The return of the ‘go away’ money
One of the worst features of the old industrial relations system was the so-called “go away money”.
This was the practice of employers paying amounts, usually in the order of $5,000 - $10,000, but sometimes much higher, to employees making an unfair dismissal claim.
It was a particular burden for small businesses who could not afford expensive HR managers, or the legal and time costs of defending a claim, no matter the merits.
It has now become clear that the old practices have returned.
Three quarters of the unfair dismissal claims Fair Work Australia has conciliated recently involved the employer paying the employee money, with the most common payment in the $2,000-to-$4,000 range but 1 per cent involving sums of between $30,000 and $40,000, according to Fair Work Australia.
Ten per cent involved payments of between $6,000 and $8,000; 5 per cent had payments of $8,000 to $10,000; 7 per cent payments of $10,000 to $15,000; 2 per cent of $15,000 to $20,000; another 2 per cent of $20,000 to $30,000; and the final 1 per cent, $30,000-$40,000.
Although the tribunal did not collect reliable statistics on the reasons for the payments, employer bodies report that “go away” payments are back in force.
Faced with a minimum cost in the order of $ 5 - 7,000 to defend a claim, many employers simply pay up, rather than expend more time and money.
This anecdotal evidence is supported by a recent Fair Work Australia survey which reported that 76 per cent of respondents settled to avoid the cost of going further, yet only 14 per cent thought their case would not have stood up to further scrutiny after a conciliation hearing.
The payments are just one of the new pressures on businesses. Faced with a tightening labour market, employers have to deal with increased wage claims.
This year Fair Work Australia – Labor’s replacement for the Fair Pay Commission – awarded a $26 per week increase in the minimum wage. Many observers believe that this will flow through to other workers.
Fair Work Australia is also considering an equal pay test case, the case reflects a change in the concept of equal pay under Labor’s new legislation, which allows the tribunal to decide that a wage is unfair even where there is no discrimination.
There is potential for Fair Work Australia effectively to mandate a new form a pattern bargaining on the economy.
In the past, pattern bargaining involved wage increases in sectors of the economy that were highly productive or skilled, or where there were labor shortages, flowing through to less productive and less profitable sectors.
With many of the Howard-era individual contracts coming to an end soon, there will be a renewed push for wage increases. Add skill shortages and the union turf wars for coverage of new projects, and the scene is set for wage increases.
While this is likely to occur first in prosperous sectors of the economy like mining and resources, the reality is that Australia now has a three-speed economy comprising the fast-growing mining sector, the slow growing non-mining trade sector, with the domestic economy caught in the middle.
Any spread of above-inflation wage increases more generally will add pressure to many struggling businesses. More significantly, wage inflation historically has been a precursor to general inflation in Australia.
Any repeat of this pattern would cause considerable damage to the economy.
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