Itcra Response to the Victorian Inquiry Into the Labour Hire Industry

ITCRA’s ICT Employment Trends Report provides an overview of the key movements and data that affects the ICT industry in terms of business conditions, human capital needs, recruitment activities, and expectations. SkillsMatch data is a major source of information for this Report, as is data from Burning Glass, Seek, and Live Salary.

SkillsMatch is a monthly reporting program of data from ITCRA Members systems that includes: position title and requirements, available positions, salaries offered, placements made and time-to-fill for ICT contract and permanent roles.

ITCRA RESPONSE TO THE VICTORIAN INQUIRY INTO THE LABOUR HIRE INDUSTRY

AND INSECURE WORK

BACKGROUND

ITCRA is the professional body for the ICT contractingand recruitment sector in Australia and New Zealand. ITCRA Members supply and/or manage white collar professionals on behalf of their clients for permanent and flexible roles, including contracting, across Australia and New Zealand as well as multiple international markets. The majority of these roles are in the ICT sector but there is also an increasing representation in other white collar professional sectors that have a strong need for contracting specialists such as, but not limited to, accounting, engineering and architectural professions.

ITCRA Members are bound by a Code of Conduct which is the Professional Practice Standard for all Members.

The Code of Conduct[1] outlines a standard of conduct that all classes of ITCRA Members must meet. It states the commitment to ethical and professional practice expected of ITCRA Members and more specifically outlines the standards regarding key relationships with other contractors and employees. Behaviour that breaches the Code of Conduct may result in the imposition of sanctions of the type provided by the rules that govern ITCRA as an incorporated entity under relevant state and Commonwealth law.

ITCRA Members have access to the People and Talent Management Standard[2] which addresses legislative requirements for the management of contractors, and employees including contract management, immigration, privacy and work health and safety.

This submission focusses on ICT professionals but would in most instances, translate easily to other white collar professions with a strong contracting base.

DEFINITIONS

These definitions outline the services an ITCRA Member may provide to the market – those with an * are the services that could be considered within the terms of reference of this Inquiry.

*Contracting service

A commercial service where an ITCRA Member, in return for a fee, completes a defined scope of work for a client. This work may be performed utilising employees or independent contractors employed or engaged by the ITCRA Member and who may work under the instructions of the client.

*Contractor management service

A commercial service where an ITCRA Member, in return for a fee, undertakes responsibility for the performance of any aspect of a contract for the performance of a contractor, without undertaking the direct employment or engagement of the contractor, or the direct performance of the work. This excludes a service that is solely a payroll service.

*On-hire contractor service

A commercial service where an ITCRA Member, in return for a fee, assigns one or more of its independent contractors to perform work for a customer under the customer’s instruction.

*Payroll service

A commercial service to facilitate the payment of remuneration for contractors or employees of a client, and can include, but is not limited to, services to remit statutory payments with respect to superannuation and taxation.

Placement Service

A commercial service where an ITCRA Member provides, in return for a fee, sourcing and presentation of candidates for permanent employment by a client.

Workforce Consulting Service

A commercial service where an ITCRA Member provides, in return for a fee, identification and response to a client’s workforce issues and recommends or implements strategies designed to assist clients to achieve stated business outcomes.

The fundamentals that underpin the services supplied by ITCRA Members are FLEXIBILITY, PRODUCTIVITY, INNOVATION, VALUE and CHOICE

EXECUTIVE SUMMARY

In responding to this Inquiry ITCRA questions the nexus drawn between the “labour hire industry and insecure work” as much of the work of white collar professionals that is captured under the broad definition of “labour hire” is not defined by the participants as “labour hire” or “insecure” – in the context in which it is outlined in this Inquiry.

Freedom of contract is a fundamental tenet of our legal system, and the notion that individuals should be free to contract for the provision of their services in different ways is well established. Similarly, a business should be able to adapt its workplace to a rapidly changing technological and economic environment, and ensure it can attract, maintain and support the skilled workers it will rely on in the future.

It is ITCRA’s position that the protection of workers from exploitation and the ability of an individual and business to contract as they choose are not mutually exclusive. Increased protection for those most vulnerable to exploitation is required to maintain a high standard of conduct and ensure the formation of genuine, non-coercive independent contracting relationships. Such relationships are essential to facilitate enterprise and support skilled talent to deliver on projects and initiatives that drive the economy.

The ICT industry in particular, engages a global workforce that sees an increased demand for the right people at the right time. In order for Victorian business and Government to compete in this global market and capitalise on the significant productivity gains available in the sector, the frameworks for the engagement of talent must recognise the demands of that talent.

An improved understanding of the changing world of work is evident in the Discussion Paper for this Inquiry, which is extremely refreshing, but continuing to ignore the growing desire of business and individuals to frame the way they engage in work, with suitable protections for the vulnerable, will impact the productivity and effectiveness of Victorian industry, and business in general and it is to these key points that ITCRA has addressed it’s response.

ITCRA makes the following submissions and thanks the Department of Economic Development, Jobs, Transport & Resources for the opportunity to respond.

1. Contractors are the key enablers of an effective ICT contribution to the Victorian economy as they represent the professionals that give effect to the hardware and software applications.

ITCRA Member companies, and the contractors they manage, are represented in the private sector, government and not for profit.

ICT refers to a wide range of services, applications and technologies, using various types of equipment and software, and often running over telecommunications networks[3]. The importance of ICT is not the technology as such, but rather its role as an enabler for accessing knowledge, information and communications, which are increasingly important elements in today’s economic and social interactions between people, firms and nations.[4]

The relationship between ICT and productivity is well established in overseas research and the flexible supply of quality labour/talent to facilitate the delivery of ICT solutions is critical.

A 2006 study from the Centre of Law and Economics at the ANU found that ICT investment and spill overs were major drivers of productivity growth in Australia and other OECD countries in recent years[5]. Similarly, Australian micro-economic studies have shown significant productivity impact from ICT at a firm or enterprise level, with ICT conferring informational, strategic, transactional and transformational benefits[6].

In order for Victoria to capitalise on the significant productivity gains ICT has to offer to the Victorian economy, it is vital that policy development and regulation supports, rather than hinders, the industry and this includes the talent that enables the industry.

2. ITCRA believes that the free and informed choice of both individuals and businesses to decide upon the optimal work engagement model for both parties is essential in a global economy.

Consistent with an industry at the forefront of innovation, the ICT workplace has adapted and responded to a rapidly changing and increasingly globalised sector and that adaptation has seen the increasing prevalence, acceptance and in most instances a demand for non-traditional employment arrangements.

A significant number of ICT workers are engaged as independent contractors, with ITCRA’s most recent data from our Employment Trends Report[7] indicating that 81% of ICT roles filled in the Jul – Sept quarter, in Victoria, were contract based.

This figure reflects the nature of the ICT infrastructure projects, coupled with ongoing changes in government tendering arrangements and the business models of clients partnering with ITCRA Members.

It is also important to note that these contractors are engaged across a broad range of industries, not just ICT, according to the Australian Digital Pulse 2015[8] by Deloitte for the Australian Computer Society (ACS). The data indicates that individuals engaged in ICT are in almost every industry with a predominance in financial services (47.9%); ICT related industries (26%) and public administration (11.2%) and, with approximately 25% of ACS members representing contractors, this is definitely an engagement model that is part of the fabric of Australian and Victorian business.

The prevalence of independent contracting in the ICT labour market is candidate driven with the vast majority of ICT professionals choosing to work as independent contractors because it affords them flexibility, recognition and diversity, whilst facilitating the maintenance of a current skill set in a rapidly changing profession.

ICT is a younger workforce, with a high proportion of ICT professionals aged between 25 and 44 years of age (67.8 per cent compared with 45.5 per cent for all occupations[9]). Amongst this demographic there is a relatively higher level of professional optimism and confidence in being able to attain work elsewhere; as a result, job security is often not considered a priority and the notion of insecure work is generally not a concern.

These workers are highly skilled professionals, with the sophistication and knowledge to understand the relative advantages and disadvantages of the various methods of engagement, and to negotiate an individual decision based upon their own personal circumstances. There is no evidence of vulnerability or a “sense” of insecurity in such career choices.

3. ITCRA acknowledges that contract and recruitment companies have a pivotal role to play in ensuring that no party is exploited and workers receive a fair rate of pay that is equal to or exceeds the statutory minimum for employees performing similar work.

While acknowledging the importance of independent contracting as an alternative form of engagement in the modern workplace, ITCRA recognises that this model can be exploited by unscrupulous hirers, seeking to avoid the minimum benefits and protections afforded to employees under labour laws. Accordingly, ITCRA considers that certain vulnerable workers require protection under labour laws when entering into an independent contracting relationship, such as those contained within ss357-359 of the Fair Work Act 2009 (Cth).

Many individuals in professional roles freely choose independent contracting as their preferred method of engagement. However, despite the relative flexibility and choice this model provides, there are undeniable disadvantages, including lack of many direct employment benefits and an adoption of increased risk.

It is therefore vital that an individual understands and accepts their rights and obligations, and the options available to them before engaging under such models.

It logically follows that protection should be afforded to those workers less able to understand, or those who are less likely to be in a position to freely choose and negotiate their mode of engagement. Such workers may include:

· Individuals under the age of 18

· Unskilled workers

· Low income earners

· New entrants to the market (for example ICT graduates seeking their first professional ICT job)

Focusing Inquiries such as this on certain classes of vulnerable workers, across all sectors, is important to protect those most at risk of exploitation. The Inquiry however, needs to recognise and accept that highly skilled independent contractors, and their hiring entities, have the capacity to operate effectively and with full transparency and knowledge of the implications and requirements of independent contracting responsibilities and, more broadly, modern work arrangements.

When determining the question of whether an employment relationship exists, the Federal Court recently focused more on the economic reality of the relationship, holding that “it is increasingly necessary that parties conduct themselves…in accordance with a correct appreciation of the nature of their relationship, not just as it may suit them”[10].

Where such “correct appreciation” is lacking, contractual terms or any statement by the parties about the character of a relationship may not be indicative of the true legal status of the relationship.

However if it can be satisfied that an individual, with a “correct appreciation” of their rights, obligations and options, has made a freely informed choice, ITCRA firmly believes that the parties’ intentions should be the key determinant of the work arrangement.

ITCRA also proposes the development of a “Fair Engagement Checklist” to ensure the formation of genuine and non-coercive independent contracting relationships. The checklist would not only provide a useful tool for businesses to ensure compliance with legal obligations when engaging workers, it could also be relied upon as evidence of the willingness of parties to enter into an independent contracting arrangement.

ITCRA has developed a work in progress checklist for in use by consultants and managers who engage ICT professionals in a non-employment capacity and would be prepared to discuss further.

4. ITCRA submits that independent contractors who earn as a minimum, the high income threshold, can reasonably be expected to possess the level of sophistication and bargaining power necessary to ensure they are able to make a freely informed choice regarding their mode of engagement.

ITCRA recognises that developing statutory definitions of “independent contractor” and “vulnerable worker” are challenging. Many of the examples of workers at risk, in the Inquiry Discussion Paper, are not in the scope of ITCRA Member’s business activity however ITCRA acknowledges these groups as relevant to the Inquiry because of their prevalence in the on hire/labour hire sector.