Putting the Labor into Labour Hire

The labour hire arrangement is a simple one. One organisation (the labour hire provider) employs workers and provides a service to another organisation (the labour hire user) by assigning those workers to perform work for that labour hire user. The labour hire user pays the labour hire business a fee for providing labour hire workers to work for them. Labour hire workers are employed by the labour hire provider; they are not employees of the labour hire user.

Labour hire arrangements are used in countless industries to provide organisations with specialised labour, often on a temporary basis, allowing them to streamline their processes by outsourcing recruitment and focus on the core aspects of their business. It can also have a beneficial impact on productivity, efficiency and the bottom line.

But this arrangement has been criticised by unions and employee advocacy groups who say it leads to labour hire workers being paid unfairly low wages to cover work that could be done by salaried employees of the labour hire user.

This criticism is one of the areas of workplace and industrial reform the new federal Labor Government says they intend to address through the principle of ‘same job, same pay’.

If this mantra is translated into law, it’s vital that all organisations who use labour hire arrangements, whether they be labour hire providers or labour hire users, understand the potential change and what it may mean for the way they do business.

The current position

Labour hire workers are covered by any relevant award and the National Employment Standards regardless of the employment arrangements in place at the labour hire user. A labour hire provider may have also have its own enterprise agreement that will apply to labour hire workers if it covers the work they perform.

Labour hire workers are not covered by an enterprise agreement made between a labour hire user and its own employees unless the labour hire provider itself is a party to the agreement. Whilst there are occasions (most commonly in manufacturing or heavy industry environments) where the terms of an enterprise agreement between a labour hire user and its own employees, may require the user to ensure that any labour hire provider it engages pays at least the pay and conditions reflected in the users enterprise agreement, these are arrangements set by the labour hire user. They are not enshrined in legislation and where they are not present, a labour hire worker can work side by side with an employee of the labour hire user on different terms and conditions, including different pay.

Labor’s policy position

Labor’s pre-election ‘Secure Australian Jobs’ policy included the principle that if you work the same job, you should get the same pay. Labor has committed to ensuring that workers employed through labour hire providers receive no less than workers employed directly by the labour hire users.

This will undoubtedly be achieved through introducing legislation that makes ‘same job, same pay’ a minimum entitlement, such as including it as a new National Employment Standard.

Labor has a majority in the House of Representatives, meaning it will only need the support of the Greens and one other Senator for such legislation to pass. Given the Greens had a similar pre-election policy stating that “Workers should be paid and treated equally for the same kind of work”, they are likely to support Labor’s amendments making the change almost inevitable. The only stumbling block may be if the Greens and/or an independent or minor party Senator demand more than Labor is willing to give, resulting in a stalemate.

Two weeks ago, Tony Burke said following the summit and more consultation, further consideration will be given to the implementation of the policy.

What would this change mean?

This change will have a significant impact on the way labour hire providers and most labour hire users conduct business.

In practice, it will mean that the wage rates of a labour hire user will be applied to the labour hire workers, where they are higher than they would ordinarily receive from the labour hire provider, and presumably only if there is like-for-like work being done where a clear comparison can be made.

The policy slogan however leaves many questions unanswered:

  1. What does ‘same job, same pay’ mean for other entitlements beyond headline pay rates (such as overtime, penalty rates and allowances)? Will these need to be equal? If it is all monetary elements, this will remove one of the key incentives for labour hire users engaging labour hire workers – a more flexible labour model and differentiated cost base.
  2. What does ‘same job, same pay’ mean for non-monetary terms and conditions such as working hours, rostering, and flexibility? When the Fair Work Commission applies the Better Off Overall Test when assessing enterprise agreements, they recognise that wage rates are only part of the equation and should not be considered in a vacuum, absent consideration of other terms and conditions. It is therefore an interesting and potentially dangerous approach to look at monetary elements in isolation from other terms and conditions.
  3. What does ‘same job’ mean? Not all labour hire arrangements involve labour hire and labour user workers doing the same job side-by-side. Many labour hire arrangements are used by labour hire users to outsource entire functions, so that the labour hire user has none of its own employees performing those jobs. In this case, applying the ‘same job, same pay’ principle has no application.

A wholesale push of the policy may result in this becoming more prevalent which would make the policy self-defeating.

What should the impacted stakeholders be thinking:

For labour hire users:

  • It may impact future enterprise agreement negotiations given the agreed wage rate (and potentially other monetary entitlements) may apply not only to an organisation’s employees, but to those they engage via labour hire arrangements.
  • It may impact the business case as to whether to outsource certain functions or engage labour hire workers to supplement or replace your workforce.
  • It may impact existing labour hire agreements.

For labour hire providers:

  • It may change the way labour hire workers are employed, given their rate of pay will differ based on the wage rates of the labour hire user they are providing services to.
  • It may impact on existing labour hire agreements.
  • It may lead to a reduction or growth in the use of labour hire arrangements.

There is more to consider as the Government continues to develop its position on this important legislative issue. The upcoming Employment Summit, which the Government has indicated will bring together Unions, Employer groups and other stakeholders will be an important opportunity for these issues to be further discussed and detail debated.

We will continue to provide Insights as this issue develops. Please contact us if you have any questions.


Rachel Bevan
Senior Associate
+61 2 9169 8410
[email protected]
Michael Mead
+61 2 9169 8428
[email protected]