Over the past two decades a profound workforce revolution has taken place in which the traditional roles of employer and employee have increasingly given way to a whole range of commercial contract arrangements. Independent contracting has become the new norm fuelled largely by the growth in franchise and labour hire activities.
This growth in independent contracting has been so significant that 28 per cent of the private sector workforce - nearly two million workers - operate under independent contracting arrangements. In fact, the number of independent contractors in Australia exceeds the number of union members. This is a paradigm shift in the true sense of the word and the nature of this phenomenon should not be underestimated.
The world has indeed changed. The information age has allowed people to take more and more control of their lives and that inner resourcefulness and enterprise of so many Australians is bursting forth.
What distinguishes independent contractors from employees is the manner in which their services are engaged. Unlike employees, they are not subject to a “contract of dependency or control”, as the International Labour Organisation (ILO) defines it, but instead are parties to a commercial contract. As commercial businesses, even if it's just a business of one person, they are subject to the provisions of commercial law operating under free market principles where payment is most commonly linked to output.
Naturally, not everyone is happy with what is taking place. While tariff protection today has few serious defenders and open financial markets are no longer contentious, the “freedom to contract” has not been similarly championed and as a result the status of independent contractors is under threat both locally and internationally.
At the local level, state governments, with the urging of their trade union constituency, have enacted legislation that deems independent contractors to be employees. However, in what seems ironic at best and hypocritical at worst, state governments continue to be among the most prolific users of independent contractors, engaging their services in the performance of all manner of government activity, from cleaning toilets to orchestrating spin.
Thankfully, at a national level we have seen a more realistic appreciation of the changing nature of the workforce and as a consequence independent contractor legislation is about to be introduced into Federal Parliament. Through this legislation it is intended to define the scope of independent contracting and enshrine and protect the rights of independent contractors to engage on a commercial basis without impediment or interference.
A logical next step would be to take the responsibility of administering the new independent contractors Act out of the employment and workplace relations portfolio and put it with the Minister for Small Business to once and for all distinguish between employment (Workplace Relations Act) and business (the new independent contractors Act).
The Labor Party, however, seems to be in complete denial about the changes taking place in the real world. Kim Beazley's recent announcement that he will reinstate unfair dismissal legislation if he gets into office is a case in point. Heavens above, even the Europeans have been forced to admit that an impediment to fire is an impediment to hire, hence the decision by the French Government to abolish restrictive dismissal provisions to enable employers to hire unemployed young people more easily. Will Beazley leap on the independent contractors Act and threaten to repeal that also? Probably.
The ILO (a division of the UN), based in Geneva, focuses exclusively on labour issues and in recent years has been engaged in a protracted and difficult debate to define the scope of employment. Since 1996 the ILO has been struggling with this issue of independent contracting, culminating in 2003 with a significant thrust being mounted against the legitimacy of independent contractors.
The result of that struggle however was the successful recognition of independent contractors and acknowledgement of their right to operate within a commercial framework. In June this year the ILO will again debate the issue of independent contracting with a particular focus on what it calls the triangular relationship, more commonly referred to as labour hire.
While this debate may be far removed in a geographic and intellectual sense from the day-to-day interests of Australia's independent contractors, it is not. There is a great deal at stake here. What independent contractors value beyond all else is their independence and they utterly reject the notion that they should by way of deeming provisions, ILO declarations or any other regulatory measures, be turned into employees. They also believe that people should have the right to work as hard as they like, for as long as they like, in order to achieve the things they want in life.
Any attempt by the ILO, or anyone else for that matter, to diminish the capacity of independent contractors to enter into commercial arrangements which suit their own needs and purposes represents a threat not only to their rights of existence but also to the future strength and vibrancy of the Australian economy. What is needed in Australia is more independence and more self-reliance, not less, if Australia is to become the great nation it has the capacity to become.
On the productivity front, the benefits of independent contracting are there for all to see. Financial reward is linked to output, disputes are rare and when they do occur they are usually sorted out between the parties without the need for strikes, histrionics or legal interventions. But it's not just about productivity. Independent contractors are happier with their lot than employees. In research published by a Stockholm conference on self-employment, a survey of 16,000 people in 23 countries found that independent contractors were happier in their work because of their independence.
Australia's independent contractors Act will be a world first. Australia's role as a strong, resilient, robust economy riding on the back of an increasingly flexible workplace structure makes it ideally placed to champion this new workplace paradigm, so desperately needed throughout the world.