Tuesday, 8 July 2014

Risk and Employment

I have been asked to deliver a paper at a conference later this year on regulatory reform and, coincidentally, have been working on the seemingly unrelated task of unpicking the rules relating to the employment of an apprentice hairdresser.  Unrelated ?

After nearly four hours of study, I think I understand the rules dealing with employment in this industry.  That is three hours and fifty minutes too long, and a serious indictment of the existing confusion of Commonwealth legislation and awards that govern the area.  

For a small business, with limited time to decide whether to engage an apprentice and the cost impacts – and for a young apprentice, just out of school – this is a serious problem.   More than many other single regulatory issue, it is the most serious regulatory problem facing every small business – acting as a significant disincentive to employment, providing a confused framework for employment and serving business and employees poorly.

Should we simply repeal the rules and let the parties make up their own rules.  No doubt this could work where the parties are reasonable people and are able to come to a fair deal.  However, even if the agreement was fair, the parties still need to cover all the bases – the agreement still must be capable of dealing with a whole range of contingencies – some likely and others unusual.  Some of the unusual cases can expose either or both parties to considerable, and perhaps unreasonable, loss if the wrong option is chosen.

A reasonable employer can sometimes do unreasonable things.  Sometimes this is not from thrift or shortsightedness.  Sometimes it can be forced by the unreasonable actions of a third party, or because the business or personal interests of the employer come under pressure.  In Australia at this time, many small businesses operate out of large shopping malls that are open until late each night – and employers operating in the malls are required to trade for quite long hours.  The requirement to keep open, even when trade is slight, can result in an employer seeking to get employees, particularly low paid employees, to work exceptionally long hours.

Let us imagine that we want to design a system that allows an employer to test fair options before employing an apprentice.  Today, a simple graphic interface, could be built that allowed the employer to quickly work out when the employee could work, and the fair cost of engagement across those times.  The interface could demonstrate all aspects of the employment, from superannuation, long leave, leave and termination, in a single screen able to be taken in – in a minute or so - with a minimum of text and no legal language.  Prospective employees could be shown the page, test alternatives, with the confidence that they are negotiating within a fair framework that will deliver a contract that deals with all of the outcomes.

Sounds easy.  It is easy.  So why does it not happen?  

Instead of a simple business-friendly framework, we have a cumbersome rules based system which forces both parties to learn a lot of irrelevant and confusing guff, and gives no coherent assistance as to core issues such as work hours and cost impacts.  

Worse, because some of the rules span different rule makers, some of the rules are directly inconsistent.  

It took me, someone already familiar with the structure and scope of the rules, four hours to get across the poorly associated rules, finding holes, gaps and inconsistencies everywhere.  In the past I have asked some small business whether they thought they understood the system. Most said they tried, but gave up because the rules did not make sense.  In the past, I have asked some employees whether they thought they understood the system.  All said they did not.  Testing the actual working arrangements in relation to apprentice hairdresser suggest that they are being systemically underpaid, asked to work outside reasonable times and denied basic conditions of service.  In some cases, employers and employees had adopted unfair practices after discussions with government agencies.  Testing some of the advice of the agencies showed it to be wrong.

The existing system fails business and employees.  Badly.  

It is time to change the rules.  

Regulatory reform has a long way to go in this country.

Peter Quinton
Palerang  July 2014

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