Wednesday, August 28, 2013

Sham contracting on the rise as economic crisis deepens

Vanguard September 2013 p. 2
Ned K.

Workers and their unions in industries including cleaning, construction, information technology and communications are fighting super exploitation of workers through sham contracting arrangements.

Sham contracting occurs when workers are paid as a franchisee or sub-contractor but receive take home income less than even the minimum safety net award under the Fair Work Act. It is common to find workers caught in these situations having net take home pay of a little as $8 to $10 per hour.


Take cleaning as an example. A worker on a temporary working visa needs to have a job for a continuous period of at least two years to stay in Australia and progress towards being accepted as a permanent resident. Their skills from their country of origin are not recognised, so they apply for jobs like cleaning to survive.

On application for the job they are told that they need an ABN and that this will be an asset to them with the Immigration Department, as they will be able to show they have their own business!

They are paid on a monthly basis an amount equivalent to say $20 to $25 per hour. This seems pretty good. However they soon find out that they have to cover themselves for workers compensation insurance, cleaning materials and equipment and they have no annual leave, no sick pay, no insurance and no superannuation. They are only paid the equivalent of three or four hours a night, but the actual job regularly takes five to six hours.

As they are a so-called sub-contractor, the principle contractor does not reimburse them for the extra hours. They are ‘free’ to work as long as they like!

If they are a franchisee, the situation is worse. They also have to pay back to the franchise holder up to 25% of the money they are paid each month in the form of a franchise fee. The holder of the franchise justifies this payment from the franchisee by saying that this enables the franchise holder to pay for the cost of bidding for other contracts for the future ‘prosperity’ of all!

Recently in the cleaning industry there was a case of two Indian cleaners receiving a take home pay of $6 per hour for cleaning a series of bank branches in a capital city.

The situation is even becoming an embarrassment for the Labor Government whose Fair Work Ombudsman recently announced it was going to audit 1,000 cleaning companies.

More workers caught in these situations are getting organised to oppose this super exploitation. This is a good development for the workers’ movement in Australia.

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