By Jonathan Singer
The Australian Manufacturing Workers Union has announced it will establish an industry-wide trust fund to pay workers' sick leave, annual leave, long service leave, severance pay and other accruable entitlements. The AMWU is also looking towards long service leave and severance pay operating on an industry-wide basis, so these entitlements will transfer with workers between jobs.
The Transport Workers Union has demanded an investigation into a similar fund (excluding sick leave) in its claim on employers in the next bargaining round in road transport. Other unions have discussed the AMWU plan at an ACTU meeting.
Participation by companies will be need to be won through industrial campaigns. Employers will then pay monthly into an account with the fund the difference between what they pay to workers directly for their entitlements and the entitlements the workers accrue.
The loss of workers' entitlements in bankrupt businesses has become a prominent political issue since 125 workers at the Oakdale coalmine lost nearly all of the $6.3 million they were owed when the mine closed in June.
The Australian Bureau of Statistics estimates that 12,000 workers lose their jobs every year due to employers' financial problems. They then face a scramble to get their entitlements against other creditors, among whom secured creditors (generally banks) have priority over workers. The ACTU estimates that 3000 workers have lost $30 million in recent years in only the well-publicised insolvency cases.
The federal Coalition government, the Labor Party, employer bodies, and insolvency administrators have all made proposals about protecting entitlements. Prime Minister John Howard and industrial relations minister Peter Reith, backed by employers, are pursuing some legal changes. Labor and the administrators back insurance measures.
The government's proposals are the least effective. AMWU metal division assistant national secretary Dave Oliver told Green Left Weekly they are "basically useless".
The government proposes making it an offence to restructure companies or shift funds to avoid paying entitlements. Various ministers have also suggested requiring companies within a group to pay for another within that group, or putting workers above secured creditors in the queue for funds.
None of these measures would get workers their money they are owed if there are no funds when a company liquidation is complete — and bankruptcy occurs when companies have little or no funds. Any effective scheme to stop the loss of entitlements must be able to pay them quickly from funds already put aside.
Tim Pallas, chief of staff of the Victorian parliamentary Labor Party, suggests employers would need to pay only about 0.3% of their wage bill into a fund to cover the costs of workers' payouts that can't be recovered from insolvent companies.
Reith complained that the ALP "was [being] a bit rich" and "did nothing about [the loss of workers' entitlements] when it was in power". In 1988 an Australian Law Reform Commission inquiry recommended a fund to protect workers' entitlements, but Labor took seven years to decide to review and address the problem — and then lost government.
Oliver indicated that the real problem with a guarantee fund is that it is a form of insurance. This means the operators need to look at the risks and possibly vary premiums; he thought premiums could run at up to 10% of wages. Operators will also look to reduce outlays; in some of the European schemes payments are capped to as little as six weeks' pay.
The wage guarantee fund cost is borne whether the company is operated soundly or as a fly-by-night operation. Oliver stressed that the union's trust fund involved payments only of existing entitlements and may save employers money through reduced costs for the transfer of entitlements when a company is sold and by covering increases for entitlements accrued out of money made from investment of the trust's funds.
Yet the metal industry employer organisation, the Australian Industry Group, claimed the trust fund would add a 20% cost to each worker's wage. Its chief executive, Bob Herbert, told the July 21 Sydney Morning Herald that substantial sums would come out of businesses before any obligation to make payments arose. Howard raised similar concerns in a July 5 2UE radio interview, saying the money is "theoretically ... earmarked for a future liability" but is needed by small businesses in their daily operations.
Employers want to keep workers' entitlements "theoretical" so they can attack them more easily in practice.
The particular fear of the employers and all pro-capitalist parties, including Labor, is that funds such as the AMWU is setting up will make workers' entitlements far too tangible. The entitlements will therefore be more difficult to attack and reduce; instead workers may demand their improvement and also portability between employers, which trust funds can provide a mechanism for. Already there are a few models for this, such as for long service leave in the building industry.
A trust fund also means that employers can't escape the costs of workers taking long service leave and accruing sick leave for longer illnesses by "churning" them through the company.
The chief limitation of the present proposals is that they are confined to particular industries, and to the employers that have agreed to participate.
Unions should also demand a common national fund for all workers into which employers pay for the leave and severance provisions of their employees. A campaign for such a fund would make a strong political point about the importance of unions for protecting all workers' interests.