In recent times the industry has experienced more actively than ever with what many would call a ‘drive to the bottom’. With a strong focus on ‘cost of living’, the pressure on the industry to continually cut freight rates – despite rising costs – remains largely unrecognised and misunderstood by the government.
Driving down fleet incomes to unsustainable levels threatens to undermine the efficiency and safety of our supply chain. If this downward pressure continues unchecked, it could significantly damage Australia’s competitive edge in global supply chains.
If this behaviour remains unchecked, it will have a significant effect on any comparative distinction Australia may hold in our supply chain.
The resulting imbalance from the misuse of market power with freight rates will continue to adversely affect everyone in the supply chain – manufacturers, logistics providers, repairers, and others – until government authorities show strong resolve to address and stem this behaviour.
Since 2007, productivity growth has stagnated, barely moving the needle from 0 per cent to 0.5 per cent. Fleets are now facing contract terms of 90 to 120 days, and instead of rates rising to at least cover costs, freight rates are regularly being reduced by 3 per cent each year.
Legislation should prevent escalation and “it should not make matters worse”. In response to the increasingly declining rate spiral, there is growing discussion about practices like sham contracting.
This practice of sham contracting is not only unethical but also illegal in Australia.
If the chain of responsibility and industrial entitlements were properly addressed at the appropriate points within the market, we wouldn’t be experiencing a constant cycle of replacing one problematic behaviour in our supply chains with another.
In the road transport sector, sham contracting can manifest when a transport operator engages a driver as an independent contractor while maintaining control over their work conditions. The road transport industry, which relies heavily on contracting arrangements, must be vigilant in preventing sham contracting to protect both workers and businesses.
Recent research from the ACTU reveals that the number of workers on sham or “dependent” contracting is at record highs, now outnumbering genuinely independent contractors. This explosion in sham contracting underscores the need for reforms to protect all workers and ensure fair labour practices.
Transport fleets should ensure that workers are correctly classified as employees or independent contractors based on their actual working conditions and responsibilities. This involves understanding the legal definitions and criteria that distinguish employees from contractors and is called the “whole of relationship test”.
Drafting detailed contracts that outline the nature of the working relationship, including roles, responsibilities, and entitlements, can prevent misunderstandings and legal issues. These contracts should be regularly reviewed and updated to reflect any changes in the working arrangement.
While authorities have a lot of enthusiasm to enforce measures targeting the symptoms of an unbalanced market, the issues just spread from one part of a system to others, causing broader effects beyond the causal issue. It is now crucial to focus on the underlying contract terms and rates to address the rising use of sham contracting being used to lower costs.
Addressing the unchecked decline in fleet incomes, implementing robust legal protections against sham contracting, and fostering a fair, transparent marketplace are vital steps toward sustainable growth.
Urgent attention is warranted to avoid further industry instability, supply chain disruption and the erosion of fair competition.
The future resilience and integrity of Australia’s supply chain hinge on decisive action to rectify the underlying issues threatening our industry.