In considering specifically, the legislative framework for Australia’s safety net, you must first define what the safety net is within the system.
Australia’s labour safety net comprises three distinct aspects:
- The Minimum Wage
- The National Employment Standards
- The Modern Award System
Having a minimum wage policy is common among OECD countries and Australia matches international policy in establishing minimum wages, counterbalancing them with the need to stimulate employment and economic outcomes. Australia’s minimum wage is determined at the federal level and as of 1 July 2018 is $18.93 per hour/$719.20 per week (based on a 38 hour week).
The original idea for a minimum, was based on the Harvester decision 1907, which invoked the role of the ‘male breadwinner’ and his ability to meet a standard family’s costs. In comparison, today over 47% of couple families receive two incomes (ABS 2016). Today’s minimum wage is equitable for men and women, embedding principals of gender equity into the system.
The legal minimum wage can only be supplanted for junior, disability, trainee or apprenticeship wages.
In consideration of minimum wages, governments look at the positive and negative effects – for example raising minimum wage rates may actually not assist poverty, and indeed, rate increases, may have adverse effects on poverty, by reducing employment opportunities (Productivity Commission, 2015). The difficult balance between unemployment and minimum wage increase, is also closely considered; the minimum wage must encourage people to work; decreasing unemployment, while considering relationships to social security payments and award wages.
In the Productivity Commission’s 2015 report they found that ongoing high level substantial wage increases do place burden on business and present employment risks, further disadvantaging some unemployed. However, incrementally small wage rate increases are unlikely to have huge quantifiable effects on employment. The relevant question is how much is too much?
The National Employment Standards (NES) are located in Part 2-2 of The Act and are communicated to employees by the provision of a Fair Work Information Statement (FWO, 2017). Through this mechanism, employee voice is enabled and empowered with increased education around ‘rights at work’. All other methods of determining pay and conditions such as employment contracts, awards, enterprise agreements and business owners themselves, cannot exclude or lower rights provided for in the NES.
The Modern Award system sets in place minimum standards for specific industries and occupations, being used universally for all workers covered by the National System who are classified under the instrument. Although Award wages are set by reference to the Minimum Wage each year, Awards can independently vary wage rates to provide flexibility, such as they have done recently with the reduction of penalty rates. Furthermore, all Awards must include an Individual Flexibility Arrangement clause, that gives scope to employers and employees to vary terms of the award for mutually beneficial reasons.
The employment market is not a simple commodities market and does requires specific regulations to ensure equity. Some service workers, such as cleaners and carers may have weaker individual voice and need protection. The safety net is designed to assist these workers. However, on the other hand, some aspects of the safety net make it increasingly hard for small business to be competitive at the same time as being compliant. It is a great safety net for workers, but where is the safety net for business, for all workers ultimately rely on business for their jobs.
Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.