As part of annual reporting to the Labour Hire Authority (LHA), labour hire providers need to explain their use of industrial instruments.
There are several types of industrial instruments that may determine the wages and conditions of labour hire workers and it is important to know which instrument applies in your business. The main types of industrial instruments are explained below.
For workers engaged as employees, there are two main types of industrial instruments:
- ‘modern awards’, which, together with the National Employment Standards, provide a safety net for most employees across Australia; and
- ‘enterprise agreements’, which are negotiated between employers and groups of employees. Enterprise agreements provide for wages and conditions above the minimums set out in the relevant modern award.
Industrial instruments made under previous industrial relations legislation such as collective agreements, which are sometimes colloquially referred to as ‘zombie agreements’, may remain in force where they have not been terminated by the Fair Work Commission or replaced with an enterprise agreement. You can find out more about these types of agreements on the Fair Work Ombudsman website.
Please note that individual contracts of employment may contain terms that complement or improve on an applicable industrial instrument, and they may otherwise deal with matters not covered by the industrial instrument, but they must not undercut or reduce any wages or entitlements in the applicable modern award or enterprise agreement. Individual contracts of employment may be written, verbal, or a combination of both.
There are two other key industrial instruments to be aware of:
Individual flexibility arrangements (IFAs)
IFAs can be negotiated between individual employees and their employer. They can be used to vary certain clauses under the modern award or enterprise agreement that applies to them. IFAs must:
- be ‘genuinely agreed’ to; and
- leave the employee ‘better off overall’.
Click here to find out more about implementing IFAs.
Piece rate agreements
A piece rate agreement is where an employee is paid ‘per piece’ rather than ‘per hour’. Where a modern award or enterprise agreement contains terms that deal with piece rate agreements, those terms must be complied with. You can find more information on the Fair Work Ombudsman website.
For workers engaged as independent contractors, the industrial instrument is called a 'contract for services'. Like individual contracts of employment, contracts for services may be written, verbal, or a combination of both.
If a worker is engaged as an independent contractor rather than as an employee, care should be taken to ensure they are no worse off than they would have been as an employee. This is because if an independent contractor is worse off, a Court could order damages against the employer/principal under the Independent Contractors Act 2006 (Cth).
Labour hire providers should also take care to ensure they are not misclassifying employees as independent contractors. If this occurs, it could amount to ‘sham contracting’, which is prohibited under the Fair Work Act 2009 (Cth).
See our fact sheet ‘Guidance for labour hire providers: engaging workers as independent contractors’ for more information about correctly classifying labour hire workers.