The Nature of Employment Relations in Modern Organizations

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Nature of employment relations

  • Stakeholders in the employment relations

        • – employers, employees, employer associations, unions, government organisations

Employees and employers

      • Employees are hired by employers to provide their physical and mental labour in return for wages and other financial rewards.

      • Employees, although the greatest asset of a business arrive at the workplace with only the potential to work.

      • It is the role of employers [or management]to maximize this potential through planning, organizing, controlling, directing and motivating employees. Employers can improve productivity by prescribing job tasks, undertaking direct supervision or relating pay to performance.

      • Some goals are shared by both employee and employer however there may be other area where the goals of employer and employee conflict. The employee may want more flexible working arrangements than the employer can provide

      • Conflicts over wages and conditions of employment have often been resolved through the interventions of organisations external to the workplace. E.g. unions and employer associations or in front of an independent umpire: an industrial tribunal.

      • One of the most important changes in employment relations in recent years has been the focus on resolving issues at the workplace without the intervention of “third parties”.

      • Better management of employees can help avoid disputes. By understanding the individual needs of employees e.g. job satisfaction-employers can better motivate staff and increase commitment to the business.

      • With more flexibility in wage arrangements employers have become more aware of the need to provide sufficient wage to attract and retain high quality staff

Unions

A union is an organization consisting predominantly of employees, the principle activities which include the negotiation of rates of pay and conditions of employment for its members.

  • Unions historically have played an important role in Australian industries and have won significant achievement for their members. These gains were possible because of high union membership.

  • Today their membership has fallen to just a quarter of the workforce. The reduction in union membership is one reason why their role in employment relations now is not as significant.

  • The peak union body in the country is the Australian council of trade unions [ACTU]

  • Recently unions have adopted new strategies to remain relevant to employment relations and encourage employees to join. The have offered services such as free financial advice, legal help, discounted computers, internet access and insurance discounts.

  • Recent research suggests that union membership does not contribute to higher rate. E.g. In 2001 the average annual wage increase for union members was (4.3%) higher than for non-union members (4.1%)

Employer associations

  • Much like unions employer associations aim to defend their members’ interests

  • In the past this has consisted of negotiating with unions, lobbying for government changes to legislation, informing members of developments in new employee relations and providing advice about how to deal with these changes

  • At a federal level, the peak employer association is the Australian chamber of commerce and industry [ACCI]. – Their resistance to wage increases during wage negotiations and in the debate over annual wage increase for workers who are under minimum award payments.

  • They have supported and actively campaigned for a greater emphasis on employee/ employer relations and cutting back the powers of outside parties such as unions and industrial tribunals

Government

The Government can influence employment relations in 3 primary ways:

  • It can affect general economic conditions, which will influence wage outcomes

  • It is a major employer itself

  • It can make laws to influence employment relations

  • The overall strength of the economy has a major effect on employment relations through wage levels, and whether businesses are increasing or reducing employment levels.

  • The Commonwealth Government’s ability to make laws about employment relations is constrained by the Australian constitution.

    • They can only make laws regarding employment relations for dispute resolution

    • They cannot pass paws that directly determine wage levels, however that can influence general wage levels, set minimum wages through Prices and Incomes Accord.

    • The Australian industrial relations commission [AIRC] resolve disputes.

  • In areas where the federal government does not have the constitutional power to pass laws the state government have “filled in the gaps”

  • State governments also have a large administrative role in terms of providing information to employees and employers; they have established an industrial tribunal NSW industrial relations commission.

Government organisations

    • Industrial tribunals

  • The most important government organization is the work place relations system has been the industrial tribunals.

  • They are like courts that resolve disputes regarding wage levels and conditions of employment; they hear cases from unions and employers regarding wages and conditions. The tribunal then hands down a decision that is binding.

  • There are state tribunals and federal tribunals

    Federal

    State

    Australian Industrial Relations Commission

    NSW Industrial Relations Commission.

  • A federal provision overrides a state provision if they are both concerned with the same issue.

    • Employment advocate

  • The office of employment advocate is an independent body established under the Workplace Relations Act, whose main role is to approve Australian workplace agreements [AWA].

  • It also handles breaches of the act, assists in prosecution and provides assistance to employers and employees about their rights and obligations

  • Managing the employment relations function- line management and specialist

  • Employment relations are now increasingly being seen as a key area of business strategy that can be used by businesses to improve productivity and competitiveness.

  • Human resource management strategies are an attempt to be more pro active in establishing harmonious employment relations and avoiding problems before they happen. This is based on achieving maximum commitment of employees by treating them as valuable assets in which to invest rather than a source of costs that need to be minimized.

  • Each business must decide on how the employment relations function is to be structured:

      • A centralised department that is a specialist in employment relations. The business can be divided into line managements (whose tasks is the production of goods or the provision of service) and support services such as marketing and finance departments

      • In a small business employment relations function can be outsourced.

Key influences on employment relations

  • Social influences-changing work patterns, population shifts

Changing work patterns

    • There has been a declining in the number of employees’ working standard hours per week. I.e. casual, temporary staff and part time.

    • Over the same period there has been an increase in percentage of full time employees working long hours.

    • The AIRC’s responsible hours test case ruled that Australian employees should have the right to refuse overtime, highlighting the need for a greater balance between work and family commitments

Population shifts

  • Another important feature of the last 30 years in the increased importance of female employment

  • The female participation rate is 54% of working age women and rising.

  • This has led to a greater focus on women’s issues

  • Sex discrimination act 1984 attempted to redress inequalities between male and female wages

  • Equal employment opportunities EEO has developed the inclusion of family-friendly provisions that have been included in agreements

  • Australia has also witnessed a change in ethnic composition since the 50s. Employees from different cultural backgrounds can bring different attitudes to employment to the workplace.

  • Businesses are recognising the benefits of a multicultural workplace-particularly in a global business environment where an understanding of other cultures help them gain greater access to overseas markets

      • Legal influences- overview of major employment legislation

The employment contract and types of employment contracts

        • The basic foundation of employee- employer relationship is the employment contact- it is legally binding and contains the rights and responsibilities of both parties, usually a written document, but even if not formal agreement is made, a legal relationship still exists

        • An employer has the responsibility to provide work, pay the relevant wage, and abide by employment relation legislation.

        • The employee has the responsibility to obey all reasonable instructions, perform work without negligence and act in good faith to the business.

        • Most employees are covered by a formal contract such as awards, a certified agreement of an Australian workplace agreement

  • Award– is a document which sets out the minimum pay and conditions for employment

  • Enterprise agreement– in which employees and employers collectively bargain over wage levels and working conditions

  • Australian workplace agreements– employers make contracts with individual employees [see further down]

Major employment legislation:

The federal government’s power to pass legislation set out in the constitution.

  • Australian constitution Act 1900[only allowed to make laws in respect to conciliation (third party resolve disputes) and arbitration

  • Conciliation and arbitration Act1904 [the industrial relations commission was formed to resolve or conciliate or settle or arbitrate industrial matters.]

    • Workplace relations act 1996– establishes a 3 tiered employment system where workers are covered by either a collective or an individual enterprise agreement, or an award

Anti discrimination laws

  • Racial discrimination act 1975

  • Affirmative actions act 1986

  • Disability discrimination act 1992

  • [state]NSW anti discrimination act 1977.

Occupational health and safety legislations

  • Occupational health and safety act 2000 [state]

  • Workers’ compensation act 1923 that requires employers to pay for insurance in case of employee injuries and provide a safe workplace.

      • New organizations behavioural influences- flat management and team structures

Another way of influencing employment relations are the styles of management. Improving the structure of the business and how it motivates employees can increase business effectiveness.

Hierarchal Vs Flat management

        • Hierarchal structure created a sharp division between the employer and employees. It meant that employees did not feel responsible for the outcomes of their work, reducing motivation and productivity

        • It is believed that flat management structures can result in efficiency gains by decreasing the chain of command and middle management.

        • Some benefits are:

  • An increase in communication between employers and employees.

  • Greater employee autonomy [independence], flexibility and commitment.

  • Management is brought closer to the front line of the business, and employees are closer to the goals of the firm.

Team structures

  • Transformed into teams consisting of members and leaders to create a culture of teamwork. Everyone is on the same team or having equal authority.

  • Team structures motivate workers to work harder as they can see how their own work contributes to concrete outcomes. It also increases employer autonomy and lead to a degree of self management.

  • Restructuring of the work place must have strong commitment from both the employer and employees if it is to prove successful and foster closer employment relations.

Flatter management structures have often been adopted primarily to cut costs rather than improve employment relations, examples of successful team based structures are relatively limited

      • Economic influences-economic cycle, globalisation

All businesses are affected by the state of the economy, which in turn affects employment relations. There are 2 key economic influences:

Economic cycle

  • Economic cyclereflects changes in demand for good and services and can affects employment relations in a no. of ways.

  • Boom: Businesses may be required to change their recruitment and remuneration policies in order to attract and maintain high quality staff. They may need to assess skill levels and possibly consider expanding training programs to overcome any skill shortages.

  • Recession: Businesses may need to cut back down on the number of employees and reduce the size of the business. This can affect a business’s termination and recruitment policies.

  • Businesses must be tactful in reducing the size of their workplace because it can have adverse effects on productivity, employee motivation and employment relations.

  • A downturn in the economy can lead to more flexible forms of employment such as part time, casual and temporary employment. They give businesses the flexibility to respond to changes in demand.

Globalisation

  • Process where businesses now operate in a world-wide marketplace and thus employment relations are affected by the external environment.

  • An impact of globalization is the opening of domestic markets to international competition through reductions in trade protection. E.g.: tariffs.

  • Globalisation in Australia has led to a shake up of the economy where only those businesses that remain competitive through improvements in productivity survive.

  • Businesses can take advantage of cheap labour sources from abroad; they may set up off-shore operations to take advantage of lower costs.

  • Highly skilled employees are increasingly attracted to work overseas. Pay rates in the US and London in comparison to Australia are often 2 -3 times more.

Effective Employment Relations

      • Role of employment relations

The main objective for Human resource management [HRM] is to use employment relations for business success. A measure of success for an employment relations plan is the level of conflict in a workplace, the quality of product or service or the comparison between the activities with a benchmark.

      • Communications systems- grievance procedures, worker participation, team briefings

Effective employment relations rely on lines of communication between employees and employers. E.g.:

    • Daily walk a rounds

    • Regular formal meetings

    • Staff newsletters

    • Suggestion schemes

    • Surveys

    • Memo’s

    • Email

Grievance procedures are pre-determined sets of guidelines outlined in an award or enterprise agreement to resolve such disputes in an orderly and timely fashion without the use of industrial action.

  • A grievance is when an employee and supervisor have a dispute about the interpretation or operation of an employment contract or alleged cases of discrimination.

Worker participation schemes increase employee involvement in a business’s decision making process. They can involve consultation with employees about workplace changes or give them direct decision making authority.

  • This can result in job satisfaction, increased company loyalty, increased motivation and greater workplace harmony.

Team briefings allow senior management to communicate their vision to employees.

  • The most typical involves seminars or videos’ of the goals of a business. It helps to identify any problems or misunderstandings and help to strengthen the commitment of employees to any changes.

      • Rewards- financial, non-financial

One of the most important ways employees can motivateand retainemployees is to offer financial and non-financial rewardsto employees. Labour costs are important because they represent about 60% of business costs, and are one of the major reasons for conflict at the workplace.

Financial rewards

Employers in Australia have a three tiered wage determination system meaning that employers can choose how much to pay their workers in 3 ways:

  • award wages

  • certified agreements

  • Australian workplace agreements

Awards

  • Sets out minimum wages and conditions.

  • Safety net for low paid workers who do not have bargaining power to negotiate agreements.

  • Ratified [Approved] by industrial relations commission [IRC].

Enterprise agreements.

  • Directly negotiated between employers and employees.

There are 2 types:

  • Certified agreement

        • Collective agreements negotiated between employers and groups of employees or trade unions

        • Ratified by IRC.

      • Australian Workplace Agreements [AWA]

        • Industrial contracts negotiated between employer and employee

        • Ratified by employment advocate

Other financial rewards include:

  • Bonuses and cash payments

  • Deferred payment schemes such as superannuation

  • Issuing of shares and stock options to employees.

  • Company cars

  • Mobile phones

  • Free childcare

  • Free Internet accounts

Financial rewards are not always paid in cash. These payments are called fringe benefits. The types of benefits offered depend mainly upon the composition of its workforce, in terms of age, skill, income level and family status.

In today’s workplace, the cost of benefits is significant and companies should develop philosophy to ensure that their dollars are well spent.

Non financial rewards

  • Work satisfaction

  • Good promotional opportunities

  • A pat on the back from the boss or a thank you for a job well done

  • Skill development and the on-the-job training

  • Childcare facilities

  • Lateral career movement (into other occupations)

  • Flexible work hours

  • Study or parental leave

  • Exciting workplace environment

  • Decision-making responsibilities

Many studies of workplace behaviour have highlighted the importance of non-material benefits of employment suggesting that non-financial rewards may be the most important factor in motivating factor.

      • Training and development-induction

In order to maximize the contribution that employees can make to a business’s performance, it is crucial that employees are adequately trained that they continue to develop relevant skills while in employment.

Training and development consultants can help businesses develop specialized training programs for their employees that will maximize productivity

The benefits of effective training programs:

  • Increased employee motivation – a business is committed to developing their skills

  • Increased flexibility – employees are able to handle a wider variety of task

New employees to receive immediate training when they commence work (induction training)

  • New employees need to be made aware of the culture of the business

  • Some workplaces can be potentially dangerous and the new employee must be immediately trained in what to do in certain situations

  • Inexperienced new employees need training in how to perform their new job

Training requires considerable time and resources and therefore should be carefully planned and implemented

Other training strategies:

  • Apprenticeship & on-the-job training – practical training that is picked up by an employee as a colleagues relate their experiences

  • Scavenger hunt/research- trainees are provided with a list of questions and a list of resources with which they will be about to find answers

  • Team training – 2 or more co-workers research topic, present it to their colleagues and apply it to their jobs.

  • Mentoring – matching trainee with an expert from a specific project.

It is important to let an employee to learn under actual circumstances with close supervision as well as following up on employee’s performance. Involving checking an employee’s performance after he or she has been at work for a period of time. Training will become a continuous process through constructive supervision.

      • Flexible working conditions-family-friendly programs

Family friendly programs – family benefits and more flexible working conditions have become extremely important employment relations issues.

Child care – On-site child-care has reduced workers absenteeism.

Maternity leave – Paid maternity leave gives new mothers an income in the months following child-birth, when they are unable to work because of responsibility of caring for a child.

In Australia, 30% of female employees have access to paid maternity leave.

      • Measures of effectiveness-levels of staff turnover, absenteeism, disputation, quality, benchmarking

The effectiveness of employment relations cannot simply be judged by the success or failure of the business overall, since its performance is influenced by many other factors. Success may have resulted from other factors such as technological developments or an economic boom.

  • Business failure may not be the fault of employment relations but may be caused by declining demand or poor operations management

There are two main measures of employment relations the

    • Levels of conflict (indicated by the levels of staff turnover, absenteeism, and disputes)

    • Measures of quality (particularly the use of benchmarking)

Level of conflict

Staff turnover – the percentage of employees who leave their jobs each year for reasons other than dismissal, retirement, retrenchment or death i.e. voluntary departures.

  • A high level of staff turnover is considered to indicate a failure of the employment relations function. This leads to higher costs for recruitment, selection, and training and can reduce employee morale.

  • Employees may leave their jobs for a number of reasons including changing priorities in life, moving to a different area, changed family conditions and ill health.

  • Businesses associated with high turnover are usually associated with low levels of employee job satisfaction, motivation and commitment. They may not have developed a fair pay structure, reasonable working conditions or the chance of career development

  • High levels of staff turnover are associated with lower levels of unionisation

  • Low staff turnover also means the business is not receiving any new ideas from other businesses.

Absenteeismis time taken off work by employees that has not been approved in advance by employers.

  • Voluntary absenteeism is the biggest problem to business, arising when employees are not genuinely ill but just choose to take a day off.

  • It is generally seen as a result of workers being unhappy and therefore a failure of the employment relations function

Disputes

  • The ABS defines disputes as either stop work meetings or strikes or lockouts.

  • These are clearly the most obvious forms of industrial conflict.

  • They are a complete breakdown of the employment relations function

  • A generally low cost for businesses when compared with staff turnover and absenteeism.

Measures of quality

  • Quality can be measured using benchmarking. Benchmarking occurs when a business observes best practice in relation to other businesses in areas of possible competitive advantage.

  • The 1995 Australian workplace industrial relations survey showed that 67% of businesses with more than 20 employees used some benchmarking techniques.

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