Adapting your business to the Labour Hire Scheme [Part 2]

Factors that impact host businesses

 

The following is a list of factors your business may not have considered in relation to the coming changes.

 

• You may think the changes don’t affect your business
  
  The new Labour Hire Scheme governs businesses across Victoria of all sizes. This means that no one is immune to the legislation.
  
  If you are a small orchard, for example, and you use a labour hire provider to organise workers for fruit picking, you are obligated to ensure the provider is licenced. You are also required to provide safe working conditions for any employee that works on your premises. It is not acceptable to plead ignorance when the Scheme takes effect.
• You may think your business won’t be audited and/or penalised
  
  Whilst certain industries have been flagged as having established problems with labour hire, all industries must comply with the Labour Hire Scheme, and all industries are subject to examination and penalty.
• You may think it doesn’t matter what your labour hire provider does, as long as you have ticked the boxes at your end
  
  You can’t turn a blind eye to how labour hire providers manage their staff.
  
  For example, you may pay a certain rate to a labour hire provider for employees, working on the assumption that the provider will pass on the appropriate hourly rate for hours worked to their staff.
  
  From 30 October 2019, it will also be your responsibility to ensure that employees provided by labour hire providers actually receive award rates for the hours they have worked. This will be assured via licensing, and by host businesses conducting realistic assessments of the costs of labour according to hours worked.
  
  

  Interested in find out more? Read our case study as an example.

 

• You may assume you can get an extension
  
  Labour Hire Providers have had since 29 April 2019 to apply for their licence under the Labor Hire Scheme. If they don’t hold a licence on 30 October, they are not permitted to operate. They may still apply for a licence after this date, but they won’t receive an extension to operate while they wait for licence approval.
  
  Host businesses who work with labour hire providers must consider this when entering into arrangements prior to the start of the Scheme. If you sign up with an unlicensed labour hire provider now, and they fail to obtain a licence, you’ll have to cease to use them on 30 October and reconsider your options. This would be a waste of time and money.

 

• You may not have considered the costs to your business under the Scheme
  
  Licence costs
  Licence application, annual and renewal fees apply to labour hire providers under the Labour Hire Scheme. For example, a Tier 1 business with an annual turnover of $2,000,000 or less will have to pay a $1,599.48 licence application fee as well as a $1,110.75 annual fee to hold the licence. Each subsequent year they will pay the annual fee, and every three years they will need to renew the licence, which involves a renewal fee of $1,599.48.
  
  Tier 2 and Tier 3 businesses incur even higher fees. View the licensing costs and fees here.

Whilst host businesses don’t pay a fee themselves, they should expect to see additional costs factored into quotes from labour hire providers, to account for significant licence fees.

Labour costs
The Labour Hire Scheme requires that all employees of labour hire providers are paid minimum rates and penalty rates appropriate to the times and hours they work, as set out in modern awards. Any company that violates the law will lose their licence to operate.

Remember, fair pay laws aren’t new. Employees should always have been paid modern award rates, but some labour hire providers have violated laws, and host businesses either unwittingly worked with these providers on the assumption that the provider was doing the right thing; or turned a blind eye, assuming that if they met their own stated obligations, it didn’t matter what the provider did.

Now labour hire providers are forced to pay modern awards, they won’t be able to offer the cheap quotes they may have offered in the past. The price for services is likely to significantly increase. This will impact host businesses.

 

All new and existing contracts/arrangements host businesses have with labour hire providers should be examined to ensure providers hold a licence. Operational costs will likely increase.

 

• You may think, if costs are increasing, why not go in-house?
  
  With costs of hiring labour likely to increase under the Labour Hire Scheme, you may think it will work out cheaper for your business to hire employees on your payroll. This may work for your business, but it’s worth considering all the additional costs of having staff on payroll.
  
  Consider the cleaning industry, as an example. Hiring cleaners involves more than just paying a wage. You must consider additional costs such as:
  • Superannuation pay
  • Holiday/parental leave/sick pay
  • Portable long service leave
  • Cost of uniforms
  • Cost of equipment
  • Cost of chemicals
  • Cost of training and supervision
  • Cost of transport

With these additional costs considered, it may be cheaper and simpler for your business to continue to outsource to labour hire providers.

 

• You may not be aware of Labour Hire reporting
  
  Labour hire providers, hosts or employees are able to anonymously report illegal labour hire arrangements on the Labour Hire Authority’s website: Report a Problem. 

As an example, if as a host you are provided with a quote by a licenced provider, but you choose a cheaper unlicensed provider, it is within the interests of the licensed provider to report the arrangement to the Labour Hire Authority. 

 

In the competitive world of labour hire, it is likely this form of reporting will be commonplace, as law abiding labour hire providers will not want to lose business to those breaking the law. On the upside, this will level out the playing field for businesses, and workers’ rights will be protected.

 

Continue reading Part 3: How we can help you prepare for the Labour Hire Scheme