by David Bates
Holden’s announcement that it will close its Australian operations in 2017 comes as no surprise to HR practitioners familiar with its bizarre Enterprise Agreement (EA). While most employers (of large and small businesses) have successfully used EAs to improve productivity and flexibility, Holden did exactly the opposite with its EA.
Why a private sector employer like Holden thinks it’s appropriate – let alone fair – for every other employer to subsidise the extraordinarily generous employee benefits they provide is a question they must be made to answer. For the rest of us, there are some important lessons to learn from the Holden EA debacle:
1. An EA is meant to make life easier
Enterprise Agreement terms and conditions replace those set out in any otherwise applicable Modern Award(s) for the life of the EA. They are meant to make life for employers and employees easier by replacing irrelevant Modern Award provisions with workplace-specific terms and conditions. An EA that doesn’t achieve this outcome is simply a waste of time.
2. EAs aren’t meant to bankrupt the employer
EAs are negotiated in good-faith and are subject to a ‘Better Off Overall Test’. Unless the EA results in employees being left ‘better off overall’ than they were under the applicable Modern Award(s), the EA will be rejected by the Fair Work Commission. But common sense has to apply here. Any employer who agrees to terms and conditions that are so generous that they eventually bankrupt the business has only themselves to blame.
3. Unions have a legitimate role – but it’s not to run the company
Under the Fair Work laws, unions have a legitimate right to act as ‘Bargaining Representatives’ for their members during EA negotiations. Unions also perform a number of other, equally important and quite legitimate roles within modern workplaces. At Holden though, the union effectively became a co-manager, apparently making it virtually impossible for the legitimate managers to run the business. An EA should never have allowed this to happen.
4. EAs can – and should – be used by more businesses
The Fair Work laws place enterprise bargaining at the heart of the national workplace relations system, and there are many benefits for businesses in negotiating EAs with employees. When used correctly, EAs lead to more productive and flexible workplaces where terms of employment meet the genuine needs of both the employer and employees. Don’t let the Holden debacle put you off EAs completely – just make sure your EA doesn’t look anything like theirs.
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