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FEATURE ARTICLE: TRENDS IN EMPLOYEE METHODS OF SETTING PAY AND JURISDICTIONAL COVERAGE
Under the Fair Work system, the majority of employees come under the federal jurisdiction. The following groups of employers (and consequently their employees) are covered by the national system:
The following groups of employers (and consequently their employees) are generally not covered by the national system:
Employees are deemed to be under the federal or state workplace relations jurisdictions for pay-setting purposes based on the legal status of their employer and the prevailing pay-setting instrument that applies to their employees.
Methods of setting pay
Information on the methods of setting pay for employees (excluding owner managers of incorporated enterprises) refers to how the main part of an employee's pay was set, or determined, in the survey reference period:
TRENDS IN EMPLOYEE METHODS OF SETTING PAY AND JURISDICTIONAL COVERAGE
Methods of setting pay
The Fair Work Act 2009 places an emphasis on 'enterprise level collective bargaining agreements' as the preferred method of setting pay over (registered) individual agreements. In May 2010, the most common method of setting pay for all employees was collective agreements (43%), while a further 37% of employees had their pay set through an individual arrangement. In line with the Fair Work Act 2009 containing no provisions for federally registered individual statutory agreements (formerly known as Australian Workplace Agreements), almost all (98%) individual arrangements were unregistered. 'Award only' was the least common method of setting pay (15%) in May 2010.
Collective agreements have been the most common method of setting pay for the past decade, with the proportion of employees whose pay was set by this method increasing by 7 percentage points from May 2000 (37%) to May 2010 (43%). The proportion of employees with their pay set by an individual arrangement has increased by 3 percentage points in the 10 years to May 2010, from 34% to 37%. In a sign of the shift away from centralised pay setting arrangements, the proportion of employees whose pay was set by award only has decreased 8 percentage points from 23% in May 2000 to 15% in May 2010.
In light of recent changes to Australia's workplace relations system, the majority of employees are now in the federal jurisdiction. To better understand the distribution of employees between the federal and state jurisdiction, this section presents jurisdictional coverage estimates between 2006 and 2010, and 2010 estimates disaggregated by state and sector.
In May 2010, 87% of employees (7.8 million) were in the federal workplace relations jurisdiction. This represents an increase of 9 percentage points since August 2008. The proportion of employees in the state jurisdiction fell from 13% in August 2008 to 9% (833,000 employees) in May 2010. This in part reflects the referral of several states' workplace relations powers with respect to sole traders and partnerships to the Commonwealth,
With the introduction of the Workplace Relations Amendment (Work Choices) Act 2005, all constitutional corporations entered the federal jurisdiction, joining employers in Victoria, the Australian Capital Territory and Northern Territory who were already in the federal jurisdiction. Following the introduction of the Fair Work Act 2009, all remaining states, with the exception of Western Australia, referred their workplace relations powers to the Commonwealth.
State government employers in New South Wales, Queensland, South Australia and Western Australia; Tasmanian Commonwealth and state public sector employers; and Western Australian private sector employers that are not constitutional corporations remain in their respective state jurisdictions.
In May 2010, Western Australia had the highest proportion of employees in the state jurisdiction (22%), while New South Wales had the lowest (10%).
Table 2. JURISDICTIONAL COVERAGE OF EMPLOYEES PAY-SETTING ARRANGEMENTS, States and Territories: Proportion of employees - May 2010
In Western Australia, 77% of private sector employees were in the state jurisdiction in May 2010. In all other states and territories all private sector employees were in the federal jurisdiction. Overall, 98% of private sector employees in Australia were in the federal jurisdiction compared with 46% of public sector employees. Of those states with their own workplace relations systems, the state with the highest proportion of public sector employees in the state jurisdiction was South Australia (64%). All public sector employees in Victoria, the Northern Territory and the Australian Capital Territory were in the federal jurisdiction.
Table 3. JURISDICTIONAL COVERAGE OF EMPLOYEES PAY-SETTING ARRANGEMENTS, States and Territories: By sector: Proportion of employees - May 2010
— nil or rounded to zero (including null cells)
(a) Includes employees transitioning out of the federal jurisdiction.
(b) Employees transitioning into the federal jurisdiction.
(c) Includes employees receiving over award pay.
(d) Employees whose jurisdictional coverage for pay setting was unable to be determined.
Source: Employee Earnings and Hours, Australia (cat. no. 6306.0)
EMPLOYEES IN THE FEDERAL JURISDICTION PAID BY AWARD ONLY
Under the Fair Work Act 2009, Fair Work Australia (FWA) is the body responsible for setting minimum and award wages and conditions for employees in the national workplace relations system, through annual determinations. Employees (and their employers) in the federal jurisdiction whose method of setting pay was award only are directly impacted by FWA determining a change in award wages.
The minimum wage or award determination may also have an indirect effect on other employees in the federal jurisdiction who have an individual arrangement if, for example, they have an arrangement to receive over award payments (such as a set dollar amount or percentage above the award rate). Award rates may also impact on employees whose pay is set by collective agreement due to application of the 'better off overall test', against the relevant modern award. While these broader groups of employees may have their pay affected by changes to awards the data from the Survey of Employees and Hours are not able to identify all employees who are 'award reliant'. Therefore, this section will only profile employees in the federal jurisdiction whose pay was set by award only, in terms of their employment arrangements and job characteristics.
In May 2010, 1.3 million employees in the federal jurisdiction had their pay set by award only (15% of all employees). Award only employees comprised:
In May 2010, 39% of federal award only employees worked full-time whilst 61% worked part-time. This is in direct contrast to the full-time/part-time status of all employees in the federal jurisdiction, with 63% working on a full-time basis. Female award only employees were more likely work part-time (71%), while male award only employees were more likely to work full-time (54%).
By industry and occupation
Award only employees are heavily concentrated in certain industry divisions. In May 2010, half of all federal award only employees were employed in either the Accommodation and food services (21%), Retail trade (15%) or Health care and social assistance (14%) industries. In contrast, each of the following industries contained less than 1% of employees paid by award only: Information, media and telecommunications; Financial and insurance services; Electricity, gas, water and waste services; and Mining .
Award only employees were also more heavily concentrated in particular occupation groups. For example, 1 in 4 federal award only employees were Community and personal service workers (25%), and 1 in 5 were Labourers (21%), whereas only 1% were Managers.
Award only employees are often viewed as minimum wage reliant. However, not all award only employees are lower paid, and not all lower paid employees are paid by award only. This section presents the distribution of employee earnings in the federal jurisdiction for those whose pay is set by award only with reference to other pay setting methods.
Distribution of total hourly cash earnings
There were 7 million non-managerial adult employees (excluding OMIEs) in the federal jurisdiction in May 2010. The distribution of hourly total cash earnings shows that 45% of these employees who had their pay set by award only earned less than $20 per hour, compared with 14% of those on a collective agreement and 19% of those who had an individual arrangement. At the higher end of the earnings distribution, less than 1% of award only employees earned more than $50 per hour compared with 8% of employees covered by a collective agreement and 11% of employees on an individual arrangement.
While the hourly earnings of award only employees in the federal jurisdiction are more heavily concentrated in the lower pay ranges than with the other methods of setting pay, they do not account for all lower paid employees. Non-managerial adult employees (excluding OMIEs) who earned under $20 an hour were just as likely to have their pay set through an individual arrangement (37%) as by award only (36%) compared to by collective agreement (27%). This suggests that not all lower paid employees receive a direct benefit from any increase in award wages from FWA, not withstanding efforts by employers to increase over award wages in order to remain competitive.
For further information, please contact Matt Dillon on Canberra (02) 6252 5183 or email <email@example.com>.
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