Keeping You In The Loop: Will The ‘Same Job, Same Pay’ Changes Be the Death of Labour Hire?

Following a deal struck between the Federal Labor Government, with Greens and some independent Senators late last year, the Closing Loopholes legislation was ‘split’ into two parts to enable its ‘non-contentious’ parts to be fast-tracked (see our previous articles here and here) for further information).

As a result, on 14 December 2023, the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 received Royal Assent, resulting in significant amendments to the Fair Work Act 2009 (Cth) (FW Act).

One of the key reforms is the introduction of ‘regulated labour hire arrangement orders’ (or RLHAOs), which will have significant negative consequences for the labour hire industry.

‘Same Job, Same Pay’ For Labour Hire Arrangements

While some of the media reports about ‘Same Job, Same Pay’ suggested that the changes were to address gender wage inequality, or would require an employer to pay a new junior employee the same as a long term experienced employee, the changes had nothing to do with these matters.

Rather the ‘Same Job, Same Pay’ changes seek to address the so called ‘labour hire loophole’ where host employers use labour hire to ‘deliberately undercut and avoid’ the bargained wages and conditions set out in enterprise agreements made with their direct employees.

From 1 November 2024, the Fair Work Commission (FWC) will have the power to make a RLHAO requiring labour hire employees to be paid no less than what they would be paid if they were directly employed by the host employer under the host employer’s Enterprise Agreement or other workplace instrument – in other words, the ‘protected rate of pay’.

The ‘protected rate of pay’ is the full rate of pay that would be payable to the employee if the Enterprise Agreement applied (including incentive payments, monetary allowances, penalty rates, etc).

When Can A RLHAO Be Made?

An employee, union, or host employer may make an application for a RLHAO. It is expected these applications will be made predominantly by unions.

In summary, the FWC may make a RLHAO where:

• An employer supplies, or will supply, either directly or indirectly, one or more workers to perform work for a host employer; and
• An Enterprise Agreement (or other employment instrument) that applies to the host employer would apply to the labour hire workers if the host employer were to employ the workers directly, for the same kind of work; and
• The host employer is not a small business employer (i.e. fewer than 15 employees).

The FWC must not make a RLHAO unless it is satisfied that the work to be performed for the host employer is not or will not be ‘for the provision of a service’ rather than the ‘supply of labour’ based on a range of factors.

FWC must not make a RLHAO if it is not ‘fair and reasonable’ in the circumstances, having regard to any submissions made by parties (including by affected businesses).

The FWC will also have the power to order an ‘alternative protected rate of pay’, if they find it would be unreasonable for the host employer to pay labour hire employees the protected rate of pay – for example where the rate would be excessive.

There are limited exceptions to compliance with a RLHAO, included where there are certain training arrangements in place, or for some short term labour hire arrangements. Notably, these provisions will also not apply to small business employers – however this small business exemption is of limited use, given there are very few businesses with under 15 employees that have their own Enterprise Agreement. Also small business are less likely to engage significant numbers of labour hire employees.

Anti-avoidance provisions have also been introduced to prevent behaviour intended at avoiding the application of a RLHAO being made, which can result in significant penalties.

What Does This Mean For Employers?

These changes will likely have significant impacts on the labour hire industry, increase the cost of doing business and ultimately cause severe damage to the labour hire industry – an outcome which will be celebrated by the union movement as they have been less successful in recruiting members employed in that industry.

While this will likely reduce the use of labour hire arrangements in future, this does not necessarily mean better outcome for labour hire workers who rely on the industry and may suffer job reductions or losses as a result.

As these changes relate to rates of pay, rather than other conditions, we are seeing Unions during bargaining making claims on host employers to extend conditions to labour hire employees.

As such, both labour hire employers and host employers should ensure that they are aware of the changes and consider whether this may present a risk to their existing workforce arrangements.

Relevantly, this may consist of reviewing current pay structures and labour hire agreements in place to determine whether they are likely to be impacted by these changes.

What is Next?

If you would like to discuss the proposed changes in more detail, including what they mean for your organisation, please contact the HR Legal team for advice. We are here to help with your HR needs.