Protected pay rates for labour hire employees

Under regulated labour hire arrangement orders, a labour hire employee’s pay rate can’t be less than the pay rate they’d get if they were working directly for the host employer.

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Payment for labour hire employees

Labour hire employees are employed by a labour hire employer, who sends them to a host employer (host). The labour hire employer is responsible for providing employees with their pay and entitlements.

Labour hire employers and hosts can be covered by the same or different awards or enterprise agreements.

Employees must not be paid less than the minimum pay and entitlements from their award, enterprise agreement or other relevant workplace instrument.

Labour hire arrangement orders

Employees, unions and hosts can apply to the Fair Work Commission (the Commission) for a regulated labour hire arrangement order (order). This is an order that regulates how a labour hire employee is paid by their labour hire employer.

When an order applies, labour hire employees working for a particular host must not be paid less than the pay rate they would receive under the host’s enterprise agreement (or other relevant workplace instrument). This is a ‘protected pay rate’. Employers and employees covered by an order are subject to certain rules.

The Commission is responsible for making orders.

For more information:

Protected pay rate

The protected pay rate can’t be less than what labour hire employees would get if they were working directly for the host.

This includes incentive-based payments, bonuses, loadings, allowances, overtime, penalty rates and other additional amounts. This is known as the full rate of pay.

The following rules apply to labour hire employees covered by an order.

Casuals

Casual labour hire employees will receive a casual pay rate if the host’s relevant workplace instrument includes a casual rate.

There are some situations where a different rate for casuals will apply. These include when:

  • the host’s workplace instrument doesn’t include casual rates, or
  • no workplace instrument provides for the kind of work performed by the casual employee.

In these situations, the protected pay rate for casuals is the full pay rate that would have applied if:

  • they weren’t casual
  • the host’s workplace instrument applied to them, and
  • the base pay rate in the host’s relevant workplace instrument was increased by 25%.

Example: Protected pay rate

Bruce is the director of a vehicle repair store. The vehicle repair company has an enterprise agreement.

Bruce engages a labour hire employer to provide labour hire employees to work for his company.

Before engaging staff, the labour hire employer informs Bruce that they pay a lower pay rate than what he pays at his vehicle repair store. Bruce decides to apply to the Commission for a regulated labour hire arrangement order.

When the order is approved, the labour hire company must pay the labour hire employees at the protected pay rate set by the vehicle repair company’s enterprise agreement.

Casuals

The vehicle repair company’s enterprise agreement provides a 27% casual loading. Liam, a casual who is employed by the labour hire employer to work at the vehicle repair company, will receive the 27% casual loading.

If the vehicle repair company’s agreement didn’t include casual rates, Liam’s protected pay rate would include the 25% loading on the base pay rate.

Pieceworkers

If the labour hire employee is a pieceworker and an enterprise agreement applies to the employee, then for the purpose of calculating the protected pay rate:

  • the base pay rate is the base pay rate in the host’s enterprise agreement
  • the full pay rate is the full pay rate in the host’s enterprise agreement.

Termination payments

When labour hire employees end their employment, they can receive a different pay rate for their termination payments. There are rules about how this rate is calculated.

This rate will generally be paid to a labour hire employee if:

  • this rate is higher than what they would otherwise be paid, and
  • they only worked for one host.

More information will be available on the Commission’s website soon.

Payments not included in the protected pay rate

Labour hire employers who are in the national workplace relations system because their state referred their workplace relations powers to the Commonwealth have some payments excluded from the protected pay rate.

This broadly includes employees:

  • in New South Wales, South Australia, Queensland, Tasmania and Victoria who are employed by:
    • sole traders
    • partnerships
    • other unincorporated entities
    • non-trading corporations
  • in Victoria employed in the public sector
  • in Tasmania employed in local government.

If the employer is one of the above, the protected pay rate doesn’t include payments such as:

  • superannuation
  • workers compensation
  • occupational health and safety
  • training arrangements
  • long service leave
  • jury or emergency service duty, and
  • public holidays.

For more information, visit our Fair Work system page.

Alternative protected pay rate

On application, the Commission can determine that an alternative protected pay rate applies to labour hire employees.

This can change the workplace instrument the protected pay rate is based on to one that is more appropriate. An example is if the alternative instrument better reflects the type of work performed.

Alternative employment instruments can only be considered if they:

  • already apply to the host or their body corporate
  • could cover similar employees.

Obligations for employers

Hosts and labour hire employers have certain requirements under an order.

Changing an order

Hosts must apply to the Commission to change an order to cover any new labour hire employers and their relevant employees.

Providing information

If a labour hire employer makes a request in writing, the host must provide them with information to help them pay their employees.

Hosts must also notify labour hire employers if a workplace instrument is replaced by another instrument.

Hosts also have obligations during tendering. Hosts must notify potential and successful tenderers in writing that an order applies and how it may impact the tenderer.

Anti-avoidance

Hosts and labour hire employers can’t behave in a way that:

  • stops, or tries to stop an order from being made, or
  • avoids paying the protected pay rate to eligible employees by:
    • engaging other employees or independent contractors, or
    • entering into other labour hire agreements.

Exclusions

When the Commission can't make an order

The Commission can't make an order if:

  • a service is being provided to the host rather than just labour
  • the host is a small business employer, or
  • it's not fair and reasonable in the circumstances.

When the protected pay rate doesn't apply

Sometimes, when an order applies, the labour hire employer doesn’t have to pay the protected rate to certain employees. This happens when the employee is:

  • on a training arrangement, or
  • engaged for a short-term period (usually 3 months or less).

The Commission can vary rules for employees engaged for a short-term period.

Disputes

Disputes can be raised about issues, including:

  • what the protected pay rate for a labour hire employee is
  • whether a labour hire employee has been, or is being, paid less than the protected pay rate.

The parties involved must first try to resolve the issue at the workplace level.

If the dispute still can’t be resolved, parties can then apply to the Commission for assistance. Visit the Commission's Labour hire arrangement order disputes page.

Source reference: Fair Work Act ss.306A–306W

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