Employers in Australia’s Cleaning, Hair and Beauty, Call Centre Industries in Sham Contracting

A significant number of Australian employers have been abusing contracting arrangements which deprived workers in certain industries millions of dollars in unpaid salaries in the last financial years.

The report by the Fair Work Ombudsman, released over the weekend, identified some industries where the practice of sham contracting is pervasive. These are in the cleaning, hair and beauty, and call centre industries where 20 per cent of firms are into sham contracting.

The Ombudsman added various forms of sham contracting in which workers are hired as a contractor to avoid legal responsibilities on the part of the employers including payment of proper salary rates and other entitlements are also found in other industries. Among the industries are construction and transport.

The report was based on an audit of almost 7,000 Australian businesses, which resulted in a total $4.7 million recovered for 7,613 workers whose employers were proven to be sham contractors. The figure is 11 per cent higher compared to 2009-10.

Among the victims of sham contractors are foreign workers. In one case, Kentwood Industries, a Western Australian construction firm, was fined $430,000 for paying five Chinese employees, who entered Australia using 457 visas, only $3 an hour.

Besides the low pay, the migrant workers slept on the floor and worked up to 11 hours a day, six or seven days a week without scheduled days off. The abused workers were also not given yearly leave entitlements.

Outside victims of sham contracting, 40 per cent of workers in Australia are employed as casuals, short-term contractors, labour hires or contractors in jobs that are unpredictable, uncertain and undermine the employees need to feel secure in their lives and their communities, said Australian Confederation of Trade Unions President Ged Kearney.

To protect workers from these abusive forms of employment, Ms Kearney pushed for stronger enforcement of existing labor laws and tougher legislation and penalties to prevent companies from setting up sham contract arrangements.

"The definition of sham contracting needs to be tightened too, to make sure it captures cases where the employer claims it did not deliberately break the law," Ms Kearney said in a statement.