Stronger together

December 29, 2015
FCB HR

Industry Focus

Retail

Efficient collaboration and smart partnerships are the way of the future for workplace relations, as explained by Nick Tindley, FCB HR’s Executive Manager, HR Consulting and Advisory Services.

When it comes to challenges caused by economic and technological change, the retail sector in Australia has been hit harder than most. But while competition and the demand for flexibility is intense, retailers also recognise that unity generates strength. With the support and guidance of its leaders, the sector is uniting and providing an example to other industries facing similar demands.

This article examines how retailers are collaborating to confront industrial challenges, through strategic networks and engaged relationships. In 2015, FCB will continue to partner with the industry to support this collaboration, including its advocacy for changes to penalty rate structures in the General Retail Industry Award.

Smart partners

Employers today are increasingly aligning themselves with key third party ‘enablers’ and common interest networks, to help them maximise the value they generate through their workforces.

In the retail sector, the Australian Retailers Association (ARA) provides an employee relations support hub for its network of members (many of whom are small retailer employers with limited specialist HR expertise). This allows members to tap into shared HR resources and expertise of a much higher quality than they would be able to afford individually. In turn, FCB partners with the ARA to provide those products and services on its behalf, meaning its members can access our extensive pool of expert and up-to-date legal, consulting and technology resources. As a result, the ARA provides a holistic and well integrated service to its members, with a level of quality, efficiency and consistency that it would struggle to provide through an internalised function.

Key sector focus: Modern Award review

In 2015, the potential benefits of collaborative partnering are particularly manifest in industries where historical business models are being disrupted by the new economy.

For retailers, one of the most fundamental societal and market shifts has been the way in which consumers shop. Consumers now demand access to retailers when they want, not when the retailer is open. This has driven retailers both to embrace online sales and to realign operating hours with consumer preferences. However, it also creates a major industrial headache because of the entrenched application of weekend penalty rates in Modern Awards. These additional penalty costs mean that many retailers fall into a ‘Catch 22’, where it is neither feasible to remain competitive without operating on weekends, nor financially feasible to employ staff at those times.

With support from FCB, the ARA has been strategising and advocating to change the industry’s baseline safety net, to ensure it remains fair and relevant for the future. Now, the ARA is collaborating with members to lead an application for changes to penalty rates as part of the FWC’s 4-yearly Modern Award review. The industry has thrown its weight and resources behind this campaign which will culminate with FWC hearings in 2015. Many retailers have already been working under FCB’s guidance for some time, to capture and prepare detailed evidence about the particular challenges penalty rates create for them. This is the first time the industry has truly united on an issue of common interest, helping ensure FCB will be in the best possible position to run the comprehensive, professional advocacy needed to support the case for change and persuade the FWC.

Deeper insights drive better service

Our relationship with the ARA and the work we do for its members put FCB in a unique position to observe and analyse work-related trends and issues within the retail industry. Not only does this help us ensure our own services remain relevant and pragmatic for retail clients, it also allows us to share our insights for the benefit of all retailers and feed them back into broader industry strategy. For example, some of the key employment trends and issues we have observed recently include:

Enterprise bargaining

Rather than waiting for the FWC to change the Modern Award, we are finding more retailers are embracing enterprise agreements to cover store based employees. The key driver for these clients has been to find creative ways to reduce the impact of restrictive award provisions. As a consequence, a fundamental component of these projects has been clearly identifying our clients’ core operational imperatives and aligning them to a set of employment conditions that don’t increase labour costs.

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Productivity driven incentive structures

Many retailers shy away from bonus schemes and performance incentives, for fear of locking themselves into extra labour costs. Few industries, however, are so reliant on frontline employees to generate revenue and deliver growth. As such, retailers are uniquely positioned to grow productivity by incentivising store based employees.

Our recent experience working with retailers shows it is possible to develop effective and flexible ‘base + incentive’ structures. The key lies not only in understanding what motivates staff and setting rewards accordingly, but also in acknowledging these motivators will vary between individuals, stores, regions and brands. In a rapidly changing retail environment, success also demands continual review and reassessment of these schemes.

Restructures

In the face of market pressure, many retailers have been forced to review their labour costs, cut jobs and/or change how existing roles are performed or structured. Some have found this extremely confronting, particularly those not used to the complexity of balancing operational imperatives with legal obligations. This is compounded by the need to be transparent with and supportive of affected staff.

The retailers we have helped through these situations have particularly benefitted from: detailed project planning (eg, locking down milestones, action items and individual responsibilities); assistance to manage compliance with the Fair Work Act (eg, planning and scripting consultations, confirming redeployment and redundancy obligations, etc); and skills development for key managers (eg, coaching line managers to help them confidently conduct difficult and sensitive discussions about structural changes, terminations, etc).

Growing management capacity

With constant pressure ‘do more with less’, we are also seeing retailers struggle to keep up with the faster pace of business and the need for workers to take on new skills. These challenges are amplified in the retail sector because many businesses operate multiple, geographically-separated stores, which remove their front line managers from head office support structures. It is one thing for head office to review and adjust expectations, values and policies for the new environment, but it is an entirely different challenge to ‘up-skill’ frontline managers to implement and maintain constant adherence to the new frameworks within their stores. For one thing, store managers in different locations often have vastly different personal values, styles and capabilities.

Over the last 12 months, we’ve worked with many retailers to develop the skills of frontline managers, particularly to improve how they promote productive work practices and conduct difficult employee conversations. Historically, most seem to have focused on ‘corrective’ management in response to behavioural shortcomings. Unfortunately, this tends to enshrine the idea within a store that ‘performance discussions’ are always negative, which gets in the way of promoting high performance and skill development. Our experience suggests that once frontline managers have a clear framework for managing performance and have been taken through the fundamentals of conducting pro-active performance discussions, they feel empowered to challenge their teams to strive for improved productivity, which leads to better outcomes for both the business and the employees.

Overview: 4-yearly Modern Award review

Modern Awards were introduced in 2010 to provide a “fair and relevant safety net of terms and conditions” for employees.1 They also provide the starting point for all ‘above award’ and enterprise bargaining negotiations. Any changes to awards could significantly alter the costs and complexity of paying and administering employment relationships in award-covered industries, including those where enterprise bargaining is prevalent.

After an initial ‘transitional’ phase, there are now 122 industry and occupation based awards operating nationally. Every 4 years, the FWC must review each award and, if appropriate, amend them to ensure they stay “fair and relevant”. Each 4-yearly review represents a significant opportunity for both employer groups (eg, ARA, RSCA, AHA, ACCI and others) and unions (eg, ACTU, HSU and others) to lobby for changes to employee conditions and entitlements.

The first 4-yearly review began in early 2014 and will continue through 2015. It is now divided into 2 concurrent stages: a common issues stage (for proposals affecting all MAs or a large number of them) and an award stage (dealing with award-specific issues). We expect the first changes to flow through to employers in early 2016.

For this review, some of the proposed common issues relate to:

  • Changing the attributes of part time and casual employment;
  • Amending award flexibility/facilitative provisions (eg, IFAs, annualised salaries, etc);
  • Adding specific provisions for micro businesses that employ fewer than 5 employees;
  • Removing leftover transitional/sun setting provisions;
  • Changing public holidays and annual leave entitlements;
  • Adding parental return to work and domestic violence protections; and
  • Making a variety of payroll related process changes.

For the specific award stage, MAs have been divided into 4 groups, with staggered review timing. All service sector awards, which will be the focus of penalty rate applications, are in Group 4.

A few of the key allocations include:

  • Group 1: mining, gas, rail, general manufacturing;
  • Group 2: nurses, medical practitioners, health professionals, storage services;
  • Group 3: banking, clerical, education, real estate, sporting organisations; and
  • Group 4: aged care, retail, hospitality, restaurants, food manufacturing.

The FWC is expected to adopt a heavily evidence-based approach, relying on interested parties to present robust research data and analytics to support their policy based submissions. The timetable imposes strict deadlines for evidence, submissions and responses by interested parties. Some of these have already passed, although there are still limited opportunities for some issues and industries.

For many industry leaders, 2015 presents an important opportunity to observe how the FWC conducts its first review and the outcomes it achieves. Doing so will help guide their own objectives and research strategy, ahead of the next review commencing in 2018. After all, much of the data that could support the next review is probably already being generated now.


1 See commentary: [2014] FWCFB 1788