Employers called on both sides of politics to resist the temptation to rule in or out any of the ideas to allow for a mature debate. Peter Harris, Chairman of the Productivity Commission. Credit:Alex Ellinghausen But in such a crucial battleground area, political posturing was swift, with Opposition Leader Bill Shorten rounding on the suggestion of a two-tiered penalty rates system in which essential services would retain existing Sunday rates but others would slip back. "Mr Abbott is at it again; this is just another trip back to WorkChoices," he said. "Mr Abbott legislating through the back door of a Productivity Commission report to cut penalty rates is just Mr Abbott up to his old sneaky tricks of going after workers' conditions."

In a surprising endorsement of the Gillard government's Fair Work laws, the Commission found they generally functioned well, that the minimum wage was not causing problems, that unfair dismissal laws were not dampening employment, and that neither excessive wage inflation nor ongoing casualisation of the workforce were worsening problems. Tony Abbott with Eric Abetz during the Abbott government. Credit:Andrew Meares Commission chairman Peter Harris said the minimum wage and awards should remain the same, because the Fair Work Commission's modernisation standards had worked well. "We've squeezed as much lemon as we can out of this," he said. Where the review found fault was in an insufficient recognition of the impact of wage decisions on the jobless, and in the make-up and performance of the central umpire in the system, the Fair Work Commission. Commission chairman Peter Harris said the minimum wage and awards should remain the same. Credit:Andrew Meares

The Fair Work Commission, it complained, was ill-equipped to optimally perform its two main functions of setting the minimum wage and adjudicating on unfair dismissal claims. It recommended separating these two responsibilities into divisions. On the former, it said the commission should substantially improve its analytical capability to be able to assess and interpret economic data against which to arrive at minimum wage judgments, likening the ideal situation to the approach of the Reserve Bank when setting interest rates. On unfair dismissal, it found the laws were reasonable - contrary to much criticism from economic and political hardliners - but said the outcomes were less reliable with employee claims often upheld even when they had been justifiably dismissed, but where employers had erred on the process. While Prime Minister Tony Abbott and Employment Minister Eric Abetz immediately distanced the government from any suggestion of cuts to penalty rates and a return individual workplace agreements recommended by the review, the idea was quickly attacked as "worse than WorkChoices" agreements. The proposed new "enterprise contract" could be imposed on prospective employees as a condition of employment, without any need for negotiation.

The Productivity Commission report says: "No employee ballot would be required for the adoption of an enterprise contract, nor would any employee group be involved in its preparation and agreement unless the employer wished this to be the case." ACTU secretary Dave Oliver said the proposed contracts would allow employers "to put these contracts on the table on a take-it-or-leave-it basis where they could find themselves signing into something that trades away their penalty rates, shift loadings and rostering hours of work. That process will not be subject to any scrutiny." "These individual arrangements are worse than WorkChoices in so far as they are providing templates to employers for wholesale migration out of the award," Mr Oliver said. Workers would no longer be able to terminate an individual contract after giving 28 days' notice, but could be locked in for a minimum of 12 months under the Productivity Commission recommendations. Professor John Buchanan, a workplace researcher from the University of Sydney business school, said the proposed individual enterprise agreements were like a later model of WorkChoices introduced by the Howard government, which included a no-disadvantage test.

"The final swag of recommendations have a very strong WorkChoices flavour of tilting bargaining power towards employers," Professor Buchanan said. "The proposal that strike action can be terminated if it does 'significant economic harm to the employer alone' betrays either naivety or bias of the highest order. That is the primary reason why strikes are undertaken. "While the commission advocates 'repairing not replacing' our current system the effects of its proposed changes would profoundly shift power in it. This would be achieved by weakening the independent standing of the Fair Work Commission as a body comprised of thoughtful practitioners and a major erosion of unions' ability to act effectively in the labour market." While the Productivity Commission recognised that setting penalty rates was a matter for the Fair Work Commission, it suggested cutting the Sunday penalty rate back to the Saturday rate in retail, hospitality and other non-essential services. That was welcomed by Retail Council chief executive Anna McPhee as being in tune with the realities of modern commerce.

"As a sector which employs more than 1.25 million Australians, the rebalancing of penalty rates to reflect the needs of the modern economy will mean retailers can create jobs to meet increased consumer demand, which in turn will benefit the economy more broadly," she said. "It's important for government and opposition not to rule anything out at this stage of the inquiry. This inquiry highlights the need for labour market reform and our workplace relations system should meet the needs of the modern economy." The Productivity Commission's draft report Penalty rates, wages Minimum wage and other awards should remain but the Fair Work Commission should be given powers to consider economic risks to low-paid workers' employment, and to vary awards when necessary, rather than every four years.

Sunday penalty rates for hospitality and entertainment workers should fall in line with Saturday rates.

Government should review the structure of junior and adult training wages.

Fair Work Commission It is prone to partisan decisions based on members' personal perspective on industrial relations debates.

The commission should be split into two divisions: a "minimum standards division" to determine and review wages, nd a "tribunal division" for unfair dismissal and adverse action cases and industrial disputes.

Members should be appointed from a shortlist selected by an expert panel, with future presidents and vice-and deputy presidents given a five-year term. National employment standards Fair Work Commission should extend to all modern awards the option of allowing employers and employees to agree to swap a public holiday for an another day. Employers should not have to pay for leave or additional penalty rates for new public holidays.

Federal, state and territory governments should review whether to extend the 20-day paid annual leave period in lieu of pay rises. Bargaining

Fair Work Commission should have wider discretion to approve agreements as long as it is satisfied employees are unlikely to have been disadvantaged.

Enterprise agreements should not be able to restrict employees' individual agreements with employers.

Employers and employees should not be required to consider productivity when making agreements.

Enterprise agreements should face the "no disadvantage" test rather than the "better off overall" test. Follow us on Twitter