Single agency bargaining: To bin or not to bin?

The Australian Public Service (APS) should dump its single agency bargaining approach to negotiating pay and conditions and re-introduce centralised bargaining, believes a former Public Service Commissioner, as the bitter three-year pay dispute between unions and the federal government grinds on for tens of thousands of public servants.

While a number of government departments and agencies have signed enterprise bargaining agreements, many larger ones are holding out for a better deal, notably Human Services, the Australian Taxation Office and Immigration and Border Protection.

The Community and Public Sector Union (CPSU) says that around two-thirds of APS workers remain without an agreement, with little possibility of back pay.

Australian National University Professor Andrew Podger, who was Public Service Commissioner between 2002 and 2004, backs an APS-wide approach to bargaining because he says single agency bargaining has had serious, negative consequences for the public service which have outweighed the promised benefits, chiefly around flexibility.

“This has caused very serious damage to the integrity of the whole pay system in the Public Service with tangible impact on mobility within the service, serious management problems for agencies affected by machinery of government changes, justified complaints of unfairness across and within agencies, and unknown impacts on attraction and retention of the skills the APS requires,” Prof Podger told the 2016 senate inquiry into APS bargaining.

Prof Podger says single agency negotiations have created pay disparities for similar jobs  in different departments and agencies and has also damaged staff morale and caused resentment.

“What’s happened is they’ve all gone their different ways and none of them have been able to focus on the market,” says Prof Podger.

“Strict central rules led to different pay rates, not because they are useful but because they are forced to be there.”

He argues that these differences have affected mobility between departments and caused problems attracting the best talent, intensified for departments that have suffered deep budget cuts and may not have the resources to match pay rates.

“It really is making it very hard for the Department of Social Services to recruit a good person from Treasury [for example] and that’s silly. Treasury jobs aren’t more important than jobs in top policy positions in DSS or Education etc,” he says.

“The very areas where you want to actually improve their performance are often the ones that are having the most difficulties.”

He advocates “a serious market-based approach” and service-wide employment conditions, because the skills across most departments are similar.

Dr John O’Brien from Sydney University Business School’s Work and Organisational Studies agrees that a centralised bargaining system would be “far more efficient” and says most public sector bargaining in the states and territories is already centralised.

“The current system is operationally decentralised but controlled from the centre,” Dr O’Brien says. “Wage disparities reflect the capacity of each agency to pay.”

Research and reports

Pay inequalities within the APS and their impacts have long been the subject of fierce debate.

A 2010 report Ahead of the Game: Blueprint for the Reform of Australian Government Administration, said wage disparities had “increased significantly both within and between departments and agencies” since APS wages and conditions were devolved in 1997.

“Anecdotal evidence suggests that growing disparity in wages and conditions across agencies has discouraged mobility and reduced the sense of a unified APS with a strong career structure,” said the report.

It said that the APS classification profile had changed dramatically, reflecting the changing nature of work and the changing labour market.

One of its key recommendations was that the Australian Public Service Commission (APSC) should take over Australian government policies for agreement-making, classification structures, APS remuneration and workplace relations advice.

The APSC’s 2016 Remuneration Survey revealed a 10 per cent disparity for similar work at every level in the APS in the salary range between the 5th and 95th percentiles.

The gap reached 30 per cent or more for the Senior Executive Service; 26 per cent for graduates and 22 per cent for the lowest classification (APS 1).

Machinery of government complications

Machinery of Government changes when whole departments or parts of them have merged have thrown differences in pay and conditions in the APS into stark relief. For example, when Indigenous Affairs moved into the Department of Prime Minister and Cabinet and Border Force joining Immigration.

Could these complications be an argument to retain single agency bargaining? Prof Podger says not, though he admits it takes ‘a couple of years’ to disentangle.

“It would be a tricky process of transition to narrow these differences over time,” he says. “No cuts [to pay and conditions] but maybe a freeze or slow increases until these things are a little bit more aligned.”

Dr O’Brien says centralised bargaining would probably need to be preceded by a round that attempted to reduce wage disparities before it was introduced.  

Public V private

A gap has also opened up regarding pay for similar skills and experience between the APS and the private sector, making it harder to attract outside talent.

Prof Podger says the private/public sector gap may be felt differently depending on pay grades. He says public servants’ pay is probably above the market at the lower end of the pay scale, around APS1-4, and below the market at the higher end, above EL1.

But he adds that most people are rising up through the public service to reach senior levels so it is internal fairness that matters most. As well, it may be necessary to be in line with the market to attract bright graduates in the first place.

Pay is not the only issue, of course, when considering public service recruitment.

“I think we forget often that people really are motivated to serve the public,” Prof Podger says. “It’s exciting and interesting work. People feel as if they’re having an influence and doing things that are good for the public. Pride in work is important for retaining staff.

“Sadly there is still too much denigration and lack of respect for the public service from the likes of IPA [Institute for Public Affairs Australia].”

Market forces and flexibility

Prof Podger believes that the federal government needs to pay much more attention to market labour forces, linking this to departments which are having retention and recruitment problems, possibly involving extra strategies.

He believes that it is more important for agencies to study the labour market than having strict rules on single agency bargaining, which he says were supposed to increase flexibility but had instead delivered differentiation in pay and conditions and made the government less flexible.

But he says a whole of APS bargaining system would still need extra flexibility in order to attract good candidates to specialised roles or into areas of skill shortages, such as ICT, project management, policy and research or finance.

Individual contracts could be offered in a limited number of cases, with clear agency policies and APSC checks on pay rates and merit-based recruitment to prevent abuse. “Agencies need some discretion or there’s a problem,” he says.

But Prof Podger qualifies that reflecting market forces more closely in the APS may not translate into higher pay or better conditions for public servants.

“It won’t be easy. It might not be more generous. Its disciplines would be a different set of disciplines. You would be talking seriously about the attraction and retention of the skills you need, [though] productivity would still be there.”

Productivity

Pay rises in the APS have been tied to productivity offsets for many years, but Prof Podger believes this has blinded successive federal governments on both sides to what is most important: having the workforce needed to do the job.

He says efficiencies and productivity can be pursued via workplaces changes, mostly technological, without totally wedding them to pay rates.

“Certainly, you want the unions to agree to the new technology and change work arrangements required by the new technology but you still want to go back and see that the pay rates ought to reflect what the market requires. There could be a reduction in staff.”

Dr O’Brien calls the emphasis on productivity trade-offs in the public sector “a zero sum game” but says that bargaining cannot be separated from the efficiency dividend, which makes bargaining even more difficult.

He says that even past public service commissioners – with the exception of the current ‘hardliner’ incumbent John Lloyd – have pointed this out.

“Wage increases equals staff losses or a freeze on appointments or decline of services,” Dr O’Brien says.

Breaking the APS industrial relations deadlock

Asked who or what could break the current APS bargaining deadlock, Prof Podger says it will not be easy, given the government’s intransigence.

The Union may also need to shift a little, he says suggesting the CPSU takes a “more careful look at market conditions and total remuneration” and shelves calls for domestic violence leave, relying on the discretion of individual managers instead.

But he did not blame the union for being jumpy about the government trying to remove some points out of EBAs and into policy, where they could ultimately be changed.

“Given the rhetoric coming from the likes of the IPA, taking super outside [EBAs] would understandably be seen as a threat,” Prof Podger says.

“The government needs to loosen its wage outcome policy. This is unlikely that a below inflation wage adjustment is sustainable. Direct negotiations between the unions (coordinated by the ACTU) and government could lead to negotiated parameters for bargaining. Again unlikely!”

Dumping single agency bargaining would also free up agency heads to do other work.

Prof Podger says: “The system has required a very high transaction cost across the APS, requiring enormous effort by management in every agency, most of whom lack the specialist knowledge needed to get the best remuneration outcomes.”

Timeline

1. The Keating government introduced decentralised agency-based enterprise bargaining into the APS in the early 1990s, ostensibly to allow agencies to improve productivity in ways that were difficult under centralised bargaining agreements.
2. There is disagreement over whether or not this was intended to be a temporary arrangement
3. John Howard reverted to agency-based bargaining after the 1996 election. Employment conditions were included within the bargaining framework along with an attempt to link any increase in remuneration to productivity gains.