PC inquiry: give agencies more freedom in bargaining

By Stephen Easton

Wednesday December 23, 2015

Governments have more industrial clout than most employers but they should weigh up the net cost of imposing authoritarian restrictions on the ability of agencies to conduct enterprise bargaining, the Productivity Commission argues.

The PC’s workplace relations inquiry report notes that while whole-of-government bargaining policies are par for the course, there are legitimate concerns when the leash becomes too tight:

“Where governments exercise a high level of control, negotiations may be prolonged. The agency’s bargaining representatives have reduced scope to negotiate. Subsequently, time is required to receive the Government’s imprimatur for counter offers, concessions and approvals.”

The PC says the best balance is a judgement call that should consider the cost of negotiations at an agency level as well as “the fact that delegates at the agency level have better information about, and control of, the operations of their agency than government as a whole”.

Giving agencies more freedom to bargain could also increase the chances of “improvements whose dividends may be shared between government and employees”.

But the drawn-out process — with no back-pay when an eventual agreement is reached — that has played out at Commonwealth level has saved the government money and the PC notes “holding out” like this is effective as a bargaining tactic.

Public service unions argued the “good faith” provision in the Fair Work Act “needs to be significantly re-worked so that it is geared towards genuine bargaining rather than mere compliance with procedure” as they believe agency representatives commonly make little effort to reach a deal.

Productivity: what does that mean in government?

The strict APS bargaining policy brought in by the Coalition does impose a lot more control than its predecessor and has resulted in a hostile and drawn-out bargaining round. The PC report also undermines one of its key points: that pay increases must be offset by productivity increases.

Productivity is inherently difficult to measure in the public sector and the term is frequently misused by governments. This feeds into an incongruous situation, detailed in the report, which makes it hard for public servants to take their employers’ enterprise bargaining arguments seriously:

“One major difficulty is that the products of the public sector are not priced in markets and have quality dimensions that are hard to define clearly, with the result that productivity is hard to measure well. Notwithstanding this, linkages between pay rises and stated ‘productivity’ in enterprise agreements are far more common in public sector than private sector agreements.”

Those “products” are, of course, social and economic outcomes, not simple outputs, and productivity is a simple equation of outputs versus inputs. It has been an ongoing challenge for generation after generation of public servants to quantify the return on the public money they spend. Often, these outcomes are out there in the community and the economy, affected by a range of other factors that make it harder to isolate the impact of policy implementation.

The PC has some general concerns about the linking of productivity to pay rises in any kind of employment, starting with “flaws in its underlying premise”. The report questions the idea of turning what should perhaps be a challenge for managers into a bargaining chip, as though employees are always taking it easy and can simply work harder if they choose.

On the flipside, the idea could create a perverse incentive whereby employees decide to take it easy, so they are able to meet the expected demands for more productivity in future.

In the public sector specifically, the PC takes issue with some of the things governments choose to define as productivity increases, like cuts to entitlements and longer hours:

“Using any standard definition of productivity, such as those used by professional economists generally and statistical agencies worldwide, these interpretations are ill-founded.”

Instead, it advises:

“A genuine productivity increase requires a change in the way a public sector organisation uses its resources to better perform its core activities, including improved quality of its outputs. This relates more to the adoption of new processes and technologies, rather than simply working harder or changing the mix of entitlements in a worker’s overall compensation.

“A well-publicised example is scope for the reduction in travel expenditures resulting from more widespread use of video and teleconferencing (fuelled by technological improvements) and the complete demise of the large typing pools that existed in the 1980s.”

But even with a better understanding of productivity, “the difficulty in measuring outputs mean[s] that the overall effect of a productivity clause is largely speculative” in the commission’s view.

The PC also reports former Australian public service commissioner Stephen Sedgwick’s view that APS enterprise agreements include “interminable or excessively bureaucratic processes” for underperformance management is widely held in Canberra.

The report is generally supportive of the benefits that Sedgwick, his successor John Lloyd and many other mandarins believe will come from removing underperformance processes from enterprise agreements. But it concludes that decisions about whether to do so should be taken at agency level, where it is clearer how much the specific organisation’s staff value the current provisions, and management can make its own decisions about how this would affect morale and culture.

The PC calls for an easing of wholesale government-wide direction in workplace relations to resolve this and the productivity issue, concluding that “probably the best solutions need to be developed at the agency level” in both cases.

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