How Risk-Share enterprise agreements can save our crippled industries

feature-risk-share-200When Labor cynically introduced the Individual Flexibility Arrangements under the Fair Work Act to mimic, somewhat implausibly, Australian Workplace Agreements, I was reminded of Captain Archer in Star Trek: “Take your Vulcan cynicism and bury it with your repressed emotions.”

What a lame and patently cynical gesture to deflect criticism of their removal of individual bargaining.

However, sitting as a sleeper in the Fair Work Act was the real opportunity. Instead of union and non-union Enterprise Agreements (EAs), all EAs were potentially (with the exception of Greenfield Agreements), non-union agreements.

What was the business opportunity and why was it ignored? The opportunity was building a collaborative business structure where workers felt ownership and trust in the business. Not only would this allow you to create EAs directly with your worker, it would allow you to broach the issue of Risk-Share EAs, where the business gets to build a successful business and the workers share the risk and benefit of the business’ success.

Risk-Share EAs are the future of industrial relations (IR) in Australia. It is an EA where the business risk is broadly shared and owned across the business with variable wage outcomes. Equally, other components such as productivity, quality, safety and any other elements that drive the business can be put at risk in wage outcomes. The EA delivers a low base wage with a large upside if everyone works hard and collaboratively.

The cost to business of a Risk-Share EA is properly resourcing the collaboration, trust and building a ‘rem and ben’ (remunerations and benefits) process that is analogous for the executive team. Everyone has to be on the same page. The financial outcome of everyone working together has, to date, been remarkable in the Risk-Share EAs I have delivered.

So why is business so reluctant to adopt the process? There is simply no business or IR down side!

The answer rests with lawyers and IR consultants who belong in Jurassic Park and prefer the battle where they seek ideological victory over business success.

These dinosaurs bleat about the Fair Work Act, long for greater business power and discretion and constantly bang on about unions. They build the battle by disenfranchising the key business stakeholder – workers – and wonder why they find themselves in intractable disputes with ignorant and, at times, badly behaved unions.

Sometimes the battle comes to you and you have no choice, like the recent Grocon dispute. What else could Grocon do but don the armour and charge off into the affray.  But all too often the IR strategies of business conflict with the key human resources messages that deliver prosperity to the business. And CEOs wonder why workers don’t trust them.

In the last two weeks we have once again gained a union’s support for a Risk-Share EA. This is the not the first time! It will allow a massive investment in country Australia, allow significant employment and produce a commodity to be sold on the world market.

A real success story negotiated by a clever CEO and business with a wise and open union. No chest beating. Absolute openness around business cost, performance and shared return. The history of Risk-Share EAs suggests the business will blossom, workers’ pay, which starts low in comparison to adjoining business, will exceed local comparable businesses within a year and everyone will benefit.

Risk-Share EAs are the only sensible path forward for our struggling manufacturers. It is also the clear solution for all businesses that negotiate industrial instruments at an enterprise level. There is nothing to fear from Risk-Share EAs. The loss of our manufacturing sector is evidence of us failing to embrace the new way forward.

Andrew Douglas is a principal at M+K Lawyers. He is a specialist in workplace relations law.


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