Same job, same pay: regulated labour hire explained

Regulated labour hire arrangement orders introduced in April have levelled the playing field for subcontracted workers, but employers must know exactly what they pay workers to avoid short-changing hired help – and getting into trouble.

Under the “same work, same pay” changes, a host company that uses labour hire agreements must pay those workers the same rate as its own workers.

“It’s attractive to the host employer to use less costly labour,” DLA Piper partner Rick Catanzariti told HRD. “[The law now says] for a host employer using labour hire, that labour can’t be cheaper than what it pays employees for the equivalent work.”

If the rates are not the same, a union, employees of the labour hire company, the host employer or its employees can make an application to the Fair Work Commission for an order that the rates be the same, he said. “As the name suggests: same job, same pay.”

Labour hire workers get same pay for same work

A host company is obliged to declare exactly what it is paying its own workers and employees of the labour hire company.

“So you’ve got that element that people are able to access relevant information through the provisions,” said Catanzariti, who will be speaking at HRD’s Employment Law Masterclass in Melbourne on 21 November.

If the Fair Work Commission determines a rate paid to a labour hire company worker is less, it will make an order to the host company, said Catanzariti, “unless it’s not fair or reasonable to do so”.

“What’s ‘fair and reasonable’ might be where you might argue that even though the rate of pay is lower for the labour hire entity, maybe there are a whole range of other non-monetary benefits that they get,” he said. “But I imagine you’d have to have fairly exceptional circumstances, because the provisions are basically designed to have the same rate of pay.”

The changes were driven by unions, and accepted by the Labor government, to prevent employers from undercutting normal permanent employee wages that they employ directly.

“Unions are trying to stop the use of outsourcing of labour to undermine jobs within the host employer,” Catanzariti said. “It’s really a policy decision.”

The changes address unions’ concern that employers had been increasingly using cheaper labour, casual employees and contracted employees, he said, pointing out that the use of contractors would be caught in the act’s anti-avoidance provision.

The act states that labour hire entities are prohibited from engaging other types of workers for the purposes of avoiding paying the employee rate of pay, he said.

Fair Work Commission to decide what’s same pay for same job

Catanzariti suggested a few checkpoints for HR managers affected by the rule change:

• Assess current labour hire arrangements, because the cost will presumably be similar to engaging your own employees.
• Remember the benefits of using labour hire, such as flexibility in scheduling.
• Take care deciding classification of workers, to avoid overpaying or underpaying.
• Factor in what is meant by full-rate pay, and whether it includes not just the wage rate but things like overtime loadings or allowances.

“Everyone creates an enterprise agreement that is tailored to their workplace, so you might have a higher rate of pay, but you might have lesser benefits in other ways,” he said. “You might say to the Fair Work Commission: ‘We have a higher rate of pay, but we’ve got other benefits that the labour hire entity doesn’t have that need to be offset.’”

At the same time, labour hire companies need to test that agreements with host employers are flexible enough that if an order is made there is scope to charge more money to the host employer.

“It’s going to mean you’re going to have to be paying your employees a higher rate of pay,” he said. “So, is your agreement with the host employer robust enough to enable that kind of cost increase to be passed on?”

Employment Law Masterclass

At the Employment Law Masterclass in Melbourne on 21 November, Catanzariti will discuss the topic: “Same Job, Same Pay – addressing the labour hire loophole”. He will talk about how regulated labour hire arrangement orders will continue to impact the labour hire industry and how can employers determine whether labour hire employees are being paid correctly.

The session will look at: 

• How to ensure compliance with obligations under the orders 

• Tips on how employers can assess and provide guidance on pay reviews and labour hire agreements, and address any discrepancies 

• Lessons from the Fair Work Commission’s ruling on Australia’s Mining and Energy Union’s filing of regulated labour hire arrangement orders 

 Want to learn more about upcoming changes to employment law and legislation? Register for HRD’s Employment Law Masterclass.