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Understanding the implications of Australia’s ‘Same Job, Same Pay’ legislation

Contractor Management
CXC Global5 min read
CXC GlobalMarch 06, 2024
CXC Global

The genesis of ‘Same Job, Same Pay’ legislation in Australia

In Australia, some major employers have taken to paying labour hire workers less than permanent employees for the same tasks. This is due to a legal loophole that lets employers sidestep agreed rates by outsourcing work to labour hire providers.

While labour hire can be useful for covering temporary needs, work surges, or specialised services, some employers exploit it to replace permanent positions and reduce wages.

This practice is widespread across various industries (mining, agriculture and transport in particular), highlighting a significant pay gap between permanent and labour hire workers in similar roles.

In December 2023, the Albanese government, passed the Fair Work Legislation Amendment (Closing Loopholes) Bill. This was the final hurdle in the government’s commitment to fairer laws for labour hire workers. The ‘Same Job Same Pay’ laws aim to eliminate these legal loopholes by ensuring that labour hire workers receive compensation equal to permanent employees who are working under Enterprise Agreements.

Key features of the legislation

The key features of the legislation include:

  • Equal pay for equal work: The fundamental principle of the law is equal pay for equal work, which dictates that employees in similar roles should be compensated equally, considering factors like experience, qualifications, and performance.
  • Contract and permanent employees: One crucial element of this legislation is its coverage of both contract and permanent employees. Employers need to guarantee that contract workers receive equal pay to their permanent colleagues for equivalent tasks.
  • Comprehensive coverage: The legislation addresses various aspects of compensation, such as base salary, bonuses, allowances, and additional benefits.

Under the new legislation, companies are advised to undertake equal pay audits of their payroll systems, to identify discrepancies in remuneration amongst workers in similar roles.

Equal pay audits are the most extensive approach to ensuring wage transparency to tackle wage disparities among different types of workers. These audits provide a wide-ranging view of business operations and consider a more extensive array of results compared to typical basic pay reporting.

Equal pay audits factor in all components of worker’s remuneration including base salary, bonuses, and other benefits.

Contractor pay review process

Employers are well-advised to undertake a regular review of the specific pay rates of contract employees alongside the pay rates for permanent workers in similar roles.

To ensure the pay scales of both worker categories are aligned, historical data and trend analyses will allow you to see where your company is falling short on all aspects of worker’s remuneration. It will also enable you to set a strategy in place for equalising any discrepancies in place in an equitable and efficient fashion.

Updating payroll systems

Your payroll system may require upgrades and/or enhancements to accommodate these new legislative requirements. It’s important that your system can effectively compare and report on pay rates across different employment types, at any point in time.

It’s also important for your system to factor in non-monetary benefits and other aspects that make-up complete pay ‘packages’, to determine how these may differ to the remuneration of contract or labour hire workers.

A simple, hassle-free and proven payroll option is to outsource to CXC. Our payroll services will make sure you’re always 100% compliant with all legislation changes (so you don’t have to worry about it).

Training and communication strategies

Train your payroll team on the details and nuances of all elements of the new law. Communicate the changes to be implemented due to the legislation. Give workers the full scope of insight into the legislation, so they clearly understand their rights under the bill, and your commitment to equitable pay for all.

A consistent communication strategy may be required in the early days, so workers, managers and leadership are all clear on the changes, on their responsibilities and on the impact these changes have on workers.

To maintain your company’s compliance with the new laws, it’s your responsibility as an employer to stay up to date with any changes, which can be sourced via the FWC.

Also, by engaging workplace relations legal counsel, you can be assured your company doesn’t fall foul of any additional nuances or alterations to the bill. (Having said that, our payroll services will also ensure you’re always 100% compliant. We have a team of internal counsel, labour law specialists and HR experts to protect your business).

Establishing effective dispute resolution mechanisms

By establishing a clear process for employees to raise concerns about pay equity, you’ll demonstrate the transparent nature of your company’s compliance to the new bill. This will not only keep your business on the right side of the legislation, but it will also give your workers confidence that they’re getting paid equitably.

Where employees have concerns about pay equity, you need to create clear processes and protocols so employees and contractors can raise issues with ease, and without judgement. In doing so, you need to provide clear steps the business will take when investigating and finding resolution to the worker’s concerns.

Preparing for the future: Adapting to ‘Same Job, Same Pay’ legislation

Organisations will need to include regular wage reviews as part of their payroll and remuneration team processes. There’s also the opportunity to go to the FWC to apply for a regulated labour hire Order.

This would ensure that the hosted labour hire workers are paid no less than what they would receive if:

  • they were directly employed by the employer; and
  • paid in accordance with an applicable enterprise agreement (if relevant to the industry) or other employment instrument, such as a workplace determination.

The FWC will be able to make Orders effective from 1 November 2024. So, there’s plenty of time for organisations to get ready.

And finally…

The ‘Same Job Same Pay’ legislation empowers the Fair Work Commission to ensure pay parity for labour hire employees. This means that workers hired through labour hire agencies will receive wages equal to those of in-house employees performing the same roles.

As an employer, it’s important that you demonstrate compliance to the bill and that you include your workers in the process. Seeing your willingness to proactively adapt to the ‘Same Job Same Pay’ legislation will be evidence that your workplace is committed to fair and equitable workplace practices. This can only be a positive for worker engagement and effectiveness.

To learn more about our payroll services and how we can help you establish the right processes so your business is compliant with ‘Same Job Same Pay’, click here and one of our payroll experts will be in touch.

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About CXC

At CXC, we want to help you grow your business with flexible, contingent talent. But we also understand that managing a contingent workforce can be complicated, costly and time-consuming. Through our MSP solution, we can help you to fulfil all of your contingent hiring needs, including temp employees, independent contractors and SOW workers. And if your needs change? No problem. Our flexible solution is designed to scale up and down to match our clients’ requirements.

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