Fact file: Labour costs not to blame for SPC Ardmona's woes

Updated

SPC Ardmona avoided closure on February 13 when its parent company Coca-Cola Amatil and the Victorian Government announced a $100 million investment plan to keep the ailing company in operation.

The announcement came after Prime Minister Tony Abbott refused SPC Ardmona's request for a $25 million Federal Government grant, sparking a heated debate about whether employment conditions at the company's Shepparton factory were to blame for its woes.

ABC Fact Check examines the main claims and counter claims made about the conditions and entitlements of SPC Ardmona's workforce.

SPC Ardmona's operations

Located in the Goulburn Valley in Victoria, SPC Ardmona is the major producer of processed fruit in Australia. In 2005 it was purchased by Coca-Cola Amatil. SPC Ardmona owns the Goulburn Valley, IXL, SPC, Ardmona, and Taylors brands.

SPC Ardmona's problems

The Productivity Commission reviewed the viability of SPC Ardmona last year after the company made a formal complaint to the federal government about unfair import competition.

The commission's December report, Safeguards Inquiry into the Import of Processed Fruit Products, made a series of findings about the source of SPC Ardmona's problems.

It said the company had been affected by long-term reductions in Australian demand for processed fruit, lower export volumes, growth in sales of processed fruit under supermarket home brands and the impact of adverse weather on local fruit growers. It concluded that labour appeared to be "a relatively minor contributor to total costs".

SPC Ardmona's industrial arrangements

The company has an enterprise bargaining agreement with its workforce, signed on March 5, 2013. As it is the only fruit processing cannery in the country, Fact Check found it difficult to find equivalent enterprise bargaining agreements on which to benchmark the SPC Ardmona agreement.

The relevant industrial award is the Food, Beverage and Tobacco Manufacturing Award 2010. In some areas, the award defers to the National Employment Standard (NES), which is a set of 10 minimum conditions for employees. The NES includes minimum entitlements for leave, public holidays, notice of termination and redundancy pay.

Heated debate

On January 30, Mr Abbott said it was "very important" that Coca-Cola Amatil completed a renegotiation of the enterprise bargaining agreement at SPC Ardmona. "The existing agreement contains conditions and provisions which are well in excess of the award: there are wet allowances; there are loadings; there are extensive provisions to cash out sick leave; there are extremely generous redundancy provisions well in excess of the award". He said the agreement needed to be "very extensively" renegotiated if a necessary restructure underway by Coca-Cola Amatil were to be completed.

At the same media conference, Industry Minister Ian Macfarlane said: "I have every confidence, providing [SPC Ardmona management] can introduce some changes to conditions - and I emphasise conditions, not wages - that this can be turned again into a profitable organisation and a profitable subsidiary for Coca-Cola."

On February 2, Employment Minister Eric Abetz said on ABC TV's Insiders program: "Some of the conditions in the enterprise agreement, and I've been through it, are, regrettably, over-generous in the current circumstances."

Two days later, Sharman Stone, the Liberal MP whose federal electorate of Murray includes the Shepparton factory, said on ABC radio: "What [the Federal Government] said was 'we are not going to help because it is the amazing wages and conditions that have knocked this company for six' and that is just wrong, that is not true."

Dr Stone said senior ministers were not telling the truth. "It's lying," she said. Instead, Dr Stone referred to the Productivity Commission's findings. She said the causes of SPC Ardmona's problems were fruit being sold at low prices by overseas competitors, flood and drought, and the strategies of supermarket chains Coles and Woolworths.

When asked the following day whether he needed to correct his comments on SPC Ardmona, Mr Abbott said: "No, I stand by what was said by me and I stand by what was said by ministers.''

After the $100 million injection into the company was announced by the Victorian Government and Coca Cola Amatil, Dr Stone reiterated her earlier claims. "As you know I am famously... on record for saying it was not about entitlements, wages and conditions. That is not a problem for SPC Ardmona," she said.

Sick leave

Mr Abbott said: "There are extensive provisions to cash out sick leave."

The SPC Ardmona enterprise bargaining agreement says permanent employees get 10 days sick leave each year. This is in line with the award.

While employees were previously able to cash out sick leave at the end of each year, the rules changed on December 31, 2012. The current agreement says unused sick leave will be held as an "accrual balance" until used.

However, employees can have up to 20 days sick leave paid out upon termination of employment. This right is waived if the dismissal is for gross misconduct.

In a subsequent interview, Senator Abetz said: "You can cash out sick leave in the situation of redundancy".

The agreement says it will pay out up to 20 days unused sick leave upon redundancy.

Fact Check concludes SPC Ardmona's permanent employees can no longer cash out their sick leave each year. However, it is still possible to cash out up to 20 days unused sick leave upon termination and redundancy.

Redundancy pay

Mr Abbott said: "There are extremely generous redundancy provisions well in excess of the award."

The agreement says employees who have completed one year's continuous service will be paid four weeks redundancy for each continuous year worked.

Again, changes were made in 2012 and caps were placed on redundancy payments. The current agreement says employees who started working at SPC after July 1, 2012 will have redundancy payments capped at 52 weeks.

However, employees who "had an entitlement greater than 104 weeks before 1st July, 2001" will retain the previous redundancy payout.

Age loadings of between 10 and 20 per cent apply to base redundancy payments. As described above, the company will also pay out up to 20 days of unused sick leave upon redundancy.

Fact Check compared these provisions to the Food, Beverage and Tobacco Manufacturing Award 2010. In terms of redundancy payments, the award defers to the NES.

The NES, prepared by the Fair Work Ombudsman, says from January 1 2010, all employees who have at least 12 months continuous service are entitled to the minimum requirements for redundancy pay. This includes up to four weeks notice of termination and up to 16 weeks redundancy pay. An extra week of termination pay applies if the worker is over 45 and has been in the job for at least two years.

Fact Check concludes SPC Ardmona has a generous redundancy regime which was significantly reduced in 2012. It does, however, still appear generous when compared with the NES entitlements which require only four weeks notice and up to 16 weeks redundancy pay. There are also provisions to cash out sick leave in the situation of redundancy which do not appear in the award.

Entitlements and allowances

In terms of entitlements, Senator Abetz said: "The shiny tin allowance has crept back into the enterprise bargaining agreement". Mr Abbott said: "There are wet allowances" and "there are loadings".

The shiny tin allowance is referred to in the agreement as the "the bright can stacking allowance", and is paid to forklift drivers. The agreement says workers who are doing this job receive an extra 50 cents per hour. In terms of wet allowances the agreement says an employee working in any place where the employee's clothing becomes wet is entitled to be paid an extra 58 cents an hour.

SPC Ardmona said the total of all allowances paid to production staff in 2013 was $116,467, which represented less than 0.1 per cent of the business's cost of goods for the year. It said zero was paid in wet allowances to cleaners last year.

The company said loadings "are the same as industry standards and common to many Australian EBAs. Afternoon shift is at 20 per cent and night shift at 30 per cent". Fact Check asked SPC Ardmona what it used as an "industry standard" but the company did not respond.

Fact Check concludes some allowances and entitlements are peculiar to a food processing plant, but based on SPC Ardmona's figures, the cost to the company is minimal. Mr Abbott's claim that the company pays loadings is correct, however loadings are commonly paid to shift workers in many industries across the country.

Wages not the problem

John Buchanan from the Workplace Research Centre at the University of Sydney says the wage scales at SPC Ardmona do not appear to be high. Last year workers received a 2.5 per cent increase, which he said was less than the going rate. But he says it's difficult to know what a "cannery worker" should be paid in entitlements and provisions because there are no similar businesses operating in the country.

Paul Houlihan from First IR, an industrial relations consultant and adviser to the former Howard government, says the problem with the agreement isn't that workers are being grossly overpaid. He says it is that the complexity of the 99-page agreement could stop SPC Ardmona management from having the flexibility to make the tough business decisions needed.

The Productivity Commission report also cited rising costs of production as a source of the company's problems. However, it concluded that labour costs appeared to be a relatively minor contributor to total costs.

It said the cost increases occurred in large part because lower demand locally and in export markets meant fewer economies of scale were available to SPC Ardmona. On the subject of labour costs, the commission "accepts that other cost components may have made a larger contribution to the overall increase," the report said.

Fact Check concludes employees are not being significantly overpaid, and labour costs are not the largest problem facing SPC Ardmona.

Sources

Topics: manufacturing, fruit, food-processing, rural, food-and-beverage, federal-government, australia, vic

First posted