Casuals are likely to find 25 per cent less cash in bank accounts

Businessman with digital tablet looking out of window

Australia’s IR Revolution Day, August 26, is getting very close. Many ordinary Australians are starting to get a whiff that their lives will change for the worse in the months that will follow the industrial relations act coming into force.

Among the thousands of reader’s comments I have received, Brian asked me one of the big questions being asked around the land.

“Robert, just a question. Our son works offshore on a gas rig. He and the majority of workers are employed as casuals through a labour hire firm. How is this IR legislation likely to affect them and the whole offshore industry?”, Brian wrote.

I will set out the details below but the simple answer is that Brian’s son is likely to find 25 per cent less cash in his bank account in future months (there may be a delay). But he will get holiday and other non-cash entitlements.

Vast numbers of Australians will have the same experience. I have tried to give Brian’s son and the rest of the nation’s casuals some help, but I am not a lawyer and it’s complex.

The Prime Minister’s address to the ACTU Congress last week helped the nation understand some of the drivers of the changes.

After praising Employment Minister Tony Burke, the Prime Minister said that in so much of the legislative work, “the mighty trade union movement has given us strength and inspiration”.

They certainly did provide inspiration when it came to replacing casuals with permanent part time workers who, unlike most casuals, come into the union ambit.

I agree with the Prime Minister that the act is “clear” in making casual employment very hard to be achieved.

Anthony Albanese says that when it came to casuals the legislation helped ”workers and business seeking a clear and fair definition of casual employment leading to our reforms which have preserved flexibility while providing new security for workers who want to become permanent”.

I agree with the Prime Minister that the act is “clear” in making casual employment very hard to be achieved. But I disagree that such a move is “fair” given the vast number of Australians relying on that extra cash in the pocket for rent and mortgage relief.

When it comes to casuals there is a long section in the act under the heading “meaning of casual employee” which starts by duplicating the thrust of the High Court’s simple casual classification definition by stating that the casual employment relationship is “characterised by an absence of a firm advance commitment to continuing and indefinite work”.

Had the legislation stopped there it would have been “clear and fair” and Brian’s son and all other casuals would find it easy to be a casual.

But the act says that definition must be “assessed” on the basis of seemingly endless criteria, including:

• “The real substance, practical reality and true nature of the employment relationship”.

• “Whether, having regard to the nature of the employer’s enterprise, it is reasonably likely that there will be future availability of continuing work in that enterprise of the kind usually performed by the employee”.

• “Whether there are full‑time employees or part‑time employees performing the same kind of work in the employer’s enterprise that is usually performed by the employee”.

So out there on the drilling rig what is the “true nature of the employment relationship” and is it likely that there will be future availability of continuing work in that enterprise (possibly including other rigs served by the labour hire firm) of a kind usually performed by an employee.

If there is no one on the rig (or other rigs) who is a full-time or permanent part-time employee who performs a similar task to the casual then it might be possible for Brian’s son to keep his cash. But Brian says the “majority” are casuals. If there is an employee doing similar work Brian’s son then cash pay cuts will be hard to avoid.

Even if that hurdle is overcome, he will need to make all sorts of statutory declarations about the nature of his relationship with the labour hire firm to comply with the act.

And, in employing casuals the labour hire firm is taking a huge risk because if there is a mistake they might have to pay him holiday pay as well as the casual margin.

Big fines could be imposed. But a 25 per cent cash pay cut to oil riggers is likely to cause strikes.

Back on land, many businesses have people on full-time and part-time employment that perform similar tasks to their casuals. And getting statutory declarations about the nature of the relationship is complex.

Accordingly, most enterprises will find it very dangerous to keep employing casuals in the months that follow August 26. The casuals will simply have to take a cash pay cut and plead with their landlords and banks for mercy. The employers will lose flexibility and productivity. Everyone loses.

The key to what is about to happen is in the PM’s words about “providing new security for workers who want to become permanent”. That’s what the unions want. Employers were not consulted. Nor were the people who want (and need) the 25 per cent casual pay premium.

This is an issue that will loom large at the next election.

Footnote: In the online reader comments it is clear that many do not understand that the casuals section of the IR Act includes two sections. One section defines a casual, which I have described. A second section gives a person, who has been employed for at least 12 months and worked “an ongoing regular pattern of hours” for at least the previous six months, the right to become a permanent part-time employee. “An ongoing regular pattern of hours” means an employer may have been illegally employing the person as a casual. The employers are in danger of penalties.