Since early 1991 provision has existed for organisations to enter into enterprise agreements which prevail over any award, industrial agreement or order of the NSW Industrial Relations Commission. The Department of Industrial Relations, Employment, Training and Further Education has issued advice on 12 April and 19 November 1991, on the procedures to be followed for the implementation of enterprise agreements within public sector organisations.

Since those letters were issued a number of enterprise agreements have been processed. It is pleasing to note that there is a larger number currently being negotiated and developed by public sector organisations.

These initiatives have resulted in significant opportunities being gained in those organisations concerned, to improve service delivery and remove constraints to operational efficiency. I feel it is important to emphasise the benefits that can be gained by this action for both the organisation and the staff involved. I therefore suggest that all organisations within your portfolio should again examine the opportunities that exist for enterprise agreements that will result in improved productivity. Some options that your organisations may wish to explore are:

• more flexible hours;
• all up pay rates;
• broader job classifications;
• new training and career opportunities;
• forms of performance related pay;

I must also stress the extremely important issue of the budgetary impact of enterprise agreements, whether the organisation is in the public service or the wider public sector. This was included as Treasury Guidelines in the letter of 19 November 1991 referred to above. These considerations are:

1. To ensure that the introduction of an enterprise agreement does not impact adversely on the finances of the State, agreements should not be entered into by budget sector organisations which cannot be supported within the current level of Consolidated Fund support as indicated by the organisation's forward estimates allocation. Where organisations have other sources of revenue available to them (eg., partial recovery of costs through charging for goods and services provided), thesesources should not be exploited through the use of monopolistic powers. Organisations should not divert funds from approved programs to provide enhanced pay and/or conditions for staff.

2. Before signing an enterprise agreement, a budget sector organisation should obtain formal clearance from the Treasury that the agreement's financial impact is budget neutral. The intent of this is to ensure that enterprise agreements do not adversely affect the State's financial position.

3. Organisations, in calculating the cost of moving to enterprise agreements, should fully take into account all expenses on a proper commercial (ie., accrual) accounting basis. This would include expenses such as long service leave and superannuation, the costs of which are met by the Crown.

4. For non-budget sector organisations (and for commercial activities of budget sector organisations), monopoly powers should not be exploited to fund unduly large cost increases associated with enterprise agreements. Organisations subject to dividend requirements should also not expect that the Crown would forego its expectation of an appropriate dividend from their operations. As with budget sector organisations funds should not be diverted from approved programs to provide enhanced pay and/or conditions for staff.

To ensure that enterprise agreements do not have an adverse affect on the State's finances, enterprise agreements must remain budget neutral. Therefore, for organisations to secure a successful passage for an enterprise agreement, it is imperative that they stay within the budgetary arrangements established by the Treasury and for the costs of enterprise agreements to be met without requests for additional budget supplementation.

I would like to emphasise again the importance of examining the potential for enterprise agreements. As explained above, the benefits available from such an arrangement can far outweigh the rigid industrial arrangements covering staff of the public sector which are currently in place.

The Attorney General and Minister for Industrial Relations will shortly be issuing a discussion paper on the introduction of enterprise bargaining in the public sector, seeking feedback from Chief Executive Officers. This should be of considerable assistance to organisations in their examination of the potential to introduce enterprise agreements.

Should organisations within your portfolio require further information or assistance concerning these matters, they should contact Public Employment Industrial Relations Services, Department of Industrial Relations, Employment Training and Further Education.

Yours faithfully

J. J. Fahey
Premier