Labour Hire Licensing Scheme: One for the good guys

Realcorp's John Reale examines Victoria's newly implemented Labour Hire Licensing Scheme.

As Australian employers have increasingly come to rely upon a casualised workforce to keep their businesses ticking along, it’s left around a quarter of Australians in a position where (until now) they had no access to or were not adequately compensated for the lack entitlement of paid annual leave, sick pay and other entitlements afforded to permanent employees.

That’s all changing. Governments are now taking an active interest, legislating improved working conditions for casuals, short-term and independent contractors and, most recently, labour hire employees.

As the managing director of a commercial cleaning company whose workforce is largely made up of casual staff, I’ve been watching these developments unfold with keen interest.

Indeed, my last article saw me take a rather sceptical view of the portable long service scheme – a program that doesn’t seem to benefit anyone but the administrators themselves.

This month, however, I’m putting the labour hire licensing scheme (which came into effect on 30 October) in the hot seat. But first we have to tackle the question…

What exactly is labour hire licensing?

If you supply a worker (or workers) to perform work for another business or person, you could be operating as a labour hire provider.

Sound familiar? Then hopefully you are aware that under the labour hire licensing scheme (which recently came into full effect on 30 October), you must now hold a license to operate legally in Victoria.

Are commercial cleaning companies considered labour hire providers?

The labour hire licensing scheme was set up in response to the findings of the independent Victorian Labour Hire Industry and Insecure Work Inquiry, which revealed widespread abuse and exploitation of labour hire workers in Victoria.

Many of you may remember the shocking stories that emerged, particularly on the plight of fruit-pickers – a group who have been shamelessly exploited by our agricultural industry in order to cut costs. Similar reports on working conditions within the meat processing sector were also splashed across the media.

You can probably appreciate why, therefore, I didn’t immediately see how the labour hire licensing legislation and scheme applied to commercial cleaning contractors like Realcorp. Would we be really be considered a labour hire company?

A quick visit to the Labour Hire Authority website put me straight. It states:

‘If you supply workers to work as a cleaner in a commercial premises you are likely providing labour hire services and will require a licence.’

Just to be sure they didn’t just mean cleaning in abattoirs etc, I got on the phone to the Authority to clarify what a ‘commercial premises’ was in terms of a cleaning company. Their response? “Anything that is not cleaning of a private home, would be seen as ‘commercial premises.’”

OK, fair enough.

What will labour hire licensing do for employees?

The licensing scheme basically means that someone is now watching – very closely – to make sure that casual employees aren’t being underpaid and generally treated like second-class workers by rogue operators.

The Labour Hire Authority includes a team of inspectors whose job it will be to promote and ensure compliance with the licensing system. They have been authorised to carry out checks and investigations into suspected breaches by individuals or companies.

Additionally, those who wish to report on non-compliant providers or hosts can do so on the Labour Hire Authority Website.

What will happen to those who don’t comply?

Labour hire providers and hosts (ie companies who hire workers through labour hire providers) will face pretty hefty penalties if they choose to ignore licensing legislation.

Providers who try to operate unlicensed will face fines of between $120,000 (for an individual) and $500,000 or more (for a corporation). Hosts who engage an unlicensed labour hire provider face similar penalties.

Hosts will not be able to claim ignorance, since they will be able to easily lookup potential providers and their licensing status on the Labour Hire Authority website.

How do I apply for a license?

Labour hire providers can apply for a license through the online portal on the Authority website.

Base requirements for approval include:

  • Clear criminal history
  • Passing a ‘Fit and Proper Person’ test
  • Proof of Workcover insurance
  • Proof of employee Visa compliance
  • Compliance with legal obligations (eg taxation, superannuation and OHS laws, and paying workers in line with industry awards)
  • Payment of license fee

Full details on how to apply and all requirements are available on the Labour Hire Authority website.

What’s my verdict?

On balance, the labour licensing scheme gets the thumbs up from us at Realcorp. This kind of licensing arrangement plays into the hands of companies already doing the right thing.

With a higher chance of being caught out, the incentive for contractors to play by the rules and pay their staff fairly – including on-costs – is far greater. This will, in turn, even up the playing field; contractors are less able to get away with lowballing during tenders by paying below award rates.

The winners are:

  • Employees: they’ll enjoy a higher chance of being paid fairly
  • Companies (like Realcorp) already doing the right thing: after years of having to justify higher prices during tenders, these companies will become more competitive from a price perspective
  • Tax office: higher contract prices and wages means higher taxes

We’ll be very interested to observe how the new legislation plays out and how the market and procurement departments respond.

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2 thoughts on “Labour Hire Licensing Scheme: One for the good guys

  1. This does absolutely nothing as those who are abusing the system are extremely well versed in ways to avoid the necessary obligations and the only way to actually stop this is is we had a cashless society in which all transactions were accounted for as they can will be able to pay cash in hand (untraceable) and/or pay cash to subcontractors (untraceable) as they are doing currently.

    The only thing the new Labour Hire License will do is allow them to promote to other businesses they are above board on paper and means nothing when one pays someone cash in hand as the Labour Hire Authority isn’t going to have the time nor the manpower to go to every single workplace in which a cleaner is working and to verify they are on the books.

    These rogue operators are not stupid and know how to work around this, I have seen tenders won by what appears to be well established cleaning companies who end up advertising for cleaners to do the work, they often chose those single mothers who are on centrelink as they can pay them cash in the hand as they know they won’t say anything as they too risk getting into trouble by the federal government for not declaring their income.

    Go and look on Gumtree and search for cleaners wanted in say Melbourne, you’d be shocked to see how many companies are looking for staff and some are very careful and want you to message or text them so they can feel you out.

    They will underpay you, they will get you to use your own transport and some want you to use your own equipment to avoid so many entitlements.

  2. It’s a positive step, the onus is with the regulator to ensure compliance. In the real world, the “contractors” will find a way around compliance as has been the case for years, but the customer will be hit with a “massive” fine, the onus shifts to the customer to undertake due diligence. The bottom line will increase for customers, directly or by considerable fines.

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