ACTU urges Labor to address sham contracting “explosion”

Union research shows number of workers on sham or “dependent” contracting at record high.

Sally McManus accused employers of ­exploiting legal loopholes by ­calling a worker a “contractor” to deny them all of the protections, pay and conditions that come as being an employee.

The ACTU is pressing the Albanese government to ensure Labor’s second wave of workplaces changes addresses an “explosion” in sham contracting fuelled by the surge in gig and platform work during the Covid pandemic.

Seeking to combat employer attacks on Labor’s proposed industrial relations laws, the ACTU released new research showing the number of workers on sham or “dependent” contracting was at record highs and outnumbered genuinely independent contractors for the first time.

According to the analysis, more than 565,000 contractors are unable to subcontract out their work, a key indicator of whether a contractor is truly independent. In contrast, only 550,000 contractors can subcontract their work.

The research finds new “sole trader” ABNs have rapidly outpaced employment growth since 2019, and boomed since the start of the pandemic.

It says workers on sham or dependent contracting arrangements earn $242.80 less a week than genuine independent contractors, measured on a median basis. Over a year, this is a pay gap of $12,644.

ACTU secretary Sally McManus accused employers of ­exploiting legal loopholes by ­calling a worker a “contractor” to deny them all of the protections, pay and conditions that otherwise come with being an employee.

“These loopholes are being used by big business, particularly via the gig economy and platform work, to drive down wages and health and safety,” Ms McManus said.

“We need protections for all workers, and to stop some ­employers picking and choosing categories and labels to cut ­people’s pay.

“If these changes are not made to keep up with corporate tactics, many more workers will be at risk of losing all their rights.

“Governments need to move with the times and protect their citizens from legal schemes that are designed to cut wages and take away rights.

“It cannot be left to big business to choose whether workers get rights or not simply by telling them to ‘go get an ABN’.”

Unions say the growth in sham arrangements has been aided by the rapid growth in gig and platform work throughout the pandemic, and two High Court decisions last year that overturned the definition of an employee, making it easier for big business to mislabel employees as contractors.

The government is consulting with unions and employers about the proposed legislation that includes empowering the Fair Work Commission to set minimum standards for workers in “employee-like” forms of work, including the gig economy.

The government is also supporting the commission setting fair minimum standards in the road transport industry.

The ACTU research paper says gig workers lose $400m a year in potential superannuation because they are not entitled to the superannuation guarantee, while 45 per cent of transport workers in the gig economy report being paid less than the minimum wage.

“Transport operators and transport workers, regardless of label, urgently require federal government intervention in order to stop the deadly downward spiral in standards.

“The market has clearly failed and the proliferation of so-called ‘gig’ arrangements has only exacerbated the problem.”

Employment and Workplace Relations Minister Tony Burke this week ruled out new ­minimum standards for ­“employee-like” independent contractors ­applying to construction, saying “the legislation will make clear that it’s about the gig ­economy”.