Two-tier wages systems for Woolworths and Coca Cola

By October 5, 2014 From the Courts No Comments

An interesting recent trend has emerged in enterprise bargaining in Australia: a two-tier wages system where there are different rates of pay for new employees and existing employees.

A proposed new enterprise agreement for a Woolworths distribution centre in Melbourne, having been approved by a majority of voting employees, is being sought to be approved by the Fair Work Commission. And a new enterprise agreement for a Coca-Cola Amatil warehouse in Victoria has recently been approved by the Fair Work Commission after it was approved by a majority of voting employees. Both workplaces have union coverage of some existing employees: SDA and NUW at Woolworths and United Voice at Coke.

The proposed new agreement to cover the Woolworths workplace cuts the hourly rate of pay of employees employed after 24 October 2014 from about $24 to $22 and it will then be frozen at $22 until 2018. Rates of pay for existing employees will increase by 4 per cent from October 2014, followed by annual increases of 3.8 per cent in October 2015 and in October 2016 and 3.6 per cent in October 2017. The nominal expiry date of the enterprise agreement is in July 2018. The enterprise agreement also provides for an increase to Saturday loadings from 125 per cent to 135 per cent, increasing afternoon and night shift loadings by 10 per cent in the first year and increasing annual leave loadings from 17.5 per cent to 20 per cent. The unions ran a “no” campaign against the employees approving the enterprise agreement, however it was supported in a ballot by about 60 per cent of the employees.

The approved Coke enterprise agreement cuts the base rate of pay of new hires by about 28 per cent and provides for a pay freeze for all employees in 2015 before an increase of 2 per cent in 2016.

For an enterprise agreement to be approved by the Fair Work Commission, it must have been approved by a majority of employees who voted for its approval and it must, amongst others things, pass the “better off overall test”. The “BOOT” requires that each employee to be covered by the enterprise agreement will be better off overall under the enterprise agreement than they would be if the relevant modern award applied.

It is apparent from the Woolworths and Coke cases that businesses, regardless of their profitable performance, are seeking to reduce costs and one way of doing so is to reduce labour costs of new employees through enterprise bargaining. However, for employers to successfully pursue such a strategy there are various factors that need to be considered before implementing such a strategy including:
• determining the likely attitudes of existing employees (there are various workplace where a two-tier system has been put forward in enterprise bargaining rounds however it has not been implemented as the existing employees were vehemently opposed to it) and well crafted surveys are a valuable tool for doing this;
• the level of union membership;
• the likely attitude of the union(s); and
• the business realities, other options and whether not implementing such a strategy will lead to the consideration and implementation of more drastic measures to reduce costs such as restructuring and redundancy.

Furthermore, employers would be well served as part of such a strategy to develop appropriate communications, negotiations and industrial action plans in order to give the strategy the best chances of success.

Author: Alistair Salmon
Holding Redlich

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