Same job, same pay: when an on-hired employee gets the host’s rate

Two dates

Part 2-7A commenced on 15 December 2023, added by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. The pay obligation in s 306F “applies on and after 1 November 2024 regardless of whether any agreement resulting in the performance of work by a regulated employee is entered into before, on or after that day.”

The Commission describes them as orders that labour hire employees be paid at least the host’s rate for the same kind of work.

From application to pay, step by step

1. Someone applies

   Section 306E(7) lists who may apply, in full: “(a) a regulated employee; (b) an employee of the regulated host; (c) an employee organisation that is entitled to represent the industrial interests of an employee mentioned in paragraph (a) or (b); (d) the regulated host.”

2. The Commission checks the arrangement

   Under s 306E(1) it must make the order if satisfied that an employer supplies, or will supply, its employees to perform work for a regulated host; that a covered employment instrument applying to the host would apply to them if the host employed them to do that work; and, under s 306E(1)(c), that the regulated host falls outside the definition of a small business employer. A small business employer is one employing fewer than 15 employees at the time, counting a casual employee only if they are a regular casual employee, and counting associated entities as one entity (s 23).

3. It asks whether this is a service, not labour

   Under s 306E(1A) the Commission “must not make the order unless it is satisfied that the performance of the work is not or will not be for the provision of a service, rather than the supply of labour”. Section 306E(7A) gives the matters it weighs, in full: the employer’s involvement in matters relating to the work; how far the employer in practice directs, supervises or controls the employees, for example by managing rosters, assigning tasks or reviewing work quality; how far the employees use the employer’s systems, plant or structures; how far the employer or another person is subject to industry or professional standards or responsibilities for the employees; and how far the work is of a specialist or expert nature.

4. It asks whether an order is fair and reasonable

   Under s 306E(2) it must not make the order if satisfied that doing so “is not fair and reasonable in all the circumstances”, having regard to the matters in s 306E(8) on which submissions have been made. Those matters include the pay arrangements of the host’s employees and the regulated employees, the history of industrial arrangements, the relationship between host and employer, and the terms and nature of the arrangement; s 306E(8) lists them all.

5. The order names its parties and its start

   An order must specify the regulated host, the employer, the regulated employees, the host employment instrument, and the day it comes into force, which s 306E(9)(e) sets as, “if the order is made before 1 November 2024”, “that day or a later day”, and otherwise “the day the order is made or a later day.”

6. The employer pays the protected rate

   While an order is in force, s 306F(2) says “The employer must pay the regulated employee at no less than the protected rate of pay”, a civil remedy provision. The protected rate is the full rate of pay the employee would get if the host employment instrument applied to them (s 306F(4)). For a casual employee where no instrument applying to the host provides for casual work of that kind, it is worked out as if the employee were not casual, with the base rate increased by 25% (s 306F(5)).

When the rate does not apply

Section 306G sets two exceptions. The first is a training arrangement: where one applies to the employee for the work done for the host, s 306F does not. Nor does it apply where the employee performs the work for the host during a period no longer than 3 months, or no longer than a different exemption period the Commission has set, or within a recurring extended exemption period as s 306G(2) describes; this second exception is not available where the Commission has determined there is no exemption period. If the work does in fact run past the applicable period because agreements are varied or made, s 306F applies from the day they are varied or made.

Those determinations are made under ss 306J and 306K, and s 306L(1) says the Commission may make one “only on application” by the host, a covered employer, a covered regulated employee, or an organisation entitled to represent their industrial interests. It may make one only if satisfied there are exceptional circumstances, having regard to the matters in s 306L(4), among them whether the purpose is a seasonal or short-term need for workers.

The employer also does not contravene s 306F(2) where it pays less because the host gave it information about the protected rate under s 306H, the employer reasonably relied on it, and the information was incorrect in a material particular (s 306F(3)). Nor does it contravene s 306F(2) where the order covers it because of s 306ED(11) and it pays less because it has not been notified of the host’s application under s 306ED(2) or, as a successful tenderer, advised under s 306EE(2) or (3) (s 306F(3A)).

The rate can also be set by another order. An alternative protected rate of pay order, while in force, has effect despite s 306F (s 306N(2)), and so does an arbitrated protected rate of pay order the Commission makes in a dispute, for the work performed during the period to which that order applies (s 306Q(6)).

What this means for a recruiter’s placements

Part 2-7A reaches an employer that supplies its own employees to a host. A placement where the client employs the worker directly does not fit s 306E(1)(a), which needs an employer supplying its own employees. The Act’s own note adds that no order can be made between related bodies corporate, branded differently, that do not supply labour to one another. Nothing in Part 2-7A makes every labour hire employee entitled to the host’s rate: the rate follows an order, and an order follows an application.

Whether the supplier also needs a state licence is in the labour hire licensing guide; the job ad for the role is in the guide to job ads.