performance appraisal, demotion, disciplinary action or deployment. In addition to these criteria, the claimant must also meet the designated impairment threshold for psychological injury. There are also significant differences in the way in which each jurisdiction assesses psychological impairment.

¶59-090 Costs of poor health and safety practices — overt and covert The price of poor OHS/WHS practice that results in workplace injury or illness is heavy enough — even when only the most obvious costs (ie insurance against injury and property costs) are considered. Injury costs can include: • compensation for lost earnings • medical and hospital costs • awards for permanent disabilities • rehabilitation costs • funeral charges (in cases involving deaths), and • pensions for dependants. Property damage can result in: • increased premiums for fire, loss and damage, and • loss of occupancy and public liability. There are, however, many other costs that are not covered by workers compensation policies, but which have a severe impact on any business. These include: • Injuries: – first aid expenses – transportation costs – investigation costs – costs of preparing and processing reports. • Wage losses: – idle time of workers whose output is interrupted – employees’ time clearing the accident area – time spent repairing damaged equipment – time lost by other workers receiving first aid. • Production losses:

– product spoilt by the accident – loss of a skilled/experienced/trained employee – lower productivity of replacement workers – idle machine time. • Consequent costs: – any gap between loss and amount recovered – replacement of workers – loss of skill/experience – training of replacement workers and reduced productivity – wages and benefits paid to disabled workers – rental of replacement machinery – overhead costs while production is interrupted – possible forfeiture of contracts through delay. • Intangibles: – lowered employee morale – potential for labour conflict – unfavourable public relations – loss of goodwill. There is an overwhelming business case for having a proactive OHS/WHS policy. Positive attitudes, an understanding of employer responsibilities, hazard identification and compliance with the OHS/WHS legislation will all help businesses to reduce workers compensation premiums. This will simultaneously result in financial savings on premiums and improve productivity. Such an approach will also assist in the avoidance of the less obvious costs of workplace injury or illness mentioned before.

¶59-100 Workers compensation — due diligence In simple terms, due diligence means “taking care”. In the workplace, it means managers taking every reasonable precaution to protect the health, safety and welfare of the workers for whom they are responsible. Importantly, due diligence should be a powerful and systematic tool to ensure identification and assessment of workplace safety hazards and the establishment of preventative policies and procedures. Evidence of due diligence is usually a good defence for managers charged with offences under the prevailing OHS/WHS legislation. Whether a manager can be deemed to have acted diligently depends on whether they took every reasonable precaution in the circumstances of the particular case. Because each workplace is unique, more detailed advice should be sought from the OHS/WHS or workers compensation body in the applicable state or territory.

¶59-110 Prevention is better than cure The high cost of penalties

OHS and workers compensation authorities are generally adopting more vigorous prosecution policies as a strategy to reign in the human cost of poor OHS/WHS management. Under the provisions of the Work Health and Safety Act 2011 (Cth) the fines for non-compliance can be substantial, and individuals found responsible can be sentenced to a term (or terms) of imprisonment for the most serious offences. By way of example, s 31 provides that — if a person or body has a health and safety duty, and 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 illness or injury or illness, and the person is reckless as to the risk to the individual of death or serious injury or illness, that person (if an individual (other than a person conducting a business or undertaking (PCBU) as an officer of a PCBU)) can receive the maximum penalty of $300,000 or five years imprisonment or both. If the person is conducting a business or undertaking, or is an officer of a PCBU, the person can be liable to a fine of $600,000 or five years imprisonment or both. If the offences are committed by a corporation, the maximum penalty is a fine of $3m. In the past, fines of $100,000 or more were quite common, and in some cases exceeded $200,000 (in one instance — $730,000). Safety management plans The most effective means by which employers can avoid these human and economic costs is to have an up-to-date safety management plan. Assistance in establishing a plan for any industry or enterprise can be obtained from the workers compensation body in the applicable state or territory. The best plans will involve: • a proactive, ongoing commitment to hazard identification, reduction and/or control • the identification of safety-critical activities • taking the initiative before accidents occur, and • constantly monitoring and improving management practices.

¶59-120 Hazard and injury prevention The key — good health and safety policies The key to reduced workers compensation costs for employers is having good OHS/WHS policies. The key to achieving good OHS/WHS is maintaining a proactive, preventative approach. Hazard identification, assessment and control are vital to such planning. The following checklist (Table 59.4) is a useful tool for employers wishing to obtain high quality OHS/WHS and at the same time reduce workers compensation premiums. Table 59.4: Example OHS/WHS checklist of requirements Checklist Is there a system in place for identifying, reporting and responding to hazards or potential hazards at work? Does the employer take corrective action when hazards are reported? Are all the potential and actual hazards identified and communicated to the employees? Do members of the health and safety committee conduct regular workplace inspections? Do managers and employees monitor their work areas and equipment on an ongoing basis to identify and correct hazardous situations? Are there written procedures for different types of inspections (eg production equipment or vehicles)?

Yes

No

Do the written procedures have specific checklists for reporting hazards? Is the manager actively involved in all aspects of audits, inspections and other means of hazard identification so that a system is in place to address all actual or potential hazards? Is there an assessment procedure for hazards that is based on degree of risk, probability of occurrence, number of persons exposed and duration of exposure? Are high risk activities (eg confined space entry or working with electricity) identified and safe procedures put in place? Are the assessment criteria taken into account when determining priorities for action? Are appropriate control mechanisms (eg engineering controls, work practices, hygiene practices and procedures, personal protective equipment (PPE), emergency plans) in place and maintained? Are standards set for each hazard control element? Do these standards take the applicable regulations, standards, codes, manufacturing specifications and so on, into account? The Model Work Health and Safety Regulations provide a systematic approach to dealing with hazards, based on the “hierarchy of control”. The provision, which has been adopted by all those jurisdictions which have enacted the Model Work Health and Safety Laws, is as follows: “Hierarchy of control measures (1) This regulation applies if it is not reasonably practicable for a duty holder to eliminate risks to health and safety. (2) A duty holder, in minimising risks to health and safety, must implement risk control measures in accordance with this regulation. (3) The duty holder must minimise risks, so far as is reasonably practicable, by doing 1 or more of the following: (a) substituting (wholly or partly) the hazard giving rise to the risk with something that gives rise to a lesser risk; (b) isolating the hazard from any person exposed to it; (c) implementing engineering controls. (4) If a risk then remains, the duty holder must minimise the remaining risk, so far as is reasonably practicable, by implementing administrative controls. (5) If a risk then remains, the duty holder must minimise the remaining risk, so far as is reasonably practicable, by ensuring the provision and use of suitable personal protective equipment. Note A combination of the controls set out in this regulation may be used to minimise risks, so far as is reasonably practicable, if a single control is not sufficient for the purpose.”

¶59-130 Conclusion — reducing workers compensation costs Can workers compensation costs be reduced? There is still an unacceptably high level of injury and disease in the workplace. A premature death (however well compensated) is not only an economic loss to society, but more importantly, it is a major personal tragedy for the family of the deceased, friends and workmates. In addition to deaths, thousands

of workers are injured, severely or otherwise, or are made ill or permanently disabled every year. However, welcome progress has been made. Safe Work Australia’s Comparative Performance Monitoring Report: Comparison of work health and safety and workers’ compensation schemes in Australia and New Zealand, 17th edition, reported that the reduction in the incidence rate of serious claims between the base period (2009–10 to 2011–12) and 2013–14 was 20%. This decrease was more than three times the interim rate of 6% improvement required to meet the target of a 30% reduction in the incidence rate of serious claims by 30 June 2022. There was a 20% decrease in the national rate of Musculoskeletal claims between the base period (2009–10 to 2011–12) and 2013–14; more than three times the interim rate of 6% improvement required to meet the target of a 30% reduction in the incidence rate of Musculoskeletal claims by 30 June 2022. The number of traumatic injury fatalities continued to fall against a backdrop of increasing employment. This resulted in a 24% improvement in the incidence of traumatic injury fatalities from the base period (2007 to 2010) to 2014; six times greater than the required improvement of 4% reduction in 2014. This result is even greater than the national target of 20% improvement by 30 June 2022. However, the volatility in this measure means that consistent improvement is still required to ensure the target is achieved. Body stressing continued to be the mechanism of injury/disease that accounted for the greatest proportion of claims (41%) although the number of claims due to this mechanism has decreased by 17% since 2009–10. The highest incidence rate of serious injury and disease claims was recorded in the Agriculture, forestry & fishing industry and Transport, postal & warehousing industry (17.4 serious claims per 1,000 employees) followed by Manufacturing (15.0), Construction (14.7) and the Health care & social services industry (12.5). In 2012, the following broad industry groups were identified as national priorities for prevention activities due to their high numbers and rates of injury and/or fatalities, or because they were by their nature hazardous: • agriculture • road transport • manufacturing • construction • accommodation and food services • public administration and safety, and • health care and social assistance. Workers compensation costs are indivisibly connected to the level of commitment to OHS/WHS from both the employer and employee. Only when good OHS/WHS practices and a determination to provide high quality return-to-work and rehabilitation strategies are linked, will there be a sustained reduction in the economic costs of workers compensation and the social and human costs of workplace injuries. References and further reading Access Economics 2011, Draft Consultation Regulation Impact Statement for National Harmonisation of Work Health and Safety Regulations and Codes of Practice, 10 January (may be obtained from Safe Work Australia: www.safeworkaustralia.gov.au). Safe Work Australia accessed 2013, “Establishment of Safe Work Australia”, see www.safeworkaustralia.gov.au/sites/swa/about/pages/about. Safe Work Australia 2012, The Australian Work Health and Safety Strategy 2012–2022, October, see www.safeworkaustralia.gov.au/sites/SWA/about/Publications/Documents/719/Australian-WHS-Strategy-

2012-2022.pdf. WorkCover New South Wales Safe Work Australia 2015, Comparative Performance Monitoring Report: Comparison of work health and safety and workers’ compensation schemes in Australia and New Zealand, 17th edition, October, Canberra, see www.safeworkaustralia.gov.au/sites/SWA/about/Publications/Documents/941/cpm-17-edition.pdf. WorkCover Authority of NSW 2014, WorkCover Annual Report 2013/14, November, see www.opengov.nsw.gov.au/publications/14720. —— 2014, Cross Border Arrangements, web content, November 2014, see www.workcover.nsw.gov.au/insurance/workers-compensation-insurance-for-your-business/who-toinsure/cross-border-arrangements. Safe Work Australia 2015, Comparison of Workers’ Compensation Arrangements in Australia and New Zealand, August, Canberra. (Note: This publication provides a detailed comparison between the various compensation schemes in Australia and New Zealand as at July 2015. However, it is important to cross check the information provided with the various responsible agencies as changes have occurred since that time.) Further useful information may be obtained from the following websites: Agency

Website

Safe Work Australia

www.safeworkaustralia.gov.au

WorkSafe ACT

www.worksafe.act.gov.au

WorkCover NSW

www.workcover.nsw.gov.au

NT WorkSafe

www.worksafe.nt.gov.au

WorkCover Queensland

www.workcoverqld.com.au

ReturnToWorkSA

www.rtwsa.com

WorkCover Tasmania

www.workcover.tas.gov.au

WorkSafe Victoria

www.workcover.vic.gov.au

WorkCover WA

www.workcover.wa.gov.au

60. WORKPLACE COUNSELLING AND EMPLOYEE ASSISTANCE PROGRAMS Editorial information

Andrew Heys Lecturer, Macquarie Graduate School of Management

This chapter is drawn from research undertaken in the author’s capacity as a staff member of Macquarie Graduate School of Management.

¶60-010 Introduction What is counselling? Counselling may be thought of as a therapeutic problem-solving process — usually used to address a wide range of personal, emotional or psychological problems. Effective counselling involves the counsellor creating a safe and confidential environment and using empathy, displaying an active style of listening, and employing problem-solving skills to help the “client” better understand and work through their problem(s) and find lasting solutions. Counselling is not generally thought of as a process where the counsellor directs the other party by making suggestions or offering advice on how to “fix things”. Rather, counselling involves a skilled person (usually with some distance from, or perspective on, the problem) helping someone in a non-directive way to come up with a solution or a plan to resolve their problem, or to relieve some of the symptoms and causes of their distress. Most people have an intuitive sense of what counselling is and, in all likelihood, at some stage everyone is likely to have been called on to offer a “lay” form of counselling for a family member, friend or colleague experiencing psychological or emotional problems. In more formal terms, counselling can be difficult to define. The British Association of Counselling estimates there are at least 400 approaches to counselling practised by social and professional groups ranging from members of the clergy, through to psychologists and doctors. The practice of counselling has led to conjecture within the academic literature regarding its use and misuse. However, these arguments mostly centre on the historical differences between the psychodynamic approach to counselling inspired by the work of Sigmund Freud, and that of the more modern person-centred humanist movement developed by its leading member, Carl Rogers. This chapter draws out some of the most important issues for managers to consider when offering formal or informal counselling to employees. Many workplaces offer their employees a free and confidential counselling service. This service is usually provided by external psychologists through what is termed an Employee Assistance Program (EAP). From time to time, managers may do some counselling themselves. Other problems, that become more manifest and lead to a significant decline in work performance, may best be handled by a professional counsellor. However, most managers would benefit from learning and using some of the methods and

techniques commonly used by professional counsellors. For managers, a drop in an employee’s performance, or some other behaviour considered to be “out of character” for the employee, usually becomes the “entry point” or catalyst for workplace-related counselling to begin. The process of counselling is often about unearthing and resolving a personal problem and — in the process — restoring the person’s work performance through practical strategies. These strategies might include allowing the person more flexibility at work so that they may deal with their personal issues. While counsellors employ a range of approaches and techniques in their work, it is not critical to discuss these approaches in any depth here. However, it is important to draw some broad distinctions around terminology. At this early stage, three key terms are important to define: (1) therapy (2) psychotherapy, and (3) psychiatry. Some professional counsellors will refer to what they do as “therapy”. Therapy can be defined as an activity aimed at healing or remedying a condition or state of mind. Therapy may mean a range of things to different people and, as stated earlier, therapists may use a variety of disciplines and techniques (eg gestalt therapy or the family “systems” approach). Another approach is a practice known as psychotherapy. Psychotherapy is different to counselling in that therapists use it when they are working with clients on deeper psychological issues or problems, as opposed to short-term or transitory life-change issues. Psychotherapy may, for example, be used by a therapist in helping a client cope with feelings of abandonment associated with parental divorce or with issues associated with some form of abuse suffered earlier in life. A medical analogy is perhaps appropriate here in that psychotherapy is used to address more chronic (long term), as opposed to acute (short term), psychological problems. Psychotherapy may involve the use of techniques such as hypnosis. Saltman (1996, p 208) defines it as a “talking cure, usually involving some form of ongoing counselling”. Finally, it is important to note that counselling and psychiatry are also quite different. While psychiatrists are likely to use a range of similar communication and therapeutic skills as counsellors, they are normally involved in the treatment of more serious mental illnesses (eg schizophrenia). Psychiatrists also differ in that they will use pharmacological approaches to help alleviate medical conditions, such as clinical depression and the like, while a counsellor is normally not qualified to prescribe medication (ie unless they are also a medical doctor). From a practical point of view, a psychiatrist’s treatment is regarded as medical and hence, a psychiatrist’s fees may be claimable on Medicare, while a psychologist’s or counsellor’s fees may not be. As Saltman (1996) noted, there are certain mental health problems that cannot be easily dealt with in a community setting, and where hospital care is the only solution. For example, if someone is feeling suicidal and wants to take their own life, it is important that the person is cared for until these feelings are diminished so that the person is no longer a high risk. Similarly, if a person behaves dangerously towards other people in the community (or threatens to do so), they may also need special help in a mental hospital. A psychiatrist or a general practitioner can help make these sorts of decisions (Saltman 1996, p 4).

¶60-020 Objectives of workplace counselling Workplace counselling may or may not be related to problems that stem from the work environment. However, the intention in workplace counselling is clearly related to ensuring that employees are psychologically fit for work, contributing effectively and performing in their job to an optimal level. Workplace counselling recognises that the workplace can be a stressful environment which can place pressure on personal relationships and negatively affect an employee’s quality of life. Counselling to help employees manage this stress offers a cost-effective and immediate response to life problems that impact on work. Counselling can also be a valuable response to individual issues that can have a negative effect

on the dynamics of a team. Managers themselves are often well-placed to provide some initial counselling to employees, in part because they are aware of current work pressures and dynamics, including past conflicts in the work environment, problems and employee divisions. Unlike external counsellors, a manager mostly likely does not require a biography of the person, nor will they need to spend time understanding the history of the client’s workplace. Counselling can have other positive flow-on effects and may also help to build greater communication within teams, or between managers and their reports, and also fosters greater trust. In cases of employee conflict, a manager may have some understanding of the situation and be able to offer some counselling intervention by way of assisting an employee to consider a range of options to help manage or resolve the situation. A British writer on the subject, Nigel MacLennan, is a strong advocate for workplace counselling to be conducted principally by managers. He argues that: “successful commercial leaders with their superior persuasion skills probably make better counsellors than those merely counselling for a living … and that it (counselling) will serve as a useful tool throughout commercial and personal life” (MacLennan 1996, p 12). Nicola Phillips is a little less emphatic and compares the qualities that “belong to a good counsellor to those apparent in a good manager” (Phillips 1995, p 17). In an environment where a line manager is expected to juggle myriad human resources (HR) responsibilities and pressures, it can be difficult to maintain empathy for problems that, on the surface, may appear trivial or beyond the scope of work. One can assume that there is often a temptation to respond to some complaints or behaviour with a “get over it” attitude. However, some odd behaviours or superficial complaints, on deeper investigation, may reveal a serious personal problem, or even point to systemic issues in the organisation or the team. Good people managers already possess many of the skills and qualities of a proficient counsellor, such as trustworthiness, referral abilities and communication skills. Of course, there are many situations where it is less appropriate for managers to act as counsellors and, while managers may be appropriate “sounding boards” (someone to listen to a problem in a non-judgmental way), they should definitely know their limits in terms of the types of problems being addressed. Where an issue is beyond the manager’s level of comfort, they should use their judgment to refer employees to a professional counsellor or psychologist. This point cannot be emphasised enough. There are clearly a variety of issues and cases where a professional counsellor, psychologist, therapist or even psychiatrist is the best person to deal with a problem, and a manager should keep these limits firmly in mind when approaching a personal issue with an employee that appears to require counselling.

¶60-030 Problems that may require counselling There are a variety of reasons why an employee may ask for counselling and issues that may be appropriately managed through counselling. Some of these are listed below: • Personal or relationship problems: These occur outside of the workplace and include relationship or marital breakdown, drug or alcohol abuse, gambling problems, financial difficulties, grief, or a range of other personal problems or traumas that impact on a person’s psychological or physical wellbeing. • Professional issues: Issues include dissatisfaction, boredom, mid-career crisis, performance decline, anxiety about work or interpersonal conflict at work. • Coping with physical, behavioural or personality problems that manifest at work: This is particularly important where problems affect workplace relationships. Problems may include an inability to control anger, irritability, loneliness or withdrawal behaviour, poor communication with colleagues, violence or an inability to manage anxiety or stress. Another area where counselling may be required is during an injured worker’s rehabilitation and even following their return to work. In such cases, an employee may be struggling to cope with light duties or may simply need some support to re-establish productive working relationships with their colleagues. • Episodes of high stress (or critical incidents): These may include incidents where an employee has been exposed to something “out of the ordinary” to their normal workplace experience. An example

might be where the employee is the victim of, or is a witness to, violence at work (eg a bank hold-up or the death or disablement of a work colleague on a building site). To help manage the casualty rate from “critical incidents”, many high-risk workplaces and professions (eg banks or law enforcement agencies) provide critical incident debriefing immediately following a highly stressful or disturbing event. These incidents are the type of events that may precede post-traumatic stress disorder, a syndrome that can be permanently disabling. Counselling may also occur in response to a stressful incident at work (eg harassment, bullying or discrimination regarding race, gender, ethnicity or sexual preference). Some of these problems will be obvious to a manager. A police officer (for example) who was exposed to the death of a colleague in the line of duty would automatically be offered counselling to help cope with the stress and grief. Similarly, train drivers exposed to members of the public committing suicide would automatically follow a crisis response protocol. A bank teller or retail worker who has been exposed to a bank robbery is also highly likely to be offered counselling. Early intervention programs have proven incredibly successful within high-stress industries. The Commonwealth Bank has successfully used early intervention programs with employees involved in hold-ups. Early data on the policy shows that by implementing this policy, the bank managed to reduce time lost and workers compensation costs by 60% (Leeman-Conley 1990, p 129). Many of the problems cited may not be immediately obvious. An employee with a relationship problem, for example, may not wish to discuss this issue with work colleagues. Similarly, someone with a less socially acceptable problem (eg problem gambling or drug abuse) may be extremely reticent to reveal this problem for fear that it may put their reputation or career at risk. The employee may, therefore, conceal these problems from work colleagues who may wrongly interpret behavioural changes as linked to a drop in motivation or to attitudinal or performance problems. As a result, they may attack the problem as it manifests in the workplace (ie the decline in performance), but not address the real cause (ie the psychological or behavioural problem).

¶60-040 Recognising that a problem exists The signs of problems potentially amenable to counselling can often show up in daily activities. Some examples are listed below: • Moodiness: This may indicate unspoken or suppressed discontent and powerlessness. A person with a problem may attempt to lower the morale of others (eg via constant criticism). This behaviour is clearly used as an outlet to express feelings. • Absenteeism/poor timekeeping: If this was not a problem in the past, some recent form of dissatisfaction or problem may have developed. Counselling is likely to have a more positive effect than punitive action. • Interpersonal conflict: Conflict between employees is inevitable and is not always a bad thing. But, lack of respect for others, unwillingness, and built-up resentment caused by lack of open discussion are problems requiring attention. • Abrasive personalities: Tolerance of this problem may lead to adverse and long-term problems for the organisation (eg high staff turnover). • Illness and signs of tension. • Hostility: This includes increased complaining and arguing. • Accidents: These may arise from alienation, lack of attention, too much pressure and so on. • General performance decline. (CCH 1994, p 612) A manager who is able to identify behavioural or performance issues in an employee and then

appropriately confront them may become a catalyst to the employee seeking some professional help from a counsellor. This may help the employee deal with and, ultimately, resolve the problem. The critical issue here is for the manager to display empathy and a commitment to supporting the employee while they are resolving their issue. Through this approach, a skilful and empathetic manager can potentially retain an otherwise valuable employee who is going through what might be a temporary problem. The likelihood is that, once the problem is resolved, the employee will return to their previous level of performance with perhaps a greater commitment to the organisation due to its understanding and loyalty. If managers intend to attempt counselling themselves, they should try to remain well aware of the limits of their skills and not attempt to deal with problems that would be best left to a professional counsellor. However, for less severe problems, where the employee is really just looking for a “sounding board”, referring an employee on to an external counsellor may appear to be an overreaction. It really is up to a manager to use their best judgment and act accordingly. (There are some legal implications here that are discussed in the following paragraphs, particularly relating to disciplinary procedures, unfair dismissal and duty of care principles.)

¶60-050 Employee assistance programs In Australia today, a large number of medium to large organisations have in place, as part of their employee benefits package, a system of support called an EAP. These programs are designed not only to help employees, but also to support their immediate families who may also be affected by personal or workplace stress or other social or emotional problems. The EAP system provides a confidential and free counselling service to employees and their families. EAPs also run training initiatives and awareness programs around safe workplace practices and stress management, and supply up-to-date information on treatments for problems such as drug, alcohol and gambling addictions. EAPs are initiatives originally designed by a committee consisting of representatives from the Australian Council of Trade Unions (ACTU), the Confederation of Australian Industry (CAI) and the Alcohol and Drug Foundation of Australia. These three organisations formed the National EAP Executive to coordinate and develop EAPs throughout Australia. Information released on the National EAP Executive website reveals that personal issues account for 80%–85% of all issues dealt with by EAP counsellors, and include categories such as alcohol and drug dependency, and financial, legal and health problems. What EAP providers supply An EAP provider strategy is designed to act as an early intervention for employees or their immediate families who are experiencing personal or work-related problems affecting workplace productivity. An EAP provider employs experienced and trained counsellors who can provide short- to medium-term therapy within a safe and confidential environment. These counsellors are also well-equipped to refer those employees requiring longer-term therapy to an appropriate practitioner. Most reputable EAP providers also run workshops and awareness programs on safe workplace practices, and regular educational seminars on a range of issues that might affect an individual’s capacity to function normally. These programs may include information on how to deal with issues such as stress, personal or family illness, depression or addiction. They can inform employees of their legal rights, and even provide some advice on redundancy or retirement issues. Organisations that use EAPs also create a potential source of information for management on what work practices may be detrimental to employee safety or wellbeing. It must be remembered that providing a work environment that is not detrimental to an employee’s physical and mental health is a critical responsibility for employers and is, in effect, a legal requirement in the context of work health and safety. Contracts between EAP providers and employers commonly allow for a three-monthly report by the provider to the employer summarising the patterns of usage of the service. This will inform the organisation how many sessions have been run, how many employees are experiencing personal trauma, how many employees are experiencing performance problems, and whether there are any unsafe work practices. Through this type of raw data gathered during counselling sessions and surveys or reports run by the EAP provider, employers and management can better respond to problems that are perhaps isolated to an individual industry or even an individual workplace. This type of broad feedback is valuable to an employer or management team and can help to promote change from within to alleviate

organisational problems. An HR manager or director will be the appropriate person to ensure this information is fed back to the right channels so that structural or work practice changes can be made. In smaller organisations where this type of reporting may inadvertently breach confidentiality, it will be critical for the EAP provider to act with tact. One can assume that professional EAP providers would ensure this confidentiality is maintained. Using EAP providers in the workplace EAP awareness programs, training initiatives and education regarding safe workplace practices are critical components of an organisation’s approach to its employees’ wellbeing. As such, they should also be critical components of most organisations’ HR policies. Where an EAP is in place, the provider encourages managers and senior management to attend EAP workshops aimed at teaching referral skills and procedures. The EAP provider will also advise employers to create conditions in which there is proactive support for all employees to have access to its service and, also, to ensure that equity in terms of access is established for all employees, in particular, for employees from non-English-speaking backgrounds (NESB). An EAP provider will often recommend that management allocate an internal program coordinator to ensure that the EAP program is effectively administered, monitored and upgraded where necessary. Employees’ voluntary participation While a manager may encourage an employee to access the organisation’s EAP counselling services, the manager does not have the right to force an employee to attend counselling, and the voluntary participation of employees in counselling is an important principle that should always be followed. In most instances, employers should act in a consultative way when positioning EAP services with an employee, and should certainly not assume that they have the right to coerce an employee to attend counselling. Indeed, there is not an automatic right of referral if the employee’s problems are not affecting their work performance or behaviour. Consider the following scenario.

Example scenario Ted is a 28-year-old supervisor in a furniture factory. His parents were both killed in a car accident five weeks ago. Although Ted took some time off to grieve and attend to his parents’ affairs, he returned to work within two weeks to resume his normal duties. His manager felt it was perhaps a premature return to work and was worried about Ted’s capacity to adjust to the situation. He offered Ted further bereavement leave; however, Ted stated that he wanted to get back to work to “forget about things”. Since returning to work, Ted has become quite withdrawn and introverted. He has refused to discuss his feelings with any co-workers or with his manager, despite their concern and tea room discussions that suggested he needed to “let it all out”. Ted’s manager is considering referring Ted to the company EAP. His manager has also indicated that, if he does not go, he will “drag him there himself”. In fact, the manager is quite seriously considering making an appointment for Ted before his work starts to suffer.

In this situation, Ted’s manager, while having good intentions, cannot coerce or compel Ted to attend a counselling session. Ted’s work has not visibly declined in quality. He is grieving the loss of his parents in his own way, which he is perfectly entitled to do, and which may be quite a healthy approach. Ted’s manager would be better advised to closely watch Ted’s behaviour, to perhaps gently offer and inform Ted of the EAP option, and also to accept Ted’s right to deal with the problem in his own way. Consider now the worst-case scenario of this example in six months’ time.

Example scenario — in six months’ time Ted does not seem to be able to move on after the death of his parents. His behaviour has now become erratic. He is withdrawn, has trouble concentrating at work, has become prone to angry outbursts and has trouble offering a quality standard of supervision. In the end-of-year appraisal, Ted’s manager received negative feedback about Ted’s supervisory style and is now faced with the difficult task of trying to get the old Ted (who was gregarious and professional) back to his previous standard of performance.

While it may not be the best situation for the manager to compel Ted to attend counselling, he may not be left with a choice if the situation has deteriorated to this extent. In this situation, Ted’s manager should consult with the company’s EAP provider, and may be within his rights to make an appointment for Ted as part of his ongoing performance management strategy within the organisation. The EAP provider will provide the best advice for what to do in this situation, and may request Ted’s permission to liaise with his manager on strategies for best supporting or managing him (ie not with information arising from the sessions but rather, with practical management strategies to ensure the counselling he undertakes is best supported back at the workplace). In general terms, when problems become apparent, managers are advised to make their best efforts to attempt to rectify problems and discuss issues that are concerning employees directly. If behavioural or performance problems continue, and all normal supervisory actions have been exhausted as part of a concerted effort to rectify the problem, the EAP provider will arrange for the employer (or management) to set up a counselling session for an employee with an EAP counsellor. If employees are not performing, the option to use the EAP counsellor can only be suggested and not enforced by the manager, and should only be used as a component of performance management with the employee’s consent. In such a case, the employee may agree to the counsellor and manager conferring over problems and progress of the employee. Managers may also access remote support through their EAP provider. For example, the provider may suggest ideas on how a manager might refer an employee to counselling or handle a difficult conversation with an employee. The counsellor may even provide some psychological background to a performance or psychological problem that a manager feels confident to deal with independently, but about which they wish to get some external feedback prior to commencement of any intervention. Engaging an EAP provider Organisations typically engage EAP providers to run their EAPs on an annual basis. When tendering, an EAP provider will look at the number of employees and assess the likely usage rates by employees in the organisation. In pricing their services, EAP providers may estimate, for example, that an organisation with 5,000 employees would be likely to have a 2% usage rate in a year. The provider is saying, therefore, that 100 employees will request counselling that year and it will price its services on that uptake. That fee will be invoiced to the organisation regardless of whether or not that 2% uptake actually occurs. Some EAP providers also offer counselling on a “fee for service” basis where they charge an hourly rate for counselling. EAPs that operate this way will more than likely obtain pre-approval for a certain number of sessions from the HR manager. A typical number would be six sessions. Organisation of sessions Confidentiality is a critical aspect of the relationship between counsellors and their clients and, as such, a manager has no right to any feedback from the sessions, unless a counsellor is given written permission by the client to pass on such information. Session contracts average six visits for both employees and their families and this is monitored by the counsellor, not the employer. Counsellors do keep personal records of the employees, but these records are confidential. Employees are given a card with a number and need only quote the number to access counselling services. Counselling can be either face-to-face or over the phone, whatever is more convenient. It should be noted that counsellors and psychologists are bound by laws relating to confidentiality of

information about clients. For example, in New South Wales, confidentiality is regulated by the Privacy and Personal Information Act 1998 (NSW). Under that Act, professionals are legally and ethically bound to report serious crimes that they find out about in the course of a private session. For counsellors and psychologists, in particular, there are also ethical limitations to the extent of confidentiality that can be offered to a client. Any of the following situations may result in confidentiality having to be breached by the counsellor: • knowing the client is suicidal • knowing there is a strong likelihood that the client is a physical danger to someone else (eg threatening to kill another person) • if the client reveals evidence of child abuse, or • if, through a court order, the counsellor’s files are requested by subpoena. Throughout this chapter, the critical part that confidentiality plays in counselling has been mentioned. It is vital, therefore, that counsellors make explicit the extent of the confidentiality that they can offer a client before commencing, and that they act with absolute integrity in maintaining that trust wherever possible under the law.

¶60-060 Making the workplace aware of counselling Induction and updates Managers new to an organisation need to find out if there is an established system for counselling employees. Induction programs may not necessarily cover the issue of employee counselling, as it may be seen as something out of the ordinary and, hence, not emphasised. However, for individuals with people management responsibilities, knowing what resources are available or what policies exist for dealing with employees’ wellbeing is important information. For there to be consistent practices and a shared understanding of the resources that are available, it is valuable to provide managers (and, where relevant, other employees) with regular updates during management meetings about the standard practices within the company regarding counselling. New managers may not be aware that expectations may have been already set and that support networks (ie reputable rehabilitation centres or professional counsellors) may be in place for immediate response to employee problems in the workplace. Some organisations, for example, have specific community-based counsellors or psychologists with whom they have an established relationship, while others have established policies or procedures regarding referral of employees to the organisation’s EAP. It would also be useful for a new manager to be aware of any previous courses that the company has organised on issues such as stress management or acceptable social practices within the workplace. Informing employees If managers are unaware of existing resources, it is highly likely that employees will also be unaware of support mechanisms available. Indeed, many employees within organisations that have quite welldeveloped programs are relatively unaware that these mechanisms exist or know much about them. Many EAP providers will assist their clients with strategies to inform managers and employees that the company has put in place an EAP. This can range from supplying independent EAP-branded materials advertising the services (to provide the message that they are separate from the employer) to advertising on some employer-branded materials (with the aim of keeping a consistent company approach to all staff material). Information strategies include newsletters, intranet links and links to other company HR policies. Information on EAP services is often supplied to employees as a part of documentation relating to managing work/life balance or stress management. Such positioning helps to gain employee interest.

¶60-070 Setting boundaries When entering into a counselling arrangement or relationship, it is often considered important that a degree of boundary setting takes place. All the relevant stakeholders should be clear about their

expectations from the intervention. How long it will take, how many meetings will occur (and so on) will need to be discussed. The counsellor and their client usually agree on how long each meeting will be. In the case of an EAP, it should also be understood by the employee, the manager and the counsellor how many meetings are to be paid for by the company. The number of meetings per employee is usually capped at around six, but this may vary from employer to employer. Again, this is something that should be negotiated by the employer and the EAP provider. Issues such as confidentiality, referral practices, and even the length of each session should all be agreed on at the outset. Clear lines of communication and trust need to be established. These can be facilitated through a number of basic ground rules surrounding a counselling session or sessions, as set out in the following paragraphs. Role conflict and establishing confidentiality Imagine a situation where a manager takes on an additional role of informally counselling a troubled employee. In this situation, the manager needs to be clear about what their role is and where their responsibilities lie. The manager’s dual roles of counsellor and manager need to be clearly separated. This can bring up the challenging issue of “role conflict” for a manager. Confidentiality is a critical element in counselling, but how far can it extend? For example, an employee has an informal counselling session with the manager of another functional area. He informs this manager of his recent inability to handle pressure from his own line manager, and of his dislike for his line manager’s communication style. In this instance, it may be quite inappropriate for the counselling manager to then go and report to the employee’s line manager what has been said, and certainly, it would be inappropriate without the employee’s permission. Perhaps a more appropriate approach for the manager as counsellor would be to help the employee consider strategies to cope better, or to discuss ways in which they could give feedback to the manager about the line manager’s managerial style. Similarly, if a manager were to counsel a person about their performance in the context of a performance management session, this relationship would be quite different to a therapeutic counselling relationship. What the manager does with the information might also be quite different (eg in respect to recordkeeping). An employee should not be under any illusion that they are being confidentially counselled about a performance issue if, in fact, what is taking place is a performance management appraisal and the information is going to be placed on an employment record. For this reason, it is valuable to draw a very clear distinction between the two types of sessions and this can sometimes be challenging for any manager. If an employee were to reveal suicidal feelings to a manager, the manager would then be likely to have a duty of care to that person as an employer to ensure that the person received some professional help immediately (ie not in three weeks’ time when convenient for a counsellor). Similarly, if an employee revealed to the manager violent feelings towards others, involvement with an illegal practice in the broader community (eg involving a serious crime), or involvement in a fraudulent act in the workplace, the manager would have a responsibility to report the act to the relevant authority. Hence, the manager is not required to treat such information confidentially. In the Privacy and Personal Information Act 1998 (NSW), third parties are compelled to inform the police if they become aware of a major crime being committed. Not passing on information about a certain class of offence is a crime in itself. Clearly, there are some limits to the level of confidentiality that can be assured in many counselling relationships. Responsibility to act Clarify whose responsibility it is to act on discussions or outcomes of counselling sessions. The ideas that are discussed in the sessions that the employee attends may involve some collective action from the employee and the employer. For example, it may be suggested that some methods of stress management need to be brought into the workplace. An employer may also wish to reassure the employee that it will be willing to provide support. An employee may be required to undertake some retraining, reskilling or upskilling as a strategy to overcome career burnout or boredom. In this instance, the employee also needs to be willing to put in the effort towards facilitating this. The employer may need to be willing to provide some support, either in terms of organising the training providing financial assistance, or providing time that the employees can take away from work to study or attend the training.

Set parameters and establish an appropriate environment It is important to set parameters regarding behaviour and create an environment where counselling can occur effectively. This means ensuring that there is a confidential or safe environment where interruption is unlikely to occur. It can include the removal of the symbolic “power” positions of talking across a desk — perhaps by going outside of the workplace or breaking normal codes of behaviour regarding swearing, smoking or yelling. These factors need to be agreed on so that neither of the parties feels inhibited or offended. Structure the session Structure the session so that complete attention can be afforded to the employee and that an agreed time is dedicated to the problem. While counsellors may not reveal this to their clients, a great deal of internal structuring of the session will be taking place. For example, in an one-hour session, a counsellor might allocate 30 minutes to discussing the issue and the associated feelings (ie to isolate the problem), 15 minutes to discussing options and, finally, 15 minutes to offering some referral or to some “housekeeping” issues, such as organising any follow-up appointments. Counselling sessions need to be organised and, in some respects, regimented to ensure results. Counsellors will often develop an informal “contract” with their clients that they agree to meet for, say, five or 10 sessions to work on the problem together and then, at the end of that time, make an agreement to determine the next steps. Gain consent from the employee Consent should be obtained from the employee with regard to any form of personal information that is to be provided to external organisations. Employees are entirely within their rights to refuse to allow the release of counselling information. This right should be supported by the employer. Realistic employee expectations Counselling sessions rarely offer black and white solutions to problems, and may only help to reveal a problem that requires regular and ongoing treatment. Counselling cannot be measured in terms of any immediate satisfaction or result. It may often be impossible for the manager to offer the employee any idea of what amount of time will need to be allocated, or what the result of counselling is likely to be. Similarly, a manager should not place unrealistic expectations on the employee who is attending counselling. Improvement in the person’s ability to cope with the issue (and, therefore, improved workplace performance) may take some time.

¶60-080 Summary of guidelines on how to approach counselling Following are some guidelines on how to approach counselling: • Establish a private, non-threatening environment. • Put the emphasis on solving problems, rather than blaming or judging. • Set the context or framework for the meeting (ie Why? What? How?). • If the counselling involves a performance issue, speak directly about that issue. Do not avoid it or generalise. Focus on specific behaviours that have been observed and stay away from opinions. • Get the story from the employee’s perspective. The following skills can help here: – active listening – open questioning – observing – responding non-judgmentally

– reflecting – paraphrasing, and – summarising. • Offer the employee the opportunity to go away and think about the issue. Where this is done, a specific date and time should be set for a follow-up meeting. • Do not expect the employee to act reasonably and with normal common sense (this may be difficult for the manager if the employee is emotionally affected). • Try to think about the employee’s interests first before the company’s, rather than vice versa. • Generate multiple options (ie consider different ways of looking at or approaching the problem). • Provide positive feedback about an employee’s strengths. • Set some attainable goals. (CCH 1994, p 169; Phillips 1995, pp 60–82)

¶60-090 Referral skills Counselling at work can be undertaken by managers, HR practitioners or by external counsellors, therapists or psychologists. The appropriate person can be determined by the nature of the problem. As discussed previously, in some cases it may be appropriate for a manager to undertake some direct counselling of the employee. In other instances, a manager’s ability to effectively refer an employee to a professional is a skill that is essential. What is a referral? When a patient visits a doctor, the doctor may provide a referral to a specialist in the appropriate area of medicine, surgery or therapy. In doing so, the doctor has made a determination that the problem is beyond or outside their area of expertise and that a patient is best cared for by someone else. The same set of skills and principles apply to managers who identify psychological or behavioural problems in a team member. The manager should identify that a problem exists and find an appropriate time to raise the issue in a non-threatening way. The use of open and then more leading questions can encourage the employee to reflect on the issue. Some example questions include: • How are things going for you at the moment? • Is there anything you want me to know about? • Would it be worthwhile for you to have a confidential chat with someone outside of work and family about the things that are bothering you? It can be possible sometimes for people to have a very general non-specific discussion about the problem or rather, to generalise the nature of the problem, but be more specific when it comes to working out how to manage the problem in the context of the person’s work performance. In such conversations, it is always valuable to try to come up with some options for moving forward toward a solution or a way of better managing the situation. When providing a referral, a manager is steering their employee toward a preferred option, but they are also trying to get the person to take the decision themselves. When doing this the manager might, therefore, provide further information about the company’s EAP (for example) to lend the service further credibility, and also outline some potential benefits to seeing a counsellor. These are the skills of referral. Of course, the process of referral is not always that simple. Some employees are apt to misinterpret a manager’s concern. Referral is a delicate matter and should be handled with a degree of caution. An EAP

or HR practitioner may be an appropriate person with whom to discuss strategies for initiating a discussion about counselling with an employee. Ensuring that confidentiality is maintained is, of course, important here.

¶60-100 Duty of care and some cautionary words Beyond the expectation that managers may be required to fulfil the roles of counsellor, mediator, mentor and adviser, there is a basic “duty of care” within the laws of workplace safety. Not only do employees expect the workplace to be physically and psychologically safe, they also expect the workplace environment to be free from discrimination, emotional or sexual harassment, and to be given every possible opportunity to achieve their optimum output. The mental wellbeing of employees and the pressures and stress created within the workplace can be the catalyst for dysfunction within the personal lives of employees. The counselling role of managers (ie involving identifying, diagnosing and managing issues such as stress and depression) should be seen as a duty of care implicit in manager/employee relations and one that is intrinsic to maintaining a balanced, focused and productive workforce. In cases of sexual harassment or any other illegal conduct within the workplace, if the manager is aware of a problem, but does not promptly act on an occurrence, then legally, the employer or management may be regarded as condoning the illegal action. This then leaves them open to legal repercussions. Processes need to be put into action by a manager immediately on being made aware of any misconduct within the workforce. Therefore, it is necessary for all employees and management to be fully aware of any company misconduct policy and the procedures that will be triggered if this policy is breached.

¶60-110 Other support mechanisms Other support mechanisms available to employers or management of organisations that do not have the resources or structures available to their employees are community-based counselling services. These include services such as Alcoholics Anonymous, Gamblers Anonymous, Narcotics Anonymous and so on. Addicts are put into 12-step programs to help cope with their addictions. Family therapy, CentreCare, Lifeline, Relationships Australia and Community Justice Centres (CJCs) are other community-based counselling and help centres. Some of these centres have a Christian or religious orientation; therefore, referring someone of a non-religious or non-Christian background may be problematic. This is something that is best checked beforehand. Someone with a problem may also need to interact with other external agencies or institutions that provide support of a financial, medical or technical nature. These organisations may include income protection insurance companies or insurance agents, WorkCover (ie if the problem involves workers compensation), trade unions, rehabilitation providers (eg occupational therapists) and legal aid centres. While it may be challenging to have to refer someone to an addiction agency, such as Alcoholics Anonymous, it may be the best thing that someone could do for an employee who is struggling. The Employee Assistance Professional Association of Australia website (see www.eapaa.org.au) is a good source of information about EAP programs. It provides a list of national and state-based organisations offering EAP programs as well as other corporate psychology services and contacts.

¶60-120 Conclusion This chapter has explored workplace counselling from a number of perspectives. It has considered the manager as counsellor, referral skills, the benefits of an EAP and principles for conducting a counselling session, along with some words of warning. Counselling is increasingly accepted as a critical aspect of maintaining workplace harmony and ensuring employees’ work/life balance and wellbeing. All managers should have an open mind about counselling as an option for employees suffering an emotional, behavioural, family or mental health issue. Managers need to support the process directly, or via their empathy, professionalism and understanding. For more information on topics covered in this chapter, refer to the CCH Human Resources

Management subscription information service. References CCH Australia Limited 1994, Employee Assessment, Appraisal and Counselling, 3rd edn, Human Resources Management in Practice Series, Sydney. Leeman-Conley M 1990, “After a violent robbery”, Criminology Australia, April–May, pp 4–6, (reproduced in P Cotton 1995, Understanding and Managing Psychological Stress, The Australasian Psychological Society, Carlton, Victoria, p 125). MacLennan N 1996, Counselling for Managers, Gower Publishing, Hampshire, United Kingdom. Phillips N 1995, Motivating for Change: How to Manage Employee Stress, Pittman Publishing, London. Saltman D 1996, With a Little Help: Choosing and Assessing Mental Health Therapists, Choice Books, Sydney.

61. REDUNDANCY Editorial information

Michael Michalandos, Partner, Baker & McKenzie

¶61-010 Introduction Redundancy is a special type of termination. In a redundancy situation, employees lose their employment through no fault of their own and due to the operational needs of the enterprise in which they are employed. For this reason, it has become customary to provide employees with enhanced termination benefits on redundancy and impose special procedural obligations on employers before termination. This chapter deals with: • redundancy • rights and obligations arising on a redundancy • source of these rights • usual methods of implementing a redundancy, and • redundancy payments.

¶61-020 When does a redundancy arise? The definition of what constitutes a redundancy is not static, and varies depending on the industrial instrument being considered. However, a redundancy usually involves the following elements: • the employer decides that it no longer wishes the job an employee has been performing to be performed by anyone • this decision is not due to the ordinary and customary turnover of labour • this decision leads to the termination of the employee’s employment, and • the termination is not due to any personal act or default of the employee. A position may become redundant if the duties of that position are no longer required or performed. This will include a situation where the duties of a single position are broken up and distributed to a number of other positions so that the position no longer exists in its original form and the person who occupied the original position has no further duties to perform. Other circumstances where a valid redundancy may arise are set out in the following paragraphs. Substantial reduction in duties, responsibilities or reporting lines A position may become redundant if the duties, responsibilities or reporting lines of that position are substantially changed such that it can be said to be a different position to what the employee originally agreed to perform.

In applying this test, the court will focus on changes to the duties of the position and the terms of the employment contract, rather than the title of the position. For example, a redundancy may be triggered if an employer restructures the position of a divisional manager so that the divisional manager reports to an area manager rather than directly to the managing director (provided that the employer does not have a right in the contract to make this variation). Such a change may involve a significant change in the authority and responsibilities of the divisional manager. If the divisional manager does not accept the change, the divisional manager may treat their employment as having come to an end as a result of redundancy. Whether a change is sufficiently serious to trigger a redundancy will depend on what the employer and employee have agreed are the primary duties and responsibilities of the position. This is usually disclosed in the employment contract and job description. In the abovementioned example, if the divisional manager’s employment contract stated that they would report to the managing director or any other position as nominated by the employer, then a redundancy would not usually arise because it was contemplated in the agreement that the reporting line may change. It is often the case that employment contracts do permit the employer to change the duties and responsibilities of a position, provided that the fundamental nature of the position remains unaffected. These types of changes are unlikely to trigger the redundancy of a position. Rather, they are changes which the parties have contemplated may be made within the scope of the position. Change in the location of position A major change in the location of the employment may also trigger the redundancy of a position. For example, if the employer no longer wishes the duties of a position to be performed out of its Sydney office, but instead wants them performed out of its Perth office, this may lead to a redundancy. Again, the only exception to this is if the employment contract contemplates that the position may be relocated and, for example, requires the employee to perform the duties of the position. This is simple where the employment contract contains an express relocation provision which sets out a permissible area of relocation. For example, if the contract provides that the employer may transfer the employee within New South Wales, then a transfer from an office in the Sydney CBD to an office in Parramatta will not trigger a redundancy. Unfortunately, employment contracts often do not properly deal with the issue of relocation. Where the employment contract is silent on the issue of the location of employment, a court may “imply” a term that the employer can relocate the employee to work at any place within the reasonable daily reach of the employee’s home. If a court does not imply such a term, then the relocation of an employee may constitute a fundamental breach of the employment contract and trigger a redundancy. In United Rubber (Australia) Pty Limited v National Union of Store Workers, Packers, Rubber and Allied Workers, the Full Bench of the Australian Industrial Relations Commission (AIRC) held:

Case example United Rubber (Australia) Pty Limited v National Union of Storeworkers, Packers, Rubber and Allied Workers In United Rubber (Australia) Pty Limited v National Union of Storeworkers, Packers, Rubber and Allied Workers, (Australian Industrial Relations Commission (AIRC) Print no H9091, 9 August 1989), the Full Bench of the AIRC held: “A change of place of employment within an existing establishment, or a relocation of the place of work within the same general locality, would not generally be held to be sufficiently fundamental to amount to a repudiation of the contract.”

However, the fact that a proposed relocation may enable the employee to assert a termination of the employment on the grounds of redundancy is not always the end of the matter. Under many industrial instruments and company redundancy policies, employers may be relieved of an obligation to make redundancy payments if they offer the employee suitable alternative employment. Often the issue as to whether a relocation triggers a redundancy will merge with an issue as to whether the relocated position constitutes suitable alternative employment. The courts have not been prepared to lay down a single rigid rule that will apply in all cases in determining whether a relocation will trigger a right to redundancy benefits. The courts tend to look at the individual circumstances of each case. They will consider such factors as the nature of the employer’s business and the employee’s position, the distance travelled by the employee to get to work, whether the employee will receive compensation for any additional travelling expenses, any assistance provided by the employer to deal with transport issues or relocation expenses, the surroundings and infrastructure of the premises to which the employee is relocated, the impact on the employee’s ability to fulfil their family responsibilities, and other personal circumstances.

Case example Julie Anne French v Commonwealth Bank of Australia In Julie Anne French v Commonwealth Bank of Australia (U No 20902 of 1998) the AIRC considered whether a relocated position constituted a “location within reasonable commuting distance” under a definition of acceptable alternative employment and whether the employee was entitled to redundancy benefits. The applicant lived in Bondi and worked in the Sydney CBD. She was asked to transfer to Chatswood. The additional travelling time was 55 minutes to Chatswood. Her total travel time was 90 minutes. The AIRC held that three hours’ total travelling time per day was too long and unreasonable — taking into account the fact that the employee worked at least a nine-hour day. However, her case was strengthened by the fact that she also had a neck problem which made it difficult for her to travel for a long time.

Sale or transfer of business Finally, a redundancy may also arise if the employing entity of an employee “changes” as a consequence of a transfer of business (eg in a sale of business). The law does not recognise a right by an employer to assign employees to another employer. What must occur in a transfer of business is that the: • employment with the first employer must be terminated, and • employee must accept employment with the second employer (which the employee is free to reject). The termination of the employment by the first employer may result in a technical redundancy. This is because the reason for the termination of the employment is that the first employer no longer requires any employee to be performing the position occupied by the employer. This application of the redundancy principles in these circumstances is a controversial one where the employee is offered employment on the same terms with the new employer. Where the employee is no worse off, there is little rationale for the employee to be able to claim redundancy benefits from the first employer. For this reason, it is often the case that industrial instruments which provide for redundancy benefits will exclude these circumstances from the definition of redundancy or will provide that redundancy benefits need not be paid in these circumstances. However, such as in the case of the Fair Work Act 2009 (FW Act), this exclusion usually comes with the proviso that the employee is offered employment on the same or similar terms and the second employer agrees to treat the employee’s

service with the first employer as continuous (at least in relation to the calculation of any future redundancy benefits). Whether or not the above situation will constitute a technical redundancy at all, will also depend on the definition of redundancy in the instrument being considered. Some definitions of “redundancy” in industrial instruments do permit a change in the identity of the employer without triggering redundancy payments provided that all terms and conditions of employment remain unchanged. An example of this is where the instrument states that a redundancy arises if a position no longer exists in a business. In this instance, the business and the position could be transferred to a new employer without triggering a redundancy. If instead the definition provides that a redundancy arises where the employer no longer requires the position to be performed, a redundancy may arise once the employer disposes of the business. The circumstances discussed above must be distinguished from a situation where a corporate employer sells the majority of its shares to a different company. Although this may lead to a new entity taking a controlling interest in the corporate employer, the identity of the corporate employer remains the same and no terminations or redundancies are triggered.

¶61-030 Sources of rights and obligations The rights and obligations of employers toward employees on redundancy are derived from various sources, including private employment contracts, human resources (HR) policies, federal or state awards, enterprise agreements and other industrial instruments, and state and federal legislation. These rights and obligations usually coexist and overlap with one another. Generally speaking, these obligations deal with the following matters: • consultation with employees and unions • selection and termination procedures • notice of termination, and • redundancy payments.

¶61-040 The employment contract The rights and obligations of an employee and employer on redundancy depend firstly on the employment contract between them. This contract may be verbal or in the form of a letter of offer, a formal agreement or, in some circumstances, an HR handbook or written redundancy policy that has been issued to employees. It has become quite common for large employers to develop and issue redundancy policies. Unless an employer has specifically reserved the right to vary or not apply such policies, they may be binding on the employer. The reduction of unfair dismissal rights in this area will result in employees placing a greater focus on such policies. Employers should ensure that policies are carefully drafted; for example, redundancy policies should define when a redundancy arises, the types of employees who will be entitled to redundancy payments, and set out exceptions where employees are offered comparable alternative employment or where a business of the employer is transmitted to another entity. Terms relating to redundancy may also be “implied” into the employment contract by the conduct of the employer. For example, if the employer has repeatedly and consistently made redundancy payments to its employees in accordance with a fixed scale, and this practice is well known among management and employees, then it may form an implied term of every employee’s employment contract. However, such a term can only be implied where the employment contract does not contain a provision which is inconsistent with its implication. Where the employment contract does not contain any terms that relate to termination on redundancy, then the employer’s only contractual obligation is to provide the employee with the appropriate period of notice of termination. The period of notice will usually be set out in the employment contract. If no notice period is specified, then the courts will imply that the employment may be terminated on the giving of

reasonable notice. An employee is not entitled to any extra payment or consideration unless it is specified in the contract.

¶61-050 Awards, enterprise agreements and other industrial instruments Awards, enterprise agreements, and other industrial instruments often impose detailed obligations on employers in the event of redundancy and restructuring, including an obligation to pay redundancy benefits. Under the FW Act, modern awards which commenced from 1 January 2010 may adopt industry-specific redundancy schemes. Where an employee is covered by such a scheme, the employee’s entitlements to redundancy benefits is governed by the scheme and the minimum entitlements set out in the National Employment Standards (NES) will not apply. Collective agreements (eg enterprise agreements) often provide for enhanced redundancy payments and contain procedural requirements in relation to the implementation of redundancies, such as to consult with workers and their representative before undertaking any redundancies. These obligations vary from instrument to instrument and it is important that an employer checks them before embarking on a restructuring or redundancy exercise. However, they usually involve some or all of the following obligations: • The employer must notify all employees as early as practicable of a definite decision to restructure that might lead to the termination of employment. • The employer must discuss with the affected employees, and the unions of which they are members, the reasons for the proposed restructuring and redundancy terminations, measures to avoid or minimise the impact of the restructure/terminations, and measures to mitigate any adverse effects of the restructure/terminations.

¶61-060 Fair Work Act 2009 (Cth) Federally, the FW Act contains a number of provisions which impact on redundancies. Some of these are discussed in the following paragraphs. In some states and territories of Australia, there are other laws which deal with redundancies. These laws vary, depending on the jurisdiction, and employers who are not covered by the FW Act will need to check the specific legislation in each applicable jurisdiction. In addition to establishing minimum standards for redundancy payments, the FW Act contains a number of procedural requirements where there are large scale redundancies (ie where an employer decides that it will terminate 15 or more employees). These federal procedural requirements are similar to those previously contained in the Workplace Relations Act 1996 (Cth) (WR Act). See below: • Section 530 — This section requires an employer who decides to terminate the employment of 15 or more employees for reasons of an economic, technological, structural or similar nature (or for reasons including such reasons) to provide a written notice to the Chief Executive Officer of the Commonwealth Service Delivery Agency (Centrelink) of the proposed dismissals as soon as practicable after making the decision, and before terminating an employee’s employment. The notice must set out the reasons for the dismissals, the number and categories of employees likely to be affected, and the time when, or the period over which, the employer intends to carry out the dismissals. • Section 531 — The Fair Work Commission (FWC; previously known as Fair Work Australia (FWA)) has the power to make certain orders where an employer who has decided to make 15 or more employees redundant fails to provide a notification (as per s 530 above) to each trade union of which any of the relevant employees is a member and give each trade union an opportunity to consult with the employer on: – measures to avert or minimise the number of terminations, and

– measures to mitigate the adverse effects of the terminations (eg finding alternative employment). This provision only applies where the employer could reasonably have been expected to know, at the time the decision to terminate is made, that one or more of the employees were members. If an employer fails to notify and consult with a relevant union, the FWC has powers under s 532 to make whatever orders it thinks appropriate in the public interest, to place the employees in the same position as if the notice had been served and the opportunity to consult had been given. However, these powers do not include reinstatement or the power to award redundancy payments or payments in lieu of reinstatement. They also do not include the power to require an employer to disclose confidential information, commercially sensitive information or personal information. The procedural requirements set out above are intended to apply to all employees, except for certain excluded employees such as probationary employees, those engaged for a fixed term, casuals engaged for a short period, certain contract trainees, seasonal employees, employees who are not employed under award-derived conditions and employees who earn remuneration that exceeds a specified rate and are given a guarantee of annual earnings.

¶61-070 Unfair dismissal legislation Federal system employers Under the FW Act, qualifying employees may lodge an application before the FWC for a remedy in respect of an unfair dismissal. However, the rights of a federal system employee to challenge a redundancy-based termination are limited. A number of threshold criteria must be satisfied before such a claim can proceed. One of the threshold criteria is that dismissal must not be a case of a “genuine redundancy”. A “genuine redundancy” will arise where: (a) the employer no longer requires a person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise (ie the termination does not relate to the conduct or performance of the employee), and (b) the employer has complied with any consultancy obligations in an applicable modern award or enterprise agreement. However, it will not be a genuine redundancy where it would have been reasonable in all of the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an “associate entity”, as defined in the Corporations Act 2001 (Cth). An associated entity would include related companies. Where an employee can establish that the dismissal did not satisfy all of the above criteria, then the employee can proceed with their unfair dismissal claim. The FW Act contemplates that an employee can challenge a termination which has genuinely been made on the grounds of operational reasons. For example, such a challenge may be possible where an employer fails to consider the availability of a position in a related company which may have been suitable for a long serving employee, or where an employee fails to consult with a union or the employee about measures to avert or minimise the impact of the redundancy in accordance with an applicable modern award. This places an onus on employers who are planning redundancies to check and comply with consultation procedures, and also conduct a thorough review of available positions within their organisation, but also related companies and other “associated” companies. An “associated entity” is broadly defined in the Corporations Act 2001 (Cth) and would extend to companies who have invested assets in the employer and a significant influence over the employer, and vice versa. As such, it is likely to be more difficult for large corporate groups to satisfy requirements for a genuine redundancy (as set out above in (a) and (b)) unless they have conducted a thorough review of business needs and available employee roles across the entire group. A related company advertising a position may become a tell-tale sign to employees that the employer has not considered options. At the very least, employers should take a very active approach to seeking out redeployment opportunities (see Howarth & Ors v The Ulan Coal Mines Limited [2010]

FWA 4817). It should be noted, however, that the “redeployment” must be reasonable in all the circumstances. For example, except in limited circumstances, it is unlikely that the FWC would regard an employer’s failure to offer a position in a foreign country with a related company as unreasonable. It is also unlikely that an employer would have to consider employing an employee in an available position where the employee lacked qualifications for that position. However, it is likely that, where an employee is highly skilled and long serving, the FWC would require the employer to consider training the employee and/or allowing the employee to trial the position. The approach that the FWC will take remains to be seen. As indicated above, where the employee can establish that the redundancy was not genuine in accordance with the tests set out above, the employee will have access to the unfair dismissal jurisdiction. At this stage, what this actually means is unclear. Section 387 of the FW Act contains a shopping list of criteria for assessing whether or not a dismissal was harsh, unjust or unreasonable. These criteria include whether or not there was a valid reason for the termination and whether or not the employee was notified of that reason. However, the criteria is targeted at conduct or performance-based terminations and does not specifically address issues which arise on redundancy. One view of it is that the FWC may confine its review of unfairness to those matters addressed in the test of “genuineness”; that is, whether or not the termination was motivated by changes in the operational requirements of the business, a failure to consult in accordance with a modern award/enterprise agreement, and any failure to consider reasonable redeployment. The current case law suggests that the FWC will adopt a narrow interpretation of the factors it may consider when determining the fairness of a redundancy. Case Examples UES (Int’l) Pty Ltd v Harvey [2012] FWAFB 5241 This case concerned an employee whose position was made redundant on “operational grounds”. The FWC found that the redundancy was not genuine because there had been no consultation with the employee prior to announcing the redundancy. There was evidence to suggest that the employee was selected for redundancy on the basis that he had the lowest “pick rates” of employees in similar roles. The full bench held that the redundancy was not genuine and the overall termination was harsh, unjust or unreasonable. However, the full bench only ordered compensation equivalent to a two-week consultation period that the company had failed to undertake. In making this finding, the full bench decided that is was not within the ambit of whether there was a valid reason for the dismissal for it to consider the fairness of the process for selecting the person for redundancy. It also held that the criteria for a “genuine redundancy” in s 389 of the FW Act which had not been met could also be taken into account in its consideration as to whether the dismissal was harsh, unjust or unreasonable as part of s 387(h) (which allows for the consideration of “any other matters that the FWA considers relevant”). However, in Ruoh-Sheue (Rose) Chang v Mega International Commercial Bank Co Ltd [2014] FWC 5606, a single Commissioner of the FWC stated that the selection process in identifying the redundant employee is not relevant “as long as there is a transparent process in place”. In considering whether a “transparent process” of selection had occurred, the Commissioner considered: • that the company had decided to make Ms Chang redundant prior to the consultation process • the failure to consult with employees and to give affected employees the opportunity to offer alternative solutions to satisfy the company’s financial concerns • the failure of Human Resources managers to respond to Ms Chang’s emails about the redundancy, and • the failure of the employer to consider voluntary redundancies. Notwithstanding the above, the usual ground on which a redundancy-based termination is attacked is that

it is not “genuine”. This is commonly a consequence of employers attempting to avoid confronting the employee with a difficult performance or conduct issues. Where an employer purports that a termination is due to changes in operational requirements, but the real motive is to eliminate an employee on performance grounds or other unrelated grounds such as personal dislike, age, race or sex, then the employee will have access to unfair dismissal rights. Employers who have failed to appropriately deal with performance issues (by issuing warnings and so on) cannot avoid liability by masking a performancebased termination as a redundancy. The above should be distinguished from circumstances where an employer makes a decision on genuine grounds to reduce the number of persons in its business for operational reasons, but selects which employees will lose their employment on the basis of performance. If the grounds for termination are challenged by an employee, as a matter of practice the employer is responsible for producing evidence that the reasons were genuinely operational. It is not sufficient for an employer to simply make the assertion and it is critical that the decision-maker gives evidence of their motivations. Evidence that the employer has appropriately considered alternatives and also reviewed the benefits to its operations of the change will serve to support a claim of genuineness. Prior to restructuring its business, an employer should carefully consider the following questions: • What is the purpose of the restructure? Does the restructure relate to the operational requirements of the business, or is it simply a smokescreen to terminate a troublesome employee? • If the purpose involves increasing the efficiency of the business or cutting costs, will the goals be served by effecting redundancies? Have alternative cost-cutting measures been considered? Has the employer consulted those employees who are capable of suggesting alternatives? • Do the perceived benefits of the restructure justify taking the harsh step of terminating employment? • Are there any alternatives to redundancies? For example, will the purposes of the restructure be served by offering job-sharing or by converting full-time positions to part-time positions? It is important for an employer at the outset to establish clear goals for the restructure and ensure that redundancies are necessary to achieve these goals. State system employers State system employees continue to be covered by state-based unfair dismissal laws. However, this class of employees is a small one. Due to a decision by a number of state governments to refer their powers to the federal government, it is principally limited to the following: • state and local government employees in New South Wales, Queensland and South Australia • state government employees in Tasmania • all employees in Western Australia who are not employed by constitutional corporations • employees of some state statutory corporations, and • certain limited classes of employees specified in the state referral legislation or whose employers are included in the Endorsed State Declaration as provided under the Fair Work (State Declarations — employers not to be national system employers) Endorsement 2009 (Cth). It is possible, if not likely, that this class may be further restricted in future. It is not the intention to cover state-based laws in this Chapter other than to note that state-based unfair dismissal laws do not contain the same exclusion relating to “genuine redundancies” as set out above. As such, these employees may be able to challenge a redundancy-based termination generally on the grounds of unfairness. It is generally accepted that a fair termination on the grounds of redundancy includes the following elements: • The decision is genuinely on redundancy grounds and has not been constructed to mask other

grounds. • The employee is consulted as soon as an “in principle” decision is made. This consultation provides the employee with the opportunity to suggest alternatives to redundancy or methods of alleviating the impact of redundancy. The employer must consider any suggestions raised by the employee. The purpose of the consultation is also to give the employee the opportunity to deal with the emotional, family and domestic stress of a redundancy. Tribunals have, in the past, been very critical of employers who “surprise” employees with a redundancy. • The employer must properly consider whether any alternative positions are available within its organisation. This may include retraining or relocating an employee, or job-sharing. • Where the employer is faced with the task of selecting which employees should be made redundant from a class of employees who are performing similar duties, the employer must adopt fair selection criteria. These criteria should reflect the operational requirements of the business and be relevant to the remaining positions. They must not discriminate on unlawful grounds (eg race, sex or age). In some decisions, tribunals have held that employees should be given the opportunity to address the criteria. Where an employer relies on performance as a criterion, it should ensure that the performance issue has been previously discussed with the employee, is relevant to the remaining position and is valid. The criteria must also be applied consistently and in good faith. • The employer should provide reasonable assistance to the employee in locating alternative work. At a basic level this would include the provision of references and allowing employees to attend interviews during working hours. In relation to long service employees, this may also include the provision of outplacement services. • The employer should provide ample notice of the termination date and also fair termination benefits. These are dealt with later in the chapter. Please note that in some industries, it is regarded as quite important for an employee to be able to search for alternative work while they are in employment because of a perceived prejudice against employees who are out of work. Therefore, a failure by the employer to offer the employee the opportunity to work out of the notice period may be a factor which points to unfairness. Fair procedures Regardless of whether or not its employees have access to unfair dismissal laws, employers should generally exercise caution when making staff redundant and, where possible, adopt fair redundancy procedures. This is good HR practice and is likely to minimise morale issues, and may also assist in defending claims of unlawful discrimination, stress-related workers compensation claims, or any unfairness claim grounded on an HR policy. Unlawful grounds Regardless of whether an employer is covered by unfair dismissal laws, selection criteria must not discriminate on unlawful grounds which may offend state and federal anti-discrimination legislation. These grounds include age, sex, pregnancy, race, marital status, disability and union membership. Even though an employer may terminate an employee for reasons which include genuine operational reasons, an employee still has rights to claim that the redundancy is an unlawful termination if another reason includes these unlawful grounds. Employers must also be careful not to indirectly discriminate against employees. Indirect discrimination will occur if an employer relies on a factor that, on face value, may not appear to discriminate unlawfully, but when applied has a disproportionate impact on one class of persons over another. The discriminating factor must also be unreasonable. For example, an employer may decide to retain all employees who have advanced computer skills. This condition may, in practice, operate to exclude older employees. The imposition of this condition may be unreasonable and, therefore, discriminatory if the remaining positions do not require computer skills. For the purposes of anti-discrimination legislation, it is not a defence that the employer did not intend to discriminate on the basis of age.

Employers should also avoid targeting employees who are temporarily absent from work. These employees must be considered equally with other employees. In fact, an employer who selects an employee for redundancy because that employee is either on maternity leave, performing light duties while on workers compensation, or is otherwise temporarily absent from work due to injury or illness, may be in breach of state or federal anti-discrimination laws. Not only must employers ensure that absence on these grounds has no part to play in the redundancy, but also that it does not result in the employee being made redundant because, by virtue of the fact that the employee was not in the office, the employee was not fully informed of the restructuring and given an opportunity to apply for any available positions for which the employee is qualified. Some of the practices referred to may also offend “unlawful termination” provisions under s 772 of the FW Act. For example, under s 772(1)(g), it is unlawful for an employer to terminate an employee for a reason which includes an employee’s absence on maternity leave or other parental leave. Section 772(3) of this Act provides that a termination will be regarded as unlawful where an employer terminates an employee’s employment because the employee’s position no longer exists, and the reason it no longer exists is the employee’s absence or proposed absence on maternity or other parental leave. For more information, see Chapter ¶63. Methods of implementing redundancies Offers of voluntary redundancy Offers of voluntary redundancy packages are commonly used by employers to avoid having to select which employees will lose their employment. Employees who accept a voluntary redundancy package are unlikely to later challenge the termination. The main problem with offering voluntary redundancies is that they are sometimes accepted by the employees who will be the most valuable in meeting the employer’s operational requirements. After all, these employees may be more capable of finding employment elsewhere. Employers who offer a voluntary redundancy package should consider the following: • The package must, at the very least, comply with any applicable contract, award, enterprise agreement or statutory requirements. • The employer should clearly explain to its employees the contents of a voluntary redundancy package and the implications of acceptance. The terms should be documented. To avoid confusion, a calculation sheet should be attached to the terms setting out exactly what the employee will receive on termination — before and after tax. • The employer should not pressure employees to accept voluntary redundancy. Employees should be given sufficient time to consider the terms and to seek independent advice. • Employers should exercise care when targeting particular employees for voluntary redundancy. For example, targeting a senior employee may give rise to an allegation of discrimination on the basis of age. “Spill and fill” To promote a fair and merit-based selection process, employers sometimes adopt what is known as a “spill and fill” procedure. This involves declaring all affected positions vacant and then inviting employees to apply for the remaining positions. Employees are then interviewed and assessed on their merits for the remaining positions. An employer adopting this type of procedure should ensure the following: • Job descriptions and the selection criteria (eg qualification requirements) should be prepared and issued to the employees. • Each employee should be given the opportunity to address the selection criteria and their suitability for the position of their choice.

• Employees should be selected in accordance with the criteria. • Where practicable, unsuccessful candidates should be given reasons and the opportunity to address these reasons. The benefits of this procedure are that it enables employees to apply for the position of their choice and gives management the opportunity to reassess the skill and expertise of each employee for the new positions. However, if managed poorly, this process can be very disruptive, create stress and uncertainty for employees and undermine morale. Employees might not appreciate having to reapply for their positions and being made to compete with one another, particularly if they perceive that management has already made its decisions and is just “going through the motions”.

¶61-080 Termination benefits The primary benefits that employees are entitled to on termination are notice of termination (or payments in lieu) and redundancy payments. These are discussed in more detail in this section. Employees are also entitled to statutory entitlements that usually arise on the termination of employment. These include long service leave and annual leave. Notice periods Employees who are made redundant must be given notice of the termination of employment. As a minimum, these notice periods must comply with: • any notice period set out in the employment contract, or in the absence of such a notice period, “reasonable notice” • any notice period required by an applicable award, enterprise agreement, workplace agreement, or other industrial instrument, and • minimum notice requirements under federal legislation which form part of the NES. Giving “notice” simply means that the employer must forewarn the employee as to the exact date on which the employee’s employment will be terminated. Ordinarily, an employee should be entitled to work through this notice period and earn their usual remuneration. However, a practice has developed that where an employer cannot give sufficient forewarning of termination because of business exigencies, or the employer wants the employee to leave immediately for other reasons, the employer will immediately terminate the employment and pay the employee a lump sum amount. This amount represents what the employee would have earned had the employee worked out the notice period and is referred to as payment “in lieu of notice”. Payments in lieu of notice represent compensation for the employee being prevented from working out the notice period and must be calculated with reference to the likely remuneration and benefits that an employee would have received if the employee had worked, including (but not limited to) contractual bonuses, commissions and entitlements to shares and options. They will not include payments that are in the nature of reimbursements for expenses incurred during the employment, which are no longer incurred after its termination (eg motor vehicle expenses for business use). Redundancy benefits Redundancy or severance payments differ from payments in lieu of notice. Redundancy payments are intended to compensate the employee for the loss of non-transferrable credits based on length of service (eg sick leave and long service leave) and the inconvenience and hardship that may occur as a result of the position being made redundant. A payment in lieu of notice is compensation for the employee not being allowed to work out notice of termination. Rights to redundancy benefits may arise under a number of instruments. Unless an employee is covered by an instrument which confers redundancy benefits, an employee will not automatically be entitled to redundancy benefits. National Employment Standards

From 1 January 2010, the FW Act introduced NES which require all federal system employers (except for small business employers) to provide their employees with certain redundancy benefits (subject to a number of notable exceptions). This is the first time that a federal law has established a minimum entitlement to redundancy benefits. Under the relevant standard, employees are entitled to receive a redundancy payment if their employment is terminated: • at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour, or • because of the insolvency or bankruptcy of the employer. The redundancy benefit is based on the employee’s base rate of pay for their ordinary hours of work. It must be calculated in accordance with the following scale set out in Table 61.1. Table 61.1: Redundancy benefits Period of continuous service Less than 1 year

Redundancy pay Nil

1 year and less than 2 years

4 weeks

2 years and less than 3 years

6 weeks

3 years and less than 4 years

7 weeks

4 years and less than 5 years

8 weeks

5 years and less than 6 years

10 weeks

6 years and less than 7 years

11 weeks

7 years and less than 8 years

13 weeks

8 years and less than 9 years

14 weeks

9 years and less than 10 years

16 weeks

10 years and over

12 weeks

However, it is important for employers to note that, under the transitional provisions, periods of service which an employee has accrued with their employer prior to the commencement of the NES will not be taken into account when calculating the abovementioned redundancy benefits. The only exception is where, prior to 1 January 2010, the employee was entitled to redundancy payments under the terms and conditions of their employment. If such an entitlement existed, then prior service will be taken into account. Employers should also note that they may be required to take into account periods of prior service with an employee’s last employer where there has been a “transfer of business” in accordance with the legislation. Redundancy exemptions An employer may apply to the FWC to reduce its obligation to pay redundancy payments in circumstances where: • the employer obtains other acceptable employment for the employee, or • the employer cannot pay the redundancy payments. The employer does not have to make a redundancy payment under the NES to the following employees: • employees who are employed by a small business employer (ie the employer has less than 15 employees) • employees with less than one year’s service

• seasonal workers, fixed-term employees, casuals, apprentices and so on • employees to whom an industry-specific redundancy scheme in a modern award applies, and • employees to whom a redundancy scheme in an enterprise agreement applies if: – the employee is covered by an industry-specific redundancy scheme in the modern award, and – the industry-specific scheme in the modern award is incorporated by reference into the enterprise agreement. In addition, we note that employees do not have a right to receive redundancy pay in a “transfer of business” situation unless: • an employee transfers to a non-associated entity and that entity does not recognise continuity of service, or • the employee rejects an offer of employment made by the second employer, where: – the offer is on terms and conditions which are substantially similar to, and, considered on an overall basis, no less favourable overall than the terms of employment with the first employer – the second employer recognises the employee’s services with the first employer for the purpose of calculating redundancy benefits under the Act, and – had the employee accepted the offer, there would be a transfer of business in relation to the employee. Employers should note that, under the FW Act, a “transfer of business” is broader than a transmission of business and will include a transfer of employees to an associated entity (eg a related body corporate), an outsourcing or insourcing, or a transfer of employees in conjunction with an asset sale, where the employees will be performing the same or substantially the same work. It should be noted that these are minimum standards only. Employees may be entitled to enhanced redundancy payments under industrial instruments, employment contracts or HR resources policies. Other rights to redundancy payments As indicated earlier in this chapter, modern awards may also incorporate industry-specific redundancy schemes. In addition, enterprise agreements usually provide for redundancy benefits assessed in accordance with a scale. These vary depending on the instrument and may be more generous than those set out in the NES. It is important that employers review these instruments before conducting redundancies. There are some states which prescribe redundancy benefits in relation to state system employers. Under the Industrial Relations Act 1979 (WA), the Western Australian Industrial Relations Commission made an order which, from 1 August 2005, required most employers in that state to comply with various redundancy-related obligations, including an obligation to make severance payments of up to 16 weeks’ pay (in accordance with a scale which is the same as the federal scale). In addition to the above, employees may be entitled to redundancy benefits under their employment agreements or incorporated or implied into these agreements as a result of a policy or practice adopted by the employer. Alternative acceptable employment A common exception to the obligation on an employer to make redundancy benefits, which appears in industrial instruments (and the NES), arises where the employer obtains alternative acceptable employment for the employee. It is often the case that to obtain the benefit of this exception, the employer must apply to an industrial tribunal for an order releasing the employer from the obligation. This is certainly the case in respect of the NES. In determining whether an offer of employment obtained by the employer will be of an acceptable

standard, the courts/tribunals have generally had regard to the following factors: • whether or not the work is of a like nature • whether or not the terms and conditions on which the employment is offered are similar to the previous employment and not less favourable • whether the location of the alternative employment is not unreasonably distant, and • whether the new employer will take into account the employee’s prior service for the purpose of calculating service-based benefits.

Case examples Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd In Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226, the AIRC held that: “when an employee has accepted alternative employment in circumstances as those here, then in the absence of positive evidence going to the unacceptability of that employment, including unacceptable features of it, the Commission is entitled to hold the employment as an acceptable alternative and relieve the employer of the obligation [to make a severance payment]”. However, before denying an employee redundancy payments on this basis (above), an employer must check the relevant industrial instrument or employment contract that provides for redundancy payments. If this instrument or contract does not provide for an exception where an “alternative acceptable employment” is located, the employer may still be obliged to make the redundancy payments. Employers must, therefore, take care when negotiating such instruments to ensure that the exception is present. Central Norseman Gold Corporation Ltd v Kempton In Central Norseman Gold Corporation Ltd v Murray Lee Kempton [2010] FWA 5316, a single Commissioner dismissed an application for the reduction of redundancy pay as an employment offer was not “acceptable alternative employment”. The applicant was a mine employee in the position of “an airleg washown” at Bullen Mine who was offered another position of “Mine Operator” at another mine. The applicant rejected the alternative offer, and his employment was terminated. The Commissioner held that the applicant was entitled to redundancy payment as the employment offer was not “acceptable alternative employment” on the basis that: • The applicant’s annual salary reduced from $106,888 to $99,899, and • The applicant’s roster would require him to work 243 days per year totalling 2,916 hours compared to 260 days and 2,600 hours previously. Shop, Distributive and Allied Employees’ Association, New South Wales, and W D & H O Wills Holdings Ltd An employee cannot simply ignore the employer’s attempts to locate alternative work for the employee. In Shop, Distributive and Allied Employees’ Association, New South Wales, and WD & HO Wills Holdings Ltd [2000] NSWIRComm 98, the New South Wales Industrial Relations Commission held that in redundancy situations, employees owed reciprocal duties to: • participate in consultation • generally explore alternative positions, and

• not to unreasonably refuse retraining, redeployment or suitable alternative employment.

¶61-090 A final warning — employee morale At all times during the redundancy process, employers must have regard, not only to the rights and obligations of departing employees, but also to the potential negative impact of a badly managed restructuring on those employees the employer wishes to retain. An unfair restructuring process may have a serious destabilising effect on these employees. Where employees perceive that their fellow workers have been treated unfairly, it is common for employee morale to plummet and for mistrust to develop. It is not unusual for employers to experience a sharp increase in labour turnover up to a period of 12 months after a major restructure has been effected. This may ultimately negate the purpose of the restructuring — which is usually to promote efficiency and reduce costs. Employees are more likely to adopt the goals of the restructuring if they are properly consulted as to its purpose, and perceive that the employer has considered all possible alternatives before terminations of employment occur. At the end of a major restructuring exercise, it is also critical to the process for employers to explain the benefits of the restructure to the remaining employees, and to ensure that they gain some advantage from it in terms of job security, increased responsibilities or benefits. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

62. ISSUES WHEN TRANSFERRING EMPLOYEES ON THE SALE OF A BUSINESS Editorial information

Michael Michalandos, Partner, Baker & McKenzie

¶62-010 Introduction A couple of key issues arise when employees are transferred from one employer to another on the sale of a business or as a result of a corporate restructure. These are: • whether the seller is required to pay termination benefits to the transferring employees, and the extent to which the seller can rely on an offer of alternative employment from the purchaser in order to avoid making these payments, and • the extent to which industrial instruments (eg enterprise agreements and awards) are transmitted to the purchaser on the sale of this business. This chapter focuses on provisions under the Fair Work Act 2009 (FW Act) (Cth) relating to the transfer of employees between private sector employers. These provisions operate to transfer federal industrial instruments which apply where there is a connection or transaction between the two national system employers and one of these employers transfers employees to the other. Which employers will constitute national system employers is dealt with in Chapter ¶6. As a large proportion of Australian employers are national system employers, this chapter will focus only on the federal system. Provisions added to the FW Act in 2012 also extend general transfer of business principles to some state public sector employees moving to employment with national system employers as the result of a transfer of business (for example, in a privatisation scenario). It should also be noted, as a precautionary measure, that the provisions discussed in this chapter have not been tested extensively by the courts at the time of publication (having commenced in 2009) and it is possible that a different interpretation to that set out in this chapter may be adopted. Further, there are complex provisions in the legislation dealing with the interaction of industrial instruments on transfer, and these are not dealt with in any detail in this chapter. It is important that employers who are embarking on a sale of business obtain detailed and updated advice on these issues.

¶62-020 Method of sale The impact of any sale of business on an employer’s workforce will initially depend on the method by which the sale occurs. Scenario 1 — Share sale In the event that the business of the seller is sold by means of a sale of its shares, then there is usually no need to transfer employees to the purchaser and these employees may not be affected by the transaction. Even though a share sale may result in a change of control of the seller, it will not result in a change in the identity of the employing entity. So long as employees remain employed by the same entity

(the seller), their existing employment contracts will continue to apply, unless the employing entity takes positive action to terminate their employment or vary these instruments. However, it sometimes occurs that variations to the employment contract are required because the employing entity becomes a member of a new group of companies which may not provide for the same group benefits previously provided to an employee (eg benefits under a share or option scheme or superannuation scheme which are provided through a group company or parent entity). Because the employing entity remains bound by pre-existing employment contracts, these variations can only be achieved by agreement with the affected employees. A potential purchaser may, via a share sale, require the seller to terminate the employment of “selected” staff and fund termination payments as a condition of purchase. In this situation, the seller may be liable to make termination and redundancy payments. A potential purchaser of a controlling interest of shares will generally be concerned about any unusual, onerous or restrictive employment arrangements in place with the seller. Therefore, it is important that the seller does not enter into any new arrangements of this kind and, where possible, eliminates any existing arrangements of this kind. Such arrangements include the following: • an arrangement that certain managers or employees will be paid large bonuses or receive other benefits immediately before, or consequent on, a change of control • employment contracts with excessive remuneration packages, notice periods, or other uncommercial benefits, and • restrictive agreements with trade unions. If the “share sale” involves the transfer of employees and assets to a new entity, then “transfer of business” issues will typically arise. Scenario 2 — Asset sale If the sale involves the transfer to the purchaser of the seller’s business, assets and employees, then this will necessarily require: • the termination of employment contracts with the seller (which may be achieved by resignation or mutual agreement with affected employees or by the seller terminating the employment unilaterally by giving notice of termination) • the seller becoming potentially liable for termination payments, including (but not limited to) payments in lieu of notice (subject to agreed termination arrangements), redundancy payments and statutory leave benefits, and • an offer of employment from the purchaser to the employees whom the purchaser wishes to transfer to it. The reason for this is that an employer (other than, potentially certain government employers) does not have the right to assign employment contracts to another entity. Employees have the right to accept or reject employment with the purchaser. However, depending on the terms of the purchaser’s offer, a refusal to accept this offer may affect an employee’s termination and redundancy benefits. Please note, the purchaser is not bound to offer employment to all of the employees in the business which is being transferred. It can select which employees it requires. The remaining employees would be entitled to receive termination benefits from the seller on the termination of their employment with the seller. Please note that other forms of corporate restructuring, such as the transfer of assets (without there necessarily being a sale), outsourcing and insourcing arrangements may also constitute a transfer of business. See ¶62-040.

¶62-030 Avoiding redundancy benefits From an employment perspective, the seller’s principal concern in an asset sale is to avoid having to pay termination and redundancy benefits to transferring employees, and those employees who are offered a position with the purchaser, but choose to reject it.

Redundancy benefits are special termination payments made to employees who lose their employment through no fault of their own on the ground of redundancy (as opposed to termination on grounds relating to their conduct or performance). These benefits arise under industrial instruments or under private employment agreements with the employer (which may include redundancy policies). An obligation to make these payments may also arise where the seller has a history of making such payments on termination. These benefits are usually calculated on length of service. It is usual that the above instruments contain an exclusion to the obligation to make redundancy benefits in the context of a transmission of business where: • the employees are offered the same terms and conditions of employment or no less favourable terms and conditions of employment by the purchaser, and • the purchaser agrees to treat service as continuous for the purpose of calculating certain employment benefits (ie the purchaser agrees to take into account prior service with the seller when calculating benefits which are dependent on length of service). For example, as discussed in Chapter ¶61, most national system employees are entitled to redundancy benefits under the National Employment Standards (NES) which commenced on 1 January 2010. One of the exclusions to this entitlement is where an employee accepts alternative employment with a purchaser in a transfer of business situation (see below) and the new employer recognises the employee’s service with the old employer for the purpose of calculating minimum redundancy benefits under the NES. Further, an employee who refuses to accept employment with a purchaser in a transfer of business scenario will not be entitled to redundancy benefits under the NES where: • the terms and conditions of the offer of employment with the new employer are “substantially similar to, and, considered on an overall basis, no less favourable overall than the terms and conditions of employment with the old employer” , and • the employee’s service with the old employer is recognised by the new employer for the purpose of calculating minimum redundancy benefits under the NES (this is automatic where the new employer is an associated entity of the old employer (eg a related body corporate). For the above reasons, it is usual that the seller negotiates into the “sale of business” agreement an obligation on the purchaser to make offers to the target employees on the same or no less favourable terms. It is also usual that the purchaser offers continuity of service for those benefits which accrue on service. However, this means that the purchaser accrues vested and contingent liabilities for such benefits as: • annual leave • long service leave • personal leave (eg sick leave) • notice benefits calculated on service, and • potential future redundancy benefits. Usually, the purchaser negotiates a deduction from the purchase price to take into account the value of this liability. It is, therefore, critical that an accurate assessment is made of these liabilities prior to the transfer of employees. Some of these benefits are contingent only. It sometimes occurs that the purchaser is not prepared to accept continuity of service as required to avoid a redundancy payment obligation or offer comparable terms of employment. In these instances, the seller may have to pay out all termination benefits before the transfer, such as statutory annual leave and long service leave entitlements. The seller must also provide prior notice of termination in accordance with the applicable industrial instruments.

Transfer of employee entitlements and redundancy benefits under the Fair Work Act 2009 (Cth) The transfer of entitlements under the NES which commenced on 1 January 2010 are dealt with in the main body of the FW Act. For the purposes of the preservation of these benefits, in the hands of the new employer, transfers of employment are divided into two categories: (1) employee transfers to an associated entity, and (2) employee transfers to a non-associated entity. These are discussed in the following paragraphs. Employee transfers to an associated entity The first category covers circumstances where an employee transfers to an “associated entity” within a period of three months from their termination date. An “associated entity” is defined under s 50AAA of the Corporations Act 2001 (Cth) and includes a related body corporate. Section 22(5) of the FW Act provides that, in this situation, continuity of service is automatically preserved when the employee transfers from the old employer to the new employer. However, any gap between the date on which employment with the old employer ends and employment with the new employer starts will not count towards the length of the employee’s continuous service with the second employer. However, where the employee has already received the benefit of an entitlement in respect of a period of service (eg accrued annual leave from the old employer), this provision will not operate such that the employee can claim the same benefit for the same period of service from the new employee. Employee transfers to a non-associated entity The second category of “transfers of employment” involves circumstances where employees transfer to a “non-associated entity”. A sale of business is more likely to fall within this scenario. In these circumstances, a transfer of employment will only occur where there is also a transfer of business under s 311 of the FW Act. What constitutes a transfer of business is described in greater detail below. Essentially, this involves a transfer of the employee within three months to a position with a new employer which involves the “same or substantially the same” work. For a transfer of business to arise, there must also exist a defined connection between the two employers, such as a transfer of assets (or their use), or an insourcing or outsourcing of work. Unlike the first category of transfers, a “non-associated” employer does have the option of not accepting continuity of service in relation to redundancy benefits under the NES (s 122(1)) or annual leave benefits (s 91(1)). Where the new employer refuses to accept continuity of service in respect of these benefits, the old employer must pay out these entitlements on the termination of the employee (s 91(2)). A new employer which is not an associated entity also has the option of refusing to recognise prior service with the old employer for the purpose of the employee serving the minimum period necessary to qualify for access to the unfair dismissal provisions (s 384(2)(b)). However, for this to apply, the new employer must inform the employee in writing before the new employment starts.

¶62-040 Transfer of industrial instruments to the purchaser The next key issue principally affects the purchaser. This issue relates to the transfer of industrial instruments to a purchaser. These instruments set out minimum entitlements and, when transferred, a purchaser has limited rights to contract out of such instruments. The transfer of these instruments is dealt with in Pt 2-8, Ch 2 of the FW Act. Similar provisions regarding private to public sector transfers are dealt with in Pt 6-3A of the FW Act. However, this Chapter focuses on Pt 2-8 of the FW Act only. Employers considering the transfer of employees from employers who are not national system employers should note that, while Pt 6-3A of the FW Act reflects Pt 2-8, there are some important differences that impact upon obligations at, and following the transfer. When does a transfer of business occur? Under the FW Act, an industrial instrument that covered an employee will transfer from the old employer

to a new employer where there is a “transfer of business”. A transfer of business will occur where: • an employee ceases to be employed by their old employer and commences employment with a new employer within three months of having left the old employer • the work the employee is performing for the new employer is the same or substantially the same as that performed for the old employer (this is referred to in the FW Act as the “transferring work” and forms a critical link with the connections in determining whether or not a “transfer of business” occurs), and • one of four connections exist between the two employers. These four connections are: (1) Assets or the use of assets are transferred from the old to new employer: There is an arrangement between the old and new employer or their associated entities under which the new employer (or an associated entity of the new employer) owns or has the beneficial use of tangible or intangible assets which the old employer (or an associated entity of the old employer) previously owned and had the beneficial use of. The assets must also relate to or be used in connection with the transferring work. (2) The old employer has outsourced the transferring work to the new employer: The transferring work is being performed by one or more transferring employees as employees of the new employer because the old employer (or an associated entity of the old employer) has outsourced this work to the new employer (or an associated entity of the new employer). (3) The new employer “insources” work which had previously been outsourced to the old employer: This connection involves a test of two limbs — • the transferring work had previously been performed by one or more transferring employees as employees of the old employer, because the new employer (or an associated entity) had outsourced this work to the old employer (or an associated entity), and • the transferring work is performed by those transferring employees as employees of the new employer because the new employer (or an associated entity) has ceased to outsource the work to the old employer (or associated entity). (4) The new and old employers are associated entities: The new and old employers are associated entities as defined under the Corporations Act 2001 (Cth) (eg related bodies corporate) when the transferring employee becomes employed by the new employer. This circumstance covers the movement of employees between different employers in a corporate group. This abovementioned definition of a “transfer of business” is much broader than the previous concept of a “transmission of business” that applied under federal laws prior to the introduction of the FW Act. The concept of a “transmission” under previous laws was generally confined to mean a transfer of core business (rather than ancillary or operational undertakings), from one entity to another. Under previous law, insourcing and outsourcing of business process functions generally did not fall within existing transmission laws. It is also important to note that, under these provisions, it is not possible for a purchaser to avoid the operation of the transmission provisions by transferring employees to a related company of the company which receives the business or assets from the seller. Which employees will be covered by a transferable instrument? The following paragraphs discuss transferring and non-transferring employees.

Transferring employees Under the provisions of the FW Act, a transferable instrument will apply to employees who transfer from the old employer to the new employer, provided that the employee commences with the new employer within three months after the termination of that employee’s employment with the old employer. Further, the work which the employee performed for the new employer must be the same or substantially the same as the work performed for the old employer. It should be noted that there is not a requirement that the old employer terminates the employment of the transferring employee. It is possible for these provisions to capture an employee who resigns and then joins the new employer. It is also possible for an employee to be caught by the provisions if the employee transfers to the new employer some time before or after the relevant connection. The explanatory memorandum to the FW Act notes that the reference to the employee performing the same or substantially the same work should not be construed too strictly, and that a broad category of work should be applied where a group of employees is being transferred. The following example is provided by the explanatory memorandum: “For example, if the old employer runs a supermarket and sells the supermarket to the new employer, the work might be characterised generally as retail work in a supermarket. The fact that an employee may have stacked shelves for the old employer but now works on the checkout for the new employer would not stop the employee from being a transferring employee.” Non-transferring employees Section 314 of the FW Act also provides that, once a transferable instrument covers a new employer and the new employer engages other employees to perform the same work as the transferring employees (ie the transferring work), these employees will also be covered by the transferable instrument in relation to that work, even though these new employees have not transferred to the new employer from the old employer. The only condition is that no other enterprise agreement or modern award covers the new employer and the non-transferring employees. If such instruments do exist, they will apply instead of the transferred instruments. Which instruments transfer? The following paragraphs discuss which instruments will transfer. Fair Work Act instruments The new provisions (referred to under the FW Act as “transferable instruments”) apply to the following instruments: • an enterprise agreement that has been approved by the Fair Work Commission (previously known as, and referred to in the FW Act as, Fair Work Australia (FWA)) • a workplace determination (ie low paid, industrial action related or bargaining related) • a named employer award (ie a modern award or modern enterprise award that is expressed to cover one or more named employers or a specific class or classes of employers), and • any individual flexibility arrangement that has effect as a term of one of the above transferable instruments. Where any of these instruments covered a transferring employee immediately before the termination of that employee’s employment with the old employer, then, once the transferring employee commences employment with the new employer, it will cover the transferring employee and the new employer in relation to the transferring work. The transferable instrument will apply to the exclusion of any other enterprise agreement or named employer award which would otherwise have covered the transferring employee on transfer. There is no provision for the transfer of modern awards which are not named employer awards. This is unnecessary because these awards are common rule awards; that is, they apply to employers and employees regardless of whether or not the employer is a named party to the award and provided that

employees fall within the classification of the award. Therefore, on transfer, where an employee was covered by a modern award with the old employer, and there was no enterprise agreement in place which overrode the terms of that award, the modern award continues to apply on the transfer of the employee to the new employer. However, modern enterprise awards which bind a particular employer may transfer under the operation of Pt 2-8. The abovementioned transferable instruments apply to the new employer indefinitely, until they are terminated or replaced by a new instrument. There are no special “interaction” rules where a transferable instrument is transferred to a new employer, other than that the transferable instrument will override any pre-existing instrument as outlined above. After a transferable instrument is transferred, the normal rules as to how the transferable instruments interact with each other and new instruments continue to apply. For example, the new employer can replace a transferable instrument, which is an enterprise agreement, by entering into a new agreement after the nominal expiry date of the first enterprise agreement. It is beyond the scope of this chapter to outline the interaction rules. These are set out in Pt 2-1 of the FW Act. In addition to the above transferable instruments, where: • the old employer has given a guarantee of annual earnings to a transferring employee who is also a high income earner (ie a person who earns an annual rate of earnings exceeding $136,700 pa as at 1 July 2015, see www.fairwork.gov.au for annual updates of the high income threshold), and • some of the period of the guarantee falls into the time during which the transferring employee is employed by the new employer, then the new employer inherits the guarantee and must comply with it (subject to the terms of the guarantee). The benefit of the guarantee is that the high income earner will not be covered by a modern award for the period during which the guarantee is in force and complied with. There are a number of exceptions, including where an enterprise agreement applied to the transferring employee at the transfer time, and where the guarantee provides for a higher rate of pay after transfer. Finally, the transfer of these instruments to the new employer is subject to any contrary order of the FWC. Under s 317 of the FW Act, the FWC can make orders that a transferable instrument will not cover a new employer in respect of transferring or non-transferring employees. The FWC also has powers to vary the operation of a transferable instrument where, for example, terms of that instrument are capable of meaningful operation after the transfer of business, or where an ambiguity or uncertainty may arise. Pre-Fair Work Act instruments Despite the introduction of the FW Act on 1 July 2009, certain federal industrial instruments, which were in operation prior to 1 July 2009 and were created under pre-existing industrial relations laws, continue to apply to employees in accordance with the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act). These instruments are referred to in the Transitional Act as transitional instruments and include workplace agreements. Some transitional instruments, such as certain old federal awards (not including named employer awards) and notional agreements preserving state awards were displaced by modern awards on 1 January 2010 and are no longer in force. Generally speaking, the Transitional Act provides that the “transfer of business” rules (outlined above) operate in relation to these industrial instruments, provided that the transfer of business occurs after 1 July 2009 (ie the date on which a connection set out above occurs, and not the date on which an employee transfers to the new employer). There are some exceptions which are not dealt with in this chapter. Like the transferable instruments outlined above, these instruments will continue to operate on transfer (displacing any pre-existing instruments) until they are terminated or replaced with a new instrument. Again, it appears from the Transitional Act and explanatory memorandum that the usual interaction rules apply in relation to these instruments on their transfer to the new employer. The interaction between transitional instruments is complex and outside of the scope of this chapter. It is, therefore, important that employers seek advice when dealing with their potential transfer. Employee records The Fair Work Regulations 2009 (Cth) provide that, where a transfer of business occurs, the old employer

must transfer certain records to the new purchaser concerning the transferring employee(s) at the time that one of the connections described above occurs. For more information on topics covered in this chapter, refer to Chapters ¶27 and ¶61 in this Guide and also the CCH Human Resources Management subscription information service.

63. UNFAIR DISMISSAL AND FAIR TERMINATION REQUIREMENTS Editorial information

Originally written by Peter Vitale, Solicitor, General Counsel, Victorian Employers’ Chamber of Commerce and Industry Updated in 2016 by Michael Michalandos (Partner) and Kerryn Kahler (Senior Associate), Baker & McKenzie

¶63-010 Introduction The rights and obligations of employers and employees in relation to the termination of employment are not solely determined by the general law. This chapter examines the availability of legislative remedies for employees against “unfair dismissal”. The common law does not recognise a general contractual right for an employee not to be unfairly dismissed, or, for that matter, require an employer to follow any fair procedure or give valid reasons for termination. However, there are legislative regimes in place at the federal and state levels that provide protection to employees from unfair dismissal in certain circumstances. This chapter examines who has access to the unfair dismissal remedies and the general principles which apply to determine whether a dismissal is unfair. A brief overview is also provided of unlawful termination for prohibited reasons and under specific anti-discrimination legislation in all jurisdictions. The Fair Work Act 2009 (Cth) (FW Act), which commenced on 1 July 2009, introduced new federal unfair dismissal laws. These unfair dismissal laws are outlined in this chapter. Issues relating to termination of employment for reasons of redundancy and issues of unlawful discrimination which may arise out of termination of employment are dealt with in more detail in Chapters ¶13 and ¶61 respectively.

¶63-020 Coverage of the Fair Work Act 2009 (Cth) The first step in determining whether an employee has unfair dismissal rights is to determine which statutory unfair dismissal jurisdiction (if any) applies to that employee. Each state of Australia, except for Victoria, has its own statutory unfair dismissal jurisdiction. There is also a federal unfair dismissal jurisdiction established by Pt 3-2 of the FW Act. The federal unfair dismissal provisions apply to national system employers. National system employers are defined under the FW Act and, among others, include employers which are private corporations. The federal unfair dismissal laws override any state unfair dismissal laws that would otherwise apply to an employee who falls within the jurisdiction of the FW Act. Given that the vast majority of employees in Australia are covered by the federal unfair dismissal regime, this chapter focuses on the federal legislation. However, employers should be mindful that a class of employees will still have access to the state unfair dismissal jurisdictions in certain circumstances.

INITIAL ISSUES TO CONSIDER

¶63-030 Time limit and form of unfair dismissal applications The FW Act provides that an application for relief relating to unfair dismissal must be made within 21 days after the dismissal takes effect. However, the Fair Work Commission (FWC) may allow a further period for the application to be made if it is satisfied that there are exceptional circumstances, taking into account: • the reason for the delay • whether the person first became aware of the dismissal after it had taken effect • any action taken by the person to dispute the dismissal • prejudice to the employer (including prejudice caused by the delay) • the merits of the application, or • fairness as between the person and other persons in a similar position. These matters are based substantially on the principles set down by the Industrial Relations Court of Australia in J Brodie-Hanns v MTV Publishing Ltd (1996) 39 AILR ¶3-222(126); (1995) 67 IR 298. Cases decided by the FWC on this point reveal that the FWC will take a strict approach to whether there are exceptional circumstances to justify the granting of an extension.

Case example Gallagher v Kidz Biz Pty Ltd t/a Kidz Biz Pre-School & Long Day Care In Gallagher v Kidz Biz Pty Ltd t/a Kidz Biz Pre-School & Long Day Care (2010) 62 AILR ¶101206(246); [2010] FWA 3778, FWA decided that lack of money and ignorance of legal rights were not sufficient reasons to constitute exceptional circumstances.

Unfair dismissal applications to the FWC must be made in accordance with any procedural rules determined by the FWC. The FWC has powers to dismiss an application if it: • is not made in accordance with the requirements of the FW Act • is frivolous or vexatious, or • has no reasonable prospects of success.

¶63-040 Preliminary hurdles to access to unfair dismissal remedies There are two preliminary hurdles that employees must overcome before they can bring an unfair dismissal claim under the FW Act. These are set out in the following paragraphs. While these hurdles may prevent an employee from bringing an unfair dismissal claim, such employees are not excluded from making claims of unlawful dismissal under s 772 of the FW Act. Minimum employment period To bring a claim for unfair dismissal, an employee must have been employed for the minimum employment period set out in the FW Act. If the employer is not a small business employer, the minimum employment period is six months. If the employer is a small business employer, the minimum employment period is one year. A small business employer is an employer with less than 15 employees (simple head count). It is

important to note that employees of associated entities of the employer are included in this calculation, as are casual employees employed on a regular and systematic basis. “Associated entities” has the same meaning as set out in the Corporations Act 2001 (Cth). It includes related bodies corporate such as a subsidiary, a parent company or another company within the employer group. For the purpose of calculating the minimum employment period, the end of the minimum employment period is taken to be the earlier of the time when the employee is given notice of the dismissal or immediately before the dismissal (s 383, FW Act). The minimum employment period must be a period of continuous employment with the employer. A period of service as a casual employee will not count towards this period unless the casual employee was employed on a regular and systematic basis and the employee had a reasonable expectation of continuing employment on a regular and systematic basis (s 384, FW Act). Where an employee’s employment is transferred to a new entity as part of a “transfer of employment”, the employee’s service with the old employer may count towards the minimum employment period in certain circumstances. However, this will not be the case where the old employer and the new employer are not associated entities and the new employer informed the employee in writing, before the new employment started, that a period of service with the old employer would not be recognised (s 384(b), FW Act). A “transfer of business” is defined in the FW Act. It includes a transfer of assets, insourcing, outsourcing, or a transfer of employment between associated entities. High income threshold and application of industrial instrument An employee will be excluded from the federal unfair dismissal jurisdiction if the sum of their annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is equal to or more than the high income threshold, and the person is not covered by a modern award or enterprise agreement. If the person is covered by a modern award or enterprise agreement they will not be excluded from the unfair dismissal jurisdiction by virtue of the fact that they earn above the high income threshold. The high income threshold is indexed annually from 1 July each year. Currently, for the year commencing 1 July 2016, the high income threshold is $138,900 (see www.fairwork.gov.au for annual updates). The high income threshold for part-time or casual employees will be determined on a proportionate basis.

HAS THERE BEEN AN UNFAIR DISMISSAL? ¶63-050 What is unfair dismissal? Once an employee can establish that they are protected from unfair dismissal, in order to access remedies under the federal unfair dismissal jurisdiction the employee must then establish that they have been unfairly dismissed. Section 385 of the FW Act states that a person will have been unfairly dismissed if the FWC is satisfied that: • the person has been dismissed • the dismissal was harsh, unjust or unreasonable • the dismissal was not consistent with the Small Business Fair Dismissal Code, and • the dismissal was not a case of genuine redundancy. These threshold issues are examined in the following section.

¶63-060 Has the employee been dismissed? Section 386 of the FW Act states that a person will have been “dismissed” if:

• the person’s employment with their employer has been terminated on the employer’s initiative, or • the person has resigned from their employment, but was forced to do so because of conduct, or a course of conduct, engaged in by their employer. In the following paragraphs we explore various issues relating to whether or not a termination will be taken to be at the initiative of the employer. Clear and unclear terminations Whether an employee’s employment has been terminated on the employer’s initiative is a matter of fact. Clearly, such a termination will arise where the employer tells an employee, either orally or in writing, that the employer is terminating their employment. Similarly, it is also accepted that clear words of resignation used by an employee to an employer will be sufficient to render the employment relationship terminated at the initiative of the employee. However, a resignation may not be effective in circumstances where it could be said that the employee did not have a clear intention to resign, and reliance on such a “resignation” by an employer may give rise to a dismissal for the purposes of the FW Act. An example of a resignation being ineffective is where the resignation is ambiguous and given under “heated circumstances”. In such a context, the employer will be held to a duty to clarify an ambiguous resignation and, if they fail to do so, any subsequent termination will be considered to have been at the initiative of the employer. Forced resignation by the employee As set out in s 386(1)(b) of the FW Act, an employee who resigns from employment will be taken to have been dismissed if they were forced to resign because of conduct, or a course of conduct, engaged in by the employer. A forced resignation arises where the action of the employer is the principal contributing factor which leads directly or consequentially to the termination of the employment. The following points have been made by the courts and tribunals in relation to forced resignations: • A resignation will be taken to be at the initiative of the employer where “in substance and fact [the employees] have no real choice in the matter” (per Olson P in Roberts v Prince Alfred College 1979 AILR ¶320; (1979) 46 SAIR 598). – A resignation will be taken to be at the initiative of the employer where “the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee” (Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200). – A resignation will be taken to be at the initiative of the employer where it is found that an employer’s conduct “was of such a nature that resignation was the probable result, or that the appellant had no effective or real choice but to resign” (O’Meara v Stanley Works Pty Ltd [2006] AIRC 496). • A contract of employment can only be terminated by resignation where the resignation is given by genuine consent, untainted by any hint of pressure and where a contract is terminated — otherwise it amounts to constructive dismissal. • An ultimatum given by an employer to an employee to the effect that, if the employee does not resign, the employment will be terminated, is capable of amounting to duress and, as such, may constitute a dismissal should the employee resign by reason of the ultimatum. Fundamental variation to the terms of employment Industrial tribunals and courts have also determined in some cases that, where an employer has attempted to fundamentally alter the terms and conditions of the contract of employment without the genuine consent of the employee, the termination is at the initiative of the employer. When determining what amounts to a “fundamental” variation to the terms and conditions of employment, the courts have adopted what is known as the “contract test”.

The contract test was enunciated by Lord Denning MR in Western Excavating (EEC) Ltd v Sharp [1978] 1 All ER 713; [1978] QB 761 at 770, where he stated that: “if the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance”. A number of Australian cases have endorsed the contract test. These cases found that a constructive dismissal by the employer arose where the employer had engaged in conduct which constituted a significant contractual breach that went to the root of the contract and entitled the employee to accept the breach, terminate the contract and leave the employment relationship. Australian industrial tribunals and courts have determined that the following conduct amounts to a fundamental unilateral variation to an employee’s terms and conditions of employment and, as such, amounts to a constructive dismissal: • where an employee’s managerial position had been abolished and the employee was offered a lesser position with a substantial reduction in remuneration • where an employee was offered the choice of continuing in the same job but with a substantial increase in working hours, or lower positions, or early retirement, and • where an employee was reclassified to a lower position on lower wages due to a restructuring. Section 386(2)(c) of the FW Act alters the application of the “contract” test in unfair dismissal cases. It provides that “demotion” of an employee is not considered a termination of employment for the purposes of the unfair dismissal provisions of the FW Act if the demotion does not involve a significant reduction in the remuneration or duties of the demoted employee and the employee remains employed with the employer who effected the demotion.

Case example Phillip Moyle v Mss Security Pty Ltd The steps which must be taken to establish an actionable demotion under the s 386(2)(c) exception were outlined by the Full Bench of the Commission in Phillip Moyle v Mss Security Pty Ltd [2016] FWCFB 372. Firstly, it must be found that there was a variation of the contract by way of a demotion that amounted to a “dismissal” at the employer’s initiative. In other words, the evidence must establish that the employee was shunted into a role which was not contemplated by the existing employment contract. Secondly, consideration must be given to the “significant reduction” requirement set out in the provisions of s 386(2)(c). This particular unfair dismissal application failed to meet the first step, largely because the relevant variations in the nature of work and the Award classification were within the terms of the employment contract. However, the full bench noted that if a dismissal been found, a $1 per hour reduction in wage and the removal of supervisory duties “may well have been significant in the context of the employee’s personal circumstances” for the purposes of s 386(2)(c).

¶63-070 Specific circumstances in which an employee will not be taken to have been “dismissed” Section 386(2) of the FW Act sets out specific circumstances in which a termination of employment will not amount to a dismissal. These circumstances are set out in the following paragraphs.

Employment for a specified period, task or season An employee will not be taken to have been dismissed (and, therefore, not be able to claim relief for unfair dismissal) if they are employed under a contract of employment for a specified time, for a specified task, or for the duration of a specified season, and the employment was terminated at the end of the period or season, or the completion of the task. This does not mean that where a person is employed under such a contract and their employment is terminated for a reason other than the end of the period or season, or the completion of the task, that such a person will be precluded from bringing an unfair dismissal claim. An employer will not be able to rely on this exclusion if a substantial purpose of the employment of the person under a contract of that kind is, or was at the time of the person’s employment, to avoid the employer’s obligations relating to unfair dismissal. Training arrangements An employee will not be taken to have been dismissed if a training arrangement applied to their employment and their employment was for a specified period of time or was, for any reason, limited to the duration of the training arrangement, and the employment was terminated at the end of the training arrangement. A “training arrangement” is defined as “a combination of work and training that is subject to a training agreement, or a training contract, that takes effect under a law of a state or territory relating to the training of employees”. This is intended to capture both trainees and apprentices whose employment is limited to the duration of a training arrangement. Demotion As set out earlier, an employee will not be taken to have been dismissed if the person was demoted in employment and the demotion does not involve a significant reduction in their remuneration or duties, and they remain employed with the employer who effected the demotion.

¶63-080 Was the dismissal a case of “genuine redundancy”? A person will not be considered to have been unfairly dismissed if the dismissal was a case of “genuine redundancy”. The FW Act sets out three requirements that must be met before a dismissal will be considered to be a genuine redundancy: (1) The person’s employer must no longer require the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s workplace. (2) The employer must have complied with any obligation in an applicable modern award or enterprise agreement to consult about the redundancy. Employers should be particularly mindful of these provisions as awards and enterprise agreements often contain provisions that require a process of consultation to be undertaken before making an employee’s position redundant. Often, these provisions require consultation with both the individual concerned and any union operating in the workplace. Therefore, if an employer wishes to rely on the redundancy provisions to prevent an unfair dismissal claim, they should check to see whether any modern awards or enterprise agreements apply to the employee, and ensure that any consultation provisions in those instruments are complied with. (3) A dismissal will not be characterised as a genuine redundancy if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer. Employers should ensure that they have properly investigated the possibility of redeployment before dismissing an employee by reason of redundancy, including discussing options with any other entities in a corporate group. In relation to this last limb, the following was stated in Ulan v Honeysett: “[34] It is an essential part of the concept of redeployment under s.389(2)(a) that a redundant employee be placed in another job in the employer’s enterprise as an alternative to termination of employment. Of course the job must be suitable, in the sense that the employee should have the skills and competence required to perform it to the required standard either immediately or with a reasonable period of retraining … [35] Where an employer is part of a group of associated entities

which are all subject to overall managerial control by one member of the group, similar considerations are relevant. This seems to us to be a necessary implication arising from the terms of s.389(2)(b).)” It should also be noted that the definition of “associated entity” is very broad and extends beyond the notion of “related bodies corporate”. As such, it will be difficult for a large organisation to establish that it would not have been reasonable to redeploy an employee within their organisation. In order to do so, it would be necessary for the employer to conduct a review of business needs and available employee roles across its entire group and to make an assessment as to whether it would be reasonable to redeploy an employee to any part of the business or any available role. In making this assessment, an employer may also be required to consider whether retraining would be appropriate in the circumstances. It should be noted that these are threshold issues and, once it has been established that an employee has the right to challenge a redundancy-based termination, there is nothing in the FW Act to suggest that the FWC cannot look at other matters in determining whether the termination itself was unfair.

¶63-090 Was the dismissal consistent with the Small Business Fair Dismissal Code? An employee employed by a small business employer will not be considered to have been dismissed unfairly if the dismissal was consistent with the Small Business Fair Dismissal Code (Fair Dismissal Code). The Fair Dismissal Code provides as follows. Summary dismissal It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. It further states that “serious misconduct” includes theft, fraud, violence and serious breaches of occupational health and safety procedures, and for a dismissal to be deemed fair it is sufficient (though not essential) that an allegation of theft, fraud or violence be reported to the police on reasonable grounds. Other dismissal In cases of dismissal, other than summary dismissal, prior to any termination a small business employer must warn the employee (verbally or in writing) that they risk being dismissed, and give the employee a valid reason for this. The reason must be based on the employee’s conduct or capacity to do the job. Multiple warnings are desirable, but not necessary. The employee must be given an opportunity to respond to the warning, and any reasonable change to rectify the problem identified by the employer. This may include obligations on the part of the employer. For example, it may require the employer to provide additional training. In any discussions between the employer and the employee relating to the risk of the employee’s dismissal, the employee must be allowed to have a support person present. This person cannot be a lawyer acting in a professional capacity. A small business employer may be required to show evidence of compliance with the Fair Dismissal Code. This may include a completed checklist, copies of written warning(s), a statement of termination or signed witness statements. To assist small business employers, the federal government has issued a compliance checklist in conjunction with the Fair Dismissal Code. (See under “Small Business Fair Dismissal Code” at www.fairwork.gov.au/ending-employment/unfair-dismissal.)

¶63-100 Was the dismissal “harsh, unjust or unreasonable”? There are various matters which the legislation directs the FWC to consider when reaching a conclusion about whether the termination of employment in a particular case met the requirements of substantive and procedural fairness: that is, whether it was “harsh, unjust or unreasonable”. Under s 387 of the FW Act, the FWC must consider: • whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees)

• whether the employee was notified of that reason • whether the employee was given an opportunity to respond to any reason related to the capacity or conduct of the person • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal • (if the dismissal related to unsatisfactory performance by the person) whether the person had been warned about that unsatisfactory performance before the dismissal • the degree to which the size of the employer’s enterprise would be likely to impact on the procedures followed in effecting the dismissal • the degree to which the absence of a dedicated human resources (HR) management specialist or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal, and • any other matters the FWC considers relevant. Each of these factors may have more significance, depending on the circumstances of the case — but no one factor will ultimately be determinative of a claim of unfair dismissal. Importantly, as with the matters which must be taken into account when assessing whether a dismissal is a case of “genuine redundancy”, these factors are merely identified as threshold issues. Once it has been established that the FWC has jurisdiction to hear claims for unfair termination, there is nothing in the FW Act to suggest that the FWC cannot look at other matters to determine whether a termination was unfair. These matters are discussed in more depth in the following section.

MERITS OF THE CLAIM ¶63-110 Considerations in unfair dismissal claims Substantive and procedural unfairness The merits of an unfair dismissal claim are usually determined according to two broad considerations. It will generally (but not always) be necessary for the dismissal to meet both criteria in order to establish that it was not unfair. First, it must be established that the termination of employment was effected with substantive fairness: that is, with a genuine or valid reason related to the employee’s conduct or capacity. Second, it must be shown that, in carrying the dismissal into effect, the employee was afforded procedural fairness. The notion of procedural fairness involves examination of whether the employee has been given warnings about an employer’s concerns regarding performance or conduct, reasonable opportunities to respond to adverse allegations by the employer, counselling about improving performance or conduct, and reasonable opportunities to respond and to improve. These factors should not generally be viewed in isolation of each other. In fact, many of the cases decided in this area of the law demonstrate that they influence each other in determining each particular case. This is a significant reason why the industrial tribunals in each jurisdiction have emphasised that previously decided cases should not be treated as binding precedent. While case examples may offer some guidance, each case must ultimately be determined on its own circumstances. Most jurisdictions also have an overarching test designed to alleviate strict adherence to the requirements of the law, where that would itself cause unfairness. The most prominent example of this type of test is the federal legislative requirement, which reflects the case law of New South Wales, that the tribunal determining a claim of unfair dismissal must ensure a “fair go all round” for both the employer and the employee (see s 381(2) of the FW Act), which is based on the expression “fair go all round” used by Sheldon J in Re Loty and Holloway v Australian Workers’ Union 1971 AILR ¶142; [1971] AR 95. Further,

remedies must typically be awarded “having regard to all the circumstances of the case”.

¶63-120 Substantive fairness The principal consideration in determining whether the termination of employment of an employee has been fair in substance is whether the employer had a valid reason for the termination.

Case example Senathirajah Selvachandran v Peteron Plastics Pty Ltd The test applied by the Industrial Relations Court of Australia in Senathirajah Selvachandran v Peteron Plastics Pty Ltd (1996) 39 AILR ¶3-216; [1995] IRCA 333 is now well accepted (see Transport Workers’ Union (NSW) v Robar Enterprises Pty Ltd [2013] NSWIRComm 84 at [59]). Justice Northrop considered that in order to be valid, a reason for termination must be “sound, defensible and well founded. A reason which is capricious, fanciful, spiteful or prejudiced could never be a valid reason”. That valid reason must be connected with either: • the employee’s performance of their duties, or the employee’s capacity to perform those duties (The FW Act specifically requires the FWC to consider the effect of the employee’s capacity or conduct on the safety and welfare of other employees.), or • the employee’s conduct.

Redundancy and retrenchment are dealt with comprehensively in Chapter ¶61. Chapter ¶61 also addresses issues of performance, capacity and conduct. It should also be noted that there are specific reasons for which termination is prohibited. These provisions will be reviewed later in this chapter. The legislation also indicates specific circumstances in which summary termination might be justified, though the fairness of the dismissal remains the paramount consideration. For example, s 123(1)(b) of the FW Act excludes the requirement under s 117 to give minimum periods of notice of termination in cases of serious misconduct by the employee. It is noted that, at common law, the test for serious misconduct includes: • wilful, or deliberate, behaviour by the employee that is inconsistent with the continuation of the contract of employment, and • conduct that causes imminent and serious risk to the health and safety of a person or to the reputation, viability or profitability of the employer’s business. Examples include theft, fraud, assault, intoxication at work, or refusing to carry out a lawful and reasonable instruction that is consistent with the employee’s contract of employment. In addition, the Fair Dismissal Code refers to summary termination where the employer believes on reasonable grounds that the employee’s conduct (such as theft, fraud, violence, and serious breaches of occupational health and safety procedures) is sufficiently serious to justify immediate dismissal. Particular examples of cases where circumstances might constitute a valid reason for termination are set out in the following paragraphs. Bad language or insolence Instances of bad or obscene language may justify dismissal. If the language is common in the workplace, the tribunal is less likely to find the termination valid. However, abuse or insolence towards a supervisor, particularly when coupled with threatening or violent behaviour, will commonly be found to justify dismissal. Disobedience

The right of an employer to terminate the employment of an employee for failure to carry out a lawful and reasonable direction is not too dissimilar to the position at common law. Unless the employee refuses to follow a direction fundamental to the contract of employment, termination of employment may not be justified. On the other hand, persistent refusal to follow lawful and reasonable directions, even if the directions themselves are not significant, may justify termination of employment. A failure by the employee to follow policies and procedures established by the employer, or otherwise applicable at the workplace, may also constitute grounds for dismissal. In general, the policy in question must be shown to have been communicated to the employees, or at least (to their knowledge) be readily available for their perusal (provided it can be shown that the employee was aware that the policy was available). The rapid expansion of the use of electronic communications has led to a number of cases involving use of those facilities contrary to the employer’s policy. Absenteeism and lateness Whether the absenteeism or lateness of an employee will justify termination is, again, a question of degree. Persistent absenteeism may, in some circumstances, result in the employee being found to have abandoned their employment. Unlike the common law position, however, a previously good attendance record may be a factor taken into account in assessing whether termination of employment was unfair. However, there will be a point at which even employees with good employment records may have been warned and counselled on a sufficient number of occasions to warrant dismissal. Theft and dishonesty A case of theft will usually justify termination of employment. The critical issue in most cases of this nature is to determine what steps the employer needs to take to demonstrate that the employee was guilty of the theft. The employer must conduct a thorough investigation in order for the tribunal to have regard to the findings of the employer. In the course of the investigation the employer does not need to meet the criminal standard of proof, such that the theft can be proved “beyond reasonable doubt”. However, the employer must show to the reasonable satisfaction of the tribunal that the theft occurred. This standard must be viewed against the gravity of the consequences of the finding for the employee, the presumption of innocence and the requirement for exactness of proof. Theft of a third party’s property may also be sufficient to found a dismissal. This is particularly the case if the employee has initially lied in an attempt to hide the theft. By contrast, a case in which the lie was maintained only for a short time, in order to protect a minor theft by another employee and which was made while the dismissed employee was not on duty, resulted in the dismissal being held unfair. Intoxication Intoxication, whether by alcohol or drugs, will usually be considered sufficient to justify termination of employment where the employee is rendered unable to perform their duties properly. Employees will generally be granted less tolerance in cases where there is a potential risk to the safety of the employee or other employees. However, the South Australian Industrial Relations Commission has held that summary dismissal of two employees for drinking on the job while driving a heavy duty truck was found to be unreasonable. The commission took into account the fact that, while the employer did have a policy of zero alcohol tolerance, this was not applied consistently in the workplace, as alcohol was kept on the premises and consumed out of hours. A similar decision was made by the NSW Supreme Court of Appeal in Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381, where a state manager of the company attended a training conference intoxicated. The employer claimed that the employee’s conduct created risk of reputational damage, disrupted others and set an improper example for junior staff members. It was found that the conduct did not amount to serious misconduct, and therefore the summary dismissal was unjustified. The court considered it relevant that it was a one-off event, that there existed a workplace culture of consuming alcohol on such occasions, and that Willis was frequently reimbursed for alcohol expenses relating to employee- or client-related events. Other cases have emphasised the importance of clear workplace policies in relation to drugs and alcohol for an employer to terminate employment for these reasons, and the need for proper satisfaction of procedural aspects including investigation of the intoxication and ensuring the employee has had opportunity to respond (see Cannon v Poultry Harvesting Pty Ltd [2015] FWC 3126 and Shannon Dawson

v Railway Transport Services Pty Ltd T/A Cartage Australia [2011] FWA 4915). In some circumstances, the tribunal may take the view that the employee has a problem with drugs or alcohol which the policies of the employer could address with measures short of dismissal, such as counselling. It is significant, in this respect, to consider the view that drug or alcohol abuse is an illness or impairment. Termination of employment may, in that case, constitute an unlawful termination or a breach of applicable anti-discrimination laws. Intoxication at social functions organised by the employer is less likely to justify termination. However, it should be noted that under the provisions of the FW Act, the FWC must consider the health and safety of other employees in coming to a decision. Conduct outside of the work environment As has been noted earlier, the conduct of an employee outside of the work environment or after hours may justify a decision to terminate the employment where it can be shown that the conduct was likely to cause serious damage to the employment relationship, the conduct damages the employer’s interests, or the conduct is incompatible with the employee’s duties: Rose v Telstra [1998] AIRC 1592.

Case examples Corrective Services NSW v Silling In Public Employment Office Department of Attorney General and Justice (Corrective Services NSW) v Silling [2012] NSWIRComm 117, it was found that an employees third conviction for domestic violence was “reprehensible” but did not sufficiently relate to his employment to justify a dismissal in accordance with the Rose v Telstra principles. Telstra Corporation Ltd v Streeter In Telstra Corporation Ltd v Streeter (2008) 60 AILR ¶100-764; s 120 Appeal against the order ([851] PR978080) by Telstra Corporation Limited [2008] AIRCFB 15, the full bench of the AIRC upheld an employer’s right to terminate the employment of a worker who had engaged in sexual relations with a colleague in the presence of other employees after a work-related function. Applicant v Respondent However, in Applicant v Respondent (1999) 45 AILR ¶3-981, the full bench of the AIRC found that the dismissal of an employee was harsh, unjust and unreasonable because the sexual harassment of another employee occurred in the employee’s own time.

Use of Social media Increasingly relevant to the discussion around out-of-hours conduct has been employee use social media websites such as Facebook. The courts have been hesitant to rule in favour of employers in these cases in the interest of employee privacy and free speech. However, particularly where employers have sufficient social media policies in place, dismissal for inappropriate use of social media can be justified where it impacts directly on the employment relationship.

Case examples Lindfox Australia v Fair Work Commission In Lindfox Australia Pty Ltd v Fair Work Commission [2013] FCAFC 157, Mr Stutsel was dismissed for posting a number of comments on Facebook about Lindfox and Lindfox staff that was considered by Lindfox to constitute racism, sexual discrimination and harassment. The unfair dismissal claim was upheld for a number of reasons including that in context, the conversations had the flavour of “a

group of friends letting off steam” and could be compared to “a conversation in the pub or café, although conducted in an electronic format”. Furthermore, although some of the comments were “disgusting” they did not contain any credible threat to the wellbeing of the other staff members, and Lindfox employees were not subject to a social media policy. Little v Credit Corp Group Limited In contrast, in Little v Credit Corp Group Limited [2013] FWC 9642, Mr Little was dismissed for Facebook posts which criticised an organisation which his employer had engaged in professional dealings with. He threatened an employee of the organisation with sexually suggestive comments. Although Little claimed it was “just a joke”, the Commission ruled that the comments were insulting and threatening, clearly accessible by colleagues, and in breach of the Employee Handbook which included a clause on appropriate Social Media Website Usage. In this instance, the Commission ruled in favour of the employer.

Lack of capacity The employee’s lack of ability to perform the requirements of the position for which the employee is engaged is a valid reason for termination. The fact that the employee may genuinely be applying their best efforts in the performance of work will not be sufficient if the employer can demonstrate a genuine lack of capacity. In practice, termination on the grounds of deficiencies in the employee’s performance of their duties because of a lack of capacity is more likely to be found unfair on grounds of procedural unfairness. Fighting Fighting in the workplace will not provide an automatic basis for termination of employment, even in cases where the employer has a clear policy against fighting. There may be cases where circumstances mitigate the employee’s involvement in a fight. Further, the employer will be expected to conduct a proper investigation into the events which lie behind any violence in the workplace. Examples of such cases include provocation by racial abuse or self-defence. In contrast, if the violence is of a grave nature, any defects in the procedure adopted by the employer prior to carrying out the termination may be overcome. Further, employees have a duty to exercise anger control when performing their duties in an environment which is fraught with danger. Sexual or racial harassment Behaviour constituting serious sexual or racial harassment will usually justify termination of employment. The employer is required to conduct an investigation, which must disclose evidence that leaves open the conclusion that the employee is guilty of the conduct alleged. Cases of interest are Wilson v Brisbane City Council [2002] QIRComm 96; 170 QGIG 250 (a case of discrimination) and T Lewis v Toyota Motor Corporation — PR901843; (2001) 50 AILR ¶4-442(118); [2001] AIRC 213 which demonstrates that misuse of an employer’s email facility to distribute pornography which could potentially offend other employees, or constitute harassment, may also justify dismissal. Matters discovered after termination Similar to the common law position, an employer, in order to justify dismissal, will generally be entitled to rely on matters discovered only after the termination of the employee has been effected. These reasons must still relate to the fundamental basis of termination, but might be matters which the employer could not reasonably have known or discovered before the termination (eg because of the employee’s fraud).

¶63-130 Procedural fairness In examining various examples of cases dealing with the question of whether or not the employer had a valid reason for the termination, a distinction drawn between cases that turn on issues of substantive fairness, and those that turn on procedural fairness, can be artificial. Having particular regard to the global view of the circumstances of each case demanded by the “fair go all round” approach, deficiencies in

procedural fairness might be overcome by a particularly strong and valid reason for dismissal. In a similar fashion, implementation of a rigorous procedure prior to termination may enable the employer to rely on reasons for termination which may, in other circumstances, be considered insufficiently valid. An example is the enforcement by the employer of clearly communicated policies relating to the performance of employees’ duties or conduct. The legislation does provide some indication of what measures must be taken by the employer to ensure procedural fairness. Around this framework, the various tribunals have identified a number of subsidiary considerations which may have an influence on determining whether procedural fairness has been observed. These factors, which are similar to the matters that the FWC must consider when determining whether a dismissal is “harsh, unjust or unreasonable”, may be more or less influential in determining a claim depending on the facts of a particular case. What follows is a summary of what are perhaps the more prominent of these considerations, including those specified in legislation: • Was the employee notified of the reasons for termination? While there is no strict legal obligation to do so, failure to notify is a factor which must be taken into account by the tribunal. The employer may be required by a contract of employment or by law to provide reasons, in which case a failure to notify is likely to be considered unfair. • Was the employee given an opportunity to respond to the allegations of poor performance or conduct? An employee should be given the opportunity to have the representative of their choice at any meeting to discuss performance or conduct issues. This may include providing an employee whose first language is not English with the opportunity to have an interpreter present. • Has the employee received prior warnings about unsatisfactory performance before the termination? Generally, the FWC will examine whether prior warnings have been given regarding the matters which formed the basis of termination. However, circumstances of a number of justified warnings within a short space of time relating to different matters may still provide sufficient procedural fairness. It is important to note the following about warnings of poor performance or conduct: – There is no fixed number of warnings which must be provided to an employee. The more serious the complaint of the employer, the less the number of warnings are likely to be required prior to termination. Equally, there is no number of warnings which provides an employer with automatic rights to terminate employment fairly. – The effect of a warning may dissipate over time. Employers should exercise caution in relying on warnings which were given any substantial length of time before the termination, particularly if there are no intervening warnings, or if any earlier warnings relate to different or less serious matters. – While there is no strict requirement that warnings be in writing, this is always advisable as it is more likely to convey the gravity of the situation to the employee. Further, written warnings will generally provide more sound evidence of procedural fairness. Written warnings may also be required by an internal company policy. The FWC may view the application of company disciplinary policy as a standard that, having been set, the employer should comply with. Compliance with internal policies may also be taken as indicative of how seriously the employer views the deficiencies in conduct or performance. • Did the employer counsel the employee about the employee’s performance or conduct? As part of discussions about any warnings given, the employer should make clear why it is concerned about the performance or conduct, what it expects the employee to do to address the issue, and how long the employee has to achieve that objective. • Did the employer make clear to the employee the consequences of a failure to improve performance or conduct? Specifically, the employer should ensure that the employee is aware that termination may be the result of a failure to improve. • Was the employee given a reasonable opportunity to improve deficiencies in performance or conduct?

• Has the employer taken reasonable steps to assist the employee to improve deficient performance? This may include additional internal or external training. • The employer may rely on a breach of its own behaviour or performance policies as the basis for termination. In that case, the employer should be able to demonstrate that the policy was communicated to employees in such a way that ensured the employees knew or should reasonably have known what the policy was, and they could understand the policy. • The cases referred to earlier in relation to the question of whether an employer has a valid reason for termination demonstrate that the conduct of an investigation by the employer can be of crucial importance. The cases illustrate that the more serious the conduct alleged against the employee, the more rigorous the investigation process and standards of proof required. Cases of theft or sexual harassment are good examples of situations requiring such an approach. • Have the procedures followed by the employer in effecting the termination been impacted on by the size of the employer’s undertaking or the absence of specialist HR skills within management? The various cases that have considered the provisions make it clear that the absence of HR staff or policies and procedures will not ameliorate the conduct of an employer who does not afford “a fair go” in the termination of the employment. Further, it has been held that an employer will not be capable of using the size of its undertaking as a shield behind which to hide when it has engaged in conduct which is improper, belligerent and bullying. If an establishment has the resources (eg access to independent legal advice), but fails to avail itself of those resources and to inform itself of appropriate procedures to follow when terminating an employee’s employment, then this may add to the unreasonableness or otherwise of the termination and create a greater onus on larger organisations to follow procedural fairness in their terminations. • Does the termination represent an approach that is proportionate (in all the circumstances of the case) to the employee’s performance or deficiency in conduct? Factors which influence this consideration include the employee’s length of service. • In some cases, the personal circumstances of the employee may be a significant consideration in determining whether termination is appropriate.

OTHER APPLICABLE LEGISLATION ¶63-140 General protections and discrimination laws In addition to the remedies available for unfair dismissal, legislation in various jurisdictions prohibits termination of employment on various grounds which, broadly speaking, fall within the description of discrimination. For a claim to succeed, it is generally sufficient that any of the prescribed reasons is one reason for the termination, and not necessarily the only one. In summary, reasons for termination which are of themselves unlawful include: • temporary absence from work due to illness or injury • involvement in the activities of a trade union, whether that be as a member or officer of the union — termination because of non-involvement in a union is also prohibited • seeking office as, or acting or having acted in the capacity of, a representative of employees • victimisation — termination is prohibited for the reason that the employee makes a complaint against the employer (eg under anti-discrimination legislation) • 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 other parental leave • temporary absence from work to engage in a voluntary emergency management activity, and • refusal to negotiate, sign, vary or terminate an individual workplace agreement (federal, Australian Capital Territory, Northern Territory, Queensland and Victoria). There is significant overlap between these provisions and the protection against termination of employment and other forms of discrimination, on grounds which are made unlawful by legislation. Each jurisdiction has anti-discrimination laws and these may provide alternative or supplementary remedies. Further, Pt 3-1 of the FW Act contains the “general protections” which prohibit the dismissal of an employee on the basis of some of the above listed grounds.

REMEDIES ¶63-150 Reinstatement and compensation The primary remedy for unfair dismissal is reinstatement. However, where reinstatement is inappropriate and an order for compensation is appropriate in all of the circumstances of the case, compensation may be ordered. Reinstatement and compensation are considered in the following paragraphs. Reinstatement The FWC has the power to order the employee to be reinstated to the employee’s former employment or re-employed in another position. This is, in the strict sense, the primary remedy available to employees. In the event that reinstatement is ordered, the tribunal usually has power to order payment of remuneration lost since the date of termination. Importantly, this remedy is not limited by the legislative cap that applies to awards of compensation. This approach has led to large awards of back pay in some recent cases. Reinstatement has been held to require the reinstatement of the person to a position on equivalent terms and conditions. Unlike the position at common law, reinstatement also means that the employer is obliged to give the employee actual duties to perform (see Blackadder v Ramsey Butchering Services Pty Ltd [2005] HCA 22; Stephen v Australian Postal Corporation [2011] FMCA 448). The FW Act contains provisions (s 391(1A)) which allow the FWC to order an associated entity of the employer to employ the employee where the position in which the employee was employed is no longer in existence and that position, or an equivalent position, exists with an associated entity of the employer. This may include an order to appoint the person to a position with the associated entity on terms and conditions no less favourable than those on which the person was employed immediately before the dismissal. Compensation In the event the FWC decides that reinstatement is not an appropriate remedy, and that an order for compensation is appropriate in all of the circumstances, it has powers to grant compensation to the employee. Section 392(5) of the FW Act sets a cap on the amount of compensation that can be awarded to an employee. This cap is the lesser of: • the amount that the employee received or to which they were entitled (whichever is higher) for any period of employment with the employer during the period of 26 weeks immediately before the termination (additional considerations will apply if the employee was on leave without pay or without full pay during any part of this period), and • half the amount of the high income threshold immediately before the dismissal (for the financial year commencing 1 July 2016, this cap is $69,450, being half of the high income threshold of $138,900 per annum for that financial year). When considering an appropriate amount of compensation, the FWC is directed by legislation to a

number of considerations. Section 392(2) of the FW Act requires examination of: • the effect of the proposed order on the viability of the employer’s enterprise • the employee’s length of service with the employer • the remuneration the employee would have received, or would have been likely to receive, if the employee had not been dismissed • the efforts of the employee to mitigate their loss • the amount of any remuneration earned by the employee from employment or other work during the period between dismissal and the making of the order for compensation • the amount of any income reasonably likely to be so earned by the person during the period between the making of the order for compensation and the actual compensation, and • any other matters the FWC considers relevant. While the FWC must take these matters into account, it will assess compensation on a case-by-case basis with consideration of all relevant circumstances, including the “fair go all round” principle. The FW Act also requires the FWC to consider whether any misconduct by the employee contributed to the employer’s decision to dismiss the person and reduce the amount of compensation by an amount they consider appropriate. The FW Act prohibits the FWC from awarding compensation for “shock, distress, humiliation” or other analogous hurt arising from the manner of the employee’s dismissal. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service, section commencing at ¶70-000.

64. TAXATION OF TERMINATION BENEFITS Editorial information

Erica Kidston Senior Associate, Baker & McKenzie

¶64-010 Introduction A variety of payments may be made to an employee on termination of employment. These may include accrued but unused annual leave payments, long service leave payments, payments in lieu of notice and redundancy payments. Where an employer makes payments to an employee on termination, they will usually be required to withhold tax from those payments. Where a payment constitutes an employment termination payment (ETP), this may be taxed at lower rates than the employee’s normal marginal tax rate. If the payment is considered a genuine redundancy payment, then part of the payment may be tax free. This chapter explores the tax treatment of ETPs and genuine redundancy payments. The chapter will not deal with ETPs paid following an employee’s death or other kinds of termination payments. Different rules and tax rates apply in these situations.

¶64-020 When is a termination payment an employment termination payment (ETP)? Generally, an ETP is a payment made to an employee in consequence of the termination of their employment or the holding of an office. The termination that triggers an ETP can be for any reason, including poor performance, redundancy, resignation, retirement or death. A payment may be an ETP whether or not it is made voluntarily, by agreement or by compulsion of law. A payment may also be an ETP if it is made to a dependant of the employee or to any other person. An ETP does not have to be paid in a single lump sum and may be paid in instalments. Where an ETP is paid in instalments, care needs to be taken to ensure that the 12-month rule (discussed later in this section) is met and that the instalments are not classed as annuity payments. Annuity payments will not receive concessionary ETP taxation but, rather, are assessed to a recipient as ordinary income at their individual marginal tax rate. Also it should be noted that instalments made after the initial payment will be subject to a lower ETP cap because the cap amount is reduced by the amount of all previous payments for the same termination. An ETP does not have to be paid in cash, and can be paid as a transfer of property. Where property is transferred, the amount of the ETP for tax purposes is the market value of the property less any consideration paid by the recipient for the property. Not all payments made at the time of termination are considered to be ETPs. For example, a payment of wages for work already performed is not an ETP and would be assessed at an employee’s normal marginal tax rate. There are also exclusions in the tax legislation for certain payments made on termination. Table 64.1 lists common payments made on termination and considers whether they are ETPs. Table 64.1: When is a termination payment an ETP?

Payments that are ETPs

Payments that are not ETPs

Payments in lieu of notice

Salary, wages or allowances for work already performed

Genuine redundancy payments in excess of the tax-free amount

Genuine redundancy payments that are within the tax-free amount

A gratuity or “golden handshake” payment

Accrued but unused annual leave and leave loading

Payment of unused sick leave

Payments with respect to long service leave

Payment for unused rostered days off

Advances or loans made on an arm’s length basis

Compensation for loss of job or for wrongful dismissal

Payments of a capital nature for restraint of trade

Payments made following the death of an employee (certain payments only)

Compensation of a capital nature for personal injury

Twelve-month rule Generally, a payment must be made within 12 months of the termination of employment for it to be an ETP. Where a termination payment fails the 12-month rule, it is not considered to be an ETP and will be assessed to a recipient as income at their individual marginal tax rate. The Commissioner of Taxation may make written determinations that certain payments can still be ETPs, even though these are received more than 12 months after termination of employment. Currently, the Commissioner has made determinations in the following situations: • where the delay in payment resulted from the commencement of legal proceedings concerning either the person’s entitlement to the payment or the amount of the payment, and the legal proceedings were commenced within 12 months of the termination of the person’s employment, and • where the payment is made by a liquidator, receiver or trustee in bankruptcy of an entity that is otherwise liable to make the payment, and the liquidator, receiver or trustee is appointed no later than 12 months after the termination of employment. It should be noted that the 12-month rule does not apply to a genuine redundancy payment.

¶64-030 Is a payment made “in consequence of” the termination of employment? In order to be considered an ETP, a payment must be made “in consequence of” the termination of the employee’s employment. In Taxation Ruling TR 2003/13, the Commissioner of Taxation stated that a payment will be considered to have been made in consequence of the termination of employment if the payment “follows as an effect or result of” the termination. In other words, but for the termination of employment, the payment would not have been made to the taxpayer. The Commissioner also stated that the phrase “in consequence of” requires a causal connection between the termination and the payment, although the termination need not be the dominant cause of the payment. The question of whether a payment is made in consequence of the termination of employment will be determined by the relevant facts and circumstances of each case. The greater the length of time between the termination of employment and the payment, the more likely that the causal connection between the termination and the payment will be too remote for a conclusion that a payment was made in consequence of termination. However, length of time will not be determinative when there is a presently existing right to payment of the amount at the time of termination. Where an employee commences proceedings against an employer in relation to the termination of their employment, and the proceedings are settled by the employer — paying the employee a lump sum in settlement of all matters in dispute — then the payment may be an ETP. However, this is not always the

case.

Case example Advanced Prosthetic Centre Pty Ltd v Appliance & Limb Centre (Int) Pty Ltd In Advanced Prosthetic Centre Pty Ltd v Appliance & Limb Centre (Int) Pty Ltd [2002] NSWSC 515, two employees (who were also shareholders) were dismissed from a company. Three different sets of legal proceedings were commenced as a result. Mediation was held on all matters and a settlement was reached. Under the terms of settlement, one lump sum was paid in settlement of all of the various claims which were not referable to particular aspects of the termination. The court held that, even though the course of events that led to the payment would not have occurred without the terminations, the settlement reached was so distant that it could not be regarded as a payment made in consequence of the terminations.

Where the settlement amount has a higher degree of connection to the termination, it is likely that it will be considered an ETP.

Case examples Le Grand v Commissioner of Taxation The Federal Court in Le Grand v Commissioner of Taxation 2002 ATC ¶4907; [2002] FCA 1258 held that a payment made in settlement of proceedings for a breach of an employment contract was an ETP. The court was satisfied that the payment was an effect or result of the termination as there was a sequence of events following that termination which had a relationship and connection that ultimately led to the payment. Dibb v Commissioner of Taxation Likewise, in Dibb v Commissioner of Taxation 2004 ATC ¶4555; [2004] FCAFC 126, a payment to a person from a former employer in settlement of unfair dismissal proceedings was held to be an ETP. The subject matter of the proceedings was clearly the termination of employment, and thus, the payment a consequence of the settlement and of the termination. This was so, despite there being a large lapse in time between the termination, court proceedings and settlement.

¶64-040 ETPs cannot be rolled over into a superannuation fund Subject to certain transitional arrangements (that are no longer in effect), since 1 July 2007 employees have no longer been able to rollover ETPs into a superannuation fund. An employee who attempts to rollover an ETP to superannuation will be assessed on the ETP in the same way as if they had received the ETP directly. An attempted rollover is also treated as an after tax contribution to superannuation by the employee and will factor in the employee’s contribution limits for the income year. Superannuation law has annual limits on the amount of contributions which can be made on behalf of a person. Where these limits are breached, the person may be liable for excess contributions tax.

¶64-050 Tax treatment of ETPs An ETP comprises two elements:

(1) tax-free component, and (2) taxable component. The tax-free component consists of payments relating to invalidity and payments relating to service before July 1983. These amounts are tax free. The taxable component is the balance of an ETP which does not represent the tax-free component. The tax rates applicable to the taxable component of an ETP vary depending on the amount of the taxable component received, whether the employee is under or over their “preservation age” on the last day of the income year in which the ETP is made, and whether the employee has received other ETPs in that income year. The “preservation age” is the age at which a person can access their superannuation benefits — generally on retirement. If the employee was born before 1 July 1960, their preservation age is 55 years. If the employee was born after 30 June 1960, their preservation age will be between 55–60 years. The preservation age will gradually increase from 55 to 60 between 2015 and 2025. The effective tax rates applicable to the taxable component of an ETP for the 2015/16 income year are outlined in Table 64.2. Table 64.2: Effective tax rates applicable to the taxable component of an ETP (2013/14) Employee’s age on the last day Tax on taxable component of the income year in which the payment is made

Cap to apply

ETPs — Excluded payments Under preservation age

• Amount up to $195,000 (which ETP cap is the ETP cap amount for the 2015/16 income year): taxed at a maximum rate of 30% plus Medicare levy • Amount over $180,000: taxed at the top marginal tax rate plus Medicare levy and Temporary Budget Repair levy

Preservation age or over

• Amount up to $195,000: taxed at a maximum rate of 15% plus Medicate levy

ETP cap

• Amount over $180,000: taxed at the top marginal tax rate plus Medicare levy and Temporary Budget Repair levy ETPs — Non-excluded payments Under preservation age

• Amount up to the relevant cap Lower of ETP cap and whole-ofamount (which is the lesser of the income cap ETP cap amount or $180,000 minus other taxable income in that income year): taxed at a maximum rate of 30% plus Medicare levy • Amount over the cap amount: taxed at the top marginal tax rate plus Medicare levy and

Temporary Budget Repair levy Preservation age or over

• Amount up to the relevant cap Lower of ETP cap and whole-ofamount: taxed at a maximum rate income cap of 15% plus Medicate levy • Amount over the cap amount: taxed at the top marginal tax rate plus Medicare levy and Temporary Budget Repair levy

The top marginal tax rate for the 2015/16 income year is currently 45%, the Medicare levy is 2% and the Temporary Budget Repair levy is 2% on taxable income exceeding $180,000. The Temporary Budget Repair levy is applicable for the income years from 1 July 2014 to 30 June 2017. The ETP cap amount is indexed each year for inflation in increments of $5,000 rounded down. The taxable components of all life benefit ETPs received in the relevant income year count towards the ETP cap amount. Additionally, taxable components of any life benefit ETP received in an earlier income year for the same termination of employment also count towards the ETP cap amount. A whole-of-income cap applies in conjunction with the ETP cap to some categories of ETPs to determine entitlement to the ETP concessional tax rates. The whole-of-income cap applies to “non-excluded payments”, such as gratuities, golden handshakes, non-genuine redundancy payments, or payments for rostered days off or unused sick leave. The wholeof-income cap does not apply to “excluded payments”, including genuine redundancy payments, invalidity payments, early retirement scheme payments, or compensation due to employment-related disputes relating to personal injury, harassment, discrimination or unfair dismissal. Where a non-excluded payment is made, the applicable cap will be the lesser of the ETP cap or the whole-of-income cap. The whole-of-income cap is currently $180,000 minus other taxable income an employee may earn throughout that income year (disregarding the ETP or ETPs received later in that income year). The leftover amount (being equal to or less than $180,000) will be eligible for the ETP tax concession. ETP amounts over the whole-of-income cap are taxed at the top marginal tax rate. The whole-of-income cap is not indexed.

¶64-060 Genuine redundancy payments If a payment made on termination is a genuine redundancy payment, a certain portion of the payment may be tax free. Section 83-175(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA) provides that a genuine redundancy payment is a payment received by an employee who is dismissed from employment because their position is genuinely redundant. In Taxation Ruling 2009/2, the Commissioner of Taxation noted that there are four necessary components within this requirement: (1) the payment must be received in consequence of the termination of an employee’s employment (2) the termination must involve the employee being dismissed from employment (3) the dismissal must be caused by the redundancy of the employee’s position, and (4) the redundancy payment must be made genuinely because of a redundancy. The Commissioner’s views in relation to each of these components are outlined in the following paragraphs. Was the payment received “in consequence of” the termination? The Commissioner’s views as to whether a payment is received “in consequence of” a termination of

employment are set out in Taxation Ruling TR 2003/13. Has there been a dismissal? The Commissioner’s view is that a dismissal from employment can only occur where there is no suitable job available for the employee with the employer: meaning that they must be dismissed. The exception to this is where a person holds an office with an employer at the same time as having a common law employment relationship with that employer. In this case, dismissal from either the office or common law employment would be considered dismissal from employment. The Commissioner also notes that dismissal requires a decision to terminate employment at the employer’s initiative without the consent of the employee. A dismissal will, therefore, not arise where there is either a resignation or an agreed termination. A dismissal can still occur even where an employee has indicated that they would be interested in having their employment terminated, provided that the final decision to terminate the employment remains with the employer. An example of such a case would be where expressions of interest in receiving a redundancy package are sought from employees. Where an employee is given notice by their employer that their employment will be terminated at a specific time in the future due to genuine redundancy, that employee will be dismissed because of redundancy, even where the employee, following notification, negotiates with the employer or nominates to end their employment at an earlier time. Negotiation or nomination of an earlier time relates to the timing of the termination and not to the character of the termination as a dismissal. Cases of constructive dismissal, such as where an employee resigns under threat of dismissal, will also be considered dismissal for redundancy purposes. Was the dismissal caused by redundancy? If there is more than one contributing cause to the dismissal, in order for the dismissal to be considered a genuine redundancy, the redundancy of the relevant position must be the prevailing or most influential reason for the dismissal. An employee’s position is redundant when an employer determines that it is superfluous to the employer’s needs and the employer does not want the position to be occupied by anyone. In some circumstances, an employer may reallocate the duties and functions attached to a particular position within the employer’s organisational structure. In such cases, the former position is still considered to be redundant. A dismissal is not caused by redundancy where personal acts or default of the employee are the prevailing or most influential cause for the termination, such as where an employee is dismissed due to unsatisfactory performance or behaviour. In some cases, an employer may decide to restructure their organisation at the same time as identifying underperformance of particular members of staff or areas within the existing organisational structure. In the event that employees are dismissed in these circumstances, careful consideration will need to be given to what was the prevailing or most influential cause of dismissal. Was the payment made genuinely because of redundancy? Whether a redundancy is “genuine” is determined on an objective basis. The fact that an employer and employee have an understanding that a payment on termination is caused by redundancy, or that the employer treats the payment as a redundancy payment for tax purposes, does not of itself establish genuine redundancy. Additional requirements for a genuine redundancy payment Section 83-175(2) and (3) of the ITAA requires the following further conditions to be met for a payment to be treated as a genuine redundancy payment: • The termination of employment must occur before the employee’s 65th birthday or the date when the employee would have had to normally leave employment anyway. • The termination must not be at the end of a fixed period of employment (which could be on completion of a particular project). An exception may exist in some cases where “rolling” fixed-term contracts or

project-based contracts establish an ongoing employment relationship. • In the event that the employer and employee are not dealing at arm’s length in relation to the dismissal, the actual amount paid must be no greater than the amount that could reasonably be expected had the parties been dealing at arm’s length. • There is no arrangement entered into between the employer and the employee or the employer and another entity to employ the dismissed employee after the termination. The Commissioner does not consider an arrangement to employ to include a situation where there is an arrangement to engage the former employee as an independent contractor. • The payment is not made in lieu of superannuation benefits due at the time, or in the future. Taxation of genuine redundancy payments In Taxation Ruling TR 2009/2, the Commissioner provides that the following steps should be undertaken to work out the tax treatment of a genuine redundancy payment. Step 1 Identify and exclude any amounts that are subject to a more specific tax treatment than ETPs or genuine redundancy payments. These include superannuation benefits, pensions or annuities, unused annual leave payments, long service leave payments, and foreign termination payments. Step 2 Determine the extent to which the remaining amounts (some or all) may be genuine redundancy payments. In determining the amount of a genuine redundancy payment, any amount that could reasonably be expected if the employee had voluntarily terminated their employment should be deducted. Contractual or other entitlements payable by an employer on voluntary termination are generally a sound guide as to what might reasonably be expected had the employee voluntarily terminated the employment. However, this would be different if the employer and employee are not dealing at arm’s length. There may be industry norms that could be used as a guide as to what payment would be made on voluntary termination. It may also be appropriate to compare standard payments made on voluntary termination within a particular company. However, these comparisons must take account of the actual nature of the dealings, as influenced by the relationship between the parties. A payment in lieu of notice can be a genuine redundancy payment, provided that such payment would not be expected on voluntary termination. Step 3 Determine the amount of the genuine redundancy payment to identify if it will be tax free. The tax-free amount is a flat dollar base amount plus an amount for each completed year of service by the employee. The tax-free amount for the 2015/16 year is a $9,780 base amount plus $4,891 for each completed year of service. The base amount and service amount are indexed annually. When calculating years of service, employers should include periods of annual and long service leave that have been taken, but should not count partial years of service. If earlier years of service with a previous employer are carried over and acknowledged on commencement of the current employment, then those years of service can be included when working out the tax-free amount of the genuine redundancy payment. This enables earlier years of service with employers within a group of entities to be recognised when an employee is ultimately terminated from one of the employers within a group. Recognition of previous service within the group in working out the termination payment should be documented by the terminating employer. Step 4 After going through this process there are two possible remaining amounts: (1) any assessable part of the genuine redundancy payment in excess of the tax-free amount, and

(2) the amount that could reasonably be expected on voluntary termination. These amounts are generally treated as ETPs. The tax-free amount of a genuine redundancy payment cannot be rolled over into an employee’s superannuation fund. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

65. POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEES Editorial information

Michael Michalandos Partner, Baker & McKenzie

¶65-010 Introduction This chapter focuses on what rights employers have to protect their business from current or departing employees. These rights largely emanate from the express and implied terms of the contract of employment. On the commencement of an employment relationship, employers must consider carefully what risks each employee might pose to their business, and what steps must be taken to minimise these risks. Employers who do not prepare suitable post-employment restraints for inclusion in their employment contracts will find that they have few, if any, rights to prevent former employees from abusing business information and poaching their clients, employees and business.

¶65-020 Implied obligations during employment While the employment is occurring, employees are under significant obligations to protect the business of their employer. These obligations are “implied” in the employment relationship. There is no need for the employer to set out these obligations in a written agreement. The courts will automatically assume that these obligations exist unless the parties to the employment agreement expressly agree otherwise. These implied obligations include the following: • an employee must comply with the lawful and reasonable directions of the employer • an employee must act in good faith and, in so doing, must not act against the best interests of the employer or damage the employer’s business • an employee must not accept bribes or secret commissions • an employee must protect the property and goodwill of the employer • an employee must truthfully answer questions of the employer that are within the scope of the employment • any inventions and other intellectual property conceived within the scope of the employment are the property of the employer, and • an employee must maintain the confidentiality of the employer. A breach of the above obligations will constitute a breach of the employment contract and may justify the termination of employment.

Except for obligations of confidentiality, which will be discussed later in this chapter, the abovementioned obligations do not continue after the employment has ceased. In other words, once an employee leaves the employment, the employee is free to: • compete with the employer • take business away from the employer, or • poach the employer’s clients, contractors and employees, except where the employee has entered into an enforceable agreement containing post-employment restrictions.

¶65-030 Fiduciary obligations The relationship of an employer and employee is a “fiduciary relationship”. A fiduciary relationship is often referred to as one of trust and confidence. It arises where one person (the fiduciary) agrees to act on behalf of another (the principal) and, in so doing, can affect the other person’s interests in a legal or practical sense (see Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41). The fiduciary is not free to pursue their own interests and derive profit from their position as a fiduciary. Fiduciaries also must not place themselves in a situation where their personal interests conflict with their duties to the principal. At all times the fiduciary must act in the best interests of the principal. This obligation is intended to prevent an abuse of power in circumstances of special vulnerability. Fiduciary obligations do not arise from the employment contract but, instead arise as a consequence of the relationship between the parties. These obligations supplement the implied obligations discussed in the previous section. Fiduciary obligations form part of a unique area of law called “equity”. Equity operates on a different level to the common law and concerns itself, not with the question of whether a person has complied with the law, but whether a person acts in the manner that they should have under the circumstances. Equity is concerned with a person’s conscience and with the question of how a person in a certain position should act. Fiduciary obligations will prevent an employee from taking advantage of a business opportunity that arises from the employment (eg by earning a secret commission or diverting business away from the employer). The only defence is where the employee has appropriately disclosed the advantage to the employer and the employer has given their informed consent. It is not sufficient for the employee simply to raise the opportunity with the employer. The employee must fully disclose all information that might influence the employer’s decision to give consent. The scope and degree of an employee’s fiduciary obligations will vary, depending on the nature of the employment relationship. There is no definitive statement by which this scope may be identified. Instead, the authorities have identified a number of indicators of a fiduciary relationship, and the task is always to analyse the particular circumstances in light of these indicators. Generally speaking, the greater the reliance an employer places on an employee, the greater the obligations are on that employee. Some of the factors that are important in identifying the scope of a fiduciary relationship in the employment context are whether: • the employee was entrusted with significant responsibilities by the employer • the employee was closely supervised by the employer • the employee represented the employer in their relations with customers and developed relationships with these clients • the employee had authority to enter into contracts on behalf of the employer • the employer was in a position of special disadvantage, or vulnerability, such that they placed reliance on the employee

• the employee had access to confidential or other sensitive information belonging to the employer, and • the particular context in which the fiduciary obligation is said to arise. For example, employees who are in charge of a particular client or client account on behalf of the employer may have a fiduciary duty in respect of their dealings with that client. They may be prohibited from pursuing opportunities to work for, or provide services to, that client during, and in some circumstances after, the termination of employment. Fiduciary obligations after the termination of employment The courts have held that the fiduciary obligations will not extend after the termination of the employment unless the former employee took steps during the employment to “prepare a position to which he could retreat with a considerable part of his employer’s business, if it should become necessary or desirable to vacate the managership” (see Blyth Chemicals v Bushnell [1933] HCA 8; (1933) 49 CLR 66; see also Maryland Metals Inc v Metzner (1978) 382 A(2d) 564) from the United States. The following scenarios are examples where fiduciary obligations may arise in relation to departing employees: • where the employee is leaving to divert a business opportunity or relationship that has come to the employee’s attention during the employment • if the employee is leaving to establish a joint venture with a client or a supplier of the employer • where, prior to leaving, the employee has approached key staff and there has been a decision that they will leave together • where the employee is leaving to secure a benefit for themself that would otherwise belong to the employer (eg a tender), or • where the employee is leaving to exploit confidential information and/or property that belongs to the employer. In any of these circumstances, the employee is regarded as having acted improperly by placing their own interests before those of the employer during the employment and, in some way, deriving an unfair advantage after the termination of the employment. A breach of fiduciary obligations during the employment has, therefore, spilled over into the employee’s conduct after their termination.

Case examples Intention to poach client — Dive and Ors v Chapman & Anor The degree to which fiduciary obligations will impact on conduct, which occurs after the termination of the employment, was considered by the Queensland Supreme Court in the case of Dive and Ors v Chapman & Anor [2006] QSC 029. In this case, the court commented that where a former employee solicits work from his former clients but had no intention to compete with his ex-employer while he remained in employment, it is unlikely that he is breaching any fiduciary obligations. Where an employee approaches clients to follow them to a new business while still working for the employer, and the clients subsequently do follow them, fiduciary obligations have been breached and will survive the termination. This conduct amounts to an unconscionable pursuit of an advantage which has been created while working for the employer. Improper business advantage — Sargant v Lowndes Lambert Australia Pty Ltd The case of Sargant v Lowndes Lambert Australia Pty Ltd (unreported, full bench, 2001 WAIRC 02604, 23 April 2001) contains a good illustration of this principle. Mr Sargant was the state manager in charge of the Western Australian Division of Lowndes Lambert. Upon the announcement of a merger of this office, Mr Sargant requested, and was given, a voluntary redundancy package. It was

a condition of this package that Mr Sargant would return as a consultant to assist with the handover of clients and business. Mr Sargant was presented with, but did not sign, a consultancy agreement. He represented that he would review it after taking a holiday. Upon receipt of his redundancy cheque, Mr Sargant announced to Lowndes Lambert that he had accepted employment with a competitor and that he expected clients would follow. The employer immediately terminated his employment and cancelled the cheque. When Mr Sargant commenced with the competitor, he immediately set upon poaching his previous employer’s clients and, by the time of the hearing, he conceded that he had taken up to 50% of its business. In doing so, there was no evidence that he abused confidential information. The Western Australian Industrial Relations Commission, at first instance, and on appeal, held that Mr Sargant was not entitled to the redundancy pay because he had seriously breached his fiduciary obligations. He had improperly led the employer to believe that after the termination of his employment he would assist the employer to retain its clients by introducing them to new management, when in fact he planned to join a competitor. The evidence established that if this representation had not been made, and Mr Sargant had told the employer of his true intentions, the employer would have taken alternative steps to protect its business. This included requiring Mr Sargant to work out a lengthy notice period and conduct a proper handover as an employee during this period. The President of the Full Bench described the offending conduct as follows: “Mr Sargant laid down a basis to enable him to divert clients to himself as an employee of his new employer in the same manner as funds are diverted from a disloyal or dishonest employee to an employer during his employment … He secretly made arrangements to enable his employer to compete successfully with his old employer after the termination of his employment and to enable both to play a major part in that process as the employee of a direct competitor.” It was critical to this decision that Mr Sargant was “the public face” of the Western Australian office and Lowndes Lambert had relied upon him for over 10 years as the primary liaison with its clientele. The President held: “It was open to find that, during his employment, Mr Sargant failed to comply with generally standards of loyalty, good faith, avoidance of conflict of duty and self interest to which he was required to conform, given in particular his seniority, his long connection with the clients and the trust reposed in him, his unique relationship with many clients, his close relationship with Mr Borsau, and the generosity afforded him.”

Courts and tribunals have very broad powers to deal with a former employee who has abused fiduciary obligations. These powers include: • an injunction preventing the former employee from abusing their fiduciary responsibilities • equitable damages compensating the employer for the loss the employer has suffered, and • an account of profits that have been earned by the former employee. Further, any accessories to the breach may be liable. For example, if a competitor has encouraged or assisted the employee to breach their fiduciary obligations for the benefit of the competitor, the competitor may be joined to the proceedings and held liable.

¶65-040 Confidential information As discussed earlier in this chapter, the only implied obligation that remains after the employment has ceased is that the former employee cannot use or disclose the confidential information or trade secrets of the employer (see Wright v Gasweld Pty Ltd (1991) ATPR ¶41-087; (1991) 22 NSWLR 317).

For the purposes of determining what information is protected, the courts have drawn a distinction between: (1) the know-how and skill of the employee that is acquired as a necessary consequence of the way they are employed and trained, and which they are free to use, and (2) the trade secrets or confidential information of the employer, which the employee is not free to use or disclose, except as authorised by the employer. The courts have not protected the first category of information, because any restriction on its use would also restrict the freedom of an employee to exercise their chosen profession and to contribute their skill and experience to the community. Information that falls into the second category is usually information an employee must deliberately memorise or copy, rather than know-how which has been learnt over a period of time. What information falls into the second category is a question of fact and will depend on not only the nature of the information, but also how the employer treats it. At the very least, the information must itself have the necessary quality of confidence about it and it must have been communicated in circumstances importing an obligation of confidence or secrecy. In determining whether information is a trade secret or is confidential, the courts will consider the following factors. • The extent to which the information is known outside of the employer’s business: If the information is in the public sphere or common knowledge, then it cannot constitute confidential information. If the information has been disclosed in a limited way, this will not necessarily mean that it is not confidential. It will depend on the circumstances and the nature of the information. • Whether the employer has taken steps to guard the secrecy of the information: If the information has been disclosed to employees, contractors or clients, the courts will consider whether the employer has made these persons aware that the information is confidential and should be treated as such. For example, it will assist if the information is marked as confidential, the copying of this information is monitored, and the employer has procedures in place to recover or destroy confidential documents once these have served their purpose. It will also assist if the employer has entered into confidentiality agreements before the information has been disclosed and has enforced these agreements. Employers who cannot establish that they have taken even the simplest steps to guard their business information may not be able to later seek the court’s protection. • The extent to which the information is known by employees and others involved in the employer’s business: The information may not be regarded as confidential if the employer has allowed all employees access to the information without differentiating according to the status or position of the employee. Access to the information should be restricted to those employees who need to know it so that they can perform their duties.

Case example Print Investments Pty Ltd v Art-vue Printing Ltd In Print Investments Pty Ltd v Art-Vue Printing Ltd (1983) 1 IPR 149, the employer tried to prevent the disclosure of names and addresses of customers that had been freely available within the plaintiff’s business operations. The information had also been publicly disseminated in a brochure. The court held that this destroyed the confidentiality attached to the information. Cadgroup Australia Pty Ltd v Snowball In Cadgroup Australia Pty Ltd v Snowball [2016] NSWSC 22, the employer sought an interlocutory injunction to restrain an ex-employee from, among other things, the use and disclosure of

confidential information. Judge Black held, however, that the restraint clause in the employment contract failed to identify the relevant confidential information with the requisite precision and as a result, included information that was publically available. This included information such as customer information, various documents and technical data; including some that was in fact published on Cadgroup’s website. The injunction was not granted, and the court instead accepted an undertaking offered by the defendant to not use or disclose any confidential information of Cadgroup as defined in the employment contract, excluding information that is already in the public domain.

• Whether the employer has spent a significant amount of time, money and effort in developing and/or acquiring the information: The information must be valuable information and not information of a trivial nature. For example, a court will consider whether the disclosure of the information to a competitor will cause harm or loss to the employer’s business. • Whether the information can be easily acquired or duplicated by others: For example, if the information is a mailing list that was compiled by the employer from the local electoral role or phone book, then it is unlikely that a court will protect the information because it can be easily reproduced. • Whether the industry usage and practice in relation to this information is consistent with an assertion of confidentiality: Courts are more willing to accept that confidentiality attaches to industry-specific information if it is of a kind that would be regarded as confidential by those who have worked in the relevant industry for a long period of time.

Case example Wilson HTM Investment Group Limited & Ors v Pagliaro & Ors In the case of Wilson HTM Investment Group Limited & Ors v Pagliaro & Ors [2012] NSWSC 1068, the Supreme Court of NSW held that it was satisfied on the evidence that lists of specific revenue figures earned by named employees as commission were confidential information because people in the financial services industry regarded them as confidential.

Because the application of the tests involves a degree of discretion, prudent employers should specify what information they consider to be confidential information in their employment contracts. The courts have held that an employer can, to a degree, extend the range of confidential information by agreement. However, the information must still be of a sensitive nature and not encroach on the know-how and skill of the employee. A blanket assertion of confidentiality over all business information may not be enforceable.

Case examples Confidential information that is inseparable from general know-how — Del Casale and Others v Artedomus (Aust) Pty Ltd In Del Casale and Others v Artedomus (Aust) Pty Ltd [2007] NSWCA 172, Artedomus (the employer) imported a particular type of stone from Italy and sold it in Australia under the name “Isernia”. The employer was the sole importer of that stone into Australia. Acquiring the stone is generally challenging because it is difficult to identify. The employer made efforts to conceal the information required to identify the stone by sharing it with only a few people, including the two employees in this case. The two employees left the company and set up their own business, importing the same kind of

stone and selling it under a different name. The employer claimed that the information used was highly confidential, but the court held that it could not be separated from the “general know-how” acquired by the two ex-employees. The effect of such a restraint would require them to “somehow blot out their knowledge that Isernia was modica stone and undertake the attempt to find similar stone under those artificial circumstances”. The “artificiality” of the separation of confidential information and general know caused the failure of the restraint in this case. Confidential information stored in a person’s head — Cactus Imaging Pty Limited v Glenn Peters As indicated previously, the courts have traditionally drawn a distinction between information which must be copied or memorised and knowledge and know-how which an employee develops in the course of performing a job. The latter type of information usually cannot be protected. However, in the case of Cactus Imaging Pty Limited v Glenn Peters [2006] NSWSC 717, the Supreme Court of NSW was prepared to protect confidential information stored in an employee’s head, even though there was no evidence that the employee memorised this information. The defendant, Mr Peters, was employed by Cactus Imaging Pty Limited as its New South Wales sales manager. Cactus Imaging produced images for display on large outdoor billboard sites. When Mr Peters eventually resigned, he decided to take up a full-time position with a competitor of Cactus Imaging. Proceedings were brought by Cactus Imaging to enforce a post-employment restraint clause, which prohibited Mr Peters from disclosing confidential information on the basis that the information would have given its competitors a competitive advantage. The court accepted that, by virtue of his position, Mr Peters had over a period of time stored specific confidential information in his head that related to the method by which Cactus Imaging prepared quotes for clients, information on printing processes, the types of machines used, client lists and marketing strategies. On this basis the court held that it was necessary to enforce the restraint. Inevitable disclosure — Great Southern E-vents Pty Ltd v Peskops The jury is still out in Australia as to whether an employer can restrain an ex-employee from approaching clients on the basis that the ex-employee will inevitably abuse their obligations of confidentiality in the new position. This argument was raised in the decision of Great Southern E-vents Pty Ltd v Peskops [2007] NSWSC 382. In this case, the employee was the sales and marketing manager of a small events management company. The employee left his employer to set up a competing events management business with a partner. The employee’s contract of employment did not contain a post-employment restriction preventing the employee from poaching clients or working in competition with the employer. It did, however, contain a standard confidentiality clause which prevented the ex-employee from using the employer’s confidential information. Regardless of this, the employer sought an urgent injunction to restrain the ex-employee from approaching five key clients on the basis that the ex-employee had access to confidential information and it was inevitable that he would use this information were he to solicit business from the key clients. The court granted an interim injunction preventing the ex-employee from approaching four of the five clients. This was on the basis that the employee had access to confidential information regarding the financial terms on which the employer dealt with the clients, budgets for their events, the expenses in relation to those events, and the profit and profit margin derived by the employer in respect of those events. The court held that there was an arguable case that it would be impossible for the exemployee to deal with the identified clients without using this information. In the circumstances, the court formed the view that there was a serious question to be tried.

Whistleblowing

As an aside, the courts will not prevent the disclosure of confidential information if: • there is a public interest in making the disclosure, and • the disclosure is made to an authority that is responsible for acting on that information (see Gartside v Outram (1856) 26 LJ Chs 113 and 114). For example, an employee or former employee may be permitted under these principles to provide confidential information regarding an employer’s unlawful trade practices to the Australian Competition and Consumer Commission. It is important that the disclosure must be made to a person who has an interest to receive this information. This exemption may apply to situations where there may not necessarily be a criminal or statutory breach.

Case examples Initial Services Ltd v Putterill In Initial Services Ltd v Putterill [1967] 3 All ER 145, Lord Denning held that this principle applied in circumstances where there was misconduct of such a nature that it ought, in the public interest, to be disclosed to others. Lion Laboratories Ltd v Evans In Lion Laboratories Ltd v Evans [1984] 2 All ER 417, a former employee disclosed information concerning the suspected unreliability or inaccuracy of a breath analysis device, the results of which were widely used as evidence in prosecutions for drink driving offences. The disclosure was made by the employee (who previously made the device) to the press. Australian Football League v The Age Company Ltd Relevant principles were discussed in Australian Football League and Another v The Age Company Ltd and Others (2006) 15 VR 419. This concerned the information of drug use by AFL players being passed on to the media, where the defendant’s claimed that the disclosure was lawful because the information was of public interest, or was not “confidential” as it concerned criminal activity. Justice Kellam of the Supreme Court of Victoria rejected both of these arguments. The information did not meet the requisite standard of “public interest” which must ordinarily involve necessary disclosure “so as to protect the community from destruction, damage or harm”. Kellam J held that it would rather be categorised as satisfying “public curiosity”. Furthermore, the drug use of the players was not considered to be of a “serious criminal nature” and there was merely a possibility that a crime was committed. Kellam J held that even if the information could be considered an “iniquity”, the disclosure was not made to a third party with a real interest in redressing any such possible crime.

Certain statutory regimes also exist to protect whistleblowers within public and private organisations. Practical difficulties in enforcing confidentiality obligations One important practical difficulty in taking action against a former employee who has abused confidential information is that the employer often does not have evidence of the offence. It is difficult for an employer to establish that an employee has copied or memorised information because this evidence is usually in the possession only of the employee, and the employee has a capacity to destroy the evidence. It is not sufficient for an employer simply to claim that, because an employee had access to confidential information generally, an abuse of this information is self-evident from the employee’s subsequent conduct. The courts require an employer to identify the confidential information that the employee has accessed and abused. It must be severable from other non-confidential information. One of the main benefits of post-employment restrictions is that it relieves the employer of this onus.

¶65-050 Agreements to restrict the trade of an employee If an employer wishes to impose more general restraints on the ability of a former employee to trade, the employer must do so by agreement. The usual types of restrictions that are sought to be imposed include limiting the employee from: • conducting certain work in a particular geographical area, or for a specified period of time, or a combination of both, and/or • poaching the clients or employees of the employer. Such agreements are only enforceable to a limited degree. The courts have generally frowned on any bar to competition in a free enterprise economy that might operate to reduce the freedom of an individual to contribute their skill or experience. The rule has developed that any agreement which is unduly restrictive of a person’s ability to carry on a trade or business will be, at first instance, void and unenforceable. However, if because of the surrounding facts the restriction is reasonable in all the circumstances, the courts may enforce the agreement. The relevant principles were summarised in Tullet Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 at [47] and have been restated in various cases including BGC Partners (Australia) Pty Limited v Hickey [2016] NSWSC 90. A post-employment restraint is regarded as invalid unless the employer can establish that it is: • confined to reasonably protecting the legitimate business interests of the employer, and • not unduly injurious to the interests of the employee and the public. This test is applied at the time when the agreement is made (see Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 at [344]; Woolworths v Olson [2004] NSWCA 372 at [40]). In applying the first part of this test, the courts have confined what constitutes legitimate business interests to the protection of: • the employer’s trade secrets and confidential information, and • an employer’s client base. In respect of the latter, the court in Burwood Night Patrol Pty Ltd v Legarde (1993) 51 IR 118 held that: “the interest … which may be legitimately protected … is … the prospect of the former employee taking advantage of a personal relationship developed during the period of his employment and therefore prima facie for the benefit of the employee, to the detriment of the employer’s business …” The employer must be able to show that, due to the employment, the employee has developed a personal influence over the employer’s customers (see Herbert Morris Limited v Saxelby [1916] AC 688; see also Beaches & Bush Properties Pty Ltd v Jennings [2003] NSWSC 798). If the former employee has never had contact with a particular client during the employment, then it is less likely that an employer will be able to restrict the employee from poaching that client. The effect is that, when preparing a post-employment restriction, the employer must in each case have regard to which clients and what confidential information the employee has access to, and whether there is a real risk that the employee will be able to damage these interests. The restriction itself must be confined to protecting these interests, and no more. The courts have not recognised that an employer has a legitimate business interest in: • reducing competition, or • preventing an employee from using knowledge and training paid for by the employer.

Case example

Attwood v Lamont In Attwood v Lamont [1920] 3 KB 571, the court held as follows: “The employer’s goodwill is always necessarily subject to the competition of all persons, including the employee, who chooses to engage in a similar trade. The employer in such a case is not endeavouring to protect what he has, but to gain a special advantage he could not otherwise secure.”

¶65-060 What is a reasonable restraint? The determination of reasonableness is a discretionary matter and the court will look at the particular circumstances of each case. The relevant time for testing the reasonableness of the restraint is the time of entry into the contract and the onus is on the employer who is seeking to enforce the restraint to show that it is reasonable. The factors that a court will consider will depend on the type of restraint. General restraints Where the restraint generally prevents a former employee from engaging in a particular business, the court will consider the following factors. • What business interests are being protected? Is the employee capable of threatening these interests, and is the restraint relevant to protecting these interests? A court will review whether the employee has had access to clients and/or confidential information, and whether these interests are threatened. • Over what period does the restraint apply? If the interests the employer seeks to be protected are client relationships, this period should reflect the strength of the employee’s influence over the employer’s clients. If the interests that are being protected relate to confidential information, the restraint period must take into account the “expiry date” of confidential information. When does this information cease to be confidential or valuable? For example, if the information relates to an up-andcoming tender, when does the tender close? • Is the time period of the restraint excessive? For example, the restraint may not be enforceable if it substantially exceeds the length of service of the former employee with the employer, or if the restraint will have a substantial impact on the livelihood of the employee. • Does any geographical limitation extend beyond the area of business over which the employee was exposed and may influence? Employers should not automatically draft restraints that apply over their existing or potential markets. The employee may not have had significant exposure to the entire market and only part of this market may be at risk. • If the restraint clause prevents the ex-employee from engaging in certain businesses, are those businesses confined to those which the employee was exposed to during the employment? Employers may be engaged in several businesses or activities. If the employee was only exposed to one business during the employment, then the restriction should not extend beyond the practice of this business. • Has the employee received a separate and significant payment as consideration for entering into the restraint? Such a payment may mollify the impact of a broad restraint on the employee, particularly if it constitutes a substitution for income that the employee could otherwise have earned. • Is there a public interest in allowing the employee to ply their trade? For example, if the employer has a stranglehold over the marketplace, allowing it to charge artificially high prices, then there may be a public interest in allowing the employee to proceed.

Case examples Time Period — Birdanco Nominees Pty Ltd v Money In Birdanco Nominees Pty Ltd v Money [2012] VSCA 64, Mr Money was employed by Bird Cameron and faced with a restraint clause which prohibited him, for three years after ceasing employment, from providing accounting services to any client he had served as an employee of Bird Cameron. The trial judge held that this was an unreasonable restraint due to the extensive time period, however, this decision was overturned by the Court of Appeal. It was found that: “It is probable that Mr Money would still retain some material level of attachment necessarily formed with a client … after an almost six year break in providing those services. Mr Money would have a degree of knowledge of the client’s affairs that would avoid the client having to explain and disclose its financial structure and history, something that it would have to disclose if it retained somebody unaware of its circumstances. Part of the attraction to the client of retaining Mr Money would be the attachment that was formed when he was employed by Bird Cameron.” [83] Therefore, due to the nature of the relationship of the employee with the client as part of Mr Money’s role at Bird Cameron, the three-year time period was considered reasonable and the restraint was upheld. Capacity — Rentokil Pty Ltd v Anita Kate Lee The courts will scrutinise carefully and define strictly the types of activities that an employer purports to restrain. Employers must be careful to refer only to activities that pose a real risk to the employer’s business. Potential problems are illustrated by Rentokil Pty Ltd v Anita Kate Lee (1995) 66 SASR 301; [1995] SASC 5566; (1995) 183 LSJS 444, in which the Full Court of the South Australian Supreme Court was faced with the covenant which provided that the employee must not “either directly or indirectly in any capacity … carry on, be associated with or engage or interested in” various kinds of business. “Capacity” was separately defined as follows: “Any capacity including without limitation, as principal, director, employee, shareholder or unit holder (other than as the holder of no more than 5% of the issued capital of any company or trust whose shares or units are listed on the recognised stock exchange), partner, joint-venturer, member, trustee, beneficiary, financier, guarantor, adviser or consultant.” Chief Justice Doyle held that there was real difficulty with several of the specified capacities, including those of shareholder, unit holder, financier and guarantor. While he conceded it was possible that the employee might in these capacities be in a position to damage the employer’s protectable interest, it could not be considered a “real risk”. Hence, the restraint went too far. The chief justice held that the offending portions of the definition of capacity could be severed, leaving behind a valid restraint that, on the facts, had been breached by the employee. Soliciting — Ecco Personnel Pty Ltd v Barrett and Ors Restraints usually attempt to prevent an employee from making active attempts to steal clients or business. The words “canvass”, “solicit” or “entice away” business are often used in restraint clauses. In Ecco Personnel Pty Ltd v Barrett and Ors [1996] NSWSC 475, the court considered the meaning of these words. It held that these words required active involvement by the person being restrained, such that the person was the mover in the client’s decision to transfer the business. In this case, the executive subject to the restraint covenant attended a client’s premises at the invitation of the client and presented a proposal that was more attractive than the client’s contract with the executive’s previous employer. The court concluded that “enticing away” referred to a situation where the executive offered someone conditions so attractive that the client is attracted to come across. The executive appealed the decision of Young J on the basis that, on the evidence, the executive

was first approached by the client and invited to submit a proposal to perform work. The executive argued that because the client initiated the first step, he could not be guilty of canvassing, soliciting or enticing any client away from his previous employer. The Court of Appeal rejected this argument on the basis that it was not appropriate to construe “solicit” in a mechanistic fashion. The fact that the approach by the client was a catalyst or trigger for the solicitation did not mean that the employee was any less the mover for the action of solicitation occurring. (See also Barrett and Ors v Ecco Personnel Pty Limited Matter No Ca 40586/96 [1998] NSWSC 545.) Planet Fitness Pty Ltd v Brooke Dunlop & Ors In Planet Fitness Pty Ltd v Brooke Dunlop & Ors [2012] NSWSC 1425, Planet Fitness sought an injunction to enforce a restraint of trade against Ms Dunlop, who had acted in an independent contractor relationship with Planet Fitness to provide personal training services to Planet Fitness’ clients. The clause required that Ms Dunlop not provide personal training services to persons who had been her client when she worked for Planet Fitness, for three months. Justice White stated that there was a strong prima facie case that Ms Dunlop had solicited persons who she provided services for at Planet Fitness through posts on her Facebook page. Evidence established that a number of these clients had in fact cancelled their memberships at Planet Fitness and signed up for services offered through the gyms that Ms Dunlop now trained at. However, there were a number of ongoing difficulties which prevented the granting of this injunction. The major issue was being able to identify which clients cancelled their memberships as a result of the solicitation, and those who, “of his or her own volition”, wished to continue to use the first defendant as his/her personal trainer. Ms Dunlop was entitled to work as a personal trainer for those in the latter group. As a result of this difficulty, Justice White ordered that Ms Dunlop be restrained from making further attempts to solicit clients of Planet Fitness through Facebook or other means, but no such injunction restraining her from working for clients she had previously serviced at Plant Fitness was deemed reasonable or practical. The dangers of acting inconsistently with restraint clauses — Kearney v Crepaldi & Ors In Kearney v Crepaldi & Ors [2006] NSWSC 23, the Supreme Court of NSW refused to enforce a restraint on the basis that the employer had acted inconsistently with it. Mr Crepaldi and Mr Paxton were employed by Kearney Australia, a management consulting firm. When both senior employees resigned, they decided to establish a competing business (Crescendo). Kearney Australia sought to enforce restraint clauses, which prohibited both ex-employees from performing similar duties and poaching of staff. However, evidence was produced to the court that Kearney Australia had diverted work to the two ex-employees in the new business in situations where Kearney Australia was overloaded. The court refused to grant an injunction which would prevent the employees from continuing in their new roles on the basis that the diversion of work to the ex-employees was inconsistent with the enforcement of the restraint. The judge described the implications of diverting opportunities to former employees as follows: “I think, it would be a travesty of justice to grant Kearney Australia the relief that it now seeks against Mr. Crepaldi … Whether it is put as a matter of delay, or unconscionability, or approbation and reprobation, does not seem to me to matter. The simple truth is that Kearney Australia, for its own purposes, availed itself of the services of Mr. Crepaldi through Crescendo and only thereafter, having got what it wanted, did it take steps to tell him that he could not perform similar services for other clients … For that reason alone I would refuse this claim for interlocutory relief.” [67] (paraphrased) Relevance of negotiated post-employment restrictions and admissions of reasonableness — Miles v Genesys Wealth Advisers Limited In the decision of Miles v Genesys Wealth Advisers Limited [2009] NSWCA 25, the majority of the Full Bench of the New South Wales Court of Appeal enforced a 30-month non-competition restraint and also a non-solicitation restraint in respect of a former managing director of Genesys. Genesys

conducted the business of providing financial products and services to retail clients through member financial planning firms and practices. The ex-managing director had enjoyed 20 years’ employment with his ex-employer. Over the course of this period the managing director had developed a longstanding relationship at a senior level with financial planning members who were serviced by Genesys. The court held that the restraints at issue were not unreasonable, nor were they intended to stifle competition. This was principally because the ex-managing director had access to information which was at a “high level of confidentiality”, such as long-term strategic planning. Access to this information could directly equip a competitor to attack Genesys’ weak points in its relationships with member firms and to build on them and, therefore, the risk of damage to the business of Genesys was very high. The relevant restraints were contained in a Deed of Release. One of the restraints prevented the exmanaging director from engaging in a competing financial services business in Australia. The deed also contained a restriction which prevented the ex-managing director from soliciting member firms. It was an important factor in the majority’s decision that the ex-managing director could have attempted to mask a breach of the non-solicitation restraint by using the sales staff of his new employer to solicit Genesys member firms indirectly. Even though indirect solicitation was prohibited by the nonsolicitation clause, the majority judges believed that it would have been very difficult for Genesys to establish evidence of such a breach. For this reason, the court ordered that the ex-managing director be restrained generally from being engaged in a competitive business. Another factor which weighed heavily in favour of Genesys was that the restraints contained in the Deed of Release were part of a negotiated outcome which also involved the ex-managing director obtaining certain share benefits under a long-term incentive plan (which were in dispute). The managing director had obtained independent legal advice from solicitors who were experienced in employment law before entering into the Deed. The court noted that the managing director had made a contractual admission in the Deed that the restraints were reasonable. Although the court did not regard this admission as conclusive, the court indicated that it did give the admission considerable weight where the parties had negotiated the Deed on an equal footing and with the benefit of expert legal advice. Independent contracts may be subject to shorter restraint periods — Informax International Pty Ltd v Clarius Group Limited In the case of Informax International Pty Ltd v Clarius Group Limited [2012] FCAFC 165, the Full Federal Court of Australia held that an independent contractor of a labour hire firm should be subject to a shorter restraint period in relation to a client non-solicitation clause when compared with a fulltime employee. This was because the independent contractor did not possess any confidential information, no costs were incurred by the labour hire firm in training the independent contractor, and the independent contractor had not become the “face of the company” with any clients. Therefore, there was minimal risk of loss to the labour hire firm. While the court accepted that the labour hire firm had a legitimate interest to protect, it was not prepared to find that a 12- or six-month restraint period necessary to protect this interest. Instead, the court decided to uphold the validity of the non-solicitation clause only on the basis that the restraint would be valid for a period of four weeks, which the court considered to be reasonable. The court also found the 12-month restraint period contained in the contract between the labour hire firm and its client was unfair under the Independent Contractors Act 2006 (Cth). This was because the restraint period was inconsistent with that contained in the contract between the labour hire firm and contractor who was engaged to perform work for the benefit of the client, and because the contractor had no knowledge of this other contract. Interaction with gardening leave — Seven Network (Operations) Limited & Ors v James Warburton (No 2) In Seven Network (Operations) Limited & Ors v James Warburton (No 2) [2011] NSWSC 386, the court considered the enforceability of a 12-month non-competition restraint in respect of the Chief Sales & Digital Officer of the Seven Media Group (Mr Warburton).

When the Seven Network ascertained that Mr Warburton had signed a contract with Channel Ten, Seven Network placed Mr Warburton on gardening leave for the remainder of his employment. During this gardening leave period, Mr Warburton was directed by his employer not to attend the workplace. He was also prevented from having access to any confidential information, clients or staff (notwithstanding that he remained strictly employed by the company). The 12-month restraint was contained within a Management Equity Participation Deed and provided that the restraint takes effect from whenever the employee “ceases to be employed or engaged by a Group Company”. Seven sought to have this phrase construed as meaning on termination of employment. However, the court disagreed and preferred a construction that the meaning of this phrase to commence at a point in time whereby “the employee has ceased to have access to the confidential information, clients and staff to which he would be exposed in the course of his employment”. To do otherwise, the court held, would be “capricious or unreasonable” as it would effectively mean that Mr Warburton would be quarantined from the company’s confidential information, clients and staff for more than 19 months and would render the restraint “a fickle caprice”. The court held that the company could not have the benefit of the full 12-month restraint without credit for any period of gardening leave and held that the words “ceases to be employed or engaged” to mean that point in time when the employee ceases to be engaged in a practical sense, that is, the date on which the employee was no longer required to perform his duties and was placed on gardening leave.

Poaching clients Different issues arise where the restraint clause prevents the employee from poaching or soliciting work from clients. The courts will have regard to the following factors. • Did the former employee deal with the clients during the employment? Did the former employee develop a personal relationship or influence with the clients during the employment that they might exploit after the employment? If not, did the former employee gain some other advantage from the employment in soliciting work from this client (eg because of access to confidential information regarding the pricing of contracts)? • Do the clients exclusively contract with the employer or do they provide work to several competitors? In these circumstances, the employer may not have any “goodwill” in the client that is capable of protection. • Did the former employee have a relationship with the clients prior to the employment? If the former employee brought the client to the employment relationship then, again, the employer may not have any “goodwill” in the client that is capable of protection, unless the employer “purchased” the clients from the employee or the employee’s business for valuable consideration. • How many clients are there? Are there other customers or clients in the market to which the employee can provide services? The restraint may be unenforceable if the range of clients is so broad that it will effectively prevent the former employee from practising in the industry. • Is the former employee capable of identifying the clients covered by the restraint? For example, if the clause refers to any person who was ever a client of the business, does the employee know who these persons are and can they exert any realistic influence over them? • Is the restraint limited to a period of time? First, the courts assume that the personal influence of the former employee will diminish over time. Second, the courts also recognise that an employer’s relationships with its clients are not permanent. For example, if the industry in which the employer operates has a high and regular turnover of clients, a restraint that applies for a long period of time may not be enforceable.

Poaching employees Restraints regarding the poaching of employees have not been the subject of detailed review by the courts. To justify such a restraint, the employer would still need to show that the restraint is aimed at protecting some proprietary right by way of trade connections or trade secrets. For example, the employee who is being poached may have developed a personal influence over the employer’s customers. Further, the ex-employee may have had access to confidential information which would assist that employee to target the most valuable employees of the ex-employer.

Case example Cactus Imaging Pty Limited v Glenn Peters In Cactus Imaging Pty Limited v Glenn Peters [2006] NSWSC 717, Brereton J of the Supreme Court of NSW enforced a restriction preventing an ex-employee from poaching sales staff on the basis that the ex-employee had access to confidential information about the performance of Cactus’s sales staff. The ex-employee could have used this information to select the most valuable staff of Cactus for defection from the sales team to a competitor.

If the restraint covers employees who are relatively unskilled, can be readily replaced, and have had no access to confidential information or clients, then it may not be enforceable. If, on the other hand, the restraint covers an employee who is a relationship manager for an important client whose business is up for tender, then it is more likely that a restraint may be enforceable.

¶65-070 Consequences of going too far In states other than, possibly, New South Wales, a court will find that a post-employment restraint is unenforceable if it is capable of applying in circumstances that are unreasonable and against public interest (see Papastravou v Gavan [1968] 2 NSWR 286). It is not relevant that the circumstances in which the employer is attempting to enforce the restraint involve a reasonable application of the restraint and the employer is attempting to protect a legitimate business interest. The focus in determining reasonableness is the potential applications of the restraint, not its actual application. This makes it very important that such restraints are drafted with care. In the event that a court finds that a restraint is too broad, it does not have the power to invalidate it. If, however, the clause has been prepared in several parts, the courts will sever or delete the offending parts. This involves what is often called the “blue pencil test”. The court will read through the restraint provisions and delete all offending parts: if what is left makes sense and is consistent with what the parties originally intended, the court will enforce it. Solicitors often attempt to take advantage of this “blue pencil test” by drafting post-employment restraints in the form of “step clauses”. These clauses provide several degrees of application, ranging from the broad to the narrow. For example, the clause may state that a restraint applies for a period of 24 months; if this is unenforceable, then 12 months; if this is unenforceable, then six months. The court can then delete the time periods that it believes are excessive and what remains is enforceable. Employers should note that the courts have cast doubt on the enforceability of step clauses that have numerous combinations on the grounds that they make the extent of the restraint uncertain.

¶65-080 Restraints of trade in New South Wales The Restraints of Trade Act 1976 (NSW) (the Act) operates to save post-employment restrictions that would otherwise be unenforceable on the grounds discussed previously. Section 4(1) of this Act provides that a restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not. This section enables a court to focus on the

reasonableness of applying the restraint in the case at hand, rather than the potential application of the restraint. The court may enforce a reasonable restraint falling within the expressed restraint even though the expressed restraint is too widely stated and contrary to public policy (see Kone Elevators Pty Ltd v McNay (1997) ATPR ¶41-564 and Woolworths Limited v Mark Konrad Olson (2004) NSWCA 372). However, under s 4(3) of the Act, the person who is the subject of the restraint (eg an employee) may independently apply to the court for an order that an expressed restraint is either altogether invalid or is valid to a limited extent. The court has discretion to make such orders as it thinks fit if it finds that there was a “manifest failure” by the person who created or joined to create the restraint to attempt to make a reasonable restraint. Under this provision, a court may effectively rewrite the terms of a restraint to make it reasonable, for example, by reducing the time period or geographical area over which it purports to apply or the nature of the businesses restrained. The potential application of the Act makes it attractive for employers who wish to enforce postemployment restraints to draft them so that the law of New South Wales applies. However, employers should not rely on the intervention of the courts to read down otherwise unenforceable restrictions and, in order to avoid the application of s 4(3), must attempt to prepare a reasonable restraint at first instance. The courts will not engage in extensive redrafting under this Act and may, on the application of an employee, wholly invalidate a restraint if the restraint was obviously unreasonable when prepared.

¶65-090 Other issues — enforceability of restraints Because this area of law is governed by discretionary concepts of reasonableness and fairness, there will always be a degree of uncertainty regarding whether a particular restraint will be enforceable. Each situation will have to be assessed on its own particular set of circumstances. Because of this, it is inappropriate for employers to rely upon pro forma agreements. Each agreement will need to cater for the specific position of the employee. Employers should also seek only the minimum restrictions required, on a realistic view of the employee’s competitive strengths, to reasonably protect the employer’s interests. Employers must also ensure that restraints are regularly reviewed during the employment and adapted to the changing circumstances of the employee. In particular, the employer needs to consider the impact of the following: • promotions to a new position or changes in the nature of the business, which may invalidate an existing restraint and give rise to new and different risks for which the employer must cater • transfers to different entities within a group, which may mean that a restraint will only be enforceable by the previous employing entity, and • the accrual of lengthy periods of service may enable the employer to seek a more extensive restraint. Employers must also enforce restraints consistently and ensure that they do not waive their rights by indicating to an employee that the restraint is either unenforceable or will not be enforced. When the time comes to enforce the restraint, employers must note the following: • A court’s power to issue an injunction preventing the former employee from breaching the restraint is discretionary. If the employer has breached the employment agreement, a court may refuse to intervene because the employer has not approached it with “clean hands”. Likewise, the court will be less inclined to grant an injunction if the employer delays in seeking relief. • A court will only grant an injunction preventing a former employee from breaching a restraint if there is a clear and substantial threat to the former employer flowing from the former employee’s breach of the relevant clause. Otherwise, the court will simply award damages representing the loss to the employer resulting from the breach (see McLachlan Consultants Pty Ltd v Boswell 1988 AILR ¶467). For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service.

66. INTERNATIONAL HUMAN RESOURCE MANAGEMENT Editorial information

Andrew Heys Lecturer, Macquarie Graduate School of Management

This chapter is taken from research undertaken in the author’s capacity as a staff member of Macquarie Graduate School of Management.

¶66-010 Introduction Australia is a multicultural country with a relatively open economy, located in the dynamic Asia Pacific region. Increasingly, many managers have direct reports or reporting relationships with people who are based in another country. It is, therefore, important for Australian managers to learn to manage people successfully across national and cultural barriers. Developing what has been called a “global mindset” means that managers may readily employ management styles that show empathy and cultural understanding to different priorities and world views and, further, that they know how to direct, motivate and lead people remotely. Increasingly, organisations of all shapes and sizes are sending employees “offshore” to work with joint venture partners or in subsidiaries for either short or extended periods of time and on a variety of differing international assignments. The field of international human resource management (IHRM) is concerned with how individuals are best selected, trained and managed throughout this period and how multinational enterprises (MNEs) manage their human capital. Some typical international human resources (HR) scenarios managers may face include the following: • You are negotiating the remuneration package for an Australian manager who has just been promoted to the position of regional sales director. The position is based in Jakarta, Indonesia. What items might you include in the remuneration package? What is fair to this person and to other managers working at the same level (eg locals)? • You have been offered a promotion in an international location. You do not want to turn it down but you are concerned about the career implications of working offshore and have been told that going on assignment can be a “one-way ticket”. Should your company be guaranteeing you a job when you return home? • You are trying to hire someone to manage your office in Seoul, Korea and you need to conduct an international search to find the right candidate. Where do you start? What should you look for in this person, what selection criteria could you use? Must they speak Korean as well as English? • You want to run some training for your back office staff, based in Mumbai, India. Do you use the same trainer that you used in Australia? Will the materials need to be adapted to meet the local culture?

• Your company is hosting a management trainee from the parent company based in the United States. What roles and responsibilities should that person take on? Who should manage the trainee’s performance? • Your company is trying to cut labour costs in China. Do you need to consult with the government before making some positions redundant and retrenching staff? Traditionally, IHRM has been focused on developing research findings and theories of HR as they relate to the management of expatriate managers working offshore for multinational companies (MNCs). However, as the previous examples suggest, the brief of IHRM has now widened to encompass a much broader range of staffing and people-related situations pertinent to international business and crosscultural management.

¶66-020 Definitions: who works in international organisations? In the world of international business there are a range of different employees. For the purpose of this chapter, and following the conventions within the discipline of IHRM, we will adopt different names for these different groups of employees. Host country nationals When a multinational establishes a subsidiary or enters an international joint venture, often the subsidiary will be run and managed to a large extent by suitably qualified local people. In the language of IHRM, such people are referred to as “host country nationals” (HCNs). They are so named because, in effect, they are hosting the international company in their country. Whether these people are in managerial, supervisory or solely in front line positions is determined by the staffing approach taken. Parent country nationals There are often a smaller number of employees (usually in managerial roles) called “parent country nationals” (PCNs) working in international organisations. PCNs are people working in foreign subsidiaries who originate from the country where the organisation is owned (and listed on the stock exchange), or where the company has its head office. In some companies, the entire upper level of management may consist of PCNs. An Australian manager working for an Australian company at a factory based in Indonesia would be called a PCN. Third country national Another category of employee is a “third country national” (TCN). TCNs are people who originate from neither the parent country nor the host country. TCNs work in both the subsidiaries and headquarters of MNCs. For example, an Australian working in Canada for an American company would be called a TCN. Expatriates Another common term used in the world of international business is “expatriates”. These are predominantly PCNs, but increasingly they are TCNs. Expatriates are individuals based for an extended and generally fixed period of time in a location that is not their home at the time of their recruitment or appointment. Expatriates receive a suite of benefits on top of their normal salary to compensate for the inconvenience and, at times, “hardship” of living away from home. Items in a typical expatriate benefits package include: • housing allowances • home leave/trips and flights • tuition costs for children at local schools • relocation costs, and • tax advice. Managing these benefits is often the task of the international HR manager or one of their suppliers (eg a

relocation company). Maintaining large numbers of expatriates can be very expensive, and so companies increasingly try to keep their expatriate numbers to a minimum. The trend for many companies is (after a set period) to shift international employees onto local contracts: that is, to pay their employees the “going rate” in the country where they are working and to engage those staff members in a permanent capacity in the offshore location, not to place them on short-term contracts. Often localised contracts are topped up with additional benefits and incentives for international employees.

¶66-030 Domestic vs international HR management With the previous definitions in mind, the following paragraphs consider how some of the typical HRM activities occurring in a domestic setting differ from how they take place in international settings. Job analysis and design Domestically, this process involves defining the duties of a particular position and ensuring the job is achievable, safe and has clear definitions. Most jobs can be summarised in a job description and a statement of the importance of the job to the organisation, along with labour market (supply and demand) information. This allows the organisation to provide a sufficiently competitive salary to attract qualified candidates. In the international arena, the process of job design is not always clear. There may be many tasks that an expatriate has to perform, which are not part of the job description (in practice or on the ground in the foreign location), such as establishing relationships within the local business community. Many complicating factors may make it more difficult to perform successfully in the job, particularly those relating to the person’s ability to adapt to the new culture or to deal with ambiguous situations where, to understand fully what is going on, can be difficult due to cultural differences or language barriers, which may make networking or influencing others complicated. Recruitment and selection Recruitment is also more complicated in the international environment. Successful recruitment means attracting an appropriately qualified candidate pool and using modern selection techniques such as psychometric and aptitude testing to assess their suitability for the role. However, for international positions, it is also important during selection to assess a candidate’s ability to cope in a new culture and to perform in a more senior role (as most foreign postings involve a promotion). Selection might also include an assessment of the family situation. Many companies are very strategic about the process and may initially identify their future leaders through what are called “high potential” talent management programs. For some companies, it is only these high-potential individuals who would be appointed to an international position. Performance management For many managers, the task of conducting performance appraisals is a challenging one. When conducting appraisals with international staff, performance management can become even more challenging due to the difficulties of communicating across different time zones and across a cultural divide. When conducting appraisals across this divide, a manager needs to be sensitive not only to what they are is saying about the person’s performance, but also how they are saying it. It is a good idea to tread carefully, to build good rapport and to maintain regular phone contact with any offshore employees who are reporting to you. Regular contact allows you to both monitor and guide the person to help them to be successful. While email is convenient for communicating across time zones, it is not sufficient for maintaining close communication, nor is it appropriate for communicating difficult messages. The use of Skype would also not be the best channel for appraisals, nor for other sensitive staff management communication (although it is a dramatic improvement on email). For many managers, especially those working in Australia, early morning or late night phone calls are often required to stay in touch with one’s employees or international networks. Such meetings can be draining and can eat into people’s private lives, and downtime and lead to work–family conflict. Training and development

Training for international staff members is often handled by learning and development professionals. However, line managers sometimes help recruit consultants or commission training programs for their international reports. A major factor in running training in the international context is to ensure that the training is culturally relevant and is delivered professionally. Managers need to help trainers understand both the business context and the cultural context for the training. It can also be valuable to consider the type of training that the person may need prior to, and during, their international assignment. Cross-cultural and pre-departure training (CCT) is increasingly being offered to employees and their families to help them adjust to the new cultural context in which they will be living and working. The core HR activities, as they occur in international subsidiaries and partner organisations, are all moderated by a range of internal and external factors, as illustrated in Figure 66.1. As the model shows, many core HR activities, such as human capital acquisition (hiring), development (training), compensation and incentives, work systems (eg self-managing teams) and labour relations will be influenced by both micro (internal) and macro (environmental) factors. Let us take the example of hiring. In some organisations, there are constraints on a manager’s freedom to hire whomever they wish, which can occur as a result of these internal or external factors. In subsidiary locations, important hiring decisions might be influenced by the fact that often international organisations have policies that mandate internal candidates as the first preference. Thus, a manager may not be able to hire their favoured candidate from an external candidate pool; corporate HR may demand that international positions are made available for young and relatively inexperienced management trainees from the home country of the firm to be appointed to the role so that they can gain international experience. Similarly, the company may be operating in a country where it is culturally appropriate and expected that there will be jobs made available in the subsidiary for friends or family members of company employees, government officials or clients. These so-called extended labour markets can also make hiring decisions more difficult and add a fair degree of political sensitivity to the task. Local labour laws or policies may also dictate the mix within an organisation in a particular location. For example, the organisation may be required to maintain a certain percentage of host country nationals. Figure 66.1: Environmental model of HRM

(Source: Gooderham and Nordhaug 2003, p 89.) Dowling (1988) argues that there are six factors which distinguish IHRM from domestic HR, as follows. (1) More HR activities: International HR practitioners must develop policies and provide support across a greater area of their employees’ lives than domestic employees. International HR managers may also be called on to develop programs and make decisions on issues such as international taxation and remuneration. They may provide for relocation of employees, or even make recommendations on issues such as home leave, immigration, housing support, pre-departure training, security and repatriation. International HR practitioners often feel overwhelmed and perhaps even a little like babysitters as often expatriate managers have unrealistic expectations of the level of support they should be receiving. The HR department is often the first to be called when small things go wrong in the expatriate’s day-to-day life. Some expatriates have a mindset that the company should be paying and arranging for everything. However, what an employee expects and what the company provides can be two very different things. (2) The need for a broader perspective: In a domestic setting, virtually all employees are HCNs; that is, they are generally all working under the same conditions and paying tax in one country only. In an international setting, however, HR practitioners must develop a broader set of policies and strive to maintain equity among different types of employees. Some companies pay expatriate packages to PCNs who are working offshore, but will not provide comparable benefits to HCNs or TCNs working in the company headquarters. This may reinforce a perception of company bias toward PCN employees that is often held by HCNs and TCNs. (3) More involvement in employees’ lives: In domestic settings, people’s private lives are, for the most part, their own concern. They look after their own housing needs, educate their children and live in whatever domestic arrangement they choose. When applying for an international position, however, employees’ personal lives are open to far greater scrutiny. The employee may be asked whether they have a partner and if that partner intends to accompany them on the assignment. The needs of their

children may have to be accounted for and the assignee’s current health status may be reviewed prior to the granting of a visa. These potentially discriminatory questions are studiously avoided in most domestic interviews; however, they may become a necessary part of the selection process for an international assignment. For example, some countries may not grant a visa to a spouse unless the couple are married. This would, in effect, discriminate against same-sex couples as well as heterosexual couples living in de facto relationships. (4) Changes in the workforce mix: A common pattern in many companies that set up operations in new locations is to fill the management roles within the organisation (in the early stages) with large numbers of expatriates. This is predominantly for control purposes because PCN expatriates can reasonably be expected to know the company’s systems, culture, products and services very well. They may also be expected to be more loyal to the company than HCN employees. However, as the workforce mix changes and more HCNs are promoted to management positions, the workforce, in effect, will localise. HR practitioners will then need to develop policies for the training of these local managers and look at scaling down expatriate numbers. At the same time, they may need to develop succession plans for local employees. Equity concerns become important during this stage of the subsidiary’s development. For example, this may include transferring local employees to the home country for periods of training. (5) Risk exposure: Risk needs to be managed in an international context from both the company’s commercial perspective and also from the employee’s personal perspective. When an expatriate fails to perform on an assignment, there are costs to be aware of that are both direct (ie retrenchment, replacement, repatriation, direct travel costs) and also indirect (ie reputation damage). Thus, selection and performance management are crucial. It is for this reason that during selection, the company must be extra careful and consider the particular demands of the assignment before an appointment is made. For the employee there are often personal risks such as threats posed by disease or crime, and the very present threat posed by acts of international terrorism or crime (eg kidnapping). Such risks need to be mitigated by the company by providing the employee with additional security or benefits (eg many foreign managers working in large Chinese cities are provided with a car and driver to help prevent the risk of extortion in the event of a traffic accident). See also Chapter ¶58. (6) Broader external influences: The subsidiary HR practitioner will need to become aware of the environmental factors in the host country which influence employment and workplace practices. These can range from the need to provide employment opportunities to ethnic groups, through to being aware of the industrial relations climate and the role of trade unions, and changes in government legislation or regulation. International HR incorporates a much wider scope than domestic HR. A range of different demands are placed on both the managers who are working offshore and the HR practitioners who are supporting them. This chapter will now look at some specific issues in IHRM and discuss some research findings, controversies and current HR practices of multinational companies around the region.

¶66-040 Staffing the international organisation It has been said that there are four dominant approaches to staffing international organisations (Perlmutter and Heenan 1979): (1) “ethnocentric” staffing approach (2) “polycentric” staffing approach (3) “geocentric” mode, and (4) “regio-centric” staffing approach. These approaches will be discussed in the following paragraphs.

Ethnocentric staffing approach In companies that adopt the “ethnocentric” staffing approach, their subsidiaries are managed principally by expatriate PCNs. This staffing policy may be taken for cultural reasons (eg Japanese companies are renowned for adopting an ethnocentric staffing mode). Alternatively, staffing policy may be based on strategic reasons, such as to exert head office control in a crucial market, or in an industry which is in an early and sensitive stage. Some companies have an ethnocentric approach with respect to certain positions, for example, finance manager or HR manager roles may always be filled with expatriates. Polycentric staffing approach In the “polycentric” approach, subsidiaries are managed by locals so that management has a local face. Significant power is divested in the subsidiary level and PCNs predominantly remain at home and run the corporate headquarters. Geocentric mode The “geocentric mode” sees the company placing the best person for the job in whatever position becomes vacant, regardless of that person’s nationality. This may mean that a Singaporean is hired to work in the Australian subsidiary of a United States-based MNC. This approach to staffing is sometimes used to reinforce the multinational character of an organisation, or it may reflect the core values of an organisation which nurtures talent and tries to give people from all cultures the opportunity for international exposure. As mentioned earlier, some organisations will only offer foreign postings to employees who are members of the company’s high-potential group. That is, they have been earmarked for future executive careers with the organisation and it is assumed that it will be easier for them to handle the pressures and ambiguities of an international assignment because they are technically skilled and have many positive personal attributes that help them to be resilient in difficult situations. Regio-centric staffing approach Finally, some companies employ an approach to staffing known as the “regio-centric” staffing approach. In this approach the company organises its operations in geographical regions (eg Europe, Asia-Pacific, Africa and North America) and only posts people within a region, not between regions.

¶66-050 Variations to the expatriate model An area of IHRM practice which needs a great deal of work is the dilemma of the dual-career couple. In practical terms (at least in Australian society), many couples are in the situation where a foreign posting for one member of the couple effectively means the suspension of career for the “trailing spouse”. Anecdotal evidence suggests that few, if any, companies have developed attractive policies to meet the career needs of the trailing spouse; such opportunities are often limited to voluntary or charitable work. For a mid-career professional spouse, the prospect of three or more years with no paid work can be rather dismal, and company-sponsored alternatives are often poor replacements for a dynamic and satisfying career. The fact that the assignee’s partner will be expected to give up work has led many budding assignees to turn down otherwise attractive international appointments, and some companies struggle to find good candidates willing to accept such assignments. Appointees often argue that the benefits of the assignment do not outweigh the personal and financial costs of uprooting children and the financial burden of their spouse having to put a temporary or permanent hold on their career. The dilemma has led many companies to rethink their approach to staffing their international organisations. The alternatives to traditional expatriation are varied and include “inpatriation” and “short-term assignments”. Inpatriation Inpatriation is where TCN and HCN employees are relocated to the headquarters of the organisation for a period of time to develop their technical and managerial skills, absorb the parent company culture or national culture, and perhaps develop their language skills. These postings also promote company loyalty, and allow for the development of an international managerial class consisting of individuals from a multitude of national origins (Harzig and Van Ruysseveldt 2004). Once the HCN returns — armed with

sufficient technical and soft skills — they can be appointed into a managerial role in the subsidiary. Short-term assignments A viable alternative to expatriation is for PCN or TCN managers or specialists to undertake shorter term visits to international offices or locations. Such visits might range from two weeks to three months or sometimes more. For a manager running a geographically dispersed region, such as the Asia-Pacific, this can mean many long hours on planes and in hotel rooms when setting up new offices, launching new products or running projects. For many international managers, however, life on the road for many months of the year is preferable to making a permanent move. Especially relevant here is the challenge of uprooting children in school. The rationale here is that email, video-conferencing and Skype, coupled with frequent short-term visits, virtually eliminate the need for companies to appoint permanent expatriates. Types of assignments International assignments will also vary in their style and how strategic they are to the organisation. This will impact on the type of training required and the approach taken to knowledge management and repatriation. Lazarova and Caliguiri (2004) have categorised international assignments as follows: • Technical assignments: The assignees who occupy these positions fill a technical need when the skill is not available in the offshore location, normally for a fixed period of time — they are “contract assignees”. Technical assignees tend to interact more with machines than they do with people, therefore, they require less CCT than other types of assignees. In the course of their assignment they are not necessarily acquiring particularly valuable information about the market where they are posted. Hence, when they return from the assignment, they may not have gained much knowledge which is new to the company or in any way strategic. • Functional/tactical assignments: The assignees who occupy these positions fulfil technical or functional roles in subsidiaries or partner organisations, often for a given period of time. The main difference is that they do interact with HCNs extensively in performing their jobs. Two consequences arise here. The first consequence is that if the organisation does not realise the level of interaction that is required, there may be selection problems (ie they are selected only on the basis of their technical skills, not their international or cross-cultural skills). They may not receive sufficient training in the cross-cultural element of the job. The second consequence is that, as these people often gain extensive international experience, they may be difficult to retain on their return to their home country as they are now more qualified and their old job is no longer sufficiently stimulating. • Developmental assignments: These assignees are sent to an international position as part of their grooming for a senior management position in the organisation. They are often “on rotation” and their goals in the position are predominantly to learn and develop their own skills — not to make a major contribution to the ongoing success of the subsidiary. If a role is purely developmental it may be destabilising to local teams as the assignee may be inexperienced and ineffective technically. • Strategic/executive assignments: These assignments involve both strategic and developmental goals. The people who fill these positions are normally at the level of vice president or general manager. Therefore, they are expected to perform important roles such as opening new markets or managing the relationship with a joint venture partner. Often, the strategic assignment is something of a “litmus test” for the individual. If they are successful in a difficult international assignment, they will be repatriated and often promoted to a more senior or executive role. The strategic assignment often positions the individual as a leader with global senior executive potential. Effective repatriation and retention of such assignees is very important as these people are a highly valued resource. Neutralising the costs Due to the prohibitive costs of expatriation, many large MNCs are scaling down the number of expatriates they have offshore to numbers in the hundreds rather than the thousands. Further, on-costs associated with maintaining expatriates on international assignments means the trend away from maintaining them on large expatriate salaries is more the norm than the exception nowadays. In place of the extravagant packages, many companies have implemented compensation policies that are designed to have a neutralising effect around issues such as housing, taxation and cost of living variations between locations:

that is, the employee neither benefits nor loses because of the particular location. In other words, many companies are attempting to downplay the financial benefits of one particular foreign posting over another, making pay neither an incentive nor a disincentive to either take an assignment or to hold onto one. This flexibility is achieved using two approaches to compensation: (1) the “going rate” approach, and (2) the “balance sheet” approach. The “going rate” approach In this approach an assignee to an international position is expected to resign their position in their home country and assume permanent employment in the subsidiary to which they are being assigned (contingent on immigration considerations). They are then paid the local “going rate” for the position that they take up. The company may continue to pay some additional benefits to the employee, such as a housing relocation service, tax advice and annual home leave; however, in all other respects, that person becomes a local employee. Australians leaving Australia using this approach would be expected to exit their superannuation plan and join the company’s retirement scheme in the new country as they are in effect no longer employed by the Australian entity. Localised employees also often have to reconcile themselves to the fact that they are leaving the company on a one-way ticket and that their current job will not be theirs when they return. An advantage of the going rate approach is that it helps the assignee to assimilate and identify with the local culture, and promotes a perception of equity among other employees in the subsidiary as there are not several “classes” of employees working side by side. Everyone is paid in the same currency and taxed at the same rate. One potential downside to this approach is that it exposes the assignee to the vagaries of international currency fluctuations. A package that may appear attractive at the time of the appointment may lose its sheen if the currency shifts unfavourably. Similarly, this approach may make some appointments more attractive than others, as pay rates, taxation levels, housing and cost of living can mean that an assignee’s net disposable income is much higher in one location than another. Two people working equally hard in two different locations may not be earning comparable net salaries and this is a potential source of demotivation that the company may be forced to try and address. The “balance sheet” approach This approach to pay is the most commonly used system by MNCs (see Table 66.1). It is designed to promote mobility for international assignees while, at the same time, “anchoring” them psychologically and financially to their home country. It works by presenting the employee with a visual breakdown of all the elements of their compensation package, including their home country base pay, their overseas living premium, a cost of living allowance and a hardship allowance (paid to expatriates living in difficult locations). Employees who are paid using the balance sheet approach receive part of their salary in the local currency and part in their home currency. They may pay part of their tax in the overseas location and part in their home country. Their superannuation (pension) plans are usually maintained in their home country. The balance sheet approach has some significant advantages, but it can be difficult to administer. Software payroll packages are designed to ensure the clarity and ease of administering the system. Table 66.1: Expatriate compensation worksheet Employee

Brian Smith

Position

Marketing Manager

Country

New Euphoria

Reason for change

New Assignment

Effective date of change

1 February 2004

Item

Amount A$ pa

Paid in Australian dollars A$ pa

Paid in local currency NE$ pa

Base salary

155,000

77,500

116,250

Cost of Living Allowance

38,800

Overseas service premium (20%)

31,000

31,000

Hardship allowance (20%)

31,000

31,000

Housing deduction (7%)

-10,850

-10,850

Tax deduction

-75,175

-75,175

TOTAL

169,775

53,475

58,200

174,450

COLA Index = 150 Exchange rate = 1.5

Authorised/Date

(Source: Dowling and Welch 2004, p 147.) Equity and mobility There are two key drivers underpinning remuneration and international employees: (1) equity, and (2) mobility. Equity is as important an issue in international compensation planning as it is at the domestic level. In international compensation management, the corporate HR planner is seeking to ensure that there is equity among all employees (managers) working internationally so that one location is not more advantageous than another. Of course, this can be a difficult principle to execute, especially when local tax laws vary greatly between locations. When international employees are working on the going rate approach it naturally means they are taxed at local levels (consider then the comparison between people working on going rate contracts in a low tax environment, such as Singapore, versus a location of higher personal tax such as Australia). This discrepancy is a major challenge for HR planners in international organisations, especially those using the going rate approach. The second major issue is mobility and international organisations are faced with the challenge of trying to put in place policies and incentives to ensure their employees are willing to move from one location as the company needs them to or as their careers progress. These issues are critical and feed into compensation and benefits planning as well as career planning and other ancillary issues concerning the international employee’s family.

¶66-060 Selecting and training people for international assignments It has long been recognised that selection for expatriate assignments should be conducted using more than job-specific (technical) criteria such as prior experience and qualifications, and that it should involve trying to identify candidates who possess what Tung (1981) calls the six necessary attributes for success on an international assignment. These wider (soft) predictors of performance include attributes are: (1) Adaptability and flexibility: The person is readily able to adapt to new circumstances and situations and can respond flexibly to different and often novel ideas and viewpoints. (2) Cultural toughness: The person has the ability to succeed in a foreign culture. (3) Self-orientation: The person possesses self-esteem, self-confidence and mental wellbeing.

(4) Others orientation: This refers to the ability to interact effectively with host country nationals, and more generally, to develop long lasting friendships (5) Perceptual ability: The person has the ability to understand why people behave as they do and to empathise with them, and (6) Family adaptability: This refers to the assignee’s spouse and children and their ability to adapt to the new culture (Mendenhall and Oddou 2000). In practice, however, expatriates are often selected using measures that relate principally to their technical competence. While such technical skills may not necessarily facilitate success, they will, in all likelihood, prevent complete failure. Possession of these skills may be reflected in the person’s broader life experience (eg have they lived overseas for an extended period of time, such as on a student exchange) or while working for another organisation. These experiences will suggest some cultural sensitivity exists and they have some of the aforementioned attributes. Ideally, the process of agreeing to accept an international assignment should be conducted in a detached climate with the assignee (and potentially their partner) considering or discussing the pros and cons of the assignment from a career, lifestyle and family perspective. The assignee may even be offered the opportunity to take a no-obligation “look and see” trip to the city where they are to be based so that they can make their final decision about whether to accept the position, having seen the location for themselves. Expatriate failure Expatriate failure (early return from an assignment) has been widely researched in the IHRM literature, and for Westerners, the results suggest that it is often the non-job-related factors which cause early return. These often include the issue of relationship pressure (eg their spouse is unhappy or has problems adjusting), or issues to do with children (eg standard of schooling). With this finding in mind, it is obviously very important that both the assignee and their partner are fully committed to the assignment. Often, assignees are reluctant to refuse an offer of an international position because such positions are frequently promotions. There is an understandable and often justified fear that a refusal will put a “black mark” against the person’s name or place a question mark over their suitability for future promotion. This fear can be compounded if the couple has undertaken a look and see trip as they may feel obligated to accept the appointment. Trailing spouses An increasingly important issue in IHRM is that of trailing spouses which is touched on earlier in the chapter. Traditionally, when expatriates were predominantly men, this issue was not given much attention either by researchers or international HR practitioners. It was assumed that women would follow their husbands on overseas assignments and look after the home or the children while the men went to work. With greater female participation in career-oriented work there are two consequences. First, when it is the male partner who is asked to consider an international position, the female partner may not wish to forgo her career for the sake of her partner’s/husband’s international position. Many career women do not wish to miss out on career advancement by being out of the workforce for a number of years potentially becoming bored in a strange city while their husbands are away each day (and possibly at night) working. Second, the increased participation of women in the workforce means that the trailing spouse may, in some cases, be a man. For some men, this can mean a difficult adjustment. A 2004 study of male trailing spouses found that men and other non-traditional trailing spouses (including male and female partners in same-sex relationships) are particularly at risk of boredom and other adjustment problems in their new location (McNulty and Boyko 2004). Non-traditional trailing spouses and indeed female partners in traditional male-female relationships may wish to continue working in their new location. In some countries this may be possible and indeed facilitated by the sponsoring company: but in others it is forbidden by immigration laws. Clearly where the trailing spouse is unable to work the challenge becomes one of finding meaningful pursuits that may

involve other expatriate partners. Naturally there are challenges here for straight and gay male trailing spouses and for lesbians when the majority of the trailing spouse population is geared towards straight women or “housewives” (to use an outdated term). Thus, the issue is a challenging one and should be carefully considered when planning expatriation: that is, by the couples themselves and by the companies who are starting to realise the importance of the trailing spouse issue in all its forms and are developing policies accordingly. Four phases of adjustment and “culture shock” In international assignments, it has been noted that there are commonly four phases of adjustment through which assignees tend to pass (see Figure 66.2). Pre-departure training for international assignees should cover these stages and help assignees and their families understand how to cope with the phenomenon of “culture shock”. The first phase of adjustment is called the “honeymoon” or “tourist” phase. Early on, the assignee (and their family) may feel a sense of elation with the new location, culture, surroundings, smells, climate and their new lives within this different environment. There are new places to see and a beguiling sense that they are on a vacation. The next stage is called “the honeymoon is over” or “culture shock” stage. This is where the reality of the situation begins to dawn on them. They realise the job is very challenging. Loneliness or isolation might occur. In some cases, the assignee or their partner may go into fully blown culture shock and feel a deep sense of despair as they do not understand the local culture or anything that is going on. Sufferers of culture shock may begin to dislike the local people and despair at their situation. This is a crucial point in the expatriate’s adjustment and the point at which they or their spouse may attempt to initiate a return from the assignment or the more extreme option of exiting (quitting) the organisation altogether. The next stage is the “adjustment” phase as they begin to adjust to the culture, learn to cope with the ambiguity of situations that they don’t fully understand and learn to look at difficult situations optimistically. The final stage is the “health recovery” stage. It is here where, from a work perspective, the individual could be expected to begin to really perform in their job (De Cieri et al 1991). The above description of expatriate and spousal adjustment is by no means normative. It cannot be expected to happen to every individual or spouse. Rather it is descriptive. Indeed, some maladjustment may continue to occur after a longer period of time (Dowling and Welch 2004). Figure 66.2: The phases of cultural adjustment

(Source: De Cieri et al 1991.) CCT The amount and style of training required for someone commencing or currently working on an international assignment will vary, depending on a number of factors. First among these is the level of interaction with HCNs that is expected to occur during the assignment (eg will the person be managing a local team?). Training should, to a certain extent, be influenced by the type of appointment (ie technical, functional/tactical, developmental or strategic/executive). It may also be moderated to some extent by the

culture into which the person is heading (eg is the culture similar to their home country or very different?). If it is perceived that there is a high level of cultural difference between the two national cultures, then the company may choose to conduct some CCT. CCT offers departing expatriates (and sometimes their families as well) training in the elements of national culture and cultural difference that will impact on their working life and day-to-day living in the new location. It should not only focus on how to avoid giving offence in the culture, but should also include elements such as how to interpret the culture, how to motivate staff, how to adjust management style, and how to negotiate in other business contexts. CCT is often built from a premise that culture goes beyond the surface elements of food, clothing, dress and language, and that it has a very deep influence on all our thoughts and actions. CCT is growing in popularity for both expatriates and managers working in multicultural societies such as Australia, as it helps managers adjust to cultural differences and become more sensitive and aware of what is driving both positive and negative workplace interactions.

¶66-070 Performance management Some of the challenges of performance management in an international context have been discussed previously. Practical problems often arise in the course of conducting an appraisal and designing a method for assessing performance. Common questions that arise are: • Who is the best person to conduct the assignee’s appraisal (ie a HCN manager or a PCN manager)? • Is it best conducted by someone in the location or someone from head office? • Should the appraisal be conducted by more than one appraiser (eg should it include some input from corporate HR)? • Should all expatriates be judged against the same criteria, or should someone in a more difficult posting have their performance output assessed, taking into account the specific cultural or market difficulties that they face? All these questions come down to basic issues of transparency and fairness which are common principles underpinning all good performance management systems. There is also an important cultural element when an MNC is designing a performance management system for the organisation. The assumption that western methods, such as management by objectives (MBO) or goal setting, 360° feedback from peers and direct reports, self-assessment and the like, will work in all cultural contexts may be at best misguided. Such approaches may inadvertently discriminate against employees from nonwestern backgrounds who are unfamiliar with the unwritten rules around these techniques. To manage this process it may be necessary, for example, to institute team-based incentives and objectives, especially in societies that may be more collectivist in nature (eg in Asia).

¶66-080 Repatriation Expatriate managers commonly express two major areas of concern in relation to how organisations manage their repatriation following an assignment. First, they often argue that their international experience is not valued by the organisation, there is no recognition of their contribution and the knowledge they have gained is not valued. Second, it is often argued that their repatriation from the assignment was not effectively planned. While many organisations train departing expatriates, there is little recognition that returning from an assignment can also entail a difficult process of professional and personal adjustment. Repatriation of expatriates is of course not always possible and many expatriates accept the fact that the experience they gain overseas will mean that there is unlikely to be a job for them when they return; they will simply be too senior. In a small (by global standards) market such as Australia this is often the case. At the end of an assignment there can be three obvious choices: (1) move on to a different international position

(2) be promoted to a senior management role in the parent country, or (3) return to one’s old position. The choice of the third option may very well mean that the person becomes a “big fish in a small pond”, they may no longer have the big title or the perks of office that they held in a subsidiary office, thus, they may quickly become dissatisfied with their role. The organisation would be well advised in such circumstances to give that person a position with clear objectives and clear reporting lines, and to find ways to value their international experience. This could range from involving them in strategic or market planning in relation to the region of their posting, or involving them in pre-departure training for people following in their footsteps. Often, successful repatriation is influenced by well-considered HR or career management policies for expatriates. Some organisations insist that expatriates are sponsored by a senior manager who “owns” the assignee. What this means is that the sponsoring manager is obliged to facilitate that person’s return to their home location including, in some cases, finding them a job. Another approach is to provide the returning expatriate with a “successful return from assignment bonus” if they were successful in their “mission” (ie receiving a financial reward on their return). Policies in the area of expatriate management acknowledge that assignees are often entering into both a material and a psychological contract with their employers. The psychological contract relates to their expectations regarding the employer, in terms of how they will be treated, and how their effort is valued and acknowledged in both financial and non-financial ways (acknowledgement and appreciation). This is particularly relevant at the end of an international assignment.

¶66-090 Conclusion This chapter has outlined the principles and practices of IHRM. It has presented concepts and ideas to help inform policies and decision-making for organisations with an established international presence, and for those that are just starting to internationalise. It is important for such organisations to consider the broad implications of these expansion plans on the individual careers and lives of the people who will execute such plans and their managers. It involves the person taking major life decisions. Good practice in this area can be the difference between a successful and a failed expansion abroad. There are many good consultants in this area who can provide advice on issues such as successful relocation, remuneration and hiring of international managers, and many HR practitioners who specialise in international HR issues. It is hoped that this chapter provides an impetus for better people management in the international arena. For more information on topics covered in this chapter, refer to the CCH Human Resources Management subscription information service. References De Cieri H, Dowling PJ and Taylor KF 1991, “The psychological impact of expatriate relocation on partners”, International Journal of Human Resource Management, vol 2(3). Dowling PJ 1988, “International and domestic personnel/human resource management: Similarities and differences”, in Schuler RS, Youngblood SA and Huber VL, Readings in Personnel and Human Resource Management, 3rd edn, West Publishing, St Paul, MN. —— and Welch DE 2004, International Human Resource Management: Managing People in a Multinational Context, 4th edn, Thomson Learning, London. Gooderham PN and Nordhaug O 2003, International Management: Cross-Boundary Challenges, Blackwell, London. Harzig AW and Ruysseveldt JV 2004, International Human Resource Management, 2nd edn, Sage Publications, London. Lazarova M and Caliguiri P 2004, “Repatriation and knowledge management”, Chapter 13 in Harzig AW and Ruysseveldt JV, International Human Resource Management, 2nd edn, Sage Publications, London.

McNulty Y and Boyko V 2004, “Understanding a new phenomenon: the male trailing spouse”, Expatica, August 2004, see www.expatica.com. Other information on this topic which may be useful is available through the following links: expatriateconnection.com/why-trailing-spouses-cant-be-happy-and-what-canbe-done and blog.iese.edu/expatriatus/2013/03/20/trailing-spouses-in-need-of-organizational-support. Mendenhall M and Oddou G 2000, Readings and Cases in International Human Resource Management, 3rd edn, South-Western College Publishing, Cincinnati, OH. Perlmutter HV and Heenan DA 1979, Multinational Organization Development, Addison-Wesley, Reading, MA. Tung R 1981, “Selection and training of personnel for overseas assignments”, Columbia Journal of World Business, vol 16, pp 68–78.

INDEX A Absences from work annual leave, effect on

¶38-040

Absenteeism unfair dismissal

¶63-120

Accessory liability

¶13-070

Accident prevention work health and safety

¶12-090

Accidents — see Incidents Accommodation unlawful discrimination, exemption

¶13-050

Achievement constructive impact on others

¶18-030

Acquisitions — see Mergers and acquisitions Action plans goal-setting

¶22-060

Actual impact on others

¶18-070

Administering bodies complaints of discrimination to

¶13-080

Administrative controls decision on control measures

¶57-060

Adoption leave annual leave

¶41-330

continuous service

¶41-280

documents required

¶41-290

employee no longer primary caregiver

¶41-340

long service leave

¶41-330

paid parental leave

¶41-320

public holidays

¶41-330

qualifying service

¶41-270

sick leave

¶41-330

special adoption leave

¶41-300

types

¶41-260

variation of period

¶41-310

Adverse action independent contractors

¶37-060

Advertising HR-centred business

¶29-070

recruitment

¶10-030

Affiliative behaviours constructive impact on others

¶18-030

AFPC — see Australian Fair Pay Commission Age permanent visas

¶33-090

Age discrimination diversity management legislation

¶4-060 ¶26-060

Aged care services Benetas, case study

¶26-080

work/life strategies

¶25-040

Ageing workforce coaching and mentoring, managing role demographic changes

¶47-020 ¶1-030

employee retention

¶46-010

learner attitudes

¶20-060

legal barriers

¶26-050

mature age employment, promotion

¶26-090

skills shortages — age discrimination legislation

¶26-060

— barriers to workforce participation

¶26-070

— corporate initiatives

¶26-080

— demographics

¶26-020

— government initiatives

¶26-075

— overview

¶26-010

— references

¶26-090

— social and economic challenges

¶26-030

— stereotypes of older workers

¶26-040

work/life balance

¶25-050

Aggressive impact on others

¶18-030

Agreements — see Australian Workplace Agreements; Enterprise agreements; Individual Transitional Employment Agreements (ITEA) AHRI — see Australian Human Resources Institute Alerts major incident planning Allowable award matters

¶58-060 ¶7-030

Allowing to work non-citizens

¶33-020

Alternate dispute processes

¶49-050

Alternative acceptable employment redundancy payments, exception to obligation

¶61-080

Alternative dispute resolution conflict resolution

¶49-050

Annual leave adoption leave, during

¶41-330

annual close-down

¶38-060

application

¶38-060

calculation of payment

¶38-070

cash payments in lieu of accrual

¶38-070

casual employees

¶38-070

correct jurisdiction

¶38-030

death of worker

¶38-080

definition

¶38-020

directing employees to take leave

¶38-060

employee replacement

¶38-060

employee working for another employer

¶38-060

employees on light duties

¶38-070

entitlements

¶38-040

loading

¶38-070

maternity leave, during National Employment Standards

¶41-140 ¶6-050; ¶43-030

number of periods

¶38-060

overview

¶38-010

partner leave, during

¶41-140

payment

¶38-070

public holidays, during

¶42-020

record keeping

¶38-090

recovery of unpaid leave

¶38-090

sick leave during

¶39-090

termination of employment

¶38-060; ¶38-080

transfer to related corporation

¶38-050

transmission of business

¶38-050

Annualised hours — see Hours of work Anti-discrimination — see Discrimination Approval behaviours passive/defensive impact on others

¶18-030

Aptitude tests

¶10-040

Arbitration conflict resolution

¶49-050

Areas of life discrimination

¶13-030

Assessment centres

¶10-040

HR contribution

¶3-100

— approaches

¶3-200

— choosing criteria

¶3-020

— front-line HR management

¶3-060

— function

¶3-080

— human capital

¶3-050

— levels of assessment

¶3-030

— overall contribution

¶3-040

— policies and practices

¶3-070

— types of contribution

¶3-030

Asset sales transfer of employees, issues

¶62-020

— avoidance of redundancy benefits

¶62-030

Assignments, international — see International human resources management Assistance programs — see Employee assistance programs (EAPs) Associated companies, definition Associated entity, definition

¶38-050 ¶62-030; ¶62-040

Attitudes — see Employee attitudes Attitudinal change older workers

¶26-040

Attributes — see also Values treatment based on

¶13-030; ¶13-040

Audits assessment, approaches

¶3-200

Australian Capital Territory sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-030

Australian Fair Pay and Conditions Standard — see also National Employment Standards minimum entitlements

¶7-020

Australian Fair Pay Commission — see also Fair Work Australia minimum wages wage fixing

¶43-010 ¶7-020

Australian Human Resources Institute “Foundations of Human Resources” program

¶19-040

Australian Industrial Relations Commission — see Fair Work Australia Australian Privacy Principles application

¶53-030

Australian Safety and Compensation Council — see Safe Work Australia Australian Workplace Agreements

¶7-020

approval

¶7-040

breach

¶7-040

overview

¶7-040

state agreements

¶7-070

termination

¶7-040

workplace agreements

¶7-070

Autonomous work groups

¶9-190

Avoidance behaviours passive/defensive impact on others

¶18-030

Award-based transitional instruments FW Act 2009, effect

¶7-030

preserved terms

¶7-030

Award employees law and the employment relationship

¶6-040

Award modernisation

¶7-030

choice of superannuation fund

¶44-050

Awards — see also Award modernisation; Modern awards breach

¶7-030

definition

¶7-030

legislation, interaction between federal and state overview

¶13-030 ¶7-020

redundancy

¶61-050

SG obligations

¶44-043

sources of employment law

¶6-030

B Background checks pre-employment vetting

¶34-020

Bad language unfair dismissal

¶63-120

“Balance sheet” approach to pay international human resources management

¶66-050

Balanced Scorecard

¶17-070

assessment, approaches

¶3-200

performance management

¶23-060

Bargaining single or multi-enterprise agreement Base rate of pay, definition

¶7-060 ¶38-070

Behaviour, organisational leadership and impact on others

¶18-020

Behaviourally-based interviews

¶35-040

Benchmarking — see also Best practice assessment, approaches pre-outsourcing performance

¶3-200 ¶28-060

Benefits — see also Termination benefits employee retention

¶46-060

mergers and acquisitions, day 1 readiness

¶27-140

Bereavement leave

¶42-030

Best practice — see also Benchmarking approach — assessment

¶3-200

— people management

¶2-030

privacy workplace flexibility and diversity

¶53-030 ¶4-030

Better off overall test enterprise agreements

¶7-050

Bibliography — see References (further reading) Blended learning

¶20-050

Blended workforce — see Diversity Blood donor's leave

¶42-060

Bonus plans

¶45-030

Brand recognition mergers and acquisitions, day 1 readiness Breach of awards Breach of company policy

¶27-140 ¶7-030

clearly expressed standards

¶48-040

Buddying induction

¶36-070

Building and construction industry long service leave

¶40-040

Bullying

¶50-010

characteristics

¶50-020

costs

¶50-030

definition

¶50-020

further information

¶50-060

harassment compared

¶50-010

incidence in workplaces

¶50-040

prevention

¶50-050

references

¶50-060

types of behaviour that could amount to

¶50-020

Business — see also Small business continuity, major incident planning

¶58-050–58-070

HR-centred — business components

¶29-060

— business development

¶29-100

— business plans

¶29-030

information and communication technology (ICT) — adoption

¶14-020

— significance

¶14-030

needs, family responsibilities compared

¶25-080

sales — see Sale of business social media, role of

¶14-070

sponsorship obligations, 457 visa program

¶33-060

strategies — see Strategy transmission or transfer — see Transfer to related corporation Business Electronic Travel Authority visas, foreign national

¶33-040

Buyer, definition

¶27-020

C

Camera surveillance — see Workplace surveillance Capability dictionaries

¶21-080

Capacity conflict resolution pre-conditions

¶49-040

reasonable restraint

¶65-060

Care of elderly — see Aged care services Career development contemporary context

¶21-020

current practices

¶21-080

diversity and careers

¶21-060

— generational diversity

¶21-070

interaction between individual/organisation

¶21-010

new forms of career

¶21-050

organisational settings

¶21-010

partnership between employee and line manager, development

¶21-090

psychological contract in a VUCA environment

¶21-040

references

¶21-100

responsibility, taking

¶21-100

skill shortages within a VUCA environment

¶21-030

Career Extension program (ANZ)

¶26-080

Careers — see also Career development breaks, work/life strategies

¶25-040

capital

¶21-050

coaching, development of partnership

¶21-090

conversations

¶21-090

planning — career progression — job analysis

¶19-050 ¶9-120

rewards, employee retention

¶46-070

Carer's leave

¶39-010

entitlement

¶39-150

family and household members

¶39-180

history

¶39-140

National Employment Standards

¶6-050; ¶43-030

non-standard employees

¶39-160

notification and proof

¶39-190

other employment during

¶39-220

payment

¶39-200

replacement employees

¶39-220

service required before entitlement

¶39-170

termination during

¶39-210

Case law indirect discrimination

¶13-040

poor performance, need for fairness

¶48-020

Case studies aged care services

¶26-080

diversity management

¶4-020

indirect discrimination

¶4-050

mergers and acquisitions — day 1 readiness strategic HRM characteristics

¶27-140 ¶2-040

Cash management HR-centred business

¶29-060

Casual employees adoption leave

¶41-140

annual leave

¶38-070

carer's leave

¶39-160

employment contracts long service leave

¶5-190 ¶40-040; ¶40-070

maternity leave

¶41-060

partner leave

¶41-170

sick leave

¶39-030

Casual employment work/life strategies

¶25-040

Causation employment termination payment “in consequence of” termination of employment

¶64-030

incident reports

¶57-040

Certificate IV in Assessment and Workplace Training

¶20-070

Change implementation

¶16-020

configurational analysis

¶30-110

emerging directions

¶16-050

job redesign

¶9-200

leadership, driver of current interest

¶18-010

learning conducive work

¶20-090

models

¶16-020

overview

¶16-010

planned approaches

¶16-020

rationale for change

¶16-010

readiness and resistance for change

¶16-030

references

¶16-060

Change of place of employment redundancy

¶61-020

Characteristics — see Attributes Charities unlawful discrimination, exemption

¶13-050

Chartered Institute of Personnel and Development (CIPD) (UK) human capital measurement and reporting

¶3-050

Checklists diversity management, best practice

¶4-030

hazard and injury prevention

¶59-120

incentive or performance-based pay schemes, design and implementation of

¶11-090

pandemic, plan for impact on business

¶58-100

poor performance of employees

¶48-070

salary administration, HR’s role in

¶11-060

salary or wages and OTE, SG purposes

¶44-040

Child care work/life strategies

¶25-040

Childbirth unlawful discrimination, exemption

¶13-050

Choice of fund superannuation guarantee scheme Civil unrest

¶44-050

major incident, type

¶58-030

Claims management workers compensation

¶59-020; ¶59-060

Clients misleading or deceptive conduct, employees’ liability

¶51-050–51-090

Close-downs annual leave

¶38-060

Coaching career — see Careers evidence for value

¶47-050

managing role

¶47-020

mentoring compared

¶47-020

mentoring distinguished

¶47-030

organisational culture

¶47-090

overview

¶47-010

self-reflection

¶22-050

skills of coaches

¶47-080

structured programs

¶47-060

— conditions for effective programs

¶47-070

terminology

¶47-010

Codes work health and safety Cognitive ability tests

¶12-030; ¶12-050 ¶10-040

Collaborative problem solving conflict resolution

¶49-050

Colleagues induction, responsibility for

¶36-050

Collective agreements — see Enterprise agreements Commencement of formal proceedings complaints of discrimination

¶13-080

Commercial risks benchmarking HR activity Commission — see Fair Work Australia

¶28-060

Commitment approach to management configurations and themes

¶30-090

Common law — see also Implied terms bullying

¶50-020

— costs

¶50-030

employment relationship injury, rights to sue for damages sources of employment law work health and safety

¶7-010 ¶59-050 ¶6-030 ¶12-020

Communications — see also Consultation internal, liability for misleading or deceptive conduct

¶51-030

outsourcing

¶28-110

Community service leave National Employment Standards Compassionate leave National Employment Standards

¶6-050; ¶43-030 ¶42-030 ¶6-050; ¶43-030

Compensation — see also Remuneration definition

¶59-040

mergers and acquisitions, day 1 readiness

¶27-140

superannuation guarantee, employer liability

¶44-080

unfair dismissal

¶63-150

Competence intangible asset, type

¶30-030

Competencies education and professional development

¶19-040

generic

¶10-030

strategic perspective

¶10-030

Competency profiling

¶9-150

Competitive advantage configurational analysis

¶30-110

Competitive behaviours aggressive/defensive impact on others

¶18-030

Competitor knowledge processes

¶30-080

Complaints bullying

¶50-050

discrimination

¶13-080

equal employment opportunity

¶13-080

superannuation guarantee

¶44-090

Compliance ethics compared

¶17-010

non-citizens

¶33-020

organisational policies and procedures, purpose

¶31-070

superannuation guarantee

¶44-080

Compressed working week work/life strategies

¶25-040

Computer surveillance — see Workplace surveillance Computer viruses protection against

¶54-020

Conciliation conflict resolution

¶49-050

Conditions of employment — see also Annual leave; Enterprise agreements; Hours of work; Long service leave; Parental leave; Redundancy; Remuneration; Sick leave; Termination of employment; Workers compensation equivalent, international workers

¶33050

fundamental variation

¶63060

sources unlawful discrimination

Conduct of a sexual nature

¶7010 ¶13050 ¶13-060

Conduct outside work environment unfair dismissal Conferences or focus groups

¶63-120 ¶9-140

Confidentiality confidential information stored in a person's head

¶65-040

employee assistance programs

¶60-050

employee obligations

¶65-040

employment contracts

¶5-110

grievance handling

¶49-050

outsourcing

¶28-100

protection of confidential information

¶54-030

social media and networking

¶24-050

Configurational analysis intangible assets — checking management activities

¶30-110

— clear themes, necessity

¶30-120

Configurational approach people management

¶2-030

Confinement — see Policies and procedures Conflict resolution — see also Grievance procedure alternative dispute resolution

¶49-050

collaborative problem solving

¶49-050

conflict in and between teams

¶49-020

conflicts with customers, clients or community

¶49-030

horizontal conflict

¶49-020

managerial directive

¶49-050

overview

¶49-010

perceived inequity

¶49-030

performance management

¶49-030

personality clash

¶49-030

potential positive effects

¶49-060

pre-conditions

¶49-040

references

¶49-060

unmanaged expectations

¶49-030

vertical conflict

¶49-020

Constitution requisite constitutional connection, definition

¶37-040

Constitutional corporations definitions Construction industry

¶39-020; ¶41-170

long service leave Constructive impact on others

¶40-040 ¶18-020; ¶18-030

Consultants advertising

¶29-070

building a sustainable business

¶29-100

business components

¶29-060

exit strategies

¶29-130

growth management

¶29-110

legal considerations

¶29-040

overview

¶29-010

planning to succeed

¶29-030

product development

¶29-090

reasons for becoming

¶29-020

recruitment

¶10-030

references

¶29-150

rewards of successful business

¶29-120

sales cycle

¶29-080

self-care

¶29-140

summary

¶29-150

working “on” versus working “in” consulting

¶29-050

Consultation — see also Communications development of employee involvement

¶15-040

— survey evidence and general trends

¶15-050

FW Act 2009

¶15-060

high involvement and high performance

¶15-030

managerial implementation of employee involvement

¶15-060

overview

¶15-010

participation and consultation

¶15-020

references

¶15-070

risk management

¶57-030

social media and networking

¶24-060

work health and safety — benefits

¶12-060

— elements of good consultation

¶12-060

— parties

¶12-060

Consumer power

leadership, driver of current interest

¶18-010

Contingency approach implementing change

¶16-020

people management

¶2-030

Continuous service or employment annual leave

¶38-040

— business transmission or transfer

¶38-050

continuous service, definition

¶41-280

long service leave

¶40-040

— business transmission or transfer

¶40-050

partner leave

¶41-170

Contract of employment — see also Termination of employment confidential information

¶5-110

definition

¶5-020

drafting

¶5-100

expatriate agreements

¶5-150

express terms

¶5-090

flexible work practices

¶5-140

implied rights — custom and practice

¶5-080

— fairness

¶5-060

— termination

¶5-070

— to work

¶5-050

implied terms

¶5-040

industrial instruments, relationship with

¶5-130

negotiation

¶51-110

— case example

¶51-170

— conclusion

¶51-180

— employers about employees, representations

¶51-150

— existing employees, representations

¶51-140

— “in trade or commerce”, employment negotiations

¶51-160

— job security, representations

¶51-120

— other representations during recruitment

¶51-130

overview policies and procedures, inclusion post-employment restrictions

¶5-010 ¶31-030 ¶5-120

preparation and presentation redundancy

¶5-160 ¶61-040

secondment agreements

¶5-140

terms

¶5-030

— engagement, of

¶1-040

types

¶5-190

updating

¶5-170

variation

¶5-180

Contract workers and contractual relationships superannuation guarantee scheme

¶44-030

Contractors — see Independent contractors Contracts — see also Contract of employment outsourcing

¶28-100

services

¶37-040

Contractual rights termination of employment

¶6-090

Contribution of HR assessment

¶3-100

— approaches

¶3-200

— choosing criteria

¶3-020

— front-line HR management

¶3-060

— function

¶3-080

— human capital

¶3-050

— levels of assessment

¶3-030

— overall contribution

¶3-040

— policies and practices

¶3-070

types

¶3-030

Control approach to management configurations and their themes

¶30-120

Control test employees and contractors compared

¶37-020

Conventional behaviours passive/defensive impact on others

¶18-030

Conviction, definition

¶34-060

Copyright employees

¶52-040; ¶54-040

Corporate culture — see Culture Corporate initiatives skills shortages and ageing workforce

¶26-080

Corporate social responsibility — see also Ethics diversity management responsible capitalism compared

¶4-020 ¶17-030

Corporate strategy — see Strategy Costs assessment, HR contribution

¶3-100

bullying

¶50-030

complaints of discrimination

¶13-080

diversity, failure to manage

¶4-020

international human resources management

¶66-050

redundancy as cost-cutting measure

¶61-070

workers compensation — overt and covert

¶59-090

— penalties

¶59-030

— reduction

¶59-130

Counselling — see also Employee assistance programs (EAPs) definition

¶60-010

duty of care

¶60-100

guidelines

¶60-080

making workplace aware

¶60-060

objectives

¶60-020

other support mechanisms

¶60-110

overview

¶60-010

poor performance of employees

¶48-060

problems requiring

¶60-030

recognition of problem

¶60-040

references

¶60-120

referral skills

¶60-090

setting of boundaries

¶60-070

Cover the field test legislation, interaction between federal and state

¶13-030

Coverage of laws unfair dismissal

¶63-020

Co-workers induction, responsibility for

¶36-050

Criminal activities internet and email use

¶54-040

major incident, type

¶58-030

Criminal law bullying

¶50-020

— costs

¶50-030

Criminal records checking

¶34-050

— discrimination

¶34-060

— spent convictions

¶34-050

spent convictions

¶34-050

— discrimination

¶34-060

Crisis management systems/plans Critical incidents

¶58-060–58-080 ¶56-010

importance of planning — checklists

¶58-100

— culture, importance

¶58-090

— forms

¶58-100

— implementation of plan

¶58-060

— legal requirements

¶58-040

— London bombings (2005), example

¶58-080

— operational environment

¶58-020

— organisational culture

¶58-050

— overview

¶58-010

— practical steps

¶58-070

— references

¶58-090

— types of incidents

¶58-030

reporting

¶9-140

Critical psychological states job design Cross-border, definition

¶9-190 ¶27-020

Cross-border transactions mergers and acquisitions

¶27-150

— subsequent steps

¶27-160

Cross-cultural issues — see Diversity Cross-cultural training

¶66-060

CSR — see Corporate social responsibility Cultural adjustment international human resources management

¶66-060

Culture coaching and mentoring

¶47-090

employee retention

¶46-030

learning conducive

¶20-090

major incident planning

¶58-050

Customers capital, type of intangible asset

¶30-030

demands — “customer demandingness”

¶30-070

— learning conducive work

¶20-090

knowledge processes

¶30-080

misleading or deceptive conduct, employees’ liability Cyber crime

¶51-050–51-090 ¶54-020

D Damages injury, common law rights to sue

¶59-050

Data data room, definition

¶27-020

mergers and acquisitions, due diligence — data analysis

¶27-080

— data gathering

¶27-080

mergers and acquisitions, risk mitigation strategy — data request lists

¶27-080

surveillance devices — see Workplace surveillance Day 1, definition

¶27-020

Day 1 readiness mergers and acquisitions

¶27-020; ¶27-120

— implementation by HR work streams

¶27-140

— key phases

¶27-080

— planning

¶27-130

De facto, definition

¶41-040; ¶42-030

Deal breaker, definition

¶27-020

Deal price, definition

¶27-020

Death child — effect on maternity leave

¶41-040

— National Employment Standards

¶43-030

compassionate/bereavement leave

¶42-030

worker, of — annual leave

¶38-080

— long service leave

¶40-080

Decentralisation

¶30-080

Deemed employees

¶37-060

Defamation bullying

¶50-030

internet and email use

¶54-040

Defence services leave

¶42-030

Defences reasonable precaution and proper diligence

¶57-010

work health and safety breach — officers’ and managers’ liability

¶12-080

Defended matters WHS prosecution

¶12-090

Defensive impact on others

¶18-020; ¶18-030

Defined benefit funds choice of superannuation fund

¶44-050

Definitions analytics

¶3-020

annual leave

¶38-020

appropriate safe job

¶43-030

assessment associated companies associated entity

¶3-020 ¶38-050 ¶62-030; ¶62-040

autonomous work groups

¶9-190

award

¶7-030

base rate of pay

¶38-070

basic periodic rate of pay

¶38-040

bullying

¶50-020

buyer

¶27-020

career

¶21-010

career coaching

¶21-090

causation

¶3-020

clearing house

¶45-030

coaching

¶47-030

compensation

¶59-040

competency profiling

¶9-150

computer surveillance

¶55-030

constitutional corporation

¶39-020; ¶41-040

continuous service

¶41-070; ¶41-280

contract of employment

¶5-020

correlation

¶3-020

counselling

¶60-010

cross-border

¶27-020

data room

¶27-020

data surveillance device

¶55-090

day 1

¶27-020

de facto

¶41-040; ¶42-030

deal

¶27-020

deal breaker

¶27-020

deal price

¶27-020

deemed workers

¶59-035

directly related to

¶53-020

discrimination

¶4-050; ¶13-040

disqualified person

¶44-100

eligible choice fund

¶44-050

employee

¶44-030

employee record

¶53-020

employer

¶44-030

employment relationship

¶53-020

engagement

¶2-020

equal employment opportunity

¶4-040

ethics

¶17-020

evaluation

¶3-020

expatriates

¶66-020

family member

¶39-180

fit and proper person

¶8-060

grievance

¶49-050

harm

¶42-030

hazard

¶57-040

host country nationals

¶66-020

household member

¶39-180

HR due diligence

¶27-070

human capital

¶3-050

human resources

¶3-020

immediate family

¶39-180; ¶42-030

“in consequence of”

¶64-030

in the course of employment

¶52-020

in trade or commerce

¶51-030

incident

¶56-010

indirect discrimination induction industrial action

¶4-050 ¶36-010 ¶7-080

injury

¶59-040

internal communication

¶51-030

job analysis

¶9-100

job enlargement

¶9-190

job enrichment

¶9-190

job rotation

¶9-190

job specialisation

¶9-190

jury leave

¶42-040

leadership

¶18-010

less favourable treatment

¶4-050

long service leave

¶40-020

materiality

¶27-020

mentoring

¶47-030

meta-skill

¶22-030

metrics

¶3-020

NewCo

¶27-020

optical surveillance device

¶55-070; ¶55-090

ordinary pay

¶38-040

outsourcing

¶28-010

parent country nationals

¶66-020

parental leave

¶41-040

person

¶51-050

personal information

¶53-020

preservation age

¶64-050

primary caregiver

¶41-040

professional development

¶19-050

reasonable restraint (trade)

¶65-060

recruitment

¶10-020

red flag

¶27-020

referral

¶60-090

requisite constitutional connection

¶37-040

risk management

¶57-010

salary packaging

¶11-120

Sale And Purchase Agreement

¶27-020

selection

¶10-020

self-awareness

¶22-030

self-reflection

¶22-030

self-regulation

¶22-030

seller

¶27-020

sensitive information

¶53-020

serious injury

¶59-060

services contract sexual harassment shiftworker

¶37-040 ¶4-050 ¶38-040; ¶38-070

show stopper

¶27-020

sick leave

¶39-010

social capital

¶3-050

Special Purpose Vehicle (SPV)

¶27-020

sportspersons

¶59-035

spouse

¶41-040

standard employer-sponsored fund

¶44-100

stereotyping

¶4-050

successful training practices

¶20-080

target

¶27-020

therapy

¶60-010

third country nationals

¶66-020

tracking device

¶55-070; ¶55-090

tracking surveillance

¶55-030

transaction

¶27-020

transferring employees

¶7-090

treatment based on attribute or characteristic

¶4-050

treatment occurs in circumstances which are the same or not materially different

¶4-050

unfair dismissal

¶63-050

victim's leave

¶42-040

volunteers

¶59-035

wages

¶59-030

workforce planning

¶9-020

workplace coaching

¶47-030

workplace right

¶37-060

Demographic changes

¶1-030

Demographics career development

¶21-060

learner attitudes

¶20-060

skills shortages

¶26-020

Demotion employee not taken to have been “dismissed”

¶63-070

Department of Immigration and Citizenship

¶33-010

visa cancellation

¶33-020

visas, types

¶33-030

Dependent behaviours passive/defensive impact on others

¶18-030

Designs, ownership of

¶52-030

Development gaps

¶22-030

Developmental assignments international human resources management

¶66-050

Digital communication — see Information and communications technology Direct discrimination

¶13-040

Directors HR consultancy employee becoming

¶29-130

Disabilities persons with, induction needs

¶36-060

Disability discrimination sick leave, termination during Disability harassment

¶39-010–39-120 ¶13-060

Disciplinary action poor work performance

¶48-010; ¶48-070

Discipline procedure — see Grievance procedure Disclosure of information confidentiality

¶65-040

superannuation guarantee complaints

¶44-090

Discounts workers compensation premiums

¶59-030

Discrimination — see also Equal employment opportunity additional benefits of countering

¶13-090

background checks

¶34-020

complaints, procedure for making

¶13-080

criminal record

¶34-060

definition

¶4-050; ¶13-040

general protections

¶63-140

grounds of unlawful discrimination — employment

¶13-050

independent contractors

¶37-060

internet and email use

¶54-050

law and the employment relationship

¶6-110

legal liability for unlawful conduct

¶13-070

legislation

¶13-020

— scope

¶13-030

overview

¶13-010

spent convictions

¶34-060

Dishonest or misleading information pre-employment checking

¶34-070

Dishonesty unfair dismissal

¶63-120

Dismissal — see Termination of employment Disobedience unfair dismissal

¶63-120

Dispute resolution model process

¶7-090

Diversity case for EEO

¶4-040

equity and equality compared

¶4-020

flexibility and need for balance

¶4-030

framework to support good practice

¶4-040

HR managers, challenges

¶4-060

HR, role

¶4-040

management

¶4-020

overview

¶4-010

programs

¶1-050

references

¶4-070

Diversity management

¶4-020

Diversity@Work award

¶26-080

Documentation/documents — see also Record keeping

adoption leave

¶41-040

maternity leave

¶41-040

mergers and acquisitions, data request lists

¶27-080

partner leave

¶41-040

risk management system

¶57-030

Dow Jones Sustainability Index

¶17-070

Dual-career couples international human resources management

¶66-050

Due diligence key phases mergers and acquisitions

¶27-080 ¶27-020; ¶27-070

workers compensation

¶59-100

Duty of care

¶12-020

counselling

¶60-100

major incident planning

¶58-040

Duty to act promptly pre-employment, false or misleading information

¶34-070

E EAPs — see Employee assistance programs (EAPs) E-business

¶14-030

Economic impact evaluation

¶3-040

Education — see also Learning and development HR practitioners — AHRI courses

¶19-040

— career progression

¶19-050

— HR education, avenues for

¶19-040

— HR knowledge and competencies

¶19-030

— HR role, models of

¶19-030

— HR role, scope of

¶19-020

— overview

¶19-010

— professional development

¶19-050

— references

¶19-060

learner attitudes

¶20-060

Effectiveness impact on others compared

¶18-060

Eldercare — see Aged care services E-learning effectiveness

¶20-050

Eligible choice fund, definition

¶44-050

Eligible termination payments — see Employment termination payments Elimination of risks decision on control measures

¶57-060

Email — see also Workplace surveillance human resources aspects

¶54-070

inappropriate use

¶54-070

overview

¶54-010

personal information, whether

¶53-020

policy development

¶54-080

— training and enforcement

¶54-090

pornography, termination of employment

¶54-040

right to privacy, whether

¶53-010

Emergency identification form

¶58-100

Emergency services leave

¶42-040

Employability

¶1-050

Employee advocate activities for managing HR/people management

¶2-050

Employee assistance programs (EAPs) — see also Counselling services provided

¶60-050

Employee attitudes evaluation learning, towards

¶3-100 ¶20-060

Employee communication mergers and acquisitions, day 1 readiness

¶27-140

Employee consultation — see Consultation Employee development — see Career development; Careers Employee engagement

¶2-020

Employee motivation — see Motivation Employee performance — see Performance management Employee records — see Record keeping Employee retention — see Retention of staff Employee voice mechanisms survey evidence and general trends

¶15-050

Employees award and non-award

¶6-040

becoming an HR consultant

¶29-010

bullying, costs

¶50-030

career coaching partnership with line manager

¶21-090

contractor distinguished from

¶37-020

“dismissed”

¶63-060

— circumstances in which not taken to have been “dismissed”

¶63-070

employment contracts forced resignation

¶5-040 ¶63-060

induction — new roles, induction needs

¶36-060

— responsibility for

¶36-050

intellectual property

¶52-010

— copyright

¶52-040

— designs

¶52-030

— moral rights

¶52-050

— patents

¶52-020

international — see International workers international human resources management — more involvement in personal lives from HR

¶66-030

— types of employees

¶66-020

internet and email use — employee security

¶54-050

liability for misleading or deceptive conduct

¶51-040

— about employer

¶51-090

— depends on involvement

¶51-055

— representations to the media

¶51-090

— to a customer

¶51-050

major incident planning

¶58-050

NES, coverage

¶43-020

observation of

¶9-140

poor performance — opportunity to respond to allegations

¶48-060

recovery of unpaid long service leave

¶40-090

redundancy — morale

¶61-090

— rights and obligations, sources

¶61-030

restraint of trade — enforceability

¶65-090

— going too far

¶65-070

— New South Wales

¶65-080

— reasonable

¶65-060

superannuation — exempted employees

¶44-035

superannuation guarantee scheme

¶44-030

— choice of fund

¶44-050

— complaints

¶44-090

transfer on sale of business — avoidance of redundancy benefits

¶62-030

— method of sale

¶62-020

— overview

¶62-010

— transfer of industrial instruments to purchaser

¶62-040

— transferable instrument, coverage

¶62-040

work health and safety — employers’ liability for actions

¶12-020; ¶12-080

Employer Nomination Scheme permanent visas

¶33-090

Employer sanctions — see Sanctions Employers allowing non-citizen to work

¶33-020

bullying, costs

¶50-030

constitutional corporations, whether

¶38-030

diversity, benefits

¶4-020

employment contracts

¶5-040

intellectual property — copyright

¶52-040

— designs

¶52-030

— moral rights

¶52-050

— patents

¶52-020

internet and email use — termination rights

¶54-060

liability for misleading or deceptive conduct

¶51-110

— case example

¶51-170

— conclusion

¶51-180

— employers about employees, representations

¶51-150

— existing employees, representations

¶51-140

— “in trade or commerce”, employment negotiations

¶51-160

— job security, representations

¶51-120

— other representations during recruitment

¶51-130

policies and procedures, risk minimisation

¶31-050

poor performance of employees — procedural fairness

¶48-030

post-employment restrictions on employees

¶65-010

— agreements to restrict employee trade

¶65-050

— confidential information

¶65-040

— enforceability of restraints

¶65-090

— fiduciary obligations

¶65-030

— implied obligations during employment

¶65-020

— reasonable restraint

¶65-060

— restraint going too far

¶65-070

— restraint in New South Wales

¶65-080

recruiters’ liability — false representation about background checks

¶51-100

redundancy — rights and obligations, sources

¶61-030

right to monitor

¶53-020

superannuation funds

— prompt payment of contributions

¶44-100

— representation on trustee board

¶44-100

— SIS legislation

¶44-100

superannuation guarantee scheme

¶44-030

— choice of fund

¶44-050

— contributions required

¶44-020

— liability for compensation

¶44-080

— payment of contributions

¶44-040

union right of entry, employer's response work health and safety duties

¶8-080 ¶12-020; ¶12-080

workplace discrimination or harassment, alleged — response

¶51-010–51-120

Employers’ duties — see also Duty of care preventative OHS/WHS

¶59-080

workers compensation

¶59-100

Employment Advocate — see Fair Work Australia; Workplace Authority Employment agencies referring non-citizen for work

¶33-020

Employment contracts — see Contract of employment Employment law — see Legislation Employment lawyers policies and procedures, perspective compared with HR practitioner's

¶31-010; ¶31-020

Employment-related visas — see Visas Employment relationship common law

¶7-010

deemed

¶37-060

employees and contractors compared

¶37-020

legislation — anti-discrimination law

¶6-110

— award and non-award employees

¶6-040

— common sense, role

¶6-170

— industrial disputes

¶6-150

— industrial relations system

¶6-010

— National Employment Standards

¶6-050

— occupational health and safety law (OHS/WHS)

¶6-120

— other laws

¶6-160

— records, maintenance

¶6-080

— redundancy

¶6-100

— simplification process

¶6-020

— sources of law

¶6-030

— state system employees, NES coverage

¶6-060

— superannuation

¶6-070

— termination of employment

¶6-090

— trade unions

¶6-140

— work health and safety law

¶6-120

— workers compensation

¶6-130

meaning

¶53-020

sham contracting arrangements

¶37-040

superannuation guarantee scheme

¶44-030

Employment termination payments “in consequence of” termination of employment

¶64-030

overview

¶64-010

rollover into superannuation fund not permitted

¶64-040

tax treatment

¶64-050

termination payment as

¶64-020

12-month rule

¶64-020

Engagement definition

¶2-020

Engineering controls decision on control measures

¶57-060

English language ability permanent visas

¶33-090

Enterprise agreements

¶7-020

approval

¶7-050

better off overall test

¶7-050

breach

¶7-050

consultation term

¶15-060

content

¶7-050

flexibility terms

¶7-050

industrial action, prohibited conduct

¶7-080

negotiations

¶6-150

process for making

¶7-090

redundancy

¶61-050

single or multi-enterprise

¶7-060

sources of employment law

¶6-030

termination

¶7-050

transitional arrangements

¶7-050

types

¶7-050

variation

¶7-050

Entitlement to work — see International workers Entitlements carer's leave

¶39-150

— service required before entitlement

¶39-170

compassionate/bereavement leave

¶42-030

jury leave

¶42-030

long service leave

¶40-040

sick leave

¶39-020

Environment business ethics

¶17-010

Equal employment opportunity — see also Discrimination additional benefits

¶13-090

bullying

¶50-020

— costs

¶50-030

business case for complaints, procedure for making

¶4-040 ¶13-080

definition

¶4-050

human rights

¶4-040

job analysis

¶9-120

legislation — administrative requirements

¶13-020 ¶4-040

— scope

¶13-030

overview

¶13-010

people management practices — framework to support good practice

¶4-040

— organisational policies and procedures

¶4-040

— scope of HR responsibilities

¶4-040

recruitment and selection

¶10-040

Equity — see also Discrimination remuneration and international employees

¶66-050

Equity theory

¶45-010

E-recruitment

¶10-030

Ethics compliance

¶17-010

HR function — opportunities

¶17-080

— role

¶17-050

implications for leadership

¶17-060

integrating ethics and values

¶17-020

organisational performance and responsibility

¶17-040

reasons to be ethical

¶17-010; ¶17-030

references

¶17-080

responsible capitalism

¶17-030

— steps for organisations

¶17-070

Evacuation plans

¶58-060

Evaluation HR function induction process job analysis

¶3-080 ¶36-090 ¶9-120

job candidates

¶10-030

self-reflection

¶22-050

Event articulation self-reflection

¶22-050

Evidence incident investigation

¶56-050

WHS prosecution

¶12-090

eVisitor Visa

¶33-040

Executive assignments

international human resources management

¶66-050

Executive coaching

¶47-090

Executive search firms

¶10-030

Executives coaching

¶47-030

— self-reflection

¶22-050

long-term incentives

¶45-040

Exemptions unfair dismissal unlawful discrimination in employment

¶63-030–63-080 ¶13-050

Exit strategies HR-centred business Expatriate agreements

¶29-130 ¶5-150

Expatriates costs

¶66-050

definition

¶66-020

repatriation

¶66-080

Expectancy theories

¶45-010

External recruitment

¶10-030

F Facilitation conflict resolution

¶49-050

Fair Dismissal Code

¶63-090

Fair Entitlements Guarantee (FEG) scheme

¶44-030

Fair Pay and Conditions Standard

¶43-010

Fair Pay Commission — see Australian Fair Pay Commission Fair procedure — see Procedural fairness Fair Work Act 2009 awards, effect on employee consultation

¶7-030 ¶15-060

law and the employment relationship

¶6-020

NES

¶7-020

right of entry and industrial action

¶8-170

— action ballots, protected

¶8-140

— broader entry rights for officials

¶8-020

— civil immunity

¶8-120

— discussion purposes

¶8-040

— employer’s role, respond to union right

¶8-080

— Fair Work Commission, role

¶8-090; ¶8-160

— investigate OHS breaches

¶8-050

— investigate suspected breaches of the FW Act

¶8-030

— notice of entry, permit holder

¶8-070

— payments

¶8-150

— protected industrial action

¶8-130

— protecting freedom of association

¶8-110

— requirements

¶8-060

— restriction on industrial action

¶8-100

— role of unions under FW Act

¶8-010

transfer of employee entitlements/redundancy benefits

¶62-030

transferable instruments

¶62-040

Fair Work Australia enterprise agreements

¶7-050

— bargaining

¶7-060

functions

¶7-020

Fair Work information statements

¶6-050

National Employment Standards

¶43-030

Fair Work institutions new institutional framework

¶7-020

Fair Work Ombudsman functions

¶7-020

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 Australian Fair Pay and Conditions Standard

¶43-010

Fairness — see also Good faith; Procedural fairness implied contractual right

¶5-060

managing poor performance and misconduct

¶5-060

policies as standard Fairness test

¶31-040 ¶7-050

Family Assistance Office (FAO) paid parental leave Family-friendly workplaces

¶41-040 ¶1-050

Family leave — see Carer's leave Family member, definition

¶39-180

Family or carer's leave — see Carer's leave Family responsibilities business needs compared

¶25-080

demographic changes

¶1-030

Federal awards

¶7-030

FW Act 2009, effect

¶7-030

Federal collective agreements — see Enterprise agreements Federal industrial relations system — see Industrial relations system Federal legislation long service leave

¶40-040

redundancy

¶61-060

sick leave entitlements

¶39-020

sick leave, termination during

¶39-120

sources of employment law

¶6-030

Federal system employers redundancy

¶61-070

Feedback positive or negative

¶18-080

self-awareness

¶22-040

360°

¶23-040

Fiduciary obligations employees

¶65-030

Fighting unfair dismissal

¶63-120

Final relief complaints of discrimination

¶13-080

Financial planning HR-centred business

¶29-060

First aid incident investigation Fit and proper person, definition

¶56-050 ¶8-060

Fixed-term/temporary employees employment contracts Flexible learning

¶5-190 ¶20-050

Flexible working arrangements

¶9-190

diversity

¶4-030

employment contracts

¶5-140

information and communication technology

¶14-040

National Employment Standards

¶43-030

requests types

¶6-050 ¶25-040

Flexible working hours — see Hours of work Flowcharts poor performance of employees

¶48-080

Forced resignation

¶63-060

Foreign nationals, entitlement to work — see International workers Forms and paperwork choice of superannuation fund

¶44-050

induction

¶36-070

Forward with Fairness — see Fair Work Act 2009 Freedom of association

¶8-110

Full-time employees partner leave

¶41-040

Functional assignments international human resources management

¶66-050

Functional expert activities for managing HR/people management

¶2-050

Functional job analysis system

¶9-140

Further reading — see References (further reading) FW Act — see Fair Work Act 2009 FWA — see Fair Work Australia

G Gainsharing plans

¶45-030

Gap analysis managerial self-development

¶22-060

Garden leave post-employment restrictions

¶65-060

General protections discrimination laws

¶63-140

Generational diversity career development

¶21-070

demographic changes

¶1-030

workplace flexibility

¶4-030

Generational factors skills shortages

¶26-030

Generic managerial competencies

¶10-030

Genuine occupational qualification unlawful discrimination, exemption

¶13-050

Genuine redundancy dismissal

¶63-080

payments

¶64-060

Global financial crisis ethical obligations, effect on

¶1-010 ¶17-010

redundancy

¶1-050

workforce planning

¶9-020

Global Reporting Initiative

¶17-070

Globalisation career development

¶21-020

dynamic interchange between ICT and

¶14-030

employee retention

¶46-010

leadership, driver of current interest

¶18-010

Goals learning and development

¶20-020

performance improvement plans

¶48-060

self-regulation

¶22-060

Good faith — see also Fairness implied contractual right/obligation

¶5-060

Good practice — see Best practice Government agencies privacy

¶53-020

Government initiatives skills shortages and ageing workforce

¶26-080

Graduates induction needs Greenfields agreements

¶36-060 ¶7-050

Grievance procedure — see also Conflict resolution categories of grievance

¶49-050

employee and employer-initiated grievances compared

¶49-020

Groups conflict in and between

¶49-020

Growth management HR-centred business

¶29-110

Guidelines — see Policies and procedures

H Harassment — see also Bullying bullying compared

¶50-010

internet and email use

¶54-050

unlawful

¶13-060

Harmonisation of WHS legislation

¶12-040

Harsh, unjust or unreasonable dismissal

¶63-100

Hazards definition

¶57-040

identification process

¶57-040

prevention, workers compensation

¶59-120

HCM systems — see Human capital Hierarchy of controls decision on measures

¶57-060

hazard and injury prevention

¶59-120

High commitment management high performance, relationship with

¶15-030

High income threshold unfair dismissal, access to remedies

_¶63-040

High involvement management — see also Consultation high performance, relationship with

¶15-030

lessons for managers in implementing

¶15-060

overview

¶15-010

High-risk industries workers compensation

¶59-030

Holistic analysis — see Configurational analysis Horizontal conflict

¶49-020

Hours of work contract of employment information and communication technology maximum weekly hours, NES National Employment Standards trends in workforce structure

¶5-100 ¶14-040 ¶6-050 ¶43-030 ¶1-040

work/life strategies — annualised hours

¶25-040

— flexible working hours

¶25-040

Household member, definition

¶39-180

HR consultants — see Consultants HR department evaluation induction, responsibility for

¶3-080 ¶36-050

HR due diligence — see Due diligence HR education — see Learning and development HR information systems — see Information HR outsourcing — see Outsourcing HR practitioners — see Education; Learning and development HR scorecard assessment, HR contribution HR service delivery

¶3-200 ¶27-140

HR transaction process — see Mergers and acquisitions HR transaction professionals — see Mergers and acquisitions HR work streams

¶27-140

Human capital assessment

¶3-200

concept

¶3-020

contribution

¶3-030

human capital development

¶2-050

intangible asset, type

¶30-030

learning-conducive culture

¶20-090

management

¶30-090

measurement

¶3-050

reports

¶3-050

Human resource function — see Outsourcing Human resources consultants — advertising

¶29-070

— building a sustainable business

¶29-100

— business components

¶29-060

— exit strategies

¶29-130

— growth management

¶29-110

— legal considerations

¶29-040

— overview

¶29-010

— planning to succeed

¶29-030

— product development

¶29-090

— reasons for becoming

¶29-020

— references

¶29-150

— rewards of successful business

¶29-120

— sales cycle

¶29-080

— self-care

¶29-140

— summary

¶29-150

— working “on” versus working “in” consulting

¶29-050

contribution of HR, assessment — approaches

¶3-200

— front-line HR management

¶3-060

— function

¶3-080

— human capital

¶3-050

— issues and questions

¶3-020

— levels

¶3-030

— overall contribution

¶3-040; ¶3-100

— policies and practices

¶3-070

— roles and expectations

¶3-010

— types

¶3-030

department — evaluation — induction, responsibility for

¶3-080 ¶36-050

due diligence — key phases — mergers and acquisitions

¶27-080 ¶27-020; ¶27-070

education — AHRI study

¶19-030

function, outsourcing — avoiding continuance of poor or undesirable practices

¶28-120

— benchmarking pre-outsourcing performance

¶28-060

— building and maintaining good business relationship

¶28-130

— communications strategy

¶28-110

— contracts

¶28-100

— future perspective

¶28-170

— line management and new HR provider

¶28-160

— management of tendering process

¶28-090

— measuring and rewarding success

¶28-140

— observations of the phenomenon

¶28-180

— reasons

¶28-030

— recent history

¶28-020

— references

¶28-190

— reflection of corporate vision

¶28-050

— reluctance to embrace outsourcing

¶28-040

— reversing decisions to outsource

¶28-150

— seeking service providers

¶28-080

— selection and evaluation of appropriate providers

¶28-070

— summary

¶28-190

international management — definitions

¶66-020

— international HRM distinguished from domestic HRM

¶66-030

— overview

¶66-010

— performance management

¶66-070

— references

¶66-090

— repatriation

¶66-080

— selection and training, international assignments

¶66-060

— staffing the international organisation

¶66-040

— variations to the expatriate model

¶66-050

management — challenges and opportunities

¶1-030

— concepts, trends

¶1-050

— contemporary themes

¶1-020

— demographic changes

¶1-030

— ethics, responsible capitalism and CSR

¶17-050; ¶17-060; ¶17080

— evolution of people management and HRM

¶2-020

— function

¶3-040

— ICT, role in

¶14-060

— in the future

¶1-060

— job analysis

¶9-120

— measuring effectiveness

¶2-090

— mergers and acquisitions — overview

¶27-020 ¶1-010; ¶2-010

— personnel management compared

¶1-060

— policy and practice, trends

¶1-040

— references

¶1-060; ¶2-100; ¶3-200

— relationship with people management

¶2-050

— strategic HRM characteristics, management, formulation and case studies

¶2-040

practitioners, education and professional development — AHRI courses

¶19-040

— career progression

¶19-050

— education, avenues for

¶19-040

— knowledge and competencies

¶19-030

— overview

¶19-010

— professional development

¶19-050

— references

¶19-060

— role, models of

¶19-030

— role, scope of

¶19-020

Human resources contribution assessment — approaches

¶3-200

— front-line HR management

¶3-060

— function

¶3-080

— human capital

¶3-050

— issues and questions

¶3-020

— levels

¶3-030

— overall contribution

¶3-040; ¶3-100

— policies and practices

¶3-070

— roles and expectations

¶3-010

— types

¶3-030

Human rights equal employment opportunity

¶4-040

Humanistic/encouraging behaviours constructive impact on others

¶18-030

I IBM skills shortages, corporate initiatives

¶26-080

ICT — see Information and communications technology Identity ethics, interaction

¶17-020

Illness or incapacity long service leave payment

¶40-080

sick leave

¶39-020; ¶39-060

Immediate family, definition

¶39-180; ¶42-030

Immigration — see International workers Immigration law

¶33-010

Impact on others leadership

¶18-030

— actual impact

¶18-070

— constructive or defensive impact

¶18-020

— ideal impact

¶18-040

— relationship with effectiveness

¶18-060

— strategies used

¶18-080

Implied terms employment contract

¶5-040

Improper business advantage post-employment obligations

¶65-030

In the course of employment, meaning

¶52-020

“In trade or commerce” employer's conduct, employment contract negotiations — job security, representation

¶51-120

— other representations during recruitment

¶51-130

misleading or deceptive conduct, liability

¶51-030

Incentives

¶45-050

incentive plans

¶45-030

long-term

¶45-040

overview

¶45-010

short-term

¶45-030

variable pay

¶45-020

Incidents — see also Work-related injuries and illnesses definition

¶56-010

investigation

¶56-040

— aim

¶56-040

— right of entry, suspected health and safety breaches

¶56-030

— steps

¶56-050

— types

¶56-040

major — see Major incidents notification

¶56-020

— work health and safety

¶12-070

plans

¶58-060

reporting mechanisms

¶58-070; ¶58-100

reports

¶57-040

right of entry to investigate suspected health and safety breaches

¶56-030

Inconsistency of laws

¶13-030

Independent contractors corporate “middle men”, use of

¶37-030

deemed employment relationships/rights

¶37-060

employee distinguished from

¶37-020

employment status, benefits

¶39-070

legislation

¶36-060

mischaracterisation, implications of

¶37-050

overview

¶37-010

privacy

¶53-030

rights

¶37-060

services contracts

¶37-040

sham arrangements, prohibitions

¶37-040

state and territory laws — unfair contracts

¶37-060

unfair contracts

¶37-060

Indirect discrimination

¶13-040

definition Individual flexibility arrangements

¶4-050 ¶7-030; ¶7-050

model flexibility term

¶7-090

Individual Transitional Employment Agreements (ITEA)

¶7-020

overview

¶7-040

process for making agreement

¶7-090

variation or termination

¶7-040

Inducements superannuation guarantee

¶44-080

Induction basics

¶36-080

blended learning approach

¶36-040

buddying

¶36-070

definition

¶36-010

effective

¶36-030

— tips

¶36-080

evaluation of process

¶36-090

group

¶36-040

overview

¶36-010

paperwork

¶36-070

performance management

¶36-060

persons responsible

¶36-050

processes — counselling

¶60-060

— different groups of employees

¶36-060

— job analysis references

¶9-120 ¶36-100

Industrial action definition

¶7-080

prohibited conduct

¶7-080

unions — right of entry

¶8-170

— action ballots, protected

¶8-140

— broader entry rights for officials

¶8-020

— civil immunity

¶8-120

— discussion purposes

¶8-040

— employer’s role, respond to union right — Fair Work Commission, role

¶8-080 ¶8-090; ¶8-160

— investigate OHS breaches

¶8-050

— investigate suspected breaches of the FW Act

¶8-030

— notice of entry, permit holder

¶8-070

— payments

¶8-150

— protected industrial action

¶8-130

— protecting freedom of association

¶8-110

— requirements

¶8-060

— restriction on industrial action

¶8-100

— role under FW Act

¶8-010

Industrial disputes law and the employment relationship

¶6-150

Industrial instruments — see also Awards; Individual Transitional Employment Agreements (ITEA); Transitional instruments award, interaction with other instruments

¶7030

employment contracts, relationship with

¶5130

federal and state legislation, interaction

¶13030

overview

¶7020

redundancy

¶61050

transfer on sale of business

¶62040

unfair dismissal, high income threshold

¶63040

Industrial organisations — see Unions Industrial relations law bullying

¶50-020

— costs

¶53-030

Industrial relations system

¶6-010

simplification process

¶6-020

Industry classifications workers compensation premiums

¶59-030

Influence reciprocal or unilateral

¶18-080

Informal learning coaching, mentoring and organisational culture

¶47-090

learning-conducive culture

¶20-090

Information — see also Information and communications technology exchange, induction

¶36-030

information and assistance — see Consultation protection

¶54-030

— IT information

¶54-020

— liability resulting from employee copyright breach

¶54-040

systems — ICT, role in

¶14-060

— mergers and acquisitions, day 1 readiness

¶27-140

Information and communications technology adoption by business

¶14-020

changes in nature of work

¶14-040

flexibility in work hours and duties

¶14-040

HRM, role

¶14-060

impact on work

¶14-010

learning and development

¶20-050

learning-conducive culture

¶20-090

references

¶14-080

significance for business

¶14-030

social media and business

¶14-070

summary

¶14-080

virtual work

¶14-050

Inherent requirements of job unlawful discrimination, exemption

¶13-050

Injury — see Work-related injuries and illnesses; Workers compensation Injury management return to work

¶59-070

Injury prevention workers compensation

¶59-120

Innovation career development

¶21-080

leadership, driver of current interest

¶18-010

Inpatriation

¶66-050

Insolence unfair dismissal

¶63-120

Insourcing HR skill insourcing

¶28-010

transferring work

¶62-040

Inspections hazard identification

¶57-040

Insurance unlawful discrimination, exemption

¶13-050

Intangible assets increasing importance

¶30-010

management

¶30-060

— basic strategic analysis

¶30-020

— checking management activities using configurations

¶30-110

— configurations require clear themes

¶30-120

— different properties in different circumstances

¶30-050

— human capital

¶30-090

— key issues

¶30-130

— knowledge management

¶30-010

— organisational capital

¶30-080

— references

¶30-130

— relationship capital

¶30-070

— strategic imperatives or mobility

¶30-040

— transfers between categories

¶30-100

— trends

¶30-130

— types of assets

¶30-030

overview

¶30-010

Integrity — see Ethics Intellectual capital — see Intangible assets Intellectual property

employees

¶52-020; ¶52-060

— copyright

¶52-040

— designs

¶52-030

— moral rights

¶52-050

— patents

¶52-020

outsourcing

¶28-100

overview

¶52-010

protection

¶54-030

Intelligent career

¶21-050

Inter-group conflict

¶49-020

Interdependency configurational analysis

¶30-110

Interim relief complaints of discrimination

¶13-080

Internal communications definition

¶51-030

misleading or deceptive conduct, liability

¶51-030

Internal labour markets

¶21-020

International assignments selection and training for

¶66-060

types

¶66-050

International human resources management definitions

¶66-020

international HRM distinguished from domestic HRM

¶66-030

overview

¶66-010

performance management

¶66-070

references

¶66-090

repatriation

¶66-080

selection and training, international assignments

¶66-060

staffing the international organisation

¶66-040

variations to the expatriate model

¶66-050

International transactions mergers and acquisitions

¶27-150

— subsequent steps

¶27-160

International workers management — compliance

¶33-020

— employment-related visas

¶33-030

— labour hire agreements

¶33-070

— long stay visas

¶33-050

— non-business visas

¶33-080

— overview

¶33-010

— permanent visas

¶33-090

— references

¶33-100

— short stay visas

¶33-040

— sponsorship obligations

¶33-060

Internet — see also Information and communications technology; Workplace surveillance employee security

¶54-050

employer's right to terminate

¶54-060

human resources aspects

¶54-070

overview

¶54-010

policy development

¶54-080

— training and enforcement

¶54-090

pornography, termination of employment

¶54-040

protection — information and intellectual property

¶54-030

— IT information

¶54-020

— liability resulting from employee copyright breach

¶54-040

references

¶54-100

right to privacy, whether

¶53-010

work environment, effect on

¶14-010

Intervention selection facilitation of learning and development

¶20-050

Interviews recruitment

¶9-140; ¶35-010

— behaviourally-based interviewing

¶35-040

— individual

¶35-020

— interviewing skills

¶35-040

— panel

¶35-030

— references

¶35-040

— structured v unstructured formats

¶35-040

Intoxication unfair dismissal

¶63-120

Intra-group conflict

¶49-020

Investigations incident

¶56-040

poor performance of employees

¶48-050

work health and safety breach

¶12-090

Invisible value — see Intangible assets Involvement of employees — see High involvement management Isolation of risks decision on control measures

¶57-060

J Job analysis — see also Job design competency profiling

¶9-150

definition

¶9-100

interaction with other HR practices

¶9-120

international HRM distinguished from domestic HRM

¶66-030

job descriptions

¶32-010

methods

¶9-140

overview

¶9-010

problems

¶9-160

role

¶9-110

trends

¶9-170

when done

¶9-130

Job applicants privacy

¶53-020

Job descriptions bullying prevention

¶50-050

definition

¶32-010

employee retention

¶46-040

induction

¶36-080

preparation

¶32-020

— guidelines

¶32-030

rationale for use

¶32-010

Job design — see also Job analysis international arena

¶66-030

methods

¶9-190

overview

¶9-010

problems

¶9-210

redesign process

¶9-200

role

¶9-180

trends

¶9-220

Job enlargement

¶9-190

Job enrichment

¶9-190

Job rotation

¶9-190

Job satisfaction employee retention

¶46-040

Job sharing work/life strategies

¶25-040

Job specialisation

¶9-190

Job specifications — see Person specification Jurisdiction annual leave

¶38-030

long service leave

¶40-030

Jury leave

¶42-040

K Keeping in Touch day National Employment Standards

¶43-030

Knowledge base information and communication technology Knowledge management education and professional development

¶14-050 ¶1-050 ¶19-030

intangible assets

¶30-060

— basic strategic analysis

¶30-020

— checking management activities using configurations

¶30-110

— configurations require clear themes

¶30-120

— different properties in different circumstances

¶30-050

— human capital

¶30-090

— key issues

¶30-130

— organisational capital

¶30-080

— overview

¶30-010

— references

¶30-130

— relationship capital

¶30-070

— strategic imperatives or mobility

¶30-040

— transfers between categories

¶30-100

— trends

¶30-130

— types of assets

¶30-030

intelligent career theory

¶21-050

Knowledge sharing

¶30-050

Knowledge transfer coaching and mentoring, managing role

¶47-020

L Labor Government — see Fair Work Act 2009 Labour force participation — see Workforce participation Labour hire agreements 457 visa program

¶33-070

Labour markets intermediaries, superannuation guarantee scheme

¶44-030

internal, flexibility

¶21-080

Lack of capacity unfair dismissal

¶63-120

Lateness unfair dismissal

¶63-120

Lateral thinking

¶18-080

Lawyers

¶31-010; ¶31-020

Leadership Australia and New Zealand, leadership ratings

¶18-090

current interest in

¶18-010

ethics, responsible capitalism and CSR

¶17-060

HR, role

¶2-050; ¶18-100

impact on others

¶18-030

— actual impact

¶18-070

— constructive or defensive impact

¶18-020

— ideal impact

¶18-040

— relationship with effectiveness

¶18-060

— strategies used

¶18-080

international comparisons

¶18-070

management compared

¶18-010

meaning

¶18-010

overview

¶18-010

references

¶18-100

styles

¶22-030

Learning and development — see also Professional development; Training changing roles of practitioners

¶20-070

coaching and mentoring, managing role

¶47-020

corporate strategy

¶20-020

development of culture that supports learning

¶20-090

effectiveness

¶20-080

framework

¶20-070

frameworks for organisational learning

¶20-040

goals

¶20-020

HR practitioners — AHRI courses

¶19-040

— career progression

¶19-050

— challenges

¶20-070

— HR education, avenues for

¶19-040

— HR knowledge and competencies

¶19-030

— HR role, models of

¶19-030

— HR role, scope of

¶19-020

— overview

¶19-010

— professional development

¶19-050

— references

¶19-060

ICT, role in

¶14-060

international HRM distinguished from domestic HRM

¶66-030

investment in training

¶20-030

mergers and acquisitions, day 1 readiness

¶27-140

overview

¶20-010

references

¶20-110

return on investment

¶20-100

suitable methods

¶20-050

systems model

¶20-040

talent management model

¶20-040

understanding the workforce

¶20-060

Learning content learning methodologies, interaction

¶20-050

Learning environment maturity model

¶20-060

Learning methodologies learning content, interaction

¶20-050

Learning mindset performance mindset distinguished

¶22-060

Leave — see also Annual leave; Long service leave; Parental leave; Sick leave alternative employment during

¶42-070

overview

¶42-010

replacement employees

¶42-070

specific purposes

¶42-060

termination during

¶42-070

Legal compliance — see Compliance Legal costs bullying

¶50-030

workers compensation

¶59-050

Legal issues — see Legal risks Legal liability — see Liability Legal obligations

ethics, interaction

¶17-020

HR-centred business

¶29-040

major incident planning

¶58-040

training

¶19-010

Legal professional privilege WHS prosecution

¶12-090

Legal risks benchmarking HR activity

¶28-060

reasons for organisations to be ethical

¶17-010

social media and networking

¶24-050

Legal work stream mergers and acquisitions, day 1 readiness

¶27-140

Legislation — see also Criminal law; Fair Work Act 2009; Work Choices age discrimination

¶26-060

annual leave

¶38-030

bullying

¶50-020

discrimination

¶13-020

— scope of legislation

¶13-030

employment relationship — anti-discrimination law

¶6-110

— award and non-award employees

¶6-040

— common sense, role

¶6-170

— industrial disputes

¶6-150

— industrial relations system

¶6-010

— National Employment Standards

¶6-050

— occupational health and safety law (OHS/WHS)

¶6-120

— other laws

¶6-160

— records, maintenance

¶6-080

— redundancy

¶6-100

— simplification process

¶6-020

— sources of law

¶6-030

— state system employees, NES coverage

¶6-060

— superannuation

¶6-070

— termination of employment

¶6-090

— trade unions

¶6-140

— workers compensation

¶6-130

equal employment opportunity

¶13-020

— scope of legislation

¶13-030

federal and state, interaction

¶13-030

independent contractors

¶37-060

long service leave

¶40-030

misleading or deceptive conduct in employment

¶51-010

parental leave

¶41-040

privacy

¶53-020–53-040

redundancy

¶61-060

references

¶12-100

superannuation funds

¶44-100

work health and safety

¶12-030; ¶12-050; ¶12-060

— common law

¶12-020

— officers’ and managers’ liability

¶12-080

— prosecutions

¶12-090

work/life balance, impact on

¶25-030

workers compensation

¶59-020

Legislative rights termination of employment Less favourable treatment definition

¶6-090 ¶13-040 ¶4-050

Liability defamation — direct and vicarious liability

¶54-040

misleading or deceptive conduct — employees

¶51-040–51-090

— employers

¶51-110–51-180

— recruiters

¶51-100

policies and procedures, risk minimisation

¶31-050

superannuation guarantee

¶44-080

unlawful conduct

¶13-070

work health and safety — employers

¶12-020

— managers

¶12-080

— officers

¶12-080

Likelihood of occurrence risk assessment process

¶57-050

Line managers career coach, as

¶21-090

coaching and mentoring

¶47-070

induction, responsibility for

¶36-050

learning and development

¶20-080

new HR provider, relationship to

¶28-160

new responsibilities

¶47-020

strategy implementation, role

¶2-070

Listening devices — see also Workplace surveillance data surveillance device

¶55-090

Long service leave adoption leave, during

¶41-040

application

¶40-060

bonuses and commissions

¶40-070

casual employees

¶40-040; ¶40-070

continuity of service, preservation

¶40-050

definition

¶40-020

directions to take

¶40-060

employee replacement

¶40-060

entitlements

¶40-060

in advance

¶40-060

jurisdiction

¶40-030

maternity leave, during

¶41-040

National Employment Standards

¶6-050; ¶43-030

non-payments

¶40-090

number of periods

¶40-060

overview

¶40-010

partner leave, during

¶41-040

payments

¶40-070

— termination or death, on

¶40-080

permanent and part-time employees

¶40-040

public holidays, during

¶42-020

record keeping

¶40-090

related companies

¶40-050

sick leave during

¶39-090

taxation

¶40-070

termination

¶40-060

transmission of business

¶40-050

working for another employer

¶40-060

Long stay visas

¶33-050

Long-term incentives

¶45-040

M Major incidents — see Critical incidents Malware protection against

¶54-020

Management — see also Managerial self-development; Managers assessment of activities — HR function

¶3-080

— references

¶3-200

challenges and opportunities

¶1-030

contemporary themes

¶1-020

demographic changes

¶1-030

diversity management

¶4-060

ethics, responsible capitalism and CSR — opportunities

¶17-050; ¶17-060 ¶17-080

evolution of people management and HRM

¶2-020

HRM concepts, trends

¶1-050

HRM in the future

¶1-060

ICT, role in

¶14-060

incident plans

¶58-060

international — definitions

¶66-020

— international HRM distinguished from domestic HRM

¶66-030

— overview

¶66-010

— performance management

¶66-070

— references

¶66-090

— repatriation

¶66-080

— selection and training, international assignments

¶66-060

— staffing the international organisation

¶66-040

— variations to the expatriate model

¶66-050

knowledge and intangible assets

¶30-060–30-090

leadership compared

¶18-010

learning conducive work, support for

¶20-090

measuring effectiveness

¶2-090

mergers and acquisitions

¶27-020

overview

¶1-010; ¶2-010

personnel management compared

¶1-060

policy and practice, trends

¶1-040

references relationship with people management social media and networking strategic HRM characteristics, management, formulation and case studies

¶1-060; ¶2-100 ¶2-050 ¶24-030 ¶2-040

Managerial self-development “blended learning” format

¶20-050

importance

¶22-010

nature

¶22-020

overview

¶22-010

process

¶22-030

— self-awareness

¶22-040

— self-reflection

¶22-050

— self-regulation

¶22-060

references

¶22-070

Managerial skills — see Skills Managers — see also Employers; Management; Senior management conflict, managerial directive

¶49-020

employee involvement, implementation

¶15-060

employee retention

¶46-020

— mutual respect and trust

¶46-030

equal employment opportunity induction, responsibility for

¶4-040 ¶36-050

policies and procedures — HR practitioners and lawyers perspectives compared

¶31-010; ¶31-020

self-development

¶22-010

work health and safety liability

¶12-080

Market research — see Research Market value intangible assets, link

¶30-030

Material rewards employee retention

¶46-020

— design of reward/recognition systems

¶46-080

Materiality, definition

¶27-020

Maternity leave — see also Parental leave accrual

¶41-040

annual leave, interaction with

¶41-140

continuous service

¶41-070

documentation required

¶41-080

interruption

¶41-080

length

¶41-050

long service leave, interaction with

¶41-140

overview

¶41-050

paid parental leave

¶41-130

pregnancy termination or death of child

¶41-090

public holidays, interaction with

¶41-140

qualifying service

¶41-060

sick leave, interaction with

¶41-140

social security, interaction with

¶41-140

special

¶41-120

variation of period

¶41-100

workers compensation, interaction with

¶41-140

Mature age employees — see Ageing workforce Maximum hours of work — see Hours of work MBA programs effectiveness

¶22-010

Mediation conflict resolution

¶49-020

Medical evacuation plans

¶58-060

Mentoring

active or passive

¶18-080

coaching compared

¶47-040

coaching distinguished

¶47-030

evidence for value

¶47-050

international human resources management

¶66-050

managing role

¶47-020

organisational culture

¶47-090

overview

¶47-010

references

¶47-100

skills of mentors

¶47-080

structured programs

¶47-060

— conditions for effective programs

¶47-060

terminology

¶47-010

Mergers and acquisitions clarifying objectives, deal type and structure

¶27-050

cross-border transactions

¶27-150

— subsequent steps

¶27-160

Day 1 readiness

¶27-010; ¶27-120

— implementation by HR work streams

¶27-140

— key phases

¶27-080

— planning

¶27-130

evaluation

¶27-110

HR due diligence

¶27-020; ¶27-070

— key phases

¶27-080

HR, role

¶27-020

HR transaction process

¶27-040

overview

¶27-010

project team, skill requirements

¶27-030

references

¶27-160

risk assessment

¶27-060

transaction integration

¶27-110

transaction process

¶27-040

Meta-skills, definition

¶22-030

Minimum employment periods unfair dismissal, access to remedies Mining industry

¶63-040

long service leave

¶40-040

Mischaracterisation independent contractors — implications

¶37-050

Misconduct clearly expressed standards, necessity

¶48-040

performance and misconduct management process, flowchart

¶48-080

social media and networking

¶24-050

Misleading or deceptive conduct

¶51-010

employees’ liability

¶51-040

— about employer

¶51-090

— depends on involvement

¶51-055

— to a customer

¶51-050

employers’ liability

¶51-110

— case example

¶51-170

— conclusion

¶51-180

— employers about employees, representations

¶51-150

— existing employees, representations

¶51-140

— “in trade or commerce”, employment negotiations

¶51-160

— job security, representations

¶51-120

— other representations during recruitment

¶51-130

“in trade or commerce”

¶51-030

key points

¶51-010

prohibitions

¶51-020

recruiters’ liability

¶51-100

representations about the future

¶51-035

Misrepresentation sham contracting arrangements

¶37-040

Mitigation strategies mergers and acquisitions, due diligence

¶27-090

Mobility intangible assets, choice of

¶30-040

remuneration and international employees

¶66-050

Model dispute resolution process

¶7-090

Model flexibility term — see Individual flexibility arrangements Modern awards individual flexibility arrangements

¶7-030

terms that may be included

¶7-030

variation

¶7-030

wage rates

¶7-030

Monitoring and review bullying prevention

¶50-050

business sponsors, 457 visa program

¶33-060

management by excellence or exception

¶18-080

risk controls

¶57-080

risk management

¶57-030

Moral rights employees

¶52-050

Morale redundancy

¶61-090

Motivation — see also Performance appraisal employee retention

¶46-010; ¶46-080

engagement in self-development process

¶22-030

performance pay and incentives

¶11-070

— design checklist

¶11-080

— implementation problems

¶11-090

— legal aspects

¶11-100

reward and recognition systems

¶11-110

Multinational corporations definitions

¶66-020

Multiplicative assets

¶30-050

MySuper products default fund terms in modern awards

¶44-060

N National Employment Standards law and the employment relationship overview

¶7-020; ¶43-030 ¶6-050 ¶43-010

public holidays

¶42-020

redundancy, termination benefits

¶61-080

state system employees

¶6-060

transfers of employment and entitlements

¶62-030

workers covered

¶43-020

National Occupational Health and Safety (OHS) Strategy

¶59-020

Natural justice — see Procedural fairness Necessary condition strategic analysis and resourcing

¶30-020

Negotiations collective agreements

¶6-150

employment contract, employer's conduct

¶51-110

— case example

¶51-170

— conclusion

¶51-180

— employers about employees, representations

¶51-150

— existing employees, representations

¶51-140

— “in trade or commerce”, employment negotiations

¶51-160

— job security, representations

¶51-120

— other representations during recruitment

¶51-130

NES — see National Employment Standards Networking recruitment

¶10-030

social media — clear guidelines, need

¶24-040; ¶24-050

— confidentiality

¶24-050

— legal issues

¶24-050

— management

¶24-030

— misconduct

¶24-050

— overview

¶24-010

— privacy

¶24-050

— recommendations are really references

¶24-050

— references

¶24-060

— rise

¶24-020

— summary

¶24-060

New employees — see also Induction choice of superannuation fund

¶44-050

New South Wales sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-040

New Zealand SG scheme, NZ citizens in Australia

¶44-035

No fault schemes workers compensation

¶59-020

Non-award employees law and the employment relationship

¶6-040

Non-business visas

¶33-080

Non-citizens

¶33-020

Non-English speaking groups induction needs

¶36-060

Non-residents — see International workers Non-standard employees carer's leave

¶39-160

personal/sick leave

¶39-030

Non-standard work — see also Independent contractors flexible hours and duties

¶14-040

Non-transferring employees transferable instrument, coverage

¶62-040

Non-union workplaces survey evidence and general trends

¶15-050

Northern Territory sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-050

Notice of intent to cancel visas

¶33-020

Notice period, required executive contracts

¶38-030

National Employment Standards

¶6-050

redundancy

¶61-080

termination — National Employment Standards

¶43-030

Notification carer's leave

¶39-020

incidents

¶56-020

sick leave

¶39-030

Notional agreements preserving state awards

¶7-020; ¶7-030

O Occupational stress

¶1-050

Offences and penalties sham contracting arrangements workers compensation

¶37-040 ¶59-020; ¶59-030

Office of the Employment Advocate — see Fair Work Australia; Workplace Authority Office of Workplace Services — see Fair Work Ombudsman; Workplace Ombudsman Officers’ liability work health and safety

¶12-080

Offshore assignments — see International human resources management Older workers — see Ageing workforce Online learning

¶20-050

Operational environment major incident planning

¶58-020

Opportunity conflict resolution pre-conditions

¶49-020

Oppositional behaviours aggressive/defensive impact on others Optical surveillance — see Workplace surveillance Oral warnings

¶18-030

poor performance of employees

¶48-060

Ordinary hours of work employer SG contributions

¶44-040

Ordinary time earnings employer SG contributions

¶44-040

Organisation test employees and contractors compared

¶37-020

Organisational behaviour leadership and impact on others Organisational capital

¶18-020 ¶3-020

intangible asset, type

¶30-030

management

¶30-080

Organisational culture — see Culture Organisational development implementing change

¶16-020

Organisational learning — see Learning and development Organisational policies — see Policies and procedures Organisational transformation leadership, driver of current interest

¶18-010

Organisational values — see Values Organisation's commitment to its employees (OCE)

¶30-090

Orientation phase — see Induction Outsourcing — see also Outsourcing providers definition

¶28-010

human resources function — avoiding continuance of poor or undesirable practices

¶28-120

— benchmarking pre-outsourcing performance

¶28-060

— building and maintaining good business relationship

¶28-130

— communications strategy

¶28-110

— contracts

¶28-100

— future perspective

¶28-170

— line management and new HR provider

¶28-160

— management of tendering process

¶28-090

— measuring and rewarding success

¶28-140

— observations of the phenomenon

¶28-180

— reasons for outsourcing

¶28-030

— recent history

¶28-020

— references

¶28-190

— reflection of corporate vision

¶28-050

— reluctance to embrace

¶28-040

— reversing decisions to outsource

¶28-150

— seeking service providers

¶28-080

— selection and evaluation of appropriate providers

¶28-070

— summary

¶28-190

overview

¶28-010

transferring work

¶62-040

Outsourcing providers — see also Outsourcing communications strategy

¶28-110

contracts

¶28-100

evaluating

¶28-070

seeking

¶28-080

severance of contract

¶28-100

P Paid parental leave — see Parental leave Pandemics major incident planning

¶58-030

— checklist

¶58-100

Panel interviews

¶35-030

Parental leave — see also Adoption leave; Maternity leave; Partner leave definition National Employment Standards overview paid — work/life balance replacement employee

¶41-020 ¶6-050; ¶43-030 ¶41-020 ¶41-130; ¶41-230; ¶41320 ¶25-030; ¶25-040 ¶41-360

return to work

¶25-080; ¶41-350

sources of law

¶41-350

termination

¶41-350

terminology

¶41-350

Part-time employees employment contracts

¶5-190

long service leave

¶40-040

sick leave

¶39-080

superannuation guarantee scheme

¶44-035

Part-time work information and communication technology

¶14-040

work/life strategies

¶25-040

Participation of employees

¶15-020

Participation, workforce — see Workforce participation Partner leave — see also Maternity leave; Parental leave accrual

¶41-350

annual leave, interaction

¶41-240

cancellation

¶41-210

continuous service

¶41-210

documents required

¶41-210

extended leave — commencement

¶41-210

— variation of period

¶41-220

length

¶41-160

long service leave, interaction

¶41-240

overview

¶41-160

paid parental leave

¶41-160

public holidays, interaction

¶41-240

qualifying service

¶41-170

sick leave, interaction

¶41-170

social security, interaction

¶41-240

workers compensation, interaction

¶41-240

Passive impact on others

¶18-030

Patents

employees

¶52-020

Paternity leave — see Partner leave Pay — see Remuneration Payment rates workers compensation

¶59-040

Payment summaries SG record keeping

¶44-040

Payments carer's leave

¶39-200

employment termination — see Employment termination payments industrial action

¶8-150

sick leave — payment other than where leave is taken

¶39-110

— payments during leave

¶39-100

traineeships, funding

¶19-060

Payroll services efficiency, importance for employee retention

¶46-060

Penalties — see Offences and penalties People management — see also Management bullying prevention

¶50-050

contribution

¶3-030

human resources management, relationship with

¶2-050

new perspectives

¶2-020

practices, institutions, performance and sustainability

¶2-030

skills shortages, corporate initiatives strategic HRM characteristics, management, formulation and case studies

¶26-080 ¶2-040

Perfectionistic behaviours aggressive/defensive impact on others

¶18-030

Performance appraisal design of system job analysis

¶23-040 ¶9-120

purpose and methods

¶23-040

steps

¶23-030

Performance-based pay

¶1-050; ¶11-070

Performance bonuses incident reporting, effect on

¶57-040

Performance grounds redundancy selection criterion

¶61-070

Performance improvement plans

¶48-060

Performance management — see also Motivation Balanced Scorecard

¶23-060

bullying prevention

¶50-050

conflict resolution

¶49-020

employees as people or resources/processes

¶23-020

future

¶23-060

goals

¶23-020

implementation

¶23-040

importance

¶23-070

incentives linked to performance

¶45-010

induction

¶36-060

international human resources management

¶66-070

— domestic HRM distinguished

¶66-030

leadership, driver of current interest overview

¶18-010; ¶18-100 ¶23-010

poor work performance — need for fairness, case law

¶48-020

— overview

¶48-010

— performance and misconduct management process, flowchart

¶48-080

— practical tips

¶48-090

references

¶23-070

talentship

¶23-060

training

¶23-040

trends in HRM concepts

¶1-050

Performance mindset learning mindset distinguished

¶22-060

Permanent employees annual leave employment contracts

¶38-040 ¶5-190

long service leave

¶40-040

Permanent visas

¶33-090

Permit holders notice of entry

¶8-070

“Person” misleading or deceptive conduct, employees’ liability

¶51-050; ¶51-055

Person specification definition

¶32-010

preparation

¶32-040

rationale for use

¶32-010

Personal information definition

¶53-020

obsolete information, destruction

¶53-030

Personal leave interaction with other leave National Employment Standards non-standard employees

¶39-010; ¶39-020 ¶39-090 ¶6-050; ¶43-030 ¶39-030

Personal or public praise employee retention

¶46-070

— design of reward/recognition systems

¶46-080

Personal particulars registers major incident planning

¶58-070; ¶58-100

Personal protective equipment decision on control measures

¶57-060

Personality clash conflict resolution

¶49-020

Phased retirement work/life strategies

¶25-040

Physical environment bullying prevention Planning workforce — see Workforce planning

¶50-050

Pleas in mitigation WHS prosecution

¶12-090

Policies and procedures bullying prevention

¶50-050

clearly expressed standards

¶48-040

compliance

¶31-070

contents

¶31-060

effective, features

¶31-070

equal employment opportunity

¶4-040

HR perspective

¶31-070

implementation

¶31-070

incorporation into employment contract

¶31-030

legal concerns

¶31-020

liability, minimisation by employers

¶31-050

major incident planning

¶58-060

overview

¶31-010

preventative OHS/WHS

¶59-080

references

¶31-080

social media and networking

¶24-040; ¶24-050

standard for fairness

¶31-040

variation

¶31-030

workers compensation

¶59-120

Political belief or activity unlawful discrimination, ground — exemptions

¶13-050

Poor work performance — see also Conflict resolution need for fairness, case law

¶48-020

overview

¶48-010

performance and misconduct management process, flowchart

¶48-080

practical tips

¶48-090

unfair dismissal, procedural fairness

¶63-130

Pornography internet and email, termination of employment Position description — see Job descriptions Post-employment obligations

¶54-040

confidential information

¶65-040

fiduciary obligations

¶65-030

implied obligations during employment

¶65-020

overview

¶65-010

restraint of trade — agreements to restrict employees

¶65-050

— enforceability

¶65-090

— going too far

¶65-070

— New South Wales

¶65-080

— reasonable

¶65-060

Power aggressive/defensive impact on others

¶18-030

Pre-employment checking background checks

¶34-020

criminal record

¶34-050

— spent convictions, discrimination

¶34-060

job applicant's right to silence

¶34-070

overview

¶34-010

reference checking

¶34-040

spent convictions

¶34-050

verification of résumés

¶34-030

Pregnancy termination, cancels maternity leave

¶41-090

transfer to safe job

¶43-030

unlawful discrimination, exemption

¶13-050

Premiums workers compensation

¶59-030

Prescriptive strategies leadership and impact on others

¶18-020; ¶18-080

Preserved terms award-based transitional instruments

¶7-030

Prevention of accidents work health and safety Primary caregiver

¶12-090

definition

¶41-090

Privacy — see also Workplace surveillance Australian Privacy Principles, practical impact

¶53-030

overview

¶53-010

Privacy Act 1988 (Cth)

¶53-020

references

¶53-030

social media and networking

¶24-050

Privacy Act (Cth)

¶53-020

Privacy Commissioner

¶53-020

Private employment agreements sources of employment law

¶6-030

Private sector agencies privacy

¶53-020

Procedural fairness grievance handling

¶49-050

poor performance, case law

¶48-030

redundancy

¶61-070

termination of employment unfair dismissal

¶6-090 ¶63-110; ¶63-130

Procedures — see Policies and procedures Product development HR-centred business

¶29-090

Professional development — see also Learning and development career progression

¶19-050

definition

¶19-050

Professionals continuum from competency to professionalism

¶19-030

Profit-making HR-centred business

¶29-060

Profit-sharing plans

¶45-030

Prohibited conduct industrial action

¶7-080

sham contracting arrangements

¶37-040

Prohibited grounds discrimination

¶13-030

Prohibitions on employees — see Policies and procedures Project management cross-border transactions

¶27-140

Project plans mergers and acquisitions, day 1 readiness

¶27-080

Project team incentive plans

¶45-030

Project teams mergers and acquisitions — HR due diligence

¶27-080

— skill requirements

¶27-030

Promotion workforce participation, barriers

¶26-070

Proof of illness carer's leave

¶39-190

sick leave

¶39-080

Property costs

¶59-090

Prosecutions failure to choose appropriate control measure

¶57-060

work health and safety breach — commencement

¶12-090

— consideration of actions

¶12-090

— officers’ and managers’ liability

¶12-080

Protected action ballots

¶8-140

Protected industrial action ballots

¶8-140

Psychological contract

¶1-050

career development

¶21-040

Public holidays

¶42-020

adoption leave, during

¶41-330

maternity leave, during

¶41-140

National Employment Standards

¶43-030

partner leave, during

¶41-240

sick leave, during

¶39-080

Public relations work reasons for organisations to be ethical

¶17-030

Purchased leave work/life strategies

¶25-040

Purchaser of business transfer of industrial instruments to

¶62-040

Q Qualifications HR

¶19-040

trainers

¶20-070

workplace coaching

¶47-080

Qualifying period long service leave

¶40-040

Qualifying service partner leave

¶41-170

Queensland sick leave entitlements

¶39-080

workplace surveillance

¶55-060

Questionnaires

¶9-140

R Racial harassment unfair dismissal

¶63-120

Racial hatred and vilification

¶13-060

Rating risks

¶57-050

Reasonable foreseeability

¶12-020

Reasonable precaution and proper diligence

¶57-010

Reasonable steps prevention of unlawful conduct

¶13-070

Reasonableness indirect discrimination

¶13-040

“likely to offend, humiliate or intimidate”

¶13-040

post-employment restrictions, contractual admission

¶65-060

Reciprocal deterministic systems self-regulation

¶22-060

Recognition — see Rewards Record keeping — see also Reporting/reports annual leave

¶38-090

grievance handling

¶49-040

job analysis

¶9-140

law and the employment relationship

¶6-080

long service leave

¶40-040

privacy exemption, employee records

¶53-020

transfer of business

¶62-040

Recovery of moneys unpaid annual leave

¶38-090

unpaid long service leave

¶40-040

Recruiters’ liability

¶51-100

Recruitment agencies referring non-citizen for work

¶33-020

Recruitment and selection application form (sample)

¶10-030

aptitude tests

¶10-040

assessment centres

¶10-040

behaviourally-based interviewing

¶10-040

cognitive ability tests

¶10-040

definitions

¶10-020

international human resources management

¶66-060

— domestic HRM distinguished

¶66-030

interviews

¶35-010

— behaviourally-based interviewing

¶35-040

— individual

¶35-020

— interviewing skills

¶35-040

— panel

¶35-030

— references

¶35-040

— structured v unstructured formats

¶35-040

job analysis

¶9-120

mergers and acquisitions, day 1 readiness

¶27-140

overview

¶10-010

person specification

¶32-010; ¶32-040

pre-employment vetting

¶34-010

purpose

¶10-030

references

¶10-050

work sample tests

¶10-040

workforce participation, barriers

¶26-070

— corporate initiatives

¶26-090

Red flag, definition

¶27-020

Redesign of equipment or processes decision on control measures

¶57-060

Redundancy — see also Termination of employment asset sales, avoidance of benefits

¶62-030

awards, enterprise agreements and other industrial instruments

¶61-050

dismissal, whether existent and caused by redundancy

¶64-060

employee morale

¶61-090

employment contract

¶61-040

FW Act 2009

¶61-060

genuine

¶63-080

global financial crisis implementation methods law and the employment relationship overview

¶1-050 ¶61-070 ¶6-100 ¶61-010

payments — see Redundancy payments policies, incorporation into employment contract

¶31-030

selection criteria

¶61-070

sources of rights and obligations

¶61-030

state system employers

¶61-070

termination benefits

¶61-080

time when arises

¶61-020

unfair dismissal legislation

¶61-070

workforce participation, barriers

¶26-070

Redundancy payments

¶61-080

genuine

¶64-060

National Employment Standards

¶6-050; ¶43-030

Reference checks pre-employment vetting

¶34-040

References (further reading) assessment of HR contributions

¶3-200

bullying

¶50-060

career development

¶21-100

change implementation

¶16-060

coaching and mentoring

¶47-100

conflict resolution

¶49-040

counselling

¶60-120

diversity management

¶4-070

email and internet use

¶54-100

employee consultation

¶15-070

ethics, responsible capitalism and CSR

¶17-080

HR-centred business

¶29-150

human resource management

¶1-060; ¶2-100

induction

¶36-100

information and communication technology

¶14-080

international human resources management

¶66-090

international workers, managing

¶33-100

internet and email use

¶54-100

interviewing for recruitment

¶35-040

leadership

¶18-110

learning and development

¶20-110

— HR practitioners

¶19-060

major incident planning

¶58-090

managerial self-development

¶22-070

mergers and acquisitions

¶27-110

outsourcing the human resources function

¶28-190

performance management

¶23-070

privacy

¶53-030

recruitment and selection

¶10-050

remuneration management

¶11-160

skills shortages and ageing workforce

¶26-090

work health and safety

¶12-090

work/life balance

¶25-090

workers compensation

¶59-130

Referral (counselling) definition

¶60-090

Referral of powers parental leave

¶41-170

Referring non-citizens

¶33-020

Reflective analysis self-reflection

¶22-050

Registered organisations — see Unions Regulation work health and safety

¶12-030

Rehabilitation

¶59-070

Reinforcement rewards or punishment

¶18-080

Reinstatement unfair dismissal

¶63-150

Related companies — see also Transfer to related corporation long service leave

¶40-040

Relationship capital intangible asset, type

¶30-030

management

¶30-070

Relationships employee retention

¶46-020

ethics, interaction

¶17-020

Religious belief or activity unlawful discrimination, ground

— exemptions

¶13-050

Religious bodies unlawful discrimination, exemption

¶13-050

Relocation — see also International human resources management redundancy

¶61-020

Remedies reinstatement and compensation

¶63-150

unfair dismissal

¶63-040

Remuneration — see also Salaries; Superannuation; Wages employee retention

¶46-060

employees and contractors compared

¶37-020

expatriates

¶66-050

fringe benefits tax

¶11-110

grades and ranges, establishment of

¶11-050

job analysis

¶9-120

overview

¶11-010

packaging

¶11-120

pay

¶11-020

— administration

¶11-150

performance pay and incentives

¶1-050; ¶11-070

— design checklist

¶11-080

— implementation problems

¶11-090

— legal aspects

¶11-100

references

¶11-160

reward and recognition systems

¶11-110

salaries

¶11-030

— administration techniques

¶11-040

— HR's role in administration and checklist

¶11-060

— surveys

¶11-130

statistics

¶11-140

trends, remuneration, social and workforce

¶11-150

Repatriation international human resources management

¶66-080

Replacement employees annual leave

¶38-060

carer's leave

¶39-220

jury leave

¶34-040

leave, during

¶42-020

long service leave

¶40-060

parental leave

¶41-360

sick leave

¶39-130

Reporting/reports — see also Record keeping human capital

¶3-050

incident investigation

¶61-050

incidents

¶57-040

mergers and acquisitions, due diligence

¶27-080

Representations by employer misleading or deceptive conduct — case example

¶51-170

— conclusion

¶51-180

— employers about employees, representations

¶51-150

— existing employees, representations

¶51-140

— “in trade or commerce”, employment negotiations

¶51-160

— job security, representations

¶51-120

— other representations during recruitment

¶51-130

Reputex social responsibility ratings

¶17-070

Requirement or condition, imposition indirect discrimination

¶13-040

Research intellectual property rights job analysis

¶52-020 ¶9-120

learning conducive work

¶20-090

successful training practices

¶20-080

Resignation forced

¶63-060

Resourcing strategic analysis

¶30-020

Response plans major incident planning

¶58-070

Responsibility learning conducive work

¶20-090

Responsible capitalism

¶17-030

organisations, furthering ethical and social responsibility

¶17-070

Restraint of trade dangers of acting inconsistently with clauses

¶65-060

enforceability

¶65-090

going too far

¶65-070

New South Wales

¶65-080

reasonable

¶65-060

Restrictions on employees — see Policies and procedures Restrictive strategies leadership and impact on others

¶18-020; ¶18-080

Retention of staff effective induction

¶36-030

job satisfaction

¶46-060

overview

¶46-010

pay and benefits

¶46-060

relationships

¶46-020

reward and recognition systems

¶46-070

— design

¶46-080

strategies, importance

¶46-090

work/life balance

¶46-050

workplace culture

¶46-030

Retirement government and business policies

¶26-030

phased — work/life strategies

¶25-040

Retrenchment — see Redundancy Return on investment (ROI) assessment, HR contribution learning and development Return to work parental leave

¶3-100 ¶20-100 ¶59-030; ¶59-040; ¶59-070 ¶25-080; ¶41-350

Revenue generation HR-centred business

¶29-060; ¶29-080

Review — see Monitoring and review Reward programs — see Incentives Rewards employee retention

¶46-070

— design of reward/recognition systems

¶46-080

learning conducive work

¶20-090

link to performance

¶11-070

performance management

¶23-030

Right of entry union — broader entry rights for officials

¶8-020

— discussion purposes

¶8-040

— employer’s role, respond to union right

¶8-080

— Fair Work Commission, role

¶8-090

— investigate OHS breaches

¶8-050

— investigate suspected breaches of the FW Act

¶8-030

— notice of entry, permit holders

¶8-070

— requirements

¶8-060

— role under FW Act

¶8-010

Right to privacy overview

¶53-030; ¶58-010

Risk analysis bullying prevention

¶50-060

Risk assessment

¶57-030

mergers and acquisitions

¶27-060

process

¶57-050

three-level classification

¶57-050

Risk control decision on measures

¶57-060

hazard and injury prevention

¶59-120

implementation

¶57-070

monitoring and review

¶57-080

Risk management — see also Hazards; Monitoring and review; Risk assessment; Risk control; Work health and safety definition

¶57-010

international human resources management

¶66-030

major incident, importance of planning — checklists

¶58-100

— culture, importance

¶58-090

— forms

¶58-100

— implementation of plan

¶58-060

— legal requirements

¶58-040

— London bombings (2005), example

¶58-080

— operational environment

¶58-020

— organisational culture

¶58-050

— overview

¶58-010

— practical steps

¶58-070

— references

¶58-090

— types of incidents

¶58-030

outsourcing, reasons

¶28-030

overview

¶57-010

summary

¶57-080

system workers compensation

¶57-010; ¶57030–57-080 ¶59-030

Role modelling exemplifying or circumscribing

¶18-080

Rollovers, superannuation — see Superannuation Rostered days off (RDOs) work/life strategies

¶25-040

Résumés pre-employment vetting

¶34-030

S Safe system of work

¶12-020

Safe Work Australia workers compensation

¶59-020

Safety management plans

¶59-110

Salaries

¶11-030

— see also Remuneration; Wages administration — HR's role

¶11-060

— surveys

¶11-130

— techniques

¶11-040

minimum level, 457 visa holders

¶33-050

ranges, establishment of

¶11-050

Salary packaging

¶11-120

Salary sacrifice superannuation

¶44-045

Sale of business HR-centred business

¶29-130

redundancy

¶61-020

transfer of employees — avoidance of redundancy benefits

¶62-030

— method of sale

¶62-020

— overview

¶62-010

— transfer of industrial instruments to purchaser

¶62-040

Sales commission plans

¶45-010

Sales cycle HR-centred business

¶29-080

Sanctions allowing non-citizen to work

¶33-020

referring non-citizen for work

¶33-020

Sandwich generation

¶26-030

Satisfaction, job — see Job satisfaction School leavers induction needs Secondment agreements

¶36-060 ¶5-140

Security major incident planning

¶58-050

protection

¶54-030

Segmented approach to outsourcing

¶28-180

Selection of employees — see Recruitment and selection Self-actualising behaviours constructive impact on others Self-awareness

¶18-030 ¶22-030; ¶22-040

Self-care HR-centred business

¶29-140

Self-development managers and their development, importance

¶22-010

nature

¶22-020

process

¶22-030

— self-awareness

¶22-040

— self-reflection

¶22-050

— self-regulation

¶22-060

references

¶22-070

Self-insurance workers compensation

¶59-030

Self-reflection

¶22-030; ¶22-050

Self-regulation

¶22-030; ¶22-060

Seller, definition

¶27-020

Senior management bullying prevention

¶50-050

induction needs

¶36-060

Serious injuries definition

¶59-060

Service-based industries intangible assets, increasing importance

¶30-010

Service delivery mergers and acquisitions, day 1 readiness Service level agreements

¶27-140

outsourcing

¶28-100

Severity of harm risk assessment process

¶57-050

Sexual harassment

¶13-060

definition

¶4-050

unfair dismissal

¶63-120

Sham arrangements

¶37-040

Share sales transfer of employees, issues

¶62-020

Shiftworkers annual leave entitlement employment contracts Short stay visas

¶38-040; ¶38-070 ¶5-190 ¶33-040

Short-term assignments international human resources management

¶66-050

Short-term incentives

¶45-030

Show stopper, definition

¶27-020

Shutdowns

¶38-060

Sick leave

¶39-010

adoption leave, during

¶41-330

contract of employment

¶5-100

definition

¶39-010

entitlement

¶39-020

illness or incapacity

¶39-060

interaction with other leave

¶39-090

maternity leave, during

¶41-330

non-standard employees

¶39-030

notification and proof

¶39-080

other paid employment during

¶39-130

partner leave, during

¶41-330

payments — during leave

¶39-100

— other than where leave is taken

¶39-110

periods of less than a day

¶39-050

public holidays, during

¶42-020

replacement employees

¶39-130

service required before sick leave

¶39-040

termination during

¶39-120

transmission of business

¶39-070

Silence, job applicant's right

¶34-070

Skills coaches and mentors managerial self-development project teams, mergers and acquisitions

¶47-080 ¶22-030–22-060 ¶27-030

Skills shortages ageing workforce — age discrimination legislation

¶26-060

— barriers to workforce participation

¶26-070

— challenges associated with ageing

¶26-030

— corporate initiatives

¶26-080

— demographics

¶26-020

— government initiatives

¶26-075

— overview

¶26-010

— references

¶26-090

— stereotypes of older workers

¶26-040

career development

¶21-030

learning and development

¶20-040

workforce planning

¶9-030

Small business HR-centred

¶29-010; ¶29-030

privacy, exemption

¶53-030

Small Business Fair Dismissal Code

¶63-090

Social capital Social cognitive theory

¶3-020 ¶22-060

Social media/networking clear guidelines, need confidentiality

¶24-040; ¶24-050 ¶24-050

human resources aspects

¶54-070

induction

¶36-040

legal issues

¶24-050

management

¶24-030

misconduct

¶24-050

overview

¶24-010

privacy

¶24-050

recommendations are really references

¶24-050

references

¶24-060

rise

¶24-020

summary

¶24-060

Social security maternity leave

¶41-140

partner leave

¶41-240

Social security agreements, international

¶44-035

Soliciting work from clients intention to poach client

¶65-030

reasonable restraint

¶65-060

Sources of law employment relationship parental leave

¶6-030 ¶41-140

South Australia sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-070

Special measures unlawful discrimination, exemption

¶13-050

Specialist human resources outsource providers, as

¶28-030

Specific purpose leave

¶42-020

Spent convictions

¶34-050

discrimination

¶34-060

Sponsorship of employees

long stay business visa

¶33-050

Sport unlawful discrimination, exemption

¶13-050

Spouses definition

¶41-140

trailing, international assignments

¶66-050

Staffing international organisations

¶66-040

Standards ASNZ 4360:2004 Risk Management

¶57-030

work health and safety

¶12-030

State agreements

¶7-070

State and territory funding traineeships

¶19-040

State awards

¶7-030

overview

¶7-030

State legislation long service leave

¶40-060

sick leave, termination during

¶39-120

sources of employment law

¶6-030

State system employees National Employment Standards

¶6-060

State system employers redundancy

¶61-070

Stereotyping

¶13-030

definition

¶4-050

older workers

¶26-040

Storytelling

¶18-080

Strategic analysis management of knowledge and intangible assets

¶30-020; ¶30-030

Strategic assignments international human resources management

¶66-050

Strategic human resources characteristics

¶2-040

development through identification of HR needs

¶2-060

formulation

¶2-040

human capital management

¶30-090

implementation/execution

¶2-070

organisational tensions

¶2-080

Strategy learning initiatives prescriptive or restrictive

¶20-040 ¶18-020; ¶18-080

Stress management

¶1-050

Strikes — see Industrial action Study leave

¶42-020

work/life strategies

¶25-040

Subjective career

¶21-010

Substantially higher proportion indirect discrimination

¶13-040

Substantive fairness unfair dismissal

¶63-110; ¶63-120

Substitution of risks decision on control measures

¶57-060

Successful training practices, definition

¶20-080

Succession planning job analysis

¶9-120

Summary dismissal Small Business Fair Dismissal Code

¶63-090

Superannuation — see also Remuneration changes on the horizon

¶44-300

deemed employment relationships and rights

¶37-070

default system

¶44-043

employer obligations under SIS legislation

¶44-100

employment termination payment, rollover into fund not permitted

¶64-040

exempted employees

¶44-035

independent contractors — contributions

¶37-070

interaction with workplace laws

¶44-043

introduction

¶44-010

law and the employment relationship

¶6-070

MySuper products, default fund terms in modern awards

¶44-060

payment of SG contributions by employers

¶44-040

preservation age, definition

¶64-050

remuneration

¶11-120

salary sacrifice

¶44-045

superannuation guarantee scheme — choice of fund

¶44-050

— choice of funds, compliance issues

¶44-080

— complaints by employees

¶44-090

— contributions and statement

¶44-040

— contributions requirement

¶44-020

— employers and employees

¶44-030

— payment of contributions by employers

¶44-040

— SG contributions requirement

¶44-020

unlawful discrimination, exemption

¶13-050

Supervisors — see Line managers Surveillance — see Workplace surveillance Surveys employees — approaches to assessment induction process Survivors, management of

¶3-200 ¶36-090 ¶1-050

Suspension poor performance of employees

¶48-090

Sustainability diversity management

¶4-020

SWOT analysis management of knowledge and intangible assets

¶30-020

T Tactical assignments international human resources management

¶66-050

Talentship performance management

¶23-060

Target, definition

¶27-020

Tasmania sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-080

Taxation deemed employment relationships and rights

¶37-060

employment termination payments

¶64-050

fringe benefits tax

¶11-110

genuine redundancy payments

¶64-060

independent contractors

¶37-060

long service leave

¶40-060

superannuation contributions, deduction

¶44-040

Teams/teamwork conflict in and between

¶49-040

performance management

¶23-050

Technical assignments international human resources management

¶66-050

Technology — see Information and communications technology Teleworking

¶14-050

work/life strategies

¶25-040

Termination — see Termination of employment Termination benefits redundancy

¶61-080

Termination of employment — see also Redundancy annual leave carer's leave, during

¶38-060; ¶38-080 ¶39-210

clear and unclear employment contracts

¶63-060 ¶5-070

“harsh, unjust or unreasonable”

¶63-100

internet and email use

¶54-040

law and the employment relationship

¶6-090

leave, during

¶42-020

long service leave

¶40-060

— pro-rata payment

¶40-060

matters discovered after

¶63-120

notice — National Employment Standards

¶43-030

parental leave

¶41-140

policies, incorporation into employment contract

¶31-030

poor performance of employees — practical tips

¶48-090

— procedural fairness

¶48-030

redundancy — dismissal, whether existent and caused by redundancy

¶64-060

— termination benefits

¶61-080

sham contracting arrangements

¶37-040

sick leave — payment for untaken leave

¶39-110

— termination during leave

¶39-120

Small Business Fair Dismissal Code

¶63-090

unlawful discrimination

¶13-050

Termination payments — see also Employment termination payments genuine redundancy payments

¶64-060

Terms and conditions of employment — see Conditions of employment Terms that may be included in modern awards

¶7-030

Terrorism major incident, type

¶58-030

Tertiary education undergraduate degrees in HR

¶19-040

Testamentary dispositions unlawful discrimination, exemption

¶13-050

Theft unfair dismissal

¶63-120

Themes configurational analysis

¶30-120

Therapy definition

¶60-010

Time limits choice of superannuation fund, standard form

¶44-050

complaints of discrimination

¶13-080

457 visa applications

¶33-050

unfair dismissal application

¶63-030

Torts/tortious conduct — see Common law Tracking surveillance — see Workplace surveillance Trade union leave

¶42-020

Trade unions — see Unions Trailing spouses international assignments

¶66-050

Training — see also Learning and development bullying prevention

¶50-050

conflict resolution

¶49-040

international human resources management

¶66-060

— domestic HRM distinguished

¶66-030

job analysis mergers and acquisitions, day 1 readiness

¶9-120 ¶27-140

online — induction

¶36-040

performance appraisals

¶23-040

qualifications for trainers

¶20-070

“successful training practices”, definition

¶20-080

workforce participation, barriers

¶26-070

Training programs funding eligibility

¶19-040

Transactions mergers and acquisitions — see Mergers and acquisitions Transfer of business — see also Transmission of business definition

¶7-090

long service leave entitlements

¶40-060

sick leave entitlements

¶39-070

time when occurs

¶62-040

Transfer of employees — see also Transfer of business; Transfer to related corporation sale of business — avoidance of redundancy benefits

¶62-030

— method of sale

¶62-020

— overview

¶62-010

— transfer of industrial instruments to purchaser

¶62-040

Transfer of employment National Employment Standards

¶43-030

Transfer to related corporation — see also Transfer of employees annual leave entitlements

¶38-050

long service leave entitlements

¶40-060

sick leave entitlements

¶39-070

Transferable instrument employees who are covered

¶62-040

Transferring employees definition

¶7-090

Transferring work transfer of business, time when occurs Transformation and change management

¶62-040 ¶2-050

leadership, driver of current interest

¶18-010

transactional approach compared

¶18-010

Transformations intangible assets, linking different categories

¶30-100

Transitional arrangements enterprise agreements Transitional instruments

¶7-050

award-based FW Act 2009, effect

¶7-030

— preserved terms

¶7-030

Transitional service agreements mergers and acquisitions, day 1 readiness

¶27-140

Transmission of business — see also Transfer of business annual leave entitlements

¶38-050

long service leave entitlements

¶40-060

overview

¶7-090

redundancy

¶61-020

sick leave entitlements

¶39-070

Transparency grievance handling

¶49-050

Travel awareness programs major incident planning

¶58-070

Travel locator system major incident planning

¶58-070

Trends employee involvement/consultation HRM practices investment in training

¶15-050 ¶1-050 ¶20-030

job analysis

¶9-170

job design

¶9-220

remuneration, social and workforce

¶11-150

workforce planning

¶9-090

workforce structure

¶1-040

Tribunals — see Fair Work Australia Triple bottom line

¶17-020; ¶17-070

Trustees superannuation funds

U Unacceptable conduct

¶44-100

clearly expressed standards

¶48-040

Unfair contracts

¶37-060

Unfair dismissal event, whether occurred — employee, whether “dismissed”

¶63-060

— “genuine redundancy”

¶63-080

— “harsh, unjust or unreasonable”

¶63-100

— Small Business Fair Dismissal Code

¶63-090

— specific circumstances, employee not taken to have been “dismissed”

¶63-070

— “unfair dismissal”, definition

¶63-050

FW Act 2009, coverage

¶63-020

general protections and discrimination laws

¶63-140

initial issues to consider

¶63-030; ¶63-040

merits of claim — considerations

¶63-110

— procedural fairness

¶63-130

— substantive fairness

¶63-120

overview

¶63-010

redundancy

¶61-070

remedies — access, preliminary hurdles

¶63-040

— reinstatement and compensation

¶63-150

time limit and form of applications

¶63-030

Unions law and the employment relationship

¶6-140

right of entry and industrial action

¶8-170

— action ballots, protected

¶8-140

— broader entry rights for officials

¶8-020

— civil immunity

¶8-120

— discussion purposes

¶8-040

— employer’s role, respond to union right

¶8-080

— Fair Work Commission, role

¶8-090; ¶8-160

— investigate OHS breaches

¶8-050

— investigate suspected breaches of the FW Act

¶8-030

— notice of entry, permit holders

¶8-070

— payments

¶8-150

— protected industrial action

¶8-130

— protecting freedom of association

¶8-110

— requirements

¶8-060

— restriction on industrial action

¶8-100

— role under FW Act

¶8-010

WHS consultation

¶12-060

Unjustifiable hardship unlawful discrimination, exemption

¶13-050

Unlawful conduct legal liability

¶13-070

Unlawful discrimination

¶13-010

employment

¶13-050

legal liability

¶13-070

Unlawful dismissal sick leave, termination during

¶39-120

Unlawful grounds redundancy

¶61-070

Unlawful harassment

¶13-060

internet and email use

¶54-050

Unlawful termination

¶6-090

Unwelcome conduct

¶13-060

V Valuation of human capital

¶3-020

Values HR-centred business

¶29-030

person specification

¶32-030

Variable pay incentives

¶45-020

Variation of policies

¶31-030

Vertical conflict

¶49-020

Vicarious liability

¶12-020; ¶12-080; ¶13-070

defamation

¶54-040

Victimisation

¶13-060

Victim's leave

¶42-050

Victoria sick leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-090

Vilification internet and email use

¶54-050

Violence in the workplace bullying

¶50-020

Virtual teams

¶14-050

Visas business ETA

¶33-040

cancellation

¶33-020

long stay

¶33-050

non-business

¶33-080

permanent

¶33-090

short stay

¶33-040

Vocational qualifications — see Qualifications Voluntary bodies or work unlawful discrimination, exemption

¶13-050

Voluntary redundancies

¶61-070

VRIO model strategic analysis

¶30-020

W Wages — see also Remuneration; Salaries definition

¶59-030

rates, modern awards

¶7-030

setting

¶7-030

War for talent — see Skills shortages

Warnings poor performance of employees

¶48-060

unfair dismissal, procedural fairness

¶63-130

Web-based recruitment

¶10-030

Websites workers compensation

¶59-130

Western Australia illness, injury or family care leave entitlements

¶39-020

work health and safety legislation

¶12-050

workplace surveillance

¶55-100

Westpac skills shortages, corporate initiatives

¶26-080

Whistleblowing

¶65-040

WHS training risk management

¶57-020

Will or willingness conflict resolution pre-conditions

¶49-040

Win-win employment relationship

¶21-080

Winding-up HR-centred business

¶29-130

Witnesses incident investigation

¶56-050

poor performance of employees

¶48-090

Women family responsibilities workforce participation, barriers

¶1-030 ¶26-070

Words and phrases — see Definitions Work “area of life”

¶13-030

Work Choices — see also Australian Fair Pay and Conditions Standard; Fair Work Act 2009; Legislation law and the employment relationship

¶6020

national workplace relations system

¶7020

Work health and safety — see also Risk management bullying

¶50-020

— costs

¶50-030

deemed employment relationships and rights

¶37-070

framework for HR managers — incident notification

¶12-070

— legislation

¶12-050

— legislative framework

¶12-020

— WHS harmonisation

¶12-050

— workplace WHS consultation

¶12-060

independent contractors

¶37-070

job analysis

¶9-120

law and the employment relationship

¶6-120

legal issues — common law

¶12-020

— officers’ and managers’ liability

¶12-080

overview

¶12-010

right of entry to investigate suspected breaches

¶56-030

unlawful discrimination, exemption

¶13-050

workplace consultation

¶12-060

Work-related injuries and illnesses — see also Incidents; Serious injuries costs

¶59-090

definition

¶59-040

serious injury, definition

¶59-060

sick leave entitlements

¶39-020

sick leave, termination during

¶39-120

Work-related stress

¶1-050

Work sample tests

¶10-040

Work streams mergers and acquisitions, day 1 readiness

¶27-140

Work/life balance ageing workforce

¶25-050

benefits

¶25-020

employee retention

¶46-050

flexible work arrangements

¶25-040

further information

¶25-090

implementation process

¶25-060

legislative changes, impact on issues

¶25-030

overview

¶25-010

programs

¶1-050

reasons some arrangements fail

¶25-070

references

¶25-090

return to work after parental leave

¶25-080

Worker protection legislation entitlement to work, foreign nationals

¶33-020

Workers — see Employees Workers compensation — see also Injury management; Stress bullying

¶50-020

claims

¶59-060

common law rights

¶59-050

costs

¶59-090

— penalties

¶59-020; ¶59-030

— reduction

¶59-130

current system

¶59-020

deemed employment relationships and rights

¶37-060

hazard and injury prevention

¶59-120

history

¶59-020

independent contractors

¶37-060

injury and compensation defined

¶59-040

introduction

¶59-010

law and the employment relationship

¶6-130

maternity leave

¶41-140

partner leave

¶41-240

preventative OHS/WHS, managerial responsibility

¶59-080

prevention better than cure

¶59-110

references

¶59-130

rehabilitation/return to work

¶59-070

summary

¶59-130

websites

¶59-130

workers entitled

¶59-035

Workforce loyalty

¶46-030

Workforce participation barriers

¶26-070

current trends

¶26-020

Workforce planning critical success issues

¶9-060

definition

¶9-020

interaction with other HR practices

¶9-040

overview

¶9-010

problems with

¶9-080

rationale

¶9-030

stages of process

¶9-050

trends

¶9-090

use of measurements/indicators

¶9-070

Workforce value — see Human capital Working from home — see Teleworking Working relationship — see Employment relationship Working with children check

¶34-050

Workplace agreements

¶7-070

Workplace Authority

¶7-020

Australian Workplace Agreements, approval

¶7-040

Workplace bullying — see Bullying Workplace coaching

¶47-090

definition

¶47-030

qualifications and standards

¶47-080

Workplace consultation — see Consultation Workplace cooperation and consultation — see Consultation Workplace counselling — see Counselling Workplace culture — see Culture Workplace discrimination — see Discrimination

Workplace harassment — see Harassment Workplace incidents — see Incidents Workplace laws superannuation and interaction

¶44-043

Workplace learning

¶20-090

Workplace Ombudsman — see Fair Work Ombudsman Workplace Relations Act 1996 — see Fair Work Act 2009; Federal legislation; Work Choices Workplace relations system — see Industrial relations system Workplace rights definition

¶37-060

Workplace safety inspectors incident investigations Workplace stress

¶56-040 ¶1-050

Workplace surveillance — see also Email Australian Capital Territory

¶55-030

national position

¶55-020

New South Wales

¶55-040

Northern Territory

¶55-050

overview

¶55-010

Queensland

¶55-060

South Australia

¶55-070

Tasmania

¶55-080

Victoria

¶55-090

Western Australia

¶55-100

Workplace systems and processes work health and safety

¶12-030

Workplace violence bullying

¶50-020

Workplace WHS committees

¶12-060

Workplaces familiarisation before conducting risk management Written warnings

¶57-030

poor performance of employees

¶48-060

CASE TABLE A Paragraph ACCC v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62

¶51-100

ACCC v Clinica Internationale Pty Ltd (in liq) (No 4) [2016] FCA 286

¶51-100

ACCC v Taxsmart Group Pty Ltd [2014] FCA 487

¶51-110; ¶51-130

ACCC v Zanok Technologies Pty Ltd [2009] FCA 1124

¶51-110; ¶51-130

ALAEA v Qantas Airways Ltd (2014) 66 AILR ¶102-111; [2014] FWC 358

¶8-030

ASIC v Citrofresh International Ltd (No 2) (2010) 28 ACLC ¶10-002; [2010] FCA 27 ¶51-055 ASIC v Citrofresh International Ltd (No 3) [2010] FCA 292

¶51-055

ASIC v Narain (2008) 26 ACLC 736; [2008] FCAFC 120

¶51-040; ¶51-055

Adams v Quasar Management Services Pty Ltd & Ors [2002] QSC 223; (2002) 56 IPR 385

¶52-050

Advanced Prosthetic Centre Pty Ltd v Appliance & Limb Centre (Int) Pty Ltd [2002] ¶64-030 NSWSC 515 Airsense Technology Ltd v Vision Systems Ltd [2005] APO 7; (2005) 65 IPR 120

¶52-020

Ajax Cooke Pty Ltd (t/a Ajax Spurway Fasteners) v Anthony Nugent [1993] VicSC 673; (1993) 5 VIR 551

¶31-030

Aldridge v Booth & Ors (1986) EOC ¶92-177

¶13-060

Aleksovski v AAA Pty Ltd (2002) EOC ¶93-219; [2002] FMCA 81

¶13-070

Amato v NRG Pty Ltd [2006] SAWCT 100

¶50-020

Ambulance Victoria v Liquor, Hospitality and Miscellaneous Union [2009] FWA 44

¶8-160

Aneeta Window Systems (Vic) Pty Ltd v K Shugg Industries Pty Ltd [1996] APO 8; (1996) 34 IPR 95

¶52-020

Anning v Virgin Australia Airlines Pty Ltd [2012] FWA 8414

¶50-030

Annual Leave Cases (1972) 144 CAR 528

¶38-070; ¶40-070

Ansett Transport Industries (Operations) Pty Ltd v Wardley (1980) 142 CLR 237; [1980] HCA 8; (1984) EOC ¶92-003

¶13-030

Applicant v Respondent (1999) 45 AILR ¶3-981

¶63-120

Application by the AMIEU, Re [2015] FWCFB 5228

¶8-040

Application by Donald Alexander Porter of an inquiry into an Election in the Transport Workers’ Union of Australia, Re [1989] FCA 226; (1989) 34 IR 179

¶37-020

Association of Non-Government Education Employees and SA Commission for Catholic Schools (1998) 44 AILR ¶11-113(6); [1998] SAIRC 51; SAIRComm 78

¶39-090

Astvilla Pty Ltd v Director of Consumer Affairs Victoria [2006] VSC 289

¶51-040; ¶51-055

Attwood v Lamont [1920] 3 KB 571

¶65-050

Austin Health v Health Services Union [2012] FWA 7098

¶8-160

Australasian Meat Industry Employees’ Union v Fair Work Australia [2012] FCAFC ¶8-080 85 Australian Catholic University Ltd [2011] FWA 3693

¶13-030

Australian Football League & Anor v The Age Company Ltd & Ors (2006) 15 VR 419

¶65-040

Australian Iron & Steel Pty Ltd v Banovic [1989] HCA 56; (1989) EOC ¶92-271; 168 CLR 165

¶4-050; ¶13-040

Australian Municipal, Administrative, Clerical and Services Union v Pelican Point Power Ltd [2010] FWA 7739

¶8-140

Australian Timken Pty Ltd v Stone (No 2) (1971) AR (NSW) 246

¶40-030

The Australian Workers’ Union & Ors v Alcoa Australia Rolled Products Pty Ltd [2010] FWA 5674

¶8-150

The Australian Workers’ Union v Roadworx Surfacing Pty Ltd [2011] FWAFB 1759 ¶7-050 “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) — Victorian Branch, Re [2016] FWC 21

¶8-060

B Paragraph BGC Partners (Australia) Pty Ltd v Hickey [2016] NSWSC 90

¶65-050

B v Cleaning Company [2009] Priv Cmr A2

¶53-020

B Rose v Telstra Corp Ltd [1998] AIRC 1592

¶53-020; ¶63-120

Barnett v Northern Territory of Australia [2010] NTMC 070

¶50-030

Barrett & Ors v Ecco Personnel Pty Ltd Matter No Ca 40586/96 [1998] NSWSC 545

¶65-060

Barrick v Qantas Flight Catering Ltd [2007] FCA 835

¶51-110; ¶51-150

Barto v GPR Management Services Pty Ltd (1992) ATPR ¶41-162; [1991] FCA 659

¶51-110; ¶51-140; ¶51-170

Beaches & Bush Properties Pty Ltd v Jennings [2003] NSWSC 798

¶65-050

Beasley v Comcare [2012] AATA 411

¶50-020

Bechtel (Western Australia) Pty Ltd v CFMEU — WA Branch [2013] FWC 2498

¶8-090

Beck v Leichhardt Municipal Council [2002] FMCA 331

¶13-080

Bevacqua v Klinkert (1993) EOC ¶92-515

¶50-030

Bevacqua v Klinkert (No 2) (1993) EOC ¶92-516

¶50-030

Birdanco Nominees Pty Ltd v Money [2012] VSCA 64

¶65-060

Blackadder v Ramsay Butchering Services Pty Ltd [2005] HCA 22

¶63-150

Blyth Chemicals v Bushnell [1933] HCA 8; (1933) 49 CLR 66

¶65-030

Boyd v SPI PowerNet Pty Ltd [2012] FWA 5962

¶48-050

Bragdon v Director of the Fair Work Building Industry Inspectorate [2016] FCAFC 64

¶8-020

Brooks v Flight West Airlines Pty Ltd (1994) EOC ¶92-629

¶4-050

Budlong v NCR Australia Pty Ltd (2006) 58 AILR ¶200-277; [2006] NSWIRComm 288

¶31-070; ¶54-040

Burwood Night Patrol Pty Ltd v Legarde (1973) 51 IR 118

¶65-050

Byrne v Statist Co [1914] 1 KB 622

¶52-040

Byrne & Frew v Australian Airlines Ltd (1995) AILR ¶3-194; [1995] HCA 24

¶48-030; ¶48-050

C Paragraph CEPU (WA) v Fortescue Metals Group Ltd [2016] FCCA 1227

¶8-050

CF, Re [2015] FWC 5272

¶50-030

CFMEU v Central Queensland Services Pty Ltd [2016] FWCFB 288

¶8-080

CFMEU v Gittany (2014) 66 AILR ¶102-140; [2014] FCA 164

¶8-080

CFMEU v Hume Highway Constructions Pty Ltd & Anor [2013] FMCA 154

¶8-080

CFMEU v Mammoet Australia Pty Ltd [2013] HCA 36

¶8-150

CFMEU v Mitolo Constructions Pty Ltd (2010) 62 AILR ¶101-169; [2010] FWA 4232

¶8-140

CFMEU v Safety Glass Pty Ltd [2010] FCA 989

¶8-080

CFMEU v Woodside Birrup Pty Ltd & Anor [2010] FWAFB 6021

¶8-160

CFMEU — Construction and General Division, Queensland Northern Territory Divisional Branch, Re (2015) 67 AILR ¶102-485(21); [2015] FWC 6708

¶8-060

C Smith v Australian Wire Industries Pty Ltd 1985 AILR ¶213

¶38-070; ¶40-070

CS Heard v Monash Medical Centre (1996) 39 AILR ¶3-203

¶48-050

Cactus Imaging Pty Ltd v Glenn Peters [2006] NSWSC 717

¶65-040; ¶65-060

Cadgroup Australia Pty Ltd v Snowball [2016] NSWSC 22

¶65-040

Canavan Building Pty Ltd [2014] FWCFB 3202

¶43-030

Cannon v Poultry Harvesting Pty Ltd [2015] FWC 3126

¶63-120

Carlile v Council of the Shire of Kilkivan and Brietkreutz (unreported, District Court of Queensland, No 12 of 1992, 2 December 1995)

¶50-030

Casey Grammar School v Independent Education Union of Australia [2010] FWA 8218

¶44-045

Cecere v Communication, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Health Services Union of Australia & Anor [2008] VCC 445

¶50-020

Centennial Northern Mining Services Pty Ltd v CFMEU (No 2) [2015] FCA 136

¶38-080

Central Norseman Gold Corp Ltd v Murray Lee Kempton [2010] FWA 5316

¶61-080

Centrestage Management Pty Ltd v Riedle [2007] FMCA 1147

¶52-040

Citibank Ltd v Liu; ABN Amro Bank NV v Liu [2003] NSWSC 569

¶51-055

Clark v Associated Newspapers Ltd (1998) 40 IPR 262

¶52-050

Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd (1988) 27 IR 226

¶61-080

Cohen v iSoft Group Pty Ltd [2012] FCA 1071

¶40-030

Collymore v Courier Pete Pty Ltd [2008] ADO 9; (2008) 79 IPR 608

¶52-030

Commonwealth Bank of Australia v HREOC & Anor (1998) EOC ¶92-908; [1997] FCA 1311

¶13-040

Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32

¶5-060; ¶31-030; ¶51-010

Computer Sciences of Australia Pty Ltd v Leslie (1983) AILR ¶556; 6 IR 188; 1983 AR 828

¶40-080

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) ATPR ¶41-022; 169 CLR 594; [1990] HCA 17

¶51-030; ¶51-110; ¶51-140

Courier Pete Pty Ltd v Metroll Queensland Pty Ltd [2010] FCA 735

¶52-030

Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337

¶65-050

D Paragraph Damevski v Giudice [2003] FCAFC 252

¶37-030

Dataflow Computer Services Pty Ltd v Goodman (1999) ATPR ¶41-730; [1999] FCA 1625

¶51-040; ¶51-090

De Luxe Red and Yellow Cabs Co-operative (Trading) Society Ltd; C of T v [1998] FCA 361; 98 ATC 4466

¶44-030

Deckert v Department of Primary Industries (2006) EOC ¶93-418; [2005] VCAT 2138

¶13-040

Dee v Commr of Police; NSW Police & Anor (2004) EOC ¶93-346; [2004] NSWADT 168

¶13-070

Del Casale & Ors v Artedomus (Aust) Pty Ltd [2007] NSWCA 172

¶65-040

Dibb v FC of T 2004 ATC 4555; [2004] FCAFC 126

¶64-030

Dive & Ors v Chapman & Anor [2006] QSC 029

¶65-030

Dixon v RNJ Sicame Pty Ltd & Anor; Sims v RNJ Sicame & Anor [2002] NSWADT 154

¶13-070

Dow Jones and Company Inc v Gutnick [2002] HCA 56

¶54-040

Driver Recruitment Pty Ltd (t/a Authorised Solutions) v Wedeco AVP Pty Ltd [2008] ¶51-100 NSWCA 290

E Paragraph Ecco Personnel Pty Ltd v Barrett & Ors [1996] NSWSC 475

¶65-060

Eddie Kwan, John Pierre Le Sands and Paul N Van Draanen v The Queensland Corrective Services Commission and The Queensland Spastic Welfare League [1994] APO 53; (1994) 31 IPR 25

¶52-020

Edwards v Auckland City Corp [1936] NZLRS 121

¶40-040

Electrolux Ltd v Hudson [1977] FSR 312

¶52-020

EnergyAustralia Yallourn Pty Ltd v CFMEU [2014] FCAFC 8

¶8-140

Escobar v Rainbow Printing Pty Ltd (No 2) (2002) EOC ¶93-229; [2002] FMCA 122 ¶13-040 Esso Australia Pty Ltd v AMWU & Ors [2015] FWCFB 210

¶8-140

Evans v Lee (1996) EOC ¶92-822; [1996] HREOCA 8

¶54-050

F Paragraph Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor [2014] FCCA 2144

¶37-040

Fair Work Ombudsman v Mineeff [2012] FMCA 232

¶37-040

Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45

¶37-030

Family Leave Test Case (1994) 57 IR 121

¶39-140

Federated Clerks Union (WA Branch) v Automatic Totalisators Ltd 1979 AILR ¶18

¶40-040

Finance Sector Union of Australia, Re; Ex parte Financial Clinic (Vic) Pty Ltd (1993) 67 ALJR 687

¶44-040

Firewatch Australia Pty Ltd v Country Fire Authority (1999) ATPR (Digest) ¶44198; 93 FCR 520; [1999] FCA 761

¶51-030

Fitzgerald v Dianna Smith t/a Escape Hair Design [2010] FWA 7358

¶54-070

Foxtel Management Pty Ltd v The Mod Shop Pty Ltd [2007] FCA 463; (2007) 72 IPR 1

¶52-040

Franks v Kembla Equipment Co Pty Ltd 1969 AILR ¶55; 1969 AR 17

¶40-080

Fraser-Kirk v David Jones Ltd [2010] FCA 1060

¶50-030

G Paragraph Gabryelczyk v Hundt [2005] NSWADT 94

¶50-030

Gallagher v Kidz Biz Pty Ltd t/a Kidz Biz Pre-School & Long Day Care (2010) 62 AILR ¶101-206(246); [2010] FWA 3778

¶63-030

Gardiner v WorkCover Authority of New South Wales (EOD) (2004) EOC ¶93-314; ¶25-090 [2004] NSWADTAP 1 Gartside v Outram (1856) 26 LJ Chs 113

¶65-040

General Aviation Maintenance Pty Ltd v FC of T 2012 ATC ¶10-235

¶44-030

Gilroy v Angelov [2000] FCA 1775; (2001) EOC ¶93-118

¶50-030

Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007] FCAFC 120; (2007) 163 FCR 62

¶12-020; ¶31-030; ¶50-020

Grace Hosana Pty Ltd t/a the Cheese Cake Shop v De Blank [2000] WADC 239

¶48-060

Great Southern E-vents Pty Ltd v Peskops [2007] NSWSC 382

¶65-040

Greenmountain Food Processing Pty Ltd v AMIEU [2014] FWC 3169

¶8-090

Griffiths v Rose [2011] FCA 30

¶54-040

Griggs v Duke Power Company 401 US 424 (1971)

¶4-050

Grosse v Purvis [2003] QDC 151

¶53-010

Gutnick v Dow Jones & Co Inc [2002] HCA 56

¶54-040

H Paragraph HV McKay, Ex parte (1907) 2 CAR 1

¶1-060

Haddad v Foxtel Management Pty Ltd [2008] FCAFC 11

¶52-040

Haros v Linfox Australia Pty Ltd (2012) 64 AILR ¶101-562; (2012) Aust Contract Reports ¶90-365; [2012] FCAFC 42

¶51-110; ¶51-120

Harrington v Philip Morris Ltd PR915206; (2002) 51 AILR ¶4-593

¶54-040

Helen Lyberpoulos v Reidwell Investments BT Pty Ltd t/a Coco Cubano Blacktown ¶50-030 [2015] FWC 4256 Herbert Morris Ltd v Saxelby [1916] AC 688

¶65-050

High Court in Commonwealth Bank of Australia v Stephen Barker [2014] HCA 32

¶48-020

Hodgson v The Warehouse Ltd [1998] 3 ERNZ 76

¶54-040

Hogan v Riley & Ors (No 2) [2010] FMCA 760

¶8-080

Hopper & Ors v Virgin Blue Airlines Pty Ltd (2006) QADT 9

¶4-050

Horne v Press Clough Joint Venture (1994) EOC ¶92-556

¶50-030

Horne & Anor v Press Clough Joint Venture & Anor (1994) EOC ¶92-591

¶54-050

Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41

¶65-030

Houghton v Arms (2007) ATPR ¶42-143; [2006] HCA 59

¶51-040; ¶51-050

Howarth & Ors v The Ulan Coal Mines Ltd [2010] FWA 4817

¶61-070

Howe v Qantas Airways Ltd (2004) EOC ¶93-359; [2004] FMCA 242

¶25-090

I Paragraph Ian Strover v Brooktide Holdings Pty Ltd (1997) 42 AILR ¶13-119(3)

¶48-050

Informax International Pty Ltd v Clarius Group Ltd [2012] FCAFC 165

¶37-060; ¶65-060

Initial Services Ltd v Putterill [1967] 3 All ER 145

¶65-040

Inspector Nigel Ball v Bazzina and Price (Inghams Enterprises Pty Ltd) (unreported, Chief Industrial Magistrate’s Court, 2 & 23 February 1998)

¶50-020

Intelmail Explorenet Pty Ltd v Vardanian (No 2) [2009] FCA 1018; (2009) 82 IPR 281

¶52-040

International Computers (Australia) Pty Ltd v Weaving 1981 AILR ¶456; (1981) 2 NSWLR 64

¶40-030

Isabel Robles v Colonial Services Pty Ltd T3229 [2000] AIRC 528

¶54-040

J Paragraph JJ Richards & Sons Pty Ltd v Fair Work Australia [2012] FCAFC 53

¶8-140

J Brodie-Hanns v MTV Publishing Ltd (1995) 67 IR 298; (1996) 39 AILR ¶3222(126)

¶63-030

J Williams v Centrelink PR942762; (2004) 54 AILR ¶100-179

¶54-040

James Willis v Marie Gibson: Capital Radiology Pty Ltd t/a Capital Radiology; Peita ¶50-030 Carroll [2015] FWC 3538 Jamie Orlikowski v IPA Personnel Pty Ltd [2009] AIRC 565

¶37-030

John Holland v “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) [2010] FWAFB 526

¶8-140

Judge v Durovic (1996) EOC ¶92-789

¶50-030

Julie Anne French v Commonwealth Bank of Australia (unreported, No 20902 of 1998)

¶61-020

K Paragraph KW v BG Ltd, DP & DF [2009] QADT 7

¶50-050

Kearney v Crepaldi & Ors [2006] NSWSC 23

¶65-060

Keays v JP Morgan Administrative Services Australia Ltd (2012) 64 AILR ¶101673; [2012] FCAFC 100

¶51-110; ¶51-130

Kelly v TPG Internet Pty Ltd [2003] FMCA 584; (2004) EOC ¶93-315

¶25-090

Kim Michelle Hollingsworth v Commr of Police [1999] NSWIRComm 240

¶34-070

Kirby v JKC Australia LNG Pty Ltd [2015] FCA 1070

¶8-050

Kone Elevators Pty Ltd v McNay (1997) ATPR ¶41-564

¶65-080

Kowalski v MMAL Staff Superannuation Fund Pty Ltd [2007] FCA 1069

¶51-030

Kronen v C of T [2013] FCA 416; 13 ESL 05

¶44-090

L Paragraph Lane v Northern Sydney Central Coast Area Health Service [2006] NSWIRComm 380

¶54-040

Le Grand v FC of T 2002 ATC 4907; [2002] FCA 1258

¶64-030

Lebsanft v Oakey Abattoir Pty Ltd [2011] FWA 3717

¶50-030

Lee v Smith & Ors (No 1) [2007] FMCA 59

¶13-070; ¶53-020

Lee v Smith & Ors (No 2) [2007] FMCA 1092

¶50-030

Leslie v Graham [2002] FCA 32

¶13-070

Lindfox Australia Pty Ltd v Fair Work Commission [2013] FCAFC 157

¶63-120

Lion Laboratories Ltd v Evans [1984] 2 All ER 417

¶65-040

Little v Credit Corp Group Ltd [2013] FWC 9642

¶63-120

Loty and Holloway v Australian Workers’ Union, Re [1971] AR (NSW) 95

¶63-110

Louka v Centrelink [2010] FWA 6827

¶37-060

Lovewell v Pearson & Anor [2011] FMCA 102

¶8-090

Lulham v Shanahan, Watkins Steel & Ors (2003) EOC ¶93-296; [2003] QADT 11

¶50-030

Lutheran Church of Australia Qld v Newman [2002] QIC 30; (2002) 170 QGIG 247

¶57-050

M Paragraph ML Griffiths and RD Griffiths and RJ Griffiths v C of T [2009] AATA 482; 09 ESL 07 ¶44-030 M Smith v Western Hospital 602/98 M Print Q1359; [1998] AIRC 722

¶54-040

McDonald v State of South Australia [2008] SASC 134

¶50-030

MacKay v McKay [2004] APO 29; (2004) 63 IPR 441

¶52-020

McLachlan Consultants Pty Ltd v Boswell 1988 AILR ¶467

¶65-090

McPhersons Ltd v Hickie (1995) ATR ¶81-348

¶54-040

Mac v Bank of Queensland Ltd; Locke; Thomspon; Hester; Van Den Heuvel; Newman [2015] FWC 774

¶50-020

Malinov v South Pacific Tyres (1997) HREOCA 53

¶50-050

Maritime Union of Australia v Fair Work Commission [2015] FCAFC 56

¶8-060

Maritime Union of Australia v Tidewater Marine Australia Pty Ltd [2014] FWC 1733 ¶8-140 The Maritime Union of Australia v Total Marine Services Pty Ltd [2009] FWA 187

¶8-140

Markland v Colonial Services Pty Ltd t/a Colonial State Bank PR903570; (2001) 50 ¶54-040 AILR ¶4-508 Maryland Metals Inc v Metzner (1978) 382 A(2d) 564

¶65-030

Mason v Electricity Commission of NSW t/a Pacific Power (1995) 62 IR 436

¶48-030

Massoud v SITEL Corp Australia Pty Ltd [2001] NSWIRComm 218; (2002) 51 AILR ¶5-385

¶54-040

Mayer v ANSTO (2003) EOC ¶93-285; [2003] FMCA 209

¶25-090

Meskenas v ACP Publishing Pty Ltd [2006] FMCA 1136; (2006) 70 IPR 172

¶52-050

Meskenas v ACP Publishing Pty Ltd (No 2) [2006] FMCA 1461

¶52-050

Micallef v Holden Ltd (2001) 49 AILR ¶4-429(147)

¶54-040

Miles v Genesys Wealth Advisers Ltd [2009] NSWCA 25

¶65-060

Minister for Tertiary Education, Skills, Jobs and Workplace Relations, Re [2011] FWAFB 7444

¶8-160

Mr Peter Bates v Commonwealth of Australia (Department of Defence) [2009] AIRC 899

¶54-040

Mrs Rachel Roberts v VIEW Launceston Pty Ltd as a trustee for the VIEW Launceston Unit Trust t/a View Launceston; Ms Lisa Bird; Mr James Bird [2015] FWC 6556

¶50-030

Mohazab v Dick Smith Electronics Pty Ltd (1995) 62 IR 200

¶63-060

Moltoni Waste Management v P Fairs & Ors [2012] FWA 5590

¶43-030

Morrison v Normandy Industrial Minerals Ltd [2003] NSWIRComm 165

¶57-050

Morton v Interpro Australia Pty Ltd (2009) 61 AILR ¶101-008; [2009] FMCA 423

¶51-035; ¶51-110; ¶51-130; ¶51-160

Moss v Lowe Hunt & Partners Pty Ltd [2010] FCA 1181; (2011) 63 AILR ¶101-291

¶51-110; ¶51-130; ¶51-160

Mulcahy v Hydro-Electric Commission (1998) 44 AILR ¶3-837; 85 FCR 170

¶51-170

Murray v Department of Family and Community Services (2002) 52 AILR ¶4616(168)

¶54-040

N Paragraph Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144

¶50-010

Natalie Newton (t/a Combined Care for the Elderly) v C of T 2011 ATC ¶10-226; [2011] AATA 897

¶44-030

National Union of Workers — New South Wales Branch v ACCO Australia Pty Ltd [2009] FWA 226

¶8-140

National Union of Workers — New South Wales Branch v Fresh Exchange Pty Ltd ¶8-140 [2009] FWA 221 Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377

¶50-010

New South Wales v Amery [2006] HCA 14

¶4-050

Newman v Aldo’s Fine Foods Pty Ltd (2002) 169 QGIG 151

¶57-050

Nikolich v Goldman Sachs JBWere Services Pty Ltd [2006] FCA 784

¶31-030; ¶50-020

O Paragraph Oates v Consolidated Capital Services Ltd [2009] NSWCA 183

¶52-020

O’Meara v Stanley Works Pty Ltd [2006] AIRC 496

¶63-060

On Call Interpreters and Translators Agency Pty Ltd v C of T (No 3) 2011 ATC ¶20-258; [2011] FCA 366

¶37-020; ¶44-030

O’Neill v Medical Benefits Fund [2001] FMCA 61

¶51-110; ¶51-120

O’Neill v Medical Benefits Fund of Australia [2002] FCAFC 188; (2002) ATPR ¶41- ¶51-035; ¶51-110; 882; 52 AILR ¶4-646 ¶51-120; ¶51-160 Orbit Drilling Pty Ltd v R; Smith v R [2012] VSCA 82

P

¶12-050

Paragraph Pacific Access Pty Ltd v Davies [2001] NSWCA 218

¶58-040

Pancreas Technologies Pty Ltd v The State of Queensland acting through Queensland Health [2005] APO 9; [2005] APO 1; (2005) 64 IPR 577

¶52-020

Papastravou v Gavan [1968] 2 NSWR 286

¶65-070

Patman v Fletcher’s Fotographics Pty Ltd 1984 AILR ¶104; (1984) 6 IR 471

¶38-080

Patrick v Steel Mains Pty Ltd (1987) ATPR ¶40-794; (1987) 77 ALR 133

¶51-110; ¶51-120

Payne v FC of T 2016 ATC ¶10-421

¶44-040

Peter Willis v Health Communications Network Ltd [2007] NSWCA 313

¶44-090

Phillip Moyle v MSS Security Pty Ltd [2016] FWCFB 372

¶63-060

Planet Fitness Pty Ltd v Brooke Dunlop & Ors [2012] NSWSC 1425

¶65-060

Poletti v Ecob (No 2) (1989) 31 IR 321

¶44-045

Port Noarlunga Hotel Ltd v Stewart 1981 AILR ¶237; (1981) 48 SAIR 220

¶40-040

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

¶8-130

Print Investments Pty Ltd v Art-vue Printing Ltd (1983) 1 IPR 149

¶65-040

Prysmian Power Cables and Systems Australia Pty Ltd v National Union of Workers & Ors [2010] FWA 9402

¶8-160

Public Employment Office Department of Attorney General and Justice (Corrective ¶63-120 Services NSW) v Silling [2012] NSWIRComm 117 Public Service Association of NSW (on behalf of Trapp and Mayhew) and the Roads & Traffic Authority of New South Wales [2002] NSWIRComm 1030

¶54-040

R Paragraph Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] ¶51-035; ¶51-110; FCA 430 ¶51-130; ¶51-160 Ramsay v Sunbuild Pty Ltd [2014] FCA 54

¶8-050

Reddy v International Cargo Express (2004) EOC ¶93-351; [2004] NSWADT 218

¶25-090

Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley [2001] VSC 91; ¶52-040 (2001) 50 IPR 565 Reedy v Global Cranes Pty Ltd [2011] FWA 3037

¶50-030

Rentokil Pty Ltd v Lee [1995] SASC 5566; (1995) 66 SASR 301; 183 LSJS 444

¶65-060

Ridge v Baldwin (1964) AC 40

¶5-070

Rind v Australian Institute of Superannuation Trustees (2013) EOC ¶93-693; 65 AILR ¶101-924; [2013] FWC 3144

¶25-090; ¶43-030

Rindos v Hardwick (unreported, Supreme Court of Western Australia, 21 March 1994)

¶54-040

Rispoli v Merck Sharpe & Dohme & Ors (2003) EOC ¶93-304; [2003] FMCA 160

¶25-090

Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889

¶31-030

Roberts v Prince Alfred College 1979 AILR ¶320; (1979) 46 SAIR 598

¶63-060

Roddy v Sydney Adventist Hospital Ltd (2013) 65 AILR ¶101-807; [2012] FMCA 1199

¶51-130

Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCAFC 177

¶31-030; ¶50-020

Roy Morgan Research Pty Ltd v C of T 2010 ATC ¶20-184; [2010] FCAFC 52

¶44-030

Royal Childrens Hospital v Alexander [2011] APO 94

¶52-020

Rugema v J Gadsten Pty Ltd t/a Southcorp Packaging (1997) EOC ¶92-887

¶50-050

Ruoh-Sheue (Rose) Chang v Mega International Commercial Bank Co Ltd [2014] FWC 5606

¶61-070

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor [2007] NSWSC 104

¶48-020

S Paragraph Saad v Twt Ltd Matter No Ca 40373/95 [1998] NSWSC 282

¶51-130

Sargant v Lowndes Lambert Australia Pty Ltd (unreported, full bench, 2001 WAIRC 02604, 23 April 2001)

¶65-030

Sargeant v Tyre Marketers (Aust) Pty Ltd & Anor [1995] NSWSC (15 November 1995), Court file no 400094/93

¶58-040

Senathirajah Selvachandran v Peteron Plastics Pty Ltd (1996) 39 AILR ¶3-216; [1995] IRCA 333

¶63-120

Seven Network (Operations) Ltd & Ors v James Warburton (No 2) [2011] NSWSC 386

¶65-060

Shannon Dawson v Railway Transport Services Pty Ltd t/a Cartage Australia [2011] FWA 4915

¶63-120

Shellharbour Golf Club v Wheeler [1999] NSWSC 224

¶13-070

Shop, Distributive and Allied Employees’ Association, New South Wales, and WD & HO Wills Holdings Ltd [2000] NSWIRComm 98

¶61-080

The Shop, Distributive and Allied Employees’ Association of Western Australia v Katies Fashion (1988) 69 WAIG 118

¶48-060

Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357

¶31-030

Somerville Retail Services Pty Ltd v Australasian Meat Industry Employees’ Union [2011] FWAFB 120

¶8-080

South Pacific Resort Hotels Pty Ltd v Trainor [2005] FCAFC 130

¶13-070

South State Food & Beverage Pty Ltd v Chanda Kaur t/a Desaron Singapore [2005] FCA 587

¶52-050

Spencer Industries Pty Ltd v Collins [2003] FCA 542

¶52-020

Standard Chartered Bank v Pakistan National Shipping Corp [No 2] [2003] 1 AC 959

¶51-055

State of New South Wales v Garry Donald Jeffery & Ors [2000] NSWCA 171

¶50-050

State of South Australia v McDonald [2009] SASC 219

¶48-020

State of Victoria v Schou (2004) EOC ¶93-328; [2004] VSCA 71

¶25-090

State Personal/Carers Leave Case, Re (1996) 68 IR 308

¶39-180

Stephens v Australian Postal Corp [2011] FMCA 448

¶13-040; ¶63-150

Sterling Engineering Co Ltd v Patchett [1955] 1 All ER 369

¶52-020

Steven David Martin v Tasmania Development and Resources [1999] FCA 593; (1999) 163 ALR 79

¶51-110; ¶51-170

Stevenson, Jordan & Harrison Ltd v MacDonald & Evans (1952) 69 RPC 10

¶52-040

Stoelwinder v Southern Health Care Network [2000] FCA 444; (2000) 97 IR 76

¶51-110; ¶51-170

Styles v Murray Meats Pty Ltd (Anti-Discrimination) [2005] VCAT 914

¶13-070

Swan v Monash Law Book Co-operative [2013] VSC 326

¶50-050

Swindells v State of Victoria & Anor [2016] VSCA 9

¶51-110; ¶51-120

T Paragraph TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151

¶52-040

TWU v Arkwood (Gloucester) Pty Ltd [2012] FWA 8247

¶8-030

T Lewis v Toyota Motor Corp — PR901843 (2001) 50 AILR ¶4-442(118); [2001] AIRC 213

¶63-120

Tannock v Hunter Area Health Service [2000] NSWADT 112

¶50-020

Tannock v State of New South Wales [1999] NSWADT 31

¶50-020

Tao Sun, Re [2014] FWC 3839

¶50-020

Telstra Corp Ltd v Streeter (2008) 60 AILR ¶100-764; [2008] AIRCFB 15

¶63-120

Thiess Pty Ltd; Mt Owen Pty Ltd v CFMEU [2015] FWCFB 5530

¶8-150

Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574

¶54-040

Thomson v Orica Australia Pty Ltd (2002) EOC ¶93-227; [2002] FCA 939

¶25-090

Tidy v Trustees of the Natural History Museum (1995) 39 IPR 501

¶52-050

Total Marine Services Pty Ltd v MUA [2009] FWAFB 368

¶8-140

Toyota Motor Corp v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union T4675; (2002) 51 AILR ¶4-541

¶54-040

Transport Workers’ Union of Australia, New South Wales Branch v Queensland Properties Investment Pty Ltd [2011] FWA 285

¶8-040

Transport Workers’ Union (NSW) v Robar Enterprises Pty Ltd [2013] NSWIRComm 84

¶63-120

Trapman v Sydney Water Corp & Ors [2011] FMCA 398

¶50-020

Tullett Prebon (Australia) Pty Ltd v Simon Purcell (2008) 175 IR 414; [2008] NSWSC 852

¶65-050

Tyco Australia Pty Ltd t/a Wormald v Communications, Electrical, Electronic,

¶8-160

Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2010] FWA 8050

U Paragraph UES (Int’l) Pty Ltd v Harvey [2012] FWAFB 5241

¶61-070

United Group Resources Pty Ltd ABN 17 114 888 201 v Calabro [2010] FCA 22

¶8-160

United Rubber (Australia) Pty Ltd v National Union of Storeworkers, Packers, Rubber and Allied Workers (Australian Industrial Relations Commission (AIRC) Print no H9091, 9 August 1989

¶61-020

University of New South Wales v Moorhouse [1975] HCA 26

¶54-040

University of Western Australia v Gray [2008] FCA 498

¶52-020

University of Western Australia v Gray [2009] FCAFC 116

¶52-020

University of Western Australia v Gray [2010] HCATrans 11

¶52-020

V Paragraph Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 392

¶52-020

Victoria University of Technology v Wilson & Ors [2006] VSC 186; (2006) 68 IPR 597

¶52-020

Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) ATPR ¶42019; [2004] FCAFC 240

¶51-030

W Paragraph Wade v State of Victoria [1999] 1 VR 121

¶34-040

Walker v Citigroup Global Markets Australia Pty Ltd (2006) 58 AILR ¶100-517; [2006] FCAFC 101

¶51-120

Walker v Salomon Smith Barney Securities Pty Ltd & Anor (2003) ATPR (Digest) ¶46-240; [2003] FCA 1099; (2004) Aust Contract Reports ¶90-183

¶51-110; ¶51-120; ¶51-160

Warren & Ors [2011] FWAFB 6709

¶43-030

Western Excavating (EEC) Ltd v Sharp [1978] 1 QB 76; [1978] 1 All ER 713

¶63-060

Weston v C of T 2008 ATC ¶10-052; [2008] AATA 869

¶44-040

Westpac Banking Corp v Wittenberg [2016] FCAFC 33

¶51-110; ¶51-140; ¶51-160; ¶51-170

Wilkie v National Storage Operations Pty Ltd (2013) EOC ¶93-700; [2013] FCCA 1056

¶25-090

Willis Australia Group Services Pty Ltd v Mitchell-Innes [2015] NSWCA 381

¶63-120

Wilmott v Bank of Western Australia Ltd (2001) 50 AILR ¶13-238

¶54-040

Wilson v Brisbane City Council [2002] QIRComm 96; 170 QGIG 250

¶63-120

Wilson HTM Investment Group Ltd & Ors v Pagliaro & Ors [2012] NSWSC 1068

¶65-040

Wong v ABN Amro Bank NV (2004) ATPR ¶42-037; [2004] NSWCA 396

¶51-055

Woodford v Landline Investments Pty Ltd [2000] QDC 258

¶44-090

Woolworths Ltd v Olson [2004] NSWCA 372

¶65-050

Woolworths Ltd v Mark Konrad Olson [2004] NSWSC 849; (2004) 63 IPR 258

¶52-040

Woolworths Ltd v Mark Konrad Olson (2004) NSWCA 372

¶65-080

Workcover (Insp Nigel Ball) v Kathryn MacMullan [1999] NSWCIMC 125

¶50-020

Wright v Gasweld Pty Ltd (1991) ATPR ¶41-087; (1991) 22 NSWLR 317

¶65-040

Wright v TNT Australia Pty Ltd (1988) ATPR ¶40-864; (1988) 15 NSWLR 662

¶51-170

Wright v TNT Management Australia Pty Ltd (1989) ATPR ¶40-929; (1989) 15 NSWLR 679

¶51-170

Y Paragraph Y Saad v TWT Ltd 1995 AILR ¶5-038

¶51-130

Z Paragraph Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 ¶37-020