Outsourcing Housekeeping Services in Australia: Compliance Considerations

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1 Outsourcing Housekeeping Services in Australia: Compliance Considerations PLAN SOURCE ASSESS DEVELOP MANAGE CHANDLERMACLEOD.COM

2 Overview The hospitality industry in Australia has seen a remarkable increase in the use of outsourcing services over the past 20 years, largely due to its convenience, flexibility and quality control 1. These services range from technical products such as Audio Visual services, internet providers and on line movie suppliers to support services such as reservation call centres, essential maintenance services and OHS compliance services. Increasingly, back office functions such as payroll processing and accounting functions are being recognised as non-core and more effectively handled via an outsourced solution. The broad range of activities undertaken in a hotel, combined with its high labour intensity and volatile demand, signify a predisposition particularly suited to outsourcing 2. However, the greatest areas of uptake in the outsourcing sector are in the usage of outsourced labour services. Specifically, the fastest growth has occurred in the provision of labour for housekeeping and housekeeping related services. This includes the cleaning of guest rooms, processing of on-site laundries, public area cleaning and kitchen cleaning. This paper will focus on the outsourcing of housekeeping labour services and the legal requirements of both hotel management companies and outsourcing providers. The evolution of the rise of labour outsourcing has been a gradual process over the past 20 years. Initially, most of the legal requirements included in the relevant hospitality Awards and Acts solely covered employees directly employed by hotel operators. As hotels began to outsource more and more, the Federal Government amended Award clauses to cover the requirements and processes required to legally and prudently outsource its labour force in any area of the business. It is now estimated that most hotels and serviced apartments in Australia utilise some type of outsourced service to deliver its product every day. As a result, today s legislation contains robust and in depth regulations regarding the required compliance of outsourcing companies and the obligations of an employer to ensure that the providers chosen comply with these legal requirements. The need for a hotel management company to possess a complete understanding and knowledge of the requirements around outsourcing has also changed. Today, the rules and regulations are very specific and detailed and hoteliers may put their operations and reputations at risk if their outsourcing partners are not fully compliant. This is important as the potential penalties to hotel management companies and hotel owners for knowingly allowing non-compliant outsourcing suppliers to operate within their business can be substantial. That said, there are examples of large national publicly listed housekeeping service providers that are fully compliant with all legal requirements, provide their employees with all required benefits and add great value to the businesses that they work within. This report will provide an overview of the requirements of both an outsourcing provider and a hotelier in regards to legal compliance to Australian regulatory conditions. These areas include minimum pay rates, OHS responsibilities, employment conditions, and adherence to National Employment Standards. This paper will also include examples of types of business models that are non-compliant as well as business models that fully comply with Australian regulations and provide a long term sustainable business solution. In Australia, outsourcing is the perfect model for reducing risk, managing a large labour force, producing consistent quality, saving money and gaining more control over an accommodation provider s labour operations September 25, 2013 So Many Advantages for the Accommodation Provider 2 An examination of factors motivating hotel outsourcing, Dawne Lamminmaki, 2010 Griffith University

3 Required Compliance The three key areas of compliance in the hospitality outsourcing sector relate to: Hospitality Industry (General) Award 2010 (HIGA); National Employment Standards (NES); and Work Health and Safety Legislation Hospitality Industry (General) Award 2010 (HIGA) All outsourced hospitality staff dedicated to performing labour at hotels in Australia are covered under the same award as in-house employees working in hotels, being the HIGA. Some of the key compliance obligations under the HIGA include: Minimum pay rates and penalty rates to be paid to employees Mandatory employee benefits such as sick leave, personal leave, long service leave Employment conditions such as employee classifications, hours of work, break times, meal times Provision of workers compensation insurance and adherence to all other relevant IR laws and regulations. The following are examples of possible issues that have the potential of impacting on a hotel s business and reputation: Outsourcing companies that do not pay the minimum rates and penalty rates or pay employees on the wrong Award. HIGA is very specific regarding the award classifications, minimum pay rates, hours of work, over time payment and other conditions of employments. Outsourcing providers must be fully compliant and up to date with all of the latest rules and legislative changes, paying the correct classifications and penalty rates as per each individual position as defined in the Award. Outsourcing organisations that sub-contract staff and require individual workers to provide their own ABNs, thus making the workers responsible for their own Workers Compensation insurance, employee benefits, superannuation and public liability insurance. This type of sub-contracting is also known as sham contracting. All reputable outsourcing providers will directly employ their own staff and be fully compliant with the payment of all insurances and benefits. Employers have the right to request proof of coverage by asking for copies of certificates of currency in areas such as Workers Compensation Insurance or Public Liability Insurance. Businesses paying employees on a piece meal basis where the employee is paid for each action or task performed regardless of time. All outsourcing employers are required to pay employees as per the total hours worked regardless of the tasks completed during their shift. Outsourcing organisations that claim to be respondents to the Award, but actually are not eligible according to the definitions detailed in HIGA. In order to be covered under HIGA, clause 4.1(k) of the Award states that employers must be fully focussed on the hospitality industry to be respondents to the Award. In other words, Contract Cleaners that are engaged in other types of cleaning outside of the hospitality industry are not eligible to employ staff under HIGA and are therefore non-compliant. Only outsourcing organisations that provide services 100% solely to the hospitality industry are able to employ staff under the hospitality award. As a result, many outsourcing providers that claim to be eligible to employ staff under HIGA are technically paying under the wrong Award and potentially in breach of their obligations.

4 NES (National Employment Standards) All hospitality employees, whether they are in-house or outsourced, are subject to the National Employment Standards as set by Fair Work Australia. The entitlements required under the NES include: Maximum weekly hours of work this is set at 38 hours per week, plus reasonable additional hours. In addition, outsourcing companies should provide staff with a roster in advance of their shifts and some type of time capturing instrument to monitor and record hours worked. Requests for flexible working arrangements certain employees, including parents or carers of a child under school age or of a child under 18 with a disability, have the right to request a change in working arrangements to assist with the child s care. Employees that specify days or work for valid reasons should have their requests met if reasonable. Parental and maternity leave benefit includes up to 12 months unpaid leave for every employee, plus a right to request an additional 12 months unpaid leave, and other forms of maternity, paternity and adoption related leave. Annual leave 4 weeks paid leave per year for full-time employees, plus an additional week for certain shift workers. For part time employees, annual leave should be paid pro rata and for transitional employees, outsourcing companies should carry over entitlements. Personal / carer s leave and compassionate leave entitlement includes 10 days paid personal / carer s leave, two days unpaid carer s leave, and two days compassionate leave (unpaid for casuals) as required. Community service leave unpaid leave for voluntary emergency activities and leave for jury service, with an entitlement to be paid for up to 10 days for jury service. Long service leave a transitional entitlement for employees who had certain LSL entitlements before 1/1/10 pending the development of a uniform national long service leave standard. Outsourcing providers need to accrue long service leave and recognise prior entitlements that are carried over during a transition. Public holidays employees are entitled to a paid day off on a holiday, except where reasonably requested to work. In the hospitality industry, public holidays are paid in conjunction with HIGA requirements. Notice of termination and redundancy pay entitlement includes up to 4 weeks notice of termination (5 weeks if the employee is over 45 and has at least 2 years of continuous service) and up to 16 weeks redundancy pay, both based on length of service. Provision of a Fair Work Information Statement all employers must provide this statement to all new employees. It contains information about the NES, modern awards, agreement-making, the right to freedom of association, termination of employment, individual flexibility arrangements, right of entry, transfer of business, and the respective roles of Fair Work Australia and the Fair Work Ombudsman.

5 Work Health and Safety Act 2011 New legislation for Work Health and Safety (previously called Occupational Health and Safety) came into effect on 01 January 2012 and includes the following obligations: As a person conducting a business or undertaking; an outsourcing provider is required to work with a hotel to provide a healthy and safe working environment, i.e both parties have mutual obligations in relation to workplace health and safety. An outsourcing provider therefore must ensure open consultation lines with client sites regarding WHS matters. An outsourcing provider must maintain a workplace that is safe and without risks to health, safety and wellbeing. This includes providing training for all new employees at commencement of employment, e.g. Manual Handling, Chemical Handling and Safe work method statements. It is prudent for outsourcing providers involved in the provision of labour for housekeeping to promptly report hazards, complete risk assessments, and maintain equipment with annual testing and tagging of electrical equipment. An outsourcing provider must provide a compliant return to work programme for workers returning from injury, including suitable duties plans and treatment as prescribed by medical providers. In addition, it is a requirement for prompt reporting of all incidents and accidents in the workplaces, including prompt medical treatment for the worker. An outsourcing provider must consult with workers on all Work, Health and Safety matters. For hospitality workers this may include Daily Briefings and Monthly workgroup discussions based around WHS. Summary The conditions around outsourcing have changed dramatically over the past 20 years. Today, the requirements for companies that outsource and the outsourcing companies themselves are regulated and stringent. Businesses that outsource to a service provider are required to ensure that their outsourcing providers are compliant with Award conditions, National Employment Standards and Work Health and Safety legislation. Today, there are significant penalties that can be applied to hotel operators and owners for allowing non-complaint outsourcing companies to illegally operate in their businesses. As detailed in this paper, there are numerous examples of non-compliant outsourcing service providers that partake in practices such as under payment of wages, paying an incorrect award, sham contracting, or paying piece meal. However, businesses have the right to request from its outsourcing provider proof of compliance to ensure that their service provider is fully complaint. It should be noted that aside from the non-compliant outsourcing operators mentioned in this document, there are also examples of large national publicly listed housekeeping service providers that are fully compliant with all legal requirements, provide their employees with all required entitlements, and provide services that greatly benefit the business they work within as well as the overall industries that they serve. Hotels outsourced housekeeping to labour hire agencies to permit: first, greater labour scheduling flexibility; second, a reduction in the costs and time involved in hiring and firing staff and managing staff performance; and third, increased productivity (more rooms cleaned per shift). However the foremost reason for outsourcing related to the reduced risk and costs of managing work-related employee injury. 3 3 Working conditions and the health and safety of room attendants in luxury hotels, Sarah Oxenbridge and Maja Moensted: Workplace Research Centre, University of Sydney

6 This publication has been produced by as general information only and does not consider anyone s specific objectives, situation or needs. Accordingly, the publication is not to be taken as legal or professional advice. We recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this paper. While we have made every effort to ensure the accuracy of the information as at the date of publication, we do not give any warranty or representation as to the accuracy, reliability or completeness of the information. To the extent permitted by law, CMG and its employees, officers and contractors shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided or omitted or from any one acting or refraining to act in reliance on this information. CHANDLERMACLEOD.COM