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Episode 115 - FWC ruling on outsourced workers - good or bad?
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Episode 115 - FWC ruling on outsourced workers - good or bad?
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Transcript
AI's Impact on Recruitment Efficiency
00:00:11
Speaker
Have you checked out Bullhorn Amplify? It's the AI game changer for recruitment teams. Amplify delivers 17% faster submit times, 22% higher fill rates, 49% better candidate matches.
00:00:25
Speaker
If you want to boost your productivity, visit the Bullhorn website to learn more about Amplify.
Australia's Employment Trends and Challenges
00:00:32
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And this is the news for the 24th of June 2025. Adele Last.
00:00:38
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Australia's unemployment rate has remained steady in May despite total employment slightly declining. According to the May labour market update released by the ABS last Thursday, the unemployment rate remained at 4.1% for the fifth month in a row in seasonally adjusted terms.
00:00:54
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Employment decreased by 2,500 people in contrast to the exceptionally strong growth of 87,600 April. The participation rate declined by 0.1 percentage points month-on-month to 67% in May.
00:01:10
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Oxford Economist Australia Ka-Ciung Lo said the drop in jobs does not reflect a sudden reversal of the labour market's fortunes. Instead, part of the fall reflects normalisation following exceptionally strong growth in April.
00:01:24
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Looking ahead, the labour market's strong run over the past 12 months will slowly forward. Global uncertainty is clouding business decisions and prompting many firms to temper hiring plans, he said. Callum Pickering, Asia-Pacific economist at Indeed, said it was a somewhat disappointing result for job growth in May, but he said we shouldn't dwell on a slight decline employment given the strong gains seen in prior months.
00:01:47
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Australian employment has increased by around 329,000 people over the past year, outpacing growth in the working age population, he said. It's helped to keep the unemployment rate low, supporting Australian households through an otherwise difficult economic period.
00:02:03
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Forward-looking measures for labour market demand, such as Indeed job postings, remain healthy. Hayes announced in an unscheduled trading update last
Global Market Effects on Recruitment Firms
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Thursday. that it expects group like-for-like net fees to decline by 9% year-over-year for the June 2025 quarter against a soft prior year comparative, with PERM down 14% and Tempun Contracting down 5%.
00:02:28
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The company said activity levels during the fourth quarter have reduced sequentially driven primarily by broad-based weakness in permanent markets globally, reflecting low levels of client and candidate confidence.
00:02:40
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The outcome of this drop in demand and the fixed short-term nature of the group's cost space has resulted in a downgrade of Hayes' 2025 pre-exceptional operating profit to around ยฃ45 million. pounds 57% lower than the previous financial year's operating profit of ยฃ105 million. pounds At a regional level, like-for-like net fees in ANZ are forecast to decrease by 9% this quarter, with the other regions also forecast to drop. 13% in the UK and Ireland, in Germany and in the rest of the world.
00:03:11
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We expect current challenging market conditions to persist into the new financial year and remain committed to delivering our focus strategy, the company stated in the vest in an investor call, adding, our initiatives to improve net fee productivity in real terms and back office efficiency will be important drivers of medium-term profit recovery when the market picks up.
00:03:32
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The Hayes share price is 38% lower compared to June last year. Corn Ferry reported higher fee revenue in both Executive Search and RPO in their fiscal fourth quarter ending 30 April. with total fee revenue up 4% year-over-year on a constant currency basis to $712 million. dollars Operating profit was down 0.7% to $65.1 million, dollars although for the full year, operating profit was up 45% on flat sales.
00:04:03
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By segment, executive search led the company's growth in Q4 with a 15% year-on-year rise to $227 million. Asia-Pacific revenue was up 16% the quarter $23 million. asia-pacific revenue was up sixteen percent in the quarter to twenty three $0.6 million. Our results reinforce the premise of Corn Ferry's diversification strategy and our continued momentum, CEO Gary Burnison said in a press release.
The AI Talent War: Meta vs. OpenAI
00:04:29
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OpenAI CEO Sam Altman said Meta had offered his employees signing bonuses as high as $100 million dollars with even larger annual compensation packages as it seeks to build a top artificial intelligence team.
00:04:43
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It is crazy, Altman said in the podcast called Uncapped, which is hosted by his brother. While Meta has sought to hire a lot of people, at OpenAI, so far none of our best people have decided to take them up on that, Altman added.
00:04:56
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Meta CEO Mark Zuckerberg has been personally recruiting for a new super intelligence group offering high sums to top AI researchers across the industry. Last week, the company announced $13.4 billion dollars investment in scale AI.
00:05:11
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Meta didn't immediately respond to a request for comment. The company has poached top engineers from multiple tech firms, including Jack Ray, a principal researcher at Google DeepMind, Bloomberg has reported.
00:05:23
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I've heard that Meta thinks of us as their biggest competitor, Altman said. i respect being aggressive and continuing to try new things.
Skilled Migration and Job Ads in Australia
00:05:33
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One in five persons granted temporary skilled worker visas in the 2024 financial year is from India, according to data from the Department of Home Affairs. The data revealed that 19,510 were given to Indian workers, making of all the temporary skilled worker visas granted by Australia last financial year.
00:05:54
Speaker
Philippines supplied the second highest number of temporary worker visa holders granted 14,040, with the next at seasonally adjusted 0.3% month-on-month in May, rose 0.3% on trend basis. seek reported job ads declined in a seasonally adjusted point three cent month on month in may but rose point three percent on a trend basis This is the second consecutive month where the trend data has risen after three years of decline.
00:06:19
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The year-on-year decline in May was 5.6% on both a trend and seasonally adjusted basis. Applications per job ad, which are recorded with a one-month lag, rose by 1.2% in April when compared with March on a seasonally adjusted basis and by 1.9% based on trend data.
00:06:38
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Looking at the trend data, ad volumes have now risen for the past two months, marking the first rise in three years, Blair Chapman, Seek Senior Economist said in a press release. Annually, South Australia is the only state or territory where ah ad volumes have grown year-on-year at 6.1% due to an increased demand for workers in the industrial and construction sectors.
00:07:00
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The Australian Capital Territory saw the steepest fall at 18.5% year-on-year. By sector, education and training recorded the steepest year-on-year job ad volume decline at 16.2%, while engineering down by 23.2% and healthcare and medical down 6.8% recorded the next two largest declines on a sector basis.
00:07:23
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Sport and recreation was up 8.3% year-on-year and design and architecture rose 6.3%.
Payroll Failures and Fair Work Compliance
00:07:31
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Griffith University will pay back more than $8.34 million dollars in salary, superannuation and interest to 5,457 underpaid staff. as part of entering into an enforceable undertaking with a Fair Work Ombudsman.
00:07:46
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Under the EU, the public university that operates six campuses in Queensland must also make a contrition payment of $175,000 and implement a broad range of measures to ensure compliance with workplace laws going forward.
00:08:00
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These underpaid employees, covering academics, administrators and support staff, worked across all six of Griffith University's campuses, although the majority were Brisbane-based. The work was completed between July 2015 and June last year. According to the Ombudsman, the underpayments were caused by a combination of insufficient training among course conveners and school administrators.
00:08:21
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insufficient data collection in onboarding processes, insufficient or non-existent payroll and data review processes, lack of automation allowing for human error and deficiencies in various payroll systems.
00:08:34
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Individual underpayments range from less than $1 to more than $92,000, including superannuation and interest. Fair Work Ombudsman Anna Booth said an enforceable undertaking was appropriate as the university had cooperated with the FWO's investigation and demonstrated a strong commitment to rectifying its non-compliance issues.
00:08:57
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A solicitor in the yeah UK has been struck off for working three jobs at the same time and billing each employer for the same hours. Between 29 June and 16 July 2021, Belinda Sarkody misled two of the firms where she worked as a locum by submitting timesheets and claiming payment for the same hours on the same dates from both firms.
00:09:18
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while she was also employed to work full-time by a third law firm, the Solicitor's Regulation Authority alleged. Sarkody argued she had not knowingly done anything wrong. She said she had worked hard in each of her roles and gone over and above the requirements of the roles that she was employed in and referenced her innate work ethic that allowed her to work multiple roles and long hours.
00:09:39
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However, the SDT concluded Sarkody's conduct was dishonest. She was struck off and ordered to pay costs of ยฃ8,891.
00:09:49
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The OECD unemployment rate remained at 4.9% in April this year, the same as April 2024. The rate has been at or below 5% for the past three years.
00:10:00
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The number of unemployed persons in the OECD also showed little change from March, totaling 34.4 million in April. Compared to March 2025, unemployment rates in April remain unchanged in 22 OECD countries, declined in seven and increased in four, including Canada and Turkey.
00:10:20
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Colombia, Italy and the Slovak Republic were the only OECD countries to record monthly unemployment rates near their record lows.
Leadership Changes in Recruitment Firms
00:10:29
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From next Monday, OnCue Recruitment will welcome Nina Mattsen-Bone as its new Managing Director.
00:10:36
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Nina brings extensive recruitment and executive leadership experience to the interim role, having been Managing Director at Beaumont People for almost nine years and previous President and Chair of the RCSA.
00:10:48
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Nina has run her own consultancy business for the past 18 months and is also author of a book called Meaningful Work. Founder, Catherine Amani, who has led OnQ for over 25 years, will transition into the role of ceo and founder, dedicating her focus to strategic initiatives, industry advocacy and long-term business direction.
00:11:09
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OnQ has eight employees and provides recruitment to the scientific, technical and medical sectors from their office in Sydney. And that's the news for the 24th of June 2025. I'm Ross Clennett.
00:11:22
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Stay tuned for Question of the Week.
Legal Implications of Outsourcing in Recruitment
00:11:28
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um
00:11:34
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Question of the Week. Is the FWC ruling on outsourced workers good or bad for agencies, Ross? Well, Adele, what you're referring to here is and is a case that we mentioned in the news a couple of weeks ago.
00:11:50
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so just to remind people what happened. The facts are a Filipino outsourced worker, Joanna Pascua, took action against Dossel Group.
00:12:04
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And this was in relation to her being sacked last year. So Dossel Group are a credit reporting law firm and she was working for them via a company.
00:12:18
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And they fired her after alleging that she unlawfully copied company and client information onto her personal drive. She denies and continues to deny those allegations.
00:12:33
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she took action against them. And the Fair Work Commission sided with her despite Docile Group arguing she was an independent contractor and outside Australia's jurisdiction.
00:12:48
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So the original decision was last September and then Docile Group appealed and lost. And the upheld ruling to go through the facts. They upheld that she was an employee of an Australian company.
00:13:07
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She was entitled to national minimum work standards, including a wage of at least $24.87 an hour. She was paid ah flat hourly rate equivalent to $18 Australian dollars an hour.
00:13:24
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So the key pieces of evidence that persuaded the FWC that Ms. Pascua was in fact an employee includes the following. She worked fixed weekly hours, 8.30am to 5pm Australian Eastern Time Monday to Friday.
00:13:42
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She was paid an hourly rate rather than being paid on milestones or outcomes. The hours she worked were were provided exclusively to the Dossel Group. She had no other clients.
00:13:56
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She could not delegate or subcontract her work. She used the firm's internal systems, including having an email address with the firm's domain name.
00:14:08
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She attended regular Zoom meetings of the firm's employees, and she was presented to others as being part of the firm's legal team.
00:14:19
Speaker
So pretty comprehensive, Adele. So this is interesting because she has that arrangement direct. And I think we should probably unpack these kinds of arrangements. I think I define these as three areas of arrangements. You've got, as in that case, a direct arrangement where the company here in Australia is employing somebody directly from overseas. That person um in this case was set up as a contractor,
00:14:46
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And they were trying to treat the person as a contractor, albeit according to the Fair Work Commission's was ah um decision. ah Actually, she was not a contractor. She was being employed as an employee.
00:14:58
Speaker
You've then got outsourced arrangements where the recruitment agency would be finding workers from overseas and on hiring them to a client, either temporary temporarily or permanently.
00:15:11
Speaker
ah And then the third option would be an outsourced company. So there are entities that are based in the country where the worker is who are recruiting people and then on-hiring them to recruitment agencies here in Australia, either as workers for the agency themselves, as recruiters, as resources, as researchers, or where they might on-hire them to a client as a third party again. And also, wouldn't just necessarily be to a recruitment agency. So those outsourced
00:15:44
Speaker
suppliers in other countries could be dealing direct with Australian end-user employers, not just recruitment agencies. Of course, of course. So so there's three yeah sort of distinct ways that people are being engaged in this manner. And this is really important case law because in any of those three options, this still raises question marks about this arrangement of whether the Australian ah industrial um landscape would deem the person an employee under the definition, under the way it looks and and sounds.
00:16:17
Speaker
So this could be a good thing for the recruitment industry in some ways, because if you have a client ah who is engaging outsourced workers, they should be scared about this. You know, there should be some some concern about the way that that this is happening now. So recruitment agencies could scoop up um under that and say, look, don't hire people from overseas, come through people, come through us and we'll find local talent. It's a much safer option.
00:16:43
Speaker
i I think many companies would be completely unaware of this ruling and probably are only going to find out to their cost if there's an aggrieved current or former outsourced worker, because there's nothing in that ruling to state that historical claims um couldn't be brought to the FWC. And I suppose that's what we're going to see.
00:17:12
Speaker
Now, if an outsourced worker has a good relationship with their Australian employer, then it's unlikely they're going to rock the boat if the relationship's working for both parties.
00:17:24
Speaker
But if the relationship has finished acrimoniously, like it has in this particular case, then that potentially is a problem. Well, that's the thing. You don't know when the relationship is going to turn. You know something that looks positive now could always turn.
00:17:40
Speaker
and you may be treating that person differently because you don't believe you need to provide the same protections as you would a local worker. So in this case, they didn't um take her through a performance management um process or discuss her performance. They just fired her. They said, we don't like that you you took some files and, you know, without any evidence, it appears they just fired her. So that's a pretty interesting lesson for everybody to learn around how recruitment agencies might be impacted by this. I've mentioned that it could be good,
00:18:10
Speaker
And you could use the the information, educate yourself about this particular case and talk to your clients about it as a means of being able to encourage them to use you locally if you're providing local workers, of course.
00:18:22
Speaker
But the recruitment agency themselves ah cells need to actually do some further research, of course, for their own workers. So if you are hiring people from overseas in any of those three capacities we discussed, direct through an outsource company or outsource direct from overseas,
00:18:41
Speaker
um you need to take stock of this and understand what occurred here and have a look at your own arrangements with workers. Yeah, it's it's consequential.
00:18:55
Speaker
And so where I see there's still an opportunity for the right thing to be done is that workers can still be paid and covered appropriately,
00:19:08
Speaker
But because they're paid the minimum rate, that's still, and legally, at at the required minimum, there may still be a significant opportunity. So, for example, in this particular case, the minimum award rate was, i think, was $24.87.
00:19:27
Speaker
Now, that worker, her market rate might be more like $35 hour. Now, you don't have to pay the worker market rates in Australia.
00:19:39
Speaker
You simply have to pay them the award minimum. So if the market rate for someone like Joanna Pascua was, let's say, $35 an hour and you pay her the award minimum, then then there's a $10 saving.
00:19:56
Speaker
So you can still have a good margin, potentially, pay the temp, the award minimum, and then still have the end user client be paying a lower hourly rate than an equivalent worker paid in Australia.
00:20:15
Speaker
And you're right here. I think that's always been the attraction of these kinds of workers. It's been about, is there a rate saving? Is there a cost saving in doing this? And that's been one of the greatest attractions, I'm sure. But there's a number of risks that this particular case highlighted earlier.
00:20:32
Speaker
particularly as you've mentioned around um award coverage, but there is a few others that are mentioned in this um access to unfair dismissal legislation, ah particularly um in relation to um warnings and terminations and um and as we said, performance management.
00:20:47
Speaker
um The national employment standards, they apply because the person is considered to be working in Australia or for Australian company and therefore things like redundancy, um long service leave, you know, all of that kind of stuff may apply to this person as well. under the National Employment Standards, sham contracting issues. So if you have actually told the person, go and, you know, get an ABN and invoice us so that you look like a contractor, but they're only working for you, you know, or I think it's a kind of 80-20 rule from my understanding around this. If 80% of their work is coming from your business, um you're going to make, it's not goingnna it's not going to stand up to a sham contracting um assessment.
00:21:26
Speaker
um And if you're using a an outsource provider, you know, you're you're still not guaranteed immunity either. You need to have this conversation with the company that's providing the workers to you as well. Yeah, for sure.
00:21:40
Speaker
And frankly, if you're a recruiter and you're using an outsourced recruiter, i would say the simplest way to protect yourself at a basic level is not pay them an hourly or daily or weekly rate. You simply pay them on outcomes because that then demonstrates that they're generally ah genuinely um an outsourced contractor. So you might pay them for candidate sourced or per candidate placed if they're working on them the candidate side or client sourced if they're working on the BD side.
00:22:14
Speaker
So if you're looking at outcomes and clearly the contract is based around outcomes, that's probably pretty good place to start rather than paying people some sort of daily or hourly rate.
00:22:29
Speaker
And we should state within this conversation, Ross, this is you and I just analysing a piece of case law. We are not lawyers. We are not providing any legal advice here in this instance. We are merely raising your awareness of this particular kind of incident, how it might affect you, your business and your clients and encouraging you to become educated, ah check the contracts and the arrangements that you have, check your documentation, ask some questions of any outsourced companies that you're using and whether they are um legitimately engaging this person or whether there is a risk that they are considered an employee under Australian law.
00:23:04
Speaker
um I would even question, um do they need a labour hire licence? You know, does that company need a labour hire licence to be on hiring the person to you? So there's a lot of questions to ask. That's what we're encouraging you to do.