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Episode 161 - How will the 2026 Federal budget affect the recruitment sector?
92 Plays1 day ago
RNA episode 161 has news for 19 May 2026, covering Ephram Stephnson's sudden online disappearance, the revolving door at the top of Adecco ANZ and company results for Ambition, Recruit Holdings and PERSOL. See why LinkedIn is pumping up their Hiring Assistant product and a depressing report on migrant worker exploitation in this country. In Question of the Week, we unpack the 2026 Federal Budget and how its likely impact on the recruitment sector.
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Transcript
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Ephraim Stevenson's Mysterious Exit
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Speaker
This is the news for the 19th of May, 2026. I'm Adele Last.
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And I'm Ross Klenit. Adele, it looks like one of Australia's most infamous recruitment entrepreneurs, Ephraim Stevenson, has quietly exited his latest venture, Leo Jackson.
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Yes, there are some obvious signs. Stevenson's LinkedIn profile has disappeared, along with the Leo Jackson company page and the company page of his consulting business, Ephraim's.
00:01:03
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His short-lived Tell All podcast has not been heard of since the fourth episode about three months ago. and I understand all four Leo Jackson employees were suddenly let go last week.
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Sources have suggested this may relate to a new director penalty notice connected to Stevenson's role in the collapse of his previous venture, Collar Group, although that remains unconfirmed.
00:01:26
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Last week, I did speak with former Collar employees who are still owed money following the collapse of the business. And have they heard anything from the liquidators? Not since December last year, Adele, when a dividend payment was made to priority creditors.
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For listeners who may not know, Leo Jackson was Stevenson's post-COLA recruitment startup, launched after Colla Group went into liquidation on the 28th of February 2025. So the big question now is whether ASIC will take action over Stevenson's role as sole director of Colla.
00:01:58
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Ross, remind us what the liquidators flagged in their report to creditors. Yes, they outlined a series of potential breaches of Stevenson's related to his role as the sole director of Collar Group, including failing to properly provide for ATO liabilities, not lodging statutory returns, poor financial management, possible uncommercial director-related transactions, breaches of the docker obligations, and trading while insolvent.
00:02:28
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That is quite a list, which means this story may still have a long way to run.
Leadership Changes at ADECO Group
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A Deco Group has officially announced their new Senior Vice President and Country Head for Australia and New Zealand. Based in Sydney, Betul Gench replaces Peter Aitchison, the former ah RGF Staffing Executive, who resigned as a Deco ANZ CEO in January this year.
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Again, she originally joined the ADECO Group in Turkey in 2003 before later becoming Country Manager for Singapore in 2020. Most recently, she's been balancing leadership roles as Head of ASEAN and Head of Sales and Marketing for ADECO APAC.
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It's a bit of a poison chalice as Gensh is ADECO's seventh CEO for the ANZ region in the last 11 years. The company has been posting huge operating losses lately with tens of millions of dollars in historic workers' compensation liabilities proving an ongoing problem.
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Despite those losses, they are still a major player locally, especially since they currently hold the largest outsourced recruitment contract in the country. the 10-year ADF contract that they won in 2022 from Manpower Australia. Well, Adele, history suggests Gensh will be just another in one door and out the other local um CEO.
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But maybe, as an ADECO insider, she'll be given a bit more time to turn things around.
Recruitment Firms' Mixed Results
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Adele, while most recent financial results coming from some of the larger staffing firms, such as Hayes, have been underwhelming, ah there are parts of the recruitment market posting more encouraging numbers. Yes, starting locally, Ambition had a much stronger 2025 financial year. Revenue climbed 14% to $108.5 million, $30,000 profit losing $1.7 million the previous year.
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Permanent recruitment was especially strong, up 21%, while contract and net fee income increased 9%.
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permanent recruitment was especially strong up twenty one percent while contract and net fee income increased nine percent And globally, the Japanese firms continued to impress Recruit Holdings. Owner of Chandra McLeod and People Bank reported quarterly revenue was up 11%, with operating profit jumping by almost two-thirds. Their staffing division grew sales 10%. Persol Holdings, the second largest staffing firm in Japan, also delivered solid growth. Annual revenue increased more than 7% to nearly US$10 billion, us dollars with particularly strong growth in outsourcing services.
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Their Asia-Pacific operations, including Persol Australia and ProGrand, were up more than 4%. Across in Europe, the ADECO Group managed a decent first quarter with revenue up 5% organically, operating income was up 28% and excluding one-offs, was million, euros up on an organic basis compared with a year ago I also see that LinkedIn says its AI-powered hiring assistant is now tracking towards $450 million US dollar annual revenue run rate, with growth averaging 36% week on week since its launch.
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If that growth continues, LinkedIn projects that the hiring assistant product could drive almost a quarter of the company's future growth.
Exploitation of Migrant Workers in Australia
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The treatment of migrant workers in Australia, based on the findings from research for the Migrant Justice Institute, are staggering.
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The researchers surveyed nearly 10,000 workers and found that 65% are receiving less than their legal entitlements under the Fair Work Act. It's unsurprising to hear that these vulnerable employees are being underpaid by an average of $8.80 an hour, which adds up to billions of dollars annually. It is estimated international students are being cheated out of more than $60 million dollars every single week, according to the data.
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The study was supported by the Commonwealth Attorney-General's Department National Action Plan to Combat Modern Slavery Grant Program with the final report, Off the Books, Inside Australia's Hidden System of Migrant Worker Exploitation.
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The research led by Associate Professors Bassina Farbenbloom and Laurie Berg from UNSW Sydney and UTS pointed out that this is not just a series of honest mistakes, but an interlocking system of exploitation.
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They found that employers are using strategies like sham contracting through ABNs at four times the rate of the general workforce in order to avoid paying minimum wage or superannuation entitlements. Just over one quarter of international students are earning half the minimum casual hourly wage or even less, a figure that has unfortunately not improved since 2016.
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The researchers noted that as underpayment increases, so do indicators of modern slavery such as cash payments, lack of pay slips and unauthorised wage deductions. Professor Farbenbloom mentioned that many of these migrant workers live in fear of losing shifts or being reported to immigration authorities by the very employers exploiting them. It's incredibly sad and disappointing that so many of Australia's employers are wage thieves of the worst kind.
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The authors don't report any favourable trends. They believe the last decade has seen no sign of improvement.
Corruption Inquiry in Parramatta Council
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There is a major recruitment and redundancy scandal involving the former leadership at the City of Parramatta Council playing out in public at the moment.
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The New South Wales Independent Commission Against Corruption commenced a public inquiry last Monday to investigate allegations that former CEO Gayle Connolly and two other council executives, Roxanne Thornton and Angela Jones Blaney, subverted hiring practices to favour their allies. The three dubbed themselves the Pink Ops or Pink Ladies due to their personal friendships and history of working together at other Sydney councils.
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The inquiry is looking into how the three colleagues allegedly provided interview questions in advance to favoured candidates and used covert electronic monitoring and workplace investigations to push out staff they perceived as threats. They are even accused of improperly accessing a councillor's emails.
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scale of the spending to force out council employees is shocking. Between January 2022 and May 2025, the council reportedly spent approximately $5.2 million dollars in ratepayer funds on redundancies for over 80 employees.
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It is a staggering amount. Many of those exits involved secret deeds of release and confidential payout agreements that the ICAC is now scrutinising. Bernadette Kavanagh, the former Director of People and Culture, was terminated just eight weeks into Connolly's term as she was suspected by Connolly of having undermined her appointment before she'd even started.
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And then there's Cherie Gover who handled complaints. She reportedly received six confidential complaints against the executives before she herself was targeted with a workplace investigation and left without any payout in 2024.
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It seems Connolly, Thornton and Jones Blaney went to great lengths to avoid transparency, allegedly using personal email addresses to evade freedom of information requests. The purpose of the public inquiry is to gather evidence to determine the extent of the alleged systemic corruption in recruitment and ah HR practices and whether the conduct reaches a threshold they could justify criminal charges. A further three weeks of public hearings are still to come.
2026 Federal Budget's Impact on Recruitment
00:10:18
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Question of the week. How will the 2026 federal budget affect the recruitment sector? I asked you this question, Ross. I want to know. Well, overall, I'd say for the, let's say, the person on the street in the recruitment sector, it probably doesn't have a lot that you need to think too much about. But certainly for some participants in our industry, there is a lot to contemplate.
00:10:44
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There was a lot of talk about capital gains tax, CGT, and quite an uproar. about its impact to businesses directly. I want to unpack this Well, more so the owners of assets. So, if you're talking about the recruitment industry, simply this, in selling the asset of a recruitment business, if you own if you have owned that asset more than a year, that the previous discount on the capital gains tax, which was 50%, going to be removed.
00:11:13
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ah is going to be removed And that will be replaced with a form of indexation. So in simple terms, it means when you sell an asset, whether you're majority owner or a minority owner of that asset, you'll be paying more tax.
00:11:27
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So a couple of things to cover off here. This is not legislation yet. It needs to still be passed. So this is proposed change. And we're talking about a significant impact to our industry because a large portion of businesses in the recruitment space are privately owned, started by one person, built as an asset with the aim to be able to sell that asset and retire or go off and you know buy another business, whatever it might be. So that's people's strategy.
00:11:58
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It jet generally is, and not that it will greatly change the strategy. It will simply make it generally more attractive to hang on to the asset for longer and continue to draw out ah money via the profitability of the business rather than selling it and then investing the proceeds of that sale, which would be less based on the proposed changes to the CGT discount in other assets.
00:12:24
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What impact is it likely to have if you're an employee of of a business like that? ah No impact at all unless you participate in an equity scheme. So, if you buy into the ownership of that business, you would then also fall under the changes to the capital gains tax discount. So, therefore, again, you would be paying more tax at the time that you sell your shares in that business.
00:12:51
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So, does it mean that people won't sell their business at all or they're going to? No. No. No. I mean, most, if not all, recruitment agency owners or almost all hope that they can sell their business at a time of their choosing. Now, a vast majority don't get to sell the business because it's not worth enough for a purchaser to um acquire it.
00:13:21
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ah So I suspect what's going to happen is that you're going to see owners continue to want to sell their business, they're just going to hang on to it for longer. And people who might otherwise have participated in equity schemes probably think, you know what, on balance, it's probably more attractive for me to go out and start up my own recruitment agency, particularly with what's available via AI in terms of having you know virtual assistants and other things that AI can produce and the acceptability of remote interviewing and not having to have an office.
00:13:56
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So we've seen a trend like this in the industry of more recent times, as you said, based potentially on the availability of technology and the ease in which you can set up a recruitment business now. You're saying this potential change could further accelerate that. people might More people are more likely to start out on their own. Yes, but i'll say it's only at the margins. Like it's not going to lead to, I'm certainly not predicting it's going to lead to 50% more people going out and setting up their own recruitment agency compared to the last five years. Certainly don't think that's going to happen. It is at the margin. So maybe it's 5% more that go and set up on their own. I really don't know. But as said, i'd I'd be very surprised if it led to a surge of people deciding that it was better to quit and start their own recruitment business.
00:14:46
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Well, if any of the online commentary is correct, it looks like it might have the opposite effect because, yeah, lot of people talking about having ah the government as a a part owner in their business now, yeah look not seeming attractive.
00:14:58
Speaker
Yeah. Look, this is just the typical overreaction from people who are losing something or proposing or suspecting they're going to lose something from government changes. Let's face it, it's always the squeaky wheel that will demand the most oil. Okay. What other changes were part of the announcements that might impact recruitment?
00:15:21
Speaker
Well, clearly skilled migration, the government has reiterated that that's a priority, that it's going to further weight the skilled but the migration program towards skilled visas, and particularly in sectors where there's shortages. So clearly this continues to be good news for those agencies in healthcare, construction, trades,
00:15:44
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engineering, infrastructure, energy. So really not a lot has changed there. The flip side is those agencies that are in the low skilled market that are putting workers who come in on student visas and other ah temporary temporary visas, those people in or putting those workers into agriculture and production, ah meat processing, our retail, distribution, wholesale, like those agencies, I think we'll find that gradually their labour supply will shrink and they'll need to rely more on local workers.
00:16:21
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So it's not going to be a case of reducing migrant numbers, but it is going to be harder for the non-skilled. So, the skilled migration program remains. It's just going to become a little more stringent.
00:16:34
Speaker
Yes. Well, that's what the government has said, and I suspect that that will be the case. So, If you're a recruitment agency in those sectors that I mentioned and you have migration services as part of your offering, then that's certainly going to be to your advantage because that simply means you'll be able to source workers offshore ah more effectively and process them faster and bring them to an Australian employer in a more timely way than probably the larger agencies. So I think that, that well, they don't necessarily need to be larger as competitive, but to say more generalist agencies can.
00:17:10
Speaker
And it wasn't mentioned specifically in the budget, but I want to touch on the non-compete policy as well. Yeah, the Federal Labor Government had made it very clear that they're concerned about non-compete clauses being used inappropriately in employment contracts, citing examples of hairdressers and physiotherapists and masseuses and so on, personal trainers are having non-compete clauses in their employment contracts. I think that's probably only happening on a very scattered basis, but still I suspect it is happening. And the government's saying that they want to free up worker movement across employers because that's what helps boost wages.
00:17:48
Speaker
But these changes around non-competes aren't just for hairdressers and and fitness trainers and those kind of things. They're talking about them these clauses being unenforceable. This could be significant for the recruitment industry itself. I mean, we use these kind of restraint of trade type clauses or movement with our own staff. So that that could be significant.
00:18:10
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ah it It will be because clearly rec recruitment agency owners use these clauses to make it far less attractive to go to a competing agency or an agency competing for the same clients. So clearly that is going to make those, the or the government's proposed changes will make these clauses less enforceable or maybe unenforceable. So that's probably the downside. On the plus side, of course, if you're a recruitment agency that deals with candidates who typically have some form of non-compete, then those non-competes are likely to be less enforceable, which means you're going to have many more candidates that won't be discouraged from seeking alternative work with a competitor simply because of a non-compete.
00:18:57
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So that could ease up some flow of candidate of talent in in those sectors where there might have been restrictions before. i I think it will increase the likelihood that candidates feel more emboldened to move, whereas certainly in the past, they've looked at a non-compete. And not knowing how enforceable it is, that probably ah dampens their enthusiasm to go to a recruiter and try and find out what their options are in terms of an alternative job.
00:19:27
Speaker
Okay, so in summary, not huge changes announced in this budget, but some key significant ones for the recruitment sector. Well, I think particularly the capital gains tax one will lead to a little bit of a change in the behaviour of buyers. But as I said at the start, I think for the average person working in the recruitment industry, once the budget legislation has passed, they're not really going to notice much change.