The Centralised and Decentralised Approaches

The Centralised Approach

The centralised system was in place in Australia from 1904 until the early 1990’s. The Centralised Approach is the determination of wage and conditions of work was conducted by the government with unions and employer bodies, which created awards.

Awards refer to legally binding agreements settling out minimum wages and conditions for a group of employees. Today awards are used only as a safety net, of which all agreements made must be better than. An award was determined as a result of unions and employer organisations presenting submissions to the to the Conciliation and Arbitration Commission

The Centralised Approach focuses on an entire industry or occupation, involves more intensive union involvement, and employee have an unlimited “right to strike”

Fair Work Australia and Dispute Resolution

Fair Work Australia has significant dispute resolution powers and provides protection for workers. Disputes are solved externally with Fair Work Australia and decisions are legally binding.

The minimum Wages Panel of Fair Work Australia determines the minimum wage for employees not covered by awards. Fair Work Australia provides bargaining assistance for workers in low-paid industries.

The Dispute Resolution Practices of Conciliation and Arbitration are used Employee Relations Disputes. Conciliation involves an impartial third party, a conciliator, assisting in the resolution of disputes by offering advice to the disputing parties. Arbitration involves an impartial third party (commissioner of Fair Work Australia), hearing both sides of the dispute and determines the outcome.

Advantages of the Centralised Approach

  1. Centralised wage fixing provides a degree of justice and equality for workers employed by different employers.
  2. Governments have greater control over wage outcomes so as can maintain better management of the economy.
  3. Industrial disputes within businesses can be reduced because awards cover entire industries.
  4. Stability and predictability are enhanced as it applies to all industries and organisations.

Disadvantages of the Centralised Approach

  1. The system is less flexible. For example the same wages and conditions for a large organisation in a capital city also apply to a small business in a small town.
  2. Doesn’t provide enough opportunities for individual businesses to provide improvements in employment conditions in return for productivity gains.
  3. Large unions are favoured due to money and resources to mount expensive legal cases before industrial tribunals.
  4. Less incentive for participative approaches to management, as decisions on wages and conditions are not made within the organisation.

The Decentralised Approach

A Decentralised Approach to Employee Relations is a system where decisions regarding wage and conditions of work are reached at enterprise and workplace levels. The focus of his approach is on the individual workplace. Employees are able to negotiate agreements with employers in individual workplaces.

The Decentralised Approach uses the Better Off Overall Test when making agreements. This means that agreements can only be made when they improve upon the existing relevant award, which acts only as a safety net.

In this approach to employee relations an employee has fewer dispute resolution powers as the individual workplaces are expected to have their own processes, a limited right to strike, disputes are solved internally and decisions made are legally binding.

Types of Agreements in a Decentralised System

  • Common Law Individual (employment) contracts covers those employees who are not under any Award or collective/enterprise agreements.
  • Enterprising Bargaining is the process of directly negotiating wages and employment conditions between employers and employees at the enterprise level.
  • Collective Bargaining refers to the process of determining the terms and conditions of employment through direct negotiation between unions and employers.
  • Collective/Enterprise Agreements are the result of collective and/or enterprise bargaining. It is a negotiated agreement between an employer and a union or a group of employees.

The Role of a Human Resources Manager under a Decentralised Approach

The role of the Human Resource Manager in a decentralised employee relations environment:

  • Training of staff and other managers
  • Dealing with disputes
  • Implementation of the agreement
  • Negotiation of employment agreements with employees and their representatives

Advantages of the Decentralised Approach

  1. There is flexibility to introduce employment conditions that take into account the individual characteristics of each workplace.
  2. Greater communication between employers and employees an improve staff motivation through the development of greater cooperative spirit.
  3. Greater effort to productivity improvements by employees can be rewarded.

Disadvantages of the Decentralised Approach

  1. There is likely to be a greater inequality between the wages of skilled and unskilled workers, as unskilled workers have less bargaining power.
  2. Government has less control over wages, management of the economy is more difficult.
  3. Less involvement of centralised tribunals could lead to industrial disputes dragging on.