Protected pay rates for labour hire employees
Under regulated labour hire arrangement orders, a labour hire employee can’t be paid less than what they’d get if they were working directly for the host employer.
On this page:
- Payment for labour hire employees
- Labour hire arrangement orders
- Protected pay rate
- Obligations for employers
- Exclusions
- Disputes
- Tools and resources
- Related information
Payment for labour hire employees
Labour hire employees are employed by a labour hire employer, who sends them to a host employer (host). The labour hire employer is responsible for providing employees with their pay and entitlements.
Labour hire employers and hosts can be covered by the same or different awards or enterprise agreements.
Employees must not get less than the minimum pay and entitlements from their award, enterprise agreement or other relevant workplace instrument.
Labour hire arrangement orders
The Fair Work Commission (the Commission) is responsible for making regulated labour hire arrangement orders (orders).
Employees, unions and hosts can apply to the Commission for an order. The order regulates how labour hire employees are paid by their labour hire employer.
When an order applies, labour hire employees working for a particular host must not be paid less than what they would receive under the host’s workplace instrument (such as an enterprise agreement). This is the ‘protected pay rate’.
The order must outline:
- the host
- the labour hire employer
- the employees covered by the order
- the relevant workplace instrument
- when the order starts.
Employers and employees covered by an order are subject to certain rules.
For more information:
- visit the Commission's Labour hire employees' protected rates of pay section
- read the Commission's Guidelines for regulated labour hire arrangement orders.
Protected pay rate
The protected pay rate is the total amount that labour hire employees would get under the host’s workplace instrument if they were working directly for the host.
To calculate the protected pay rate:
- identify the employee’s minimum wage under the host’s instrument
- apply any additional amounts that the employee would be entitled to under the host instrument, based on their hours of work and working conditions, including:
- penalty rates
- loadings
- allowances
- overtime
- incentive-based payments
- bonuses
- other additional amounts.
The following rules apply to labour hire employees covered by an order.
Interactions with awards and agreements
A labour hire employer’s award or enterprise agreement can still apply to a labour hire employee, even while they are working for a host.
A protected pay rate doesn’t affect an employee’s conditions from the labour hire employer’s award or enterprise agreement.
The total amount paid to a labour hire employee covered by an order must be the higher of:
- the payments under the labour hire employer’s award or enterprise agreement
- the protected pay rate.
Labour hire employers must check what the employee would be paid in both situations and pay the employee the higher amount.
Casuals
Casual labour hire employees will receive a casual pay rate if the host’s relevant workplace instrument includes a casual rate.
There are some situations where a different rate for casuals will apply. These include when:
- the host’s workplace instrument doesn’t include casual rates, or
- no workplace instrument provides for the kind of work performed by the casual employee.
In these situations, the protected pay rate for casuals is the full pay rate that would have applied if:
- they weren’t casual
- the host’s workplace instrument applied to them, and
- the base pay rate in the host’s relevant workplace instrument was increased by 25%.
Example: Protected pay rate
Bruce is the director of a vehicle repair store. The vehicle repair company has an enterprise agreement.
Bruce engages a labour hire employer to provide labour hire employees to work for his company.
Before engaging staff, the labour hire employer informs Bruce that they pay a lower pay rate than what he pays at his vehicle repair store. Bruce decides to apply to the Commission for a regulated labour hire arrangement order.
When the order is approved, the labour hire company must pay the labour hire employees at the protected pay rate set by the vehicle repair company’s enterprise agreement.
Casuals
The vehicle repair company’s enterprise agreement provides a 27% casual loading. Liam, a casual who is employed by the labour hire employer to work at the vehicle repair company, will receive the 27% casual loading.
If the vehicle repair company’s enterprise agreement didn’t include casual rates, Liam’s protected pay rate would include the 25% loading on the base pay rate.
Pieceworkers
If the labour hire employee is a pieceworker and an enterprise agreement applies to the employee, then for the purpose of calculating the protected pay rate:
- the base pay rate is the base pay rate in the host’s enterprise agreement
- the full pay rate is the full pay rate in the host’s enterprise agreement.
Termination payments
When labour hire employees end their employment, they can receive a different pay rate for their termination payments. There are rules about how this rate is calculated.
This rate will generally be paid to a labour hire employee if:
- this rate is higher than what they would otherwise be paid, and
- they only worked for one host.
More information will be available on the Commission’s website soon.
Payments not included in the protected pay rate
Labour hire employers who are in the national workplace relations system because their state referred their workplace relations powers to the Commonwealth have some payments excluded from the protected pay rate.
This broadly includes employees:
- in New South Wales, South Australia, Queensland, Tasmania and Victoria who are employed by:
- sole traders
- partnerships
- other unincorporated entities
- non-trading corporations
- in Victoria employed in the public sector
- in Tasmania employed in local government.
If the employer is one of the above, the protected pay rate doesn’t include payments such as:
- superannuation
- workers compensation
- occupational health and safety
- training arrangements
- long service leave
- jury or emergency service duty, and
- public holidays.
For more information, visit our Fair Work system page.
Alternative protected pay rate
On application, the Commission can determine that an alternative protected pay rate applies to labour hire employees.
This can change the workplace instrument the protected pay rate is based on to one that is more appropriate. An example is if the alternative instrument better reflects the type of work performed.
Alternative employment instruments can only be considered if they:
- already apply to the host or their body corporate
- could cover similar employees.
Obligations for employers
Hosts and labour hire employers have certain requirements under an order.
Changing an order
Hosts must apply to the Commission to change an order to cover any new labour hire employers and their relevant employees.
Providing information
Hosts covered by an order must comply with a written request from a labour hire employer covered by the order. This request for information is to help labour hire employers pay their employees.
Hosts must provide the information:
- as soon as possible
- within a period that allows the labour hire employer to correctly pay employees.
Hosts also have obligations during tendering. Hosts must notify potential and successful tenderers in writing that an order applies and how it may impact the tenderer.
Changing workplace instruments
If a host’s workplace instrument is replaced by another instrument (for example, a new enterprise agreement), then the order will be taken to refer to the new instrument from when it applies to the host if:
- the workplace instrument would apply to the employees covered by the order
- the employees were employed to perform the same kind of work.
Hosts must notify the labour hire employer of the new instrument and give them the relevant information to update their payments.
Anti-avoidance
Hosts and labour hire employers can’t behave in a way that:
- stops or tries to stop an order from being made, or
- avoids paying the protected pay rate to eligible employees by:
- engaging other employees or independent contractors, or
- entering into other labour hire agreements.
Exclusions
When the Commission can't make an order
The Commission can't make an order if:
- a service is being provided to the host rather than just labour
- the host is a small business employer, or
- it's not fair and reasonable in the circumstances.
When the protected pay rate doesn't apply
Sometimes, when an order applies, the labour hire employer doesn’t have to pay the protected rate to certain employees. This happens when the employee is:
- on a training arrangement, or
- engaged for a short-term period (usually 3 months or less).
The Commission can vary rules for employees engaged for a short-term period.
Disputes
Disputes can be raised about issues, including:
- what the protected pay rate for a labour hire employee is
- whether a labour hire employee has been, or is being, paid less than the protected pay rate.
The parties involved must first try to resolve the issue at the workplace level.
If the dispute still can’t be resolved, parties can then apply to the Commission for assistance. Visit the Commission's Labour hire arrangement order disputes page.
Source reference: Fair Work Act ss.306A–306W
Tools and resources
- Guide to labour contracting Guide to labour contracting
- Fair Work Commission - Labour hire employees' protected rates of pay
- Fair Work Commission - Guidelines for regulated labour hire arrangement orders