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Analysis: How can the labour hire industry adapt to the new world of work?

Blog By Duncan Khoury – 05 December 2020

2020 has redefined the world of work. 

Workforces have seen a rapid rise in remote working and flexible work arrangements. Where work-from-home hasn’t been possible, new procedures and practices have been necessary to create COVID Safe workplaces. Job security is now a key concern, with fluctuations in demand leaving no industry untouched. 

Workforce planning has become more important than ever, with the labour hire industry feeling this strain more than others. 

In this article, we’ll take a closer look at the challenges and financial impacts faced by the labour hire industry in 2020, and explore how the industry can prepare for the future world of work. 

The labour hire industry in Australia

So, what exactly is the labour hire industry and what role does it play in our economy?

Labour hire refers to the practice of one company contracting out workers to another company. The labour hire company sources and qualifies the workers, and enters an agreement with another company to supply these workers to them for a period of time. Labour hire companies supply workers across almost every industry.

The labour hire industry has grown significantly in Australia over the past three decades. In fact, it now makes up a significant portion of the workforce in a number of industries – such as construction, hospitality, mining and manufacturing

This widespread adoption of contract workers brings the challenge of managing employee rights, commercial considerations, and the changing demands of our economy. 

A changing landscape

2020 was a particularly challenging year for the labour hire industry, as the COVID-19 pandemic swept the globe and related response measures came into place. Some industries shut down all together, some saw spikes in demand, while others experienced ongoing fluctuations as a result of changing restrictions. Add to that new virus-related OH&S considerations, and it was a year of mixed fortunes and challenges for labour hire businesses across the sector.

Here are some of the changes and their impacts:

  • Unexpected decline – For companies experiencing a significant decrease in worker demand, an unforeseen drop in revenue put a strain on finances and raised questions about their future viability. No matter what their prior plans had been, the focus switched to simply what they could do in order to continue operating through the pandemic, and come out the other side as strong as possible.
  • Rapid expansion – Conversely, some labour hire companies found themselves struggling to manage fast growing demand. Their attention turned to ramping up recruitment, sourcing new workers, and securing fast funding to capitalise on new opportunities. 
  • New conditions – For labour hire workers in industries with continued demand, new virus-related OH&S factors came into play. While they could still work, there was now a difficult balance between wanting to stay safe, and employment that came with no job security or sick leave. 

While 2020 introduced these significant changes, it’s likely their impact will continue into the future. With the pandemic still running its course and further fluctuations in demand expected, labour hire companies therefore need to continue to adapt the way they do business so as to better meet the challenges ahead. 

Addressing workforce challenges

The future of the workforce and the way we work will continue to challenge the labour hire industry. There will be practices that are no longer relevant in the future and need to be let go, as well as adjustments necessary to meet the new way of doing business. Without a clear plan in place to address these new challenges, the ramifications for labour hire companies can be significant. 

There are also ongoing commissions in place conducting annual investigations into the industry. The findings consistently  focus on the fair treatment of workers and adherence to their rights, maintaining OH&S levels and monitoring compliance to regulations. Payment orders and penalties are in place for companies who are found to be non-compliant.

The risk for labour hire companies doesn’t end with a fine though. If sufficient OH&S measures are found lacking, company and shareholder value can come under threat and access to external capital can be made difficult. As such, a focus on managing human and labour rights with commercial considerations is imperative.

Looking ahead: the labour hire industry of the future

Now that we’re nearing the end of the year, the spotlight has turned to the future. How has 2020 changed the labour hire industry and what does this mean for labour hire providers?

Securing stability during downturns

2020 has highlighted the impact of demand fluctuations, and the importance of having strategies in place to ride them out. It is now a critical consideration to prepare for future downturns. With flexible finance solutions, such as debtor financing, in place, labour hire companies can access fast cash flow to help meet commitments until demand turns around. With cashflow playing such an important role in ongoing financial viability, flexible financing will be key to riding out future downturns. 

Capturing new opportunities

For some industries, demand for workers will continue to grow for the foreseeable future. And while some labour hire businesses may find themselves in this enviable position, it doesn’t come without its challenges. Access to flexible finance is one of the biggest issues facing companies with fast-growing demand. Sourcing new labour takes time and resources that are often stretched in periods of growth. We offer a range of Labour Hire Financing Solutions that may be suitable in helping quickly source funding for growth. 

New levels of compliance

As the labour hire sector continues to come under scrutiny from government regulators, so does the need for labour hire companies to mitigate their risk. Without it, the financial penalties can be significant and the reputational risk long-lasting. While commissions haven’t as yet publicly announced any of the breaches they’ve uncovered, this may change in future.

Being prepared

Changes in demand can, and do, happen – and the impacts can be substantial. With an ongoing pandemic and associated economic uncertainty, being prepared is key. Labour hire finance solutions can help you prepare for shifts in demand, free up capital to support growth, and mitigate risk.

Take a look at our flexible Labour Hire Finance Solutions and get in touch to discuss.

 

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.