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Contractor rights gather pace

Peter Davidson, Information Age

09/06/2005 14:28:31

The dynamics of the Australian workforce have changed significantly over the past few decades. People entering retirement now started their working life in a vastly different environment to the one they leave.

Typically, people entered the workforce with a "job for life" mentality; career opportunities were often dependent on biding one's time, toeing the company line and waiting for retirements or other natural attrition.

The modern landscape allows people to take a much more significant and proactive role in career planning, and compels the employer to provide greater flexibility as well as adhere to an ever-increasing number of compliance issues and legal responsibilities.

The reality is that employers now compete for the services of employees, particularly skilled individuals and key personnel, who are increasingly aware of their marketability.

The outcome of this evolution is that, whether by increased legislative requirements, a generational change in philosophies, or simply to keep pace with positive employment practices to maintain a standing of an "employer of choice", employers must continually evolve and review practices to ensure compliance and relevance.

Changes in the employment landscape mirror the continuing evolution of our population in size, demography, attitudes, values and philosophy.

Catalysts for change have been many and varied: racial diversification, increased disposable income, technology advances and pervasive media.

In short, the modern workforce comprises a far more educated population, with evolving career goals and requirements.

And consequently, the nature of employment, the role of the employer and their responsibilities and obligations has also changed considerably.

This evolution has been underpinned by significant legislative change, often trying to keep pace and maintain relevance to the modern workforce in practice.

Where the old employment paradigm may best be described as master/servant, the modern workforce focuses on partnering, shared goals and is framed by an increased focus on safety, fairness and protection of the rights of the individual.

Evolution of the contracting industry

This changing nature of the workforce has manifested itself not only in modern employment practices, but also in a diversification of employment or engagement models. An engagement model may best be defined as the legal employment structure through which an individual may be "engaged" or "hired".

Common Employment Methods: • Full Time • Part Time • Casual/Temporary

Common Engagement Models: • Pay As You Go (PAYG) • Personal Company Structure • Partnership Structure • Trust Structure • Sole Trader Structure

A significant product of the changing landscape of the Australian workforce has been the emergence of the contract professional; essentially a person who contracts his/her services to a third party, for a limited tenure, typically for a specific result.

Whether it be perhaps the flexibility or autonomy associated with this type of career, Australians have adapted to contracting in huge numbers. On a per capita basis we are one of the leading countries in the Western world for contractors as a percentage of the workforce.

Current estimates suggest that up to a quarter of the Australian workforce are engaged in temporary, part time or contract positions, driven not only by the individuals' need for choice, but also because businesses required more flexible staffing solutions.

Why do Organisations Employ Contractors? Whether it is a commitment to outsourcing non-core activities, reduction in employment costs or a perceived reduction in risk, contracting has evolved from piecemeal early beginnings to a major industry sector.

The problem for organisations in the modern era is that whilst employment models have evolved considerably since the paradigm of 50 years ago, most legislation relevant to employment, employment law, industrial relations law, OH&S etc. was written before the advent of contracting, and both the initial drafts and subsequent amendments focus almost exclusively on traditional permanent engagement models.

As a result the contracting industry has had to fit, as best it can, into the more rigid definitions of the law. Many perceptions, based more on convention than law, have proliferated. Some examples might be:

• My contract staff are employed via a recruitment agency who cover them for Workcover, and therefore my company is not at risk and has no responsibility under IR or OH&S regulations. • A benefit of employing contractors is the ability to terminate the engagement immediately without concern of unfair dismissal. • My contract staff are paid a loaded rate inclusive of all entitlements. Therefore, my organisation is not exposed to entitlements under federal or state awards - ie, leave loading, overtime, and long service.

The above are just a few examples. How exposed your organisation may be is a matter for examination - or in a worst case a matter for the courts. The fact is, many of these perceptions exist unchallenged.

Contract staff have the same rights and protection as any permanent employee at law.

An investigation into current practices and implementation of a modern, compliant and qualitative approach to your external workforce is not only a responsible business practice but also potentially a great cost saver.

Not only are many conventions and perceptions relating to contractors outdated, many of the practices relating to the hiring and management of these external resources are outdated and inefficiently handled or you may be paying for services you don't utilise.

A modern approach to modern and responsible employment practices starts with:

• Review current practice • Implement change where necessary or appropriate • Feel comfortable • Reduce costs

As regards contract staff or permanent employees, there is one certainty: governments are constantly reviewing legislation and tightening it to ensure all employees have the highest level of protection. For example:

The New Awards system implemented in Victoria on January 1, 2005 says that all Victorian employees have entitlements under a new system of awards. This does not exclude contract employees.

Victorian Occupational Health and Safety Act (OHS Act) has grown from 84 pages to a massive 170, and raises important issues for organisations to prepare for, and understand their obligations prior to its commencement on July 1, this year.

There are a number of important changes including an almost a four-fold increase in penalties, significant revisions to personal liability for senior managers and officers, new right of entry powers for unions and extensive consultation obligations on employers and a range of other requirements.

Do not risk your business by ignoring this growing list of employee rights and protection. Solutions are available, do not have to be invasive and will save costs in the short and long-term.

David Little is commercial manager of Melbourne-based consultancy Marpeon P/L