When Filipino worker Edwin De Castro landed a position through a labour hire firm to work on a construction site in Narrabri in New South Wales, he was no doubt excited.

Upon arrival, however, De Castro and others were forced to endure 60 to 70-hour working weeks in dangerous conditions with gross underpayment of wages and made to sleep six to a bedroom on site, with another sleeping in a shipping container. For these sparse living arrangements, the workers had $250 per week deducted from their pay for accommodation, according to a recent Fairfax report. One night, all were dismissed without notice and threatened with prosecution for trespassing if they did not leave their accommodation immediately.

Whilst this illustrates problems with treatment of foreign workers on labour hire arrangements in construction and other sectors throughout Australia, local and domestic staff employed through such arrangements also report poor practices and conditions. Upon finding without notice that the company to which he had been assigned had closed down days before Christmas, Melbourne-based rigger/dogman Patrick O was told he was expected to remain available over Christmas to service his employer’s requirements but would receive no pay until January 21.

Richard M, a casual crane driver in Melbourne, talks of being underpaid for hours worked as well as being on site with cranes which had no load charts, riggers who were inexperienced, a lack of street protection for dogmen and the public, balconies being overloaded, and being expected to lift dangerous deliveries.

Justin M, a construction contractor employed through a labour hire agency in Melbourne, reports not only being underpaid but being sacked after asking for a week off in order to undergo surgery. An anonymous worker in the coal industry talks of working on a casual basis on short-term contracts which are renewed every three months without any form of leave or entitlements well as being forced to take unpaid leave in order to attend training courses and having to pay for the cost of those courses.

Such sentiments are being echoed not just in construction but throughout a range of industries, as significant numbers of labour hire workers throughout the economy complain about low wages, insecurity, and an environment in which they feel afraid to speak up about bullying, harassment and unsafe work practices.

First established in the 1950s, Australia’s labour hire industry now consists of around 5,798 temporary staffing services, making up a combined annual turnover of $18.5 billion, according to IBIS World. Estimates of numbers of workers involved vary, but a report by the Australian Council of Trade Unions in 2012 puts the proportion of employees covered at between two and four per cent of the national workforce, which would equate to somewhere between 235,330 and 470,660 workers based on current numbers.

Done well, labour hire arrangements offer a convenient means through which employers can fill short term vacancies or respond to temporary periods of high demand and provide employees with opportunities for flexible working arrangements, alternative pathways to ongoing employment and development of a diverse range of skills and contacts through working with multiple employers.

At the moment, however, separate reviews of industry practices are under way in Victoria and Queensland amid concerns not only that such arrangements are being used to scrimp on wages, entitlements and OH&S requirements but also that standards are being eroded as a lack of barriers to entry sees legitimate and reputable organisations being undercut by fly-by-night operators and about labour hire companies being linked to pheonixing activity and foreign worker exploitation.

Are such fears justified?

According to Dr. Elsa Underhill, a leading labour market policy researcher at RMIT, overwhelming evidence suggests that this is the case. Underhill says a number of studies have demonstrated that compared with their permanent employee counterparts, labour hire workers are paid lower wages; afforded fewer opportunities for training, promotion or advancement; are made to perform higher risk duties and generally have lower levels of financial and employment security.

In the construction sector specifically, Underhill said focus groups had revealed cases of labour hire workers receiving limited supervision despite not having worked on the site in question previously amid assumptions that those coming on site did so with a complete understanding of how to do the work. In reality, whilst many performing tasks involving cranes, for example, may indeed have had prior experience, this may not have necessarily been on the same type of crane in use on the site in question, she said.

Aside from this, a lack of training meant that labour hire workers were being locked into lower paid roles with fewer options of advancement, Underhill said.

“All of the evidence suggests that labour hire employees get paid lower rates of pay compared to those who are hired by host companies, (and) they receive less training and if they do get training they are more likely to have to pay for their own training,” she said.

Building unions agree. In its submission to the Victorian inquiry, the Victorian Division of the Construction Forestry, Mining and Energy Union argued that there was considerable research which suggested that labour hire and casual workers were being used by employers in order to avoid paying employee entitlements. The union also said those working under such arrangements were subject to precarious work conditions and that use of labour hire was undermining the pay and conditions of regular workers under direct hire contracts.

The union says it is aware of many cases of exploitation, whilst feedback from a number of workers indicated that they were dissatisfied with pay and safety conditions but were afraid to speak out for fear of losing their jobs.

“Labour hire agencies are undermining Australian working conditions through the increased use of precarious work arrangements such as casualisation and engaging workers under sham independent contract arrangements, as well as exploiting vulnerable temporary foreign workers,” the union said in its submission.

“There is also a proliferation of labour hire firms avoiding paying employee entitlements and tax through phoenix activities.”

Employer groups, however, disagree. In its submission to the Victorian inquiry, Master Builders Association of Victoria argued that labour hire arrangements are a legitimate form of arrangement which helps businesses within the construction sector conveniently access a source of labour to meet peaks and troughs in demand.

As for pay and conditions, Master Builders notes that all labour hire arrangements are subject to the same awards and minimum conditions as would be the case were the worker in question hired by the host company, whilst loading is provided to those employed on a casual basis in lieu of leave entitlements. Any workers previously employed by the host company in question who are transferred to labour hire companies, meanwhile, are entitled under the Fair Work Act to retain their existing terms of conditions of employment.

Going forward, the CFMEU wants a licensing system with minimum capital requirements and compliance checking as well as a statutory minimum period for labour hire assignments with a given host organisation and for labour hire firms to be excluded from engaging staff on working holiday visas or student visas. Such measures, it believes, will help weed out unscrupulous operators, prevent situations of sham arrangements and those who in reality work for the host company on an ongoing basis being forced to remain indefinitely within labour hire arrangements and help prevent foreign worker exploitation.

Underhill supports the notion of a registration system, which she says will help eradicate fly-by-night operators and put a ‘floor’ on standards, helping not only labour hire workers and legitimate labour hire operators but also host employers, who would end up being sent better trained workers whose skills and experience more suitably matched to the role in question.

“The problem is that there are labour hire companies that do all of the right things in terms of training, communication with their workers and going the extra mile in terms of safety,” Underhill said.

“They are the ones that are undercut by the ones with poor practices. Those companies are losing business to those companies who are really just in it for a fast buck and who take little notice of their employment obligations.

“You need a system that creates a floor so that better companies can operate without continually being undercut.”