Hiring agencies will need to tread very carefully in 2022
The introduction by the Australian Labor Party of a Private Members Bill seeking to amend existing employment laws faces a tough road ahead. The Bill seeks to grant casual workers employed through labour-hire companies to have the same entitlements as their permanent colleagues. It will target companies profiting from sourcing casual workers at a lower cost.
“If this Bill is passed - and very few Private Member’s Bills do pass - it will mean that host employers who engage large numbers of staff through labour hire arrangements on an effectively permanent basis will need to re-examine their arrangements,” Joellen Munton, Harmers executive counsel and team leader, told HRD. “The obligation on labour hire agencies to ensure that the staff they place with host employers are paid at the same rates and enjoy the same benefits of employment as the host’s directly engaged staff, may mean that any cost savings derived from hiring labour hire staff are significantly diminished. There is a small business exemption, so this new requirement would not apply when the host employer employs fewer than 15 staff.”
On 26 March 2021, the Fair Work Act 2009 (Cth) (FW Act) was amended to make significant changes to casual employment which affected every national system employer in Australia that employs casual employees. HWL Ebsworth Lawyers stipulate that for casual employees of employers who employ 15 or more employees to be eligible for casual conversion, the employers need to consider whether the employees have:
- been employed for at least 12 months at the time of assessment (which for existing casual employees is 6 September 2021); and
- during at least the last 6 months of that period, worked a regular pattern of hours on an ongoing basis which, the employee could continue to work as a full-time employee or a part-time employee (as the case may be) without significant adjustment.
If the above eligibility for conversion is satisfied, the casual employees must be offered conversion to permanent employment in writing from the employer, unless an exclusion applies.
For casual employees employed prior to 27 March 2021, this offer needs to be made by 27 September 2021. Otherwise, for casual employees employed after 27 March 2021, this needs to be done within 21 days of the casual employee reaching their 12-month anniversary.
The effect on labour-hire companies
The Private Members Bill will have labour-hire companies questioning what they need to do if it should pass.
“Labour hire agencies that place staff in long term arrangements with host employers will need to ensure that the labour hire employees are paid rates equivalent to the host’s directly hired employees,” Munton added. “The bill won’t affect genuine ‘temp agency’ type placements because there is an exemption for placements to cover staff on leave, or to deal with temporary surges in the demand for work, so long as the placement lasts for less than three months.
“There is no effect on the permanent staff of the host employer. It is unusual for staff engaged by labour hire agencies to be permanent full-time workers. Labour hire staff are most commonly engaged as casual employees of the labour hire agency, or as independent contractors.”
The Bill’s impact on casual workers
Thousands of casual works across an array of industries will hope that the Bill passes. While some industries, such as hospitality, still have loadings added to Public Holiday work, a lot of industries have forgone such benefits due to the fact that we now live and work in a 24/7 economy.
“If enacted, this Bill would benefit the casual employees of labour hire agencies, by ensuring that they receive the same rates of pay as the host’s direct employees who are doing the same job,” Munton said. “It will also give them access to training opportunities provided by the host and will allow them to accept direct employment with the host if it is offered.
“Some labour hire arrangements presently include restrictions on hosts employing the labour hire workers directly. These arrangements would be unenforceable if the Bill is enacted.”
What effect will it have on employers?
One complexity in the whole situation is when employers hire staff through labour-hire agencies. Many employers are unclear on what impact it would have on their staffing costs.
“Employers who hire staff through labour hire arrangements will need to review their contracts with the labour hire agencies,” Munton added. “Although the Bill would place primary responsibility on the labour hire employer to ensure that the employees are paid the same rates as the host’s own staff, there are provisions in the Bill which impose obligations on the host employer.
“These include providing information to labour hire agencies about the rates of pay it provides to directly hired staff and taking ‘all reasonable steps’ to ensure that the labour hire employer is complying with the obligation to pay those rates to the labour hire employees.”
Then there is the issue of who pays the difference if the hourly rate varies.
“Those labour hire agencies who pay staff at rates below those paid to the host’s direct employees will need to raise their rates of pay, at least in respect of particular hosts,” Munton continued. “The rates of pay paid to labour hire staff will vary depending on the host with which they are placed. This is likely to mean that labour hire agencies will seek higher rates under their contracts with host employers.
“If the cost of labour hire staff rises significantly, host employers are likely to review their labour hire arrangements to determine whether there are any remaining benefits in hiring staff through these arrangements. The clear purpose of the Bill is to attempt to remove many of the incentives host employers presently have to use labour hire for long term staff engagement.”