In brief
Employers bargaining for enterprise agreements should develop a tool that will allow data-driven decisions and complement their industrial strategy
Commercial focus
Enterprise bargaining is a highly regulated process, and Australian employers spend significant amounts of time and resources to comply with obligations under the Fair Work Act 2009.
On the other hand, there are no specific requirements for the depth of commercial analysis. For example, when re-negotiating an existing agreement, businesses often focus on variances only and fail to understand overall commercial implications.
Decision-making patterns
It is common for time-poor executives to make critical decisions based on gut feel and ballpark numbers, particularly when things are getting complicated or numbers are different from the expected results.
This approach sometimes works but often provides misleading guidance because it ignores operational nuances and specific business practices.
For a transport business with 350 drivers covered under the agreement and an annual labour spend of $21 million, a wrong decision on pay structure or overtime component can cost the company $400,000 per annum or over $1.6 million over the life of the agreement.
Support tool
To get a commercial edge in enterprise bargaining, develop a tool that will reflect operational practices and quantify the combined effect of multiple parameters. It will complement your industrial strategy and enable data-driven decision making.
While designing models can be tricky business, and parameters will be different for every agreement, these are four steps to get started:
- Develop a baseline model that reflects existing operational practices. It must be at the individual employee level.
- Validate the model using historical data for 12–18 months.
- Document two to three likely negotiation scenarios.
- Modify the baseline model to reflect each documented scenario.