The Australian labour market is in a state of transformation. The dynamics of work have evolved significantly in recent years, driven by shifts in job types, industry composition, and the adoption of automation technologies. This transformation has given rise to a growing contingent workforce, comprising individuals who work for organisations but are not classified as employees. In this blog, we delve into the world of contingent workers, exploring their various forms, the impact they have on modern workplaces, as well as considerations for HR professionals and business owners.
The Contingent Workforce Landscape
A Contingent Worker (CW) is a professional engaged to perform tasks for an organisation but is not an employee. However, these individuals often collaborate closely with directly employed staff within the company. Generally engaged for a temporary period, a CW can include:
- Independent Contractors
Independent contractors offer services to businesses independently. They typically negotiate their own fees, working arrangements, and can serve multiple clients simultaneously. These workers are sometimes referred to as contractors or subcontractors.
Freelancers are similar to independent contractors but are typically engage in shorter-term and more creative projects for a wider variety of clients.
- Outsourced / Labour Hire Workers
Where tasks, roles or processes are outsourced to a third-party provider. This can look very different based on the industry and needs of the business. For example, a company may outsource their HR function on an on-going basis; by outsourcing a HR professional via a service agreement. Another example would be an events company that has a commercial contract with a labour hire agency who supply labour to the events company, as required. In both examples, the company pays the third party for services, and the third-party company then pays the worker.
The Changing Labour Market
Several factors have contributed to the growing prevalence of CW’s in Australia:
- Skills Mismatch
The shape of the Australian labour market has changed significantly over recent decades. We can see the impact of these changes in both the types of jobs and the mix of industries across the economy. There has been strong growth in higher-skill level jobs, non-routine jobs and services jobs; as well as a growing use of automation.
Occupations in high demand are more likely to be specialised and may require formal or trade related qualifications, such as registered nurses, software programmers, teachers and tradies.
However, the skills of people seeking work can be limited, or in other words aren’t a traditional match to the majority of vacant roles that are in demand.
- Migration system delays
It has been widely reported that some of the 70+ unique visa programs in Australia, each with their own criteria and subcategories, haven’t been efficiently delivering on their intended objectives. For example, in the Australian Governments Jobs & Skills Summit Issue Paper (August 2022), reported only around half of short-term Temporary Skill Shortage visas (designed to address labour shortages) are processed within three months.
- Slow Pace of Education and Training
Australia has seen a slow pace of traditional education and training, meaning local workers aren’t ‘work ready’, or at least to the level or volume required (AiG 2023). The Jobs & Skills Summit Issue Paper also reported that of the government-funded VET students who completed their qualification, only 60 per cent had improved their employment status after their training.
- Low Unemployment Rate
Australia has maintained a near 50-year record low unemployment rate (%), resulting in a limited pool of available and skilled workers.
- The COVID-19 pandemic disrupted consumer spending patterns, business models, and supply chains, leading to increased demand for local and skilled workers. As such, employers are experiencing competition for a limited pool of talent. Therefore, businesses have turned to non-standard forms of employment, such as the contingent workforce, to meet their organisational needs and adapt to the rapidly changing post-pandemic landscape.On the other side of the coin, many individuals who experienced job disruptions during the pandemic or reconsidered their career choices during the crisis now, exhibit greater confidence in changing roles. Including embracing more mobile, independent, and flexible work arrangements—characteristics often associated with contingent work.
- Job security remains a significant concern for CW’s, given the transient nature of their employment. This challenge extends to core (permanent) employees, who may perceive the growing contingent workforce as a threat to their job stability. These concerns can lead to workplace tensions, conflict, and unhealthy competition, adversely affecting productivity and the organisations overall strategic objectives.
- The Australian Labor Party (ALP) have emphasised the importance of job security on their political agenda (Secure Australian Jobs). Recent industrial relations reforms have included plans to empower the Fair Work Commission to set minimum standards for gig workers and ensure that labour hire workers receive the same pay as directly employed counterparts.
HR’s Role in Managing Contingent Workers
Human Resources (HR) professionals play a critical role in strategically managing the challenges and opportunities presented by a contingent workforce. Encompassing responsibilities from both employer and employee perspectives:
- Compliance and Legislation
HR professionals will need to keep up to date with current and future legislative changes that may be directly or in-directly related to the engagement of CW’s. This is a significant consideration when looking at workforce design, compliance and cost related objectives. HR Professionals will need to conduct relevant analysis, in order to support with strategic and commercial decision making and planning with key stakeholders in these areas. To develop flexible strategies that align with the current legal framework while also allowing for adaptability to future reforms.
- Workplace Health and Safety
The Work Health and Safety Act 2011, which falls within the Australian Governments Federal legislation, outlines an employer’s primary duty of care to ensure, so far as is reasonably practicable, the health and safety of their workers.
Under the Act, a worker is defined as a person carrying out work in any capacity for the company, including:
- a contractor or subcontractor; or
- an employee of a contractor or subcontractor; or
- an employee of a labour hire company who has been assigned to work in the person’s business or undertaking
International research has shown that the risk of occupational injury is higher for temporary agency workers than for employees.
This is a significant challenge, as employers can face monetary penalties for breaching WHS laws. Further, a growing number of states have introduced Industrial manslaughter which brings prison time (Safety at Work Blog).
HR professionals should provide contingent workers with access to training, workplace policies, resources, and procedures to address health and safety concerns, including bullying and harassment. As well as ensuring the organisations is adhering to their positive duty obligations in preventing sexual harassment, sex discrimination and victimisation (Respect@Work 2022).
- Compensation and Pay Equity
One of the key attractions of engaging a CW, is to save on workforce costs and the ability to respond more efficiently to changing market conditions. However, consideration should now be made to the Federal Government introduction of the ‘Same Job, Same Pay’ (now branded ‘Closing the Labour hire loophole’) reform. As this reform will mean that where labour hire employees are supplied to a ‘host employer’, who has direct employees that are a) covered by an enterprise agreement; and b) are performing the same work as the labour hire employees, will be required to be paid the same rate of pay. Put another way, in this scenario, outsourced labour cannot be brought in at a lesser rate than employees (covered by an EA) directly hired by the business, who are performing the same work.
In scenarios where a specialised Independent Contractor is engaged, it is likely that their rate (given the nature of their work) is higher than if a business where to insource this work. Consequently, HR professionals should assist the organisation in strategically managing the balance between the potentially inflated immediate costs Vs long term savings. Otherwise, a culture of convenience as opposed to efficiency can be formed, causing a significant financial challenge to the organisation which will have rippling adverse consequences.
More generally, it is also worth noting the new provisions surrounding pay secrecy. HR professionals may look to consider reviewing pay structures. Promoting pay transparency and equal pay for equal work (where applicable), fostering a fair and inclusive work environment.
- Upskilling and Development
CW’s can be a valuable resource for upskilling the core workforce. HR professionals should explore opportunities for knowledge transfer and skill development within the organisation.
- Collaboration and Communication
Promoting collaboration between CWs and employees enhances workplace cohesion and innovation. HR professionals should consider coaching applicable stakeholders in facilitating open communication channels, to build positive relationships and address concerns, if present.
- Strategic Workforce Planning
HR professionals must develop a comprehensive people strategy that aligns with the organisation’s goals. This may include the design and implementation of a performance management framework, change management processes, and planning for contingencies. The engagement, or potential engagement of a contingent workforce must align with the organisation’s overall strategic objectives.
In a rapidly evolving labour market, the contingent workforce has become a vital component of many organisations. HR professionals will need to support organisations in navigating the complexities of managing CWs to ensure organisational productivity, efficiency, and strategic objectives being met.
By addressing compliance, safety, compensation, upskilling, collaboration, and strategic planning, HR can lay the foundation for a successful and sustainable workforce model.
By not managing a contingent workforce effectively, could result in reputational damage, recruitment challenges, decreased productivity, and increased operational costs.
To learn more on how one of our HR Business Partners can help your organisation optimise your workforce in today’s ever-changing world of work please contact us.
About Employment Innovations
Employment Innovations is one of Australia’s leading providers of employment services designed to increase productivity and ensure compliance. Its services and solutions include all the tools that every Australian small to medium sized employer needs – including workplace advice, workplace safety, legal services, payroll solutions, migration, human resource management and HR software.
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.