The Age http://www.theage.com.au/news/20000217/A22555-2000Feb16.html Put free riders on employee entitlements out of business KENNETH DAVIDSON Thursday 17 February 2000 LET us not mince words. The use of employees' accumulated holiday, long-service, redundancy and other statutory entitlements by directors of a company is in the nature of an unsecured loan obtained without the knowledge or permission of the lender. Company directors should have no right to access these entitlements to improve the cash-flow position of the company. The money representing these liabilities of employers to their employees should be deposited in a trust fund as soon as they accrue, in the same way that companies are expected to pass on the PAYE income tax deduction to the Tax Commissioner, the compulsory superannuation levy to the relevant superannuation fund and their workers' compensation insurance premiums to the relevant insurer. Compulsion overcomes the problem of the free rider. All companies have to contribute in proportion to potential liability. Start-up companies would have very little liability, because even if they go bust there will be little liability for redundancy payments. Industry trusts, managed jointly by employers and employees, can accumulate capital, invest and earn income, which down the track can be used to improve entitlements and allow employees in industries and occupations with high staff turnover to accumulate long-service leave. Such a fund has already been established for eight years in the cleaning industry in Victoria. This overcomes the problem that most cleaners spend a lifetime in the industry, but their employment is based on short-term contracts. The fund ensures their long-service leave entitlements are portable. Less than a quarter of employees access long-service leave now. The proportion will be even less as security of tenure disappears from industries and occupations such as financial services, where until recently a white-collar job in a bank or an insurance company was a lifetime career, and the public service, health care, teaching and the universities, where permanency - once paraded as a virtue promoting professionalism - is now seen as a barrier to maximum efficiency. Economic security retreats with the advance of labor-market flexibility and globalisation. Even if the siren promise of full employment is met, growing inequality combined with widespread insecurity is likely to lead to social tensions that will undermine the narrowly defined prosperity promised by the economic rationalists. Workers live in an age of insecurity and corporate amorality. Labor-market mobility is considered a virtue and tenure a vice. Even worse, there appears to be no approbation attached to the behavior of company directors who switch their employees into shell companies without the resources to meet accumulated worker entitlements, sack the employees from the shell company and offer the sacked employees the same jobs, at the same machines but sans their entitlements, because they are legally employed by a completely different company. At least the failure of National Textiles can be put into the category of miscalculation. They hung on because they thought they would get the contract for the Olympic Games uniforms. They didn't. The decision of National Textiles directors to use the savings offered up by workers last year to increase their own pay is not unusual in principle. It is now considered good management to boost profits by downsizing, and director and CEO remuneration reflects this. The highly respectable banks cut 15,000 staff last year to generate record profits, which justify obscene remuneration for those at the top despite the adverse impact of downsizing on customer service. Under Reith's scheme, an employee with 15 years' service would get 16 weeks' pay compared to 43 weeks' redundancy pay from a company that made proper provision for worker entitlements. It has been suggested the problem could be solved if the limited liability of company directors for the debts of a bankrupted company were to be revoked in the case of worker entitlements, as is the case with tax liabilities. Very few companies now go bankrupt owing accrued tax liabilities. But a destitute worker is a less terrifying creditor than the Tax Commissioner. The ACTU has put forward a sensible proposition. The superannuation levy should be raised by 0.1per cent, which would raise $160million a year from all employers. Together with the $50million already promised by the Government under the Reith proposal, that should provide enough money to meet the claims of those whose past entitlements for long-service and redundancy payments are still unmet, as well as ongoing claims. Industry-based trust funds, managed jointly by employers and unions, would overcome the "free rider" problem after the backlog of entitlements is met. To the extent that labor-market mobility is a good thing, the trust funds would also have a positive impact on labor productivity as long-service leave would become portable in the same way as superannuation. But in the medium to long term, the big advantage of industry trust funds to manage redundancy payments is that they could become self-funding. Kenneth Davidson is a staff writer.E-mail: [EMAIL PROTECTED] ************************************************************************* This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." -- Leftlink - Australia's Broad Left Mailing List mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink