industrial relations advice for small to mid-sized businesses

Industrial Relations Advice for Small to

Mid-Sized Businesses

Contributors: James Price, JPAbusiness Pty Ltd Dan Houlihan, First IR Consultancy Pty Ltd

http://www.jpabusiness.com.au

2 jpabusiness.com.au +61 2 6360 0360

Table of Contents

Introduction ........................................................................................................... 3

Chapter 1: How industrial relations impacts business success and business value .. 4 What does it mean for me as an employer? ............................................................................................. 5

Chapter 2: Meeting your critical IR obligations ....................................................... 8 1. As an employer, what are your critical obligations to your employees, both under employment law and also to build a professional and harmonious workplace? .................... 8 2. What’s your top tip for covering the IR basics? ................................................................................. 9 3. What do I need to consider in terms of staff entitlements when a long-‐term staff member moves on? .......................................................................................................................................... 10 4. What do I need to consider in terms of staff entitlements when selling my business? .. 11

Chapter 3: Employment contracts and employment ‘flexibility’ ........................... 13 1. Do I need an employment contract when I employ staff and if so when, why and in what form? .......................................................................................................................................................... 13 2. How do I introduce employment flexibility in my business? ..................................................... 16 3. When should I seek external advice? ................................................................................................... 17 4. Can you suggest some helpful tools or websites? ........................................................................... 18

Chapter 4: How to deal with employment and staff disputes ............................... 19 1. How can I avoid employment and staff disputes? ......................................................................... 19 2. If there is a dispute, how do I best deal with it? ............................................................................. 21 3. How can I protect my business during such events? .................................................................... 24

Disclaimer: The information contained in this eBook is general in nature

and should not be taken as personal, professional advice.


jpabusiness.com.au +61 2 6360 0360 3

Introduction In this month’s eBook we’re focusing on industrial relations (IR) issues.

This is a huge topic and it’s not easy in an eBook to give specific practical advice on individual situations, but a number of our clients and readers have asked us to cover it.

To help meet this challenging brief we’ve called on Sydney-based industrial relations consultant Dan Houlihan from First IR Consultancy Pty Ltd.

As one of the principals of First IR Consultancy, Dan is involved in all facets of industrial relations, including design and negotiation of enterprise agreements, providing written employment advice, industrial dispute resolution, union negotiations, and providing advocacy before the tribunals and courts.

Dan has kindly agreed to share some of his extensive expertise with us and has answered a range of IR-related questions in Chapters 2 to 4.

First up, though, JPAbusiness managing director James Price discusses why it’s important for employers to meet their industrial relations obligations, and not just because it will keep you out of court.

http://www.firstir.com.au

http://www.firstir.com.au/index.php/about-us/our-people/


http://www.jpabusiness.com.au/about-jpabusiness/our-team



Chapter 1: How industrial relations impacts business success and business value Comments by James Price JPAbusiness Pty Ltd

When providing business performance advice and assistance to our clients, we’re often asked for advice regarding the roles, conditions and activities of employees in the workplace and how they relate to business performance.

One of the core components of a successful workplace is to ensure the people resource operates in a very positive culture.

This culture needs to be aligned to the objectives of the business and respectful of the individuals contributing to those objectives.

That internal environment is largely influenced by the business owner and their senior team and how they nurture and develop the business’s culture.

But, of course, external factors also have a big influence on employee activities and expectations.

http://www.jpabusiness.com.au/advisors-to-business/business-performance



The people talent market is competitive and dynamic and, in Australian business, it’s very much a global market.

Further to that, the Australian employment market has some long-established and regularly refined employment protection instruments such as the Fair Work Act, the National Employment Standards and Work Health and Safety (WHS) laws that underpin the way businesses employ people across a vast array of industries.

What does it mean for me as an employer?

It means, potentially, that keeping up with what industry, government and the community expects from business owners in employing staff can be a minefield.

But it also means doing the right thing with regards to your IR obligations is a cornerstone for ensuring a solid culture within your team.

Don’t pay the price of poor IR compliance

As a business owner, if you choose to underpay your employees, not properly record and account for their entitlements, not respect and fulfil your obligations to them under the National Employment Standards, or tolerate an environment that is either unsafe or disrespectful of community standards with regards to issues like bullying, harassment and equal opportunity, you will be penalised.

This punishment is not necessarily about getting ‘found out’ by a union or an association representing employees, or about the government regulator chasing you for something you’ve failed to do.

You will be penalised because your business will suffer.



It can suffer in a number of ways:

• Poor staff retention rates;

• High absenteeism rates;

• Lower than expected performance against job descriptions;

• Poor culture and poor morale within the business impacting the productivity of your people;

• Poor productivity impacting the business’s ability to deliver on promises to customers in a productive and efficient way;

• Inordinate time and money taken up with employment disputes also contributing to lack of productivity;

• Reduced business value when it comes time to sell. An astute purchaser doing due diligence will use non-compliance in these areas as a means of beating down the price or requiring indemnities to cover your failings and claims that may result.

The implications of not respecting and complying with employment and IR obligations can be much further reaching and debilitating for a business than simply paying for a lawyer to clean up the mess.

Meeting obligations has multiple benefits

In our experience, if you as a manager or owner are at the stage of getting a lawyer involved in an IR-related dispute or incident, you’ve missed the opportunity to avert that risk through good people management practices.

Get it right, comply, focus on your commitments and obligations, and the benefits will flow: your legal bills will be well reduced and your productivity heightened.

http://www.jpabusiness.com.au/buying-a-business/due-diligence



What if I can’t resolve a dispute in-house?

Sometimes, despite your best efforts, seeking industrial relations and legal advice is a must because it’s the best way to address a difficult situation.

Our approach, for clients in that situation, is to introduce them to the team at First IR Consultancy Pty Ltd.

First IR Consultancy has a wealth of practical expertise on industrial relations issues and a solution-orientated approach that ensures a solid outcome.

Dan Houlihan is one of the principals at First IR Consultancy Pty Ltd and he’s kindly agreed to answer some of our questions in the following chapters.




http://www.firstir.com.au/index.php/about-us/our-people/



Chapter 2: Meeting your critical IR obligations Comments by Dan Houlihan First IR Consultancy Pty Ltd

1. As an employer, what are your critical obligations to your employees, both under employment law and also to build a professional and harmonious workplace?

From a legal point of view you have a couple of basic obligations:

1. Ensure you’re paying your employees in accordance with the law. For most employers that will be based on an award or an enterprise agreement.

2. Ensure you keep time and wage records in accordance with the regulations under the Fair Work Act. That involves disclosing who the actual employer is and the accruing of paid leave entitlements.

To build a professional and harmonious workplace, you need good communication and structure.

These two elements are key to a professional and harmonious workplace, no matter the size of the business.

Good communication means ensuring there is clear understanding of your expectations and the employee’s obligations. You must also understand that, when you’re running a business, you and your employees may have different interests and motivations for working.



Structure refers to ‘employment structures’ – such as understanding your legal obligations, knowing what award your staff work under, whether your staff member is an employee or contractor – but it also refers to structure in terms of how you communicate with staff.

Whenever you have a conversation with someone, write a note detailing what you said, when you said it and how you said it.

This means when you’re preparing to go into what could be a confrontational meeting with an employee, you’ve done some work beforehand so you can achieve an appropriate outcome for both the business and the individual, rather than just reacting in the meeting.

2. What’s your top tip for covering the IR basics?

On July 1 every year there is usually an increase in rates of superannuation, minimum wages and many allowances. For example, this year there is an increase in superannuation from 9.25% to 9.5%.

Superannuation is looked after by the tax office, so if you get behind on one part of your business with the tax office, you can have all sorts of problems further down the track.

So, my top tip is: make a note in your diary for the middle of June each year, to find out what is going to happen to wages, superannuation and allowances on July 1.



3. What do I need to consider in terms of staff entitlements when a long-term staff member moves on?

Check with your industry or trade association, your business advisor or a lawyer about your legal obligations with respect to accrued leave and superannuation and your employee’s obligations with respect to notice to you.

You also need to have clear and structured conversations about what property is yours and what is the employee’s. For example, you may have provided a laptop and a dongle that has sat in the employee’s home office for the past three years, but that is still your property.

If you provided a mobile phone that is now two years old and you don’t really care about it, then be deliberate in making it clear to the employee that they can keep it.

These days most employees bring their own devices and their own phone numbers, but if you provided the phone number you need to think about whether you want to keep that number.

You need to speak to your IT people to ensure when the employee leaves they no longer have their email address or access to your email server or business information.



4. What do I need to consider in terms of staff entitlements when selling my business?

Selling your business can be a little complicated when it comes to employment.

When you sell your business it depends whether the buyer is purchasing:

• The company’s Pty Ltd shares, or • The company’s assets.

Scenario 1 – Buying or selling a Pty Ltd company

If you’re selling the company – for e.g. Dan Houlihan Enterprises Pty Ltd – then the employment and all your obligations to your employees simply transfer to the new owner of the entity. The name of the employer may change, but the actual employer remains the same.

If you’re buying the company and you discover the old owner didn’t pay in accordance with the award or enterprise agreement, or didn’t give people annual leave, then you, as the new owner, are fully liable for up to six years of whatever the former owner has done – or not done!

As James mentioned in Chapter 1, an astute purchaser doing due diligence will use non-compliance in these areas as a means of beating down the price, or they could require an indemnity clause in the Purchase of Business Agreement or a particular transfer payment to cover the vendor’s failings and any claims that may result.

So whether you’re buying or selling a Pty Ltd company, it is important to ensure employment information and obligations are up to date and properly disclosed.



Scenario 2 – Buying or selling a business’s assets

In terms of the second scenario, where you’re winding up the old business and someone is coming in and buying your assets, then the employment is probably coming to an end.

In this case all the ‘termination of employment’ issues come into play, including redundancy and long-service leave for employees with more than five years service, so it would be a good idea to get some advice.

You can reduce those costs by having the new employer pick up the employment of the old employee – this can lower your redundancy obligations.

There are particular steps you have to take – including going to the Fair Work Commission to get an order recognising the employee’s prior service as service of the new employer – but it’s certainly an option.

In fact, the ‘transfer of employment’ test is now much simpler than it used to be. It’s basically a ‘Beneficial Use of Assets’ test.

So if you’ve just sold the assets of the business and you have a former employee doing the same work on the same assets, then under employment law there will be considered to have been a transfer of employment.



Chapter 3: Employment contracts and employment ‘flexibility’ Comments by Dan Houlihan First IR Consultancy Pty Ltd

1. Do I need an employment contract when I employ staff and if so when, why and in what form?

All employment is contractual in nature. Whether you have a written contract or a verbal contract, you are bound by a contract.

There are four basic elements to a contract:

• An offer; • An acceptance; • An intention to enter into a legal relationship, and • Offer and acceptance underpinned by valuable consideration.

If you ask someone to come and work in your business and say ‘I’ll pay you $50,000 per annum’ and they accept, then you have all four elements of a contract: you have an offer, an acceptance, the valuable consideration is the salary, and you have an intention to enter into that legal arrangement of employment.

So the minute they verbally accept your employment offer, there is a contract.



Why you should write it down

If you put your offer in a written form and include all those elements, but also include “the employment will start on a further date XYZ” then that explicit term in the contract will prevail. That’s one good reason to have a written contract.

Another good reason is that it clarifies what the parties have actually agreed and forces a bit of housekeeping on you as the business owner, encouraging you to think about exactly what you require of the employee and to consider your legal obligations.

It makes you think:

• What sort of work will this employee be doing? I’d better put that in the contract.

• Are they covered by an award or an enterprise agreement? I’ll put that in.

• Do I have to pay them annual leave and sick leave? Better put that in. • What about their superannuation entitlements? And so on…

It also means that once a year, when you’re doing your mid-June check to see what the wages are going to do next year, you get a chance to review the contract and see if there’s something that’s not working or needs updating.



What to include in a contract

A contract must ‘describe the relationship’ so it should include the wage to be paid and a description of the work to be performed i.e. you’re coming to work for me as a clerk, a CEO, or whatever, and I will pay you XYZ.

It’s a good idea to include a formal job description with the contract, which both parties must sign. This provides the basis for managing and reviewing performance against expectations.

Contracts should state your expectations regarding things like appropriate dress, hair styles, daily start and finish times. This eliminates confusion later on and reduces the chance of disputes.

Brief is best

Contracts of employment don’t have to be 80-page documents – they should be relatively brief and straight forward. Standard form documents are largely fine.

The only people you should generally avoid having a written contract for are genuine casual employees. That means ad hoc employees, the casual you use once or twice a month when someone is sick, not the casual that comes in every Thursday, Friday and Saturday.



2. How do I introduce employment flexibility in my business?

Employers are always saying “I want my employees to be more flexible”, but what does that mean?

If they’re acrobats that’s fine, but to me ‘employment flexibility’ is one of those phrases that has been almost denuded of meaning.

The only way you can introduce employment flexibility in the business is if you’re very clear about what it is you want to do.

Do you want your employees to be able to come to work earlier and finish later? That’s fine, but have that conversation with them and make part of the conversation about money. Do you want your employees to work four days a week instead of five? Again, have a chat to them about it.

But first you need to be clear in your own mind about exactly what it is you want.



Flexibility works both ways

Flexibility is a two-way street; it’s not just about an employer being able to make more and excessive demands on an employee.

A small business owner is usually pretty good at walking both sides of the street because they recognise they have a personal relationship with their employees, as well as a professional relationship.

Write it down

It helps to have your ‘flexibility requirements’ written down.

It might not be an offer, but if you’re going to engage in a discussion with employees then you should be taking notes about what is said, anyway.

If you can’t write down the flexibility you want, because you’re not really sure what you want, you have a problem.

3. When should I seek external advice?

The simple answer is: if you’re unsure, get advice.

If you don’t know the answer, then that’s a really good time to seek external advice from people like me or your business advisor.

The clients that make the best use of us call once or twice a month and spend 15 minutes on the phone discussing particular issues. They get a little bill every month for a couple of hundred dollars.

The clients who ring us once every six months, because they’ve taken a stab in the dark and done something without any advice, can end up facing substantial costs. They may have gotten themselves into a situation that will cost anywhere from $25,000 to $30,000 to get out of and back to normal.

Make sure you ask for the advice to be written down, even if it’s just an email, so you build up a little reservoir of knowledge and don’t have to rely on your own memory if the situation ever arises again.



4. Can you suggest some helpful tools or websites?

Three good websites, particularly when you’re starting a business, are:

• Fair Work Ombudsman – Whether an employee or employer, this is a good place to start. They give general advice about employment issues – rates of pay, award coverage and adverse action.

• Australian Taxation Office – For tax and superannuation issues, this site is always worth having a look at.

• Fair Work Commission – This site has a list of all the awards and often has template documents you can use, such as template employment contracts, and has information about basic employment entitlements and payslip requirements. It also gives you an idea of the information you have to record, information you have to keep and information you have to give to employees every time you pay them.

In terms of generalist IR advice, look at some of the larger law firm websites and subscribe to their newsletters.

If you’re doing a little more of this sort of work, there are dedicated websites for most industries.

Joining an employer association might also be worthwhile – they can provide more tailored advice at low cost.

For a more detailed legal perspective, you can use:

• Australasian Legal Information Institute • Australian Government ComLaw website

http://www.fairwork.gov.au

https://www.ato.gov.au

https://www.fwc.gov.au

http://www.austlii.edu.au

http://www.comlaw.gov.au



Chapter 4: How to deal with employment and staff disputes Comments by Dan Houlihan First IR Consultancy Pty Ltd

1. How can I avoid employment and staff disputes?

You can’t – all you can do is be prepared.

Proper preparation means having structures in place:

• Be clear in all your dealings with employees; • Be clear in terms of your expectations and the rewards on offer; • Impose standards and communicate them to employees; • Provide regular feedback and review of performance and expectations.

The courts will back you 100% in terms of an employer ‘giving reasonable instruction’ and requiring compliance to ‘reasonable and lawful directions’.

Those are your rights as an employer.

What is considered a ‘reasonable’ instruction?

In order for your instructions to be reasonable, they’ve got to be comprehensible.

Reasonable means cogent, i.e. clear and logical – I want you to do ‘X’.

Your instructions don’t have to be ‘right’. They can be 100% wrong from a business advisor’s point of view, but it’s your business and you’re entitled to run it as you see fit, so long as you’re ‘reasonable’ in terms of your requests to employees.



Be clear on your expectations

Telling staff “I want you to be more responsive to my clients’ needs” is not an example of a clear instruction, but I hear it from clients all the time.

What does that mean?

• Should the employee sit by the phone and wait for the clients to ring? • When the client asks for a steep discounts on bills, should the

employee say ‘yes’?

Having clear expectations means you can actually measure them and it means you can require your employees to meet your standards, maintain them and enforce them.

Providing clarity is a key way to avoid disputes.

Deal with potential issues early

Lots of disputes between employers and employees occur where there has been aggravating behaviour over a period of time.

The classic for me is employees rocking in at 8.35 or 8.40am, when they’re supposed to start work at 8.30am.

Punctuality is a big thing for me and it annoys me when employees waltz in late.

If they want to come and speak to me about changing their start time to 9am because that suits their lifestyle, that’s fine, I’m happy to have that conversation.



What I don’t want to do is sit there for weeks, taking notes about their late arrival times, have a meeting about it, blow up and pull the trigger, when the employee had no idea I was even upset.

If there’s something ticking you off, either performance or conduct related, deal with it early.

If it can be dealt with, it can be fixed.

2. If there is a dispute, how do I best deal with it?

This will depend on the nature of the dispute and who is involved.

If you’re an employer with a number of employees, it can be almost anything, and might not even involve you.

But if at least one of the parties is in your employment, it’s your problem.

Inter-employee disputes

The most common disputes arise between employees and often include allegations of bullying, harassment or discrimination.

An employer has a vicarious liability for the actions of their employees, so their problem is also your problem

In the case of inter-employee disputes you need to make a decision about which version of events you believe and what action you should take on the basis of your belief.

While doing that you’re subject to a court or tribunal peering over your shoulder and telling you you’ve got it wrong or right.

So how do you get it right?

The answer is: through proper process.



What does ‘proper process’ entail?

For an inter-employee dispute, following the proper process means getting the facts.

You need to have a conversation with the alleged perpetrator and alleged victim. This gives the employees an opportunity to give their viewpoints about what happened, how and why it happened.

Your job as an employer is to work out whether or not it occurred and, if it did, what sort of sanction, if any, you are going to impose.

Bring a third-party to the meeting

Because it could end up in court, it’s a good idea to have someone else in the room during this conversation, whether as a note taker or support person for you.

Also give any employee you’re interviewing the right to have a support person.

Can an employee bring a ‘representative’?

No, a support person is just that – a person there to support the employee, not represent them.

To get to the bottom of the matter you need to speak to the people involved.

If someone wants to bring their lawyer or barrister, that’s fine, but they are there in the capacity of a support person.

Your conversation is with your employee – that’s your right.



What if the employee refuses to discuss the issue?

If an employee doesn’t want to come to the meeting and talk about these allegations you have the right to direct them to come along.

If they refuse, that is a failure to follow a ‘reasonable and lawful direction’ and jeopardises their employment.

What if I can’t reach a resolution?

If you’re unsure how to proceed, then go back to Chapter 3, Question 3: When should I seek external advice? Whenever you’re unsure.

Employer-employee disputes

As an employer, you can find yourself involved in disputes related to issues such as:

• Safety • Performance • Wrongful termination • Pay and conditions

If you have a dispute with an employee you need to take as much of the emotion out of it as you can.

Have a third person in the meetings – it will assist you in maintaining a proper decorum and running the meeting properly.

Most disputes should be able to be worked out. Do it over a cup of tea or coffee, don’t do it over a beer.

Try to deal with the issues, rather than the emotions. And, as always, if you’re unsure, seek external advice.



3. How can I protect my business during such events?

The best way to protect your business is to follow proper process, because all of these decisions are reviewable in the courts and tribunals.

If you have a fight with your employee and decide that’s it, they’re fired, the courts can order you to take that employee back on and give them compensation of up to six months’ pay.

Don’t allow yourself to build up a head of steam, because your rational mind will take the back seat and you’ll do something you might really enjoy at the time, but repent at your leisure, possibly in court.

You don’t want to see people like me in those circumstances – all you do is give us money.

So, again, my best advice is: follow proper process.
