Overall views on the bill
2.1
There was broad support among stakeholders for the underlying objective of the Fair Work Amendment (Equal Pay for Equal Work) Bill 2022 (bill) to ensure that labour hire workers receive at least the same rate of pay as other employees performing the same work.
2.2
Despite this, stakeholders generally raised concerns that the bill as drafted will not achieve its desired outcomes. For example, most stakeholders who provided evidence to the inquiry, including those who supported the intent of the bill, raised concerns about its limited scope and questioned whether its provisions would operate as intended. At the same time, some employer groups queried the need for the bill and suggested it could have unintended impacts on businesses and employees.
2.3
In addition, a significant number of stakeholders noted they were actively consulting with the Australian Government (government) on the issues that the bill aims to address. Many of these stakeholders urged all parties to work through this consultation process to develop a legislative response that will deliver the objectives of the bill in a more comprehensive way.
Support for the principle of 'same job, same pay'
2.4
Underpinning stakeholder support for the same job, same pay principle was concern about the increased use of labour hire in Australia, pay and conditions disparities between labour hire workers and direct hire employees, and a lack of protection for labour hire workers.
The growth of labour hire in Australia
2.5
Evidence provided during the inquiry pointed to an increase in the use of labour hire workers, particularly in sectors such as mining, agriculture, and in transport and distribution. Recent statistics from the Australian Bureau of Statistics indicated that 86 per cent of workers paid by a labour hire firm or employment agency are employed on a casual basis.
2.6
This growth was noted by Per Capita Australia (Per Capita), which argued that the use of labour hire had moved beyond its traditional role in 'providing short term or temporary labour, or workers with specific expertise for specific time-sensitive projects' to become 'a practice on which entire operations and industries are built'.
2.7
This view was shared by the Australian Manufacturing Workers' Union (AMWU), which highlighted the increasing use of labour hire by employers irrespective of job type or duration. This includes the practice of large companies establishing their own labour hire companies to supply labour at their workplaces:
The experience of the AMWU is increasingly that more employers across a range of industries prefer to engage labour hire companies to provide cheaper workers, regardless of the nature of the work or the duration of the expected vacancies. This includes the setting up of labour hire companies by large employers and project joint venture partners to provide a cheaper source of labour at their own workplace, sometimes in competition with or instead of their own directly hired employees.
2.8
One large employer that has engaged in the practice of setting up its own labour hire subsidiaries, Qantas, confirmed to the committee that this has enabled the company to renegotiate more 'competitive' pay and conditions with its workforce, with the result that conditions for its workers have declined in recent decades:
…Qantas had to be competitive in terms of its rates. If we hadn't done that, essentially what would have happened is we would have had higher costs, higher overheads and higher fares, and we simply would have been competed out of business. So what we have done is create other entities within the group... Those conditions are grandfathered for those who already have them—they hold onto those, no-one is trying to take that away from them—but new people who enter the group are on more modern ones. It almost varies depending on which decade you were employed in.
2.9
Indeed, the growth in labour usage in the transport and aviation industries was described by the Transport Workers' Union of Australia (TWU) as a deliberate strategy and part of a 'bundle of approaches taken by employers to suppress wages and conditions'. The TWU submitted:
We call it the deliberate fragmenting of work, pushing workers into different groups and essentially pitting them against each other in competition, whether it's through using labour hire, whether it's the creation of artificial, lower-paying subsidiaries, whether it's pushing the work to outside hire or whether it's pushing workers themselves outside of the traditional protections … into the gig economy.
2.10
The Mining and Energy Union (MEU) noted the impact of this growth on the mining industry and described 'the increased casualisation and exploitation of mineworkers, primarily through the contracting out of jobs by the big mining companies' as a steadily growing 'threat to decent mining jobs in regional Australia'.
2.11
Accordingly, many stakeholders called for the implementation of the same job, same pay principle to ensure that workers employed through labour hire companies receive no less than workers employed directly. For example, the MEU argued that the same job, same pay principle was 'essential in ensuring that all mineworkers are fairly rewarded with fair pay, and safe and secure work, for performing demanding work in an inherently dangerous industry'.
Pay disparities and a lack of protections for labour hire workers
2.12
It was argued by many stakeholders that labour hire workers often experience disparities in pay and conditions compared those directly engaged by employers and that this can impact the ability of some labour hire workers to exercise their rights in the workplace. For example, JobWatch highlighted analysis from its telephone information service database which revealed 'that labour-hire employees often experience a lower standard of pay and conditions at work and have little recourse available to them'.
2.13
The MEU argued that employees in the mining industry who are engaged through third-party contractors may be earning 30 to 40 per cent less than individuals in the same role employed directly by a mining company, despite performing the same duties. This statement is supported by data previously published by the Coal Mining Industry (Long Service Leave) Corporation on the wage differential between full time and casual workers in the black coal industry.
2.14
These figures were similar to those provided by the The McKell Institute, which found that mining jobs offered through labour hire companies provided rates of pay that were only marginally higher than the award rate.
2.15
This was illustrated by TWU Delegate and Qantas Freight worker, Mr David Masters, who described the differing pay and conditions for labour hire workers employed across six different entities at Qantas' freight facility at Sydney Airport:
At present we have AAE, Qantas Airways Limited, or QAL, and QGS ground services, as well as three labour hire companies—Blue Collar, Wymap and Precision—with workers all working under different rates of pay and conditions, even though we do the same job at the same facility. All QGS workers are employed on a permanent part-time basis, while QAL and AAE workers are almost all full-time workers. Labour hire workers are generally casuals.
2.16
Several stakeholders also observed that the insecure and precarious nature of labour hire employment meant that, in addition to lower wages and conditions, many labour hire workers felt constrained in their ability to exercise their rights in the workplace, particularly in relation to workplace health and safety.
2.17
In addition, evidence received from current and former mine workers suggested that the imbalance in power between labour hire workers and their host employers created a risk that workplace health and safety concerns would not always be raised. For example, Mr Stuart Bonds told the committee:
…if you are a casual employee, your employment is day to day. If you are seen to raise questions about safety, it could be perceived that you are a troublemaker and you're causing issues. You might get a 'don't come Monday' statement from the employer. I feel that you're disadvantaged greatly as a casual employee. You don't have any protection.
2.18
Likewise, Mr Simon Turner highlighted a case 'where the mining and energy union filed for adverse action against BHP Mount Arthur because this girl … was complaining about the water carts putting too much water out and making the roads dangerous. She was sacked; she was told not to come back'.
2.19
The Queensland Coal Mining Board of Inquiry, tasked with investigating an explosion at Anglo American's Grosvenor mine in Central Queensland, concluded with respect to the link between labour hire employment and safety:
The Board's conclusion is that there is a perception among coal mine workers that a labour hire worker or contractor who raises safety concerns at a mine might jeopardise their ongoing employment…the existence of a perception, no matter how widespread, creates a risk that safety concerns will not always be raised.
2.20
In addition to the impact on safety in the mining industry, other stakeholders raised concerns about the connection between labour hire and unsafe work practices more broadly. For example, in the aviation industry, Qantas' recent illegal outsourcing of almost 1700 workers to outsourced providers including Swissport resulted in serious safety incidents including firearms being unloaded onto baggage carousels, and passenger stairs being removed from a plane while the door remained open.
2.21
Beyond the impact on individual workers, stakeholders also highlighted the impact on the communities in which affected workers live. For example, The McKell Institute referred to the findings of two of its reports, which examined the direct cost of labour hire arrangements and casualisation on employees and the communities where they live. The reports looked at the mining sector across five federal electorates and 'found that $989 million was lost in economic activity across these electorates alone'. Dr Stephen Whelan, the principal author of the reports, told the committee that there was 'a loss of income to employees in the labour hire firms relative to those who are employed directly by the company; likewise, to the communities in which they live through the indirect effects of the lower wages they receive'.
Opposition to the bill
2.22
Some stakeholders questioned the need for the bill on the basis that the misconduct it proposes to address is not widespread across industries and occupations. In doing so, they pointed to existing protections for labour hire workers and the benefits of labour hire arrangements.
2.23
For example, Ai Group claimed that the 'vast majority of labour hire companies are reputable and comply with relevant laws and regulations'. It also argued that the National Employment Standards, unfair dismissal laws and other protections of the Fair Work Act 2009 [Fair Work Act] already apply to labour hire workers, including labour hire companies and their employees. Similarly, Maritime Industry Australia Limited (MIAL) argued that it could not 'identify what perceived issue has been identified that would justify legislative intervention of this nature'.
2.24
Other stakeholders, such as the Australian Chamber of Commerce and Industry (ACCI), argued that employers were not engaging labour hire workers to undercut wages and conditions and maintained that 'employers overwhelmingly engage labour hire to manage workforce factors that sit outside their control, such as seasonal demands or skills gaps, mostly on a short-term basis'. The ACCI also claimed that labour hire 'provides flexibility for employees and offers job opportunities that would otherwise not exist'.
2.25
While noting that pay disparities exist in a small number of industries, the Recruitment, Consulting and Staffing Association (RCSA) submitted that 'instances of negative pay disparity for on-hire workers compared to their directly hired counterparts is very much the exception, rather than the rule'. The RCSA also expressed concern that trying to regulate across all industries where labour hire is used risks creating unnecessary regulatory, administrative, and cost burdens on business. This view was shared by Ai Group, which described the policy intent behind the bill as 'unfair, inappropriate and unworkable'.
2.26
However, both the Department of Employment and Workplace Relations (DEWR) and Maurice Blackburn Lawyers highlighted several international examples where same job, same pay regulation had been introduced. For example, DEWR's submission noted that several European countries have 'implemented regulation to ensure that temporary agency workers (the term used by the European Union for labour hire workers) receive the same pay and conditions as employees directly engaged by the same business'.
Right principle, wrong implementation
2.27
While most stakeholders supported the underlying objective of the bill, many argued that its provisions would not be sufficient to give effect to the same job, same pay principle. Indeed, stakeholders raised several concerns in relation to the operation of the bill, including a lack of clarity around its key terms and provisions, its limited scope, and whether it would be effective in tackling the issues it aims to address.
Key terms not defined
2.28
Several stakeholders raised concerns about the failure to define key terms in the bill, particularly 'labour hire employer' and 'labour hire employee'. For example, the Australian Council of Trade Unions (ACTU) was concerned that this could limit the scope of the bill to arrangements that are understood to be labour hire arrangements. The ACTU argued that this would 'leave workers engaged through outsourcing arrangements entirely unprotected'.
2.29
From an industry perspective, the Ai Group argued that the absence of these definitions would 'create risk for a very large number of business-to-business contractors who would be caught by this bill when in fact they're not deemed to be labour hire under the current and established definition of labour hire in Australia's modern award system'.
2.30
In addition, the ACCI observed that any definition of 'labour hire' would 'need to be considered in the context of the [government's] proposed national labour hire registration scheme, especially as inconsistency would be problematic'. The ACCI noted:
Labour hire is hard to define in practice, and could, in the absence of a carefully crafted definition, inadvertently and quite damagingly for employers, employees and communities, capture a broader range of arrangements not usually characterised as 'labour hire', such as service providers, i.e., those companies that provide services rather than labour.
2.31
Some stakeholders also considered there to be a lack of clarity about the concept of the base rate of pay and that this could create compliance and administrative complexities. For example, the ACCI noted that the bill:
…fails to clearly identify which employee 'in the same classification or class of work for the same hours of work' the labour hire employee's pay must be the same as in circumstances where there are several employees earning different wages in that classification or class of work.
2.32
The ACTU argued that the bill could also create a risk that workers who work unrostered overtime may find themselves entitled to be paid only the overtime penalty for those hours of work, rather than both the base rate and overtime.
2.33
Adding to this confusion, Ai Group submitted that the inclusion of the words 'or would be' payable under proposed section 333B(2)(a) of the bill was problematic:
If the intent is that the labour hire employer must pay the labour hire employee the same rate of pay as the host employer pays to its equivalent employees at each point in time, this is captured by the words 'that is payable'. The words 'or would be' are unnecessary, and their inclusion would lead to uncertainty and potential unintended consequences.
Limited scope of the bill
2.34
Several stakeholders commented on the limited scope of the bill. For example, the ACTU was concerned that businesses could move employees onto contracting arrangements to remove the risk of being covered by the provisions of the bill. It argued that the 'labour hire sector will no doubt swiftly evolve the language in its contracts to move any employees onto contracting arrangements, to greatly limit the risk of ever being captured by the terms of the bill'.
2.35
The Australian Nursing and Midwifery Federation (ANMF) noted that this would be 'particularly relevant to carers and nurses working in aged care which historically have had lower wages than their public and private acute counterparts'. The ANMF also expressed 'significant concerns around the use of digital platforms and independent contractors in the aged care sector'.
2.36
Similarly, the RCSA warned that some businesses would find ways to circumvent any regulations. RCSA argued that 'any Equal Pay for Equal Work Scheme must consider how it can be applied across all forms of market activity relating to the provision of labour, not just to labour-hire structures'. It noted that any '[r]egulation needs to adequately address the activity and behaviour, not the structure, if it is to have any real impact'.
2.37
Some stakeholders were also concerned about the limited number of modern awards that would initially be covered by the bill. For example, Maurice Blackburn Lawyers argued that the bill 'offers no protection to workers in other parts of the economy where labour hire arrangements are common – including construction, transport, hospitality, cleaning and aged care and disability care services'.
2.38
In contrast to concerns about the bill's limited scope, some industry stakeholders raised concerns about the breadth of the proposed requirement for labour hire companies to provide additional payments based on the employee's base rate of pay, including incentives, allowances, overtime and penalty rates, and any other identifiable amounts.
The bill would not operate as intended
2.39
There were also concerns the definitions and obligations contained within the bill would, in operation, give rise to more questions than they would resolve, particularly in relation to some of the objectives outlined in the bill's second reading speech. Indeed, despite comments in the second reading speech, there were doubts about how the bill would require an equal pay for equal work provision in an enterprise agreement. For example, the MEU noted:
If enacted, the provisions of the bill would be found in Division 3 of Part 2–9 of the [Fair Work Act]. Those are matters that the Fair Work Commission would not be required to consider when approving an enterprise agreement. Any suggestion that those provisions would somehow form part of the underlying relevant modern award and then be relevant in application of the BOOT are misconceived.
2.40
In addition, several submitters noted that it was not clear how a labour hire provider could comply with the requirements of the bill in circumstances where either they or the host employer are covered by an enterprise agreement. For example, Mr Brent Ferguson from Ai Group told the committee:
…there is a fundamental difficulty with how you would calculate the entitlements pursuant to this bill where the different entities are operating under different industrial instruments. It is extremely complicated, if not impossible, to work out how you would do that, and it will result in all sorts of unfair outcomes.
2.41
Other stakeholders questioned how the bill would encourage employers to retain existing staff in permanent work arrangements, while training new staff through apprenticeships and traineeships as stated in the Explanatory Memorandum.
Other concerns with the bill
2.42
Other concerns outlined in relation to the bill, included the proposed scope of the Minister's regulation making power in relation to the expanding the number of awards and the potential for confusion arising from the expression 'equal pay for equal work' given its history in relation to the relative pay rates between men and women.
The need for a more comprehensive approach
2.43
There was strong support from many stakeholders for a more comprehensive response to the issues raised. A number of participants called for all parties to work with the government to develop a legislative response that would deliver on the objectives of the bill in a more comprehensive way. For example, Mr Trevor Clarke from the ACTU told the committee:
…we believe a more comprehensive response to the problems it appears to wish to address is warranted. Noting that the government has announced that it intends to advance legislation, including in relation to labour hire, we would recommend that all senators and members support the development of a comprehensive response through that process.
2.44
Similarly, the RCSA was supportive of the underlying intent of the bill but argued that its aims should not be achieved at the expense of a regulatory system that provides certainty for businesses and employees:
RCSA is committed to getting the right balance between flexibility and responsibility in the labour market, however we are concerned this bill not only fails to strike that balance but creates a series of obstacles for on-hire staffing firms, their workers and their clients, that are extraordinarily difficult to overcome or effectively administer.
2.45
To this end, DEWR noted that the government was currently consulting with a range of stakeholders including unions, employer groups, and employers with a view to introducing legislation in the first half of 2023:
The government is consulting on a broad range of issues, including the scope of the reform, the various definitions of 'labour hire', worker entitlements, comparators, the operation and application of enterprise agreements, the rights and obligations of businesses, including labour hire and hosts, and the potential impact on business, industry, the labour market and the economy.
Committee view
2.46
The committee would like to thank stakeholders for their engagement in this inquiry, particularly labour hire workers who bravely provided evidence about their personal experiences of being subjected to this form of employment.
2.47
While the committee acknowledges there are legitimate uses for labour hire, it agrees with those stakeholders who argue that the pendulum has swung too far and that the use of labour hire has moved well beyond simply filling specialised or short-term skills gaps and has instead become an established mechanism for lowering costs by undercutting wages and employment conditions.
2.48
The increased use of labour hire, without particular reference to jobs performed or the duration of employment, appear to have blurred the distinction between labour hire employees and those permanently engaged by the host employer. Indeed, it may also be contributing to the underreporting of labour hire employee numbers, with many workers who have been persistently employed by labour hire firms identifying as employees of an industry, rather than a labour hire firm.
2.49
The committee is particularly concerned by the practice of some large employers, including Qantas, of using the threat of outsourcing core ongoing workers, such as pilots and flight attendants, to internal or external labour hire entities as a tool to obtain bargaining concessions. Or, as in the case of the almost 1700 illegally outsourced Qantas ground handlers, outsourcing core ongoing work to labour providers to prevent workers from engaging in collective bargaining or protected industrial action.
2.50
The committee notes the evidence of stakeholders who argued that labour hire workers often experience disparities in pay and conditions compared to those directly engaged by employers. In particular, the committee is concerned that labour hire employees in some industries may be earning 30 to 40 per cent less than individuals in the same role employed directly by a host employer, despite performing the same duties.
2.51
In addition to disparities in pay and conditions, the committee received evidence that labour hire workers feel limited in their ability to exercise their rights in the workplace. The committee was particularly concerned by the evidence of some witnesses that safety and health standards may have been compromised due to labour hire and other types of temporary and insecure arrangements in the mining industry.
2.52
Accordingly, the committee supports the broad aim of the Fair Work Amendment (Equal Pay for Equal Work) Bill 2022 (bill) to ensure that a labour hire worker doing the same job as a directly engaged employee receives the same rate of pay.
2.53
That said, the committee recognises that any legislative response must be effective and operate as intended and requires further consideration. Accordingly, the committee must acknowledge the significant misgivings expressed by most inquiry participants about the limited scope of bill and the lack of clarity concerning its key provisions and definitions.
2.54
The committee is mindful that the Australian Government (government) is currently engaged in consultation with relevant stakeholders with a view to introducing legislation to address many of the issues raised by this and previous inquiries. The committee is encouraged by the willingness of a wide range of stakeholders to engage constructively on a nationally consistent approach to labour hire regulation that will help to protect workers by promoting greater compliance with workplace and other relevant laws by labour hire companies.
2.55
Noting the concerns raised by stakeholders regarding the effectiveness of the bill, the committee supports stakeholder calls for all parties to work with the government on legislation that can more comprehensively give effect to the policy intent behind this current bill.
2.56
Therefore, the committee recommends that the bill not be passed.
2.57
The committee recommends that the bill not be passed.
Senator Tony Sheldon
Chair
Labor Senator for New South Wales