Flat White

Worker entitlement funds: the missing millions

30 October 2019

5:52 PM

30 October 2019

5:52 PM

Big unions boast that they represent the financial interests of workers. But actions speak louder than words. If unions are truly motivated by workers’ financial interests why won’t they support safeguards which will protect workers’ money being siphoned off from worker entitlement funds?

The level of union membership in the private sector has fallen significantly over the past few decades – it is now below 10 per cent of the workforce – but for many unions, the fall in membership has not adversely impacted their revenue.

Most unions have implemented innovative strategies which have resulted in extraordinary growth in the funds they recieve. Ironically, many unions have never been richer and arguably no longer need revenue from union membership.

The example below illustrates how the Australian Manufacturing Workers Union (AMWU) obtains a tax-free surplus when employers purchase the income protection insurance product “WageGuard” on behalf of their employees.

Several unions also obtain multi-million dollar distributions from worker entitlement funds, including income protection funds, redundancy funds, training funds, employee welfare funds and even charities. These funds are set up by unions, who then use enterprise bargaining to pressure employers to pay periodic contributions into the funds on behalf of their employees. A small number of employer groups help facilitate this process.

While many funds are set up to enable large sums of money to be distributed exclusively to unions, some funds are also set up to enable a small number of employer groups to receive distributions. This is often the reason why a small number of employer groups encourage their members to sign up to enterprise agreements containing particular funds.

The boards of the majority of funds are comprised of union representatives, however, a small number of funds also include employer group representatives. It is the board of a particular fund who determines the distribution of monies, potentially worth millions of dollars each year.

Additionally, many unions and a small number of employer groups also collect a percentage of employer contributions made to funds as commissions, as well as collecting a percentage of the investment earnings that funds produce. However, instead of reinvesting the earnings for the benefit of workers, these organisations are pocketing the money as dividends for themselves.

While unions and the small number of employer groups involved will tell us the money they receive is used to benefit their members, these claims are dubious. We already know that unions are more likely to use the money for contesting union elections, paying ACTU affiliation fees and making political donations to the current federal opposition or the likes of GetUp! in order to influence their policies. In contrast, employer groups are more likely to use the money to bolster their financial position.

For example, Protect, is an income protection and redundancy fund whose board contains representatives from both the Electrical Trades Union (ETU) and the Victorian branch of the employer group National Electrical Contractors Association (NECA). Earlier this year it was reported that the board of Protect decided to transfer almost $17 million — tax free — of workers’ money to the ETU, as well transferring over $10 million — also tax free — to NECA. With one large transfer of money from the fund, NECA’s financial position went from a deficit to a surplus.

Currently, there is no legislation in place to prevent workers’ money contained in worker entitlement funds from being siphoned off for other purposes. However, with Labor so heavily reliant on financial support and political donations from affiliated unions, it is doubtful that they will support legislation to shut down these unscrupulous practices.

Sam Puri is an advocate for industrial relations reform.

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