Using contractors and outsourcing - some agreement provisions


Using contractors and outsourcing - some agreement provisions

Many employers may wish to use the enterprise agreement as a means of allowing the possibility of certain work to be performed by contractors or even outsourced completely.


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Many employers may wish to use the enterprise agreement as a means of allowing the possibility of certain work to be performed by contractors or even outsourced completely.

Whilst many trade unions frown on this practice, if contained in the agreement, it does provide the employer with a certain flexibility, particularly in situations where the time-frame for hiring appropriate employees cannot meet the immediate necessity of the work to be performed.

The use of contractors can be put to a union(s) or an employees' committee party to an enterprise agreement as a legitimate mechanism to assist permanent employees to participate in appropriate training, development activities and skills transfer.

Use of contractors

Many enterprise agreements establish general principles to identify the circumstances under which the employer would consider the use of contractors.

There may be functions within an organisation which are traditionally earmarked to be performed by contractors so the agreement may identify these specific functions.

Generally, reference to the use of contractors may continue subject to certain guidelines, such as:

  • the work volume is beyond the capacity of the resources or staff of the company;

  • the type of work or specialisation required is beyond the capacity of the resources or the staff of the company;

  • it is in the company's interest (or the public interest in the case of a government department or agency) to undertake such work and includes issues of cost effectiveness;
    the security and tenure of employment of additional staff required to meet work peaks cannot be guaranteed; and

  • the security of employment of employees engaged by the company shall not be impaired by the use of contractors.

The agreement may also have a provision which adopts the principle that it is unacceptable to use contractors as a device to avoid increasing staff numbers:

  • to meet developing work demands of a permanent and continuous nature in current operations; or

  • to circumvent the availability and delivery of training to permanent employees.


The agreement may make a statement that the company will consult with the relevant union(s) or employees committee if it decides to enter into any significant new use of contractors and where relevant will provide appropriate details about the proposed use of contractors.

Employment of contractors

The agreement may provide that contractors and/or their employees will not be appointed to any positions within the company covered by the agreement unless normal advertising and selection processes have been followed.

This is to ensure that outside people are not placed in any position which is regarded by current staff as an opportunity for internal promotion.

Outsourcing - employees' concern

The greatest concern for employees employed in a section of an organisation earmarked for outsourcing is job security and maintenance of employment entitlements.

The agreement could state that should a whole function of the business be outsourced the parties agree that it is a transmission of business within the meaning of the applicable federal or state legislation. This has the effect of ensuring the continuity of their employment entitlements.

Contract documents - compliance requirements

For the benefit of contractors performing work for the company, the agreement may identify the company's compliance requirements before a contractor or his/her employees can commence work on the premises.

Such compliance requirements may include:

  • Occupational Health and Safety and Workers Compensation legislation;

  • safe working practices including PPE and test equipment equivalent to that used by the company's employees;

  • Codes of Practice and Standards established or promulgated by the appropriate industry regulator or standard setting entity including those prescribed under the relevant employment legislation;

  • reporting monthly on a range of occupational health and safety indicators;

  • reporting monthly on workers compensation indicators; and

  • reporting at appropriate junctures on quality assurance.

Other minimum requirements may include:

  • contractor accreditation;

  • industry standards on training;

  • engagement and supervision of sub-contractors;

  • compliance measures (including compliance audits);

  • penalties; and

  • termination arrangements.

Contractors will usually be required to make payments on behalf of their employees to the appropriate superannuation fund(s) and severance funds (where applicable) in accordance with the relevant federal or State award/agreement/legislation.

Training issues

Where the use of contractors is the result of an ongoing need for a particular skill that employees could reasonably expect to acquire and use, the company may indicate it will provide appropriate training to develop an in-house capacity in those skills.

This is an appropriate way in which to utilise the skills being used through contractors by passing them on to the relevant employees within the company. The offers of training and skills acquirement should initially be limited to full-time staff. Part-time and casual staff should only be offered the relevant training when no full-time employee volunteers to undergo such training.



Agreements generally

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