The TWA industry

TWAs have become active and influential labour markets intermediaries as their growth and significance have expanded (Reference Enright and PembertonEnright and Pemberton, 2016). The TWA industry employs over 10.4 million workers worldwide and it generates revenue of around €247 billion annually (International Confederation of Private Employment Services (CIETT), 2012). Australia’s TWA industry generates revenue close to AUD20 billion annually (IBISWorld, 2016), and it represents one of the most significant markets in the world (Adecco Group, 2012). While the Australian TWA industry only accounts for approximately 1.6% of the global market, it represents the most valuable market outside of the top five countries (France, Japan, Netherlands, USA and UK), and it is one of the fastest-growing TWA markets in the world (Reference Coe, Johns and WardCoe et al., 2007). The most recent data available in Australia indicate that 5% of all employed persons (600,800 persons) found their job through a TWA or employment agency, and approximately 132,176 persons were paid by a TWA (Australian Bureau of Statistics (ABS), 2016). However, these data underestimate the number of TWA workers because independent contractors organised through TWAs are not included in ABS figures. Nevertheless, extant data clearly indicate that growth in this industry is strong and ongoing.

Agencies have the potential to play a positive role in the functioning of labour markets (International Labour Organisation (ILO), 2007), and research across various countries, including Australia, has highlighted benefits associated with such work, especially during the industry’s initial expansion (Reference Smith and NeuwirthSmith and Neuwirth, 2008). For example, workers were said to be able to register with multiple TWAs and accept the placement of the agency best able to meet their needs and preferences (Reference RogersRogers, 2000). Moreover, agencies were said to invest in their employees in order to retain ‘the best’ and most reliable temporary workers (Reference RogersRogers, 2000). Additional research has reported similarly positive outcomes among professionals and highly skilled workers, who reportedly gain enhanced flexibility, high pay and greater autonomy and discretion working for TWAs (Reference Alonzo and SimonAlonzo and Simon, 2008).

Similarly, Australian survey findings reported by Adecco Group (2012) have highlighted the benefits of TWA work, indicating that TWA workers choose temporary work in order to maintain a flexible lifestyle (41%), as a stepping stone to full-time employment (32%), or because they cannot find full-time work (27%). Indeed, in a survey of its temporary employees, Adecco Group (2012) found that 84% of respondents would recommend temporary agency-based work, 67% indicated that the work improves or maintains skill levels and 67% are satisfied with their job. Other evidence from Australia also points to agencies acting as ‘good employers’, many of whom possess enterprise bargaining agreements, providing collective employee representation and entitlements and benefits that improve upon those provided in relevant awards (Independent Inquiry into Insecure Work in Australia (IIIWA), 2012).

However, a growing body of research has highlighted problems with TWA work. TWA workers typically bear a heightened risk of performing substandard work, involving lower levels of pay and security, less control and variety, reduced training and career opportunities along with higher injury rates, relative to workers employed on a standard (permanent) basis (Reference AletrarisAletraris, 2010). Recent research by Reference Bosmans, Hardonkb and De CuypercBosmans et al. (2016) illustrated how TWA work negatively affected employees’ mental wellbeing, with workers experiencing feelings of powerlessness, isolation and unfairness. Other research has demonstrated how TWA work negatively affects employees’ physical wellbeing. According to Reference Oxenbridge and MoenstedOxenbridge and Moensted (2011), the contracting out of hotel’s housekeeping to agencies is producing work intensification, ‘speed ups’, unsafe work practices, inferior wages based on piece rates and increased injury rates. Almost 90% of the housekeeping agency workers surveyed by Victorian Immigrant and Refugee Women’s Coalition and Liquor, Hospitality and Miscellaneous Workers Union (VIRWC) (2010) were migrants and three-quarters were women. Many of these employees only earn AUD25,000 per year (representing around one-third of the average full time salary in Australia), and around 50% have suffered injuries as a result of their work, but they are too scared to seek compensation (VIRWC, 2010).

Further research highlights that the lack of income security associated with TWA employment can affect individuals’ living standards and financial independence (Reference KnoxKnox, 2010). Workers have reported difficulties obtaining bank loans, finding accommodation in the private rental market and maintaining relationships because of their lack of financial/employment security (IIIWA, 2012). For some workers, it can be difficult to escape the cycle of insecurity at work and unaffordable housing, creating serious health problems and widening health inequalities (Reference Moss and McGannMoss and McGann, 2011). Findings of this nature suggest that TWAs can be associated with detrimental outcomes for workers, especially migrants (Reference Forde, MacKenzie and CiupijusForde et al., 2015; Reference MavrakisMavrakis, 2015). TWAs are known to be used frequently by migrants to access the labour market (Reference Forde, MacKenzie and CiupijusForde et al., 2015; Reference Hopkins, Dawson and VeliziotisHopkins et al., 2016). Many of these workers rely on limited and culturally bound networks to gain employment, and their options are often restricted by poor recognition of qualifications from their home country. International students are also prevalent in the TWA industry as their visas only allow them to work for 20 hours per week while studying in Australia (Reference KnoxKnox, 2010). Some firms deploy TWAs in order to defer their duty of checking the visa status of workers, thereby avoiding responsibility for the use of workers who are breaching visas or do not have visas (Reference Underhill and RimmerUnderhill and Rimmer, 2016).

In Australia, trade unions have regularly expressed concerns regarding the substandard wages and conditions endured by TWA employees; they are especially worried about the ‘institutionalisation’ of the TWA industry (e.g. Australian Council of Trade Unions (ACTU), 2006; IIIWA, 2012). Similar concerns have been raised in other countries, including the US and UK (Reference McDowell, Batnitzky and DyerMcDowell et al., 2008; Reference Peck and TheodorePeck and Theodore, 2002), and the need for further research examining the activities of TWAs has been highlighted (Reference Enright and PembertonEnright and Pemberton, 2016), particularly within the ‘mosaic of distinctive national formations’ (Reference Coe, Johns and WardCoe et al., 2009: 80). The national context and its regulatory environment is thought to be especially important because ‘the actual use of LMIs (labour market intermediaries, namely TWAs) often reflects their regulatory capability to shift risk and lower wages, rather than the heralded role of matching skilled and mobile workers with flexible and highly paid contract work’ (Reference Strauss, Fudge, Fudge and StraussStrauss and Fudge, 2013: 6). This allows firms to avoid entitlements and benefits normally paid to employees while also transferring the risk associated with fluctuations in demand to workers. Accordingly, Reference FuFu (2015: 1) points to the legal ambiguities that can ‘open the gates for abuse’ and goes on to assert that TWAs ‘are active institutional agents of neoliberal deregulation’ (p. 3). Taking a slightly more nuanced approach, Reference Mitlacher, Burgess, Connell and FuMitlacher et al. (2015) argue that the context in which agency work is conducted has a strong effect on its impact on workers and employers. In comparing experiences of agency work across different national/regulatory contexts, including Australia, Germany and Singapore, Reference Mitlacher, Burgess, Connell and FuMitlacher et al.’s (2015) findings revealed that increased regulation improved outcomes for agency workers.

Within Australia, the TWA industry is subject to limited regulation. There is no national regulation specific to the TWA industry, and regulations that do exist are confined to state jurisdictions (Reference Mitlacher, Burgess, Connell and FuMitlacher et al., 2015). Tighter regulation, including directives regarding entitlements and working conditions for temporary agency workers such as those provided in the European Union (EU), does not exist. Moreover, there are no limitations on the occupations or industries in which TWA agencies can operate, the number of hires that can occur or the length of the hire (Reference UnderhillUnderhill, 2006). A number of inquiries into TWA practices have recommended the development of licencing within the industry (e.g. Reference ForsythForsyth, 2016; Parliament of Queensland, 2016; Parliament of South Australia, 2016). In Victoria, for example, the state government has considered the findings of an extensive inquiry and agreed to establish a system for licencing labour hire agencies. Similarly, a consultation process is currently underway on TWA regulation in South Australia and a bill has been introduced into the Queensland Parliament to create a TWA licencing regime in that state, following parliamentary inquiries in those states (EERC, 2017). In contrast, the federal government has done little in terms of licencing within the industry. At present, the FWA is the most significant regulation at the national level, marked by its attempt to consolidate the federal industrial relations system and create a statutory floor of employment rights (Reference Mitlacher, Burgess, Connell and FuMitlacher et al., 2015).

For most TWA staff, employment is casual and regulated through the FWA in conjunction with the relevant industry-level award. Critically, casual workers are not entitled to many of the benefits associated with standard (permanent) employment, including paid (annual and sick) leave or notice of termination. However, they are entitled to a 25% casual loading – a wage premium in lieu of being excluded from the standard employment entitlements mentioned (Reference Mitlacher, Burgess, Connell and FuMitlacher et al., 2015). The regulation makes no attempt to restrict casual employment to temporary, short-term or irregular engagements. Subsequently, a large number of casual employees perform regular and predictable work on an ongoing and often long-term basis (Reference Mitlacher, Burgess, Connell and FuMitlacher et al., 2015). Critics of this entrenched precarious employment argue that casual work should be confined to engagements that are genuinely irregular, intermittent or very short term (IIIWA, 2012).

A smaller proportion (exact numbers are not known because precise data are not collected) of TWA employees are covered by enterprise bargaining agreements likely to provide entitlements and benefits superior to those provided by the award system. However, most of these sorts of collective agreements still classify TWA employees as casual and therefore pay by the hour; thus, employment remains impermanent and annual and sick leave provisions are unlikely to be offered (Reference Knox and FuKnox, 2015).

Other TWA employees are treated as independent contractors and the FWA does not protect them, though many of these workers are actually being misrepresented as such (Australian Building and Construction Commission (ABCC), 2011). For instance, the ABS (2011) data indicate that approximately 40% of independent contractors do not have authority over their own work, which is largely indicative of ‘sham contracting’ arrangements that misrepresent employees as independent contractors. These arrangements are rife in the construction industry (Construction, Forestry, Mining and Energy Union (CFMEU), 2011) and the frequency of sham contracting is also increasing in other segments of the TWA industry, including hospitality (Reference KnoxKnox, 2010). By employing workers under commercial contracts rather than as employees, firms avoid having to pay a range of entitlements such as superannuation, sick and annual leave, as well as workers compensation. Moreover, investments in training are also frequently avoided through the use of sham contracting arrangements. Such arrangements, according to ABCC (2011),

Often employers disguise an employment relationship (with an employee) as an arrangement between a principal and contractor by engaging workers through third-party TWA agencies (ABCC, 2011). Although the FWA states that employers cannot knowingly misrepresent an employment relationship as a contracting arrangement, evidence from workers and unions suggests that the legislation is not proving to be effective and such practices are occurring (IIIWA, 2012; VIRWC, 2010). In the construction industry, for instance, between 26% and 46% (between 92,000 and 168,000 workers) of all contractors are actually working unlawfully in sham contracting arrangements (CFMEU, 2011). Sham contracts enable employers (including TWA agencies) to minimise tax contributions and their responsibility to protect workers from injury by misrepresenting an employment relationship as a contracting one (IIIWA, 2012). In some sectors, including construction and cleaning, employers are developing complex outsourcing and contracting chains, often involving the use of TWA agencies and sham contracts, in order to maximise profits and minimise liabilities (IIIWA, 2012; VIRWC, 2010).

Further problems stem from so-called ‘phoenixing’ activities within the TWA industry (Parliament of Australia, 2016). Phoenixing occurs when a TWA dissolves and then recommences operations using a different business name in order to avoid legal obligations. Such activities are harmful to the industry and its workers (Parliament of Australia, 2016).

Unfortunately, more recent academic research examining the TWA industry in Australia has been scant. While Inquiries conducted by South Australia’s Economic and Financial Committee (2016) and Industrial Relations Victoria (IRV) (2016), for example, suggest that the problems associated with TWA work have not been resolved, the specific terms of reference vary between Inquiries and analysis of the TWA industry at the national level has been remiss until now. The recent Senate Inquiry into corporate avoidance of the FWA (Commonwealth of Australia, 2017) provides unique national data related to TWA industry, as outlined below. This research analyses those data in order to understand how regulatory avoidance is constructed and played out within Australia’s TWA industry, and its effects. The findings contribute to debates surrounding the regulation of TWAs.

Research findings

Overall, analysis revealed three main themes. The first theme encompassed evidence of the TWA industry’s positive effects and attested to its adherence to regulation. The second theme encompassed evidence of regulatory avoidance within the TWA industry, which was associated with negative effects previously identified in extant research. The third theme revealed additional forms of regulatory avoidance, producing negative effects that have not previously been highlighted in research examining the Australian TWA industry. These themes are considered in turn.

First, analysis revealed evidence attesting to TWAs adherence to regulation and the range of benefits provided by the industry. Submissions, albeit primarily from representatives of the TWA industry itself, indicated that agencies serve an important function that is critical to other Australian industries. The Australian Chamber of Commerce and Industry (ACCI) stated, for example, that ‘most employers endeavour to do the right thing and to be mindful of the crucial role that private sector employers play in creating wealth, prosperity and opportunities for social and economic participation for Australians’ (S148: 4). In doing so, the ACCI emphasised the importance of the TWA industry to the performance and competiveness of Australian business. Moreover, evidence supplied by a range of TWAs and their representatives indicated that TWAs are ‘good employers’ who uphold, and in many instances exceed, minimum wages and conditions while also providing workers with valuable training and career development opportunities, flexibility and preference matching. Illustratively, the Australian Industry Group (Ai Group) suggested that the TWA industry is critical to addressing economic and business challenges faced by employers, and ‘the vast majority of … [TWAs] are reputable in their employment practices and comply with relevant laws and regulations … and often provide superior wages and conditions’ (S179: 7). Such evidence indicated that TWAs can fill legitimate needs on the part of their clients and employees. This view and the industry’s alleged adherence to regulation was endorsed in the Coalition Senators’ Dissenting Report, which formed the final section of the Inquiry’s final report (EERC, 2017).

Second, the data revealed cases of regulatory avoidance which produced a range of problems, as noted by extant literature. Overwhelmingly, submissions revealed an increasing prevalence of TWA-based work across all industries and indicated that most TWAs relied on casual employment. Illustrating this trend, a submission from Job Watch emphasised the increasing level of casualisation and TWA-based work (S187), leading to an ever growing number of workers denied job security and paid (sick and annual) leave. In addition, United Voice highlighted that TWA work ‘is no longer used as a temporary supplement to permanent work and is now often used as the permanent workforce, replacing permanent directly engaged employees’ (S203: 4). Moreover, casual employment within TWAs was often long term in nature. An example of an employee working as a casual for the same host firm for a period of 10 years was provided, for instance, and there were typically no opportunities to convert to permanent employment. Examples of this type were common among submissions and reiterated in Hansard.

This widespread and persistent casual employment among TWAs was highlighted as contributing to systemic insecurity at work:

Another issue consistent with extant research related to the inadequate provision of training and progression opportunities within the TWA industry. Illustratively, the Australasian Meat Industry Union argued that the meat industry’s growing reliance on TWAs was eliminating training opportunities for local workers. Moreover, inadequate provision of training was said to precipitate skill shortages and contribute to the creation of an ever stronger reliance on 457 visa workers to perform higher skilled duties. Relatedly, a lack of apprenticeships within TWAs was also highlighted as an issue, as it adversely impacted training and skill development opportunities: ‘In relation to apprenticeships and training, it is unusual for labour-hire companies to have any apprentices at all. It simply is not the business they are in’ (Assistant National Secretary, Construction, Forestry, Mining and Energy Union, Senate 15 March 2017: 37). Other submissions emphasised the inadequate training among TWA employees working in dangerous environments. One particular submission outlined how a worker was almost crushed under a tractor and highlighted that no induction or safety training was provided.

In addition, evidence of underpayment was extremely common within submissions and Hansard. In their final report, the Committee stated that ‘underpayment is rife and practically the norm in many industries that employ vulnerable workers’ (EERC, 2017: 4). In one instance, employees who had worked casually for a TWA for 4–7 years were paid, on average, AUD100 to AUD150 less than permanent workers. In another case, TWA employees were paid around AUD5 to AUD6 per hour as packers on a berry farm; faster packers were able to earn AUD12 to AUD14 per hour. In another case, a TWA employee was paid AUD100 per day, in cash, for working from 7:00 a.m. to 6:30 p.m. When she complained about underpayment, she was told ‘if you won’t do it there are hundreds of others who will!!!’ (S076). A submission by the Queensland government included reference to a number of high-profile cases of underpayment, including six workers underpaid a total of AUD2691 on a strawberry farm, 90 Korean backpacker workers underpaid AUD16,000 and 107 casual employees collectively underpaid AUD15,892 while working on farms in Queensland (S150). Such exploitation was especially common among (im)migrant workers with limited English proficiency, a lack of knowledge regarding their rights and reduced bargaining power. Many of these workers feared taking any action against the TWAs as they desperately needed work.

Related evidence from submissions and Hansard indicated that the penalties associated with wrongdoing were widely thought to be inadequate. One example provided by the FWO involved a AUD4,400 fine for underpayments totalling over AUD200,000. Numerous witnesses in the inquiry suggested that employers are prepared to flout the law and take a calculated risk because they believe that they are not likely to get caught and even if they do, the penalties are minimal. Submissions supported such claims and the Committee’s final report emphasised that existing penalties are ‘proving powerless’ (EERC, 2017: 59).

According to evidence examined, these issues were often occurring in combination with ‘phoenix’ activities, whereby TWAs would dissolve and then recommence operations using a different business name in order to avoid legal obligations. ‘Phoenixing’ was commonly cited among submissions and witnesses indicated that it served to enable TWAs to continue to exploit workers. Illustratively, the South Australian government noted that

The issue of sham contracting was also persistent within the TWA industry. Evidence to the following effect was provided:

The ongoing negative implications associated with the TWA industry highlight that existing regulation is not adequately protecting workers. Rather, regulatory avoidance and worker exploitation, as identified in extant research, continue to create serious and ongoing problems.

Finally, analysis highlighted additional forms of regulatory avoidance creating emergent problems not previously identified within existing research. One particular and growing problem related to the termination of collective agreements and/or unrepresentative formation of collective agreements that were then extended to larger workforces, often in different locations, leaving workers worse off by undercutting their pre-existing pay and conditions. The termination of agreements, initiated by both standard (direct hire) employers and TWA employers, appeared to be an increasingly common practice ‘whereby employers are able to subvert the collective bargaining process by terminating old agreements or threatening to do so, leaving employees’ pay and conditions to fall back to the award, instead of bargaining to negotiate a new agreement’ (S197: 4). Numerous submissions and witnesses provided evidence consistent with these practices; in their final report, the Committee stated that employers are terminating agreements, or using the threat of termination as a coercive bargaining strategy, in order to gain an advantage in negotiations and significantly reduce employee wages and conditions (EERC, 2017).

Other evidence indicated that unrepresentative agreements were being formed based on ‘the use of artificially small and unrepresentative voting cohorts to approve enterprise agreements with a broad scope to cut workers’ pay and conditions’ (S148). While major cases illustrating unrepresentative agreements often involved standard (direct hire) employees, such agreements were also represented among TWAs. In relation to standard (direct hire) employees, the National Research Officer at the Australian Manufacturing Workers’ Union (AMWU) stated,

An Industrial Officer at the National Union of Workers referred to this arrangement as ‘sham bargaining’, arguing that ‘We need an end to sham bargaining. It is very easy now for an employer to effectively unilaterally determine the wages and conditions in a workplace through sham collective bargaining. We need an end to that’ (Senate, 15 March 2017: 17). Further evidence indicated that ‘sham bargaining’ was used within the TWA industry in order to avoid more extensive, and arguably legitimate, collective bargaining, thereby leaving workers worse off. Several submissions indicated that support for these unrepresentative agreements was being fabricated by employers. In other stances, firms were utilising TWAs, which often relied on so-called ‘sham bargaining’, to supply the vast majority of their workforce with the TWAs engaging in ongoing ‘sham bargaining’. This complex arrangement was explained by one of the workers:

Additional evidence from submissions and witnesses illustrated that many of the agencies used by the host firm – Oxford – were simply ‘shelf companies’ set up by the host itself to avoid legitimate bargaining:

Other examples, including CUB and John Holland, indicated that such practices were not isolated. Typically, individual submissions and witnesses argued that these so-called ‘sham agreements’ were used to ‘deliberately … deprive workers of the right which they should enjoy under the Fair Work Act to collectively bargain’ (Secretary AWU Victoria, Senate 15 March 2017: 34) in order to undercut established rates of pay and conditions. As outlined in one submission: ‘[i]n the case of CUB, it allowed CUB to engage a new labour hire provider and reduce the wages of long-standing workers at the Abbotsford site by up to 65%’ (S184: 7). In certain areas, such as the meat industry, it was claimed that such practices were rampant among TWAs, being used to circumvent legitimate collective bargaining. Representatives of the Australasian Meat Industry Union indicated that meat processors who were previously paid EBA rates have been replaced by TWAs paying award rates, or in some instances significantly below award rates (often due to blatant disregard of minimum wage rates), frequently requiring 417 visa workers to sign flexibility agreements to work overtime and on public holidays for no penalty. The Committee’s final report noted that ‘sham bargaining’ distorts the balance of power in favour of the employer, undermining the purpose of the FWA and its emphasis on collective bargaining – intended to minimise the power imbalance between employer and employees during negotiations (EERC, 2017).

In more extreme cases, forms of modern slavery and debt bondage were alleged:

These emergent problems, unidentified by pre-existing research, reflect an intensification and expansion of regulatory avoidance, as TWAs further concentrate and extend their deregulatory activities.