The Federal Government’s proposals for the regulation of labour hire are signalled in two discussion papers recently issued by the Department of Employment and Workplace Relations.

The proposed regulation will extend beyond standard labour hire arrangements, and cover so-called workforce contracting arrangements.

The standard labour hire model is where the provider employs the worker and pays their wages and entitlements, and supplies or on-hires the worker to work in the host’s business. These arrangements are used to provide a host with short-term supplementary labour as required from time to time to meet business needs. The workers are typically supervised by the host.

Workforce contracting arrangements flow from an organisation’s decision that it would be more beneficial for a third-party contractor to provide the labour needed to fulfil a function in its business, rather than directly employ that labour.

Workforce contracting arrangements are usually governed by contracts that provide for ongoing labour services over a significant term i.e. 1–4 years. Under workforce contracting arrangements, the work of the staff supplied by the contractor is usually supervised by the contractor or its representatives, as opposed to the client.

The proposed regulation will not apply to so-called genuine subcontracting arrangements. This is where the subcontractor is engaged to perform a discrete piece of work, and has full control and legal responsibility for the performance of that work.

It’s not clear the extent to which the proposed regulation will apply to contracting arrangements where there is a significant non-labour component of the contract and the contractor is responsible for the provision of plant and equipment used to perform the contracted services.

What would be the host’s obligations?

If a contracting arrangement entered into by an organisation is subject to this regulation, the ‘host’ will need to:

• ensure the provider is licensed;
• cooperate with the labour hire regulator in respect of its enforcement activities; and
• consult and share information with the provider and otherwise take reasonable steps to ensure the provider is meeting its ‘same pay, same job’ obligations with respect to the staff employed by the provider who are performing the work of the contract.

It seems unlikely the national labour hire licensing scheme will be in operation before 2025. The recent federal budget papers state the costs to establish the national scheme will be met from savings, meaning there is no specific money allocated towards its implementation. The creation of the national scheme will involve a transition away from the established State schemes.

The ‘same pay, same job’ obligations may commence earlier, in 2024.

What is a ‘same job’ under the scheme?

In the scheme, it appears a ‘same job’ will arise for the host when an employee of the provider is performing the work of the contract for the host and one of the following criteria applies:

• the employee would be covered by an enterprise agreement binding the client if it directly employed the employee;
• the employee performs the same duties as an employee covered by a modern award; and/or
• the employee performs the same duties as a person who is directly employed by the client.

The second criterion is unclear. On its current terms, it appears to provide that a same job would arise for a host simply by virtue of the fact an employee of the provider who is performing the work of the contract would be covered by a modern award, even if the host is not covered by the award and does not directly employ anyone covered by the award.

‘Same pay’ obligations for ‘same job’

If a ‘same job’ is identified within a host in respect of an employee of the provider performing the work for the member, the member must consult and share information with the provider and otherwise take reasonable steps to ensure the employee is receiving the ‘same pay’. The ‘same pay’ will be the rate of pay, inclusive of any overtime or penalty rates, casual loadings, monetary allowances, incentive-based payments and bonuses and any other separately identifiable amounts.

It is proposed these obligations will be subject to civil penalty provisions, meaning bodies corporate who breach these provisions could be ordered to pay a maximum penalty of $82,500 per breach. Where a host knowingly or recklessly engages an unlicensed provider, it is further proposed that criminal offences will apply.