Labour hire is the term applied (especially in Australia) to provision of outsourced skilled and unskilled blue-collar worker

Blue-collar worker

A blue-collar worker is a member of the working class who performs manual labor. Blue-collar work may involve skilled or unskilled, manufacturing, mining, construction, mechanical, maintenance, technical installation and many other types of physical work...

s hired for short- or long-term positions.

The workers, known as contractors, field employees, temps, on-hired employees or even just employees, are employed by the labour hire organisation. They are not employed by the company to whom they provide labour. This is an important distinction for the purposes of Occupational Healthy and Safety (OH&S) purposes, in particular who has legislative responsibility for ensuring a safe working environment. This has been tested in court (see below).

Development of labour hire

In Australia, SKILLED Group

SKILLED Group

SKILLED Group is a public Australian company headquartered in Melbourne, Victoria and listed on the Australian Stock Exchange. Its core business is labour hire, also known as supplementary staffing, and it is the market leader in this space in Australia...

is credited as creating labour hire as a viable business service. Initially, such services provided short-term additional staff for a client's peak periods or other special needs. Since the early '90's however more and more companies have discarded their base employment workforce, or a substantial portion thereof, and utilised labour hire companies to provide their workforce.

Pay and charge rates

An essential component of any labour hire organisation are the two fundamental concepts of pay and charge rates. The pay rate is the per-hour wage paid to the employees. The charge rate is the fee levied on the client to whom labour is provided. Although this sounds very basic, many factors must be considered when calculating these two items.

The following items have a bearing on the determination of pay rates:

• Industrial agreements
• Statuatory on-costs (at state and national levels)
• Worker's compensation levies
• Comparable pay rates for employees of the client

The following items have a bearing on the determination of charge rates:

• Personal protective equipment (PPE) supplied
• Payment terms
• Superannuation
• Payroll tax
• Casual loading
• Gross margin
• Preferred supplier agreements
• Competition

The gross margin is generally calculated as a percentage value of the pay rate. In certain circumstances, it may be calculated as a specific dollar markup.

A schedule of rates is typically quoted to the client which includes

• Charge rate for each hour of ordinary time
• Charge rate for each hour of overtime (typically time and a half, double time, double time and a half)
• Charge rate for applicable allowances which will be paid to the employee in various circumstances (most commonly meal allowance, but also crib allowance, travel allowance, laundry allowance, plus various industry-specific allowances - for example, an additional amount per hour for working with wet/dirty hanging birds in the poultry sector.)

The charge rates for physical hours of time (ordinary plus overtime) are typically quoted for the position at discrete classification increments, for example, level 1, level 2, etc.

Notable court cases

Most legal proceedings against labour hire companies fall into one of two broad categories. The first is unfair dismissal

Unfair dismissal

Unfair dismissal is the term used in UK labour law to describe an employer's action when terminating an employee's employment contrary to the requirements of the Employment Rights Act 1996...

. There are few successful such cases because of the nature of the industry and because organisations are generally careful to emphasise that the work is casual and periodic and cannot be guaranteed. Many labour hire companies are careful to avoid terminology on their staffing systems that may imply an employee has been "terminated" because that can corrupt a defence against unfair dismissal, namely that the employee has not been terminated, there simply has just been no recent placement opportunities.

There is an argument that labour hire firms ought really to be calling their employees "contractors" which makes more explicit that such workers are providing subcontracted services.

The second broad category is a major issue for labour hire companies, namely workplace safety.

It may have been considered in times past that the client of the labour hire company, i.e. the workplace where the labour is performed, were responsible for the safety of their site. However, Drake Personnel Ltd trading as Drake Industrial v WorkCover Authority (Insp. Ch’ng) (1999) 90 IR432 was a significant court case which established that because the worker is an employee of the labour hire company itself, a joint burden of safety is imposed upon the labour hire company.

In this case, the NSW Industrial Commissions full session judged

A labour hire agency does not employ people to work for itself but to work for a client, it does not directly on a day to day basis supervise the tasks carried out by the employee and it is usually not in control of the workplace where the work is done. However, these circumstances do not obviate, or diminish, the obligation of the employer under the [employer’s general duty]. Indeed ... an employer who sends its employees into another workplace over which they exercise limited control is, for that reason, under a particular positive obligation to ensure that those premises, or the work done, do not present a threat to the health, safety or welfare of those employees. Certainly, there is no basis to consider that such an employer has a lesser liability or obligation under [the employer’s general duty].… A labour hire company cannot escape liability merely because the client to whom an employee is hired out is also under a duty to ensure that persons working at their workplace are not exposed to risks to their health and safety or because of some alleged implied obligation to inform the labour hire company of the work to be performed. In our view, a labour hire company is required by the OH&S Act to take positive steps to ensure that the premises to which its employees are sent to work do not present risks to health and safety This obligation would, in appropriate circumstances, require it to ensure that its employees are not instructed to, and do not, carry out work in a manner that is unsafe.

In Labour Co-operative Limited v WorkCover Authority of New South Wales (Inspector
Robins) (2003) 121 IR 78 at 84-85 the Full Bench of the New South Wales Industrial
Relations Commission upheld the trial judge’s finding that it was reasonably practicable for the labour hire agency to have ensured against the risks to the worker’s safety by "adopting a positive and pro-active approach with [the client] to require steps to be put in place to avoid the risks as a condition of it making available" the services of the worker. The labour hire agency had sufficient control to ensure the adequacy of instruction, training and supervision, and could refuse to supply its employees to the client "until 14 appropriate and sufficient measures to ensure safety were implemented."

Since 1998 prosecutions of labour hire agencies and host firms have been taken regularly in most Australian jurisdictions, particularly in NSW and Victoria. In NSW, for example, the first prosecution of an agency and a host firm took place in 1997, and there have been half a dozen or so prosecutions of agencies and of host firms each year since 2002. In Victoria the first successful prosecution of an agency and of a host firm took place in 1999 (Extra staff and NCI Speciality Metals respectively), and since 2002 there appear to have been half a dozen prosecutions of agencies and of host firms annually. There have also been successful prosecutions against directors of labour hire companies for failing to prevent the agency from contravening its general duty to the worker.