Public sector salaries: the state of play
Extracted summary of a seminar given by Anthony Britt, Barrister, Sir Owen Dixon Chambers
2013 and 2014 Crown Wages Round
This paper focuses on the 2013/2014 Crown wages round bearing in mind its historical perspective from the 2011 wages round.
On 17 June 2011, the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 was assented to (the "Amendment Act"). The Amendment Act amended the Industrial Relations Act 1996 NSW ("the Act") by, inter alia, inserting s. 146C.
The relevant cls 6 and 8 are the subject of numerous decisions relating to interpretation of its meaning. Clause 6 deals with policies that are subject to compliance with the paramount policies and include provision for an increase of no more than 2.5%.
Clause 8 deals with the definition of employee related costs.
2013 Wage Round
The Union parties initially filed 39 applications to vary awards, agreements seeking that the salaries and allowances provided for under those instruments should be increased by 2.5 per cent from 1 July 2013 in accordance with what is allowable under the 2011 Regulation.
The employer parties submitted that increases in superannuation costs which arise as a result of the Superannuation Guarantee (Administration) Amendment Act 2012 (the "2012 Act") is an "employee related cost" for the purpose of cl. 6(1)(a) of the 2011 Regulation. As such, the costs of any such increase in superannuation must be taken into account when the Commission is awarding an increase in any Award.
The Commission's first decision
The Full Bench found that cl. 6(1)(a) declares as a policy to be given effect to by the Commission that public sector employees "may be awarded increases in remuneration or other conditions of employment that do not increase employee-related costs by more than 2.5% per annum."
Following the decision of the Full Bench, the New South Wales Government replaced the 2011 Regulation by means of the Industrial Relations (Public Sector Conditions of Employment) Amended Regulation 2013 ("the 2013 Regulation"). The 2013 Regulation required the Commission, in making awards and orders under the Act, to take into account increases in superannuation contributions.
Consequently, the parties agreed that the appropriate amount by which rates and allowances should be adjusted in light of the 2013 Regulation was 2.27 per cent and that the increase would operate from 1 July 2013.
However, on 21 August 2013 the Legislative Council disallowed the 2013 Regulation, which meant that the 2011 Regulation applied. That is, an increase in rates of pay and allowances of 2.5 per cent per annum was available to be included in awards, agreements and determinations in the public sector following the earlier decision of the Commission.
On 6 September 2013, union parties pressed the Commission to vary the awards that are the subject of the proceedings by increasing rates and allowances by 2.5 per cent. The employer opposed this course.
The employer parties submitted that they should be given an opportunity in proceedings to present a case based on budgetary and economic considerations that any increase beyond 2.27 per cent was not sustainable. The Commission determined to allow the employer parties that opportunity.
The employers' submission on why salaries should not be increased by the Commission beyond 2.27% was summarised by the Commission:
(1) The 2012 Act gradually increases the Superannuation Guarantee ("SG") charge percentage from nine to 12 per cent in 2019- 20 income year.
(2) The Commission should have regard to all factors relevant to the determination of the general claim and then make a global assessment of what is a fair and reasonable wage to be determined in the circumstances.
(3) The quantification of any salary adjustment should not be undertaken by means of a "mathematical exercise" and will include a "value judgment" in order to determine appropriate increases in all the circumstances.
(4) The increase in award rates of pay of 2.27 per cent from 1 July 2013 when coupled with increasing superannuation contributions provides fair and reasonable remuneration for public sector employees and is affordable for the State.
(5) Since 1997 until June 2013 NSW public sector wages have increased at an annual rate of four per cent when compared with the NSW private sector of 3.4 per cent.
(6) The impact of a weaker global and domestic economic outlook had led to downward revisions to domestic inflation forecasts for 2012-13, risks to economic growth need to be addressed, and the proposed removal of the carbon pricing mechanism will put further downward pressure on the inflation rate.
(7) The credit rating agency Standard and Poor's placed NSW on negative outlook in October 2012 which means there is a one-in-three chance that the State could lose its triple-A credit rating over the next two years.
(8) The Government's total savings task amounts to nearly $19 billion over the six years to 2016-17. Only $1.9 billion of those savings were delivered at the end of 2012-13.
(9) There is a positive difference between recurrent revenue and expenses reflected in the forward estimates.
(10) Providing increases in remuneration to public sector employees above 2.5 per cent (including increases in superannuation) has not been budgeted for and if this were to occur the Government would need to consider other options to maintain its fiscal position.
(11) The Government is committed to deliver sustainable savings of $18.9 billion in the period 2011-12 to 2016-17. Additional expenditure of $860 million related to the increase of superannuation contributions would add to these already large savings targets in order to maintain the Budget targets. It is not in the public interest that the State:
(a) lose its triple-A credit rating;
(b) raise taxes to fund additional wages and superannuation costs;
(c) reduce services to fund additional wages and superannuation costs; or
(d) reduce infrastructure spending to fund additional wages and superannuation costs.
The Commission determined that it cannot award more than 2.5 per cent, but it is open to it to award increases in remuneration of 2.5 per cent or less. The Commission concluded that the employer parties did not make out a case to limit the increase to 2.27 per cent.
Following the decision in Re Crown Employees Wages Staff (Rates of Pay) Award 2011 & Ors (No 3)  NSWIRComm 109 the employer parties sought both judicial review of the decision and order in the Court of Appeal and sought to appeal the decision before the Full Bench of the Industrial Relations Commission. The application for judicial review was concerned with the interpretation of the 2011 Regulation.
The Court of Appeal accepted the employer argument and determined that compliance with the policy contained in cl. 6 involves an inquiry as to whether any increase awarded by the Commission, taken together with any other increases in employee-related costs, has the effect of increasing employee-related costs by more than 2.5% per annum for the award period.
Prior to the decision of the Court of Appeal, the Union parties commenced proceedings to increase wages and allowances by 2.5% from 1 July 2014. The initial view of the employer parties was to argue again on discretionary grounds that this increase should not be granted.
However, given the subsequent Court of Appeal decision, the parties during a conciliation conference agreed to a 2.27% increase in wages and allowances from 1 July 2014. (For further additional agreements please refer to the full paper.)
And then …
On 19 June 2014 the employer parties made an application to the Commission under s. 17 of the Act to vary the Awards to include a "no extra claims" clause as part of a consent increase in rates of pay and allowances of 2.27%.
The 2011 Regulation was repealed by cl. 5.3 of Sch. 5 to the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014. In addition this Act enacted the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 (the "2014 Regulation").
The 2014 Regulation took effect 24 June 2014. The 2014 Regulation applies to proceedings that are pending in the Commission on the commencement of Sch. 5 to the State Revenue and Other Legislation Amendment (Budget Measures) Act 2014. Such proceedings include both the 2013 and 2014 wage claims.
The Commission is yet to determine the employer parties' application to insert "no extra claims" in the relevant awards.