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Reducing harmful risks in complex supply chains in the security industry

1 June 2023
Reducing harmful risks in complex supply chains in the security industry

The Labour Hire Authority (LHA) has imposed conditions on a security provider’s licence after its arrangements with subcontractors raised concerns.

Subcontracting can increase the risk of non-compliance by providers within the supply chain. This is more likely where contract prices are too low to enable subcontractors to comply with their minimum legal obligations, such as for wages, superannuation, long service leave and workers compensation.

As part of a compliance review of one security provider, LHA used information about its arrangements with its subcontractors to assess the risk of non-compliance with minimum legal obligations in the provider’s supply chain.

LHA found that the provider – who provides labour hire services both directly and through subcontractors – had arrangements to pay the subcontractors flat rates of just over $40 per worker per hour (ex GST).

In line with LHA’s approach outlined in its Guidance for the Security Industry, these arrangements created a risk that subcontractors could not comply with their minimum legal obligations.

Conditions imposed to increase transparency and responsibility

To address the risk, LHA imposed its model supply chain transparency and responsibility conditions on the provider’s licence. Under these conditions:

  • The provider must periodically report details about its subcontractors to LHA, enabling more effective monitoring of compliance across the supply chain over time – providing transparency.
  • The provider must genuinely assess – prior to entering a contract – whether the amounts it proposes to pay a subcontractor allows them to comply with their minimum legal obligations. They must also report to LHA about those arrangements, moving this head contractor to taking more responsibility for compliance in their supply chain.

LHA is continuing to work with security industry stakeholders to improve outcomes for workers and the community.