In a new consultation paper, the Albanese government has laid out the fine points of its proposal for a ‘Same Job, Same Pay’ policy. What would this measure mean for HR, and what challenges could it pose?

In a consultation paper released earlier this month, the Australian Government Department of Employment and Workplace Relations unveiled the details of its plan to introduce a ‘Same Job, Same Pay’ provision to the Fair Work Act.

The measure has been proposed as a way to “address the limited circumstances in which host employers use labour hire to deliberately undercut the bargained wages and conditions set out in enterprise agreements made with their employees”.

According to the paper, the development of the policy will be informed by four guiding principles:

1. Businesses should be able to access labour hire for genuine work surges and short-term needs.

2. Labour hire workers should be paid at least the same as directly engaged employees doing the same work. 

3. Disputes about Same Job, Same Pay obligations and entitlements should be dealt with quickly, economically and fairly by the Fair Work Commission. 

4. Targeted anti-avoidance measures are needed to protect Same Job, Same Pay entitlements and ensure long lasting behavioural change.

Here’s what else HR needs to know.

What issues does this policy seek to address?

According to ABS data, labour hire workers represent around 2.3 per cent of employed people in Australia, as of June 2022. The majority of these workers (81 per cent) worked full-time, but were likely to earn less than a directly employed worker.

Currently, under the Fair Work Act, a labour hire worker and a directly engaged employee performing the same work for the same host employer may have terms and conditions of employment set by different instruments. 

According to Michael Byrnes, Employment Partner at law firm Swaab, the inherent issues with this policy have grown clearer in recent years.

“[Labour hire] is not something that’s occurred in the last two or three or even five years – it has been around for decades,” he says.

“However, there seem to be more and more cases where businesses have two workforces working side by side, and they’re ostensibly doing the same work. But one will be employed by the company itself under its enterprise agreement, and [the other] is procured through the labour hire company on different, lower terms and conditions.

“[This proposal] is about saying: if you do the same work, perform the same job, have the same classification, then you should be paid the same. It’s a way of dissuading businesses from seeking to structure their affairs in a way that undermines the applicable industrial instruments.”

The proposal comes in the footsteps of recent changes to the Enterprise Bargaining Framework, which seek to make enterprise bargaining agreements (EBAs) more accessible to employers who have not traditionally engaged in collective bargaining. 

If passed, this policy could bolster the reforms by making it harder for employers to skirt the terms of their EBAs by increasing their usage of labour hire workers.

“Labour hire can be very useful in circumstances where you have a strong period of demand, a big call for your services, or you acquire a contract affecting the need for labour for a limited period,” says Byrnes.

“But I think it has expanded and evolved to include attempts to structure the workforce in such a way as to lower terms and conditions and avoid payments and benefits that would otherwise be applied to employees by reason of an enterprise agreement.”

“It’s a way of dissuading businesses from seeking to structure their affairs in a way that undermines the applicable industrial instruments.” – Michael Byrnes, Employment Partner at law firm Swaab

How would ‘Same Job, Same Pay’ be classified?

In the paper, the department lays out the proposed measures to calculate whether a labour hire worker is doing the same work and receiving the same pay as an employee.

The department is “considering the merits” of identifying a ‘same job’ when a labour hire worker is performing:

• duties that align to a classification, job, or duties set out in or covered by an enterprise agreement that applies to the host employer and directly hired employees; and/or
• the same duties as an employee covered by the modern award; and/or
• the same duties as a specific directly employed employee working in the host.

The paper uses the example of Jane, a labour hire worker who works the same job as an employee at a food production company. 

Jane is paid according to the relevant modern award by the labour hire provider, but the company has an enterprise agreement that has better pay for the classification that covers the work that Jane does. In this case, the Same Job, Same Pay measures will apply, and the labour hire provider will have to pay Jane at least the same pay that employees doing the same work under the enterprise agreement are paid.

Meanwhile, when calculating the ‘same pay’ that a labour hire worker should be entitled to, the paper proposes comparing labour hire workers’ wages with employees’ ‘full rate of pay’, as defined in the Fair Work Act. This definition includes incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates and “any other separately identifiable amounts”.

What challenges could these measures pose for HR?

While the proposed measures have been heralded by some as a step forward in increasing job security and ensuring fair wages, others have questioned the impact that the policy could have on employers who have a legitimate and appropriate need to engage labour hire workers.

For instance, AI Group released a statement following the paper’s publication expressing concern that the policy ‘represents an unfair attack on labour hire businesses that comply with relevant workplace laws and provide a valuable and legitimate service to other organisations, employees and the broader community’.

As well as adding a layer of complexity to the legitimate engagement of labour hire workers, there are also question marks surrounding how easy these measures would be to enforce, says Byrnes.

“One complication is that you’re imposing an obligation on the employer in relation to workers who are employed or engaged by another company – the labour hire company,” he says. 

“There’s an obligation proposed for the employer to take reasonable steps to ensure that the labour hire workers are being paid in accordance with the industrial instrument. However, the employer is not ordinarily the entity actually paying the labour hire workers. Usually they’re paying the labour hire company. 

“Therefore, there’s only so much an employer can do to ensure that these workers, who are not their employees, and with whom they have no direct contractual relationship, are actually being paid in accordance with the terms of the employer’s enterprise agreement.”

In order to make these obligations feasible for employers, the host company must engage in appropriate and regular communication with the labour hire company, he says.

“[The host company] would have to take steps such as having the labour hire company agree in their contractual arrangements that they will pay their workers the full rate of pay in accordance with the enterprise agreement.”

It might also be necessary to implement an auditing system to ensure the labour hire company is following through on this agreement, he says.

“[In terms of] the labour hire company itself, it will need to apprise itself of the enterprise agreement, its terms and the way in which it’s applied in the host employer’s workplace, so they can ensure there is absolute parity between the workers that they’re providing, and the employees of the employer in the workplace.”

The Department of Employment and Workplace Relations is now seeking feedback on the direction the government should take in implementing the Same Job, Same Pay measure. Feedback submissions close at 11:00pm AEST on Friday 12 May 2023.

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