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The most contentious aspect of the federal government's new industrial relations rules centres on multi-employer bargaining, which critics say will create wage pressure and add to inflation. There is some common ground, however.

With the federal government’s Secure Jobs, Better Pay bill set to be enshrined into legislation, investors will need to consider how the new industrial relations rules affect employers’ bottom lines.

The laws, which were passed on the final sitting day of Parliament this year, significantly bolster the position of workers and unions in negotiations with employers.

The most contentious aspect centres on multi-employer bargaining, which would govern employers with “clearly identifiable common interests”, like location or business activities, under a single enterprise bargaining agreement. In theory, that will lead to a stronger bargaining position for employees and subsequently higher wages.

Employers with existing enterprise agreements will not be drawn into a multi-employer deal, encouraging the uptake of direct deals with employees. Unions will also need to prove the majority of employees support the agreement.

Research conducted by the Centre for Future Work estimates the bill will prompt nominal wage growth of 1.6 per cent. It will also increase the number of workers covered by collective bargaining.

“These reforms will lift wage growth and improve fairness in workplaces across Australia, big and small, in all sectors of the economy,” said Dr Jim Stanford, economist and director at the Centre for Future Work.

Business lobbies against changes

Industry groups have largely rallied against the change, suggesting it will lead to job losses, make it harder for employers to adapt to changing conditions and increase the chances of industrial action or strikes. The latter is of particular concern given the potential operational cost to a company.

“The bill, as it stands, will do nothing to achieve the aim of increasing wages, and will only add cost and complexity to Australian businesses at a time when they are dealing with deteriorating conditions,” Australian Chamber of Commerce and Industry (ACCI) chief executive Andrew McKellar (pictured) said.

At the Qantas annual general meeting, chairman Richard Goyder said the new laws will dismantle the current enterprise bargaining system and lead to centralised wage setting.

“This kind of system will have little regard for the fact different companies have different needs, and that will have a massive impact on productivity, growth and, in the longer term, the ability to pay more,” Goyder said.

There is some common ground, with both Woolworths and Wesfarmers pleased with changes to the ‘better off overall test’ that will simplify approval processes. Industry has also been willing to prohibit pay secrecy, limit fixed-rate contracts and increase gender equity and representation.

Data from the Australian Bureau of Statistics shows real wages have effectively remained stagnant over the past 10 years. Meanwhile, non-mining profits have increased by 61 per cent, while mining profits have quadrupled.

Costs unclear

It’s unclear what the legislation will cost businesses. The regulatory impact statement issued by the Department of Employment and Workplace Relations estimates it will cost small businesses $14,638, medium-sized businesses $75,148 and large businesses $94,311.

ACCI believes this grossly underestimates the cost. Using the department’s methodology but with what it says is a more realistic market rate for consultants, it predicted costs could be 30-100 per cent higher.

“Ultimately, this bill represents a fundamental de-linkage of wages with productivity and will detract from the flexibility and dynamism required by modern economies,” McKellar said.

However, the line item that requires most attention is employee expenses. Should the policy result in wage growth, this will need to come either from a company’s bottom line or via price increases, only adding fuel to the inflation fire.

A small business with fewer than 20 employees will be exempt from multi-employer bargaining. For businesses with 20 to 49 employees, the onus will be on unions to convince the Fair Work Commission the business should be included. For large employers of 50 or more employees, the onus is on the employers to demonstrate why they shouldn’t be captured.

Australia Industry Group chief executive Innes Willox said the bill will leave employers with the impossible decision between spending money on litigation or simply giving in.

“The bill unfairly puts this very significant onus on an employer with 50 staff, rather than expecting a union to demonstrate why they contend a particular employer should be covered by a relevant agreement,” Willox said.