|Issue No 99||15 June 2001|
Redundancy Rules Promote Outsourcing
A loophole in redundancy laws is leaving employees of small business without redundancy protection and providing an incentive for employers to contract work out.
The Textile, Clothing and Footwear Union has called for a review of the NSW Employment Protection Act in the wake of the One.Tel and HIH collapsed.
Under the Act, employers of less than 15 employees are exempt from having to pay redundancy pay to workers they retrench.
TCFUA state secretary Barry Tubner says the effect has been to make outsourcing and contracting out much more attractive. Tubner says the practice is now rampant in the industries he represents.
"In the clothing industry about 95 per cent of firms in SNW would engage less than 15 employees," he says. "That means that 95 per cent of employees are prima facie not entitled to severance pay in the event of redundancy."
"A principal contractor might contract out production to 20 or more contractors who would then in turn typically contract out production to one hundred or so makers.
"It would be very rare to find a single business in the clothing industry that would employ more than 15 workers - even though the principal may be engaging more than 100workers to make its product. And none would be entitled to redundancy."
Tubner says while the logic of protecting small businesses may have been sound when the exemption was passed in 1982, today's industry profile is much different.
The TCFUA has called for a review of the redundancy laws to ensure that workers in these type of circumstances still have access to redundancy benefits - both for the workers and to take away one of the incentives to contracting out.
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Last Modified: 15 Nov 2005