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6105.0 - Australian Labour Market Statistics, Jan 2008  
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This article was published in the January 2008 issue of Australian Labour Market Statistics (cat. no. 6105.0).

JURISDICTIONAL COVERAGE OF PAY-SETTING ARRANGEMENTS


EMPLOYEES IN THE FEDERAL OR STATE WORKPLACE RELATIONS JURISDICTIONS FOR PAY-SETTING


INTRODUCTION

There has traditionally been a great deal of interest in the jurisdictional coverage of employees, that is, the number of employees in the federal and state workplace relations systems. With the changes to the federal workplace relations system, through the introduction of the Workplace Relations Amendment (WorkChoices) Act 2005, this issue has gained further prominence. This article uses data from the 2006 Survey of Employee Earnings and Hours (EEH) to provide indicative estimates of the proportion of employees in the federal and state workplace relations systems for pay-setting purposes.


The most recent EEH survey was run in respect of May 2006, while the Workplace Relations Amendment (WorkChoices) Act 2005 took effect in March 2006. As a result of this timing, the survey was not designed to collect information according to the new workplace relations system. Accordingly, published results from the May 2006 EEH survey (released in February 2007) were compiled according to the workplace relations system that existed prior to March 2006.


Nonetheless, using the available information on business structures, along with the prevailing pay-setting instruments, it is possible to produce indicative estimates of the proportion of employees in the federal and state workplace relations jurisdictions according to the post-March 2006 workplace relations system.



THE WORKPLACE RELATIONS ENVIRONMENT

The introduction of the Workplace Relations Amendment (WorkChoices) Act 2005 brought significant change to the workplace relations environment. Prior to its introduction, employers could essentially choose whether to access federal or state workplace relations systems (i.e. by using a federal or state award, collective or individual agreement to set the pay and conditions of their employees). Alternatively they could choose to negotiate pay and conditions outside of either the federal or state systems (through an unregistered arrangement, e.g. common-law contract). However, employers (and their employees) are now deemed to be in the federal jurisdiction if they are within scope of the Workplace Relations Amendment (WorkChoices) Act 2005. This comprises:

  • constitutional corporations (i.e. financial, trading and foreign corporations covered by paragraph 51(xx) of the Constitution);
  • employers and employees in Victoria, ACT, NT and Christmas and Cocos Islands;
  • the Commonwealth, including its authorities; and
  • waterside, maritime and flight crew employers.

The Workplace Relations Amendment (WorkChoices) Act 2005 also includes two sets of transitional arrangements. These apply to:
  • constitutional corporations with employees who have their terms of employment set by a state registered agreement or state award; and
  • employers who are not constitutional corporations with employees who have their terms of employment set by a federally registered agreement or federal award.

Employees of constitutional corporations who have their terms of employment set by a state registered agreement or state award, are deemed to be in the federal jurisdiction on a transitional basis (transitioning into the federal jurisdiction). For these employees, the state agreements or awards are now deemed to be transitional federal agreements, or Notional Agreements Preserving State Awards (NAPSAs).


Upon expiry of existing agreements, or at the end of a three year transitional period (whichever occurs first), these employees will be required to negotiate a new federal agreement or fall back to the relevant federal award.


Employees whose employer is not a constitutional corporation, but who have their terms of employment set by a federal award or agreement, are also deemed to be in the federal jurisdiction on a transitional basis (transitioning out of the federal jurisdiction). For these employees, the federal agreements or awards are now deemed to be transitional federal agreements or transitional federal awards. Upon expiry of existing agreements, or at the end of five years (whichever occurs first), these employees will fall back to the applicable state jurisdiction unless their employer chooses to incorporate.



JURISDICTIONAL COVERAGE FRAMEWORK

The following diagram provides a framework for identifying which employees are deemed to be under the federal or state workplace relations jurisdictions for pay-setting purposes, based on the status of the employer and the prevailing pay-setting instrument of the employee.

1. FRAMEWORK FOR JURISDICTIONAL COVERAGE OF EMPLOYEES' PAY-SETTING ARRANGEMENTS



(a) As defined for the Survey of Employee Earnings and Hours. Comprises all employing organisations in Australia, except: businesses primarily engaged in agriculture, forestry and fishing; private households employing staff; and foreign embassies, consulates, etc.
(b) Comprises employers who are constitutional corporations; waterside, maritime, or flight crew employers; and all employers in Victoria, the NT or the ACT.
(c) Employers other than those in the federal jurisdiction (as defined).
(d) Comprises employees with pay set by a federally registered individual or collective agreement or by a federal award.
(e) Comprises employees with pay set by a state registered individual or collective agreement or by a state award. For employees of constitutional corporations, these state agreements or awards are now deemed to be transitional federal agreements, or Notional Agreements Preserving State Awards (NAPSAs).
(f) Comprises employees with pay set by a federally registered individual or collective agreement or by a federal award. For employees of employers who are not constitutional corporations, these federal agreements or awards are now deemed to be transitional federal agreements or transitional federal awards.
(g) Comprises employees with pay set by a state registered individual or collective agreement or by a state award.
(h) Employees with their pay set by an unregistered arrangements have their pay and conditions negotiated outside of the federal or state jurisdictions.
(i) Working proprietors of incorporated businesses are not generally bound by the requirements of the federal workplace relations system in setting their own pay and conditions.



METHODOLOGY

The EEH survey uses the ABS Business Register from which it selects a sample of employers to survey. The ABS Business Register contains information on certain characteristics of employers which can be used to provide an indication of whether they are a constitutional corporation.


For this article, employers have been categorised to either the federal or state jurisdiction largely on the basis of the Type of Legal Organisation (TOLO) indicator, as well as information on their state or territory.


Employers who are located in Victoria, the NT or the ACT, as well as employers who are Ltd or Pty Ltd companies, Federal government departments, etc. have been categorised to the federal jurisdiction. Employers who are not located in Victoria, the NT or the ACT, and who are sole traders, partnerships, state government departments, etc. have been categorised to the state jurisdiction.


For some employers, the TOLO indicator does not provide sufficient information to reliably determine whether they are in the federal or state jurisdiction (e.g. charitable institutions, local government authorities, trusts).


It should be noted that the TOLO indicator provides information on whether an employer is incorporated, but not whether the employer is a constitutional corporation. For this article, all incorporated employers have been assumed to be constitutional corporations. However, while most incorporated employers are likely to be constitutional corporations, there may be some incorporated employers who are not constitutional corporations as they are not financial or trading enterprises. Despite these limitations, it is possible to use this information, along with information on the prevailing pay-setting instruments, to provide a broad indication of the proportion of employees in the federal and state workplace relations jurisdictions for pay-setting purposes.



INDICATIVE ESTIMATES OF JURISDICTIONAL COVERAGE

The following table provides indicative estimates of the proportion of employees in the federal and state jurisdictions in the post-March 2006 workplace relations system.

2. Jurisdictional coverage of employees' pay-setting arrangements: Indicative estimates - May 2006(a)

%

Federal jurisdiction
Federal award or agreement(b)
36.1
State award or agreement(c)
9.8
Unregistered arrangement(d)
28.2
Federal jurisdiction (excluding Working proprietors of incorporated businesses)
74.0
Working proprietor of incorporated business
5.1
Total federal jurisdiction
79.1
State jurisdiction
State award or agreement
8.8
Unregistered arrangement(d)
3.2
Total state jurisdiction
11.9
Unable to be determined(e)
9.0
Total
100.0

(a) While data were collected according to the pre-March 2006 workplace relations system, these indicative estimates are compiled according to the post-March 2006 workplace relations system.
(b) Includes employees transitioning out of the federal jurisdiction.
(c) Employees transitioning into the federal jurisdiction.
(d) Includes employees receiving overaward pay.
(e) Employees whose jurisdictional coverage for pay-setting was unable to be determined.
ABS Survey of Employee Earnings and Hours (cat. no. 6306.0).


The table shows that, at May 2006:

  • 79% of employees (6.6 million) were in the federal workplace relations jurisdiction;
  • 12% of employees (1 million) were in one of the state workplace relations jurisdictions; and
  • for 9% of employees (750 thousand) there was insufficient information to reliably determine which workplace relations jurisdiction they were in.

Employees in the federal and state jurisdictions can be further distinguished according to whether they are directly or nominally in either the federal or state jurisdiction, or whether they are transitioning into, or out of, the federal jurisdiction (see Figure 1). The 79% of employees in the federal jurisdiction comprised:
  • 31% directly in the federal jurisdiction (i.e. their employer was in the federal jurisdiction and their pay was set by a federally registered agreement or federal award);
  • 10% transitioning into the federal jurisdiction (i.e. their employer was in the federal jurisdiction but their pay was set by a state registered agreement or state award);
  • 33% nominally in the federal jurisdiction. Of these:
      • 28% had their pay set by an unregistered arrangement (their employer was in the federal jurisdiction); and
      • 5% were working proprietors of their own incorporated business;
  • 2% transitioning out of the federal jurisdiction (i.e. their employer was in one of the state jurisdictions but their pay was set by a federally registered agreement or federal award); and
  • 3% where pay was set by federal instrument but it was not possible to determine whether they were directly in the federal jurisdiction or transitioning out of the federal jurisdiction.

The 12% of employees in the state jurisdiction comprises:
  • 9% directly in one of the state jurisdictions (i.e. their employer was in one of the state jurisdictions and their pay was set by a state registered agreement or state award); and
  • 3% nominally in one of the state jurisdictions (i.e. their employer was in one of the state jurisdictions but their pay was set by an unregistered arrangement).


FURTHER INFORMATION

For further information, please contact Michael Gerrity on Canberra (02) 6252 5514 or email <m.gerrity@abs.gov.au>.

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