Picture showing sub-contractor

The Victorian Labour Hire Licensing Scheme: A positive step for our industry

From April 29th this year, labour hire providers – including security suppliers – will have six months to apply and obtain a licence under the Victorian Government’ Labour Hire Licensing Scheme.

Victoria’s Minister for Industrial Relations, Tim Pallas, says that the Scheme will “make the system fairer for workers, businesses and providers.”

It seeks to combat widespread abuse, underpayment and exploitation in the labour hire sector. This helps to protect workers such as fruit pickers, meat workers and of course, commercial cleaners & security officers.

The Scheme also aims to achieve a level playing field, so that labour providers do not face unfair competition from unscrupulous operators where workers are particularly vulnerable to exploitation.

Quest Effect offers its full support to this Scheme

Like NSW, Quest Effect holds a Master Security License in Victoria. This allows us to legally provide a range of security services to businesses across the state.

As a labour hire provider, we’ve already applied for a license under this new Scheme. This is so we can continue to operate legally in Victoria.

One of the ways we hope this Scheme will improve the security/property services industry is by ensuring more honesty and transparency in the tender process for both businesses and providers.

Going to tender: The problem of sham sub-contracting

Like most companies outsourcing security services to an external supplier, a tender is created which security providers respond to. This contractually outlines the scope of work, company expectations of the supplier & mandatory industry compliance/insurance requirements. However, one of the questions asked in almost every tender is. Are any part of the services to be offered through a sub-contractor?

The challenge here is that many companies avoid engaging security providers that use sub-contractors because they are too high risk. There have been several cases where sub-contractors were being paid below the Grade 1 security officer award rate. This also includes failure to meet other statutory obligations such as payroll tax and superannuation.

As a result, some security providers will indicate that they only use direct employees. However, their real intention is to sub-contract to cheaper, third party labour. This gives suppliers who omit that they use sub-contractors an undue & unfair advantage when responding to a tender. Because they are able to submit relatively lower charge-out rates than those honest, genuinely compliant security providers that don’t use sub-contractors.

Unfortunately in many cases, a company will accept the tender response with the lowest charge-out rates and grant that supplier the contract. If you consider the minimum average labour cost based on current award rates, security suppliers charging below this are either losing money (which wouldn’t make business sense) or are simply not complying with Fair Work legislation and other statutory obligations (most likely the case).

Why this new Scheme is a positive step for our industry?

Sham sub-contracting has been the primary cause of this exploitation and a major driver for this Scheme. However, there are several other important factors to consider.

For example, a shortfall in the security industry’s total turnover due to undeclared revenue represents a loss of tax revenue for the State Government. This can often be attributed to corrupt sub-contracting where most non-compliance occurs.

It is important to note that companies engaging a security/property services provider that is not compliant can also be responsible for their supplier’s misconduct. This can result in significant legal costs and loss of reputation.

Introducing tighter regulation of the labour hire sector through the Victorian Labour Hire Licensing Scheme will mean:

  • Better protection for commercial cleaners, security officers and other workers in the labour hire sector. (Ensuring worker entitlements are granted and minimum award rates/superannuation are paid)
  • Less risk of a company contracting a security/property services provider that does not meet its statutory obligations.
  • Fairer charge-out rates for all security/property services providers that are more reflective of true labour costs.
  • Improved industry compliance/service delivery.
  • More accurate reporting of revenue for taxation purposes.

While the Victorian Labour Hire Licensing Scheme is currently enforceable in Victoria only, we believe it is only a matter of time before it is rolled out nationally.

Looking for a reputable commercial security & property services provider for your business? Contact Quest Effect here for a free site visit and services assessment.