WHY INSIST ON THE ASIAL SUBCONTRACTING CODE OF PRACTICE?

WHY INSIST

ON THE ASIAL SUBCONTRACTING CODE OF PRACTICE?

By Chris Delaney

The problem of unsustainable rates in the Security Industry runs from the top of the Supply Chain through to the Security Officer providing the service. ASIAL has developed the Subcontracting Code of Practice as one tool that will help fix it.

The top of the supply chain – whether it’s Local, State or Federal Government or Facilities Management Companies or businesses - often puts pressure on private security providers to “sharpen their pencils” – a euphemism for dropping the price (and usually to unsustainable levels). The justification is often that the client is seeking “value for money” – another euphemism, this time meaning “lowest possible price”. Some customers don’t know or even try to know what a reasonable or sustainable price should be.

Some time ago we wrote about the cost of providing a security officer and the responsibilities of end users under s550 of the Fair Work Act 2009 (the Act). A revised schedule appears below.

Level 1 Security Guard working a 24/7 Roster at 1 July 2019 (1 weekend a month)

Base Rate + Penalties

Annual Leave, Personal Leave, Long Service Leave, Superannuation, Payroll Tax, Worker’s Compensation, Various Insurances and Indemnities, Administration

Average Cost of providing the service Hourly rate

$31.55

$10.00

$41.55

Penalty rates apply to Security guards. Saturdays at time and a half ($33.42), Sundays double time ($44.56), and Public Holidays double time and a half ($55.70) – for a Level 1 Guard. Most are level 2 or above. Casuals get an extra 25%.

NB The above costs are before the security provider can apply a reasonable profit margin.

It is incumbent on clients to ensure that private security providers are compliant with all legal requirements. And merely asking the provider to declare that they are compliant is not sufficient.

ASIAL recommends that clients seek hard proof of compliance either by audit or third party accreditation.

One issue of concern lies with the use by the private security provider of subcontractors to carry out the work. While this can be a genuine business model in some instances, there are dangers of which clients should be mindful, especially when the suncontractor is an independent contractor.

Much has been written about wage theft and exploitation of workers. It is paramount that clients become familiar with the composition of the security providers workforce. One group open to exploitation is the “independent contractor” often called an “ABN holder”.

There are significant contrasting features between a person who is an employee and an independent contractor. An employee is in a relationship of personal service. An independent contractor is a business person.

Many people who are appointed as contractors are not really in business or truly independent, but rather are dependent on a principal.

More often than not, in the protective services sector of the security industry, ABN holders do not reflect the characteristics of a bona fide business owner. Often the work is carried out personally, rates are not negotiable, there is no commercial risk for the ABN holder and they cannot substitute another to carry out the work. They work when and where they are directed, have no tools or equipment and cannot create goodwill.

AREAS OF EXPOSURE

• Underpayment of Wages, Annual Leave etc. • Underpayment of Superannuation • Failure to provide Worker’s Compensation Cover • Avoidance of Income Tax • Avoidance of Payroll Tax • Heavy fines for each breach of the Fair Work Act 2009 and/or the Award.

These relationships are at risk of being deemed employer/ employee, expose the security provider and the client (under s550 of the Act) to back pay, costs and fines.

ASIAL recommends proceeding with caution in arrangements that include the use of independent contractors providing security services to prime contractors in the protective services sector.

As a way of dealing with this issue and subcontracting in general, ASIAL is implementing The ASIAL Subcontracting Code of Practice (the CoP).

Commencing on 1 July 2021 the CoP is an important initiative that provides best practice guidance on the use of subcontractors in the protective security services sector.

The Code aims to raise professional standards, eliminate sham contracting and improve service delivery to customers.

The Code applies to and must be adhered to by ASIAL Members operating in the protective security services sector. ASIAL members will have exclusive access to the checklists and tools referenced in the Code. These include: • Appendix 1: Employee vs Independent Contractor

Checklist – a checklist to assist in determining whether an independent contractor is actually an employee; • Appendix 2: Subcontractor Information Form - a template for capturing relevant information about subcontractors; • Appendix 3: Recommended Terms – a checklist that sets out key details and information that may be preferable to include in the contract between the Prime (Head) contractor and the subcontractor; • Appendix 4: Security Contractor Audit – a framework against which periodic audits can be conducted. ASIAL recommends that, as part of any contract with a private security provider where subcontracting features, clients require proof of compliance with the CoP from each party before and during the contract.

AWARD OR ENTERPRISE AGREEMENT?

Tenders for protective services work should include a requirement to identify the industrial instrument under which the security officers are paid. The Award providing minimum pay and conditions for security officers employed by National System employers, is the Security Services Industry Award 2020 (the Award). It provides for: • Minimum hourly rates of pay; • Penalty and weekend and public holiday rates; • Minimum and maximum hours of work; and • 5 Classifications covering different tasks and levels of responsibilities. Some security providers have Enterprise Agreements (EAs) approved by the Fair Work Commission. Many of these will have a flat or “loaded rate” of pay. Current approved EAs, are those that have not reached their nominal expiry date and have passed a Better Off Overall Test (BOOT) i.e. the employee is better off under the EA than they would be doing the same work under the award.

The term “Zombie EBAs” refers to those industrial instruments, which have passed their nominal expiry date but have not been terminated or replaced by another agreement. Some of these EBAs may include terms and conditions that do not include penalty rates and other award related benefits – that would not pass the BOOT under current tests, and often give the security provider a commercial advantage over competitors.

While most Zombie EBAs are technically lawful, they can be terminated by application from an employee (or another party to the agreement), forcing the security provider to revert to the award. If this occurs employees’ rates of pay are sure to increase and the security provider may not be able to maintain the service at the contracted price, adversely affecting the continuance of the service to the client.

USE OF ABN HOLDERS OR INDEPENDENT CONTRACTORS

What should clients do?

When awarding tenders or contracts insist that the Security Provider meet the standards set by the ASIAL Subcontracting Code of Practice (CoP).

Use the CoP to require the security provider, at the tender stage and regular intervals throughout the contract, to prove that they are meeting their compliance responsibilities, paying employees in accordance with a lawful industrial instrument and not involved in dubious subcontracting arrangements with individuals.

Don’t confuse value for money with lowest price. Haggling over price is degrading for both the customer and the security provider.

Remember the security provider has to be compliant with workplace laws and regulations governing licensing of both their business and their employees and you have responsibilities too under s 550 of the Fair Work Act 2009.

When determining what security needs you have to be conscious of and realistic about the cost associated with the provision of those services and what might be a reasonable expectation of price, including a reasonable margin for profit.

If you need further information about the provision of security services, compliance or workplace issues contact ASIAL for further advice.

About the Author: Chris Delaney

Chris Delaney is a highly regarded employee relations professional with over 40 years’ experience in industrial relations and human resources.

Note: The information provided above is for convenient reference only. ASIAL and Chris Delaney & Associates Pty Ltd provide this information on the basis that it is not intended to be relied upon in any cases, as the circumstances in each matter are specific. Accordingly, we provide this information for general reference only, but we advise you to take no action without prior reference to a workplace relations specialist.