Labour hire

Labour hire is a form of employment in which an employer (“host”) hires a worker from a labour hire agency (“provider”) for a short period of time.

In Australia, it’s estimated that at least 600,000 workers are employed in the labour hire industry.

In fact, every ASX20 listed company (i.e. organisations whose shares are traded on the stock market) uses labour hire; with the majority in the financial, material, health care and consumer staples sectors, including Commonwealth Bank, Afterpay, Wesfarmers and Telstra.

What started as a last resort for companies that found themselves in unpredictable emergency situations has since exploded over the last 30-something years into a key feature of the organisational structure of many Australian businesses.

The result? A ruthless and largely unregulated industry predicated on employing low-paid workers with few benefits in ongoing roles – the ramifications of which are huge.

But we’ll get to this shortly. First, let’s take a closer look at labour hire and how it works.

What is labour hire?

Labour hire is an arrangement between a business (aka a “host client”) and an external agency (“provider”) that supplies (“on-hire”) workers to perform duties on a temporary basis.

While the term ‘labour hire’ is relatively new, the use of agencies or companies specialising in the supply and provision of outsourced labour in Australia has existed for decades.

Labour hire could include work performed at the host’s premises or work that is a part of the host’s business. For example, waitstaff temporarily filling in at a large function or construction workers providing extra hands on a large project.

Under the agreement, on-hire workers are supervised by the host client who pays the labour-hire provider via an ongoing fee that covers labour costs, a margin for business costs, adequate working capital, plus an additional margin that’s paid to shareholders (keeping in mind that listed companies dominate the labour hire industry).

A flow chart showing how the labour hire provider employs and pays the worker. In turn, the worker attends and works under the directions of the host client. And in turn, the host client pays the labour hire provider.

This fee is then used to pay labour hire employees generally at a much lower rate than if they were contracted on a permanent basis.

This is because on-hire workers fall outside the scope of union-employer negotiated agreements, resulting in labour-hire workers being paid basic modern Award rates and a fractured workplace.

In some cases, corporate groups who use labour-hire will subcontract work via a separate contracting entity to other providers. Or, they’ll subcontract work via independent contractors with their own ABNs (who are more often than not paid under the minimum wage). In doing so, this creates a multi-tiered labour supply chain that further reduces on-hired workers’ pay as it trickles down through lower-tier providers.

Examples of labour hire

The structure described above is common in mining, building and civil construction and transport industries.

Like Qantas for example, who established their own labour hire subsidiaries but also outsourced functions to primary contractors such as Swissport, Dnata and Menzies Aviation.

These primary contractors are the host employer for labour-hire workers but also subcontract work to other contractors who deal with lower-tier labour-hire providers.

In other words, the people you find working under a Qantas logo at the airport are unlikely to be Qantas employees.

In the case of Qantas, the Australian flag carrier was found to have unlawfully outsourced 2,000 ground crew workers during the pandemic. Currently in the process of appealing the ruling for a third time, Qantas used third-party providers who had not trained their workers properly and kept them on lower wages and worse conditions.

But this is just one example of companies taking advantage of the labour-hire industry.

According to data from the Australian Bureau of Statics (ABS), the median hourly earnings of labour-hire employees in 2020 was 10 per cent lower than the median for all employees – $32.70 versus $36 per hour.

Labour-hire employees are also predominantly casuals who work full-time hours. So, in addition to being underpaid, labour-hire workers have no access to leave entitlements and other rights of permanent employees.

The issue of labour hire in Australia

Given the nature of its business model, labour hire undermines workers’ collective power and facilitates easier exploitation.

By legally separating individual workers from host clients in a contrived agreement, labour hire limits the ability of on-hire workers to unionise, raise and highlight workplace issues and collectively bargain for better pay and conditions.

Without these basic workplace rights, a loophole is established for companies to exploit casual workers, strip them of job security and undercut their wages. And in the process, exacerbate the confusion and lack of transparency and accountability that surrounds the industry as a whole.

On-hire workers are also at greater risk of workplace bullying out of fear that any complaint made would endanger their employment. It’s for that reason that all communication you have with your union is kept private and confidential.

The same goes for workplace injuries. Unlike permanent employees, in the event an on-hire worker is injured, the employer can simply pick up the phone to the labour-hire provider and ask that the worker not be sent back to the job.

Where to from here for labour hire?

Union members are committed to the making ‘same job same pay’ a reality for all workers. That means ensuring all workers at the same workplace are treated equally.

Workers employed by a labour hire company who do the same job as directly employed workers should receive the same pay. It’s that simple. 

Watch this space as the campaign unfolds. In the meantime, if you have questions about how labour hire works or about your rights as a labour hire worker, contact the Australian Unions Support Centre.

Cover photo credit: Romain Dancre on Unsplash

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