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What will Labor’s proposed reforms to the Fair Work Act mean for Australian contractors and gig workers?

The Labor Party vowed a massive overhaul to Australia’s employment system that it claims is failing gig workers and temporary staff during the election campaign. 

In an official proposal to the country’s wage authority, the Labour Party, among other things, endorsed a pay boost for low-paid workers. 

In the last stages of his election campaign, newly elected Prime Minister Anthony Albanese stated that his government would support a significant increase in the minimum wage and that the wage increase should be no less than the inflation rate, which was 5.1 per cent.

The party also committed to making secure work a goal of the Fair Work Act, which governs employment laws.

Professor Anthony Forsyth from RMIT University notes that as Prime Minister Anthony Albanese has committed to holding a Jobs Summit in the first 100 days of Labor’s term in office, business and union leaders will be asked to come up with policy solutions to lift real wages, boost enterprise bargaining and promote more secure forms of work.  

“Insecure work has been increasing in Australia for decades, including casualisation, labour-hire, independent contractor arrangements and now the gig economy. Yet many workers want the security that only a permanent job can provide. 

“Labor has pledged to make secure work an object of the Fair Work Act. It has also committed to improving the situation for gig workers, who are incorrectly labelled “contractors” by most platforms and therefore denied all employment rights. 

“While Labor has said it will give the Fair Work Commission the power to set minimum employment standards for gig workers, other approaches, including redefining “employment” to capture these workers, also need to be considered. This will be more effective in disrupting the exploitative business model at the core of the gig economy.” 

Call for reform 

Meanwhile, Sara Charlesworth, Professor of Gender, Work, and Regulation at RMIT University believes that by making job security and gender pay equity central objectives of the Fair Work Act, the Fair Work Commission will be forced to consider the impact on job security and gender pay equity in its decisions on minimum wage increases and award conditions.

“The COVID pandemic has revealed the growing job insecurity faced by many workers in Australia. While we have relied on them during the pandemic, workers in feminised sectors such as aged care and retail lost hours of work and income while also facing increased risks to their own health. During the recent federal election campaign, the ALP promised to address job insecurity through two main reforms to the Fair Work Act. 

“This will be particularly important for those employed in aged care, childcare and disability support and will provide an avenue to address the undervaluation of this crucial work and limit the increasing employer-orientated flexibility in many sector Awards by encouraging a shift to more predictable and fairly paid work. 

“Secondly, the ALP has promised to extend minimum wages and employment protections in the Fair Work Act to those in ‘employee-like’ relationships, such as gig workers and many so-called ‘self-employed’. 

“While it is still unclear exactly how ‘employee-like’ relationships will be determined, this reform holds real potential to provide better working conditions for many workers currently without employment rights and also to provide the continuity of staffing in sectors such as aged care, childcare and disability support that is crucial to good quality service provision.”    

A research paper published in the Griffith Law Review focuses on the need for state-corporate legal reforms in Australia – as well as a broader approach to worker rights in the modern globalised economy – to address the harmful impact on gig workers, many of whom come from multicultural backgrounds and are already at a disadvantage in the labour market. 

As per the research, “inadequate legal reforms, unions’ limited authority, and the lack of additional safeguards protecting this new-economy industry continue to disadvantage gig workers and strengthen the power of firms operating in such a ‘precarious’ casual labour market.”

The other side

Meanwhile, the Australian Industry Group (Ai Group) submitted its proposal for the Annual Wage Review in April this year. The submission requested that the Fair Work Commission not jeopardise the delicate recovery from the outbreak and the ensuing recession but instead support greater job creation and reductions in unemployment and underemployment. 

According to the Ai Group, the consequences of the global pandemic are still being felt, there are various global and national uncertainties, and the recovery has been quite uneven thus far. Many businesses deal with supply chain disruptions, dramatically higher input costs, skill and labour shortages, and limited productivity growth.

 “When setting the level of this year’s minimum wage increase, the Commission needs to have particular regard to those sectors that are struggling and will be severely impacted by an excessive increase,” Innes Willox, Chief Executive of Ai Group, said.

“The two sectors with the largest proportion of low paid award-reliant employees (by far) are Accommodation and food services, and Retail trade. These two sectors have been particularly hard-hit by the pandemic and are still experiencing very challenging conditions. 

“Award-reliant sectors are the most heavily impacted by movements in minimum wages. Minimum wage increases need to be set at a level that employers in all sectors can bear. This necessarily requires that the Commission adopt a cautious approach.
 
“Minimum wage increases are a very blunt instrument. They impose costs on employers that are much higher than the after-tax benefits received by employees from any wage increase granted, both because of the on-costs that result and the tax that employees pay on additional pre-tax wages. Also, minimum wage increases cannot be readily targeted to individuals and households that most need assistance, unlike tax cuts and tax transfer payments.

“The ACTU has proposed a minimum wage increase of 5%. Such an increase would wreak substantial economic damage, destroy the jobs of thousands of employees, reverse the recent strong growth in full-time employment and inflict lower hours of work on many part-time employees,” said Mr Willox.

Anthony Forsyth is a Distinguished Professor in the Graduate School of Business & Law, RMIT. He is the author of the recent book: “The Future of Unions and Worker Representation: The Digital Picket Line”.

Sara Charlesworth is a Professor of Gender, Work, and Regulation at RMIT University’s School of Management. Her research interests include insecure labour in feminised industries such as aged care and retail and gender equality.

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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