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Jeremy Buultjens andKatrina Luckie

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Flexibility in the Hospitality Industry: Is Deregulation Necessary?

Jeremy Buultjens and Katrina Luckie

Abstract: The search for flexibility has assumed great importance in most developedcountries and it has been the catalyst for the decentralisation which has occurred, andcontinues to occur, in the Australian labour market. Importantly the question remainswhether decentralisation of the labour market in Australia is necessary for the attainment offlexibility. It appears the rhetoric of flexibility has been far too readily accepted, in spite of alack of empirical support (Bamber et al., 1992: 56).

Industry representatives from the hospitality/tourism sector argue that a high degree offlexibility is a vital component for this industry to be able to meet market demands andachieve international competitiveness. This paper, using data from a study of registeredclubs in New South Wales, examines which areas of flexibility hospitality enterprises valueand how awards and trade unions impact on the ability of these enterprises to achieveflexibility in these areas. This study found that, despite the existence of awards and theinfluence of trade unions, many enterprises had a significant degree of flexibility.

Introduction

The decentralisation occurring in the industrial relations system in Australia has been justified, toa large extent, by the search for increased labour flexibility. It has been assumed that thecentralised system has inhibited flexibility, and therefore has also reduced the internationalcompetitiveness of Australian industry. Despite the acceptance of this assumption by allgovernments at the Federal and State level, and policy-makers, there are some commentators(Callus et al., 1991; Goss, 1988; Shaw, 1990) who argue that the centralised system is not asinflexible as argued by the proponents of decentralisation.

This paper examines one sector of the hospitality industry, registered clubs in NSW, to determine ifthe centralised system does inhibit flexibility. The findings indicate that flexibility is not significantly inhibited by either awards or trade unions. These results probably provide theexplanation for why no registered club in NSW has entered into a formal enterprise agreement.

Reason for change: the search for flexibility

Despite the success of the centralised system, via the Accord, in restraining wage increases, otherobjectives were perceived as being more important to policy-makers (Gittins, 1994). The desire to'free up' the labour market and promote flexibility emerged as the number one priority ofgovernment industrial relations policy during the late 1980s and early 1990s.

The perceived problem with Australia's industrial relations system is reflected in the conclusion to apaper delivered at the August 1988 Economic Congress by Professor Max Corden who suggestedthat: The biggest constraint on good management of the Australian economy is still the inflexible(or inadequately flexible) labour market (Corden, in Moore 1989: 29).

To the proponents of a decentralised system, inflexibility has, to a major extent, been caused by theexistence of awards and the intrusion of trade unions. Award regulations, it is argued, cannot takeinto account the individual characteristics and needs of enterprises and therefore, inhibit workplaceflexibility (Bray, 1996). The complicated nature of the awards system is also said to make theadministration of awards difficult and costly for business. The awards system is also said to givetrade unions too much. In combination, the unions and the award system create a structure whichensures a continued wages pressure. In short, the system was almost designed to impairproductivity and to abort growth at regular intervals (Business Council of Australia, 1989: 6). Theproponents of decentralisation have used a mixture of pragmatic and theoretical arguments to


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agitate for a change in the industrial relations system.

The search for flexibility is not peculiar to Australia. It has assumed great importance in mostdeveloped countries and, as Campbell (1993: 2) states, it seems to swirl through the literature oncontemporary changes in the world of production as a slogan in search of a theory . Despite theimportance placed on the search for flexibility, its meaning is rarely defined and when it is, it isoften ambiguous (Burgess and MacDonald, 1989; Hancock, 1987). Pollert (1991) argues that despiteits importance the notion of flexibility has become so confused, diffused and contradictory that thereis a need to find more appropriate instruments of analysis. This view is also supported by Boyer(1987). Leman (1992) has suggested that there are limits to the extent that flexibility can be putinto practice. He goes on to suggest that there is little evidence of functional flexibility or multi-skilling in the UK economy.

In short, flexibility has come to mean all things to all people. However, despite its ambiguousnature there have been attempts to categorise flexibility, and these attempts range in complexityfrom simple dichotomies, such as 'functional' and 'numerical' flexibility to more sophisticatedtypologies (Green and MacDonald, 1991).

In 1986, the Dahrendorf Report (OECD, 1986) discussed six factors which they argued affectedlabour market flexibility. These were: labour costs; conditions of employment; work practices andwork patterns; rules and regulations; mobility; and education and training.

In 1989, Brunhes (1989) narrowed the focus to labour flexibility at the enterprise level or theinternal forms of labour flexibility and established the importance of five forms of flexibility. Theseare shown in Table 1.

Table 1: The classification of flexibility

Brunhe's classification Rimmer's classification1. External numerical flexibility the ability

to alter the number of employees to suit theneeds of the enterprise

1. Numerical flexibility the right to hire andfire staff to suit the prevailing economicconditions

2. Internal numerical flexibility the ability toalter the number of working hours ofemployees to suit the needs of the enterprise,while the number of workers remainunchanged

2. Work time flexibility the ability to adjusttime and quantity of work time with relation toovertime, shift- work, flexible starting times andstand down arrangements

3. Functional flexibility the ability to alteremployee job tasks according to the needs ofthe enterprise

3. Functional flexibility the ability to extendthe range of tasks a worker can perform

4. Wage flexibility the ability to alter thewages to suit the prevailing economicconditions

4. Wage flexibility the ability to alter wagesand conditions to suit the prevailing economicconditions

5. Externalisation the ability to contract outwork to be done by persons not employed bythe enterprise.

5. Procedural flexibility the establishment ofa procedural framework which will allowconsultation and negotiation to occur at anenterprise level between an employer and theiremployees.

In Australia, Rimmer (1991) modified Brunhes' typology and established five similar areas whereenterprises would seek flexibility. This typology was used in this study and is also shown in Table1.

Importantly, while these definitions may provide adequate measures of flexibility, the questionwhether decentralisation of the labour market in Australia is necessary for the attainment offlexibility remains. As Bamber et al. (1992: 56) state the rhetoric of flexibility has been far tooreadily accepted, in spite of a lack of empirical support .

This lack of empirical support for increased flexibility, supposedly fostered through enterprise


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bargaining, has not prevented the acceptance of enterprise bargaining amongst policy-makers. Enterprise bargaining is consistent with the neo-classical economic approach which is a strongproponent for increased labour market flexibility through decentralisation. The post-Fordistparadigm has also been very influential in providing legitimacy for decentralisation.

The pursuit of flexibility, it has been argued by post-Fordists, would result in greater control andautonomy for employees, more rewarding and skilled jobs and more mutually co-operativeindustrial relations (Hall and Fruin, 1994). Two other 'sweeteners' were also proposed, by right-wing advocates of post-Fordism, to result from the pursuit of increased flexibility. First, it wasargued that there would be increased employment opportunities with a more market-orientedapproach to wage fixing. This would clearly be viewed as an advantage in a country experiencingvery high rates of unemployment. Second, it is proposed that there would be a significantly reducedrole for the trade union movement to play. Piore and Sabel (1984) argue that trade unions are toorigid to allow the attainment of flexibility at the workplace. A reduced role for trade unions hasappeal to many influential Australians who share a strong anti-union sentiment.

This research investigates the role awards and trade unions play in the registered clubs sector. Italso attempts to determine whether the flexibility of these enterprises are, in fact, affected by tradeunions and awards.

The registered clubs sector

The proponents of decentralisation have argued that service industries, such as the tourism andhospitality industry, are particularly concerned with the attainment of flexibility. Flexible workarrangements which reflect the 24-hour-a-day service requirements are said to be necessary toensure international competitiveness (Commonwealth Department of Tourism and Department ofIndustrial Relations, 1992).

This study focuses on one sector of the hospitality and tourism industry, the registered clubs sectorof New South Wales. This sector has had increasing competitive pressures placed upon it by thechanges which have taken place around it. In the early 1990s, clubs in Victoria and Queenslandwere, for the first time, allowed to introduce gaming machines onto their premises. Many NewSouth Wales clubs suffered considerably from this introduction of gaming machines intoQueensland and Victoria. Clubs, in border regions in particular, found it increasingly difficult tooperate under the current structure. A number of NSW clubs which profited from the patronage ofcustomers from Victoria and Queensland have, since the introduction of machines into those States,had their income fall substantially.

Another important impact on the clubs sector in NSW has come from the deregulation which hastaken place in the hospitality industry, as a whole. In most States, hotels have been allowed tooperate on Sundays and introduce gaming machines. This has resulted in clubs losing some of theircompetitive advantages. In a further loss to competitive advantage, in November 1996, the NSWgovernment gave notice of its intention to introduce legislation which would allow hotels tointroduce the same type of gaming machines which are on registered clubs' premises.

These changes to the competitive environment in which clubs are operating under and, theparticular needs of the hospitality sector in general, should ensure that flexibility is an importantconsideration to registered clubs in NSW.

The nature of clubs

Registered clubs in New South Wales operate under the Registered Clubs Act NSW, and have aunique ownership structure and business goals. Clubs are non-profit organisations formed bygroups of people who share a common interest and who have got together to pursue or promote thatinterest. Individual clubs are governed by a board of directors who are responsible for the


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formulation of policy and for ensuring that these policies are carried out by the management.

The manager/secretary, also known as the chief executive officer, is the person responsible for thestaff employed by a club. Directors are not expected to be involved in the day-to-day running of theclub nor become involved with the staff. Trade unions and industrial tribunals have been keen toensure employees only deal with one person to avoid confusion and to maintain clear lines ofcommunication (Registered Clubs Association of NSW, 1990). The manager/secretary is seen by theindustrial tribunal and trade unions as the employer.

Clubs cover a vast array of interests including sporting, social, community and ethnic interests. InAustralia, clubs are a major social outlet for people and in a number of cases clubs providesignificant funds for community projects. In NSW alone, in 1987, clubs spent $413 million for suchpurposes (Registered Clubs Association of NSW, 1990).

The development of the club industry has been very varied in the different Australian States andTerritories. NSW was, and still is, clearly the most important State in regard to registered clubs inAustralia. In NSW, there are over 1,500 clubs (40.5 per cent of all clubs in Australia) generating aturnover of over $20 billion annually and employing over 63,000 people (67.3 per cent of allemployment in Australian clubs) (ABS, 1994).

The study: flexibility in NSW registered clubs

The results presented in this paper were obtained from survey of registered clubs in NSW and theACT. The sample consisted of the 1381 registered clubs, who were members of the NSW RegisteredClubs Association. This Association has, as members, over 90 per cent of all registered clubsoperating in NSW and the ACT. Each club in the sample was sent a copy of the questionnaire, afree-post reply envelope, and an explanatory letter from the researcher. A reminder letter was sentto all clubs two weeks after the initial posting.

There were 454 clubs which responded to the survey, and of these, 435 provided useable responses. This represented a response rate of approximately 33 per cent.

Award coverageThere is a broad range of occupations involved in the clubs sector and this is illustrated by thenumber of awards covering employees within the sector. In NSW, for example, the followingawards apply to various employees within the clubs in that State:

1. The Club Managers and Club Secretaries' (State) Award;2. The Club Managers and Club Secretaries' Superannuation (State) Award;3. The Club Employees' (State) Award;4. The Club Employees' Superannuation (State) Award;5. Bowling Club Employees' (Country) and (Cumberland and Newcastle) Awards;6. Bowling and Golf Club Employees' Superannuation (State) Award;7. Musicians' (Live Performance) (State) Award;8. Club Industry (Variety Artists) (State) Award

(Registered Clubs Association of NSW 1990).

The above awards apply in some cases to managers and in other cases to employees. The resultsfrom the survey suggest despite the existence of awards there were significant differences in theway wages were determined for management and employees. Table 2 indicates that managementwages were determined solely by the award in 24 per cent of clubs, which compares with 61 percent of clubs who pay their employees award wages. A number of clubs (41 per cent) use the awardas a basis for negotiation with management staff about wages, while 29 per cent of clubs use theaward to negotiate with employees. More than 76 per cent of clubs negotiate with management inregard to wages. This figure falls to, but remains a significant, 39 per cent of clubs who negotiatewith employees in regard to wages.


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Table 2: Method of wage determination for management and employees

Determinants Management Employees# % # %

Exactly as award 102 24.4 263 61.3Award & collective neg. 39 9.4 31 7.2Award & individual neg. 134 32.1 92 21.4Collective negotiation 3 0.7 3 0.7Individual negotiation 55 13.3 7 1.6Pay what they are worth 8 1.9 4 0.9Voluntary 48 11.5Combination 29 6.7 29 6.9Missing 17 6TOTAL 435 100.0 435 100.0

The figures, in relation to determination of wages, indicate that, despite the existence of awards forboth employees and management, clubs have a significant level of flexibility. While this flexibilityis greater for management than for employees, the findings indicate that clubs are not too restrictedby awards, in regard to the setting of wages.

Given the level of negotiation involved over wage determination it is not surprising to find thatthere are a high level of over-award payments made in the club sector. Table 3 indicates that amajority of clubs, 57 per cent, pay all or some their management staff over-award wages, while 52per cent of clubs pay all or some of their employees over-award wages.

With a majority of clubs paying over-award wages it could be concluded that wages may not be amajor concern for a number of clubs. If wages were a pressing concern for clubs they could payaward wages rather than negotiate with management and staff. This lack of concern over wages issupported by the rating given by clubs to the ability to adjust wages, which is discussed in a latersection on the importance of various flexibility variables.

Table 3: Payment of over-award payments to management and employees

Category Management Employees# % # %

Yes all staff 98 23.8 24 5.6Yes selected individuals 138 33.5 201 46.7No 168 40.8 203 47.2Unsure 5 1.2 2 0.5Not Applicable 2 0.7 0Missing 23 5TOTAL 435 100.0 435 100.0

Trade unionsAs stated previously, to a number of critics of Australia s centralised industrial relations system theintrusiveness of the trade union movement has been a major concern. The evidence on trade unionpresence at the workplace is mixed. Approximately 26 per cent of the clubs had no union membersamongst its management and general staff. For the clubs with union members, on average, 34 percent of all employees, including management, were members of a union or association. Thisgenerally low level of unionisation is a common characteristic of the hospitality sector as a whole.

Contact with a trade union official also varied considerably for the sector, as Table 4 indicates. Almost 35 per cent of clubs had never had any contact with a trade union official and a further 11


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per cent of clubs last had contact with a trade union official over two years ago. On the other hand,42 per cent of clubs had contact with a trade union official within the last six months and a furthereight per cent had contact within the last 12 months. Despite a mixed presence at workplaces,trade unions are heavily involved in the industrial disputations which occur, with 87 per cent ofdisputes involving a trade union. Despite this heavy involvement in disputations, trade unionmembership does not seem to present a problem to club mangers in this survey. Nearly 99 per centof club managers were either in favour of trade union membership for their employees or wereambivalent about membership.

Table 4: Last direct communication with trade union

Last Communication Frequency Percentage (%)0 6 months7 12 months13 18 months19 24 months> 24 monthsNeverMissing

15328864112475

42.57.82.21.711.434.8

Total 435 100.0


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FlexibilityIn order to gain an insight into which areas of flexibility clubs thought were to be of particularimportance, managers were asked to rate the importance of five flexibility variables . The resultsare shown in Table 5. The five flexibility variables were: the ability to hire and fire to suit the prevailing economic conditions the ability to adjust the hours worked by employees the ability to extend the range of tasks undertaken by employees the ability to adjust wages to suit the prevailing economic conditions the ability to consult and negotiate directly with employees.

Rating took place on a scale of 0 to 10. A variable of no importance was rated 0, while a variable ofa very high importance was rated at 10.

Table 5: The rating of flexibility variables

Variable Mean Rating SDThe ability to adjust the hours worked 9.1 2.0The ability to extend the range of tasks 8.8 2.2The ability to hire and fire 8.2 2.9The ability to consult and negotiate 7.7 3.0The ability to adjust wages 6.3 3.6

It is very clear from the responses that the flexibility variables considered to be the most importantwere the ability to adjust working hours, the ability to extend the range of tasks performed byemployees and the ability to hire and fire to suit the prevailing economic climate. All thesevariables had a mean score of over 8, indicating a high level of importance to clubs. The ability toadjust working hours was considered the most important with a rating of 9.1, the ability to alter therange of tasks had a mean rating of 8.8 and the ability to hire and fire had a rating of 8.2.

The ability to consult and negotiate with employees was the next most important variable with amean rating of 7.7. Somewhat surprisingly, the least most important variable was considered to bethe ability to alter wages to suit the prevailing economic conditions. Clubs rated this variable at6.3.

This was a surprising result for two reasons: clubs are a labour intensive industry and therefore wages would be a relatively highproportion of total costs when compared with other enterprises; and the deregulation which has occurred in the hospitality industry should have made clubs more aware of their cost structure.

This was also a significant result, since a major criticism of awards is that they impose wages whichimpinge on the ability of business to maintain viability. But according to the clubs in this sample,there are more pressing concerns in running their clubs than gaining wage flexibility.

Clubs were also asked to rate the extent to which the existence of awards and trade unionsrestricted their ability to achieve flexibility in the five areas mentioned earlier. Rating took placeon a scale of 0 to 10. A variable which was not restricted was rated 0, while a variable which wasvery restricted was rated at 10. The results are shown in Tables 6 and 7.

According to the critics of the centralised industrial relations system the existence of awards is veryrestricting on the ability of an organisation to achieve flexibility. As discussed earlier, over 61 percent of clubs based their employees' wages and conditions on awards and 24 per cent based theirmanagers' wages and conditions on the award (see Table 2). These figures should indicate thatclubs are restricted by awards, particularly when dealing with employees. However, this did not


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appear to be the case.

The results, shown in Table 6, indicated that the existence of awards impacted most heavily on theability of clubs to achieve numerical flexibility. The mean rating provided by clubs was 5.9. Whilethis was the most restricted variable, it was a relatively low rating and indicates that clubs werenot severely restricted, by awards, in achieving flexibility in this area.

The ability to alter wages to suit the prevailing economic conditions was the next most restrictedvariable with a mean rating of 5.7. Again, this was a relatively low rating, indicating that anumber of clubs were not inhibited by awards in this area either. This finding was supported bythe number of clubs who were paying over-award wages to their employees and management (52per cent and 57 per cent respectively).

Table 6: The perceived impact of awards on the flexibility variables

Variable Mean Rating SDThe ability to hire and fire 5.9 3.6The ability to adjust wages 5.7 3.6The ability to adjust hours 4.7 3.3The ability to consult and negotiate 4.5 3.4The ability to extend the range of tasks 3.7 3.1

The impact of awards on the other three variables were negligible, with mean ratings under five. Interestingly, the two most highly valued flexibility variables, the ability to adjust the hours workedand the ability to extend the range of tasks performed by employees, rate low in terms of the impactof awards. The ability to adjust the hours worked had a mean rating of 4.7 and the ability to extendthe range of tasks performed by employees had the lowest rating of 3.7. The high number of casualemployees is one major reason for clubs having the ability to adjust the working hours of theiremployees.

The final variable, procedural flexibility, which determines the employers ability to consult andnegotiate directly with employees on wages and conditions had a mean rating 4.5. Again, thisresult seems consistent with other findings, such as the methods of determining wages, thepayment of over-award wages and the determination of rosters, which indicate a high level ofconsultation and negotiation taking place between management and workers.

The overall results concerning awards and the ability to alter the five variables seemed to indicatethat clubs do have a large measure of flexibility despite the existence of awards. These results aresimilar to the findings of Callus et al. (1991) and Buultjens (1994). Callus et al. (1991) found 57 percent of workplace managers reported no restriction being placed upon them by awards in pursuingefficiency changes. Buultjens (1994) found small business owners had significant levels of flexibilityunder the centralised system.

These results would seem to indicate the centralised system does allow enterprises flexibility. Callus et al. (1991), Goss (1988), Shaw (1990) and others argue that awards do not preventflexibility from being achieved in the labour market. It is argued that the award system allows asubstantial amount of informal negotiation to be undertaken at enterprise level. This appears to beconfirmed by the findings from this study.

Another major criticism of the centralised system is the supposedly restrictive nature of trade unioninvolvement. However, Table 7 indicates that unions do not impact heavily on the operations ofclubs. The mean ratings were slightly lower than the ratings for awards and they also followclosely the pattern for award ratings. This may suggest that many clubs associate trade unions andtheir impact closely with the existence of awards.

Table 7: The perceived impact of trade unions on the flexibility variables


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Variable Mean Rating SDThe ability to hire and fire 5.3 3.8The ability to adjust wages 5.1 3.6The ability to consult and negotiate 4.3 3.5The ability to adjust hours 4.0 3.3The ability to extend the range of tasks 3.5 3.0

The inability of employees to undertake a range of tasks is often a major criticism used againsttrade unions. It is argued craft-based unions prevent the adoption of multi-skilling. Interestingly,this argument does not appear to apply to the club sector. While clubs rated the ability to extendthe range of tasks as the second most important flexibility variable, it was the least restrictedflexibility variable. Managers rated the impact of trade unions on this variable at 3.5 a very lowrating.

The other ratings given by managers were also relatively low. The most valued flexibility variable,the ability to adjust hours worked, was the second least affected variable by trade unions. Managers rated the impact of trade unions on this variable at 4. The other ratings were 5.3 for theability to hire and fire, 5.1 for the ability to adjust wages and 4.3 on the ability to consult andnegotiate. The figures indicate that, despite the rhetoric, trade unions do not appear to impact onthe operations of awards to any great extent.

The relatively high level of flexibility existing under the centralised system is likely explanation forthe lack of formal enterprise agreements in the sector. At the time the survey was conducted noregistered club in NSW had an enterprise agreement registered with the NSW IRC. Clubs havehad the opportunity under Section 11 of the Industrial Arbitration Act 1940 to enter into a formalenterprise agreement if they so wished. Since the introduction of the NSW Enterprise AgreementAmendment Act 1990 there has been an opportunity for clubs to enter into such agreements withoutthe involvement of a trade union. Given the increasingly competitive environment clubs operate in,and the perceived importance of the penalty rates issue, it is somewhat surprising not one club hadentered into a formal enterprise agreement.

Despite the lack of formal agreements there are a number of clubs (28 per cent) who have enteredinto informal enterprise agreements. While this is a significant figure it would appear that thismay be an underestimate of the actual number of clubs who have an informal agreement. Asdiscussed previously, a minimum of 39 per cent of clubs stated they negotiated, individually orcollective, with employees while 75 per cent negotiated with management (Table 2). Both thesefigures are greater than the number of clubs who stated that they had an enterprise agreement.


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Discussion and conclusion

The results from this study support the conclusion that organisations are able to attain significantlevels of flexibility under the centralised industrial relations system. They also suggest that thepredicted benefits from decentralisation are problematic. It appears, therefore, the pursuit ofdecentralisation through enterprise bargaining has been due to the changing balance of politicalpower and political ideology rather than pragmatic business decisions.

Since the early 1970s there has been a shift in the balance of political forces in Australia. Thisshifting balance has occurred internationally as well and resulted in major changes in the UnitedKingdom's and New Zealand's industrial relations systems. This shift in the balance, away fromthe left toward the right, has been supported by, as well as supporting, the perceived failure ofKeynesian economic policy and the Welfare State, the concern over the increasing levels ofgovernment debt and the breakdown of communism. The 'New Right', espousing rationalisteconomic policies, have increasingly been able to dominate the policy agendas in most developedcountries.

This shift in political forces toward the right has also been mirrored by a shift in the balance ofpower away from labour toward capital. The recession of the late 1980s and early 1990s served toreinforce this change in the balance of power. Capital/management saw this as an opportune timeto pursue downward wage flexibility, increased managerial prerogative and reduced interferencefrom external parties such as trade unions and the industrial tribunals (Campbell, 1993). To justifysuch changes capital was able to draw upon the economic imperative for Australia to improveflexibility. Post-Fordism allowed capital to disguise their pursuit of downward wage flexibility,increased managerial prerogative and reduced third party influence by extolling the benefits ofincreased flexibility.

In reality, as the findings from this study suggest, formal enterprise bargaining may provide fewerbenefits than anticipated and these benefits may be outweighed by the costs imposed on bothemployers and employees. Clearly, registered clubs in NSW do not perceive any major benefitsflowing from formalised bargaining since no club has entered into such an agreement.

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