Carbon tax: implications for HR

How the carbon tax will work

• the tax commences on 1 July 2012, if legislation is passed by Parliament.
• the tax is imposed only on the ‘500 biggest polluters’, who will pay $23 per tonne initially, increasing to 25.5% from 1 July 2013 and 28% from 1 July 2014. In other words, the cost to business will increase annually for the next three years (assuming no decrease in their emission levels)
• from 1 July 2015, the set rate will be replaced by an emissions trading scheme, under which the rate payable will be set by the market – businesses will be required to purchase permits for their emissions at that rate, with taxation treatment of those permits prescribed by tax legislation
• the expectation is that businesses affected by the tax will attempt to pass on some, if not all, of their increased costs – the government estimates the amount of this cost increase to an average household at $9.90 per week 
• the government intends to allocate around 40% of carbon tax revenue to assist businesses who may be disadvantaged by the tax – this assistance covers both help to reduce emissions and assistance to jobs and employees affected.

Why HR needs to know about it 

1. The general expectation from senior management that HR should know how the business operates and how important issues affect it.
2. HR staff can expect to receive questions from employees on how the carbon tax may affect their employment, and need to be able to provide informed answers, or at least have ready access to another source that can provide them.
3. Budgeting — some HR activities may be affected by increased costs, which need to be anticipated and planned for.
4. Some HR policies and practices will need to be reviewed to assess the possible impact of the carbon tax on them. This issue is discussed in detail below.

Impact on HR policies and practices 

Claims for compensation in awards or agreements 

It remains to be seen whether this will become an issue, but employees and/or unions negotiating awards or agreements may seek new clauses that compensate employees for possible cost increases. HR practitioners should research whether such cost increases have actually occurred and prepare a strategy to respond to any such claims.

Electricity allowances and payments

Some employees are paid an allowance as part of their remuneration package to cover the cost of the electricity they use, while others may have their actual electricity expenses reimbursed. Sometimes, there will be an award or agreement provision to provide these benefits. As electricity costs are likely to increase (which may be the case even if there is no carbon tax), current arrangements should be reviewed to ensure they are adequate. It may be necessary to increase the allowance or budget for higher reimbursed expenses. The next issue may be whether an allowance is simply increased, or whether there is a trade-off by reducing another component of remuneration to balance it (because otherwise some employees will have their remuneration increased and others will not).

Redundancy and restructuring

Critics of the carbon tax have warned that it will threaten the viability or some businesses to the extent that either they will not be able to continue or will send some business functions off-shore in order to avoid the tax. Others may have to drastically change their structure and/or operational methods in order to survive.
 

The HR issues raised by these scenarios include reskilling, creation of new jobs, redundancy and transferring employees and jobs overseas. Policies and practices relating to each of these issues may need to be reviewed to ensure they can cope adequately with possible changes. In addition, HR functions implementing any of these changes need to ensure that they fully comply with all relevant legislation and award/agreement provisions.

Apply for assistance packages

As noted above, the government intends to allocate funding to assist both businesses and employees who are disadvantaged by introduction of the carbon tax. These will include industries that currently have high emission levels and those that may be threatened by overseas competitors. For example, assistance may include retraining, relocation assistance, outplacement counselling and various other forms of subsidies, although precise details are yet to be provided (only dollar amounts have been announced so far). The role for HR is to inform itself of the types of assistance that become available and to know the procedures for applying for it.

Review outsourcing contracts

Some HR service contractors may have their operating costs affected by the tax and may seek to have their contracts varied to pass on the costs. Note: the carbon tax price will increase on 1 July each year until 2015, so contractors may seek clauses that provide for annual increases.

 

The role for HR is to review the provisions of current contracts, understand the impact (or non-impact!) of the carbon tax on each contractor, and be ready to negotiate any appropriate contract variations.

Review HR policies and practices to reduce carbon use

A likely effect of the carbon tax is that senior management will place increased pressure on the various business functions to reduce the company’s carbon footprint, even if the business is not one of the top 500 liable to pay the carbon tax.

 

Examples of HR policies and practices with opportunities to reduce carbon use include business travel policies, use of company vehicles and use of electricity at the workplace. Strategies for ‘greening’ the HR function have been discussed in a previous WorkplaceInfo article: Workplaces should be greener, and it’s up to the boss: survey

Recruitment and retention

Anecdotal evidence suggests employees and job seekers are increasingly making judgements about employers based on their perception of the employer’s ‘green’ and ‘sustainability’ credentials. For example, a company with a reputation for being progressive in this field is more likely to attract job seekers than one that is not.

 

The implication for recruitment staff is to be aware of the employer’s commitment and initiatives in these areas and to be able to demonstrate them to employees and job seekers.

Financial counselling

This seems unlikely to occur, but some employees may be significantly financially disadvantaged by the carbon tax (eg those with very high domestic electricity usage). Such employees should be provided with access to independent financial advice and counselling if they need it.

 

The availability of financial counselling is a desirable benefit/service to make available to all employees at any time, but the carbon tax will provide an opportunity to remind employees that the service is available if they require it.

Further information