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Slam the Sham

What is sham contracting?

Sham contracting is an illegal but widespread practice in the Australian construction industry.

It occurs when a company signs up workers as independent contractors (also known as ABN* workers) instead of hiring them properly as employees.

Companies use sham contracting so they can avoid giving an employee their working rights and entitlements. Employees on sham contracts miss out on rights and entitlements such as:

  • paid sick leave, holiday leave and long service leave
  • overtime and public holiday rates
  • protection against unfair dismissal
  • redundancy payments 
  • superannuation payments from employers
  • workers' compensation insurance
  • fares and travel allowances
  • and more.

*ABN stands for Australian Business Number

What does this mean for workers?

Think about it.

No sick leave, long service leave or paid holidays means every day you don’t work, you earn no money.

If your employer doesn’t pay Superannuation, you can end up with no pension.

If the boss doesn’t pay Workers’ Compensation, who is going to cover you if you are injured at work?

How do I know if I'm on a Sham Contract? What can I do about it? - go to Campaign Downloads (left) and read the Slam the Sham booklet in English, Arabic, Chinese, Croatian, Greek, Italian, Korean, Serbian and Vietnamese. Or download the flyer in language of your choice.

Why do we need to stamp out sham contracting?

Sham contracting erodes the wages and conditions of workers.

When workers who should be employees are put on sham contracts, they are denied many of the benefits and protections that employees are legally entitled to.

The community misses out as well.

By disguising employment relationships as independent contracts, companies avoid paying payroll tax. That means less money for our schools, roads and hospitals.

When companies don’t pay superannuation, it shifts the burden of funding workers’ retirement on to society. Workers with no super have to rely on government pensions.

Sham contracting also gives an unfair advantage to companies doing the wrong thing. By evading tax, not contributing super and not paying industry standard wages and entitlements, companies that engage sham contractors are able to undercut honest employers who are doing the right thing by their workers and the community.

 

CFMEU's plan to stop sham contracting includes changes to the Fair Work and Tax laws: see Race to the Bottom report March 2011 in Campaign Downloads (left).

What needs to be done NOW?

A new CFMEU investigation has brought to a halt hundreds of sham contracts at construction sites across Australia on big-name contractor projects, as well as smaller sites. 

Bovis Lend Lease,  Multiplex, Leighton construction jobs are among those which have come under the scrutiny of the Union since March 1. These companies are taking lucrative Government contracts with one hand, while undermining Australia’s tax base with the other.

Nationwide audits are continuing. The CFMEU is stepping up its campaign against sham contracting because the authorities are turning a blind eye to the practice.

STOP the scam at source:

The CFMEU demands that:

  • Banks and financiers prove their corporate responsibility – no money for projects with Sham Contracting
  • Builders and developers must weed out Sham Contracting at the tender stage – cheap tenders lead to Sham Contracting
  • Builders and developers must ban Sham Contracting on their jobs
  • Government projects ban sham contracting immediately
  • Principal contractors should check their subcontractors: 100% of wages, entitlements and tax should be paid to workers before subbies get their next progress payment
  • Contractors who are forcing workers on to sham contracts should be banned from the industry.

 

Download the CFMEU Campaign flyer to Stop Sham Contracting (left) and get involved today.  NOTE: there are separate flyers for each State/Territory with CFMEU Construction contact numbers for each Branch campaign.

Facts

  • According to 2009 ABS figures, construction accounts for 33% of all persons working as ‘independent contractors’* in Australia, although it accounts for only 9% of total Australian employment.
  • 36% of all persons working in construction in Australia (or 336,000 people) were working as ‘independent contractors’ in November 2009.
  • The proportion of the construction industry working as ‘independent contractors’ was more than five times the rate in all other industries (36% vs. 7%).
  • The 336,000 people working in construction as ‘contractors’ included 49,000 labourers, a category the ATO has decided is ineligible to hold an ABN and work as a contractor.
  • In 12 months, 2008-2009, the number of ‘independent contractors’ in construction grew by 7.6%, even though employment in the industry declined by 4.9%
  • Based on official figures, the CFMEU estimates the number of sham contracting arrangements in the industry at November 2010 to be between 92,000 and 168,000. This represents between 26-46% of all independent contractors in the industry. Anecdotal evidence and industry experience suggests the real figure is much higher.
  • The CFMEU estimates that tax revenue leakage attributable to sham contracting in construction may be $2.475 billion per year.
  • There are 336,000 ‘independent contractors’ in construction and 890,000 ABNs.
  • The current Fair Work Act 2009 does not make sham contracting unlawful. It only deals with what employers say about an employment relationship and whether they incorrectly describe someone who is an employee as an independent contractor. It allows employers to argue that they didn’t think about the difference between an independent contractor and an employee when they made statements about a person’s employment status.
  • Current Tax laws allow the tax treatment of income derived from personal services to be distorted by the use of artificial business structures and sham contracting arrangements.
  • *NOTE: Citation of these ABS figures should not be taken as acceptance by the CFMEU that all persons cited by the ABS as being within the category of ‘independent contractor’ would in fact be an independent contractor as a matter of law.
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Tell a Mate

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Your Messages

  • How can this keep happening?

    Susan's Message - submitted Monday 19 July 2010

    In memory of Brian Murphy

    With the recent news of yet another death, this one at the desal plant, we are forced yet again to relive the heartache of that day when we were told that Brian had been killed at work, similarly crushed by a load of steel falling from a truck.
    After 3 years it has not gotten any easier to live without him and every death that has occurred since has been like another knife through our hearts. How can this keep happening?
    Worst of all was having to face the penalties that were handed down to the company where Brian's accident occurred. After admitting fault the SAIRC fined Normetals $52,000 for failing their duty of care in relation to Brian's death. At the same time the media were reporting a story of a company that was ordered to pay $250,000 to a worker for a sexual harrassment suit. It absolutely boggles the mind and darkens the heart to know that Brian's life meant so little to those he worked hard for and to our Government.
    We will not let him or his death and the deaths of other workers be forgotten.
    RIP to all those who have lost their lives working hard for their families.

    Read the full article

Leave a message

To commemorate International Workers' Memorial Day, the CFMEU is putting together a website tribute wall with messages for mates who have been seriously injured or killed on construction jobs.

Or phone the CFMEU National Publicity Officer
on 02.8524 5800 with your message

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Videos for "Slam the Sham"

Ark Tribe - Not Guilty

http://www.youtube.com/watch?v=KQRyTGS6x

Created on 03/02/2011

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