1.1
The Fair Work Amendment (Equal Pay for Equal Work) Bill 2022 (bill) seeks to amend the Fair Work Act 2009 (Fair Work Act) to require that certain labour hire workers receive at least the same rate of pay as other employees performing the same work.
1.2
According to the Explanatory Memorandum (EM), the bill 'is designed to limit the use of labour hire contracts by removing the incentive for employers to do so, which is lower wages'. The EM also states that the bill aims to encourage 'employers to make improved provision for their labour requirements by retaining existing staff in permanent work arrangements, while training new staff through apprenticeships and traineeships'.
1.3
The bill was originally introduced as a private senator's bill by Senator Malcolm Roberts in the 46th Parliament. It was restored to the Notice Paper in the 47th Parliament on 27 July 2022.
Use of labour hire workers in Australia
1.4
According to data from the Australian Bureau of Statistics (ABS), the number of jobs in 'Labour Supply Services' was around 797 712 in 2018–19. The use of labour hire workers has been particularly widespread in the mining, construction, agriculture, transport and distribution sectors.
1.5
Typically, a labour hire worker is someone who enters a work contract with a labour hire agency. The labour hire agency has a commercial contract with a host employer to supply labour. The labour hire worker performs work for the host employer, while the host employer pays the labour hire agency, which then pays the labour hire worker. This type of labour hire arrangement is illustrated in Figure 1.1 below.
1.6
Under this arrangement there are no direct or contractual relationships between the host and the worker; instead, the worker is engaged by the labour hire agency as an employee or an independent contractor, depending on the circumstances of the arrangement.
1.7
Some of the stated advantages of labour hire arrangements for employers include the increased flexibility and cost savings associated with quickly filling gaps in direct-hire workforces and the sourcing of non-permanent labour to support significant projects and operations.
1.8
However, the growing use of labour hire and casualisation in Australia have prompted calls to ensure that labour hire is not misused to undercut the pay and conditions of employees performing the same work, regardless of the industry in which they work. In particular, concerns have been raised that labour hire workers experience lower pay, poorer working conditions, and higher rates of injury when compared to direct hire employees.
Trends in the labour hire sector
1.9
The ABS provides a range of data sources in relation to labour hire trends in the Australian economy, including the household survey-based Characteristics of Employment and the administrative data-based Jobs in Australia publications. However, the Department of Employment and Workplace Relations (DEWR) has pointed out that there are key technical differences between the estimates in these publications.
1.10
According to the ABS's latest Characteristics of Employment data, as at August 2020, there were around 339 400 employees registered with a labour hire firm and around 112 600 registered with and paid by a labour hire firm. However, this is likely to under-report the true figure given the ABS's Jobs in Australia data shows that the number of jobs in 'Labour Supply Services' has increased from 584 311 in 2011–12 to 797 712 in 2018–19.
1.11
In addition, the Recruitment, Consulting and Staffing Association noted that the labour hire sector 'employs over 500 000 people who are sourced and placed across a variety of industries and workplaces'.
1.12
DEWR noted in its submission that the median hourly earnings for all labour hire employees registered with and paid by a labour hire firm are $32.70 per hour compared to $36.00 per hour for all employees. Other evidence suggests that the pay gap may be as much as 30 to 40 per cent in some industries.
Regulation of the labour hire industry
1.13
Over recent years there have been several inquiries, at both the state and federal level, into various aspects of the labour hire industry in Australia. These inquiries identified deficiencies and inconsistencies in the way in which the labour hire sector is regulated and recommended various options for improving the regulation and standards of the labour hire industry.
Senate Select Committee on Job Security
1.14
In December 2020, the Senate Select Committee on Job Security 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. The select committee identified a variety of concerns regarding the labour hire industry, including the insecure and precarious nature of the work, the lack of workplace protections, and varying pay and conditions.
1.15
In its Third Interim Report: labour hire and contracting, the select committee listed 18 recommendations including:
…that the Australian Government amends the [Fair Work Act] to ensure that the wages and conditions of labour hire workers are at least equivalent to those that would apply had these workers been directly employed by their host entities.
1.16
The committee also recommended the introduction of a comprehensive national labour hire licensing scheme for all business sectors and requiring mandatory registration and continuous compliance with all legal obligations.
1.17
Currently, there are labour hire licensing regimes in Queensland, Victoria, South Australia, and the Australian Capital Territory, with Western Australia having indicated in principle support to introduce its own scheme.
The Australian Government's election commitments
1.18
Prior to the last federal election, the Australian Government (government) announced that as part of its Secure Australian Jobs Plan it would legislate to ensure that workers employed through labour hire companies receive no less than workers employed directly. The government is 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'.
Overview of the bill
1.19
The bill would insert a new Division 4 of Part 2-9 into the Fair Work Act that would require that certain labour hire employees receive at least the same amount of pay as other employees performing the same work.
Minimum pay for certain labour hire employees
1.20
The proposed new Division 4 would include a new section 333B which would:
define the circumstances under which the new requirement would apply to a labour hire employer and host employer, including where the whole roster has been replaced with labour hire employees;
require a host employer to pay an employee a base rate of pay that is at least equal to, if not more than, the rate being paid to an employee of the host employer, including incentives, allowances, overtime and penalty rates, and any other identifiable amounts;
clarify that the 'same work for the same pay rate test' should consider employees who may be on the same shift, but working a different roster and therefore may receive a different rate of pay; and
limit the application of the bill to specific modern awards and allow the Minister to add additional awards by way of disallowable instrument.
Awards to be covered by the bill
1.21
The bill would apply to labour hire employees under the Black Coal Mining Industry Award 2020 and the Aircraft Cabin Crew Award 2020, as well as the Australian Nuclear Science and Technology Organisation (ANSTO) Enterprise Award 2016; the Fire Fighting Industry Award 2020; the Maritime Offshore Oil and Gas Award 2020; and the Seagoing Industry Award 2020.
Penalty for non-compliance
1.22
The bill would provide a new civil penalty that would apply in respect of a worker employed under a labour hire contract where the provisions of the proposed amendments have been breached. The EM notes that 'the penalties in this section are in line with similar penalties for breach of enterprise agreement provisions already contained within the [Fair Work Act]'.
Application of amendments
1.23
The amendments relating to the pay rate would not have a retrospective application and would be limited to any new labour hire contract entered into after the commencement of the bill.
Consideration by other parliamentary committees
1.24
When examining a bill, the Senate Education and Employment Legislation Committee (committee) considers any relevant comments published by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) and the Parliamentary Joint Committee on Human Rights (Human Rights Committee).
1.25
The Scrutiny Committee noted that proposed subsection 333B(4) of the bill may raise scrutiny concerns under Senate standing order 24. It noted that this provision 'may raise scrutiny concerns under principle (v) in relation to the incorporation of external material as existing from time to time'.
1.26
The Human Rights Committee did not make any comment on the bill. However, the statement of compatibility with human rights concluded that the bill is compatible with human rights because 'it advances the protection of human rights, particularly the right to equal pay for equal work'.
Conduct of the committee's inquiry
1.27
On 28 July 2022, the Senate referred the bill to the committee for inquiry and report by 24 October 2022.
1.28
The committee advertised the inquiry on its website and invited submissions by 14 September 2022. The committee received 18 submissions which are listed at Appendix 1 of this report. The public submissions are available on the committee's website.
1.29
The committee held a public hearing in Sydney on 5 October 2022. A list of the witnesses who gave evidence at the hearing is included at Appendix 2.
1.30
The committee thanks those individuals and organisations who contributed to this inquiry by preparing written submissions and giving evidence at the public hearing.