Australia's employment contracts
In the Australian labour market, there are three main ways of determining wages/conditions: awards, enterprise or collective agreements, and individual contracts. Let’s give you a quick run down on each.
Awards
These are the minimum standards and conditions for a particular job/occupation. They set out minimum rates of pay and the basic level of employment conditions that a worker must receive in their job.
This is a more centralised way of determining wages. Everyone at the same level may receive the same pay and conditions. Some employers pay above-award wages, and this is great news for an employee.
The role of awards is to act like a ‘safety net’ for workers that are vulnerable in the labour market. These workers may be relatively unskilled or inexperienced, and could be victim to exploitation in terms of receiving low wages or unsafe conditions.
Enterprise/collective agreements
These are agreements that apply across entire workplaces or even occupations. They are typically negotiated between unions and employers.
These agreements are more decentralised arrangements. This is because there is some scope for negotiation between employees and employers. So, employees can agree to work harder (increase productivity) to receive higher wages. Also, employees can agree to trade-off some working conditions for others, or even for higher wages.
We can also see some inequality emerge from this type of agreement. This is because some workers will receive higher rewards than others — even if they’re in the same job.
Please note: enterprise agreements must meet the Better Off Overall Test (BOOT). This means that employees on enterprise agreements must be better off under their relevant agreement than the award. This ensures employees aren’t exploited and trade-off too many conditions.
Individual contracts
These contracts are negotiated one-on-one between employers and employees. They typically apply to high skill, high wage workers who are very valuable and this gives them bargaining power. They can argue for certain wages and specific conditions because they are very valuable.
These contracts will exacerbate inequality in the labour market as the rewards may be very uneven. A highly skilled worker will command much higher wages than someone relying on the award.
I’m not saying that inequality is a wholly bad thing in the labour market. Inequality encourages people to work harder and help boost output. But it can create additional economic and social issues.