5 steps to better enterprise bargaining: what questions should HR be asking?

Enterprise bargaining is one of the biggest recurring dilemmas facing employers. Failure can imperil the bottom line and destroy workplace culture.

The basics of enterprise bargaining can be broken down into 5 key questions that HR should be asking themselves, according to Tony Wood and Jess Toop

Enterprise bargaining is one of the biggest recurring dilemmas facing employers. Failure at bargaining can imperil the bottom line (through wages costs or exposure to industrial action) and destroy workplace culture.

To be successful in this space typically means avoiding failure, or maybe just removing some obstacles that were given away in a previous bargaining round. Certainly, it’s rare for success to be defined by genuinely innovative enterprise solutions which are focused on more competitive or productive business outcomes.

Most employers already know the system isn’t delivering more productive workplaces. And for unions, whilst wages outcomes and retaining (often outdated) work practices are key motivators, union membership is continuing to trend down to historical lows.

Add to this the fact that real wage growth is flat, with wage rises in 2017 only marginally exceeding the Consumer Price Index, many commentators, both from the left and right of the political sphere, have declared that enterprise bargaining is effectively dead.

And if it’s not dead, it’s certainly on life support. With the Australian Council of Trade Unions already campaigning strongly on a platform of reinstating workers’ rights, this is probably an issue that will continue to create headlines before and after the next federal election.

“Enterprise bargaining is one of the biggest recurring dilemmas facing employers”

Australian businesses have been enterprise bargaining now for a quarter of a century. Despite the misgivings of the Industrial Relations Commission in 1991 that employers and unions lacked maturity to replace a regulated system which combined a multitude of awards, compulsory arbitration and central wage fixation, we have now evolved to another highly prescriptive system of enterprise bargaining supplemented by a much more regulated award and statutory safety net than has ever existed.

Same, same, but different! Now, there is generally no access to compulsory arbitration by an independent umpire. Instead, the forces of economic coercion are lawfully deployed and parties can take protected industrial action (for employers – lockouts; for employees – strikes and bans) in support of their bargaining demands.

All of which brings us back to the dilemma facing employers. How can enterprise bargaining be made a worthwhile exercise? The current system has many flaws, but this shouldn’t mean that the situation is hopeless.

“Now, there is generally no access to compulsory arbitration by an independent umpire”

Challenging the status quo, especially for many employers in unionised workplaces, isn’t easy. But here are some questions employers should consider:

1. Why are you bargaining at all?
Just because you have an existing agreement doesn’t mean you must replace it. Can you invest your time in more productive efforts? Sadly, through a combination of inertia, fear and resignation, a great many employers commence bargaining with low expectations and with no real planning. Consider your workforce – do they want to bargain and how likely are they to form a majority so they can compel you to bargain? Perhaps more importantly, how likely are they to constitute a majority of workers voting to endorse industrial action? Further, if your agreement is a real dinosaur, there are options to terminate expired agreements in some circumstances. At the very least, consider if this is suitable for your business, and be prepared to challenge your assumptions about the merit of bargaining.

2. When should you start planning?
It’s often the case that employers don’t plan for bargaining until shortly before a current agreement is reaching its nominal expiry date. Consider your options early and test assumptions.

3. Who’s in charge?
Let HR facilitate the process, but empower your front line business managers to own it, and the outcomes. Most successful businesses don’t rely on their industrial instruments to impact change. Instead, they have empowered and engaged managers and supervisors who are trusted by their teams. Before you embark on your industrial relations strategy, ask yourself: how competent are your supervisors?

“Just because you have an existing agreement doesn’t mean you must replace it”

4. What is the tipping point?
Know what success looks like and be clear about what is unacceptable. Know when to say “no”, and stand by it. You should also plan for all contingencies. How exposed are you to industrial action, and what self-help options can you take?  The better prepared you are, the more leverage you will have in negotiations. After all, successful bargaining is all about using leverage.

5. How do you communicate with your people?
Do this early and often. Don’t be conned into thinking that ‘good faith bargaining’ prevents you from engaging with your employees directly. Trust isn’t earned overnight. If you’re straight and upfront with your employees, they will be more inclined to trust you if unions or other third parties become involved. Don’t be afraid to put your bargaining proposals directly to your employees at a ballot. In bargaining under the Fair Work Act, the employer and only the employer decides when and how to conduct the approval process.


This article was jointly written by Tony Wood and Jess Toop. Jess is a senior associate and the national training leader in the employment, industrial relations and safety team at Herbert Smith Freehills. With more than a decade of experience, Jess advises clients on the full range of employment, human resources and industrial relations issues, including termination of employment, executive contracts, anti-discrimination and business sale transactions.