In early August 2015, the Productivity Commission released its draft report into the workplace relations framework.

This review is a result of the Federal Government’s promise to conduct a detailed inquiry to ensure that Fair Work laws benefit everyone and, so far, the Productivity Commission has received 255 submissions. Astonishingly, there has not been a truly independent review of Australia’s industrial relations system for decades, and this inquiry is the most significant of its type since the Hancock inquiry into Australian industrial relations in 1985.

As a result, it isn’t a surprise that the Productivity Commission found quite a bit to say about Australia’s workplace relations framework. The report runs to over 1,000 pages. Consequently, if you are interested, you may find the report overview a little easier to digest. In the meantime, we thought we’d give you a user-friendly outline of the recommendations that will be of most interest to HR Assured’s clients.

How significant are the Productivity Commission’s recommendations for reform?

Although the Chairman of the Commission, Peter Harris, stated that ‘much was working well’, and said that we need to ‘repair’ the workplace relations framework rather than ‘replace’ it, the draft report contains recommendations for changes to the workplace relations framework that would have a major impact if implemented.

What are the recommendations that will be of most interest to HR Assured clients?

Sunday penalty rates

The report says that Sunday penalty rates in the hospitality, entertainment, restaurant and retail industries should be reduced to be in line with Saturday penalty rates.

It is hardly surprising that this recommendation has been met with enthusiasm from the small business sector but with strong opposition from the union movement and the ALP. Peter Strong, Head of the Council of Small Business Australia, stated, ‘The penalty rates stuff, that is really quite good’, while the Shadow Workplace Relations Minister, Brendan O’Connor, said that cutting penalty rates by almost 40 per cent on Sundays is akin to ‘setting up two Australias’.

Interestingly, the Australian Retailers Association (ARA) is currently arguing, in a case before the Fair Work Commission (FWC), that Sunday penalty rates act as a disadvantage to employers providing employment opportunities to workers on Sundays.

Unfair dismissals

The report recommended three major changes to the unfair dismissal regime of the Fair Work Act 2011 (Cth).

First, the FWC should be either given greater powers to decide unfair dismissal applications ‘on the papers’ or, alternatively, conciliation conferences should be more merit focused.

Second, compensation for unfair dismissal should be limited to circumstances where the employee has been dismissed without reasonable evidence of persistent underperformance or serious misconduct.

Third, procedural errors by the employer should not result in reinstatement or compensation but, rather, counselling and education of the employer, or financial penalties.

Restructuring the Fair Work Commission

The report also recommends splitting the FWC, to establish a ‘minimum standards division’. This body would be made up of FWC members with expertise in economics, social science and commerce, instead of in law and industrial relations, and it would make decisions about minimum rates of pay and award conditions. The idea is to ensure that members making decisions on these issues have more diverse experience than just in law and workplace relations.

New employment agreements

The Commission has recommended that ‘enterprise contracts’ be introduced to fill what it has identified as a gap between individual employment arrangements and enterprise agreements.


The Commission claims that these contracts will allow an employer to vary an award for entire groups of particular employees, without having to negotiate individual flexibility arrangements.

Although no union involvement or ballot approval would be required for the preparation of these agreements, the Commission has provided for a number of safeguards to the ‘enterprise contract’. This means that employees could stay on their existing employment contracts or could opt out after a year, and refer any complaints to the FWC.

Better off overall test (BOOT) to be replaced

The report also proposes that the BOOT in enterprise agreements and individual flexibility arrangements be replaced with the more flexible no disadvantage test. This test would still ensure that employees were not disadvantaged compared with their status under the award, while allowing employees and employers to develop agreements that represent wins for both parties.

What happens next?

As mentioned above, this is a draft report and all interested parties have been asked to provide, in writing, any comments on it by 18 September 2015. A number of public hearings will be held throughout September. The final report is to be provided to the Government by the end of November 2015.

Are the recommendations in the report likely to be implemented?

The Government has stated that it intends to use the report to develop the workplace relations policy it will take to the next election.

There is no doubt that a number of the recommendations, if implemented, will provide some clarity and benefit for employers in all industries, even if many business owners find most of the recommendations a little underwhelming. However, in the current political landscape, it is hard to predict whether the Federal Government will get the necessary support for such changes to be passed.

We’ll keep you updated on developments.

Are you an HR Assured client? Do you have any questions about the Productivity Commission’s report? If so, feel free to call our Telephone Advisory Service.