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Episode 65
155 Plays4 months ago
News for the week beginning 10 June 2024 and Question of the Week "Are recruitment agency owners too ignorant of risk?"
#RNA #recruitmentnewsaustralia #recruitmentpodcast
Transcript
00:00:10
Speaker
This is the news for the week beginning 10th June 2024. I'm Ross Clennett. The RCSA has claimed a major victory for on-hire employers with the announcement of WorkSafe Victoria's Labor Higher Services Rate for the 2024-2025 Premium year almost halving, down from this year's 7.469% to 3.907% for the coming financial year. The RCSA has been working closely with a group of member organisations to advocate strongly for action from WorkSafe on the Labor High Services WorkCover industry classification after it jumped to more than 7% last year. The advocacy resulted in WorkSafe conducting a significant audit of claims against the classification dating back to 2018, which the RCSA asserts has led directly to the coming year's reduction.
00:00:59
Speaker
In a statement, the RCSA said it sees the outcome as a welcome first step, but acknowledges that the labour high classification remains more than double that of the employment placement services classification and that it will continue to work with members and WorkSafe Victoria to further interrogate claims against the labour high services classification. Last Monday, the Fair Work Commission announced a lift of 3.75% to both minimum wages and awards affecting about one in five Australian workers or 2.6 million people. The decision lifts the minimum out adult hourly wage by about $33 a week to $915.91, starting from the 1st of July. A primary consideration has been the cost of living pressures that modern award-reliant employees, particularly those who are low paid and live in low-income households continue to experience, FWC President Adam Hatcher said.
00:01:55
Speaker
The decision fell short of the 5% sought by unions, but was above the 2% employers pitched for. The FWC noted that modern award minimum wages remain lower in real terms compared to five years ago. However, the FWC deemed it was not appropriate to increase award wages by any amount significantly above the inflation rate. In the 12 months to the March 2024 quarter, prices rose slightly more than expected with the Australian Bureau of Statistics revealing that the consumer price index had increased 3.6%. Last Monday the New South Wales Independent Commission Against Corruption commenced an inquiry into the potential corrupt conduct surrounding a company linked to a former Sydney Council employee and an ex-contractor which netted up to $4 million dollars through the supply of dozens of on-high workers
00:02:45
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through Randstad and SpinFX recruiting. The New South Wales ICAC is examining weather between July 2020 and December 2022. Former Canterbury Bankstown Council employee Benjamin Webb and former contractor Pietro Cossa, dishonestly exercised their official functions in the awarding of council contracts, having not disclosed their respective financial interests in two related third party companies. The inquiry heard evidence Kossa had used one of his companies to supply 26 on-high workers to Randstad and SpinFX recruiting, who in turn contracted those workers to the council from 2021 to late 2022. Financial records showed Webb and Kossa's companies reaped gross margin of just over $4 million dollars from supplying those workers to both Randstad and SpinFX. Commissioner Helen Murrell, SC, said information obtained by the ICAC to date supports a tentative view
00:03:42
Speaker
that the activities, the subject of the investigation might amount to serious corrupt conduct. Council assisting the commission, Georgia Huxley, said there was no evidence of any of the on-high workers had been engaged in corrupt conduct. No allegations of corrupt conduct have been made against either Randstad or spin effects. The inquiry, which is public and is expected to last for up to three weeks. Australia is experiencing a surge in business insolvencies with approximately 1100 insolvencies in March, the highest monthly figure since 2015. In the March 2024 quarter, around 2600 businesses entered an insolvency process, 41% higher than the same quarter last year. The Australian Securities and Investments Commission predicts that by the end of the financial year, the number of companies entering external administration
00:04:37
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will likely exceed 10,000, a level not seen since 2012-13 in the aftermath of the global financial crisis. However, while the absolute number of insolvencies is high, the number of companies entering external administration as a share of total registered companies is 0.33%, and is still lower now than in 2012-13 when it was at 0.53%. The construction sector has been hit particularly hard, with construction firms topping the sector by sector insolvency rankings in every quarter since mid 2021, accounting for nearly approximately 25% of all insolvencies in the past 33 months. One of the key factors contributing to this surge in insolvencies is the ATO pursuing debts that were previously put on hold during the COVID-19 pandemic. According to the ATO, small business accounts for approximately 65% of the total debt owed to the ATO.
00:05:35
Speaker
As has been flagged for some months, foreign citizens with permanent residency in Australia will, from next month, be able to serve in Australia's armed forces as part of an effort to reduce recruitment shortfalls. Defence Minister Richard Miles said expanding applications to include eligible permanent residents was essential to meeting Australia's security challenges in the years ahead. From July, New Zealanders who are permanent residents and have been living in Australia for at least a year before replying will be able to join the ADF. From January next year, citizens from the United States, the United Kingdom and Canada who meet the same criteria will also be eligible as long as they meet security checks. Applicants must also not have served in the foreign military in the preceding two years and be able to attain citizenship. Once the recruiters serve for 90 days, they will be expected to become Australian citizens.
00:06:26
Speaker
The government intends to lift recruitment by around 350 people a year through the non-citizen route, although it's unclear how the ADF has assessed the likelihood of eligible permanent residents pursuing a career in the ADF to arrive at the figure of 350. Minister Keogh said the government remains committed to the goal of lifting the number of permanent ADF members to 80,000 by 2040 up from 57,000 last year. The New South Wales government has flagged measures to slash spending on consultants in this month's state budget. The New South Wales Treasurer Daniel Mookie said an analysis shows between 2017 and 2022 external consultants were engaged just over 10,000 times for state government projects and assignments. During that time, the average contracted price increased by more than 58% from just over $75,000 to around $119,000.
00:07:24
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15% of contracts were for generalist work that the analysis says could have been done in-house, including policy design, program evaluation, strategy development and business case development. Mr Mookie said the government is on track to deliver on its commitment to cut spending on consultants by $35 million dollars per year. Ahead of the 2024-25 budget, the government is considering further measures to reduce over-reliance on consultants and rebuild the New South Wales public sector, the statement says. The NSW Government has moved to tighten controls and implement property measures around the use of consultants following recent scandals involving PwC and other consultancies. Jobs and Skills Australia has come under fire for not including more construction trades in its draft skills priority list for migrants amid a growing shortfall of workers needed to meet Australia's housing targets.
00:08:18
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Critics are attacking the draft list for including yoga instructors, martial artists and dog handlers, while excluding bricklayers, stonemasons and plasterers. JSA said it will be undergoing further consultation with the construction industry. The Australian Constructors Association CEO John Davies said the lack of support for boosting the supply of tradies was a significant problem. At a time when industry productivity is at its lowest in 60 years, the demand for construction workers has never been higher, said Davies. At the same time, the industry is facing significant worker imbalances, he said. The draft skills list release comes at a critical time for the Albanese government as it races to meet its goal of building 1.2 million new homes by the end of the decade.
00:09:02
Speaker
The construction sector said it needs another 90,000 workers to have any hope of helping the government meet its goal. British social care agencies have been accused of exploiting foreign workers, leaving people living on the bread line as they struggle to pay off debts incurred while trying to secure jobs that fail to materialise. Dozens of people working for 11 different care providers have told The Guardian They paid thousands of pounds to recruitment agents to secure jobs working in yeah UK care homes or residential care, with most finding limited to no employment when they arrived. Many are now struggling to pay off huge debts in their home countries and having to work in regular jobs for below the minimum wage. The Royal College of Nursing has now written to the leaders of all three major national parties to demand a full government inquiry into treatment of migrant care workers when Parliament returns after the upcoming national election.
00:09:57
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Joanna White, a solicitor with the Anti-Trafficking and Labor Exploitation Unit, a charity, said, I can see what look like indicators of trafficking and modern slavery. In many cases, there appears to have been deceptive recruitment, with the individuals being given false information and promises to induce them to pay large fees upfront to the agents for the opportunity to live and work in the UK, being left vulnerable to forced labor, financial exploitation or both. The yeah UK care industry has turned to foreign workers in the hundreds of thousands in recent years to solve labour shortages caused by Brexit and the COVID pandemic. The government granted 350,000 health and care visas in 2023 to workers and their dependents accounting for 75% of all skilled worker visas issued. And that's the news for the week beginning the 10th of June, 2024. I'm Adele Last.
00:11:04
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Given current circumstances in the industry around the collar groups, voluntary administration, and obviously subsequent conversations that have been going on in the industry, people analyzing everything around that situation, the topic of risk has come up around you know the kinds of risks that business has um taken, the kind of decision making that was going on. in face of the risks that were were occurring in the business. And our question of the week this week is, are agency owners too ignorant of risk? What do you think, Ross? I think definitely yes. And this is because most people who start recruitment agencies are optimists. They're people who have come from being
00:11:57
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a recruiter at another agency or a team leader at another agency, maybe a general manager at another agency. And in those roles, you're not really thinking about risk very much. You're really thinking about sales related activities, bringing in jobs, getting candidates to fill jobs, building client relationships and so on. And yes, there are issues around risk in terms of taking reference checks and checking work rights and and those sorts of things. But
00:12:30
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When you're a recruitment agency owner, there are many, many other things that you need to consider that are part of risks. so For example, i mean a very simple one would be IT security. so That's something clearly you've got to think about upfront. You've got a database that's valuable to hackers. and in a previous job at a previous recruitment agency, that wouldn't have been something you would have thought about because that was taken care of by the MD or the CFO or the operations manager or the IT manager. So it's just general ignorance. It's not that recruitment agency owners deliberately ignore it. I don't think it's just that it hasn't really been on their radar. And so they start a recruitment agency without without a risk mindset. I suppose is how I'd describe it.
00:13:20
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But some people will have had years of experience. you know So yes, they might have started out that way, but now they've been running their business for a number of years, or they may have run other businesses before they've started on their own. So some of them understand the risks in business overall. But do we think that ah the idea around ah the fact that recruiters develop these traits around being opportunistic and adaptable and having to kind of move and pivot really quickly means that they don't take the proper due diligence around assessing risk.
00:13:57
Speaker
ah Yes, because they're not trained to do it. There's probably not somebody else in the business who's prompting them to do it. And if there's someone who's not getting outside of their business, and part of an industry association like the RCSO so or APSCO or attending events or attending webinars with those sorts of things are raised, then they're kind of just going to go on their way, blissfully ignorant, until something blows up in their face. That's kind of typically how it goes. They don't know what they don't know. But that's not an excuse, right? That's not a way to run the business. And certainly, as we've seen, ah certainly not a way to to stay successful on the top of your game. So ah you touched on there, Ross, around the, you know, associations and, so and, um you know, things like a conference and, you know, is that a good place to
00:14:53
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to assess risk and make comparisons. Can you get that sort of information, do you think, in that situation? Well, I certainly think getting out and when you're at a conference, you're going to be seeing vendors and some of those are ah going to be less, less let likeck let's say, risk management type. operations. So for example, outsourcing your payroll is a way of minimizing risk, because if someone is ah offering outsourced payroll as a company and as a substantial company, and clearly if they're going to be exhibiting at an industry event, they're probably going to be pretty substantial, then you can be confident
00:15:37
Speaker
that they're ticking all the boxes in terms of payroll, compliance and risk management. Whereas if you're doing that in-house, you're relying on yourself or your payroll clerk or your accountant to manage all that. And I and i just think there's a you know different level of competence between those ah two different types of parties. So then if I've got experts that are managing my payroll and I've got experts managing my cybersecurity and I'm outsourcing those things to experts, you know I'm an entrepreneur. I don't need to worry about that. I can go ahead and just um you know drive the business culture and and drive that sales growth. Isn't that what most people listening would be thinking? That's not my level of expertise. so I'm outsourcing that. I don't have to worry about it.
00:16:24
Speaker
Well, yes, it's outsourced, but ultimately as the business owner, you're responsible. I mean, as a company director, ah your arse is on the line. So if things go south, then you can't be poor pointing to your external providers that they didn't do a good job or a good enough job. Ultimately, the buck stops with you. And so you as an owner, should be, well, hopefully very mindful that they are your responsibilities as the director of the company or one of the directors company. And therefore you want to understand the various risks that your business is running because so all businesses run some form of risk. And I think recruitment agencies, particularly those agencies with on-hire employees run many more risks than probably the owners are aware of.
00:17:22
Speaker
And I think you're right in saying that they need to have an understanding and awareness is the starting point of the risk. And then ah being more analytical about the information you're receiving. Like we still see a lot of agency owners making decisions based on mood, based on how much cash is in the bank. You know, um when the sun's shining, they've they've got this optimistic idea around it's all good. and making business decisions around that versus really looking at what is my business plan? Does this this opportunity present itself fit with my business plan? Well, I think people, when they're in a good mood, it's like things are going well, you know which is great, but that doesn't mean
00:18:06
Speaker
things underneath the surface might be brewing and are about to explode. So like just a very simple example would be work rights. Now, I don't know how many owners of recruitment agencies know that you can be fined tens of thousands of dollars simply by referring for referring a candidate to a job for which the candidate does not have the appropriate work rights. The candidate doesn't even have to be employed And you can be fined simply for referring them. Now, I don't think that's happening or I don't think it's happening very frequently, but that is the law. And so therefore, how many recruitment agencies are diligently checking that their consultants are checking work rights every single time?
00:18:57
Speaker
when a candidate's not a citizen. Like, I don't know, I mean, guess the percentage, boy, I reckon it's definitely less than half of recruitment agency owners would be all over that at all. Yeah, and compliance is one area I think, overarchingly, where we look for risk, obviously things around award rates and payment to to on higher workers and compliance and safety and those kinds of things. But ah This can even be a situation where they're making decisions on, as I said, opportunistic situations of, you know, coming across a great candidate who's in an industry we don't recruit in. So, you know, I'm in one category, I'm a niche, you know, agency, but this recruiter presents themselves, they've got experience, they've got a network, they can come and start up a desk um in my team. I mean, a lot of agency owners have done this.
00:19:54
Speaker
to me, that's a massive risk. Because potentially, that's going to soak up a lot of resources in an area where you don't have existing strengths. So to me, that is a significant risk. But I don't think many owners think about that in terms of risk, they just think, Oh, this is a person I've got a spare desk, they can go and recruit in this market. But what are the risks of recruiting in that market? um Does the owner know? Like, again, when it's just a sales mindset, it's just about or we can bring in more work and feel the work. But if it's a completely different sector, there may be risks that are completely unknown to the recruitment agency owner and the person they've hired is probably ignorant of them. And so what's the agency owner potentially setting themselves up for? A nasty surprise further down the track. Right. So what sort of
00:20:45
Speaker
um information advice, let's say, we're not giving advice, but what kind of that's right we don't give advice? advice We're just having a conversation. What do we say to to close this out, though, Ross? How should agency owners be thinking at the moment, given the current circumstances in the market? What can we learn from this? Okay, well, I'm biased. I think you should be joining um an industry association because the industry associations, and we've got the RCSA and APSCO here in Australia, they're on the front foot about these things. They're dealing with partners and vendors, exhibitors. And so all of those businesses that are in the business of risk are exhibiting and are making themselves known. The industry associations are running webinars.
00:21:36
Speaker
So they're raising the awareness of various areas of risk. And so to me, that's a very easy starting point. And then often, for example, the RCSA has many templates. to save you having to spend thousands and thousands of dollars um hiring a lawyer to produce a lot of documentation for a much, much, much smaller investment. You've got access to those things that you know and can be confident have got rigor in them and are therefore minimising your risk. Yeah, so that kind of very Aussie ah saying of she'll be right mate doesn't apply here in risk management. Yeah, definitely. I
00:22:16
Speaker
I don't like that attitude because I want to see recruitment agency owners um build profitable businesses that are thriving businesses and sales and profit absolutely clearly are very necessary parts of it but effective risk management and having a risk mindset from the owner is a very important part in ensuring the sales keep going and that you keep your profit rather than losing the profit because suddenly you find you've been exposed to a risk that's cost you tens, if not hundreds of thousands of dollars.
00:22:53
Speaker
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