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Labour hire regulation in Australia: the players, the duties and the noncompliance

Written by Nicolina Holmes

 

Introduction

 

Labour hire is an arrangement whereby an organisation (the ‘host’) pays for the services of a labour hire provider to supply them with workers.

 

 

In 2024 in Australia, 2.6% of employed persons were labour hire workers. Whilst this industry represents a small percentage of the total Australian workforce, its coverage is extensive; labour hire workers have varying skill sets and can be employed across a range of sectors.

 

 

In some sectors, however, there is a higher number of labour hire arrangements. These sectors have also reported a higher number of temporary migrant workers, as well as serious cases of worker exploitation and non-compliant practices by labour hire providers.

 

 

To address this concerning issue and establish equal protection to this vulnerable group, the Australian Government proposed a National Labour Hire Licensing Scheme. However, as of March 2023, the Scheme has not progressed past the consultation phase and each state and territory continues to legislate labour hire separately.

 

 

In this article we delve into the logistics of labour hire arrangements and the requirements of all parties involved, what the labour hire industry looks like across Australia, as well as the blueprint for the national scheme.

 

 

Even though the Scheme is at a standstill, the issues raised to fuel its inception can educate relevant duty holders on how to better protect their vulnerable workers.

 

 

 

 

 

 

 

Defining labour hire in Australia

 

Who are labour hire providers?

Labour hire providers are businesses that outsource their workforce to assist their clients (host organisation).

 

 

Labour hire providers can include group training organisations that supply trainees or apprentices, employment agencies that supply temporary administration staff or labour hire contractors that supply workers to farmers or fruit growers, or to major supermarkets for trolley collection.

 

 

What is a typical labour hire arrangement?

A typical labour hire arrangement consists of a host organisation having a contractual agreement with a labour hire provider to supply them with workers when they need them, and the labour hire provider having an employment agreement with the labour hire worker.

 

 

The labour hire provider pays the labour hire worker’s wages and other employee benefits, and the host organisation stipulates the tasks to be carried out as well as other arrangements such as work location and hours.

 

 

How does labour hire work differ from independent contracting?

With labour hire work, the host organisation is in control of what the labour hire worker does, when and where, and the work performed is similar to tasks carried out by the organisation’s other employees.

 

 

Independent contractors, on the other hand, are in control of how, when and where their work is completed, as well as who may complete it. Independent contractors are individuals or businesses, hired by an organisation to perform a specific service, project or job. Independent contractors sign a contractual agreement with the organisation and negotiate a fee for their work.

 

 

 

 

 

 

Labour hire arrangements and an overarching duty of care

 

Under Australian Work Health and Safety (WHS) and Occupational Health and Safety (OHS) legislation, the definition of ‘worker’ or ‘employee’ includes labour hire workers, and as such labour hire workers are entitled to the same duty of care by their PCBUs (persons conducting a business or undertakings) or employers as others in the workforce.

 

 

In a labour hire arrangement, this duty of care is owed by the labour hire provider and the host organisation. Both parties have a legal requirement to ensure, so far as is reasonably practicable, the health and safety of their labour hire workers. How each party achieves this requirement may differ but there is an expectation that all parties ‘consult, cooperate and coordinate with each other’.

 

 

The duty to consult

As some labour hire arrangements can be complex with multiple providers and host organisations, it is important that continual and effective communication between all parties occur before and during the placement of the labour hire workers to ensure adequate coverage and accountability of health and safety compliance.

 

SafeWork Australia provides guidance on areas that might require collaboration, including but not limited to:

  • Identifying and controlling hazards and risks that may arise with the work
  • Assigning the duty holder responsible for providing training or required PPE
  • Identifying who will be involved with and supervising the work
  • Assigning the roles required to respond to an incident.

 

Labour hire providers meeting their duty of care

Labour hire providers may consider the following actions to help ensure the health and safety of their labour hire workers (this is not an exhaustive list):

  • Conducting a thorough evaluation of the host organisation and their work environment including safety record, facilities, work schedules etc.
  • Ensuring workers have the right training, competence and/or qualifications to carry out the work.
  • Setting up communication channels with workers and encouraging them to reach out if the work or environment becomes unsafe.

 

 

Host organisations meeting their duty of care

Host organisations may consider the following actions to help ensure the health and safety of labour hire workers at their workplace (this is not an exhaustive list):

  • Providing the labour hire provider with detailed information about the work to be carried out and the work environment
  • Providing workers with safety inductions including health and safety policies and procedures
  • Consulting with workers and labour hire providers before changing tasks and/or locations.

 

Responsibilities of labour hire workers

As with any other worker or employee, labour hire workers also have a legal obligation to ensure their own health and safety and the health and safety of those around them in the workplace.

 

This could include:

  • Following the health and safety policies and procedures provided by the labour hire provider and host organisation
  • Taking part in hazard identification in their work environment
  • Raising concerns about safety or incompetence to perform the task.

 

 

 

 

 

Regulating labour hire in Australia

 

Currently, each Australian state and territory is responsible for regulating their labour hire industry.

 

 

In New South Wales, Northern Territory, Tasmania and Western Australia there are no specific labour hire requirements, instead labour hire providers and host organisations must simply comply with their WHS responsibilities. On the other hand, the Australian Capital Territory, Queensland, South Australia and Victoria, regulate their labour hire through labour hire licensing schemes.

 

 

Each scheme is somewhat different to the other, but they all follow a similar regulatory approach with common conditions and requirements.

 

 

Some of these include:

  • Labour hire providers must:
    • have a licence, and meet the conditions of the licence
    • notify their relevant regulator of changes to their circumstances or information
    • not transfer, sell, or lend their license to another provider

 

  • Host organisations must:
    • only engage with licensed labour hire providers
    • not acquire workers from a provider if they know the arrangement is designed to avoid legal obligations.

 

 

The pitfalls of state-based schemes

The Migrant Workers Taskforce Report indicated concerns with the current state-based scheme approach, particularly regarding the compliance burden and costs imposed on labour hire providers and host organisations operating across multiple jurisdictions. There was also a concern that the limited reach and coverage of these schemes potentially restricted them from capturing other forms of labour hire such as workforce contracting arrangements.

 

 

It advocated a single national scheme specific to certain high-risk sectors that would represent the complexity of labour hire without imposing restrictions on the entire industry. The sectors were horticulture, meat processing, cleaning and security. These were the focus of the Report because of their high number of temporary migrant workers and high use of labour hire arrangements.

 

 

 

 

 

 

 

The national Scheme: one set of rules for all

 

The Australian Government took the recommendations from the Migrant Workers Taskforce Report, as well as findings from the Black Economy Taskforce Report and Select Committee on Job Security Inquiry, and proposed the National Labour Hire Licensing Scheme (the Scheme).

 

 

The Scheme would apply the same set of mandatory requirements to all labour hire providers and host organisations across Australia in both traditional and workforce contracting arrangements. A traditional arrangement being where the labour hire provider supplies workers to a host, and a workforce contracting arrangement being where an independent contractor is engaged by an organisation to perform a specific service or job. The independent contractor may employ their own workforce to assist on the job.

 

 

The requirements draw from the existing labour licensing schemes currently operating in the Australian Capital Territory, Queensland, South Australia and Victoria, with some additions including not coercing or encouraging another person not to provide relevant information. There are also some additional licence conditions such as having appropriate workplace relations expertise on hand to negate noncompliance of workplace obligations.

 

 

The aim of the Scheme was to put all providers and organisations on a level playing field and to improve accountability, compliance and worker protections in the labour hire industry.

 

 

At time of writing this article, the National Labour Hire Licensing Scheme was still in the consultation phase and the issues faced by the industry remain unresolved.

 

 

 

 

 

 

Exploitation in the labour hire industry

 

Most labour hire providers operating in the horticulture, meat processing, cleaning and security sectors comply with their legal obligations; some unintentionally fall short due to lack of legal knowledge, and some blatantly engage in noncompliant behaviours to reduce labour costs and increase profit margins.

 

 

The Migrant Workers Taskforce Report outlined some common noncompliant behaviours, including, but not limited to:

  • Underpaying wages, and not paying superannuation guarantees and workers’ compensation premiums
  • Avoiding tax payments
  • Arranging sham contracts
  • Having poor record keeping
  • Liquidating businesses to avoid accumulated employee obligations (also known as ‘illegal phoenixing’).

 

 

In some instances, labour hire providers create complex and layered operating environments to deliberately avoid compliance with their legal obligations. This can include using intermediaries like migration agents to arrange visas, travel and accommodation or being involved in criminal activities such as money laundering and human trafficking. These tactics make it harder for authorities to ascertain who is legally accountable, and harder for law-abiding providers to compete against.

 

 

Migrant workers on temporary visas are at risk of exploitation because they may not have an adequate understanding of their workplace rights, they may not have a great command of the English language, and they may try hard to fit into the cultural norms of their host country.

 

 

This worker vulnerability along with factors such as a lack of barriers, in some jurisdictions, to become a provider and a lack of discernability from host organisations as to the behaviour of providers, allow illegal labour hire providers to thrive.

 

 

 

 

 

 

Protecting workers with due diligence

 

Labour hire workers in Australia should be safe at work like any other worker regardless of the industry, sector or location they work, skill set they have or language they speak.
However, until there is a more concrete and consistent approach to labour hire regulation in the country, there is still a threat of unsafe practices and worker exploitation.

 

 

Host organisations need to be accountable, meet their general duty of care and do their due diligence on their labour hire providers; be aware of their provider’s company structure and contracting arrangements, set clear expectations of legal compliance and have a signed agreement on workers’ wages and entitlements, as well as report any noncompliance behaviour.

 

 

Labour hire providers need to be held responsible, stay on top of all relevant legal obligations, and do their own due diligence on the host organisation; understand the work environment, the health and safety hazards and risks, and ensure control measures have been implemented.

 

 

 

 

References