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Agreement making and reforms in the APS

The Hon. Dr David Kemp MP
Minister Assisting the Prime Minister for the Public Service
Address to: "Agreement making and achieving corporate goals"
Canberra, 26 March 1998

Ladies and Gentlemen, I am pleased to have this opportunity to speak with you about an issue of vital importance to the Government's economic reform agenda. The reform of workplace relations in Australia is an essential condition for achieving a genuinely reformed labour market and the high productivity and cost competitiveness upon which our living standards as a nation depend.

For most of this Century, responsibility for determining pay and conditions has been removed from enterprises and their workforces. Third parties - by which I mean, employer organisations, central public service agencies, trade unions and various industrial tribunals have assumed these responsibilities.

This approach had become 'the Australian way of doing business', so far as workplace relations was concerned. It was an approach rationalised on the fallacy that by organising our institutional arrangements this way, industrial disputation would be unnecessary.

Wages and conditions were determined by complex regulatory mechanisms - more complex and pervasive than anywhere in the world outside Australasia. There was a belief that wages and conditions would somehow be fairer than if left to more market-based approaches - in which pay and employment conditions were settled by the enterprise or workplace.

To compound the situation, many of our enterprises, both private and public, abdicated their responsibility for ensuring that employment conditions and working arrangements were actually geared to the needs of the enterprise, its clients and its people.

Instead, an entire industry or 'club' of industrial experts, had been working assiduously as third parties deciding:

what the right pay should be;
what the right conditions should be;
what the right categories of employment should be;
what the right classifications and training should be and what career paths (if any) would apply;
what proportions of certain groups should be employed in relation to others;
what quotas must apply;
how shifts could be worked;
what leave arrangements should operate at what time of the year, and so on.

In the face of that complex and increasingly institutionalised external process, people in individual workplaces felt both disempowered and disinterested in the fundamental issues of how to attract, retain, develop, organise and motivate people so as to contribute most to the achievement of enterprise goals.

Until recently, these have been the constraints within which Australian enterprises have had to operate. Australia is now breaking away from that regulatory regime and the restrictive work and management practices that it gave rise to. And, at the same time, industrial disputation is at the lowest level on record!

There is beginning in Australian enterprises, including in the Public Service, the resumption of strategically managing people. Through a focus on workplace relations and agreement-making at the enterprise level, there are emerging more creative ways for cooperation and management so that everybody's efforts are directed to the achievement of corporate goals and higher productivity.

In short, "better pay for better work" is being made possible by better management of workplace relations and agreement making.

The APS has suffered from the same restrictions as the rest of the Australian workplace. For much of its existence these past 97 years, there has been a strong centralised model, run by central agencies which determined:

the job classifications and associated rates of pay and increments;
the conditions of employment; and
rules for the selection, advancement, appraisal, redeployment and retirement of staff.

The APS has been highly unionised, with a multiplicity of unions, each of which used the arbitration system to establish some 130 union-based and highly prescriptive industrial awards. It is only recently that these awards have begun to be rationalised and simplified.

Despite grievance machinery and dispute-settling procedures the Public Service has historically been subject to interminable interruptions from bans and limitations, imposed at whim by unions determined to challenge or veto public sector innovations.

There has also been a complex web of legislation governing the Public Service, most notably the current Public Service Act which is over 75 years old and has been amended 100 times. It is complex, prescriptive and out of date.

Importantly, there has been little regard to the growing differences in circumstances between agencies in respect of their operating environments, clients, staffing requirements and the like.

Signs of major change for the APS have been with us for some time, illustrated by the shift of functions outside the Service that has been occurring over the last 20 years. There have been extensive moves to commercialisation and contestability has become a fact of life for the Public Service in delivering advice, goods and services.

The onset of new technology, purchaser/provider approaches and the ready availability of competitive tendering and contracting options are changing the face of the Public Service. Taxpayers are demanding more efficient and effective services, whether from the public or the private sector.

It is in this radically new operating environment that the Public Service is now operating. In a 'people business', like the Public Service, the way in which people are managed is a central leadership issue. To become competitive with the best of the private sector and to deliver to high standards in line with Client Service Charters, the Public Service needs to be subject to comparable employment and industrial arrangements. That is what the Government has set about doing through its workplace relations reforms in the APS.

The Government's approach to reform

On coming to power, the Government realised that it needed to change the prescriptive legislative framework to provide the conditions necessary if high performing organisations were to be realised.

New legislation was quickly progressed in three key areas that were crucial to the competitiveness of the APS - workplace relations, financial management and the Public Service Bill.

The Public Service Bill is an essential part of the reform agenda. The Government will not be deterred from completing its reform of the APS by the short-sighted obstruction of the Opposition and minor parties in the Senate. The effect of this obstruction is simply to frustrate the very many people in the public service who are keen to press ahead with a reform agenda in the development of which they have had an important role, and which they see clearly is essential for building morale and opportunities for the future.

The amendments passed in November 1997 by the Opposition parties in the Senate have been rejected outright by the Government. The Bill has passed the House, unchanged, a second time, and is now awaiting debate in the Senate. In the interim, the Government is pressing ahead with implementation of many of the reforms through administrative means. Details of those measures were released on 25 February and came into effect last week.

Financial management is being modernised through three pieces of legislation designed to improve the quality and clarity of understanding of the Commonwealth's financial management framework. The Financial Management and Accountability Act 1977 has resulted in a massive shedding of prescribed rules and given Agency Heads greater flexibility and autonomy in their financial management.

The third and vital string to the bow - the Government's Workplace Relations legislation - was designed for Australian workplaces, not just the APS. It is now over a year since the legislation began to operate and the positive effects are being felt around Australia.

Micro-economic reform, including labour market flexibility, is the key to achieving high sustainable economic growth. Our Government is committed to removing barriers to change and other measures which inhibit economic growth. These general concerns are equally applicable to the public sector as the private sector.

I cannot emphasise strongly enough that this Government is determined to act responsibly as an employer and to use the flexibilities provided by the Workplace Relations Act in its own area of employment. The intention is to establish an APS which will be competitive into the next century and which will meet the need to be a vibrant, high performing organisation.

We have taken the initiative in seeking change in the Public Service by targeting it as one of the key sectors for workplace reform. The provisions of the Workplace Relations Act are tools that the APS can and must use to progress down the path towards long term success.

It is the Government's expectation that public sector agencies will take a leading role in utilising the opportunities provided by the Workplace Relations Act to improve productivity in their workplaces.

The Workplace Relations Act establishes the broad framework for reform:

the fundamental principle is direct employee/employer relations with the emphasis on making agreements and a reduced role for third parties like the AIRC or unions, without the support of employees;
genuine freedom of association for employees is guaranteed - with choice now as to whether or not to join a union and greater choice about who may represent their industrial interests;
clearer rights and responsibilities have been established with remedies to support compliance with obligations under awards and agreements; and
it is more accessible - there are simpler arrangements with less regulation and greater choices about which kind of agreement best suits the circumstances - awards are a safety net in the framework and will be subject to simplification.

The Workplace Relations Act is as relevant to government employment as to the private sector. The Act can and should be used as a powerful lever to achieve broader objectives that are relevant to every sector of the economy. The Government is taking the lead, using the Act, as one of the drivers of significant change in the public sector.

Agreement making

Agreement making at the agency level is playing a key role in APS reform because it allows agencies to achieve high performance and better pay for better work. For the first time each agency is deciding, by agreement with the employees in the agency, the salaries, the detailed classification arrangements and conditions of employment to be offered in the agency.

The practice where the former Department of Industrial Relations tried to represent the diverse needs of agencies in negotiations with a few peak union officials, arriving at a uniform outcome which was then imposed on all APS agencies, irrespective of their operations, is gone.

Agencies are able to link their corporate goals, business plans and their human resource strategy to remuneration outcomes for their staff. There will be an assessment of the effectiveness and performance of an employee in moving up a pay scale - agencies are ensuring pay is linked to performance management. We have moved away from 'one answer fits all', and agencies are taking advantage of this flexibility to establish remuneration arrangements that reflect their specific needs.

The authority to make agreements has been devolved to agencies within broad policy parameters which recognise the Government's interests as the ultimate employer. This is consistent with the practice of major corporations. It is aimed at directing the process positively while retaining the features necessary to support a coherent Public Service, such as facilitating mobility through classification reforms and portability of leave entitlements between agencies.

The objective is not simply a matter of securing an agreement. We want to see quality agreements. A key objective is that agencies take a strategic, longer term approach to improving their agencies over a 3-5 year time horizon. There will be a need for successive agreements in agencies, building one on the other to achieve those key steps to becoming high performance organisations.

The 'Policy Parameters for Agreement Making in the APS', as they are formally known, bear little resemblance to the complicated arrangements in the early 1990's that limited rather than supported agreement making at agency level. They are brief, to the point and facilitative, rather than detailed and prescriptive. Essentially they recognise the Government's responsibility as employer to give direction to the process without unduly inhibiting the discretion of management to adopt innovative solutions to the issues that face them.

Agency heads already have authority to implement major changes under the Workplace Relations Act, including resolution of pay and conditions linked to productivity and performance, making AWAs etc. The formalisation of their role as the direct representative of the employer is an issue included in the Government's Public Service Bill.

Achievements under the Workplace Relations Act

A great deal has already been achieved in the ten months since the Government settled its policy parameters.

The process has been taken up in a significant proportion of the APS.

Twelve agencies have completed the process (ie have had an agreement certified) - and another is scheduled for certification today. A further six have made agreements and certification is pending. In total these agreements cover about 35% of APS staff.

Another 20% of APS staff will be covered by agreements currently being cleared against the Policy Parameters.

A further 30% of staff are in agencies that are actively pursuing the agreement making process - so that about 85% of APS staff are now involved in a settled agency agreement or the agreement making process.

So far 9 of the 18 agreements which have been approved by staff have been developed directly with staff - evidence that the options for different types of agreements under the Workplace Relations Act are in fact being utilised. This is all the more significant given the high level of unionisation within the APS.

The agreement certified by the Department of Foreign Affairs and Trade is, at this stage, the largest direct employee agreement in the federal jurisdiction (over 2000 staff in Australia and overseas). That agreement, together with the agreement in the Department of Finance and Administration, and the proposed agreement with employees in Health and Family Services, constitute the three largest federal agreements made directly with employees anywhere in the country.

Where unions have been directly part of the negotiations there has been direct communication between management and staff. This represents a significantly different way of doing business. This outcome is reinforced by the more democratic processes established by the Workplace Relations Act, with its emphasis on direct relationships with staff and requirement for majority staff endorsement of agreements.

The Government is seeking to have the majority of staff covered by agreements by the end of the financial year and is well on the way to exceeding this target.

The Government also expects all Senior Executives to sign Australian Workplace Agreements:

to recognise the distinctiveness of each Senior Executive position;
to better align the corporate goals of each position with the remuneration and conditions attached to it; and
to provide flexibility to executives in the way they actually receive that remuneration.

A number of agencies already have AWAs in place and others are well advanced. The Office of the Employment Advocate has advised that 230 AWAs have already been made in the APS.

The agency-level agreements include positive initiatives to support innovative approaches. They are making breaks with the past Public Service culture by not continuing arrangements that are no longer relevant or appropriate. Many agreements include significant innovations specifically designed for the particular needs of the agency concerned.

At the same time, while they are relevant to the organisations which are implementing them they could also suggest better practices for other agencies. Understanding what others are doing can provide valuable prompts to examine areas of your own operations and, with a fresh perspective, design your own specific changes where appropriate.

Let me just highlight a few examples to give an indication of the sorts of things that are being achieved:

the variety of pay outcomes between agencies, although an important outcome in itself, is occurring in a context where automatic increments are being removed in favour of productivity and performance linked remuneration;
more flexible hours of work, including weekends and public holidays, and working arrangements mean improved services to clients as well as more family friendly practices;
performance linked remuneration arrangements under revised classification models;
simplification of leave and changes to complex arrangements for rewarding performance of higher duties, thereby saving in personnel administration; and
restriction on the numbers and hours of permanent part-time employment are being removed.

These measures being developed by individual agencies are all contributing to strengthening performance management and a culture of high performance. These are essential features the APS needs to achieve because its continued relevance depends on it becoming a modern employer. Its success will depend on its ability to become a leading edge employer with contemporary workplace practices and a culture which fosters and rewards high performance. The challenge is to provide maximum flexibility in a devolved environment and to encourage managers to use these new freedoms creatively.

It is important for agencies and employees that each and every agency move forward actively to complete their agreements as soon as practicable. For those agencies that have already achieved their first agreement, there is the task ahead of them to implement it and start work on developing the next round of agreements. This is a process for continuing improvement, not a one-off procedure.

The dramatic shift in responsibility for workplace relations and agreement making to APS agencies now sees each agency able to control its own destiny for the management of its people. While the Government as employer still expects its agencies to operate consistently with its workplace relations and wages policies, the emphasis is on mainstreaming the employment and industrial arrangements in the APS with those applying in the community.

Understandably, many agencies have only limited expertise with agreement making and setting employment provisions. There needs to be a 'bridge' from the past into the future, to assist agencies with the transition. This means ensuring ready access to information about innovations and good practices that might be adopted in moving away from detailed central regulation. It also means providing technical assistance to navigate through the challenges of the new operating environment.

While some agencies have made some call on private consultants to support them in this transition, a priority task for the Department of Workplace Relations and Small Business is to provide pro-active support to agencies to underpin the Government's goal to achieve a genuinely reformed APS. That support must be professional, timely and geared to agency requirements. The fundamental priority is supporting agencies in achieving positive change outcomes consistent with the Government's reform agenda.

I am delighted to announce today a new service from the Department of Workplace Relations and Small Business - a service tailored to the new circumstances in which agencies find themselves - to be known as Workplace Partners.

The aim of Workplace Partners is to provide a professional range of services to agencies, to assist them to take responsibility for their workplace relations and to maximise their efforts to take advantage of the opportunities afforded them by the Workplace Relations Act.

There is both market need and support for DWRSB to play a more pro-active role in supporting moves by agencies to operate within the devolved environment and take up the opportunities available to improve their workplace relations and develop innovative agreements. Services need to be tailored to supporting agencies to develop workplace relations and agreement making approaches as part of strategic human resource management for high performance. The range of services to be encompassed under the Workplace Partners umbrella will include:

consultancy services;
advocacy services: for agreement certification or management of disputes;
research services: using DWRSB databases to research best practice agreement or award provisions, and innovative workplace reforms such as innovative leave arrangements or working time arrangements;
in-house seminars, workshops, and communication activities.

The needs of Agencies and the Government's APS reform objectives can be more effectively met by the development of sound, longer term working relationships between DWRSB and agencies, and this is the goal of Workplace Partners.