Enterprise agreement negotiations are typically treated as a direct-workforce matter — HR, the union, management, legal. But the outcome of your EA negotiation will shape the total cost and flexibility of your contingent workforce for the next three to four years. If your workforce planning team is not at the table when EA strategy is set, you are likely to end up with an agreement that creates constraints or cost surprises in your labour hire program that were entirely avoidable.
This article covers how collective bargaining intersects with contingent workforce strategy: what unions commonly pursue on labour hire, what host employers can and cannot agree to in an EA, what happens to labour hire workers during industrial action, and how to build contingent workforce considerations into your EA planning cycle.
Managing a workforce that includes both direct employees and contingent labour requires a coherent strategy across both. Programmed’s MSP and people solutions service is designed for employers who need to manage that complexity at scale.
Key takeaways
- Labour hire workers cannot be covered by the host’s enterprise agreement and cannot vote on it — but the EA outcome directly affects their pay via Same Job Same Pay, and their presence on site affects union bargaining dynamics.
- Unions commonly pursue EA clauses restricting labour hire use — employers need to understand which claims are within scope for an EA and which cross into operational matters that should not be conceded.
- Industrial action by direct employees does not automatically extend to labour hire workers employed by a different entity — but the operational consequences are significant and need to be planned for.
Labour hire workers and enterprise bargaining: the legal position
An enterprise agreement is made between an employer and its employees. The labour hire provider is the employer of labour hire workers — not the host. This means labour hire workers cannot be covered by the host’s EA, cannot be named as bargaining representatives, and cannot vote on whether to approve the agreement.
That legal separation is straightforward. What is less straightforward is the economic link that now exists via Same Job Same Pay. Where an FWC labour hire order is in force, the EA the host negotiates sets a pay floor for labour hire workers doing the same work. A 5% pay increase for direct employees under the EA flows through to labour hire worker rates — increasing your provider’s cost base and, by extension, your labour hire spend. The host’s EA is no longer only a direct-employment cost document.
For a detailed explanation of how EA coverage and Same Job Same Pay interact, see our article on enterprise agreements and labour hire EA coverage.
How unions approach labour hire during bargaining
Unions representing workers on sites that use labour hire have a legitimate interest in how contingent labour affects their members’ job security, conditions, and bargaining power. Common claims made during EA negotiations include:
- Ratio clauses: provisions requiring a minimum proportion of direct employees relative to contingent workers (e.g., “no more than 20% of the workforce may be labour hire at any time”).
- Work preservation clauses: provisions restricting the use of labour hire to perform work previously performed by direct employees, or requiring that vacancies be offered to direct employees before labour hire is used.
- Signatory provider clauses: requirements that any labour hire provider used on site must be a signatory to a union agreement.
- Conversion clauses: provisions requiring that labour hire workers who have been on site for a defined period be offered direct employment.
These claims reflect genuine union concerns and are worth engaging with seriously. An employer that dismisses all labour hire-related claims without explanation is likely to face harder bargaining on other matters.
What can go into an EA and what cannot
Enterprise agreements under the Fair Work Act can contain “permitted matters” — terms about the employment relationship between the employer and the covered employees. They cannot contain “unlawful terms” or attempt to regulate the conduct of third parties (such as labour hire providers) in ways that exceed what the Act allows.
In practice, this creates a spectrum. A ratio clause that limits the proportion of labour hire workers as a percentage of the host’s total headcount is likely to be challenged as an attempt to control the host’s operational decisions beyond what an EA can regulate. A clause that gives direct employees preference for available positions before external labour hire is sourced sits closer to the permitted end.
Employers should seek legal advice before agreeing to any EA clause that purports to restrict how, when, or from whom labour hire is used. Agreeing to an unenforceable clause is not harmless — it creates an expectation that may be difficult to walk back and can generate disputes when you rely on labour hire in ways the union believes are inconsistent with the clause.
The practical approach is to address union concerns about labour hire as an operational matter — through genuine workforce planning commitments, direct hire targets, and transition pathways — rather than locking them into EA terms that may be legally problematic and operationally constraining.
Same Job Same Pay and bargaining cost modelling
Because Same Job Same Pay now links your EA rates to your labour hire costs, EA negotiation is also a labour hire cost modelling exercise. Before you enter bargaining, you should know:
- What proportion of your contingent workforce is subject to a Same Job Same Pay order.
- What a proposed EA wage increase translates to in labour hire cost uplift over the life of the agreement.
- Whether your labour hire contracts include repricing mechanisms that allow providers to adjust when your EA changes.
An EA that appears affordable when you model direct-employment costs alone can look very different when contingent workforce costs are included. This is not an argument against reasonable wage increases — it is an argument for complete cost visibility before you commit to a position at the table.
For a review of how to check that labour hire workers are being paid correctly against applicable instruments, see our article on Same Job Same Pay and labour hire.
Industrial action and labour hire workers
Protected industrial action under the Fair Work Act can only be taken by employees covered by the agreement being negotiated. Labour hire workers employed by a provider are not employees of the host, are not covered by the host’s EA, and cannot participate in protected action related to the host’s bargaining.
This has important operational consequences:
- Labour hire workers can continue working during a work stoppage by direct employees — they cannot be stood down by the host under the same industrial action provisions.
- However, labour hire workers may face practical difficulties — crossing picket lines, union pressure, or simply an inability to perform work that requires direct-employee collaboration.
- The host cannot instruct labour hire workers on how to respond to industrial action — that is a matter for the provider as employer.
- The host should notify the provider promptly if industrial action is anticipated so the provider can manage obligations to their own workers.
This does not make labour hire a strike-breaking mechanism — and treating it as one is likely to inflame bargaining and generate union claims that further restrict labour hire use. The point is to understand the legal framework so you can plan operations appropriately if action occurs, not to exploit the distinction.
Building contingent workforce strategy into EA planning
EA negotiations set conditions for three to four years. Labour hire strategy built on rates, flexibility assumptions, or volume projections that do not account for the new agreement is built on stale data from day one. The planning steps that make a difference:
- Bring your contingent workforce manager or provider into EA pre-planning at least six months before bargaining opens.
- Model total workforce cost — direct and contingent — under the range of possible wage outcomes.
- Review your labour hire contracts to confirm they include repricing mechanisms tied to EA changes.
- Consider what union claims about labour hire you can address operationally without conceding EA terms that restrict your flexibility.
- After agreement certification, update your labour hire providers immediately and confirm the timeline for rate adjustments.
Related reading
W41-01: Enterprise Agreements and Labour Hire: How EA Coverage Affects Your Provider
Related services
MSP and People Solutions — managed contingent workforce programs designed for complex, multi-site environments including unionised operations.
Managed Skilled Workforce — structured labour hire delivery with EA-aligned pay management and compliance tracking built in.
FAQ
Can labour hire workers vote on our enterprise agreement?
No. Labour hire workers are employed by the provider, not by you as the host. They are not your employees and cannot vote on your enterprise agreement. They are also not covered by the agreement — though the agreement may indirectly affect their pay via Same Job Same Pay if an FWC labour hire order applies.
Can we agree to an EA clause that limits how much labour hire we use?
Proceed with caution. EA clauses that purport to restrict operational decisions about who you engage may exceed what an enterprise agreement can lawfully regulate under the Fair Work Act. Seek legal advice before agreeing to any ratio clause, work reservation clause, or signatory-provider requirement. Agreeing to an unenforceable clause creates expectations you will struggle to manage.
What happens to labour hire workers on site during a strike by direct employees?
Labour hire workers are not covered by the host’s enterprise agreement and cannot participate in protected industrial action related to the host’s bargaining. They cannot be stood down by the host under industrial action provisions that apply to direct employees. However, they may face practical difficulties working during a stoppage. The provider, as employer, manages obligations to labour hire workers — keep them informed and notify the provider early if action is anticipated.
Does a wage increase under our EA automatically change what we pay our labour hire provider?
Not automatically — but if a Same Job Same Pay order applies, the provider must update labour hire worker rates to match the new EA comparison rate. Whether that flows through to your invoice depends on your contract terms. Labour hire contracts that do not include EA-linked repricing mechanisms create disputes when the EA changes. Build a repricing mechanism in before you need it.
Next step
If you are approaching an EA renewal and you have a significant contingent workforce, talk to Programmed before bargaining opens. Understanding the total cost impact — direct and contingent — before you enter negotiations gives you a clearer mandate and avoids repricing surprises mid-agreement.
Talk to us about MSP and people solutions.
General information only: This article is for general informational purposes only and does not constitute legal advice. Legislation varies by state and territory — consult a qualified employment lawyer or Fair Work adviser for guidance specific to your situation.
