Background and definition
Labour hire arrangements commonly involve a 'triangular relationship' whereby a labour hire firm provides the labour of a worker to a third party, also known as a host, in exchange for payment. The Australian Council of Trade Unions (ACTU) submitted that these hosts are commonly large companies who, in many cases, utilise their own employees alongside externally sourced labour hire.
Emeritus Professor Michael Quinlan at the University of New South Wales noted that the term 'labour hire' is specific to Australia and New Zealand, and that in other jurisdictions around the world firms performing essentially the same role are referred to as 'agency labour' and 'temp agencies'.
A comprehensive explanation of the common labour hire arrangement was referenced in the final report of the 2015–16 Victorian inquiry into the labour hire industry and insecure work (the Victorian Inquiry):
… [it] involves the agency entering into an agreement with the worker, and arranging to hire out their services to a host, or to a series of hosts. The worker generally performs these services at the host's premises, and may be supervised (if their work requires supervision at all) either by the host's staff or by other workers supplied by the same, or a different, agency. The worker is paid by the agency, but aside from any requirement to submit timesheets may have relatively little contact with it. The host, on the other hand, pays a fee to the agency which covers the worker's remuneration and any associated on-costs. … In many instances the nature of the arrangement is such that there is no obligation on either side to give or accept work. If an assignment is accepted, a contract is formed (usually on the agency's standard terms). But in between assignments, there may be no mutuality of obligation and hence no contract.
Under these arrangements 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. A typical labour hire arrangement is shown in Figure 2.1 below.
Figure 2.1: A typical labour-hire arrangement
Victorian Government, Victorian Inquiry into the Labour Hire Industry and Insecure Work: Final Report, p. 48.
Importantly, the party with the actual control over how tasks are performed is the host firm; not the labour hire firm. The Victorian Inquiry described the working environment, and the temporary nature of these engagements, as follows:
The employee commences and concludes work in accordance with the requirements of the host, works at the direction of the host, at the host's workplace, and in many cases alongside direct employees of the host. Further, irrespective of the length and regularity of a labour hire employee's work for a host, the labour hire employee's engagement at the host's business is, of its nature, temporary.
Although both the labour hire agency and host have a number of duties and obligations regarding their labour hire workers and the workplace environment, the precise allocation between the parties will depend on the circumstances.
The Construction and General Division of the Construction, Forestry, Maritime, Mining, and Energy Union (CFMMEU) highlighted the myriad forms that labour hire can take and noted a number of the complications:
Despite the typical forms of labour hire arrangement, in reality there is often variation in how such workers are engaged: workers may be hired as employees or independent contractors, employees may then be casual, fixed-term or ongoing. Complicating these arrangements even further is the fact that hosts may outsource only some work to a labour hire agency, thus creating a situation where direct employees and labour hire workers perform the same duties side-by-side. Further, in some instances labour hire agencies themselves may further outsource or contract out their labour needs, creating a multi-tier relationship.
Industry profile and size
There has been substantial growth in the labour hire industry in recent years, with estimates suggesting that the sector is now worth $19 billion a year. The Recruitment, Consulting and Staffing Association (RCSA) estimated that labour hire firms, or job agencies, employ approximately 360 000 people in Australia, including professionals, tradespeople, and skilled and semi‑skilled workers. It submitted that:
… they are young, old and middle-aged and they are assigned to work for business, and government, across hundreds of different industries, ranging from IT and engineering through to health and manufacturing.
The CFMMEU contended that the utilisation of labour hire in the construction industry is becoming increasingly widespread and that it has been a 'significant factor in undermining job security and the entitlements of construction workers'.
In its submission to the inquiry, the Queensland Government stated that, in 2018, just under 4 per cent of employees in Australia, or approximately 400 000 people were registered with labour hire firms. It highlighted that between 2014 and 2018, the number of these workers increased by around 24 000, or 6.3 per cent, and that their median weekly earnings were 4 per cent lower than the median weekly earnings of other employees.
The Western Australian Government (WA Government) submitted that, as at August 2020, an estimated 14 600 employees, representing 1.3 per cent of all employees in Western Australia, were paid by labour hire firms or employment agencies. It also noted that, in 2015, the Productivity Commission estimated that labour hire accounted for approximately 1.8 per cent of the national labour market.
In its final report, the Migrant Workers' Taskforce argued that the number of labour hire workers in Australia was uncertain, stating that estimates varied depending on which data source was utilised. With regards to the number of businesses operating in the sector, the taskforce similarly said the following:
Based on existing data, it is unclear how many labour hire businesses are currently operating in Australia. This is because of the way labour hire is captured in government datasets, how businesses record their labour hire activities (where it might not be the primary service they deliver) and the increased likelihood that unscrupulous labour hire operators will operate within the black economy.
The Migrant Workers' Taskforce also highlighted another significant deficiency in data collection by noting that there are currently 'no data to determine how many migrant workers are engaged by labour hire operators'.
The joint submission to this inquiry made by the Attorney-General's Department; the Department of Education, Skills, and Employment; and the Department of Industry, Science, Energy, and Resources (the Joint Departmental Submission) argued that ABS data showed that the relative share of most individual forms of work had remained 'relatively stable' over the last decade, with the exception of part‑time employment. It articulated this further:
… as per ABS definitions, the number of casual employees as a share of all employees, the number of individual contractors as a share of all employed persons, the number of labour hire workers as a share of all employees, and the number of employees on fixed-term contracts as a share of all employees have all remained relatively stable (notwithstanding the decline in casual employment experienced during the COVID-19 pandemic …
Similarly, the Australian Chamber of Commerce and Industry (ACCI) argued that the labour hire workforce only represents a 'very small proportion' of the total workforce, and that the proportion has 'barely moved' over the last ten years. It noted that the largest users of labour hire and agency workforces in Australia were the professional, scientific and technical services sectors and the banking and finance industry, followed by construction and healthcare.
Referencing a 2018 research paper published by the Australian Parliamentary Library, the Australasian Centre for Corporate Responsibility (ACCR) suggested 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 ACCR also noted that it had recently reviewed how the top S&P/ASX 100 companies across the mining, construction, and property services sectors reported the composition of their workforces. Based on this review, it concluded the following:
Very few companies report any information about their use of labour hire and/or contract workers, despite the fact that these workers often made up a large proportion of a company's total workforce. Of the companies analysed, 42% made no material disclosure about their labour hire and/or contracting workforce in annual reporting documents. When companies do disclose some information about their use of labour hire and/or contracted workers, it is often unclear how the companies are defining each of these categories of work.
Notwithstanding the lack of available information, the ACCR said it was 'clear that labour hire workers constitute a staggering proportion of workers in some industry sectors'. In support of this assertion, the centre noted that, since 2012, many operators within the mining industry had moved to engaging predominantly labour hire workforces. The ACCR also raised the 'incursion' of these arrangements into the health and community sectors, highlighting that during 2019–20 the National Disability Insurance Scheme (NDIS) workforce included 1692 labour hire contractors and consultants; representing 15 per cent of the total workforce.
Australian Bureau of Statistics data
The Program Manager of the Labour Statistics Branch at the Australian Bureau of Statistics, Mr Bjorn Jarvis, told the committee that the Labour Force data, which is commonly used to estimate the number of labour hire workers in Australia, is not the best source of data on labour hire. He contended that this is because it is often underreported by employees who do not know they work for a labour hire company:
… a lot of those people who are persistently employed by labour hire firms who are—using an example of working in mining—doing it over a long period of time, end up identifying that they're employed in mining rather than employed by a labour hire firm that is contracting work to the mining industry.
As an alternative, Mr Jarvis suggested that the Labour Account data, which is a collection of data from industry and other sources, ‘provide[s] the best indication of the size of the industry’. He explained that labour hire falls within the Administrative and Support Services Industry Division, under ‘Labour Supply Services’, and to get a more accurate picture of the growth in the sector, the Labour Account:
… gives us the best sense of the size of the industry, how many people are employed by the industry, the jobs within that industry, the hours that are worked within that industry, and also the total remuneration for people employed within that particular industry.
According to the ABS' Jobs in Australia data, the number of jobs in ‘Labour Supply Services’ (labour hire) has increased from 584 312 in 2011–12 to 797 710 in 2018–19 (latest available data). This figure is higher in real terms than the figures provided by the Labour Force data, and higher than industry estimates. Importantly, it indicates material growth in this precarious and insecure form of employment over time.
Figure 2.2, below, highlights that the share of total jobs in the economy generated by Labour Supply Services grew from 3 per cent to 4 per cent between 2012–13 and 2018–19.
Figure 2.2: Labour supply services share of total jobs in the economy
Source: ABS, Labour Account, Parliamentary Library calculations.
A brief history of labour hire in Australia
Labour hire has existed in Australia since the 1950s when it was predominantly utilised 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, there has been significant growth in what has been termed the 'pure' labour hire industry, which provides contract labour across a wide range of industries as a flexible alternative to the traditional direct ongoing employment model.
The Victorian Inquiry noted that the industry has become well established in Australia over the last twenty years. It also highlighted the various types of labour hire arrangements operating within Australia in recent times. These services have evolved and now include a multitude of options, such as:
the supply of short term placements;
the outsourcing of specific functions, such as maintenance;
the provision of substantial proportions of organisations' workforces for extended periods of time, such as call centres and retail organisations; and
the provision of entire workforces for hosts.
The ACTU also observed that this form of employment has substantially increased, and now operates across a range of industries and occupations. It contrasted this with the historical approach whereby the use of triangular employment relationships were commonly confined to specific tasks considered outside a business' core activities and competencies, or to fill genuine short-term staffing shortages. It submitted that a key reason for this increase in recent times has been to 'reduce labour costs and transfer risk to workers'.
The 2016–17 Black Economy Taskforce highlighted the recent evolution of the labour hire industry, and indicated that some newer models may utilise the 'sharing or gig economy model'. Specifically, in its final report it said:
Some newer models of what could be considered labour hire use the sharing or gig economy model. The labour hire firm operates as an online platform, workers and businesses seeking workers are matched through the platform. The labour hire platform may just match staff to jobs, with the business paying users directly, or may provide users with the business paying the platform. The same platform may operate both models, with it varying between what the business chooses, either generally, or for particular workers.
Partly in response to poor practices in some parts of the sector, the peak body for the recruitment and staffing industry in Australia and New Zealand, the RCSA, implemented a voluntary workforce services provider certification scheme known as StaffSure. As articulated on the scheme's website:
StaffSure was developed because there were a number of service providers in the Australian and New Zealand market who were not meeting their legal obligations to workers and, following allegations of exploitation, there was a call from industry, unions and government for the development of a scheme that made it easy and simple to work out which providers had business integrity and which did not - who to use and who to avoid.
The purpose of certification is to provide a measure of assurance that, within an acceptable degree of residual risk, a certified workforce services provider is reputable, has established and operates reasonable controls in the key areas covered by the standard, and will seek to meet its compliance obligations in accordance with the standard.
Although commending industry efforts to improve integrity, the Migrant Taskforce still had lingering concerns regarding its ability to change behaviour. In its final report it said:
… there are concerns that StaffSure will have limited impact in correcting poor behaviour in high-risk sectors. The many small labour hire operators that operate in these sectors would have little incentive or ability to invest in meeting the rigorous certification standard while the drivers for potential unscrupulous practice remain. As such, certification alone will be unlikely to capture unscrupulous labour hire operators, including those operating in the black market, in any meaningful way.
A national licensing scheme
A number of factors are commonly thought to provide the environment for 'unscrupulous' labour hire operators to exist within Australia, such as a lack of:
barriers to entry to operate within the industry;
visibility regarding the prior conduct and behaviour of labour hire operators; and
supply chain accountability for unscrupulous practices by labour hire operators.
Recognising these problems and aiming to mitigate them, a number of states and the Australian Capital Territory developed and implemented labour hire licensing schemes in their respective jurisdictions.
Commenting on these existing state-based licensing schemes in 2019, the Migrant Workers' Taskforce argued that a national scheme would be preferable to regional schemes for a number of reasons. On this it said the following:
The separate state-based licensing schemes, while sharing some common elements, have key differences. Having multiple schemes in operation imposes a further regulatory and cost impost on the labour hire operators and host businesses that operate across state borders. The Taskforce is of the view that a single national regulatory scheme is preferable over different and overlapping state-based schemes.
Given this, the taskforce called for the government to establish a national labour hire registration scheme with the objectives of:
gaining visibility and accountability of labour hire operators operating in high‑risk sectors;
extending accountability to hosts;
providing a means for government to encourage compliance and behavioural change; and
reducing exploitation of vulnerable workers by labour hire operators and in supply chains.
In its submission to the inquiry, the Queensland Government expressed its support for a national licensing scheme based on the successful model already operating within its state. The ACTU also advocated for a national scheme, as long as it provides protections, and imposes obligations, which are 'at least equivalent' to those under the existing state-based schemes.
The Black Economy Taskforce, however, did not favour directly licensing labour hire firms at either the state/territory level or nationally. In its 2017 final report, it said the following regarding the proposal:
Any licensing scheme is creating further regulatory burdens. Government licencing, if not backed up by strong enforcement, can sometimes degenerate into a tick-the-box exercise. Licence fees are paid, but little action is taken. A further risk is that otherwise credible licencing regimes, over time, are diluted and compromised. As a result of lobbying, they come to define the lowest common denominator. A third licencing pitfall is that, being defined by government, they fail to keep pace with changes in technology, consumer preferences and commercial practices.
Notwithstanding these reservations, in response to the findings of the Migrant Workers' Taskforce the then Minister for Industrial Relations, the Hon Christian Porter MP, wrote to his state and territory counterparts in October 2019 seeking their input into the development of a national scheme. In his letter, he proposed a number of 'guiding principles' to underpin the development of the scheme:
labour hire operators must be registered to operate, and unregistered entities would be subject to penalties;
the scheme would operate nationally;
the sectors covered by the scheme would be informed by stakeholder consultation, but would, at a minimum, cover 'high-risk' sectors;
labour hire operators would be required to register and supply information about the owners of the business;
registered operators would pay an annual fee;
the Fair Work Ombudsman would administer the scheme, including registration and compliance;
the government would maintain a public register of labour hire operators to allow hosts to easily find registered operators; and
hosts are required to use registered operators, and those that use unregistered operators would face penalties.
The development of this national scheme has not yet been finalised by the Australian Government, and no draft legislation has been presented publicly for discussion.
The reasons why organisations use labour hire
Host organisations engage labour hire workers and contractors for a myriad of reasons, with the two key ones being increased flexibility and cost savings. The 2020–21 Queensland Coal Mining Board of Inquiry (the Mining Inquiry) submitted that the most significant advantage for host organisations in the mining industry is:
… the ability to increase their labour supply during periods of demand without having to increase their employee numbers, and reduce that supply when it is no longer required.
The Mining Inquiry also noted that other advantages included:
providing enhanced numerical flexibility to cope with peaks and troughs in demand, staff absences, or to manage specific work (e.g. programmed maintenance)
simplifying recruitment and selection processes and meeting interim or immediate staff needs at short notice facilitating access to specialist skills from time to time as required
reducing in-house staff and outsourcing non-core business areas, including the management of areas of expertise (e.g. human resources, occupational health and safety)
reducing costs associated with staff overheads and entitlements, simplifying tax planning, and
outsourcing risk management and administrative burdens associated with regulatory compliance, including unfair dismissal claims and workers' compensation.
The RCSA submitted that Australian small businesses are heavily reliant on on-hire staff, and that they use this form of labour to perform roles where they are not large enough to warrant engaging permanent or full-time employees. It highlighted that the utilisation of labour hire workers is most important during a business' transition and growth phase:
As businesses take on new projects, new clients or attempt new lines of work, at the time the activity commences there is often uncertainty about the longevity of new operations, the stability of the opportunity or the commitment of the client. On-hire staffing allows small business to engage the labour it needs to trial or develop a line or service, and to grow it with less risk.
The RCSA also noted that labour hire has been utilised across Australia's health and care systems to provide surge staffing needs. It submitted that '[w]ithout accessible, qualified and 'work ready' teams of on-hire casual staff, Australia could not rely on its health and care structures in the way we have come to take for granted'.
The Australian Workers' Union (AWU) noted that, according to the Organisation for Economic Cooperation and Development (the OECD), Australia has one of the highest rates of 'non-standard employment' in the world. It submitted that this is often done ostensibly to increase organisational flexibility and to fill specific skill shortages; however, it argued that, in practice, the aim is actually to:
… prevent labour hire employees from having access to the same pay and conditions provided under existing enterprise agreements (EAs). This becomes increasingly transparent when employers fire their own employees and seek to rehire them under labour hire contracts.
In its submission to the inquiry, the ACTU contended that the use of labour‑hire workers by corporations and government agencies is designed to 'facilitate the stripping of conditions and driving wages down below industry standards'. Further articulating this point, the ACTU stated that the utilisation of these arrangements is a means of:
… putting wages into competition through outsourcing that puts the workforce beyond the reach of enterprise bargaining with the host business.
The Mining Inquiry also recognised this, noting that another key advantage seemed to be the 'marginalisation of the union', which served to reduce the risk of increased industrial disputes, work stoppages, lower productivity, and higher labour costs.
The reasons why workers engage in labour hire work
A number of reasons were provided to the committee to explain the rationale for workers choosing to engage in labour hire work. For example, mirroring the flexibility benefits that host organisations receive, it was submitted that this form of work offers additional flexibility for workers as well. Specifically, it was contended that these arrangements make it possible to combine work with study, family, and travel; and can also accommodate partial retirement and facilitate the transition back to work from studying, parental leave, and unemployment.
It was also suggested that other advantages of this form of work include having agents who scout for placement opportunities on workers' behalf; tailored working conditions; an increase in the variety of work undertaken; and heightened independence to determine work options.
As referenced by the Mining Inquiry, a 2008 Australia Bureau of Statistics (ABS) survey identified numerous reasons why workers engage in labour hire work. These are listed below, along with the percent of respondents who selected each reason:
ease of obtaining work (55.7 per cent);
the fact that it is hassle-free (15.6 per cent);
respondents like short-term work (2.8 per cent);
they are unable to find work in their line of business (7.1 per cent);
labour hire work is a condition of working in the job/industry (9.2 per cent);
a lack of experience prevents them finding a permanent job (2.4 per cent);
it allows them to gain more experience (2.8 per cent);
it affords them flexibility (7.4 per cent); and
other unspecified reasons (17.8 per cent).
In its submission to the inquiry, the CFMMEU highlighted that the majority of labour hire employees are casual employees and, hence, are entitled to a higher hourly rate than equivalent full-time and part-time employees through a 'casual loading'. Although noting that it is commonly argued by labour hire advocates that workers are generally happy with these arrangements, as they allow higher wages through this casual loading, the CFMMEU concluded that:
… the argument is 'not backed up by the facts' as researchers have found that the casual loading does not fully compensate for all of the foregone benefits associated with stable, ongoing work.
The Mining Inquiry stated that there was evidence indicating that some workers utilise temporary forms of employment, such as labour hire, because of a 'lack of options'. It referenced a 2009 study of the European Union which found that over 50 per cent of the study's participants had 'involuntary motivations' for engaging in this form of work.
In alignment with the above finding, the Victorian Inquiry concluded that:
While there is evidence that some workers are attracted to the flexibility that labour hire offers and see it as a path to ongoing employment, many workers accept labour hire engagements as the only choice open to them and would prefer permanent positions. There is also considerable financial insecurity attached to many labour hire engagements.
Notwithstanding the above, the RCSA argued that the conversion rate of labour hire workers into full‑time or part‑time employment was 'extremely low', noting that it was less than 4 per cent. Given this, it concluded that '[t]he vast bulk of agency workers choose to work the way they do'.
This argument was rejected by numerous witnesses, who noted that the conversion to full-time employment with the labour hire company would still leave them on the inferior pay and conditions offered by the labour hire company, while also stripping away the 25 per cent loading. The base rates of pay on these labour hire agreements are in some cases so low, that the 25 per cent loading is essential. On the other hand, labour hire workers are desperate to convert to employment with the host, to access superior union-negotiated terms. Mrs Kelly Vea Vea, Deputy Mayor of the Isaac Regional Council said:
I would really like to make a statement regarding that claim that was made yesterday by labour hire companies that less than one per cent of labour hire workers have converted to permanent jobs because they prefer more money and flexibility. For us out here, that's as misleading as it is downright offensive. We have no doubt that less than one per cent have converted to permanent jobs, because there aren't permanent jobs to be had. For us, it's really frustrating because mining companies create new workforce structures that deprive workers of genuine choice, and then they say the workers actually didn't want to do that anyway. For us as communities that is as predictable as a metronome. I couldn't personally, on behalf of our communities, be more offended at those statements… The jobs that those people were offered would have been for less conditions, less value, less everything than everyone they work beside.
Australian Workers' Union National Secretary Daniel Walton echoed those sentiments:
I think it's hilarious. It's hilarious that some employers have come up and said, 'I've asked all of my employees who wants to become permanent,' somehow using that as their anecdotal evidence to support a claim that people don't want more permanency. Take a straw poll. Walk out into any areas with high casualisation and ask a group of workers: Do you want to stay as a casual worker and get paid less than the full-time workers that are here? Do you want to be a casual worker and struggle to get a loan to be able to buy a house or to build a house? Do you want to stay here as a casual worker, where you don't enjoy any annual leave to spend time with your kids during school holidays? Do you want to remain a casual worker where you've got fewer rights around unfair dismissal than any other category of worker? If you find that less than 90 per cent of that workforce put up their hand to say they want more permanency, I'd be shocked.
Key concerns raised with labour hire work
The previous two sections highlighted the reasons why host organisations and workers are believed to utilise labour hire arrangements over traditional direct employment. This section discusses the key issues and concerns raised during the inquiry, as well as drawing on the significant amount of research previously undertaken through other processes. These central concerns specifically relate 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.
Insecure and precarious work
The insecure and precarious nature of labour hire work was raised as a key concern by a number of inquiry contributors. For example, the CFMMEU submitted that construction workers regularly suffer from 'chronic job insecurity' throughout their working lives, as they are usually engaged through casual labour hire arrangements or on a daily hire basis. It highlighted the following concerns with these arrangements:
Workers who face chronically precarious and unpredictable employment are frequently forced to undertake unpaid or underpaid work activities, or forego other legal entitlements such as the superannuation guarantee, in order to gain - or retain – employment. These workers are particularly vulnerable to exploitation as when they do speak out and demand their lawful entitlements, they are moved on.
The Australian Manufacturing Workers' Union (AMWU) also raised its concerns, arguing that there are hundreds of thousands of workers across Australia 'trapped in insecure jobs'. It noted that insecure work, such as labour hire and casual employment, not only negatively affects these workers, but also has 'devastating impacts' across the broader economy. In its submission the AMWU argued that this form of work impacts at both the macro and micro levels:
At the macro level, casualization has depressed wages and improvements in workers' working conditions. Not only are casual workers less likely to push for these things in bargaining, but the ever-present threat of permanent jobs being replaced by casual ones serves as a brake on demands by permanent workers. The ability of companies to replace their directly employed workers with labour hire – a common experience in manufacturing – has hampered workers' ability to win improvements to wages and conditions.
At the micro level, the impacts of insecure work are well known. Workers unable to do simple things like make plans, support their communities or engage in volunteer work. More serious impacts like being unable to get loans, make financial commitments or undertake long-term planning; increased pressure on mental health; and family breakdown are also well documented.
Evidence indicated that individuals may also be reluctant to speak up about issues because they are concerned that they are being tracked by enterprise software and may be ‘blacklisted’. For example, an inquiry participant submitted the following:
We're talking about a system that has ERM and a SAP; they can track who you are. If you said a certain thing, you bet your techforce would get a pop-up saying that you were mentioned in this, and they'd say, 'We remember that incident, that guy.' So I'll probably still get pinged; they'll probably still blacklist me. But, potentially, if you put your name against the record, all of a sudden BHP can look you up, and Rio Tinto can look you up and put you on their system as blacklisted, 'He's a troublemaker, he speaks out when things aren't right.'
Another witness noted that ‘they say it’s not a blacklist system’, but contended that:
… [w]hen you apply for a job, it goes on ERMS. It then tracks your flights, where you are, what you do. We all know they're there. They know where we are. Then it makes a register of everything that's happened along there. On that, it also puts down if you've been fired. It keeps a log of what your last supervisor thought of you, and then that can judge you, which is a bit frightening. People say that it doesn't stop you from getting jobs, but I know people who've actually phoned up, applied for their ERM system, had it cleared-these are people who could not get jobs-and then reapplied. When you'd reapply, you'd say, 'I was on this job and on that job.' You can't say that anymore. They'd say: 'No, you can't have been on that job; it's not in the ERM system. You're lying to us that you were on that job.' You'd say, 'No, I cleared it.' They'd ask, 'Why did you clear it? You're a problem.' So it's an automatic blacklist that sits there. They say it doesn't do anything, but it does. If you don't tick the boxes all the time, you move down the list. It's only if there's a big job and they need a flood of people that they open up the doors a little bit more to let you in. I don't know why it only exists in WA as well.
In its response to a question taken on notice, BHP confirmed its use of ERMS. On this, it said the following:
BHP uses ERMS in Western Australia as a contractor mobilisation system that reviews medical compliance and verifies competencies and qualifications. ERMS is also utilised to facilitate access to online inductions and the relevant site access systems. ERMS is not used for the purposes of recording details of employees’ conduct, union engagement or otherwise. BHP does not use ERMS to record feedback, comments or complaints from an employee, nor does it record details of a candidates’ union engagement or otherwise.
Lack of workplace protections, and varying pay and conditions
In its submission to the inquiry, the WA Government noted that a prior report published by the Australian Human Rights Commission (AHRC) in 2020 had raised concerns regarding the lack of protections from sexual harassment, and the heightened barriers to reporting this type of abuse, when workers are engaged under non-standard employment arrangements, such as labour hire. The AHRC contended that:
… it might be challenging for a victim of sexual harassment working under such arrangements to identify an employer, a workplace or personnel who are responsible for safety. Such workers are also reluctant to complain to avoid their contracts not being renewed or being assigned fewer hours of work. This may then place these workers at higher risk of experiencing sexual harassment.
The AWU contended that workers performing identical roles, and working side‑by‑side on the same site, can be on 'dramatically different terms' depending on how they have been engaged. It also submitted the following:
Many labour hire providers are smaller than the employers they provide workers for, and can even take an underhanded or outright ignorant approach to their legal obligations. If workers raise issues, shifts can be revoked by the labour hire firm.
Further, the 'true' employer is not responsible for ensuring that many obligations to employees are met: those are the responsibility of the intermediary labour hire firm, while the employer merely pays for the services provided. This allows employers to turn a blind eye to compliance issues.
In its final report, the Mining Inquiry highlighted concerns that labour hire workers were generally paid less than direct employees and that contracted labour had been used to 'undermine labour standards and weaken or remove union presence'. Furthermore, it submitted the following:
Another concern associated with labour hire is that labour hire workers can be used to substitute an existing workforce with a cheaper equivalent which is more likely to be compliant because of the temporary nature of their engagement.
Increased criminal activity
It has been contended for a number of years that some parts of the labour hire industry may be involved in criminal activities. For example, in its 2017 final report, the Black Economy Taskforce suggested that parts of the labour hire industry had been 'infiltrated by unscrupulous firms and individuals that are operating in the black economy'. It noted the following:
Some sectors are particularly vulnerable to such operators, including horticulture, security and perhaps even aged care. This can range from simple non-compliance with PAYG tax withholding and payment of cash wages well below award rates, to exploitation of vulnerable workers and even labour hire firms with links to crime, money laundering, immigration fraud and other abuses.
The Black Economy Taskforce also made the following specific observation on the use of labour hire within the horticulture industry:
Forty-thousand temporary positions need filling for fruit picking and other harvest activities seasonally. Historically this has been managed through the working holiday maker visa ('backpacker visa'). However, insufficient supply provides an opportunity of unscrupulous operators, frequently with connections to organised crime both locally and internationally, to set the terms both of the supply to the farmers and the payment and other terms to the workers.
This theme of illegal behaviour and exploitation by labour hire operators was also detailed in the 2019 final report of the Migrant Workers' Taskforce. This report said the following:
The Taskforce found that labour hire operators that exploit migrant workers often create complex operating environments that make it harder to ensure compliance with the law. This can include involvement in the black economy, the use of intermediaries (e.g. accommodation providers and migration agents) and potential acts of money laundering, human trafficking and modern slavery.
Lower levels of workplace safety
The Mining Inquiry highlighted that there is a considerable body of research into the safety and health implications of the utilisation of labour hire and other types of temporary and insecure arrangements. It noted the high degree of consistency in the findings of this research, which it contended were 'overwhelmingly negative'. It articulated this further:
The research shows that, generally speaking, temporary and insecure work arrangements are associated with a higher incidence of injuries and fatalities, as well as poorer physical and mental health. Workers employed in such arrangements generally have a poorer knowledge of, and poorer access to, regulatory employment rights, and are less willing to raise occupational health and safety concerns.
In addition, the existence of labour hire arrangements at a workplace presents more complex inter-organisational chains of responsibility. It also increases demands on regulator resources.
Other safety impacts arise from the fact that labour hire workers are, generally speaking, significantly less likely to have access to complaint mechanisms, health services, statutory entitlements to protections and benefits, return to work pathways, and representation.
Emeritus Professor Michael Quinlan highlighted a number of key negative health and safety outcomes associated with contracting and labour hire when compared to ongoing full-time employment. These included:
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 (OHS) concerns.
The WA Government noted that anecdotal evidence received by WorkSafe inspectors suggested that insecure workers may be less likely to raise health and safety concerns either within their own organisation, or through contacting a safety and health regulator, because of fears of reprisals such as being permanently dismissed. It articulated this further:
Fear of losing income may also encourage labour hire and gig economy workers to work in unsafe ways, such as not complying with fatigue management requirements or operating machinery without adequate training. The combined factors of less injury data and fewer complaints mean that gig economy workers are, to some extent, out of 'sight' of regulators.
Box 2.1: Case study: Labour hire and Snowy Hydro 2.0
The AWU provided the inquiry with a case study concerning a labour hire worker at the Snowy Hydro 2.0 project who was involved in a 'horrific incident'. The case study, described below, highlights a number of key health and safety issues which labour hire workers involved with the infrastructure project may be exposed to, such as poor fatigue management, unsafe practices, and the ability for blame to be avoided.
In this scenario, a crane supervisor on the infrastructure project was involved in a car accident while returning from remote offsite accommodation at night, and in the middle of a storm. The AWU contended that '[t]his worker should never have been put in this situation', and that Snowy Hydro and its joint venture partner should have halted work earlier in the day when the storm initially hit.
The AWU stated that the welfare of the worker was further compromised by the fact that, due to the poor weather conditions at the time, he was unable to be air lifted by helicopter and had to be transported by road to Canberra.
In addition to raising the incident itself, the AWU also noted their concern regarding the response by Snowy Hydro and its joint venture partner following its occurrence:
The AWU sounded the alarm on this in late 2020. Snowy Hydro and their joint venture partner initially tried to pass the buck to their labour hire firm, NX Blue. NX Blue said it was the joint venture partner’s fault. The joint venture partners only acted on [the AWU's] concerns at the end of May this year , but the involvement of a labour hire operator allowed the blame to be avoided.
The AWU went further:
The use of labour hire seeks to erode pay, conditions and safety requirements that the AWU has fought hard to secure. Workers can be side-by-side on the same site, doing the same work, on dramatically different terms. Further, the 'true' employer is not responsible for ensuring that many obligations to employees are met: those are the responsibility of the intermediary labour hire firm, while the employer merely pays for the services provided. This allows employers to turn a blind eye to compliance issues.
Increased tax avoidance and wage theft
In its submission to the inquiry, the WA Government stated that intelligence gathered by RevenueWA suggested that some labour hire firms 'intentionally structure their operations across a number of entities to avoid the threshold at which payroll tax becomes payable'. It also noted that many of these entities are administered by 'dummy directors', who are commonly located overseas.
The WA Government also referenced evidence submitted to another inquiry by RevenueWA's predecessor organisation, the Office of State Revenue, regarding the unscrupulous behaviour of various labour hire operators. In that submission, the then Office of State Revenue argued that:
…..these labour hire firms are intentionally avoiding their employment obligations. They are often set up with 'straw man' directors and false addresses, which impedes our investigations and makes collection of payroll tax difficult and/or unlikely. Often, when they become aware we are investigating them, they simply 'disappear' and stop providing services.
It was also noted that RevenueWA had identified an increase in the rate which labour hire operators were being 'phoenixed' and dissolved prior to instigative or enforcement action. To make the detection and recovery of unpaid taxes increasingly difficult for authorities, it was suggested that these firms were now changing their structures every three to six months, as opposed to every ten to twelve months.
The Migrant Workers' Taskforce submitted that the reasons for non‑compliance can range from a lack of knowledge of obligations through to intentionally operating solely in the black market. It contended that evidence suggested the following common practices utilised by non-compliant operators:
underpayment of wages and non-payment of the superannuation guarantee
not remitting PAYG tax and paying workers' compensation premiums
the use of vulnerable workers (including illegal and trafficked workers)
sham contracting arrangements
sub-contracting arrangements that add little value to the supply or service
practice of liquidating businesses to avoid accrued employee obligations (known as 'illegal phoenixing')
provision of over-priced, sub-standard accommodation
involvement in criminal activity (e.g. money laundering, illegal tobacco).
Centre for International Corporate Tax Accountability and Research (CICTAR) Principal Analyst, Mr Jason Ward, said that labour hire multinationals aggressively avoid tax while undermining employment standards:
These multinationals have an oversized footprint in Australia and are now amongst the largest employers in the world… Dutch based Randstad is the world's largest labour hire multinational. Its Australian business is owned via Luxembourg and financed through Singapore… Other multinationals, like Glencore, with its own major tax-dodging concerns, also use labour hire to avoid obligations to workers and increase profits in the mining sector and across the broader economy.
Mr Ward added that Randstad and Adecco, in the most recent year ATO data is available, paid zero in taxes, while other major labour hire firms including PERSOL, which owns Programmed, and Recruit Holdings, which owns Chandler Macleod, reported 'very, very low' profit margins compared to the profit margins that they report globally.
Exploitation of vulnerable groups
In its submission to the inquiry, the ACCR noted that a number of recent media stories and government inquiries have shone a light on some of the exploitative behaviours within the labour hire industry. These included:
the Australian Broadcasting Corporation's (ABC) 2015 Four Corners episode entitled 'Slaving Away', which exposed the 'extreme exploitation' by labour hire operators in fresh food supply chains; and
the revelation that cleaners hired by contractor Spotless, and utilised by Myer in its department stores, were working under sham contracts 'hidden through multiple layers of subcontracting'.
The Queensland Government contended that 'vulnerability risk' increases with the use of labour hire; digital platforms; casual workers; and contractors, and that that these insecure arrangements can particularly affect vulnerable workers, such as those that come from non-English speaking backgrounds; have lower levels of education; are disabled; or are young. Its main concern with this increased risk was that:
… this vulnerable cohort of workers may be reluctant to report injuries due to fear of dismissal or other unwanted effects.
The Migrant Workers' Taskforce suggested that the main driver of unscrupulous behaviour was to gain a competitive advantage by lowering labour costs and associated charges. It also noted the following factors which promote these forms of bad behaviour by industry participants:
a desire to avoid the regulatory requirements associated with operating an employing business in Australia;
believing that the monetary gains from non-compliance outweigh the risk of being caught and penalised;
low or no barriers to entry to become a labour hire operator;
high demand for labour to be available at short notice and a limited supply of labour in some locations, occupations, or industries;
lack of visibility from host businesses regarding the behaviour of labour hire operators, especially when there is a stronger economic imperative to have the work done (for example, have the crop picked on time);
the lack of accountability in a supply chain for unscrupulous practices at the bottom end;
low profit margins in some labour-intensive industry sectors;
the relative large supply of vulnerable workers; and
in some industry sectors, unscrupulous labour hire operators are accepted as a standard part of the market.
Proposals for reform and committee view
A number of suggestions were raised during the inquiry to address the key concerns discussed above. These supplemented, and in some cases reiterated, prior suggestions and recommendations made by previous inquiries and reviews. The following discussion highlights a number of these key proposals, and provides the committee's view and associated recommendations for reform.
Implement 'same job, same pay' principle
Evidence indicates that, in many cases, a host's enterprise agreement does not apply to their labour hire workers, resulting in differential treatment between these individuals and those directly employed by the host. Although commonly working side‑by‑side with each other, the committee is very concerned that labour hire workers frequently receive lower pay and conditions than their directly‑employed counterparts.
In its final report, the Victorian Inquiry also highlighted this disparity between workers as a key issue, and made the following recommendation to address it:
Labour hire employees should have the opportunity to be covered by enterprise agreements applying at a host's workplace – whether this occurs de facto (arising from the voluntary decision of the labour hire employer to observe the site enterprise agreement); or because of the application of a parity clause in the host's enterprise agreement.
Similarly, the ACTU advocated for amendments to the Fair Work Act 2009 (Fair Work Act) which, amongst other things, would require labour hire firms to provide wages and conditions of employment that are 'equal to or better than those that would have been received by those directly employed by the host employer had the work been performed by them'.
The Queensland Council of Unions (QCU) supported this proposal, stating that protections for labour hire employees should be introduced within the Fair Work Act through implementation of the 'same job, same pay' principle. In its submission to the inquiry, it argued for penalties to be introduced:
[T]o properly address insecure work in the labour hire sector, the Fair Work Act needs to be amended to provide regulation of, and civil penalties for, employers who use labour hire to reduce wages of its permanent workforce, such as is occurring in Queensland, particularly in the coal mining sector.
The committee strongly supports these suggestions, and recommends that the Australian Government immediately implement them in their entirety. The committee believes such reforms are vital to incentivising proper workforce arrangements, where employees are directly engaged by employers, and to reduce the exploitative nature of labour hire arrangements where they are utilised as a means to lower wages and provide inferior conditions for Australian workers.
The committee recommends that the Australian Government amends the Fair Work Act 2009 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.
Introduce a national labour hire licensing scheme
As discussed previously in this chapter, there are a number of key factors which support unscrupulous labour hire operators within Australia, such as low barriers to entry; a lack of visibility of prior misconduct and poor behaviour; and a deficiency of supply chain accountability.
The committee commends those jurisdictions which have recognised this issue and implemented their own labour hire licensing schemes to mitigate the devastating impacts rogue operators can have on workers and the broader community. The committee notes that these schemes have been fundamental in reducing exploitation across the sector, and assisted in protecting vulnerable workers from harassment, wage theft, and serious workplace health and safety risks.
Notwithstanding the above, the committee recognises that separate state and territory-based licensing schemes may not be the most effective and efficient approach to regulating the industry. Regional variances across schemes can impose an additional unnecessary regulatory burden on those labour hire operators and hosts which operate across multiple jurisdictions.
The committee notes that the 2015–2016 Victorian inquiry into the labour hire industry and insecure work also recognised this issue and recommended the implementation of a national approach to regulation and licensing. The committee is concerned that, although the Australian Government subsequently accepted this recommendation and the then Minister for Industrial Relations wrote to his state and territory colleagues in 2019, there is still no national scheme in place over half a decade after it was suggested.
The committee is also concerned that the Government's proposed approach will only be 'light touch' and would likely only apply to a limited number of 'high-risk sectors', such as horticulture, meat processing, cleaning and security.
Given these concerns, the committee strongly advocates for the immediate development and implementation of a comprehensive national labour hire licensing scheme. It is envisaged that such a scheme would cover all labour hire operators within Australia and make registration mandatory. Further, an operator would only be eligible for registration if it is compliant with its tax, safety, workplace, migration, and other legal obligations; and has no criminal history or past involvement in corporate liquidations. To promote compliance, such a scheme would also impose significant penalties on those unregistered providers which continue to operate and host entities which engage the services of their workers.
The committee recommends that the Australian Government immediately introduces a comprehensive national labour hire licensing scheme covering all business sectors, and requiring mandatory registration and continuous compliance with all legal obligations. It is recommended that significant penalties apply for those entities which continue to operate without being registered, and for those organisations which engage the workers of such unregistered operators.
Enhance data collection on the prevalence of labour hire in Australia
The committee is concerned that existing datasets may significantly under‑report the size and scope of the labour hire workforce in Australia. Evidence provided to the committee indicates that this may occur for a variety of reasons, such as workers' confusion regarding their particular arrangements and whether they are being paid by a labour hire firm or the host they work at.
Further, during the inquiry it also became apparent that very few companies report any information on their use of labour hire or contract workers, despite the fact that these workers may make up a substantial proportion of their workforce.
Notwithstanding the above deficiencies, it is clear to the committee that there has been substantial growth in the labour hire industry in recent years, with ABS data suggesting that it grew by 36.5 per cent between 2011–12 and 2018–19, and that the sector employed approximately 800 000 people across Australia in 2018–19.
Given the size of the sector, its expected continued growth, and its ability to impact the day‑to‑day lives of large numbers of Australians and the communities in which they live and work, the committee is very concerned about this lack of accurate datasets and the reduced transparency this problem creates. The Victorian Inquiry also noted this as a key problem:
There are deficiencies in and inconsistencies between the available data relating to the prevalence of labour hire employment arrangements in Victoria and Australia, both in respect of the proportion of labour hire workers and the proportion of workplaces which use labour hire.
Hence, the committee recommends that the Australian Government improves its data collection techniques to better determine the prevalence of labour hire arrangements in Australia.
The committee recommends that the Australian Bureau of Statistics enhances its labour hire data collection techniques for labour hire operators, labour hire workers, and host entities which engage their services, with the aim of better determining the prevalence, and scope, of this form of workforce arrangement in Australia.
Enforce existing laws
The committee is concerned that existing laws are not being adequately enforced, resulting in increased illegal behaviour, lower levels of workplace safety, and increased tax avoidance and exploitation of vulnerable workers. This position is based on evidence indicating that, although many laws apply to labour hire operators, the lack of effective enforcement by government regulators has resulted in poor compliance and created an environment which inadequately deters poor, and sometimes illegal, practices.
The Migrant Workers' Taskforce also commented on this issue. In its final report, the Taskforce noted that operators are required to comply with the 'wide range of laws that apply to any employing business', but submitted that enforcement is a 'challenge' when these entities are hard to identify, numerous, and able to illegally phoenix.
Given this, the committee recommends that the Australian Government immediately enhances its monitoring and compliance activities regarding labour hire operators with the aim to meet the identified challenges and to ensure that these organisations are in continuous compliance with their legal obligations.
The committee recommends that the Australian Government enhances its monitoring and compliance activities of labour hire operators to ensure that they are compliant with all their legal obligations. It is envisaged that such an approach would promote collaboration with unions, data-sharing amongst government entities, and utilise joint investigations, as required.
Enhance workplace health and safety
The committee notes that a significant body of research has shown that insecure work arrangements result in greater risks to worker health and safety than would otherwise be the case. It was contended that these arrangements result in higher frequencies of injuries; poor physical and mental health; poorer knowledge of, and access to regulatory employment rights; and a reduced willingness to raise health and safety concerns.
This understandable reluctance for workers to raise health and safety issues with their agencies and hosts, due to potential reprisals, is a key concern for the committee. In its submission to the inquiry, the Isaac Regional Council also noted this issue and recommended that it be further investigated and, if found to be true, then:
… mechanisms must be implemented to allow all employees to report safety concerns without fearing they will lose their job or be penalised in some other way.
The committee is also aware of concerns regarding agencies and hosts failing to meet basic obligations to their workers. For example, research suggested that requirements around health, safety and welfare were not being met by these entities, and that the triangular labour‑hire relationship, and temporary nature of most placements, posed serious issues for government agencies in their enforcement of health and safety standards. Given this, two researchers proposed that:
… there is a compelling case for further regulation ensuring that minimum employment standards are observed safeguarding temporary workers' capacity to raise OHS complaints with both the host organisation and the agency.
Based on this evidence, the committee suggests that the Australian Government thoroughly investigates the extent to which labour hire workers are more reluctant to raise safety concerns due to fears of reprisal, with the aim of implementing effective safeguards for these workers to ensure that they feel secure in their ability to promptly raise these issues, either to their labour hire operator or host entity.
The committee recommends that the Australian Government investigates whether labour hire workers are more reluctant to raise safety concerns due to fears of reprisal from their employer and/or host and, if this is found to be the case:
develop effective methods for the Fair Work Ombudsman to safeguard these workers from such reprisals, and to promote their capacity to promptly raise workplace health and safety concerns with both their host organisations and their labour hire operators; and
improve the general protections provisions of the Fair Work Act 2009 to ensure labour hire workers are effectively protected when speaking out.