BHP warns of $1.3 billion cost blow from new IR laws

The Federal Government is playing down Australian mining sector claims that new industrial relations proposals will significantly impact the industry’s bottom line, including estimates attributed to BHP (ASX: BHP) of a potential $1.3 billion jump in its wage payments.

Australia Workplace Relations Minister, Tony Burke, says the proposed “same job, same pay” IR reform is targeting the potential use of a “loophole” impacting lower paid labour by hire firms.

In a recent interview, Minister Burke said the government had identified the potential labour hire loophole and that new IR reforms are now set to come up for debate.

“There’s a whole lot of consultation happening in terms of transition as to how you phase this, how you do it. We haven’t landed on any of those decisions. But the principle that we took to the election is the principle we intend to legislate. Which is at the moment, if you have the employer agree and the workers vote and the Fair Work Commission register that this is what the rate of pay is going to be at a workplace,” the Minister said.

Miner concerns

According to the Minister, the issue of differing pay levels has been personally presented to him by mine workers.

He said a Hunter Valley miner recently told him that casual workers on the mine site were being paid less than permanent workers per hours.

“We all think of a casual loading, the casuals there were being paid less than the permanent workers because the labour hire loopholes being used.”

According to numerous reports, BHP has raised concerns that labour hire companies may be blocked by the new industrial relations laws, leading to a $1.3 billion a year increase in costs for businesses.

The company is reported to have said that it estimates that the impact on its Australian operations is equivalent to the labour cost of approximately 5000 full-time employees across its operational workforce.

Government principles

The Department of Employment and Workplace Relations has unveiled a number of principles to be considered with the introduction of Same Job, Same Pay measures.

This includes assessing whether business should be able to access labour hire for genuine work surges and short-term needs and whether labour hire workers should be paid at least the same as directly engaged employees doing the same work.

Further political and industry debate will be undertaken on the coming months, with mining not the only sector affected.

Legal view

Mellor Olsson lawyers said recent release of a Department of Employment and Workplace Relations consultation paper confirms the Federal Government’s commitment to a proposal that, if you do the same job as a directly engaged employee, you should get the same pay.

The Government is considering amending the Fair Work Act 2009 (Cth) (FW Act) to introduce positive obligations on labour hire providers and host employers to ensure labour hire employees receive at least the same pay as employees engaged directly by the host employer.

The paper outlined a number of criteria for identifying when a labour hire worker is performing the ‘same job’ as a directly engaged employee.