The “Gig Economy” – and the complete failure of our Regulators.

Posted on August 23, 2018

Over the past couple of years, we’ve seen new terminology developed to describe people who are supposedly self-employed contractors being engaged by businesses – the so-called “Gig Economy”.  Those promoting the gig economy see it as a way of getting around our labour and employment laws. The people who are supposed to regulate this ‘new’ business model (Fair Work Australia) clearly haven’t spoken with the ATO about the definition of “contractor”.

What is clear, is that the gig economy allows businesses engaging these so-called contractors to avoid paying the people they hire properly, and to avoid paying the on-costs that legally have to be paid by every employer with respect to every employee – such as workers compensation insurance and superannuation.

The justification for this development, it appears, is that businesses think the people they employ cost too much and it is better to pay them less, than not to employ them at all.. There’s no doubt this is a perspective that suits the owners of businesses, but there’s equally little doubt that it is based on a fallacy – and is not at all good for people who would otherwise be employed (paid properly and insured) as casual employees.

In the past 12 months, we’ve seen increasing numbers of casuals who tell us they were being paid between $7 and $13 per hour, as part of the gig economy. The people running the operations or Apps tell these hospitality workers that they are self-employed and need to arrange their own insurance. They are also advised that, for the same reason, they will not be paid superannuation. Looking at the way most gig economy businesses operate, at the very best the casual workers they utilise are sub-contractors. Australian law requires even sub-contractors be covered by workers compensation insurance.

Now this may all sound a bit boring and you might figure people can negotiate for a higher fee if they think they’re worth it. Certainly, there are some highly sought-after baristas in Sydney earning $40 cash per hour working as ‘contractors’ – but they are in the overwhelming minority. AND, they are not insured and they are not putting any money away for their later years (superannuation).

Another significant impact of Fair Work Australia ignoring the gig economy and allowing it to regulate itself, is that we’ve seen the days of “black money” – people earning cash and never being shown as employed – return to our industry. Back in the 80’s and 90’s, huge efforts were made by the ATO to ensure that people who were employed were insured, paid properly and paid tax – and that businesses paid tax if they earned a profit. The last couple of years has seen the cash economy return nearly to those 80’s and 90’s levels.

Again, you might think that this is all just boring stuff and that the market should be allowed to regulate itself. But, here’s the crunch – at a time when Australia depends on its tourism and hospitality industry at least as much as ever to ensure tourism numbers stay up and to keep hospitality employment growing, we’re finding it near impossible to find enough people to satisfy demand from employers. And this is happening because, more than ever, the complete failure of Fair Work Australia to regulate the industry means that people are leaving in droves, convinced that they’ll never be able to make a decent living – or supplement their other income, because the remuneration on offer is just too low.

This regulatory fiasco is highlighted by the failure of the regulator to pursue the highest profile offenders of employment law – and payment of Award wages – in our Industry. Most will remember a number of highly celebrated chefs being found not to have paid Award wages and recently Melbourne’s Vue de Monde restaurant. From what we understand, no fines have been levied against these high profile offenders and, from what we hear, the amounts left unpaid to workers have still not been paid in full.

This, of course, sends a very loud message to our Industry and everyone employed in it. If you are a celebrity, pay what you want and at worst you’ll have to repay what you owe. If you want to avoid paying employees’ entitlements and not to have to insure them – just call them contractors. In both cases, Fair Work Australia’s response makes it clear that you have nothing to worry about.

We did, in fact, approach Fair Work Australia on this subject and were told that all the gig economy workers were contractors, so not within FWA’s jurisdiction. In actual fact, if Fair Work Australia spoke to the Australian Taxation Office (ostensibly also a part of the Federal Government), they might be surprised to hear that most gig economy workers fail the tests the ATO applies to determine whether workers are employees or contractors. Possibly, though, it’s easier to ignore the blindingly obvious than to investigate a new business model.

As an organisation that has been committed to keeping the Hospitality & Catering industry alive for nearly three decades, we struggle to understand what the thinking is – or whether there’s any thinking being done at all – within Fair Work Australia as it blunders along its erratic path. First they make haphazard changes to Awards that make employment more expensive (but do help to keep casuals in the industry because they protect penalty rates). Then they completely fail to regulate so-called ‘contracting’ arrangements that are clearly designed to thwart those pay increases and result in far lower wages being paid, with no insurance and no superannuation being provided.

We’ve been trying to have this message heard far and wide, but it appears there is either no political will or insufficient understanding of business to allow us to be heard by the Regulator. If they don’t act soon, more people will leave the industry and many tourism & hospitality businesses will face having to wind down their operations.

From where we’re standing, all we can say to you as you read this, is if you’re an employee, don’t put up with being paid less than you are entitled to. If you’re a business, think about what paying people less than the Award pay and conditions will mean for the Industry in the medium term – and start to place a value on the people who look after your customers. And, by the way, good luck if someone gets injured while they’re working for you – trying to pay them less than they are entitled to might just prove to be a very expensive decision!