Australian Manufacturing Workers Union

AMWU Submission

Australian Manufacturing Workers Union

Submission to the Victorian Inquiry into

the Labour Hire Industry

and Insecure Work

11 December 2015

Contents

Executive Summary

Labour Hire Workers in Manufacturing

The Experience of Labour Hire Workers

Phoenixing

Portable Long Service Leave and Severance Scheme

Recommendations

Conclusion

Attachment A – Selected comments from labour hire workers

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 establishmentas 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 securepermanent 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 issuesdiscussed 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.

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 worker[2].

The manufacturing industry is the largest user labour hire workers in Australia, with 23,500 labour hire workers[3]. Given the concentration of the manufacturing industry in Victoria[4], 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 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 employmentis 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 asked whether labour hire workers should be able to convert[5] 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.

Financial insecurity

Many 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 employmentand, 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 relationships

As 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 safety

Some 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.”

Pay

Labour 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 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.”

Conditions

Some 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.”

Bullying

Some 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 Security

All 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 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.