ITCRA SUPPLEMENTARY SUBMISSION TO THE VICTORIAN INQUIRY INTO THE LABOUR HIRE INDUSTRY AND INSECURE WORK

Transcription

1 ITCRA SUPPLEMENTARY SUBMISSION TO THE VICTORIAN INQUIRY INTO THE LABOUR HIRE INDUSTRY AND INSECURE WORK Submitted: 15 March 2016 By to:

2 ITCRA is the professional body for the ICT and professional contracting and recruitment sector in Australia and New Zealand. ITCRA Members supply and/or manage professional talent on behalf of their clients for permanent and flexible roles, including contracting, across Australia and New Zealand as well as multiple international markets. ITCRA s ICT Employment Trends Report provides an overview of the key movements and data that affects the ICT industry in terms of business conditions, human capital needs, recruitment activities, and expectations. SkillsMatch data is a major source of information for this Report, as is data from Burning Glass, Seek, and Live Salary. SkillsMatch is a monthly reporting program of data from ITCRA Member systems that includes: position title and requirements, available positions, salaries offered, placements made and timeto-fill for ICT contract and permanent roles. Developed by ITCRA, isafe sets a new benchmark for those who supply or manage white collar professional talent as it consolidates system and site assessments for companies who deliver recruitment, contract management, professional and management services as well as for their clients and contractors. The People & Talent Management Standard (PTM), in partnership with Certex International and Service Excellence Consulting, sets best practice for organisations that recruit and manage workers.

3 ITCRA SUPPLEMENTARY SUBMISSION TO THE VICTORIAN INQUIRY INTO THE LABOUR HIRE INDUSTRY AND INSECURE WORK EXECUTIVE SUMMARY The Information Technology Contract & Recruitment Association (ITCRA) appreciates the opportunity to provide a supplementary submission to the Victorian Inquiry into the Labour Hire Industry and Insecure Work (Inquiry). ITCRA relies on the material already submitted in its initial response to the Inquiry on 27 November 2015, and now wishes to respond to and provide comment on the following issues that have been raised in other submissions and during the public hearings relating to the Inquiry: 1. the distinction between labour hire professionals and vulnerable workers in the ICT and other professional sectors and the processes ITCRA has in place to protect such workers; 2. whether an industry wide definition of independent contractor is feasible; 3. how non-standard work is an attractive option for the majority of temporary contract workers and secure work is a misnomer; 4. compliance with occupational health and safety (OHS) laws; and 5. that a licensing system or other additional regulation is not viable for the professional contracting sector, and what this would mean for ITCRA Members. 1 - A distinction must be drawn between labour hire professionals and vulnerable workers It is ITCRA s experience that the individuals engaged by its Members in alternative forms of work are predominantly skilled professionals capable of making decisions as to their preferred form of engagement. Further, the anecdotal surveys conducted by ITCRA Members indicate the majority of these individuals do not actively seek permanent roles. The position of these individuals is quite different from those persons who were the focus of the submissions of organisations such as the Australian Council of Trade Unions (ACTU) and Professionals Australia, which have focused on the disadvantages of labour hire and particularly the exploitation of vulnerable workers. ITCRA submits that the concerns raised by the ACTU exclusively relate to vulnerable workers such as migrant and unskilled workers in particular blue collar sectors within the labour hire industry. In considering any regulatory or statutory reforms to the labour hire industry, a distinction must first be drawn between professional workers who are engaged on labour hire arrangements and those labour hire workers who are truly vulnerable. It follows that heightened protection should be afforded to those workers less able to understand the terms of any labour hire arrangement, or those who are less likely to be in a position to freely choose their mode of engagement. Focusing any increased regulatory protection on certain classes of vulnerable workers would protect those most at risk of exploitation. This would also allow genuine independent contractors, and their hiring entities, to freely negotiate the terms of engagement without the fear of those terms unintentionally falling foul of sham contracting or other laws aimed at preventing exploitation of temporary workers, which could arise if there was a rigid and overly simplistic definition of independent contracting adopted.

4 If the Inquiry results in the Victorian Government (Government) implementing regulatory protection for temporary workers, ITCRA respectfully submits that it should be limited to vulnerable workers and should not extend to professional white collar temporary workers. 2 - Considering a definition of independent contractor Many commentators and some of the submissions argue for a simple and clear statutory definition, which settles the distinction between an employee and an independent contractor. The common law test for determining an employment relationship and whether a worker is an employee or an independent contractor is not always precise or straight forward. It does however provide the level of flexibility necessary for the courts to examine the true nature of varying employment relationships. ITCRA agrees with Australian Industry Group s (Ai Group) submission that a one size fits all definition of independent contractor would prevent all the nuances of individual circumstances being fully considered. The development of a single statutory definition to accurately categorise all workers within the labour hire industry across all sectors in Australia is not feasible and would only lead to future complications as work arrangements continue to evolve. Of particular concern to ITCRA Members, is the likelihood that a narrowly drafted definition would adversely affect current genuine arrangements. As part of ITCRA s ongoing commitment to developing industry best practice, we are holding a Forum on 7 April 2016 during which we will be encouraging Members and other interested stakeholders to engage in an informed discussion surrounding the development of workable, specific descriptors and definitions of the different types of employment relationships most commonly adopted by our Members. Although the results of the Forum are not available to include in this submission, ITCRA is happy to provide this information for consideration by the Inquiry. 3 - Workers are choosing non-standard forms of work The Productivity Commission Draft Report on the Workplace Relations Framework observed that workers value different forms of work and that the availability of alternative forms of work satisfies the wide variety of preferences of workers. 1 This is particularly the case among professional workers such as those represented by ITCRA Members across ICT, accounting, engineering and banking & finance sectors, with the majority of workers in these sectors finding the autonomy offered by nonstandard forms of employment an attractive option. The freedom to determine the type of employment relationship that is most beneficial to their circumstances, when to take work and when not to, and the opportunity for career growth and development that working with different organisations provides are just some of the reasons why contracting professionals choose to enter the labour hire industry. 1 Australian Government, Productivity Commission, Workplace Relations Framework: Productivity Commission Draft Report (August 2015).

5 Any regulatory reforms should consider the intentions and preferences of these individuals and recognise the distinction between professionals who are capable of choosing for themselves the appropriate form of employment, as opposed to vulnerable workers within at risk industries. In ITCRA s experience, the vast majority of professionals who work under a labour hire arrangement have no desire to become permanent employees working for the same employer. This is due, in part, to the fact that these professionals know they enjoy the same legislative protections. Further these professionals, especially those working with ITCRA Members, will have experienced good employment practices that comply with relevant laws and regulations, often providing superior wages and conditions. It is simply not the case that non-traditional forms of work are indicative of low quality work or poor conditions and caution should be exercised in considering submissions representing all non-standard forms of work as precarious. This is certainly not the situation in the professional contracting sector. ITCRA is unaware of any examples that demonstrate a lack of opportunity for contractors to negotiate fair terms or being engaged under less favourable pay and conditions. In ITCRA s experience, labour hire is predominantly used to fill a specific specialist function within a business. It is also commonly used as a longer-term supplement to a permanent workforce, with permanent and labour hire professionals working alongside each other performing the same work. The labour hire firms and client businesses operating within the professional contracting sector do not use contracting as a way of avoiding employment costs and obligations; rather it is used to supplement their workforce to fill a short term niche or to add specific skills. The contractors who work with ITCRA Members can have multiple contracts concurrently with different clients and different recruiters, and many will move between states on short term contracts. At the end of the engagement, if the role is not what the worker had hoped than they have the option to move on and the client has the benefit of sourcing someone more suitable. ITCRA Members offer plenty of permanent vacancies as well but they often find workers preferring to work under contract terms to give them variety and other benefits of flexibility as discussed above. ITCRA Members clients also prefer to engage with this model. The most significant evidence of the demand for contracting roles is in the regular data ITCRA receives and has independently validated as part of its Employment Trends Report. The statistics reflect the roles advertised and filled and clearly show the market driven preference for contractors, as illustrated below: State by State Ratios of Permanent to Contract ICT Roles Q Q Permanent Contract Permanent Contract Australian Capital Territory 10% 90% 8% 92% New South Wales 12% 88% 20% 80% Queensland 14% 86% 8% 92% South Australia 12% 88% 16% 84% Victoria 19% 81% 19% 81% Western Australia 10% 90% 8% 92% Australia-wide 14% 86% 16% 84%

6 Average Days-to-Fill ICT Roles by Permanent or Contract and by State Permanent Contract Contracts Require Australian Capital Territory % more New South Wales % less Queensland % less South Australia % less Victoria % less Western Australia % less Hourly Rates i in Australian Dollars for ICT Roles by Permanent or Contract and by State Permanent Contract Contracts Require Australian Capital Territory $75.31 $ % more New South Wales $69.57 $ % more Queensland $61.12 $ % more South Australia $50.84 $ % more Victoria $69.79 $ % more Western Australia $62.45 $ % more icomparative hourly rates are calculated by dividing permanent annual salaries by 1,672 hours, representing 44 weeks per year at 38 hours per week. This takes into account 52 weeks per year, less and approximated hourly earnings of permanent entitlements represented by four weeks of annual leave, two weeks of statutory holidays, one week of sick leave, and one week of long service leave. Top Recruiter-Sourced ICT Roles by Permanent and Contract Placement Permanent Contract Software Developer/Engineer ICT Project Manager Systems Analyst Systems Analyst Helpdesk Officer Helpdesk Officer Computer Systems Engineer/Architect Software Developer/Engineer ICT Project Manager Technology Consultant Computer Systems Engineer/Architect Software QA Engineer/Tester Computer Programmer Network/ Systems Administrator Network Engineer/Architect 4 - Compliance with OHS laws ITCRA has observed that compliance with OHS has been a prominent focus of the Inquiry, in particular the concern that labour hire workers are likely to be more vulnerable to safety risks. Industry associations like ITCRA play a prominent role in assisting Members to navigate and comply with OHS legislation to ensure high levels of compliance and minimise the health and safety risks to temporary workers. As part of its commitment to OHS compliance, ITCRA has developed a unique site, system and document risk management review solution called isafe that supports, in a practical way, the notion that everyone has a right to a safe work environment. ITCRA s isafe program sets a new benchmark for those who supply or manage professional workers by consolidating these reports for reference by participating companies.

7 The isafe program is designed to: ensure all OHS site and system reports and follow ups are managed to the same quality benchmark; deliver consultation, co-operation and co-ordination through a centralised team of qualified OHS practitioners; document a process for OHS Risk Management, where there are multiple parties involved, that ensures stakeholder engagement; and provide an opportunity for a collaborative process for overall practice improvement. There is a growing need to ensure workplaces, where there are multiple stakeholders (recruiters, contracting companies, contractor management organisations, payroll service providers, professional services and managed solution providers), have a co-ordinated approach to OHS Risk Management. Consultation, co-operation and co-ordination, as required under the legislation, makes common sense and can be facilitated through a centralised process, such as the isafe program. The statistics from the program track OHS conformance on sites where professional contractors are engaged. ITCRA also partners with its insurers to compare this evidence against their claims history for the sector. The levels of compliance are illustrated below: ACTIVE CLIENT SITES ACT NSW QLD SA VIC WA TOTAL CONTRACTORS ON-SITE 4,000 3,000 2,000 1,000 0

8 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 SITE CONFORMANCE CONFORMANCE PARTIAL CONFORMANCE NON CONFORMANCE All reports are discussed with clients and the recruitment company and, where partial or non conformances are identified, action is taken to: assist the client to develop on site solutions; support the contractors on site if the issue impacts them directly; educate the recruitment company to ensure they have support mechanisms and policies in place; and develop tools and resources to inform the wider market as part of an ongoing education campaign. To support this specific data, ITCRA s insurers, Arthur J Gallagher (AJG), have noted that over the past twelve months claims related to ITCRA Members have been the lowest of all their clients across the contracting and recruitment client base. AJG believe this is, in some way, attributable to the isafe program. 5 - Viability of a licensing scheme There is no conclusive evidence to suggest that employers operating labour hire businesses are any less compliant with their employment obligations than the general employer population. As such, ITCRA is not convinced of the need for a licensing system in the labour hire industry, particularly in professional sectors. Complex laws and significant penalties are already in place to address noncompliance and there is no need to introduce a licensing scheme that would increase costs for labour hire agencies who are already complying with their obligations as employers. Of particular concern to ITCRA Members is that a Victorian-based licensing scheme would not only be costly to implement but would cause significant compliance issues for those Members operating in more than one state and, even more significantly across global marketplaces. Further, ITCRA asserts that a licensing scheme is unlikely to change the behaviour of unscrupulous labour hire providers and will only impose heightened regulation on already compliant agencies. Calling for legislative changes that will impose responsibility for workers employment entitlements on both host organisation and labour hire agencies will only add a further layer of complexity to an already complex regulatory framework. Requiring existing labour hire companies to comply with an additional layer of registration would not, in our view, do anything to overcome the problem of illegal activity and do nothing to deal with those who would simply not register.

9 Considering a nationwide Employment Services Industry Code (ESIC) In June 2015, the RCSA released for public submissions a proposal for an ESIC that it claimed would provide a single national framework for the regulation of those involved in the provision of employment services and on-hire contracting. ITCRA conducted a survey of its Members in response to the RCSA s proposal in % of ITCRA Members companies responded to the survey, representing locations across Australia and New Zealand but predominantly the east coast. Those Members who took part in the survey overwhelmingly agreed that standards that are recognised by all those in the industry are needed for reasons of consistency and quality management. However, the Members commentary indicated that the following key points need to be considered before any overarching code or regulation for the contracting and recruitment sector would be effective and these comments also reflect a response to licensing generally: The fact that there are instances of non-compliance is not a sufficient reason to add another layer of compliance or regulation. More effort should be spent on ensuring that the sector connects with regulators to better understand their obligations and ensure breaches are reported and addressed. The respondents had little support for any of the licensing regimes in place, other than to suggest they did provide a point of difference between recruiters and professional services. The general consensus was that professional standards for recruitment professionals are a real issue to be considered in any discussion on mandatory codes and/or regulation. The feedback suggests that there is a need for greater commitment to the training of recruitment professionals. There is a real need for consistency and uniformity of practice across the sector so that it behaves as a profession. This means recognition of consultants as professionals a recognised program of qualifications with mandatory review and renewal (ITCRA Certification is a starting point). Clients and candidates will then recognise the standards of practice similar to a CPA. The challenge of legislation and licencing at present and comprise of being locked into definitions that do not even reflect today s sector let alone the emerging models that we will see in the future. The need for a national framework, together with national standardised statutory codes and standards certainly exists, however ITCRA Members generally consider it naive to believe it will eradicate unethical employment practices. With 70% of companies in this sector being small and medium enterprises, it is also important to ensure that any new compliance model does not, in its development and implementation, add another barrier to these companies in the marketplace due to increased costs and red tape. Professional Standards ITCRA has partnered with top quality training providers to establish a number of programs that provide Member consultants, managers and contractors the opportunity to demonstrate their commitment to best practices and establish themselves as leaders in their field.

10 In particular, we provide programs for: new recruitment consultants, with introductory webinars on ITCRA Certification and the People & Talent Management Standards; established recruitment consultants, with specific modules for ICT, Legislation, and Recruitment Skills; middle management, which is designed to develop the individual s ability to build support and trust with clients; and contractors, with the goal of helping participants achieve success in their chosen field. The People & Talent Management Standard ITCRA has partnered with Certex International and Service Excellence Consulting to deliver the People & Talent Management Standard (Standard) which sets best practice for organisations which recruit and manage workers. The Standard is equally applicable to organisations that recruit and employ their workers directly, as well as outsourced service providers such as contracting & recruitment organisations, contractor management and payroll management providers. The Standard includes six modules: 1. Recruitment Management 2. Talent Management 3. Immigration Management 4. Privacy Management 5. Safety Management 6. Quality Management Organisations may seek certification in the Quality module and one or more of other modules. Certification in all modules indicates the organisation is meeting the highest standards for recruitment and worker management. This joint initiative was launched in November 2015 and currently 43 organisations are at various stages of the program. The Standard is applicable to organisations providing recruitment services as outsourced suppliers, and to departments within organisations that conduct and manage their own recruitment and human resource functions. It applies equally well to organisations both in the private and public sectors. The Standard also applies to organisations and departments within organisations which provide recruitment related services such as payroll functions, contractor management services and candidate management databases. As a benchmark it takes people and talent management best practice to the heart of the company and puts the people and talent (workers) first and foremost and ensures that essential protections and processes are in place throughout the relationship with the workers no matter how they are engaged.

11 Conclusion While the exploitation of vulnerable workers is an appropriate target for enforcement agencies, there is no need to target already compliant companies and individuals capable of effectively and lawfully entering into alternative employment arrangements. It is important to recognise that many workers have no desire to become permanent employees and actually enjoy the freedom and financial incentives associated with self-employment and other alternatives. These genuine preferences should not be interfered with by another layer of regulation. Further, it is because of these clear differences amongst workers within the industry, that an industry wide definition is not feasible. Instead, we are committed to refining professional contracting specific classifications that reflect existing legal arrangements and facilitate beneficial forms of commercial relationships. It is important not to lose sight of the main objective of the Independent Contractors Act 2006 (Cth) (ICA Act), which is to protect the freedom of contractors to enter into contracts to supply their services, to recognise independent contracting as a legitimate form of work arrangement that is primarily commercial, and to prevent interference with genuine contracting agreements (section 3 of the ICA Act). It is clear that within the professional contracting sectors that ITCRA Members represent there is already a high degree of regulatory and OHS compliance, therefore any reform must be proportional and targeted. Based on the practices and experiences of our Members, ITCRA is not convinced that a state based or nationwide licensing system or additional regulation is viable and in fact would do little to deter unscrupulous labour hire agencies. The focus should instead be on educational programs, recognised quality business standards and professional accreditation. This will assist parties to identify compliant contracting and recruitment companies and qualified consultants who know their responsibilities and understand the rights and obligations of workers, rather than introducing additional regulation in an already heavily regulated area. Julie Mills ITCRA CEO 15 th March 2016