Discussion Paper

The Transformation of Australian Industrial Relations

*** This series is now complete ***

The Changing Nature of Bargaining Structures and the Consequences for Management and Trade Unions - Discussion Paper Series No 7 (June 1999)

Executive Summary

- This paper uses survey-based data collected from a sample of workplace managers to examine the changing nature of bargaining arrangements in Australia in recent years. Particular attention is paid to factors underlying the decision made about the type of bargaining arrangement to adopt, and how the increased array of bargaining options has impacted on both management and trade unions.

- There can be little doubt that, compared with just a decade ago, bargaining structures in Australian workplaces are far more decentralised. The survey data reported on in this paper, for example, suggest that at the average Australian workplace with more than 20 employees, over half the non-managerial workforce no longer depend on awards for the determination of wages and employment conditions. Instead, their wages and conditions are largely dependent on agreements negotiated at the workplace and/or enterprise level. Indeed, a classification system developed in this paper suggests that two-thirds of all workplaces are pursuing industrial relations strategies which place emphasis on either enterprise/workplace-level or individual-level bargaining, and are no longer content to rely on awards. Moreover, this trend towards reliance on agreements is expected to continue and, if anything, accelerate.

- Most workplaces are classified as adopting one of three clear alternative bargaining strategies - collective bargaining (43 per cent of all workplaces in the sample), individual bargaining (17 per cent) or reliance on industry- and occupation-based awards (34 per cent).

- Identifying the factors driving change is difficult. What we do know, however, is that managers typically see enterprise-level agreements, irrespective of whether they are collective or not, as more conducive to achieving better outcomes for their firms and promoting improved relationships between management and employees. Further, the choice between collective and individual agreements is heavily constrained by the presence of trade unions - workplaces with a well organised union presence will almost certainly pursue a collective bargaining strategy. Other factors shown to have a major bearing on the choice between collective and individual bargaining include foreign ownership and workforce composition. There are also size effects, with the smallest firms being the least likely to choose collective bargaining.

- The large majority of workplaces with collective agreements reported `formalising' at least one of those agreements, with the main consideration being the greater ease with which the conditions and terms specified in formalised agreements can be enforced. Not surprisingly, informal collective agreements were found to be concentrated in small, non-union, private sector workplaces, especially in the retail trade and accommodation, cafes and restaurants industries. In addition, they were also found to be quite common at workplaces employing relatively large numbers of highly skilled workers.

- Formalised individual agreements are relatively uncommon - less than one-in-five workplaces with individual agreements reported that such agreements had been approved by a relevant statutory authority. Moreover, it was quite difficult to identify workplace characteristics that were associated with the likelihood of formalising individual agreements, though a strong negative association between the concentration of women employees was uncovered.

- The survey revealed that a small but still sizeable proportion of workplaces with collective agreements have negotiated those agreements without union involvement. The majority of these non-union agreements, however, lie outside the purview of industrial tribunals and commissions. Compared with union agreements, these non-union agreements tend to have lower rates of employee coverage and are less likely to be modelled on other agreements within the industry. Not surprisingly, these non-union agreements were, like individual agreements, most common in small private sector workplaces and firms.

- The survey data suggest a rising involvement of management in workplace industrial relations matters in recent years. It is argued here that this finding is consistent with the hypothesis that it has been the greater scope for bargaining at the workplace that has been instrumental in facilitating this change. There are at least two pieces of evidence that provide some support for this conclusion. First, over half of the respondents to our survey indicated that legislative change had been instrumental in facilitating this greater role for managers. Second, it was the collective bargaining workplaces which were most likely to identify an increasing role for management.

- There is evidence to support the strategic choice framework of industrial relations, with management strategy found to be of large importance at workplaces adopting bargaining strategies (especially collective bargaining) and relatively unimportant at the award dependent workplaces. That said, it seems very likely that choices are often constrained. There is, for example, ample evidence in this paper to suggest that a well organised union presence has a major bearing on bargaining strategy and on the extent to which firms move away from awards.

- The relationship between bargaining structures and various indicators of management style were also examined. With respect to various objective measures of the presence of different types of formal mechanisms and processes for structuring employee relations, few differences across workplace types classified according to bargaining strategy were found. More subjective measures, however, did suggest differences, with the individual bargainers exhibiting the greatest commitment to team work, consensus and human resource management as an important feature of overall business strategy.

- It is difficult to attribute much, if any, of the decline in trade union membership in recent years to changes in bargaining structures. Greater scope for formalised individual employment arrangements clearly has the potential to undermine trade union activity, but the incidence of such arrangements is still quite low. Collective agreement-making, on the other hand, which is much more pervasive, provides opportunities for unions to re-establish their credibility in the workplace. To date, however, collective bargaining has not been able to reverse the downward trend in union membership rates. While enterprise bargaining appears to have facilitated increased dialogue and cooperation between unions and workplace management, this has not translated into additional paid-up members.