THE EQUAL PAY DECISION & HOW THE ERO WORKS Keith GODFREY Jobs Australia Community Legal Centres 2012 November 2012

 National Equal Pay Case  The Equal Pay Decision February 2012  The Equal Remuneration Order June 2012  Classification Issues  How it works  Arithmetic  EBA issues OUTLINE

 Federal Case would take place in an uncertain environment  Equal remuneration orders (Part 2-7)  No requirement to establish discrimination and the concept of equal remuneration was broadened to equal remuneration for work of equal or comparable value  The power to make equal remuneration orders is a discretionary one  Provisions do not preclude the regulation of over award payments. FWA EQUAL REMUNERATION

 Entitlement to equal remuneration given a legislative foundation in  Discourse framed around discrimination equal remuneration defined to mean rates of remuneration established without discrimination based on sex.  WRA retained the 1993 provisions  Work Choices reforms altered the provisions in two ways Applicants to include explicit reference to a comparator group of employees. Excluded if effect of any order sought to vary the minimum rate of pay. EQUAL REMUNERATION

 Union claim that work in the SACS sector  Is undervalued,  For reasons related to gendered cultural assumptions about caring work as “women’s work”  Fair Work Australia found undervaluation largely due to gender NATIONAL EQUAL PAY CASE

 Does the addition of comparable value involve a broader conception of equal remuneration?  Test to be applied to equal remuneration for work of equal or comparable value  Influence of state tribunals: undervaluation, the influence of past work value assessments, the requirement for comparative assessments  Relationship to claims for work value  The utility of an equal remuneration principle. ASU CASE

 Initially rejected an approach that the application be dealt with in two streams: operation of the relevant FW Act provisions; the substantive application.  A decision that for employees in the SACS industry there is not equal remuneration for work of equal value (May 2011)  A decision concerning the extent to which gender inhibited wages growth in the SACS industry (majority decision) February  ERO order issued June FWA APPROACH

Two components 1)Changes to the transition process for award rates, and the application of national wage increases 2)Equal Remuneration Order (ERO) which is separate to the award and overrides the award EQUAL PAY DECISION

Refrained from establishing fixed nexus between the rates in the SACS industry and those in local and state government agreements Gender an influence but the entire gap is not entirely attributable to gender Wage increases proposed by joint submission too close to public sector rates and some reservation about the inclusion of indirect care work in the definition of care work Majority decision noted that the proposed percentage increases, in general terms, were appropriate Phased over eight years with a further 4% loading phased DECISION FEBRUARY 2012

Equal Remuneration Order  Old SCHCADS transitional provisions to 2014 deleted.  Higher rate of either transitional SACS or modern SCHCADS rates apply.  National Wage increases apply to both rates.  Difference in rates continues until  Over award rates can be absorbed. DECISION JUNE 2012

 A complicated and difficult to implement decision.  Percentage rates from 23% to 45% depending on classification for SCHCADS.  Percentage rates less than SCHCADS percentages for transitional SACS rates.  Two pay increases in July and December each year.  Problems in calculation of rates. IMPLEMENTATION

 Calculations & Pay Tables.  The importance of accurate SCHCADS classifications.  Further details in workshop later in the conference.  Where to get further assistance OUTCOMES

 Correct classifications essential to implementing the ERO.  All ERO calculations have as a starting point the SCHCADS classification level.  Incorrect classifications either an over- classification or an under-classification will skew the ERO result. CLASSIFICATIONS

 Generic skills and responsibilities  4 Classification Schedules:  SACS – 8 levels compared to SACS (NSW) 6 Grades  Includes clerical & admin  Crisis Accommodation – 4 levels (aligned with SACS 3 – 6) based on CASH Q  Home Care – 5 levels  Family Day Care – 5 levels CLASSIFICATIONS

Classifications take effect 1 July 2012 Evaluate core skill & responsibility requirements of the position (not the person), against the classification definitions TRANSLATION TO NEW SCHCADS/SACS CLASSIFICATIONS

 Only a starting point  not a substitute for assessing skills and responsibilities using the classification definitions of the award  Indicative roles based on  Evidence in equal pay cases  Skill levels  Translation guides assume positions already correctly classified TRANSLATION GUIDES

 Ensure accurate PD  Use Guide as a starting point to identify potential classification levels  Check the PD against the starting point definition, and also one level above and below  Holistic approach, subject to some mandatory requirements (eg entry levels for certain qualifications) PROCESS

 No phasing in of wages for SCHCADS/SACS classifications  If current wage rates are above the modern award they are maintained  If current wage rates are below the modern award, they increase fully to the modern award from July 2012  Annual wage increases apply for SCHCADS/SACS if current rate is higher than the modern award  For other modern awards, national wage increases are absorbed in this situation. ERO PAY RATES

 Modern award (MA) rates to be increased by a percentage equal remuneration (ER) amount  The full ER amount to be payable from Dec 2020  Phased in via 9 equal instalments each December ERO BASICS

SACS LevelER%Total: ER + 4% loading 1/9 per annum (for MA rates)* % % % % % % % * This figure is the starting point, but the exact annual % increase may vary slightly in subsequent years as a consequence of compounding and the effect of different national wage increases ERO INCREASES

 ERO clause 5.3  “The employer must pay an employee no less than either.  (a) the minimum wage for the relevant classification in the award or.  (b) the minimum wage in the relevant transitional minimum wage instrument and/or award based transitional instrument for the classification concerned.  Whichever is higher.” ERO TRANSITIONAL ISSUES

 Currently, where old award rates are higher than the MA rate, old rate is maintained  Those “transitional” higher rates also reach the same ER payment by Dec 2020  But the “transitional” rates increase at a slower rate than MA rates to get to the same ER payment in 2020, because the gap is smaller ERO TRANSITIONAL ISSUES

1.A = ER Payment calculated as percentage of MA rate (including national wage increases) 2.B = Award rate = MA rate or preserved transitional rate (old SACS NSW),  whichever is higher (including national wage increases) 3.Each December, add another 1/9 of (A-B) to award rate  2012: B + (A-B)/9  2013: B + 2x(A-B)/9  2014: B + 3x(A-B)/9……etc ERO ARITHMETIC

ERO Increases (A-B) B Current MA Rate B Current Preserved above MA Rate A ERO (2020) (A-B) 24

ERO ARITHMETIC ERO 1/9 ERO 2/9 ERO 3/9 ERO 4/9 ERO 5/9 ERO 6/9 ERO 7/9 ERO 8/9 ERO 9/9 12/20 12/19 12/18 12/17 12/16 12/15 12/14 12/13 12/12

ERO ARITHMETIC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO NWCNWC EROERO 7/ 20 12/ 20 7/ 19 12/ 19 7/ 18 12/ 18 7/ 17 12/ 17 7/ 16 12/ 16 7/ 15 12/ 15 7/ 14 12/ 14 7/ 13 12/ 13 12/ 12

 Classified from previous SACS (NSW) Grade 6 to SCHCADS/SACS Level 8  July 2012 SCHCADS level 8 p.p.1 rates  Plus full ERO increase 45%, = final rate  July 2012 SACS Grade 6 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Specific Examples

 Classified from previous SACS (NSW) Grade 6 to SCHCADS/SACS Level 7  July 2012 SCHCADS level 7 p.p.1 rates  Plus full ERO increase 42%, = final rate  July 2012 SACS Grade 6 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Specific Examples

 Classified from previous SACS (NSW) Grade 5 to SCHCADS/SACS Level 5  July 2012 SCHCADS level 5 p.p.1 rates  Plus full ERO increase 37%, = final rate  July 2012 SACS Grade 5 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Specific Examples

 Classified from previous SACS (NSW) Grade 4 to SCHCADS/SACS Level 5  July 2012 SCHCADS level 5 p.p.1 rates  Plus full ERO increase 37%, = final rate  July 2012 SACS Grade 4 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Specific Examples

 Classified from previous SACS (NSW) Grade 3 to SCHCADS/SACS Level 3  July 2012 SCHCADS level 3 p.p.1 rates  Plus full ERO increase 26%, = final rate  July 2012 SACS Grade 3 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Specific Examples

 Classified from previous SACS (NSW) Grade 2 to SCHCADS/SACS Level 3  July 2012 SCHCADS level 3 p.p.1 rates  Plus full ERO increase 26%, = final rate  July 2012 SACS Grade 2 year1 rates  SCHCADS rate is higher than SACS grade so pay SCHCADS rate  26% divided by %  Rate from Dec add 2.888% to = $ ERO ARITHMETIC Specific Examples

 Anomalies occur when a classification or translation does not fit within the usual range set out in the JA or ASU translation guides.  Check the PD, classification and translation.  Over-classifications  Under-classifications  If not a classification problem then require a specific calculation to determine the correct pay rate. ERO ARITHMETIC Anomalies

 Classified from previous SACS (NSW) Grade 3 to SCHCADS/SACS Level 5  July 2012 SCHCADS level 5 p.p.1 rates  Plus full ERO increase 37%, = final rate  July 2012 SACS Grade 3 year1 rates  SCHCADS rate is higher than SACS grade so pay SCHCADS rate  37% divided by %  Rate from Dec add 4.11% to = $ ERO ARITHMETIC Anomaly Examples

 Classified from previous SACS (NSW) Grade 4 to SCHCADS/SACS Level 6  July 2012 SCHCADS level 7 p.p.1 rates  Plus full ERO increase 40%, = final rate  July 2012 SACS Grade 4 year1 rates  SCHCADS rate is higher than SACS grade so pay SCHCADS rate  40% divided by %  Rate from Dec add 4.44% to = $ ERO ARITHMETIC Anomaly Examples

 Classified from previous SACS (NSW) Grade 5 to SCHCADS/SACS Level 7  July 2012 SCHCADS level 7 p.p.1 rates  Plus full ERO increase 42%, = final rate  July 2012 SACS Grade 5 year1 rates  Diff. between ERO final rate and July  divided by  Rate from Dec add to = $ ERO ARITHMETIC Anomaly Examples

 Allowances can be inserted in the award as a fixed amount.  Travel allowance at $0.75 cents per kilometre  Meal allowance currently $11.37  Or calculated as a percentage of the standard rate in the modern SCHCADS award.  On call allowance 2.0% or 3.96%.  Sleepover allowance 4.9% NOTE: The standard rate remains set in the modern award and does not include any ERO increases only annual NWC increase so allowances do not increase when the ERO rate increases. ALLOWANCES

 Provisions of enterprise agreements continue until replaced  Next agreement will use modern award as basis for Better Off Overall Test  But if agreement has different classifications, need to nominally translate to modern award and monitor pay rates to ensure not less than award + ERO  Usually able to absorb award increases into over award pay and conditions – but not obliged to AGREEMENTS & OVER AWARD PAYMENTS

 ERO clause 2.2.  “The monetary obligations imposed on employers by this Order may be absorbed into over-award payments.  Nothing in this Order requires an employer to maintain or increase any over-award payment” AGREEMENTS & OVER AWARD PAYMENTS

 Back to the Future  Using old SACS (NSW) or SCHCADS classifications.  Must pay at least legal rates.  Over-award issues.  Using your own job classifications.  Must be able to ascertain former classification.  Relate legal rates to EBA rates. ENTERPRISE AGREEMENT ISSUES

 Existing EBA’s.  Check against legal obligations  Old State EBA, delete or replace with federal EBA.  Old Federal EBA, variation or replace with new EBA.  New EBA’s & MEA’s.  Consider using existing SCHCADS classifications  If using your own classifications make sure you keep records of previous classifications.  Boot test ENTERPRISE AGREEMENT ISSUES

MULTI-EMPLOYER AGREEMENTS  Each employer must formally decide whether to be bound and proceed to approval process  Follow same procedural rules as for single employer agreement  Each employer only bound if valid majority of their employees  Employer can replace multi-employer agreement with single employer agreement

 Commonwealth commitment to fully fund its share  Including funding provided to states  As well as direct funding of federal programs  8 year phase in to assist unfunded programs as well as government budgeting FUNDING

 Where to get further assistance  Fair Work Australia.  Jobs Australia  Employer Associations.  Australian Services Union CONTACTS

 Keith GODFREY  Jobs Australia  (03)  FURTHER INFORMATION