T2599 and T2690
TASMANIAN INDUSTRIAL COMMISSION
Industrial Relations Act 1984
The Tasmanian Public Service Association
Minister administering the Tasmanian State Service Act
Award variation - Mainland allowance
In this matter The Tasmanian Public Service Association (the Association) sought the variation of subclause 16(1)(a) - Accommodation Allowance of the Tourism Tasmania Staff Award.
The "Accommodation Allowance" (the allowance) was first introduced into the General Conditions of Service Award as a result of proceedings in matter T299 of 1985.
Subsequently this provision was removed from that particular award and included in the Tourism Tasmania Staff Award because only employees subject to that award are entitled to the allowance upon transfer from Tasmania.
When the allowance was first determined a review mechanism to facilitate the adjustment of it was also included in the General Conditions of Service Award. This was subsequently deleted from that award and included in the Tourism Tasmania Staff Award as subclause 16(3) in the following terms:
Review of Accommodation Allowance:
The Real Estate Institute of Australia (REIA) review data refers to median purchase price information relevant to mainland capital cities and Hobart. Accordingly the Association in compliance with the provisions of subclause 16(3) of the award requested the Commission to make the appropriate adjustment to the allowance.
For comparative purposes the existing allowance for each mainland capital city and the amounts proposed by the Association are set out hereunder:
It should be noted that the allowance was varied on at least one other occasion1 having regard to the provisions of subclause 16(3). At that time, the review resulted in increases in the allowance for Sydney and Melbourne and decreases for Adelaide and Canberra.
On this occasion increases would result for all mainland capital city locations specified in the award. As well Brisbane and Perth would be included for the first time.
Mr Smyth, appearing for the Association, tendered exhibit S1 detailing the methodology for adjusting the allowance. Briefly, median house and median unit purchase prices for each capital city are taken into account to produce an average price for each location. The average price is compared to the average price for Hobart which is also derived from median house and median unit price information.
The allowance is then calculated by taking 10 percent of the difference between the Hobart price and those in each mainland capital city. The result is multiplied by 1.702 representing a component for taxation.
Mr McCabe appearing for the Minister Administering the Tasmanian State Service Act, 1984 (the Minister) indicated that he could not contest that the Association's application was in accordance with the "formula as set down in decision T299 of 1985"2.
Mr McCabe said:
In respect of the Wage Fixing Principles, Mr McCabe contended that the adjustment of the allowance for Sydney ($16860 pa) exceeded the level of the change in expenses incurred by employees when regard is had to rental costs as opposed to median purchase price information.
It is well understood that the Allowances Wage Fixing Principle (the Allowances Principle) stipulates, among other things, that existing allowances which constitute a reimbursement of expenses may be adjusted to reflect the relevant changes in the level of the expenses incurred.
Mr McCabe submitted that the existing formula based on median purchase price information provided by the REIA does not produce an outcome which conforms with the Allowances Principle.
Given the disparity between the respective positions of the Association and the Minister, I acceded to Mr McCabe's request to adjourn the hearing for further discussions to take place between the parties.
Joining of Applications
During the period of adjournment the Minister also made application to vary the award. The application contemplated the deletion of all Mainland Allowance provisions from the award and inserting in lieu new Transfer Allowance arrangements.
Subsequently on resumption of hearing I informed the parties of my intention to join both applications.
This was supported by Mr McCabe, but strongly opposed by Mr Vines appearing for the Association.
Mr Vines said:
Mr Vines also referred to an earlier Full Bench decision3 of the Commission where it was indicated in respect of the variation of Mainland Allowance that only one application was required.
The Full Bench said:
It is important to place in context the above comments made by the Full Bench. They were made because the Association sought to vary only those allowances which would increase consequential to the review mechanism in subclause 16(3) of the award, and not those which having regard to the same review processes, would have decreased.
It was in regard to those circumstances that the Bench observed that one application should comprehend the whoLE outcome of the application of the review processes and that there was no need for a separate application to be lodged by the Minister to have the Commission consider allowances that may have reduced as a result of the review processes.
The predominant concern of the Association to the joining of the applications related to what was said by Mr Vines to amount to "the preparedness of the Commission to vary indexes. To vary the application of indexes ... previously agreed."4
He submitted that the "rules"5 that should be adopted in respect of adjusting the allowance are those currently set out in the award and that changes should only be made prospectively.
In the final analysis and having regard to the submissions placed before me I decided to join the applications for hearing purposes.
Mr McCabe submitted that the Association's application should not be granted. He said that since the introduction6 of the allowance in its current format, the allowance had increased substantially and in the case of Sydney "over fourfold" but notwithstanding there still existed a reluctance by Tasmanian based employees to transfer interstate. He said:
Mr McCabe explained that the current allowance in the award was based on two components. One was to meet higher rental costs and the other for additional living costs.
He said that rental costs would result in the allowances in the award reflecting the proper intent of the allowance.
It was submitted by Mr McCabe that reliance on the method of adjustment of the allowance contained in the award would result in outcomes significantly higher than if median rental cost data now available from the REIA is relied upon.
The reason this aspect was particularly highlighted by Mr McCabe was to reinforce his contention that to adjust the allowance in accordance with the award would be in breach of the Allowances Principle.
He also wanted to highlight that the rationale behind the allowance was to enable the reimbursement of employees for the difference in rental costs between Hobart and other mainland capital cities and not to provide windfall salary increases.
A further reason for the Minister's opposition to the variation sought by the Association was because the allowance is only paid to employees recruited from Tasmania.
Mr McCabe said that a supervising travel consultant with Tourism Tasmania in Sydney would, if the allowance for that city was adjusted in accordance with the current award provision, receive a higher level of remuneration than that manager in that location.
He submitted that the allowance was anomalous and inequitable having regard to costs incurred by employees when they are transferred or promoted from a capital city where costs are comparatively cheaper compared to the capital city they are being transferred to.
To overcome this Mr McCabe submitted that the Minister wanted to achieve a more equitable allowance which would be available to all employees required to transfer between capital cities.
Mr Sproule, who appeared with Mr McCabe, said that in the event the application by the Minister was successful the intention would be:
In brackets mine Transcript p31
Mr McCabe argued that I should reject the application by the Association essentially because:
The application made on behalf of the Minister, as amended on 25 September 1990 contemplated the variation of the award to incorporate a Transfer Allowance based on REIA median rental information.
Having regard to that information the respective allowances, as set out in exhibit Tourism 1 would be as follows:
The actual differential in costs between Hobart and the above mainland capital cities represents the reimbursement available to employees. For example the allowance for Sydney would be $15709 less $9293 = $6416 per annum of $123 per week.
This may be contrasted with the award adjustment for Sydney sought by the Association which would be $16860 per annum or $324 per week.
The differences for the other capital city locations are as follows:
The amounts in the Minister's proposal represent the actual difference in rental costs between Hobart and the above capital cities.
Mr McCabe submitted that the intention would be for the transfer allowance to continue to operate for a period of two years, adjusted only by reference to the "applicable rates" in the REIA's "Annual Review of Major Property Markets in Australia".
After the two year period the transfer allowances would be reduced by 20 percent each year to a residual value of 40 percent of the original value of the allowance, albeit that regard would be had for REIA median rental costs.
The residual value of the allowance would continue to be paid in perpetuity for as long as the employee remained in the transferred location as an employee of Tourism Tasmania.
In respect of existing employees Mr McCabe said:
Mr Sproule further clarified this proposed variation by indicating that the intention is to reduce the mainland allowance for existing employees by 20 percent after a two year period, followed by further 20 percent reductions until a residual value of 40 percent is reached.
Existing employees would continue to receive the mainland allowance based on the current amounts in the award until such time the new transfer allowance provided a superior outcome for individual employees.
The Excess Costs Allowance component of the mainland allowance was also requested to be varied by the Minister.
In that regard Mr McCabe proposed a reduction after a five year period in the quantum of the allowance by 20 percent per year to a residual value of 40 percent; which would be paid in perpetuity.
Mr McCabe submitted that the transfer allowance could be awarded by the Commission in accordance with the Allowances Principle which comprehended the creation of new allowances in circumstances where the new allowance is to compensate for the reimbursement of expenses incurred by employees.
Mr McCabe submitted that the Minister's proposals would not provide an over or under subsidy and is therefore "more in keeping with the public interest than the current method of calculating the mainland allowance"7. He said for the Commission to adjust the allowance in the manner sought would not be consistent with the established principle behind adjusting expense related allowances and therefore would not be in the public interest.
In this matter I have endeavoured to highlight the respective positions of the parties and to canvass the principle issues.
In summary the Association seeks what my be termed the status quo because it is based on an index in the award previously agreed to by the parties and which by definition can only be applied after the relevant information is to hand. That is, like most indices which measure fluctuations in the level of expenditure and costs incurred, the median purchase price information has retrospective application.
The Association argued that the Commission should endorse what had previously been agreed and that the "rules" should not now be altered.
The Association submitted that any change to the current award review mechanism should be made prospectively and it agreed to participate in a review of existing arrangements.
On the other hand the position of the employer was that the allowance is no longer equitable because it differentiated between employees depending on place of recruitment and/or transfer; it is the cause of dissention between those receiving the allowance and those who do not; it significantly distorted internal salary relativities specifically in the case of Sydney; the current index is contrary to the provisions of the Allowances Principle, and in any event it does not produce outcomes consistent with the intent of the allowance.
The proposal submitted on behalf of the Minister would, in the main, result in allowances significantly below those specified in the award at present. Even greater differences would result in the event the existing award allowances were adjusted by the application of the award review mechanism.
This is illustrated as follows:
Note 1 The amounts in the column above headed "Minister 1" are those which are derived from the REIA's median rental cost information.
Note 2 The amounts in the above column headed "Minister 2" are less the Hobart median rental cost of $9293 per annum.
The difference between the Minister's proposal and the variation requested by the Association can be ascertained by calculating the difference between the amounts shown in the above columns headed "Award Adjustment" and "Minister 2". Those calculations produce the following differences:
*For Brisbane the amount of allowance is exceeded having regard to the allowance for that location in the Minister's proposal.
With the exception of Brisbane, the Minister's proposal results in lower outcomes when compared to the adjustments that would occur if regard was had for the award review mechanism.
Obviously the differences are because of the application of different review data, ie median purchase price information as contemplated in the award and median rental cost information as relied upon by the Minister.
There can be no doubt at all that the purpose of the allowance was to offset rental cost differences compared to Hobart.
The proposals put forward by the Minister to introduce Transfer Allowance provisions which would include an accommodation allowance based on median rental cost comparisons for every mainland capital city where Tourism Tasmania has employees is a significant departure from present mainland allowance arrangements.
I am of the opinion that there is little merit in a proposal which contemplates the payment of an allowance in perpetuity regardless of circumstances.
Further, an allowance which would recognise individual capital city rental cost differences would still create perceived inequities between those employees native to a particular capital city receiving the award salary and those transferred or promoted to that same capital city who would receive an allowance in addition to salary.
Accordingly I consider that the philosophy of the mainland allowance and as previously determined ie as a reimbursement of rental cost differences, confirmed by a Full Bench, should not be extended to all other capital city transfers.
In my opinion the existing arrangements should be reviewed by the employer having regard to the following provisions of subclause 16(2) of the award:
In that context the submissions made by Mr Smyth are relevant when he said that the ability to:
Clearly the Association recognises, and appropriately so in my view, that there may be circumstances where the employer may wish to give notice that an allowance for a particular employee may no longer be appropriate.
It would be entirely correct, in my view, rather than extending the allowance by way of a new transfer allowance provision, that the existing arrangements, having regard to rental costs, be tightened to have application where individual circumstances of employees have a direct bearing as to whether the allowance should continue to be paid or not.
In that regard I consider that it would be reasonable to review individual circumstances after a five year period away from Tasmania.
The issues in this matter arise primarily because of the skew in the existing allowance as a result of the proposed application of the median purchase price index.
There can be no doubt that the outcomes that would now result having regard to the median purchase price index are completely out of line with what the allowance was intended to do.
The parties are reminded that a Full Bench upheld an appeal, the effect of which was to remove an accommodation allowance for the purchase of property. The Full Bench indicated that they considered that the allowance was to offset rental cost differences between Hobart and other mainland capital cities.
The only reason that the median purchase price index was used in the first instance was because the REIA did not produce a rental cost index.
Now that it does, it is clearly the correct index to use. To do otherwise would so distort the allowances in the award so as to make them irrelevant to what was intended.
It is not my intention to vary the award to further distort the differences between rental costs and purchase costs even though this means a departure from what is contained in subclause 16(3).
There is an obvious flaw in the current formula to the extent that I consider that the public interest and the dicta of the Wage Fixing Principles are best served by making a correction at this time.
However, I am concerned that employees in receipt of the allowance currently specified in the award are not disadvantaged in respect of the amount of money they have been receiving, and which they may have budgeted on continuing to receive having regard to the standard of accommodation they have secured.
Accordingly I determine that the existing levels of allowances be maintained for a period of three years or until such time as the median rental costs exceed the allowances in the award; whichever comes first.
To that end new and existing employees who are entitled to the allowance are to continue to receive the level of allowance currently specified in accordance with the arrangement referred to above. The exception is Brisbane where the median rental based allowance is to apply because it is in excess of the amount of allowance that would result from the application of the purchase price index.
Also I expect the Minister and the Association to review the payment of allowances to individual employees in order to ascertain the justification or otherwise for the continuation of the payment being made. That review should have regard to the provisions of subclause 16(2) of the award.
In order to provide an appropriate datum point for the contrast of median rental price costs and the existing allowances, the award will be varied, operative from 1 January 1991, to include allowances for mainland capital cities based on median rental costs. Those allowances will be less the median rental cost for Hobart and accordingly will represent the net allowance that should apply when regard is had for that particular index.
It will be necessary for the parties to make application for the further variation of the median rental cost based allowances as and when the appropriate information is available from the REIA.
In that way the median rental cost based allowance will be able to be contrasted with the existing allowances in the award and the change over period will be able to be properly monitored.
Finally I intend to make no change to that part of the Accommodation Allowance that relates to excess costs.
The Order is attached.
R K Gozzi
Date and Place of Hearing: