Australian Manufacturing Workers Union

Submission to the Victorian Inquiry intothe Labour Hire Industry

and Insecure Work

11 December 2015

AMWU Submission

ContentsExecutive Summary.......................................................................................................2Labour Hire Workers in Manufacturing........................................................................3The Experience of Labour Hire Workers.......................................................................4Phoenixing......................................................................................................................8Portable Long Service Leave and Severance Scheme...................................................8Recommendations..........................................................................................................9Conclusion....................................................................................................................11Attachment A – Selected comments from labour hire workers...................................12

Executive Summary

The Australian Manufacturing Workers’ Union (“AMWU”) is a trade union which has about 30,000 members employed in manufacturing jobs throughout Victoria.

The AMWU has expressed its concerns about the rise in insecure work for many years. Insecure workers, be they labour hire, casual, sham-contracting or visa workers are denied the basic dignity afforded by full industrial citizenship.

The growth of these classes of employment and their establishment as long-term forms of employment within Australia’s industrial landscape has left millions of Australian workers without access to workplace rights, career development and job security. Insecure work is a permanent phenomenon in the lives of many workers.

Labour hire workers are often forced into this type of employment due to a lack of other options and many have expressed a desire to move to more secure permanent employment. Labour hire workers are more vulnerable to being ‘moved on’ with little recourse when they raise concerns about issues like safety, pay or conditions.

Labour hire workers want the opportunity to work secure jobs in safe workplaces, where they are valued equally to the employees in the host company that they work alongside.

The AMWU has already completed a comprehensive analysis of the issues surrounding insecure employment, particularly casual employees, in Australia. This body of work was submitted to the Fair Work Commission and a copy has been provided to the inquiry for its consideration. Chapters 4 and 5, and Attachments 5 and 12 are of particular interest to this inquiry. There are many similarities between the issues discussed in relation to casual employees that apply equally to the largely casualised labour hire workforce. Given that background material, the focus of this submission will be labour hire workers in the manufacturing industry in Victoria.

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Labour Hire Workers in Manufacturing

Victoria is home to 163,700 workers who found their current job through a labour hire company (placement workers)1. This means that 25% of all placement workers in Australia reside in Victoria. Across Australia, 21% of workers who found their current employment through a labour hire company are paid by that labour hire company (labour hire workers). Assuming that the percentages are similar across the country, that would mean nearly 35,000 Victorians meet the ABS definition of a labour hire worker2.

The manufacturing industry is the largest user labour hire workers in Australia, with 23,500 labour hire workers3. Given the concentration of the manufacturing industry in Victoria4, there may be close to 7,000 manufacturing labour hire workers in Victoria alone, or nearly 20% of all Victorian labour hire workers.

The most common occupations among labour hire workers are labourers (26,200), Technicians and Trade Workers (23,300) and Machinery Operators and Drivers (21,600)3.

The AMWU recently surveyed labour hire and casual employees as part of a submission to Fair Work Commission (FWC). The Survey received responses from 157 labour hire workers and 266 casual workers. The AMWU Survey was sent to AMWU members by email and text message and it was posted on various AMWU-run social media accounts. As a result, 88% of respondents are union members.

Labour Hire – AMWU Survey and Anecdotal Information

The AMWU represents approximately 30,000 manufacturing workers throughout Victoria, including labour hire workers. Our organisers have significant experience dealing with member and non-member labour hire workers and in workplaces where labour hire is introduced or where it is an established practice.

It is our submission, based on that experience, that labour hire workers are present in all sectors of the manufacturing industry (metals, engineering, food, printing, etc.) and in all parts of the state. It tends to be more common amongst smaller businesses, but many large companies also retain a significant number of labour hire workers at any given time.

Labour hire workers are less likely to speak up about their concerns in the workplace and are more likely to be ‘moved on’ if they do. Given the structure of the current workplace relations laws, it is very difficult to prosecute employers who request that

1 Australian Bureau of Statistics, Characteristics of Employment, 6333.0, August 2014, Table 402 ABS, Characteristics of Employment, 6333.0, August 2014, Glossary3 ABS, Characteristics of Employment, 6333.0, August 2014, Table 424 Department of Employment, Industry Outlook –Manufacturing, May 2014, p. 4

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particular labour hire workers are moved on for questioning safety or seeking better pay and conditions.

Many labour hire workers feel very insecure in their employment, despite some of them enjoying quite significant tenure in their current roles. Of the 157 labour hire workers that responded to the AMWU Survey, 129 (82%) were casual and 28 (18%) were permanent (AMWU Survey, Question 1). 83 respondents (64%) worked full-time hours and 47 (36%) worked part-time hours (AMWU Survey, Question 3, 28 did not answer the question).

There is little evidence to suggest that labour hire employment is any more flexible than traditional kinds of employment with only 7% (8 of the 118 respondents who answered this question) of labour hire employees having a lot of say with their hours (AMWU Survey, Question 19).

Most labour hire companies offer casual employment, often with short periods of work with little or no notice of commencement or termination. The few permanent labour workers tend only to be engaged by larger labour hire firms where they have a long-term contract with a larger client. This not only provides little stability for the workers, it can make it harder to find permanent ongoing work for the significant majority of workers who would prefer it.

The Experience of Labour Hire Workers

It our submission that labour hire employment is primarily used in the manufacturing industry to replace roles that were previously and still could be undertaken by permanent employees. While labour hire does, like all types of employment, have a role to play in the manufacturing industry (certainly shut down maintenance or short-term projects may lend themselves to this sort of arrangement), labour hire is not used in the manufacturing industry in such a way that it is accrues beneficial outcomes for workers, the community and, in the long run, businesses.

A large majority of labour hire workers who responded to the AMWU survey indicated that they would prefer to be in other forms of employment. This may reflect the lack of choice that these workers had in selecting their type of work in the first place with 81% (100 of 123) saying that they became a labour hire worker because that was the only type of employment they were offered (AMWU Survey, Question 6). Further, 72% of respondents (89 of 123) indicated that they continue to work as labour hire workers because they do not have another choice (AMWU Survey, Question 7).

The clear preference of labour hire workers was to be engaged as permanent employees, with their host employer. When asked, 60% said that they would like the opportunity to become permanent employees (AMWU Survey, Question 20). When

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asked whether labour hire workers should be able to convert5 to their host employer, 91% (118 of 130) agreed or strongly agreed that they should have that right (AMWU Survey, Question 2).

To further illustrate the point, 41 labour hire employees (33%) had requested to convert to permanent employment, with only 2 being successful. Of the 81 labour hire workers who had not requested conversion, only 15 said that it was because they were content with the current arrangement (AMWU Survey, Questions 9, 10 & 11). That means that only 10% of labour hire employees surveyed were content with their current form of employment.

Impact of Labour Hire and Insecure Work

Labour hire employees raised a number of concerns about the disadvantages of this kind of work. 38% believe that not having paid leave affects their personal lives, 35% believe that they do not get promoted or reclassified because they are labour hire workers, 31% feel vulnerable and don’t speak up about workplace safety and, 35% say that they don’t get access to training (AMWU Survey, Question 20). These issues are explored in more detail in the next section.

A lack of access to training has long term implications for the future employment of labour hire workers. For casual employees, only 48.5% had received training in the last 12 months and the employee had to cover some or all of the cost in 28.4% of cases. This is compared with 61.5% of permanent employees, with the employer covering the entire cost in 85.7% of cases.6 This lack of training results in insecure workers being less skilled and makes it harder for them to move into higher paying and often more secure types of employment. To further expand on the concerns highlighted in the AMWU survey, this section will provide a summary of the long form responses provided by respondents to these surveys as well as a survey recently conducted by the Victorian Trades Hall Council (VTHC). More detail about their survey can be found in the VTHC submission to this inquiry, along with the individual submissions of AMWU members received through the VTHC survey. The responses selected from the VTHC survey are for those respondents who work within the trades covered by the AMWU and who indicated that they were describing labour hire work in their submission. A larger, referenced collection of statements from survey respondents is provided at Attachment A.

The disadvantages discussed below are not significantly different from those experienced by casual workers, analysed in detail in chapter 5 of the AMWU submission to the FWC (Attachment B), section 5.4 analyses the impacts of insecure work on labour hire workers.

5 The concept of ‘conversion’ in industrial relations is commonly understood as the process of changing the nature of your employment (usually from casual to permanent) after a qualification period of six months of regular and systematic employment with a single employer.6 Fair Work Commission, The Australian Workplace Relations Study (unpublished data), 2015

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Financial insecurityMany labour hire workers highlight financial insecurity as a particular hardship experienced due to their type of employment. The experience of living “week to week” and being unable to “financially plan (as) income is not guaranteed” is quite a common complaint. Many labour hire workers find it “harder to get home loans” due to the insecure nature of their employment and, if they are able to secure one, are concerned about the difficulty in making repayments.

One labour hire worker summarised the financial concerns of labour hire workers: “when the company ran out of work, we are sent off that day with no real warning… This was hard for my wife and I to balance the budget. The fatigue and low morale certainly put a dampener onto my home life as well.”

Personal relationshipsAs noted previously, insecure work was also seen to have a negative impact on personal relationships. The lack of security made it hard to plan socially, and the fluctuations in income and work created financial stress put pressure on relationships. One labour hire worker stated, “the financial and emotional flow on effect has been a major factor in three of my relationships failing.”

One worker put it simply: “Insecurity of labour hire affects many families all over Australia and it is a stress that can and should be easily avoided.”

Workplace safetySome statements also highlight concerns about safety in the workplace and the pressure to remain silent that is created by insecure work. Workers, often with very good reason, believe that “to raise concerns about health/safety makes you a target.” Some workers gave examples of where they had personally been targeted for raising safety concerns and been dismissed. It only takes a few examples of workers being singled out for a workforce who are concerned for their job security to learn the lesson and remain quiet when they should be encouraged to speak up.

Nothing is more important than creating a safe workplace, and we know that workers need to be able to raise their concerns to make that happen. Workplace safety cannot be, as one worker put it “his way or the highway.”

PayLabour hire workers have highlighted their concerns that labour hire was being used to undermine pay and conditions. Many expressed a belief that “labour hire should be on the same rate as the (directly engaged) employees.” Many workers state that they had worked “alongside so many others for half the money and no conditions doing the same job.”

This sort of practices should be understood as an effort by an employer to undercut the pay in their workplaces. By engaging labour hire workers to do work that would be paid at a higher rate under a workplace agreement, employers are seeking to use labour hire workers to undermine the enterprise bargaining framework and deny

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workers their rights. It is concerning that the Productivity Commission’s draft report into the Workplace Relations Framework recommended that clauses concerning contractors, labour hire and casual employees be “non allowable” matters in enterprise bargaining agreements. If picked up by the Government this recommendation will further undermine collective bargaining and significantly the wages and conditions of labour hire employees.

Other labour hire workers talked about their experiences being underpaid and denied workplace entitlements because of their status as labour hire workers. One worker stated that pay “in a casual job can be as low as $13 an hour and if you raise any questions your employer will ring the labour hire company and tell them not to send you back.” As with other areas where labour hire workers feel like they are being mistreated, speaking up inevitably results in termination. One worker shared their story: “When I was first paid, I found out I was getting less than the permanent employees in the host company. Other employees had complained about this and were fired the same day.”

ConditionsSome labour hire workers shared their first hand experience of labour hire being used as a method of avoiding entitlements under the relevant Award or Agreement. In particular, clauses that enabled casual employees to request conversion to permanent employment after a fixed period. For one worker “after three months the company would sack me then rehire me so they wouldn't have to put me on permanent.”

BullyingSome insecure workers believe that they are targeted in workplaces due to their method of employment. This can manifest itself in many different ways, from exclusions from overtime, a lack of training, being asked to undertake unsafe tasks and in some cases, bullying. One labour hire worker shared their story: “Last year I was bullied, victimised, assaulted and made a scapegoat by (name removed) because I was labour hire”

Job SecurityAll of the problems listed above are due, in part or in whole, to the lack of job security. It is particularly worrying, given the evidence presented that this form of employment is used specifically to avoid current award or agreement entitlements aimed at improving job security for long term, systematically engaged workers. The insecurity seems particularly worse for labour hire workers, even when compared to casual workers.

This is because the labour hire company has a strong motivation to provide workers which do not cause problems for the host, even if those problems relate to underpayment, safety or other concerning practices in the workplace. One labour hire worked noted, “the client company (name removed) wants everyone casual so they can pick you up and drop you whenever it suits them. My company (name

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removed) does whatever they are told.” Another stated, “I felt I had to be grateful that I have a job and like I said, if you complain, you were gone.”

Phoenixing

It is estimated that phoenixing costs employees between $191m and $655m and that its total impact is between $1.78bn and $3.19bn each year (Fair Work Ombudsman, Phoenix Activity: sizing the problem and matching the solutions, 2012, p 15). The same report that provided these figures also stated that stakeholders, which included, ATO, ASIC, AIG, MBA and several trade unions including the AMWU, considered that “phoenix activity is a significant issue in the labour hire industry” (p 17).

The AMWU has raised concerns about the practice, and its impact on workers in the manufacturing industry, for a considerable length of time. A previous AMWU submission, which includes a number of examples of phoenixing activity that has affecting AMWU members, has been attached.

One of our recommendations, that require labour hire operators to pay all worker entitlements into an appropriate trust fund, will help to remove the temptation to engage in phoenixing activity and protect workers’ entitlements.

Portable Long Service Leave and Severance Scheme

The AMWU has a principled position that all workers, permanent and casual, should have an entitlement to at least 3 months’ long service leave (“LSL”) after 10 years’ employment. Moreover, this entitlement should be portable across different employers and industries.

The AMWU’s objective is for a fully portable LSL benefit, and from a worker’s perspective, an industry-based defined benefit fund would be the best vehicle to achieve this objective. The benefits of such an approach cannot be understated and a new, portable entitlement required if a new generation of workers are to have access to Long Service Leave.

A portable scheme for long service leave is particularly important for workers in precarious and insecure employment like labour hire workers. As has been established previously, many labour hire workers are trapped in this form of employment, often for several years. Without a portable entitlement to long service leave, it is extremely unlikely that this important workplace right will be available to these workers.

Labour hire workers, along with all other workers, should also have an entitlement to a severance scheme, such as that provided by CoInvest. Portable LSL and a severance scheme give workers protection against the regular economic shocks that arise from

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insecure, casual and short-term employment. These workers need backup, and a system that supports them in periods between employment. Labour hire workers suffer economically because they are largely casualised. The State should support schemes that provide economic support to vulnerable and casual workers, and a severance scheme would provide this support.

Recommendations

The AMWU submits that the Victorian Government must require all labour hire operators to:

- obtain a licence to operate in Victoria on the grounds that they:o are operated by a fit and proper person;o have completed the required training for workplace safety, industrial

relations;o pay an annual fee, to be used to fund the dedicated compliance unit

for monitoring labour hire operators;o pay a bond, to be held by the government to ensure that companies

remain solvent until wound down;

- pay all employee benefits, including leave, redundancy and other entitlements, into an appropriate trust fund. Nomination of this fund, and compliance with its deed would be a requirement under of the licence. This will help to protect against phoenixing and sham-contracting, and protect employee entitlements in case of insolvency. It will also ensure that insecure workers have access to basic workplace entitlements;

- have a minimum capital requirement equal to a sum that ensures they are able to meet reasonably foreseeable labour costs, taxation liabilities and insurance costs at the time of licencing and at all subsequent times;

- follow a code of conduct, to be developed in consultation with employers and unions, including conversion to the host after a specified period, and ratified by the regulator; and

- not engage in any practice which would prevent or limit the ability of the host employer to engaging a labour hire worker directly.

The government should:- Establish a dedicated compliance unit to actively enforce the rules governing

labour hire companies with the ability to investigate concerns around financial viability, compliance with workplace safety and industrial relations laws and regulations.

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- Develop a model labour hire contract for the relationship between the labour hire company and a business seeking to use their services. This model contract should include provisions that:

o requires the take home pay for any labour hire worker will be the same as any employee undertaking a similar role in the host company;

o enable labour hire workers to be directly employed by the host employer at no additional cost to the host employer;

o extend any rights conveyed to workers at the host company under an Award or Collective Agreement to the labour hire workers. In the case of any right for casual employees to convert to permanent employment, specify that those rights would allow conversion to permanent employment with the host employer.

- Legislate to require labour hire operators to contribute to a portable long service leave scheme for their employees and make these contributions a condition of their licence. The AMWU notes that the government is currently investigating Portable Long Service Leave schemes in Victoria and encourage this inquiry to recommend that the government establish such a scheme.

- Require labour hire operators to contribute to a severance scheme, such as that provided by CoInvest, to provide economic support to vulnerable and casual workers between periods of employment.

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Conclusion

The labour hire industry, as currently structured and regulated, does significant harm to many of the workers that it engages. That may be why such a high proportion of those engaged as labour hire workers are doing so, not because they prefer this form of employment, but because they do not believe that they have any other options. This leaves many workers facing extended periods working in a job that they may enjoy, but without the normal conditions that our society has come to expect will accompany long-term employment.

While the regulation of the labour hire industry allows it to be used to undermine the wages and conditions, it will continue to suffer reputational damage from businesses seeking to use it for this purpose. It is in the best interests of those seeking a long-term future to support the proposed regulation, aimed at stamping out rogue operators and businesses that seek to use the industry to undermine the established workplace relations framework.

The requirement for all labour hire workers to have an entitlement to portable long service leave and a severance scheme will provide workers with protection against the regular economic shocks and financial burdens that arise from insecure, casual and short-term employment. The state should support schemes such as these that provide support to vulnerable and casual workers.

The recommendations proposed would be a good first step towards cleaning up the industry and assisting it to find a sustainable role in Australia’s industrial relations framework. While most of the heavy lifting on the issue of insecure work will need to be done by the Commonwealth Government, the recommendations are focused on the role that the Victorian Government can play in protecting Victorian workers from exploitation.

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Attachment A – Selected comments from labour hire workers

AMWU Survey

Q: How did you become a labour hire worker?A: “Made redundant. Only work available” (Respondent ID 4175117955, Manufacturing)

Q: Thinking about working as a labour hire, do you have any comments about your experience or issues you would like to raise? A: “The client company (name removed) wants everyone casual so they can pick you up and drop you whenever it suits them. My company (name removed) does whatever they are told.” (Respondent ID 4173078218, Oil and Gas)

A: “I recently completed my apprenticeship with BMA, they then said I had to leave and come back as a contractor. I have been here almost 5 years now and am only working as a casual labour hire, and not being offered anything permanent, I have more pads outs and tickets than most permanent contractors and I still only get two or three month contracts at a time, sometimes even a matter of weeks.” (Respondent ID 4174103523, Mining)

A: “Labour hire should be on the same rate as the permanent employees.” (Respondent ID 4132569770, Mining)

A: “Last year I was bullied, victimised, assaulted and made a scapegoat by (name removed) because I was labour hire” (Respondent ID 4120388438, Construction)

A: “Insecurity of labour hire effects many families all over Australia and it is a stress that can and should be easily avoided” (Respondent ID 4139816967, Manufacturing)

A: “Labour hire are parasitic companies with bugger all regard for employees, they bring little to nothing to the table and are just swiping money away for no real service, and business use them to circumvent their moral obligations to workers. Money that would otherwise contribute to payrises or better conditions is going to them and not the person working for it.” (Respondent ID 4139186495, Manufacturing)

A: “It's harder to provide for your family as you never have any job security harder to get home loans” (Respondent ID 4140810268, Construction)

A: “There is no security in the job, can get fired easily, cannot plan anything (financially and socially).” (Respondent ID 4156093060, Mining)

A: “No safety in work, can be easily fired. There is very little notice to shift changes (always just a few days notice) - however that is also a part of the nature of the

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work. Difficult to financially plan, income is not guaranteed as income is inconsistent.” (Respondent ID 4156118812, Mining)

A: “At (name removed) mine sites since 2008 - 7-8 years. So obviously the work is there so I should have the chance to be permanent. And its tough not having long service leave especially after ive worked there so long. You could say it’s discriminatory.” (Respondent ID 4160475922, Mining)

A: “Dont really see the labour hire company - just a name on a pay slip” (Respondent ID 4160496957, Manufacturing)

A: “It is hard to plan your life out, because you are not financially stable, therefore the member feels he has to live week to week, and cannot commit to big investments or commitments such as a mortgage. Also, there is very little security, in case the member falls ill, or something, this would be very difficult without sick leave. Also the member gets very little holidays and hasn't had a break in a while and only gets a break at Christmas. Member is starting to feel run down, and needs a holiday. Member mentioned that he is nervous to reject offers of casual work, as rejecting might affect future job offers (i.e. employers might not offer you work again).” (Respondent ID 4160652158, Manufacturing)

A: “I work alongside so many others for half the money and no conditions doing the same job at most times :-(“ (Respondent ID 4166593063, Mining)

Victorian Trades Hall Survey (via https://www.securejobsvic.org.au/)

Q: Please explain the problems you had with your pay and conditions...

A: “the pay in a casual job can be as low as $13 an hour and if you raise any questions your employer will ring the labour hire company and tell the not to send you back.” (Respondent ID 205, Production Worker)

A: “after three months the company would sack me then rehire me so they wouldn't have to put me on permanent. Very rarely got paid corect hourly rate” (Respondent ID 329, Maintenance Fitter)

A: “When I was first paid, I found out I was getting less than the permanent employees in the host company. I was getting a labourers rate with no penalties, yet I am a fully qualified tradesmen. (Boilermaker/Welder.) I thought perhaps the penalty on top of my wage was entitled to the labour hire company but found out it wasn't and that was my full wage. Other employees had complained about this and were fired the same day. The conditions weren't any better, I only had one break the entire day, which was lunch, we worked 5 and a half hours straight to lunch and then the rest to finish. If we did over time, it would mean 5 and a half to lunch and 5 and a half to finish, on the Friday, we finished an hour and a half earlier, we'd just work a 6-hour straight shift with no break. On one occasion I was abused by my foreman for going to the toilet one morning and threatened with my job. As a labour hire worker,

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you had to supply your own uniform and some additional PPE as per requirement, which is more of a consumable in welding fabrication. All the welding bay's didn't have screens so the owner and director could freely walk around us and watch us constantly whilst we were working, however on hot 40 plus degrees days the owner would hand us icy poles so we could keep working fast in 45• heat and still no morning break. I had little choice of any other employment as I felt I had to be grateful that I have a job and like I said, if you complain, you were gone.” (Respondent ID 366, Boilermaker/Welder)

A: “I was working full time hours, after penalty rates was only getting between 18-22 dollars per hour no sick leave no annual leave. And if you missed a day due to sickness you may not work again for weeks at a time. Also if you were working full time hours you would be stood down for a few weeks just before you had the right to ask for permanent employment. You are just used and abused as cheap slave labour because of lazy and bad management practices. It's always big companies like (name removed) for example that abuse the casual system and have people working full time hours as a casual instead of a gainful full time position. It's an absolute disgrace” (Respondent ID 106, Fitter)

Q: Please explain the problems you had with your health and safety...

A: “had accident at work and I felt that health was not the fist concern” (Respondent ID 396, Engineering / Tool Maintenance)

A: “I had a small welding burn to my arm. When explaining what happened to the rep he flat out said I was lying and then said it again in front of the whole work crew. Shortly after I was sacked!” (Respondent ID 329, Maintenance Fitter)

A: “his way or the highway” (Respondent ID 109, Fitter Welder)

A: “as above, to raise concerns about health/safety makes you a target.” (Respondent ID 260, Fitter)

Q: Please explain the personal problems you had because of insecure work...

A: “Money for bills being the big one, when the company ran out of work, we are sent of that day with no real warning. If you need to take a day off cause you're sick, to see a doctor, collect your child etc. those hours away are unpaid which you may not have an option to make up for. This was had for my wife and I to balance the budget. The fatigue and low morale certainly put a dampener on to my home life as well.” (Respondent ID 366, Boilermaker/Welder)

A: “I believe not being able to get a permanent job, the financial and emotional flow on affect has been a major factor in three of my relationships failing.” (Respondent ID 329, Maintenance Fitter)

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A: “Financial security was always the first worry in anything you did relating to work. Getting housing loans paying rent and just general living standards all paid the price for casual employment.” (Respondent ID 106, Fitter)

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