The Transition to Modern Awards: Challenges for Small and Medium Enterprises in Western Australia

Abstract

Statistics gathered by the Department for Business Innovation and Skills (UK) in 2015 show that total employment in small and medium enterprises (SMEs) was 15.6 million, representing 60% of private sector employment in the United Kingdom. Similarly, SMEs in Australia are significant employers and this is reflected in the State of Western Australia (WA) where SMEs account for over 99% of employing businesses. While there is limited existing research into industrial relations compliance in SMEs, United Kingdom studies by Anderson and Ullah (2014), Harris (2002), Schmidt and colleagues (2007), and Ullah and Smith (2015) found that SMEs are challenged by the complexity of industrial legislation, are time poor, and balance time spent on compliance with business survival. These findings were supported by research into small business experience with regulations undertaken by the Australian Government Productivity Commission (2013). This latter research also found that small business owners are time poor, have limited time to read regulations, need help interpreting regulations, and that support material provided by Government needs to be simplified.

On 1 July 2009 the Fair Work Act 2009 (Cth) (FWA) introduced compliance obligations for Australian employers under newly constructed Modern Awards. These 122 Modern Awards resulted from consolidation of thousands of Federal and State Industrial Awards, and each Modern Award contained Transitional Provisions that provided gradual changeover to new pay-rates over five years. Transitional Provisions were intended to assist employers, but their complexity was underestimated and SMEs were ill-equipped to undertake the required diligence and calculation.

This paper considers the actions taken by forty-one (41) SME owner/managers in WA to comply with the obligations of the Modern Awards, and investigated their knowledge and awareness of those obligations and willingness to comply. The paper also presents a Stakeholder perception, represented by nine (9) participants drawn from Government, Unions and Employer Associations, of how SMEs navigated their obligations under the Modern Awards.

The research considers the complexity of Transitional Provisions and adequacy of ‘free’ support resources provided by Federal Government Agencies such as the Fair Work Ombudsman (FWO). Failure by SMEs to implement the Provisions accurately has consequences. Increased FWO regulatory audits into employer compliance provide evidence of SMEs being ordered to back-pay wages if found to have applied the wrong pay-rate. These audits attracted significant media attention and ‘orders’ for back-payments were accompanied by fines if SMEs were unable or unwilling to comply