The portable long service scheme: who really benefits?

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Is the portable long service scheme truly going to benefit cleaners?

Is Victoria’s recently-implemented portable long service scheme really the best way to acknowledge the hard work of cleaners? JOHN REALE doesn’t think so.

On July 1, 2019 the Victorian government introduced the portable long service scheme.

Basically, the scheme means that Victorians working in the cleaning, community services or security industries can now access long service leave after seven years of continuous service.

The ‘portable’ part comes into it because employees carry the benefit with them to their next position within the industry. As such, eligibility for the scheme isn’t dependent upon how long an individual has worked with a single employer.

Employer contributions, set at a rate of 1.8 percent of normal wages for cleaning and security roles and 1.65 percent for community services, will be collected into a fund managed by the Portable Long Service Benefits Authority – a Victorian government department. Once eligible, employees must then make a claim to access the benefit. It must be claimed within four years of an employee reaching eligibility or the benefit will be ‘absorbed’ into the fund.

To comply with the scheme, all contractors need to have registered by September 30, 2019. They are then required to pay the employer levy and submit a quarterly return, the first of which is due this month (October 2019).

On the surface, it sounds like a good idea. It certainly acknowledges some of the very real challenges for long-term workers who are employed in these industries. Yet upon closer inspection, I’m not convinced that some elements of the scheme stand up to scrutiny. In fact, you could drive a fully loaded cleaning cart through some of the holes in this scheme, so excuse me while I get up on my soapbox (pun intended).

There are four main problems:

  1. Many employees don’t work in the cleaning industry long enough to collect the benefit.
    At Realcorp, we estimate that 95 percent of our current staff will leave the cleaning industry within the next seven years. After all, the majority of cleaning positions are taken as a steppingstone for those working their way through an education or stopgap employment until an employee finds a more engaging role elsewhere. So, what happens to all the contributions employers make on those inevitably ineligible employees’ behalf? They will sit in an account for four years until ultimately being claimed by the Portable Long Service Benefits Authority. The employees will never have the opportunity to collect their money from their portable service leave fund.
  2. It’s too late for the extra costs to be incorporated into existing long-term contracts.
    The terms of many medium to long-term contracts have already been locked in. This means that the costs associated with those contracts have suddenly increased, with no way to offset them. That’s going to hit employers where it hurts – right in the bottom line.
  3. It affects all honest employers’ ability to stay competitive.
    Unfortunately, there are plenty of dodgy operations out there who underpay their staff with no regard to cleaning services awards and offer cleaning services at rock-bottom prices. The additional employment on-costs associated with the scheme will make it even harder for ethical employers who pay their staff a fair wage to compete.
  4. It makes it harder to offer services at rates the market will accept.
    These same honest employers already have to accommodate for the award rate rises of recent years – rates rising above inflation. A fair wage is now made up of award rate + superannuation + long service leave + on-costs like work cover and payroll tax. Somewhere in there they must also add some margin to keep their businesses afloat. With the constant threat of a recession hanging over their heads (along with those less than honourable competitors driving down price expectations) will the market accept the prices contractors will need to charge in order to fairly remunerate staff?

It occurs to me that while, in theory, the Portable Long Service Benefits Authority has attempted to close a gap for a potentially vulnerable group of workers, it has really only ended up benefitting itself while encouraging dodgy operations to continue their practices because it’s even more expensive now to do otherwise.

A better solution

I believe that the resources and energy of the authority would be far better spent on enforcement of the existing award rates, ensuring that all cleaning staff are paid fairly. Indeed, I am all for cleaning companies having to lodge quarterly data on staff hours and pay. I hope that some efforts are put into examining that data and running exception reports that would expose those not paying award rates.

This would benefit everyone. Workers will be more likely to be paid fairly. Ethical employers can remain competitive in the market. The Victorian government can collect higher income taxes from individuals and increased GST due to higher contract values.

As for the rogue contractors who ignore the awards, perhaps the authority could use the fines they collect from policing them to fund their long service scheme?

I am interested in hearing your thoughts on the portable long service leave scheme. Will the market tolerate such a price adjustment? Is this another lever that can increase the competitive gap between companies who pay fairly and those who subcontract and ignore the award? Is cleaning a ‘career profession’ in which staff will typically achieve long service?

John Reale is the founder and Managing Director of Realcorp. Realcorp service facilities managers, owners corporations and offices across metropolitan Melbourne and regional Victoria.

 

Image: Verne Ho, Unsplash.

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