Labour hire and contracting
1.1
Over recent decades there has been a continued increase in workplace productivity and workforce flexibility, with the majority of these benefits flowing to corporate interests. This 'flexibility' has manifested itself in numerous ways, such as increased rates of casualisation and the utilisation of insecure labour hire workers and independent contractors.
1.2
This shift continues to transfer risks from employers to their workers, and has resulted in everyday Australians forgoing job security, paid leave, minimum rates of pay, and workplace insurance. Evidence provided during the inquiry has indicated that this ongoing trend towards outsourcing through the engagement of contractors and labour hire workers is endemic in sectors such as mining, agriculture and horticulture, and transport and distribution.
1.3
It has been argued that these forms of insecure work leave large sections of the Australian workforce unable to share in the nation's economic prosperity. The Australian Council of Trade Unions has submitted that these workers:
… have inferior rights, entitlements, and job security to their counterparts in ongoing employment. It makes it tough for working families to plan for their future when they cannot rely on regular incomes, but have rising household costs, and are shouldering more and more household debt.
1.4
Labour hire contracting has existed in Australia since the 1950s. Originally it was used to provide temporary staffing options for businesses, with entities operating within the industry colloquially known as 'temping' agencies. From the late 1980s, and through the 1990s, the industry saw significant growth, and now provides contract labour across a wide range of industries as a flexible alternative to the traditional direct ongoing employment model.
1.5
Recent figures suggest that the labour hire sector is now worth $19 billion a year, and the Recruitment, Consulting and Staffing Association estimated that labour hire firms, or job agencies, now employ approximately 360 000 people in Australia, including professionals, tradespeople, and skilled and semi‑skilled workers.
1.6
Notwithstanding these already significant numbers of workers, it was argued convincingly during the inquiry that the true number of labour hire workers in Australia may be underreported, partly due to these workers' confusion about their particular arrangements and whether they were being paid by a labour hire firm or their host. The Australian Bureau of Statistics' Jobs in Australia data indicated that the number of jobs in ‘Labour Supply Services’ (labour hire) increased from 584 312 in 2011–12 to 797 710 in 2018–19.
1.7
During the inquiry, the committee heard numerous concerns from stakeholders regarding these arrangements and their increasing prevalence in workforces around Australia. These key concerns are discussed in detail further in this report; however, they generally related to:
the insecure and precarious nature of the work;
the lack of workplace protections, and varying pay and conditions;
increased criminal activity;
lower levels of workplace safety;
increased tax avoidance and wage theft; and
the exploitation of vulnerable groups.
1.8
The committee is especially concerned that hosts' enterprise agreements do not commonly apply to labour hire employees, resulting in differential treatment between labour hire workers and those workers directly employed by host organisations. Although commonly working side-by-side with each other, the committee heard that labour hire workers frequently receive lower pay and conditions than their directly‑employed counterparts.
1.9
Further, it became evident during the inquiry that labour hire arrangements are being utilised as a means of competition between directly and indirectly employed workers, with the aim of lowering wages and providing inferior conditions for all Australian workers.
1.10
Although many labour hire operators abide by the law and meet their legal obligations to their employees, evidence indicates that there may be significant lawlessness within the industry, with a number of jurisdictions mandating licensing schemes in an attempt to mitigate the most egregious examples of this poor behaviour, including harassment; wage theft; and serious workplace health and safety risks.
1.11
The committee also notes research that these arrangements negatively impact health and safety outcomes, including higher incidence or frequency of injuries, including fatalities; poorer physical and mental health, including susceptibility to bullying and drug use; and poorer knowledge of, and access to, regulatory employment rights, and less willingness to raise occupational health and safety concerns.
1.12
It also became evident that the unique industry characteristics of horticulture and meat processing have significant implications for the wages and conditions of its workforce. Specifically, the committee heard compelling evidence regarding the unconscionable exploitation of migrant workers; the creation of a two-tier workforce; and the facilitation of inadequate wages, and wage theft, through piece rates and the structural dependencies flowing from specific visa arrangements.
Outsourcing and subcontracting
1.13
Among other methods employed by firms looking to decrease costs, increase margins, and reduce obligations to workers, are outsourcing and subcontracting.
1.14
Firms outsource entire parts of their production, distribution, maintenance, or support functions, resulting in the loss of stable, secure jobs almost overnight. These jobs are often replaced 'the very next day' by lower-paid, less-secure, casual contracts that are offered by the successful contractor. Workers may end up unemployed, or they end up signing on to do the exact same job, with the new employer, on inferior terms and conditions and a lower rate of pay.
1.15
These decisions are always justified by companies with commercial reasoning. However, as in the case of the Qantas' decision in November 2020 to outsource its ground handling operations on the eve of the expiry of its enterprise agreements, there is evidence that companies are sometimes driven by a desire to 'prevent' the exercise of workplace rights—including preventing 'protected industrial action'.
1.16
As well as outsourcing, firms use contracting and subcontracting to save money and reduce risk. Firms contract out parts of their business to other firms, who might then engage subcontractors to complete all of part of that work.
1.17
Inquiry participants highlighted the problems that can result from the pressures on supply chains where subcontracting is a dominant feature: each contractor takes a cut, until the business at the bottom—often an independent contractor or sole trader—is squeezed and has no choice but to 'take what they are given'.
1.18
Mr Peter Anderson from the Victorian Transport Association and Australian Road Transport Industrial Organisation provided an example. When he previously ran a large national transport company, Mr Anderson lost a large contract 'to a company that was willing to give a stronger supply chain solution based on a lower cost'. Mr Anderson's company 'had about 50 per cent subcontractors and 50 per cent company trucks', and was told that his company would have needed to cut the rate they paid to their subcontractors in order to compete for the contract:
Those subcontractors had been working for us for years doing this contract, and all of a sudden their whole world was turned upside down. The regular work they had been doing and everything they had known in terms of the skill set applied to this type of freight was now challenged, and they had to accept $300 per load less per load, which would be anywhere between $600 and $900 less income per week to do the same work that they had been doing. That's a real-life example of what can happen without proper standards.
1.19
The committee has heard a number of examples where outsourcing, contracting and subcontracting have resulted in substantial and concerning threats to job security and undermined fair wages and conditions. A number of these examples are explored in this report.
Progress of the inquiry so far
1.20
Appointed by resolution of the Senate on 10 December 2020, the Senate Select Committee on Job Security (the committee) was established to inquire into and report on the impact of insecure or precarious employment on the economy, wages, social cohesion and workplace rights and conditions in Australia.
1.21
At the time of publication of this report, the committee has held 20 public hearings—hearing a broad range of diverse evidence from workers and employers, unions, experts, sector organisations and industry bodies—and published 219 submissions. The committee has also held six in camera hearings, during which it heard evidence from workers on a confidential basis to protect their identities.
1.22
The committee notes that it is a possible contempt for any person to inflict a 'penalty or injury upon' another person for giving evidence as part of Parliamentary proceedings, including a Parliamentary inquiry. Where Senate committees are made aware of any concrete threats, or actions taken against witnesses, such actions are treated with the utmost seriousness, and investigated.
1.23
Notwithstanding the protections offered by Parliamentary Privilege, it is the committee's preference to avoid placing workers in a situation where they felt their livelihoods may be at risk. Hence, some of the testimony received during the inquiry to-date has been received in camera, and, where utilised within the committee's reports, has been quoted anonymously with the permission of those individuals.
1.24
The committee has also collected a significant amount of data and information from government agencies, private companies and not-for-profit service providers in the form of answers to questions on notice. All of the public information is published on the committee's website.
1.25
On 24 June 2021, the committee tabled its first interim report titled On-demand platform work in Australia, which looked into employment arrangements in the gig economy and the adequacy of existing legislative and policy approaches, and proposed a number of reforms.
1.26
On 19 October 2021, the committee tabled its second interim report titled Insecurity in publicly funded jobs. This report analysed employment arrangements across the public sector, and was the result of concerning evidence provided to the committee relating to the precarious and insecure nature of work in a number of publicly‑funded employment sectors.
1.27
In particular, testimony from workers in aged care and higher education prompted the committee to look more deeply into these troubled areas. The committee also sought evidence from a number of Australian Public Service agencies to better understand how they structured their workforces, and reviewed the role of Commonwealth procurement in promoting job security. This review of government procurement also included a comprehensive case study on the workforce practices employed by NBN Co, and its delivery partners, in the rollout and upgrade of Australia's National Broadband Network (NBN).
1.28
All reports tabled by the committee can be found on the committee's website, along with the committee's terms of reference, published submissions, information on all public hearings the committee has undertaken, as well as links to Hansard transcripts.
Extension of time to report
1.29
As discussed in the committee's second interim report, the COVID-19 pandemic has shone a light on the true nature and extent of insecure and precarious work in Australia. The pandemic has, and continues to, alter the employment landscape—its impacts are playing out in real time, and its effects are still being understood.
1.30
Playing a vital role in this process of discovery, the committee's inquiry is also giving voice to the concerns of Australians affected by insecure work at this critical time. The committee believes it has never been more important for the Parliament to hear these stories directly and to give these matters their due consideration.
1.31
Given this, the committee sought an extension to its inquiry from 30 November 2021 until the last sitting day in February 2022. The committee's aim in requesting this modest extension of time was to allow it to hear from additional key witnesses, as well as provide critical additional time for the due consideration and reporting on the substantial body of evidence the committee has already gathered.
1.32
On 19 October 2021, the Senate agreed to the committee's request to extend the presentation of the final report until the last sitting day in February 2022. Amongst other things, this vital extension has allowed the preparation of this third interim report focusing on the labour hire sector and contracting across key industries within Australia. These sectoral studies provide a powerful way for the committee to explore issues of job insecurity, with concrete examples of the exploitative nature of some labour hire and contracting arrangements.
The third interim report: labour hire and contracting
1.33
This third interim report is comprised of the following five chapters:
Chapter 2—Labour hire and its impacts
Chapter 3—Workforce arrangements in the mining sector
Chapter 4—Workforce arrangements in the agriculture sector
Chapter 5—Workforce arrangements in the transport and distribution sector
1.34
The current chapter, Chapter 1, provides a brief introduction to the topics of labour hire, contracting, and outsourcing, and highlights a number of key themes which are returned to throughout the report. It also provides information on the progress of the inquiry so far, and the rationale for the committee's decision to seek an extension of time to report.
1.35
Chapter two provides a detailed discussion of the labour hire industry, providing key information on its history and current size, as well as the rationale explaining why workers and entities utilise this form of work. Key concerns are also highlighted and discussed, along with a number of proposed reforms, and the committee's views and headline recommendations.
1.36
Chapters three through five take a sectoral approach in their analysis of labour hire, contracting, and outsourcing, and review the workforce arrangements commonly in place across the mining, agriculture, and the transport and distribution sectors in Australia, respectively.
1.37
These chapters discuss the key issues and concerns raised during the inquiry, as well as utilising prior relevant research undertaken by boards of inquiry, taskforces, and other entities and processes. Each chapter provides the committee's view on the concerns raised and associated recommendations for reform.
Acknowledgements
1.38
The committee would like to acknowledge all submitters and witnesses who gave evidence at public hearings, including many via video or teleconference during COVID lockdowns. We particularly acknowledge the workers who shared their stories with the committee, sometimes under difficult circumstances.