Recently I read an article on Rio Tinto’s move towards a fully contingent operational workforce. I am a proponent of the Contingent Workforce model, especially within the Resources, Energy, Construction and Infrastructure sectors. Why?
We have all read or heard about Australia’s diminishing resources and energy sectors. Driven by China’s steadying state economy, crap commodity prices, environmental and regulatory burden, and the high cost of doing business in Australia (in part due to wage rates). I mean where in the world would you pay up to $12 AUD for a pint (570ml) of beer, only it’s not a pint but a schooner (425ml)! That’s right one of the biggest swindles of all times is happening right here in Perth, that’s where. Where a pint is sold as a pint, priced like a pint, and served in a schooner. But, enough of my beer woes, let’s focus on Contingent Workforce.
Firstly let’s take a look at Australia’s protectionist employment laws. Every three or four years employers look to put an Enterprise Bargaining Agreement (EBA) in place with Fair Work Australia. This provides the employer with the ability to budget and forecast with a great deal of confidence in remuneration and benefits. Totally understandable, why wouldn’t you put something like this in place?
The problem arises where these agreements are set in place during periods where skills are in high demand, low on availability, and remuneration rates begin to skyrocket to meet demand. Sounds a bit like Uber! Then the market crashes or resembles something like Metallica’s Enter Sandman music video. Employers begin to scale back on projects and reduce head counts. New projects are cancelled or postponed. Clients demand price cuts and the company profits begin to take a hit. Remember, these are not NFP (not-for-profit) employers.
Talent is now readily available and willing to face the harsh new reality of the modern world. Employers, however are stuck with remuneration rates set at a peak period, making them uncompetitive and or too expensive to be awarded work. How do you access talent whilst maintaining a financially viable and profitable business?EBAs are hindering Australian businesses from maintaining their competitiveness says @StanRolfe Click To Tweet
One approach is to move towards a Contingent Workforce model. This enables the employer to be more agile and meet changing market conditions. Other benefits include:
- Reducing leave liabilities in an industry where leave liability is quite high due to the rostering nature of work (employees don’t access leave in the same manner as a Monday – Friday worker due to the roster off arrangements);
- Reducing other liabilities and insurance costs associated with employees, i.e. Workers Compensation, etc.;
- Removing the costs associated with redundancies and notice periods on termination;
- Accessing live current market rates (similar to a stock market) which may be lower than your EBA;
- Partnering with labour hire suppliers to extend the employer’s ability to access the best talent;
- Reducing direct employment related costs such as pre-employment medicals, police clearances, personal protective equipment (PPE),
- Reduced resourcing team size (dependent on model).
When Rio Tinto is recruiting hundreds, if not thousands of people per year, you can understand why they are moving towards such a model.
But what of the risks?
You’ll notice in the article comments around limiting the talent pool, increased safety issues, reduced capability, and quality of contractor skills and experience. And let’s not forget our antagonistic unions implying employers becoming blood sucking slave drivers who’d rather import skills then develop their own.
Limiting their talent pool. Australia is a big country with a relatively small working population. Could Rio Tinto or any other employer’s recruitment teams have the same reach as a handful of labour hire providers? Unlikely. Is it likely that those providers are fishing from the same pool of people? Highly likely based on my experience of multiple representations. Would the large labour hire firm be making the same comments if they were on the panel? I doubt it.
Contractors equal increased safety incidents, behavioural issues and higher turnover – old school thinking. Does it need to be this way? No. Inducting and on boarding contractors should be the same as employees. Operational attitudes and culture change need to occur to ensure there is no difference. The better you partner with your suppliers and the more imbedded they are within your business, the better the risk management. It is in the Labour Hire partner’s interest to identify and retain the best and ensure a safe working environment to maximise their profit. It serves them no purpose for a high churn, high incident workforce.
Labour hire partners need to start looking at their approach to contractor engagement and tightening their industrial and employee relations approach. More and more suppliers are beginning to move towards maximum or project term contracts, and or putting EBAs in place which are close to the award. This provides contractors with more stability and assurance around job security, whilst reducing turnover and removing the casual loading costs to both client and the contractor.
The more progressive suppliers will begin to look at retention tactics and career development opportunities to further improve the quality of their contractor workforce.
The use of a contingent model through the labour hire providers will eventually weed out the unwanted. Those individuals not aligning to the employer’s culture, values, and performance requirements will be identified and removed. Is there anything wrong with an employer wanting the best possible person for the job?Opponents to Contingent Workforce Model are stuck with an old school mindset says @StanRolfe Click To Tweet
What of the contractor?
If I was an employee of Rio Tinto and things looked grim, would Rio Tinto be actively seeking out new opportunities for me? They might extend outplacement services and if you are lucky to have a great manager they may tap into their network to help you out but that would be about it. Working as a contractor through a labour hire model allows you to tap into a wider network of opportunities and if you are doing great work it would make sense that the provider finds you work elsewhere. It is for their benefit after all.
For me, and I’m sure others are the same, I like to hear real stories about real people and in real scenarios. Please join me at the Contingent Workforce 2016 (#CWF2016) so we can learn, share, build new solutions and most importantly get to the bottom of the surrounding issues.
Join Stan along with other leading Contingent Workforce experts including Alan Wilkerson, Matthew Dickason and Antonia Mochan at the Contingent Workforce Conference 2016. See full agenda and purchase tickets here.