Why contractors are key

Independent contracting is thriving in the residential building sector but it’s regularly under attack.

Author

Melissa Adler: HIA Executive Director – Industrial Relations and Legal Services

Attacks on independent contracting are not new – in fact, the model is constantly under threat. Independent contracting is a quintessential part of the residential building industry. It’s a legitimate business model which needs to be preserved for workers, businesses, consumers, and the national economy.

HIA estimates that over 80 per cent of the work completed in the sector is performed by independent contractors.

For residential builders, it provides a flexible, workable and efficient model for engaging workers and managing the peaks and troughs of the home building cycle. Builders rely on access to good and reliable trade contractors to maintain competitiveness. For contractors, it’s a pathway to business ownership, career flexibility and entrepreneurship.

The rise of the ‘gig’ economy and agitation by the unions for secure work are drawing attention to the legitimacy (or otherwise) of independent contracting and challenging long-held views on the nature of the traditional ‘employment relationship’.

New and evolving ways to organise a workforce have been a feature of the Australian economy for decades. Celebrated court cases have considered the status of encyclopaedia salespeople, cleaners, bicycle riding couriers and labour hire workers among others. Importantly, all these cases were resolved using the long-standing distinction between common law employees and independent contractors.

Notwithstanding this is a compensation claim against Uber Eats on behalf of the widow and child of a rider killed while delivering food in Sydney – being underwritten by the Transport Workers Union (TWU). This is just the latest in what can be expected to be ongoing challenges and litigation around the gig economy.

In that case, if considered an employee, the widow would be entitled to a lump-sum amount, weekly payments and compensation for funeral expenses.

This Uber Eats rider is one of five food delivery workers killed on Sydney and Melbourne roads between September and November last year.

This incident appears to have bolstered the continuing focus on not only the gig economy but also ‘insecure work’. Last December, Labor Senator and ex-TWU state and national secretary Tony Sheldon requested the establishment of a Senate Select Committee to inquire into Job Security.

The terms of reference are broad ranging; the committee is being asked to consider the impact of insecure or precarious employment on the economy, wages, social cohesion and workplace rights and conditions.

HIA made submissions and the inquiry is expected to report in November, but initial hearings are already making headlines.

 

BUILDERS RELY ON ACCESS TO GOOD AND RELIABLE TRADE CONTRACTORS TO MAINTAIN COMPETITIVENESS

 

While giving evidence to a Senate inquiry, the Menulog food delivery business advised it will apply to the Fair Work Commission for a new modern award covering the on-demand industry. This has been heralded as a landmark decision and the first step toward an employment model based on minimum wages and conditions.

While the business conceded that the contractor model is historically well-suited to the Australian market, the company now believes it needs to make improvements for couriers that align with the philosophies and values of its new European parent group, Just Eat Takeaway.com. The company ultimately wants to employ couriers, but has stated that the current regulatory framework ‘presents a number of challenges, with specific regards to existing modern awards, the lack of flexibility they present and subsequent cost’.

This is just the most recent inquiry in a string of investigations into the gig economy. 

During 2020 the NSW Parliament inquired into the ‘impact of technological and other change on the future of work and workers in New South Wales’ which is yet to release a final report, the Victorian Government conducted an inquiry into the ‘on-demand’ economy, releasing a final report last July, and the Queensland Government investigated the coverage of their workers’ compensation scheme to gig economy workers.

Prior to this, the federal Senate inquired into the Future of Work and Workers, releasing a final report in 2018 which made a number of observations and recommendations regarding the treatment of the gig economy. 

To date in Australia, gig workers have been considered independent contractors rather than employees but it’s a distinction that unions and the Labor Opposition continue to challenge.

Earlier this year Opposition leader Anthony Albanese set out Labor’s position on industrial relations that it will take to the next federal election. The eight-point Secure Australian Jobs Plan focuses on job security and proposes to:

  • Insert ‘Job Security’ as an objective of the Fair Work Act.
  • Establish rights for gig economy workers through the Fair Work Commission by reviewing the current definition of ‘employee’.
  • Establish portable entitlements (annual leave, sick leave and long service leave) for workers in ‘insecure industries’. Last November, the Victorian Government announced a Secure Work Pilot Scheme to provide up to five days of sick and careers pay for casual or insecure workers in priority industries. The government has allocated $5 million to support the development of the scheme although further details have not yet been released. 

Labor’s plan would clearly have implications for the residential building industry including independent contracting arrangements.

Victorian reforms currently on foot would see the licensing and registration of all trade (sub) contractors (regardless of who they work for) and all employees performing the same roles. This represents a risk to independent contracting. 

This raises concerns for HIA, key among them being that if the bar is set too high for existing unlicensed independent trade contractors to obtain a licence, they will be forced to become employees. This threatens the foundations of the residential building industry. 

The impacts of independent contracting in the residential building industry are overwhelmingly positive. The task of governments should be to preserve and enhance genuine independent contracting businesses, not force small business to become employees. 

Moves to restrict the use of independent contracting in the residential building industry will only serve to undermine the contribution of the sector to overall economic growth and exacerbate the challenge of making housing more affordable.

Fighting to preserve the status of independent contracting in the residential building industry has always, and will always be, a priority for HIA. 

 

Not an HIA member yet? By joining Australia’s largest national association for the residential building industry, you’ll get access to a range of member benefits, as well as industry products and business services designed to help you manage, operate and grow.

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