Same job, same pay: the labour-hire orders explained

What 'same job, same pay' is

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 introduced 'regulated labour-hire arrangement orders' into the Fair Work Act. These orders address situations where workers are engaged through labour-hire providers.

The core principle of these orders is that a labour-hire provider must ensure the worker receives at least the same rate of pay as the host employer’s own employees performing the same job. This rate is determined by the host’s enterprise agreement, or other relevant industrial instrument.

The first of these orders commenced taking effect from 1 November 2024.

When the FWC can make an order

The Fair Work Commission (FWC) has the power to make an order requiring a labour-hire provider to pay its workers the same as directly employed workers of the host. This power is triggered when three conditions are met. First, the worker must be supplied by the provider to perform work for a host. Second, the host must have a covered enterprise agreement or a similar instrument in place. Finally, the FWC must consider whether making an order would be fair and reasonable given the specific circumstances.

Applications for these orders can be initiated by various parties. These include a host employee, a union, or the host business itself. The FWC considers submissions from all parties when deciding whether to grant an order.

When determining fairness and reasonableness, the FWC takes into account several factors. These include the nature and history of the arrangement between the provider and the host, the host’s existing pay rates, and any submissions regarding the potential commercial impact of an order.

Carve-outs

The labour-hire orders do not apply to all engagements. The regime is specifically targeted at the supply of labour, and therefore does not cover situations where a business is outsourcing a full service. Genuine service contractors, where the contractor is providing a complete service rather than labour, are not subject to the orders.

Certain small businesses benefit from a partial carve-out. These are typically businesses with fewer than 15 employees. The specifics of this partial carve-out are determined by the relevant orders.

Short-term labour hire arrangements are also generally excluded. Arrangements lasting under 3 months are not subject to the orders.

What hosts + providers should do

To ensure compliance, hosts and labour-hire providers must take proactive steps regarding labour-hire arrangements. A primary obligation is to map each arrangement against the host’s enterprise agreement rates. This assessment is crucial for determining whether the rates paid to labour-hire workers are consistent with those paid to directly employed workers performing the same job.

Where rate differentials exist, providers should document the commercial rationale for those differences. This documentation should be readily available if requested. It is also vital to carefully review the distinction between service contracts and labour-hire arrangements. Incorrect characterisation can have significant legal and financial consequences. penalty estimator

Finally, hosts and providers should build the potential cost differential arising from a labour-hire order into their commercial pricing. This proactive approach allows for a more sustainable business model should an order be issued requiring rates to be aligned.