F0512 Dec 1060/00 M Print S9669


Workplace Relations Act 1996
s.113 application for variation
s.107 reference to Full Bench

National Meat Association of Australia
(C No. 22330 of 1997)

(ODN C No. 21814 of 1993)
[Print N7479 [F0512]]

Various employees

Meat industry








Meat industry - award simplification - tally system - incentive systems - form of new provision - item 51(5) - Paid Rates Review Principles - fixation of minimum rates.


[1] On 24 September, 1999 we published our decision on an application by the National Meat Association of Australia (NMA) pursuant to s.113 of the Workplace Relations Act 1996 (the Act) to amend the Federal Meat Industry (Processing) Award (the FMIP Award)1. The decision also dealt in part with the Commission's review of the FMIP Award pursuant to item 51 of Schedule 5 of the Workplace Relations and Other Legislation Amendment Act 1996 (item 51). The issues submitted for determination are set out in the decision2. Principal among those issues was whether the simplified award should provide for a system of payment by results and if so what form that system should take. Other issues included whether there should be one single federal award for the meat processing industry and mooted changes in the award provisions relating to hours of work, overtime and shift work.

[2] We decided in principle that the existing tally provisions in Appendix III to the FMIP Award should be deleted and replaced with a flexible and simplified safety net prescription permitting payment systems based on incentives. We expressed a number of tentative conclusions about how the new provision might operate and how the transition might be made from tally systems based on Appendix III to the new incentive payment system. We also encouraged the parties to give further consideration to the application of the Paid Rates Review Decision3 to the FMIP Award. We directed Commissioner Leary to prepare a report to assist us in finalising the provision dealing with incentive payment systems and other matters.

[3] Commissioner Leary submitted her report on 28 April 2000. The report indicated that three matters required determination. The first matter was the precise form of the new payment by results provision. The second matter concerned the protection to be accorded to the earnings enjoyed by current employees of respondents' to the award when the new provisions commence to operate. The third matter concerned the implementation of the principles in the Paid Rates Review Decision for the fixation of proper minimum rates. In a statement issued with the Commissioner's Report on 9 August 2000 we identified the issues and invited further submissions by the parties on 23 August 2000 on which date we reserved our decision.


[4] In her report4 the Commissioner set out the position the parties had adopted in relation to the proposed incentive payment system provision. There was agreement on the overall structure of the provision and on a number of specific clauses but some areas of disagreement remained. Following consideration of the Commissioner's report we reached a tentative conclusion concerning the appropriate form of the incentive payment system provision. A copy of the proposed clause was circulated to the parties5. Having heard the parties, the clause we have adopted is in substance the same as the one we circulated. A number of aspects of the clause merit some comment.

[5] In the proceedings before Commissioner Leary the Australian Meat Industry Employees Union (the AMIEU) sought the inclusion of a clause requiring the employer to make a copy of any incentive payment system available to the employee's union if an employee so requests. The NMA opposed this provision. We included it in our proposed clause. It seems to us to be a reasonable requirement and it will form part of the award provision.

[6] The parties agree that there should be provision for disputes concerning modifications the employer or the majority of employees might seek to incentive payment systems to be referred to the Commission. The NMA submitted to Commissioner Leary that any such reference should be for the purposes of conciliation only. The AMIEU proposed that the reference also include arbitration should that be required. We are concerned that the clause proposed by the AMIEU might give rise to disputation concerning the Commission's power to arbitrate the terms of incentive payment systems to apply at particular enterprises, bearing in mind the terms of Part VI of the Act and in particular s.89A(3). It is in any event appropriate that we give every encouragement to the parties to reach agreement at the enterprise level on the system of work to apply at that enterprise. We have adopted the employer proposal.

[7] Under the new provision daily hire employees engaged on incentive payment systems will be entitled to minimum rates based on the appropriate timework rate plus a 20% incentive loading and a 10% daily hire loading. The AMIEU submitted to Commissioner Leary that employees on daily hire should be entitled to have the 10% daily hire loading calculated on the timework classification rate plus the 20% incentive loading. This was put forward on the basis that the 20% incentive loading should form part of the base rate for all purposes of the award. The NMA opposed this and pointed out that it would result in the daily hire loading being increased from 10% to 12% of the timework classification rate. It is not our intention to establish a separate minimum rate of pay for employees engaged on incentive systems. There should only be one minimum rate for each classification. The work value of the classification does not alter because of the nature of the engagement of the employee. The value of the work is the same whether it is performed by an employee on timework, a casual employee, an employee engaged on daily hire or an employee working on an incentive system. The approach adopted in our decision is one which involves a loading referable to the nature of the engagement. The AMIEU's proposal is inconsistent with that approach and we do not intend to adopt it.

[8] A related issue arose in connection with the minimum rates to be paid to employees working in accordance with an incentive payment system in overtime hours, on weekends or on public holidays. The AMIEU submitted that such employees should continue to receive the 20% incentive loading and the 10% daily hire loading for such work. The submission was based on the contention that regular daily hire employees engaged under the terms of an incentive scheme accrue additional benefits by way of annual leave, sick leave, superannuation and other forms of paid leave which add between 25% and 30% to the ordinary rate. On this basis employees so engaged receive a notional 55% - 60% for work during ordinary hours. It was then submitted that if such employees were entitled only to the overtime rate applying to employees engaged on timework, 50% for the first three hours and double time thereafter, during the first three hours of overtime remuneration would decrease to 150%. We have decided that employees engaged on incentive payment systems who perform work on overtime, on weekends or on public holidays should be paid in accordance with the relevant award provisions as proposed by NMA. There are two reasons for this. Firstly, we are concerned here only with a safety net provision which establishes minimum entitlements. Secondly, we are not persuaded that we should take into account in fixing penalty rates the fact that benefits might accrue during ordinary hours of work which do not accrue during periods when penalty payments apply. The argument does not provide a sound basis for the fixation of rates to apply to work which is not included in ordinary hours. The NMA contended that in some cases such accruals are paid out in cash but in others they are not. Assuming this to be so, it follows that no assumptions can be made about such accruals, in particular whether they crystalise and become a real benefit in every case. It is also relevant that the argument is only valid if the work is performed outside the hours constituting the ordinary working week. As an example, it may be quite inequitable to take accruals into account in fixing penalty rates for work performed on weekends but within the maximum number of hours permitted for a week's work. For this and for other reasons the quantification of the benefit is difficult. Furthermore the adoption of the AMIEU's proposal might have significant implications for the pay of other categories of employees such as daily hire employees engaged on timework and perhaps some casual employees. On the material before us we have concluded that it is not appropriate that we embark on the course the AMIEU has urged upon us.

[9] We have considered the parties' proposals concerning the fixation of the weekly rate of pay during annual leave for employees working under an incentive payment system. We have concluded that the NMA's proposal to average earnings over the preceding 12 months is a fair way of dealing with a difficult issue.

[10] There was some debate before Commissioner Leary concerning the definitions of "incentive payment system" and "timework payment system." Despite concerns we expressed in our September 1999 decision about lack of precision in the proposed definitions, we are not persuaded that any of the amendments suggested by the AMIEU in response to those concerns improve the position. If it emerges in due course that the definitions require amendment an application can be made.


[11] In the September 1999 decision we dealt at some length with the requirements of item 51(5) and the way in which the earnings of current employees might be protected in accordance with that item once the new incentive payment provision commences to operate6. We sought further submissions to Commissioner Leary on the form of a suitable provision and the submissions are summarised in her report. We also heard further argument on 23 August 2000.

[12] Item 51(5) is expressed in mandatory terms. We have considered, and are disposed to make, provision to guard against the overall entitlements to pay provided by Appendix III of the Award not being reduced. However we are not satisfied that any of the options advanced by the parties is fully satisfactory for inclusion in the simplified award. In perspective with the award provisions and the operating Appendix III incentive schemes, the notion "overall entitlements to pay provided by the award" is not amenable to precise application. Even if the term can be given meaning in the circumstances of this case, it lacks the definition in operation that will be present in many other cases, such as where the Commission is simplifying an award which was formerly a paid rates award. Moreover to give the term effective application in the new award it would seem necessary to extend the operational effect of the tally system and the Appendix III formulae that will be otherwise supplanted. Those considerations do not however remove any basis for concern that entitlements of the kind intended to be subject to a non-reduction effect of sub Item 51(5) may not be adequately protected by the provisions we have determined. We accept that the new provisions should suffice generally to produce pay levels that will match or exceed those that were associated with the system in operation prior to the commencement of the safety net provision. For that reason we are prepared to allow the new provision to operate for a period of time and then to reassess the position on application. Should it become apparent that the overall entitlements to pay of employees who were engaged on an incentive payment system pursuant to Appendix III have been reduced, application may be made to the Commission for the insertion of a board of reference provision. The provision would permit a board of reference to examine the earnings of employees engaged on an incentive system at a particular establishment. Under such a provision if it could be demonstrated that at the enterprise in question an employee's pay for a specified period is manifestly less than he or she received for an equivalent amount of production under the Appendix III system, the board of reference would be empowered to fix a fair and reasonable rate of pay in order to give effect to item 51(5).


[13] During the proceedings before Commissioner Leary the parties reached agreement on the appropriate relativities and rates for the award classification structure but they were unable to agree on the manner in which those rates should be implemented. By the time the proceedings resumed before the Full Bench agreement had been reached on that aspect as well. The only question remaining for the Commission is whether the agreement should be included in the new simplified award. We have no reason to doubt that the rates the parties have agreed on are appropriate minimum rates for the purposes of item 51(4) and the principles formulated and set out in the Paid Rates Review Decision. No party or intervener contended otherwise. In these circumstances all that remains is for the order to be finalised.


[14] It is clear from Commissioner Leary's report that the parties are agreed that the Hours of Work provision found in the Metal Engineering and Associated Industries Award 1998 is appropriate for inclusion in the award and that the NMA does not now press a number of matters referred to in the September 1999 decision.

[15] The order necessary to give effect to our decision will be settled by Commissioner Leary with recourse to the Full Bench. Regardless of when the order is made the first instalment of the minimum rates adjustment will operate from the first pay period commencing on or after 1 October 2000. The other amendments to the award will not have retrospective operation.




L. Norris with J Cooney for the Australasian Meat Industry Employees Union

A Herbert of counsel, for the National Meat Association, Australia Meat Holdings Limited, Metro Meat International and Samcor

E R Cole with S Kibble for the Minister for Employment, Workplace Relations and Small Business (the Commonwealth), intervening

R Calver for the National Farmers Federation, intervening

Hearing details:

August, 23.

Printed by authority of the Commonwealth Government Printer

<Price code C>

1 Print R9075

2 Ibid, para [6]

3 Print Q7661

4 paras [13] to [31] inclusive

5 Appendix B to Full Bench Statement of 9 August 2000

6 Ibid paras [109] - [110], [141] - [143]