Portable Long Service – More Costs, No Benefits

01 May 2018

Mr MORRIS (Mornington) (16:32:33) — As the minister and others have noted in this debate, this is certainly not the first time the Parliament has considered various provisions around long service leave. Firstly, and of course most famously, in 1953 there was the Factories and Shops (Long Service Leave) Act 1953.

As was noted in the second-reading speech, the original intent was to provide a reward for service to one employer. The minister also referred to two other bills, one being the Pre-school Teachers and Assistants (Leave) Bill 1984, which was for whatever reason apparently not proclaimed, and the Community Services Long Services Leave Bill 2010, which was not considered by the house before the Parliament was prorogued in 2010; and it did not make an appearance.

The minister also noted what is now an infamous committee report, and I will have more to say about that if time permits later on in my speech.

The bill essentially establishes a Portable Long Service Benefits Authority with a board of up to nine persons appointed by the minister and a registrar as CEO.

What we do not know of course is how many employees are going to be in that organisation and what the actual cost of running it is going to be. We also know, as others have noted, that initially this regime will apply to contract cleaning, security and community services, but there will be capacity for the scheme to be extended to other sectors in the future.

So we are being asked to establish an authority and we are being asked to give the Parliament’s imprimatur without knowing what the extent of the scheme will ultimately be.

There are a number of other major provisions, but the one I will comment on is the requirement to pay a levy of up to 3 per cent of an employee's ordinary pay to the authority, but again with the actual levy to be set by the authority. The Parliament is once again being asked to authorise something that may or may not be a much, much higher figure than the 1.5 per cent figure that the government has been talking about.

The other provisions are standard, for example allowing for a cashing out of entitlements.

What is perhaps not standard is the provision to allow an employee to not work in the industry for up to four years but still maintain their entitlement. That is, as I understand it, well beyond most enterprise agreements and well beyond the conditions in other industries. The bill also allows for payments in lieu of long service leave.

In the context of this bill we need to consider what exactly long service leave is. It seems obvious, and to some extent it is, but it is paid leave additional to the normal recreational leave, or annual leave, that is accrued through the working year.

Interestingly Long Service Leave is not an entitlement that is widely recognised around the world. It is not even an entitlement, as I understand it, that is recognised, for example, in OECD countries. It seems to be an entitlement that is peculiar to Australasia. Certainly the sources I was looking at suggest that perhaps the origin might even be in payments to the Victorian colonial public service. I was not able to verify that, but I understand it is one possibility.

The important point though, is it is a reward for service to one employer. I think it is a good concept. It is a benefit to an employee. It is an opportunity for them to take a break, to refresh themselves and to return to their employment reinvigourated and far more able to tackle the tasks at hand, rather than perhaps going on and becoming stale and potentially looking elsewhere for employment.

It is a benefit also to the employer, because it is a strong incentive for employees to remain with that single employer. It is an effective method to reduce labour turnover, and it is an effective method to reduce the obvious costs that are associated with a higher labour turnover. Given that benefit to the employer, I think it is entirely reasonable that employees are able to share in that cost saving, effectively through the opportunity to take long service leave.

But of course what is proposed here will break the nexus between the benefit that the employee derives and the benefit delivered to the employer. That nexus will unfortunately be broken, and on the basis of this bill, long service leave would simply become another allowance.

For a decade or more in this state our productivity growth has been almost negligible; it has been non-existent. If we are going to remain competitive and if we are going to continue to have our standard of living rise, then we must get back to a situation where we are making productivity gains.

You cannot raise productivity by loading additional costs on employers and not give them the opportunity to generate productivity gains and recoup some of the costs. You will actually drive productivity down rather than up and, as the member for Ringwood noted, potentially drive down employment as well, because if you add more costs to employers and there is not headroom in terms of the opportunity to raise prices, then they will be out of pocket.

Employers do not have a magic pudding. There is not some imaginary employer super-profit scheme, from which the additional benefits can be funded without offsetting savings.

Not only does the bill propose to introduce additional costs, it is proposing to do so without any offset whatsoever. It proposes to introduce a levy potentially as high as 3 per cent.

The government is suggesting, as I said earlier, that 1.5 per cent is the levy that they will charge, but we know that is only going to be the opening bid. We know the levy is going to go up, and it is likely to go up soon.

If every employee qualified for long service leave, it would cost employers 1.66 per cent, so the levy that is proposed is marginally lower than would be the cost of providing long service leave to every single employee. We know that not every employee is going to qualify for long service leave; in fact it is highly unlikely that even half of the employees are going to qualify for long service leave.

There are a number of other concerns with the bill. The member for Box Hill has addressed most of them.

There are issues associated with providers under the national disability insurance scheme. With a fixed price for undertaking their work and relatively slim reserves, there is a distinct risk that they could be sent to the wall, and there has been no commitment at this stage of additional funding from either the Victorian government or the commonwealth.

As I mentioned earlier, I want to touch briefly on the issue of the Economic, Education, Jobs and Skills Committee report.

I think it is worth noting in this context that the majority of members of the committee found that the Victorian government should commission independent research to determine what methods of removing long service leave inequity were desirable. That was not followed through. They did not find that there was merit in introducing a portable long service leave scheme.

They did not find that the Victorian government should commission a feasibility study into the scheme. They did not find merit in introducing portable long service leave schemes for the security industry. But they did ask the government to commission independent research.

As of course we know, the view of the majority of those members of the committee was rejected and a casting vote, which should only ever be used to maintain the status quo, was used to overturn resolutions of the committee.

There are many difficulties, I think, with this bill. It does not reflect the recommendations of the majority of the committee that was established to consider the subject. It breaks the nexus between the payment for long service leave with one employer and actual service given, and it adds considerably to the cost burden of employers without commensurate savings or benefits.

I do not support the bill.