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ACPERS |
Assistant Chief of Defence Force (Personnel) |
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ACPOL |
Assistant Chief of Defence Force (Policy) |
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ADF |
Australian Defence Force |
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ADFILS |
Australian Defence Families Information and Liaison Staff |
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APS |
Australian Public Service |
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ADFHLAS |
Australian Defence Force Home Loan Assistance Scheme |
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ARA |
Australian Regular Army |
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ArFFA |
Armed Forces Federation of Australia |
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AWE |
Average Weekly Earnings |
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AWOTE |
Average Weekly Ordinary Time Earnings |
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CDF |
Chief of the Defence Force |
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CES |
Commonwealth Employment Service |
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COI |
Kerr/Woodward Committee of Inquiry |
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COR |
Committee of Reference for Defence Force Pay |
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COSC |
Chiefs of Staff Committee |
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CPI |
Consumer Price Index |
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CSHA(S) |
Commonwealth State Housing Agreement - Service Personnel |
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CSS |
Commonwealth Superannuation Scheme |
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DCO |
Defence Community Organisation |
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DER |
Defence Efficiency Review |
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DFA |
Defence Force Advocate |
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DFDA |
Defence Force Discipline Act |
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DFPCC |
Defence Force Pay and Conditions Committee |
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DFPPC |
Defence Force Personnel Policy Committee |
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DFRDB |
Defence Force Retirement and Death Benefits Scheme |
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DFRT |
Defence Force Remuneration Tribunal |
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DGSC |
Director General Service Conditions |
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DGSPP |
Director General Service Personnel Policy |
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DHA |
Defence Housing Authority |
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DIR |
Department of Industrial Relations |
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DIY |
Do-It-Yourself |
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DRT |
Discharge Resettlement Training |
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DSH |
Defence Service Homes |
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DSNSG |
Defence Special Needs Support Group |
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DVA |
Department of Veterans' Affairs |
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DWR & SB |
Department of Workplace Relations and Small Business |
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EA |
Education Allowance |
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EANL |
Education Assistance in the New Locality |
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EAOL |
Education Assistance in Other Localities |
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ETA |
Education Tuition Allowance |
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FIND |
Family Information Network for Defence |
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FLO |
Family Liaison Officer |
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FSFP |
Family Support Funding Program |
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FSR |
Force Structure Review |
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FWSN |
Families with Special Needs |
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HMCs |
Housing Management Centres |
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HQADF |
Headquarters Australian Defence Force |
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INDMAN |
Manual of Salaries and Conditions of Service for the Permanent Forces |
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LOA |
Living Out Allowance |
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LOAFHA |
Living Out Away From Home Allowance |
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LWOP |
Leave Without Pay |
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MSBS |
Military Superannuation and Benefits Scheme |
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MWF |
Members with Family |
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MWOF |
Members without Family |
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NAB |
National Australia Bank |
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NCGSS |
National Consultative Group of Service Spouses |
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NCO |
Non-Commissioned Officer |
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OSS |
Occupational Superannuation Standards |
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PSS |
Public Sector Superannuation Scheme |
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PTC |
Principal Tenant Concept |
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RDFWA |
Regular Defence Force Welfare Association |
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REDLO |
Regional Education Liaison Officer |
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SDA |
Sex Discrimination Act |
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SRCA |
Safety Rehabilitation and Compensation Act 1988 |
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SVETS |
Services Vocational and Educational Training Scheme |
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TAA |
Temporary Accommodation Allowance |
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TAASA |
Temporary Accommodation Allowance in Serviced Apartments |
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TRA |
Temporary Rental Allowance |
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VEA |
Veterans' Entitlements Act |
This paper, a full revision and update of a Background Paper written in November 1990, provides a survey of conditions of service in the Regular component of the Australian Defence Force. It is essentially a reference paper, giving a general outline of the background to policy, the existing policy, and some of the problem issues that remain. Generally the aim is not to analyse issues and policies but to provide basic information on a variety of personnel matters which are often complex, hopefully equipping the reader with a context for issues that may arise.
In twelve chapters information is provided on:
There are issues to be debated in each of the above topics. But some areas, such as housing and regulation of ADF pay, are particularly subject to debate at present, and these chapters contain more analysis of issues. Other chapters, such as those dealing with allowances and leave provision, are very largely descriptive.
Many readers will be interested in only one or two subjects and will want to confine their reading to the relevant chapters. Hopefully the Contents Table has been given sufficient detail to facilitate the finding of most subjects. Chapter 1, the Introduction, gives some background information and discusses issues which are relevant to most, if not all, of the following chapters. One example is the posting requirement, the compulsory rotation of personnel from location to location.
Chapter 2, written by Derek Woolner, tries to put the conditions of service area in its economic context. It is essentially an economic introduction to the paper.
Throughout this paper the term 'Defence' refers (in context) to either the Department of..., the Defence Force, or both as the whole Defence organisation. Where 'defence' is used with no capital it refers to the subject or field, not the Defence organisation.
Members of the regular Defence Force constitute a microcosm of society. The Services employ people with skills and professions extending across the entire civilian work-force spectrum. Many tasks they perform, and circumstances of employment, however, have no civilian equivalent.
In looking at conditions of service this paper will cover some benefits and drawbacks of service life; financial rewards of pay, allowances, gratuities and bounties; compensation and reimbursement; and the machinery for regulating service conditions. Each chapter warrants a paper in its own right; this paper can, at most, provide for each area a general outline of the background to policy, the existing policy, and some of the problem issues that remain.
The costly, and often lengthy, initial and continuation training makes retention of trained personnel a major objective of any conditions of service consideration. Although a sense of patriotism, service and adventure still play a part, the constant demand to attract adequate numbers of suitable recruits from an increasingly sophisticated population requires the frequent review of realistic incentives. Standards in the Armed Forces are high (81.8 per cent of applicants were rejected in 1996-97)(1) and despite continuing high unemployment levels the labour market remains in many areas highly competitive.
In some ways the title of this paper is a misnomer in that it deals not only with 'conditions of service'. Conditions of Service are the entitlements which members of the Armed Forces can draw upon from time to time, such as pay, allowances, accommodation and compensation, whereas the paper also covers such things as child care and education assistance which are more accurately termed 'conditions of employment'. The ADF, as a responsible employer, provides assistance in these areas for two reasons: first, because its main concern is operational efficiency, and Service personnel will be more effective soldiers if these areas of their lives are secure. Secondly, to attract and retain the more capable young people in society it must keep up with changing lifestyles and social requirements. People will only take on the burden of Service life if certain needs are met. Indeed, such are the expectations that young people bring to their jobs that the grey area between conditions of service and these 'conditions of employment' is becoming even more blurred, with assistance in an increasing number of areas necessary if the ADF is to attract and retain happy, efficient personnel.
The genderless term 'member' will be used throughout to describe regular servicemen and servicewomen of all ranks and Services. With a few exceptions only Army ranks will be used in this paper. These also refer to equivalent ranks in the Navy and Air Force; use Appendix A as a guide if needed.
Conditions for the Reserves are not covered in this paper. In general terms, however, Reserve remuneration is a fixed proportion of the regular Defence Force rate, and where Reserve members serve under the same conditions as Regulars, regular provisions generally prevail. The paper also says nothing about the civilians who make up the Department of Defence and whose experience and expertise is essential to a well-run Defence Force.
There are currently about 57 200 members in the Australian Defence Force (ADF), of whom 12 600 are officers, including 1660 officer trainees. About 7700 are women. Approximate numbers in individual services are as follows:
| Navy | 14 700 (2850 officers; 240 officer trainees) |
| Army | 25 880 (4460 officers; 740 officer trainees) |
| Air Force | 16 630 (3620 officers; 580 officer trainees) |
The average age of members is 30 with more than 30 600 under this age. 26 743 members, or slightly less than half the force, are married. At present the average length of service is 11.6 years for officers and 9.6 years for other ranks. Retention of the longer serving, experienced and fully trained member, who is usually married, is seen as vital for the continuity of Defence Force expertise.
The single most important item is salary. A salary structure which recognises the nature of employment in the 'defence industry' must be able to attract and retain suitable young Australians. Essential components of a salary structure include compensation for arduous and dangerous situations, for long working hours, and for disabilities to families caused by Service life. Expenditure necessarily incurred as a result of Service requirements should be met in the first instance, or reimbursed. Facilities such as accommodation of acceptable standard must be provided. Assistance must be given to the member's family to meet legitimate needs, in acknowledgment of difficulties experienced. Provisions for transition to civilian life, recognising the member's disadvantage compared with those who have always pursued civilian careers, should be made. A retirement scheme tailored to the unique nature of Service careers is the final ingredient.
The question of the unique nature of the military is an important one, and was well expressed in the 'Cross Report', the Joint Committee report in 1988:
Graham Glenn, in his 1995 report Serving Australia, emphasised other unique aspects:
This uniqueness tends to lose its sharpness, at least in society's mind, during a long spell of peace, and some would claim that the major threat to Service life is the steady move towards conditions which fail to reflect and properly compensate this uniqueness, and tend to place military personnel gradually closer to the public servant. Certainly there have been examples of this, but it must also be recognised that the Defence Force is not totally unique, to be treated in isolation. It is ironic that some of the worst discontent in the 1980s was due not to the Defence Force moving closer to the public service and the rest of society, but to the failure of Defence facilities and institutions to keep up with prevailing standards in society. Housing and barracks disrepair, and the wage freeze from 1982-83 are two examples. The danger has been that, in being treated differently, Defence personnel may be treated worse. Fortunately there appears to be increasing recognition by both political and military leaders that, assuming an effective Defence Force is essential to Australia's future (i) an important element of this effectiveness is a well-trained and generally contented membership (ii) this general contentment, which leads to retention of experienced personnel, can only be achieved if the ADF meets key community expectations.
The unique aspects create special needs, and it is important that these needs be defined and that appropriate institutions and rewards are in place to deal with them. Where Defence circumstances and roles parallel the civilian sector, members can expect to receive similar treatment. Superannuation was an example of an area of Service conditions where change was overdue and a move towards civilian standards unavoidable, but where the new scheme, the proposed Military Superannuation and Benefits Scheme (MSBS), both omitted the major defects of the old scheme and offered features unique to the ADF.
Some studies have expressed apprehension that the vision of a unique institution may be lost within the military itself. In their 1990 report 'Facing up to the Future',(4) Dr N. Jans and J. Frazer-Jans discussed the tendency for a greater emphasis on personal goals and values to clash with what have been traditional values of loyalty to the military institution and one's military career. They concluded that to counter the trend to regard the military as being like any other occupation, caused by over-emphasis on such things as the 'remuneration package', an extra effort is required to reinforce institutional values. In particular they recommended a revitalisation of leadership practices in the ADF, mainly by better training and longer spells by leaders in specific units.
Although very high professional standards are generally required, involving intensive training and dedication, for the majority of members the Defence Force is not a long term career. Although recently extended, statutory retiring ages are still lower than the civilian norm.(5) Other Rank servicemen and women in Army and Navy are required to serve for a minimum initial term of four years (for a non-technical specialisation) or six years (for a technical specialisation). The RAAF's initial minimum terms are three years and six years. After the initial term, there is 'open ended engagement', with the member free to continue service if he or she chooses.
Unlike public servants, members have had little or no protection in employment, and a career can depend on the international situation or government decisions, as illustrated by the May 1983 decision to disband the fixed-wing elements of the Fleet Air Arm, which made some 900 Naval postings redundant. Similarly the 1991 Force Structure Review reduced the ADF by around 11 000 members in five years; although the Review saw over 4000 civilian positions also disappear, and certainly public servants have lost some security of tenure recently. The intention with the 1997 Defence Efficiency Review (DER) recommendations is that military positions will be generally reallocated from support to combat and combat-related functions but it is certain that many ADF personnel will become redundant. In addition to this insecurity, employer-employee relations in the ADF can extend into most aspects of a member's life.
To balance some of the drawbacks, there are aspects of Service life which are attractive to many people. The ideal of worthwhile patriotic duty appeals to some; others seek adventure, comradeship, travel or a sense of belonging; operation of complex and deadly machines and weapons in scenes of legitimised violence is a common recruitment theme.
Longer term benefits include the opportunity to exercise real leadership and responsibility early in life; a large variety of job openings, some providing technical training and experience valued in civilian life; and avenues for personal development in a kind of uniformed welfare state.
The ADF is a numerically small military organisation by world standards but its units are dispersed throughout a large country. It is acknowledged that the process of posting personnel at regular intervals to a wide variety of locations across the country is a basic part of Service life, for such reasons as replacing people who leave, assisting career development, and providing specialised training to meet Service requirements. All of these posting reasons are necessary to establish and maintain the operational effectiveness of the ADF. As the RAAF Personnel Information Handbook states: 'The rotation of personnel through operational units and staff and training appointments is an essential requirement in the peacetime Defence Force'.(6)
The mobility of ADF members poses a number of problems, particularly for married members for whom economic considerations, and the importance of such things as spouse employment and dependants' education, produce an increasing need for geographic stability. As Graham Glenn states: 'Without doubt, the mobile life style of ADF families is the primary source of service related stress on families.'(7) Many of the matters discussed in this paper stem from the posting requirement.
The ADF has accepted the need to minimise posting turbulence. Following a review of posting policy in 1986-87, the Chief of the Defence Force (CDF) directed the Services to aim for a normal posting period of three years, and instructed that back-to-back postings be achieved where possible, with personnel staying in the one geographical location for two or more successive postings. In June 1993, CDF issued a posting Directive with the aim of reducing posting turbulence in the ADF. Major features of this policy again included a standard posting period of three years where possible; in addition, the retention of members in one geographic location for a minimum of four years was specified. Available figures indicate that, despite the CDF Directive, mobility remains high in the ADF. In financial year 1995-96, the ADF issued 30 222 postings amongst an average force strength of 57 965 i.e. 52 per cent of total strength, which is practically identical with the 1991-92 percentage, and similar to percentages in the interim years. In 1995-96, the majority of postings for each Service were two years or less.(8) The emphasis in the ADF towards sharp-end capabilities through such measures as the reduction in administration and base support, and the general shift to remote locations, suggests a move away from urban areas and more pressure on the Service family.
In their 1990 report Facing up to the Future, Dr N. Jans and J. Frazer-Jans borrowed from the Scandinavian example in recommending that a tax-free bonus of up to three months salary be offered to married members to encourage relocation by Service families to remote localities or unpopular areas(9). In 1995, Glenn proposed a 'Mobility Allowance', which he claimed would provide an incentive to relocate, assist with the turbulence experienced, such as disruption to schooling and spouse employment, and compensate for certain costs incurred. This concept is currently being developed within the Defence Personnel Executive.
When the previous edition of this paper was written in December 1990, the ADF had spent several years fighting a losing battle to retain personnel. Separation figures had remained high since 1986, and prompted a report on personnel wastage by the Australian Parliament's Joint Committee on Foreign Affairs, Defence and Trade. Ironically the solution to the separation problem emerged some years later when the recession and high unemployment effectively slowed the exit from the Forces. The Joint Committee saw erosion of Service conditions as one of the significant factors in the increased separation rate, a conclusion which the ADF seems to have taken seriously. Whereas the 1980s saw several institutions e.g. the Defence Force Remuneration Tribunal and the Defence Housing Authority, set up to meet long-standing needs, the 1990s have seen detailed studies take place on specific aspects of Service life-housing, personnel without families, women in the Forces, child care etc. This has been an encouraging trend. As a generalisation, whereas traditional defence policy was rather to throw money at a problem, the present procedure is to hire an expert to examine the issues involved. One reason for this seems to have been the strategic decision that the ADF deploy to the north and west, and the realisation that the success of this deployment depended on proper support from personnel and their families.
Nevertheless it does seem that comparatively high wastage figures, at least among skilled personnel, will continue to be a problem. This need not necessarily indicate discontent with the Forces so much as a conforming to the changing standards of Australian society; for example, the tendency for young people to change jobs much more frequently than in the past. Also the ADF's posting requirements conflict sharply with some current values, e.g. the demands for geographical stability in one's home, educational opportunities for dependants, and careers for spouses. As Dr Jans wrote in 1990, such factors 'decrease the probability of the selfless, long term service which the military has come to expect and plan for'.(10)
Among the many recommendations in the Jans Report, one particularly relevant to a paper on conditions of service is the proposal to extend to members 'committal bonuses' i.e. payments made in return for a commitment to serve for at least a further period. Thus it is advocated that for 'other ranks' in select categories, two committal bonuses be paid, one at five years and one at 10 years, the amount being equivalent to four months pay, or six months pay for the most valued categories, both tax free. All officers should be offered a similar bonus after 10 years. The Jans Report argues that, in the long term, such investment would prove economical in training and in administrative posting costs.(11)
The previous edition of this paper, in 1990, made extensive use of the Cross Report. This present edition draws on the Glenn Report, the report Serving Australia: the Australian Defence Force in the Twenty First Century by Graham Glenn, released in December 1995. Glenn's summary list of his 120 recommendations are included at Appendix D. A good summary of his findings is perhaps contained in the following seven 'consistently recurring themes' which emerged from his contacts with members:(12)
Following this list, Glenn provides balance and focus with this reminder:
In making his proposals, Glenn, of course, was not burdened with the responsibility for providing the resources to implement them. Nevertheless, the Glenn Report is a stimulating study, and it would be unfortunate if political considerations consigned it to a shelf. It is encouraging that later reviews seem to be picking up and promoting many of his themes.
The Defence Efficiency Review (DER) was established in October 1996 with an overall aim of making recommendations for reform of Defence management and financial processes, and the report was published in March 1997. Its main effect on personnel issues was in personnel administration. The creation of a single Defence Personnel Executive from 1 July 1997 will generate savings by coordinating a number of personnel management functions previously distributed between the three Services and ADF Headquarters (HQADF). For example, a Defence Health Service has been formed from the existing health and related staffs of current Service and civilian Programs and this Health Service has become part of the Defence Personnel Executive Program. Savings from this health initiative should lead to reductions in personnel, compensation, facilities and materiel costs and are estimated to be $23 million per annum.(14)
In April 1997, the Defence Minister, Ian McLachlan, announced the Defence Reform Program (DRP), a plan to put the 70 findings and recommendations of the DER into effect. And in September 1997, he made a further statement to Parliament outlining DRP progress and anticipated outcomes.
Specific DER recommendations will be mentioned at relevant points in the paper, but another result of the DER for personnel generally is a possible move away from the traditional paternalistic relationship between the organisation and the member, which has seen the ADF take the responsibility for career development and the provision of virtually all needs e.g. housing, education, health.(15) In future, greater choice and responsibility could be given to members in meeting their housing needs and maintaining health standards. However, it is likely change here will be subtle rather than radical. While Service families do not expect a paternalistic meeting of every need, they will continue to want intelligently directed support in many areas.
The DER Report was published in two volumes: first, the Report proper, consisting of views accepted by the Review Panel. Throughout this paper, this volume will be referred to as the DER Report. The second volume was the Secretariat Papers, an addendum to the Report, consisting of advisory material only. This volume will be referred to as the DER Secretariat Papers.
This chapter is intended to provide a background to the discussion of specific issues of Service pay and conditions. Obviously, the extent to which these issues can be addressed, when responses to them have financial implications, is determined by the amount the Government is prepared to devote to defence and by the priorities for expenditure within that amount.
A summary is given of the restriction of defence spending over the last ten years and the efforts of the Department of Defence to identify management efficiencies which would release funds to allow initiatives identified in various White Papers to proceed. The characteristics of these efficiencies have been the sale or corporatisation of Defence shipyards and factories, a number of tasks previously performed by the Services or Defence civilians being contracted-out, and reductions in the numbers of ADF and civilian personnel. Between 1984 and the early years of the 21st Century, Defence will have reduced staffing by more than 39 000 Service and civilian positions and gained savings perhaps approaching $1.5 billion.
To date, the majority of funds freed by management efficiencies have gone to improving pay and allowances. For instance, 75 per cent of the $450 million released by the Force Structure Review, between 1991 and June 1996, has been used to improve Service and civilian salaries and allowances. However, this was a trend running against policy, which was to use the majority of the savings for equipment and to improve Service capabilities. The cost of introducing currently planned additions to ADF equipment, the pending retirement of significant numbers of expensive equipments from about 2007 and the need to improve identified deficiencies in ADF capabilities, indicates that there may not be as much capacity to improve Service pay and conditions in future Defence Budgets as there has been in the past seven years.
In promoting the 1987 Defence White Paper The Defence of Australia (DoA87), the (then) Defence Minister, Kim Beazley, argued that the traditional basis of the politics of defence was, henceforth, dead. This had been the cry that government should spend more on defence in response to any perceived shortcoming, and particularly, the claim that the Party which promised to spend more on defence had the better policy. Now, Beazley argued, the development of defence policy had been given a logical structure in DoA87, which would transform the argument from one of how much was being appropriated into that of how well defence funds were being managed to achieve objectives.(1)
The view of the then Minister was to prove a correct interpretation politically, in that the major parties did not thereafter contest defence policies on the basis of which would spend the most, but it proved to be incomplete. Although Minister Beazley hinted that defence objectives could now be obtained without substantial increases in expenditure, DoA87 predicated that the developments it foreshadowed were based on the defence function being funded at a rate 'generally within the order of 2.6 per cent to 3.0 per cent of GDP'.(2) In reality, however, the defence budget was one of those areas which was required to contribute to the tightening of Commonwealth fiscal policy in the aftermath of (then) Treasurer Keating's warning that the circumstances of Australia's balance of payments placed the country at risk of becoming a 'banana republic'. As can be seen from Table 1, in the financial year immediately following the release of DoA87 the proportion of GDP allocated to defence was reduced from the 2.5 to 2.6 per cent which had prevailed since the beginning of the decade, to 2.3 per cent and (in general) has thereafter been reduced further.
Indeed, only four years later, the Force Structure Review 1991 (FSR) reported that there had been no real growth, on average, in the defence budget since the release of DoA87 and concluded that continuing the defence budget at this level of allocation would mean that only three-quarters of the planning in DoA87 could be implemented over the next decade. If, instead, defence funding was cut by an average of one per cent, only half of the plans could be implemented.(3) The significant financial management problem cited was that the commitment to pay for equipment which had already been approved was the highest ever incurred by the Department of Defence and that, at current levels of funding, this left little capacity to handle competing priorities, such as military salaries, in coming years. The response embodied in the FSR was to implement a series of management efficiencies, staff reductions and the commercialisation of some functions, to allow Defence to broadly achieve its planning objectives with stable (no real increase) funding.
The current difficulty for defence management is that, instead of staying stable, funding has instead fallen in real terms. From 1989-90 the Defence Budget has been held constant or reduced in real terms with the effect that the 1996-97 budget was 2.23 per cent less, in real terms, than that of 1988-89.(4) By 1994, the White Paper Defending Australia (DA94) was saying that continuing management efficiencies could support the development of military capabilities only until the last few years of the decade. After that, and throughout the first decade of the 21st Century, real growth in defence funding, sufficient to hold Defence Outlay at a level of about 2 per cent of GDP, would be required.(5) The demand for additional funds would be driven initially by conflict between the costs of new equipment programs and those of improvements in personnel remuneration (with the latter expected to absorb most of the gains of management efficiencies). However, from around 2007, most of the funding pressures would be generated by the impending retirement of large sections of the Australian Defence Force's most expensive types of equipment at about the same time, a circumstance referred to as 'bloc obsolescence'.
Any increase in defence funding is not yet in prospect. The Government came to power promising to retain defence spending at the levels planned by its predecessor. This was for real reductions of 0.5 per cent in 1995-96 and 1996-97 and for the real level of funding then to be held constant until the turn of the century. Although he personally supported funding real increases in Defence Outlay, the incoming Minister, Ian McLachlan, was quick to emphasise that, nonetheless, there would be no possibility of any increase in defence spending during the forthcoming three years.(6) The Government's approach has been to further pursue management efficiencies within Defence, funding the development of ADF capabilities into the beginning of the next century, but also to provide an exemplar to support the argument for an increased defence budget early in the 2000s.
After the early implementation of an election policy to transfer $125 million from administration to the development of ADF capabilities, the Minister proceeded to a full scale overhaul of defence management with the DER. As noted above, the DER proposed many changes in the organisation and work of ADF and Defence staff most of which are now being implemented under the title of the Defence Reform Program (DRP). The objective of the DRP is, once again, to improve the efficiency of defence function management so that further funds can be released to allow the improvement of capabilities in the ADF's combat forces. In this regard the DER reported that its recommendations could result in one-off savings, expected to reach $500 million (mostly through the sale of Defence properties), and further recurrent savings, currently estimated to release $900 million and, perhaps, more than $1 billion.(7) These economies are in addition to the estimates that a range of associated efficiency programs, set in place by the FSR process,(8) had generated recurrent annual savings of $450 million by June 1996,(9) which would reach $530 million by 1999-2000.(10)
The salient characteristic of these attempts to reallocate funds within the Defence portfolio has been the significant reduction of personnel numbers. Under the FSR process, 16 210 ADF and civilian positions were removed between June 1991 and June 1996.(11) The DER estimated that its recommendations would lead to the reduction of a further 7800 ADF and civilian positions, although the Government will relocate 'at least' 2000 Service personnel to positions in the combat force.(12) Significant reductions in Defence staffing are not just a product of 1990s style searches for management efficiency, however. In the previous six year period, between June 1984 and June 1990, Defence personnel numbers fell by over 17 900, most of them (over 14 600) being civilians.(13) This movement was due to (mostly) a change of function, as dockyards, munitions factories and other Defence production facilities were privatised or corporatised and the responsibility for funding their staff was removed from the defence budget.
The principle effect of this history of management efficiencies and cost cutting is that the ADF is becoming a comparatively small force. The Chief of the Defence Force, General John Baker, has predicted that by the turn of the century the ADF will number 'about 50 000'.(14) At the end of 1980-81 there were 72 520 in the ADF and the latest figure is 57 423, as at 31 March 1997. This significant reduction in numbers represents a refocussing of ADF activities on combat and essential technical support areas, with reductions of uniformed members employed in non-combat related support areas such as administration.
The lesser numbers of ADF personnel is also a reflection of developments in military technology, where the increased capability of systems tends to reduce the requirements for military personnel in important areas of capability. For example, the Collins Class submarine requires half the crew of its predecessor. However, as a consequence, the levels of skill required to operate these systems have increased and defence management has recognised that this factor would be 'reflected in expectations for remuneration and other things in personnel costs in the future'.(15) It could also be expected that, as these changes take effect, a higher proportion of Service personnel will be entitled to combat-related allowances, in addition to any change in their base rate of pay.
Indeed, the Minister has said that a proportion of the DRP savings would go to improving the remuneration of those personnel who were retained in the restructured organisation. This would not be a new process for Defence. In fact, the majority of the savings made under the FSR process have been utilised in improving wages and conditions of Defence civilian and Service personnel. A move towards productivity based pay increases in the Australian Public Service in the 1990s, with government agencies largely being expected to fund pay rises from within existing budget appropriations, was also applied to Defence and has meant that over recent years the Department has allocated $340 million per annum from within its Budget to pay for increases in salaries and allowances.(16) This is an amount equal to 75 per cent of the savings generated by the FSR process at the end of 1995-96.
The current projected loss of ADF positions as a result of the DRP is about 2700, which would reduce the Services to a total of some 54 700 positions. (General Baker's figure of around 50 000 may be an estimate of the impact of the proposal to further test which defence functions can be performed under contract by the commercial sector of the Australian economy.) A simple mathematical calculation indicates that a reduction of ADF personnel of 2700 will save over $153 million at the level of allocation proposed in the 1997-98 Estimates, which would represent a transfer of an additional 4.9 per cent to the remuneration costs of remaining Service personnel. This is not the same as a 4.9 per cent pay increase, as total personnel costs include charges which do not pass to individuals in fortnightly payments, such as superannuation, intermittent allowances, notional loadings for staff absences and so on. Defence has calculated that each one per cent rise in base salaries and wages for the ADF and for Defence civilians as the result of any productivity bargain will cost the Defence Budget $40 million,(17) which indicates that an ADF salary increase of about 3.8 per cent is the maximum which could be funded on the basis of currently known DRP proposals.
So, despite the large size of the projected DRP savings, it is not likely that these will presage a significant increase in ADF pay and allowances. The justification for the DRP was the need to identify significant amounts within the budget that could be diverted to ADF combat elements, paying for equipment programs in response to the looming bloc obsolescence problem. A need to fund forthcoming equipment programs has been the central objective of defence planning and reform programs since the publication of the 1976 white paper,(18) but none of the plans have made the objective any easier to obtain. Despite the savings of the FSR process and the continuous reduction of employment within Defence throughout the 1980s and 1990s, the Minister has said that 'the Defence Organisation was potentially facing a severe budget crisis ... after the turn of the century ... (and) drifting toward a point where the only choice was to cut capability.'(19)
Defence already expects to pay an additional $135 million from within its budget as an outcome of a current review of ADF personnel and housing and accommodation policies. The need to restrain any untoward expansion of Defence personnel costs has been further emphasised by differences in the dynamics of capital and labour price movements. Defence claims that analysis of its own experience has shown that the cost of the major capital equipment it purchases has increased at a rate of 4 per cent per annum in real terms.(20) Since 1985 there have been few years when the cost of labour, as measured by Average Weekly Ordinary Time Earnings (AWOTE), has exceeded inflation (measured by the Consumer Price Index) by more than a few percentage points.(21). The implication is that, for most of the past decade, it has been more difficult to keep abreast of capital funding requirements than those for remunerating personnel. Yet, to date, comparatively little of the funding released by management efficiencies has gone to other than personnel costs.
However, during 1996-97 AWOTE increased by 3.5 per cent, while the CPI increased by only 0.4 percentage points. It is difficult to know for how long wages growth will continue to run ahead of inflation and the comparability of income data is becoming more difficult as awards and conditions are simplified, leading to variations in the nature of labour cost data. The occurrence of a negative CPI for the year to September 1997 can only confuse the prospects for predicting prospective wages growth. Continuing low expectations of inflation may lead to negligible demands for salary increases from the ADF, whereas significant claims for catch-up increases could lead to Defence outlaying more for personnel costs than is generally being granted by other large organisations.
Although stating its commitment to improved wages and conditions for its personnel, the most pressing current financial priority of Defence is to fund the operating costs of high priority equipment programs currently under development and for which no allocation has been provided, as of now, in forward financial planning. These programs, which include Airborne Early Warning and Control aircraft and helicopters for the ANZAC Class frigates and Offshore Patrol Combatants, may cost an additional $360 million per annum when fully operational.(22) Such ongoing operational costs (that is, independent of the cost of acquiring the equipment) are in addition to the funding needed to overcome pressures effecting the logistics support and training required by the Services. Further, Defence must find the budgetary means to bring these capabilities into service before, in about ten years time, it looks for finance to address the bloc obsolescence problem (a general rule of thumb in military procurement is that it takes about ten years to introduce a new capability into service).
Analysis of Table 1 indicates that the current proportion of total Defence Expenditure allocated to Service and civilian personnel costs is well above the median point for the last 17 years, although in most cases the variations are small. This conclusion is not apparent from the table itself, which presents the official data. However, as explained in the box following Table 1, on page 18, there is a disjuncture in the series of annual proportions of total Expenditure, and therefore percentages for wages and salaries in financial years before 1992-93 are not comparable with current figures. After adjusting the proportions for earlier years by the percentage point variations as described on page 18, it appears likely that one would have to go back to 1983-84 to find a higher proportion of expenditure spent on personnel costs than the expected outcome for 1996-97 and the estimate for 1997-98.
Similarly, the current proportion of Expenditure allocated to new capital equipment is slightly below the median point. Although variations are mostly small, the 23.3 per cent of Outlay estimated to be spent on equipment in 1997-98 is well below the almost 30 per cent which was the proportion allocated in 1986-87 (allowing for revision of the data). Given the clear objective of the DRP to provide funding to overcome capability shortfalls and to address the bloc obsolescence problem, the proportion of Expenditure allocated to equipment must rise significantly in coming years. Correspondingly, this will see a fall in the proportion, of a fixed budget, which can be allocated to Service personnel costs. For reasons such as these, it is unlikely that the shape of future Defence Budgets will support a significant increase in the salaries and conditions of ADF personnel.
|
Financial Year |
Defence Function Outlay $million |
Defence Outlay As % of GDP |
Total Personnel Costs $million |
Total Personnel Costs As % of Defence Expenditure |
ADF Salary and Allowances As % of Defence Expenditure |
New Capital Equipment Costs As % of Defence Expenditure |
|---|---|---|---|---|---|---|
|
1980-81 |
3492 |
2.5 |
1816 |
49.6 |
32.5 |
16.0 |
|
1981-82 |
3886 |
2.6 |
2311 |
54.2 |
36.7 |
12.5 |
|
1982-83 |
4501 |
2.6 |
2466 |
49.9 |
33.0 |
17.4 |
|
1983-84 |
5056 |
2.6 |
2576 |
46.5 |
30.1 |
22.1 |
|
1984-85 |
5657 |
2.6 |
2721 |
43.7 |
28.0 |
25.9 |
|
1985-86 |
6333 |
2.6 |
3025 |
43.4 |
27.9 |
26.4 |
|
1986-87 |
6823 |
2.6 |
3091 |
40.8 |
26.5 |
25.7 |
|
1987-88 |
6967 |
2.6 |
3333 |
40.9 |
27.6 |
27.1 |
|
1988-89 |
7295 |
2.3 |
3534 |
43.3 |
27.7 |
21.8 |
|
1989-90 |
9913 |
2.1 |
3697 |
41.5 |
26.5 |
21.4 |
|
1990-91 |
8480 |
2.2 |
3877 |
40.8 |
25.8 |
22.6 |
|
1991-92 |
8731 |
2.4 |
4080 |
41.5 |
25.9 |
22.6 |
|
1992-93 |
9158 |
2.4 |
3456 |
34.3 |
26.1 |
23.4 |
|
1993-94* |
9746 |
2.3 |
3917 |
38.0 |
29.2 |
22.8 |
|
1994-95 |
9731 |
2.1 |
3810 |
36.9 |
28.4 |
23.1 |
|
1995-96 |
10 011 |
2.1 |
4007 |
37.8 |
29.1 |
22.5 |
|
1996-97 |
10 003 |
2.0 |
4156 |
39.1 |
30.2 |
22.3 |
|
1997-98 |
10 405 |
1.9 |
4239 |
38.7 |
29.0 |
23.3 |
Notes:
| *Figures for 'Defence Outlay' and 'Defence Outlays as % of GDP' for the years 1981-82 to 1993-94 are from Table L.1, Defence Report 1993-94, p. 322. This table substantially revised the figures previously given for the Financial Years 1981-82 to 1992-93, to reflect the decision taken in the 1993-94 Budget to remove superannuation contributions and refunds from the Defence Function Outlay. This makes the earlier figures consistent with those for Outlays post 1993. Adjustments for 1981-82 and for Personnel, ADF Salaries and Equipment expenditures as a proportion of Total Defence Expenditure for the years 1982-83 to 1991-92, are not available. In general, the adjustment appears to have resulted in 'Total Personnel Expenditure' declining as a proportion of 'Total Expenditure' by about 5 percentage points (39.4 per cent down to 34.3 per cent in the adjustment of 1992-93 Budget Outcome), reflecting the removal of the superannuation component from this appropriation grouping. Conversely, expenditure on 'ADF Salaries and Allowances' and 'New Capital Equipment Costs' increases as a proportion of total Expenditure (24 per cent up to 26.1 per cent and 21.6 per cent up to 23.4 per cent, respectively, in the adjustment), reflecting the decline in the size of Total Defence Expenditure as a result of removing superannuation. |
Most of this chapter will deal with the regulation of financial conditions of service, but it is important first to summarise the procedure by which policy on Service conditions is developed.
As a result of the Defence Reform Program, significant structural changes have recently taken place in the Defence Department's personnel activity. On 1 July 1997, an integrated organisation, the Defence Personnel Executive, was formed. This encompasses the former Headquarters ADF personnel area, the single Services personnel functions, the Department's civilian personnel area, together with some other activities such as Service and civilian health programs.
Proposals can originate from many points-internal committee reports, external reports such as Glenn's Serving Australia, or from sections within Defence. But traditionally the principal sources of initiatives, and the areas where proposals have been prepared for further consideration, have been the Service Conditions Sections of the individual Services offices and, more particularly, the Personnel Division within Defence Headquarters. Personnel Division is divided into the Pay and Conditions Branch, dealing with financial matters, and Personnel Policy and Plans Branch and the Defence Community Organisation, both dealing with non-financial matters. After initial development by the staff in these areas, traditionally a proposal would be presented to what was for years called the Defence Force Personnel Policy Committee (DFPPC), but which in June 1996, following a recommendation of the Glenn Committee, was renamed the Defence Personnel Committee. The Committee has traditionally comprised:
Chairman: Assistant Chief of the Defence Force - PersonnelMembers: Assistant Chief of the Naval Staff - Personnel Assistant Chief of the General Staff - Personnel Assistant Chief of the Air Staff - Personnel First Assistant Secretary Human Resources
The Director General Services Conditions (DGSC) and the Director General Service Personnel Policy (DGSPP) were permanently invited members.
With the introduction of the Defence Reform Program, the positions of several members of the Committee were abolished, and the Defence Personnel Executive has yet to finalise future arrangements for personnel policy.
The function of the Committee has been to consider and accord priority to major ADF pay and personnel policy matters for endorsement by the Minister, or for submission to the Defence Force Remuneration Tribunal (DFRT) and the Department of Industrial Relations (now Department of Workplace Relations and Small Business) as appropriate.
After endorsement by the DFPPC the policies were developed by DGSC and DGSPP. Part of the development process has involved negotiations with the then Department of Industrial Relations (DIR). DIR, in considering its position, might discuss the proposal with other areas such as Department of Finance, Department of Veterans' Affairs and the Taxation Office.
The final step is still the same. Pay and pay-related allowances covered by Section 58H of the Defence Act are then submitted to the DFRT, while non-pay related allowances and other matters covered by Section 58B of the Defence Act are submitted to the Department of Workplace Relations and Small Business, (DWR&SB).
This subject will be dealt with in three parts; the system operating prior to 1985; the present system, centering on the DFRT; and current matters at issue within the system.
Kerr/Woodward
From 1947 to 1985, Service pay and allowances were under the control of standing Departmental committees, with ad hoc external advisory committees established from time to time. The most important of these, the Kerr/Woodward Committee of Inquiry, which was appointed in 1970, produced seven reports on formal conditions of service during the period 1970 to 1973. These introduced much-needed principles to govern subsequent deliberations, as well as reforming the structure of Service pay. For example, the traditional complex daily rate of pay was replaced with a civilian-style salary structure, including a Service Allowance to compensate for the disabilities of Service life, with a major component being payment in lieu of overtime. The system of numerous trade skill margins was replaced by six broad-banded pay levels ranging from unskilled to technicians. This broad-banded wage structure was, in fact, far in advance of the prevailing civilian wages systems, with their untidy multiplicity of awards and relativities, and formed the basis for the broad-banded system in place today.
The Committee of Reference for Defence Force Pay
The Committee of Reference for Defence Force Pay (COR) was formed in 1973 following a recommendation of the Kerr/Woodward Committee to establish independent standing machinery to deal with conditions of service. The most significant work of the COR, headed by Justice Coldham, a Deputy President of the Conciliation and Arbitration Commission, were the four reports, 'Adequacy of Defence Force Remuneration', produced between October 1980 and August 1982.
The COR mechanism suffered from severe deficiencies:
The Defence Legislation Amendment Act of 1984, which was assented to on 25 October 1984, established the Defence Force Remuneration Tribunal and the office of the Defence Force Advocate, defining the powers of each. The relevant sections of the Defence Act 1903, as amended by the 1984 legislation, are 58F to 58Q, with the functions of the Tribunal set out in section 58H. As the 1987 Defence White Paper notes: 'The establishment of a special tribunal for the Defence Force both recognises the special aspects of military service and acknowledges the convergence that has occurred between military and civilian employment. These arrangements better integrate the Defence Force into the industrial framework applying to the community at large.'(3) For the first time a body could determine pay and conditions rather than make a recommendation to the Minister.
The following appointments to the Tribunal were made on 22 February 1985: Mr Justice L.H. Williams, a Deputy President of the Australian Conciliation and Arbitration Commission, was appointed Chairman of the Tribunal; the other members were Mr A.S. Paine, a commissioner of the Conciliation and Arbitration Commission, and Rear Admiral N.E. McDonald AO RAN (Retd). Mr. D.M. Quick, Q.C., a barrister in industrial law and an officer in the Naval Reserve, was appointed Defence Force Advocate (DFA).
Principal Features
The following summary of the principal features of the Tribunal and functions of the Defence Force Advocate is taken largely from a paper by the first DFA, David Quick:(4)
It will be observed that the machinery of investigation and determination of rights is in many respects not unlike that which obtains in the Australian Industrial Relations Commission.(5)
A key feature of the Tribunal's functioning, the question of who represents the employees and who acts as employer, will be discussed later.
Defence Force Advocate
The legislatively defined functions of the Defence Force Advocate are:
The Defence Force Advocate has tenure for a period of three years from appointment or re-appointment and may be removed from office only by the Minister and then only on grounds of misbehaviour or physical or mental incapacity.
Advantages of the DFRT
David Quick summed up the most important features of the DFRT as follows:
Present Membership of the DFRT
The present membership of the DFRT is as follows. The President (formerly Chairman) is Hon. Justice A.J. Boulton. Rear Admiral K.A. Doolan AO (Retd) was appointed in March 1996 for a period of three years, and Commissioner Patricia Leary was appointed in February 1995 for a period of four years.
The present Defence Force Advocate is Richard Kenzie, Q.C., who was appointed in June 1996 for a period of three years after having served as Acting Defence Force Advocate from September 1995.
Determinations Made
In the approximately eleven years since it began its work in 1985 until June 1996, the Tribunal has made 199 determinations, ranging from National Wage Case Applications applying to all Regular Service personnel, to determinations relating to Allowances or to Reserve personnel. Of these determinations, 89 have been made in the last three years.
The creation of the DFRT has been a welcome step forward, but the system is still not without its problems, the most obvious being the challenge of adjusting to the new workplace relations environment. Some of these problems, as will be seen later, relate to the advocacy roles i.e. who is employer and who represents the employees i.e. the ADF members, when bargaining is to be done. Recommendations made in both the Glenn Report and the Secretariat Papers to the DER have given new emphasis to these and other issues. At present, the Chief of the Defence Force (CDF) represents the ADF members and is responsible (through his departmental staff) for initiating remuneration claims; the Department of Workplace Relations and Small Business (formerly Department of Industrial Relations) is responsible for the employer's i.e. the Commonwealth's, case. A number of suggestions for change have been made over the years, but it is virtually impossible to avoid the problem of conflict of interest in the system, especially concerning the CDF's role.
1. Is the Tribunal appropriate for workplace bargaining?
When the Tribunal was established in 1985, collective bargaining, or, more accurately, payment in accordance with the award system, was the prevailing industrial relations system. Wages decisions, often conforming to the Prices and Incomes Accord and driven by market forces such as inflation, applied across industries including the whole public service, and formed the basis of the agreed decision determined by the Tribunal. The cost of pay increases was then supplemented by the Government. However in October 1991, the Australian Industrial Relations Commission introduced provision for enterprise bargaining i.e. the direct negotiation between the employer and the employees at an enterprise concerning wages, work practices etc. In this more decentralised wages system, pay increases are usually internally funded and can be linked to productivity a