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Episode 74
132 Plays4 months ago
News for the week beginning 12 August 2024 and Question of the Week: "How do you say no to bad business?"
#RNA #RecruitmentNewsAustralia #RecruitmentPodcast
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Transcript
Weekly News Introduction
00:00:09
Speaker
This is the news for we commencing the 12th of August, 2024. I'm Adele Last.
Government Wage Increase Plan
00:00:15
Speaker
Last week, the federal government announced a plan to increase wages for early childhood workers as part of a $3.6 billion dollars effort to bolster the recruitment and retention of a female-dominated workforce plagued by staff shortages. The increase will be phased in over two years, starting with a 10% rise from December this year, taking the full-time permanent award minimum to $59,000 per annum.
00:00:38
Speaker
and then a further 5% from December 2025.
Impact on After-School Services
00:00:42
Speaker
The wage increase also applies to workers in outside school hours services who care for school children of working parents in increasingly large numbers. The early education workforce made up of at least 95% women has been facing a staffing crisis with some centres closing due to a lack of qualified staff. The pay bump is tied to childcare centres commitment to limit fee increases ensuring workers can be paid fairly without the costs being passed on to families. To be eligible to receive funding for the wage increase, centres won't be able to increase their fees by more than 4.4% over the next year. Australia's largest childcare provider, Good Start Early Learning, which operates 660 centres across the country, said the pay rise would help fix the staffing crisis. Vacancies in early childhood have more than doubled in the last four years and continue to rise even as vacancies in other sectors are falling.
00:01:35
Speaker
Every unfilled educator role means up to 15 other families struggling to find care to work," CEO Roz Baxter said. The company pledged to work within the government's fee cap of 4.4%.
Staffing Companies' Financial Reports
00:01:48
Speaker
The Adeco Group reported revenue of €5.84 billion euros for the second quarter ended 30 June 2024, down 2% on an organic and trading days adjusted basis. The second largest global staffing company said gross profit fell 5%, adjusted EBITDA was down by 3%, and operating profit declined 6% year on year to €58 million. euros Adeco ANZ reported a 41% rise in quarterly revenue on the back of the ADF RPO contract. The fifth-largest staffing company in the world, Tokyo headquartered Recruit Holdings, owner of local brands Chandler McLeod and PeopleBank, reported revenue fell 0.9% in constant currency to US$5.6 billion u s dollars in its fiscal first quarter ended 30 June.
00:02:39
Speaker
The HR tech division, including Indeed and Glassdoor, fell 5.5% year over year to US$1.83 billion. u s dollars Global operating profit rose 8% to US$106 million. u s dollars Purcell Holdings, the second largest staffing firm in Japan and owner of local brands, programmed, and Purcell Kelly, reported revenue rose 9.8% year over year to US$2.24 billion u s dollars in its fiscal first quarter, ended 30 June. Group gross profit was up 12% to five hundred and twenty two million US Asia Pacific revenue was up 17.6%. Temporary staffing revenue remained strong in all countries, the company said.
00:03:24
Speaker
Page Group announced revenue declined 9.8% in constant currency and the half year ended 30 June 2024 to £898 million. pounds Group Profit dropped 12.4% Operating Profit plummeted 53.7% to £80 to £28.4 million. pounds In Asia Pacific, revenue decreased 17.4% to 116.6 million pounds in the first half and gross profit decreased 17.8%. Revenue at Page Group Australia declined 35%.
00:04:01
Speaker
Kelly Services reported second quarter revenue rose 0.6% on an organic basis. Education staffing was the fastest growing business line, growing revenue 21.7% to US$251 million. Asia Pacific revenue rose 14.9% in constant currency.
00:04:22
Speaker
ASX listed Jaime reported June 2024 quarter revenue of $8.1 million, dollars an increase of 28.5% from the June 2023 quarter. The company said revenue improved due to an increase in the number of contractors. Gross profit was up 7.9% over the prior year. Full year revenue was $30.1 million, dollars up 44.4% year on year. The company has a market cap of $6.7 million.
Sushi Bay's Exploitation Scandal
00:04:51
Speaker
dollars The owner and companies behind a chain of sushi restaurants have been hit with a record $15.3 million dollars in fines for exploiting and underpaying vulnerable migrant workers. A federal court found sushi bay outlets in New South Wales, Darwin and Canberra underpaid 163 workers more than $650,000 between February 2016 and January 2020 with individual underpayments ranging from $48 to $83,968.
00:05:23
Speaker
Most of the staff were Korean nationals working on student working holiday and 457 skilled visas. In her judgment, Justice Anna Katzmann said the case showed the exploitation of migrant workers and a shameless but ultimately unsuccessful attempt to conceal it. Most of the underpayments occurred because the companies did not pay staff adequate overtime rates. Some employees were required to repay their employer part of their salaries. Other records had also been falsified in an attempt to conceal the underpayments court documents revealed.
00:05:54
Speaker
The court also imposed a $1.6 million dollars fine against Rebecca Shin, the owner and sole director of the Sushi Bay companies and ordered all affected employees to receive compensation. All of Shin's companies are now in liquidation.
Return to Office Push by NSW Premier
00:06:10
Speaker
The NSW Premier's Department has issued a circular to government agencies, saying it's time for government employees to return to the office. The circular issued last week says agencies are expected to have flexible work policies that meet employees' reasonable requests. However, the default arrangement is to work principally in an approved workplace, office or related site.
00:06:32
Speaker
Employees who want to work from home regularly must provide reasons and get formal approval and agreement from agency heads. All such arrangements must be recorded. Work from home approvals should also be for a defined period and regularly reviewed, the circular says. Individual agencies will be responsible for designing and monitoring their own policies. The New South Wales Property Council, the people lobby group for developers took credit for the government's decision to dramatically curtail working from home.
00:07:01
Speaker
Asked outright on ABC Radio Sydney whether the property council had lobbied the Mins government for the change, executive director Katie Stevenson said, yeah, we absolutely did. We've seen the pre-pandemic to now office vacancy rate skyrocket, Stevenson said. Prior to the pandemic, Parramatta had a vacancy rate of just 3.2% and now it's approaching 20%. And we know there is an enormous public service presence in Parramatta.
00:07:28
Speaker
So it's really having a significant impact on the viability of those centers, the coffee shops and local businesses that set themselves up to support the workforce that has not been there because people have been working from home most days.
00:07:40
Speaker
Unions have warned the circular does not alter the core employment terms of public servants, most of whom already don't work from home. It has been reported that both the departments of health and transport have sent communications to employees saying there is no immediate change. In the wake of New South Wales return to office order, of the Victorian government made it clear it would not be following suit. We have no plans to roll back existing flexible working arrangements, a statement from Premier Jacinta Allen's office declared.
CFO Optimism Amid Economic Concerns
00:08:10
Speaker
Australian CFOs are feeling more optimistic about the future according to the latest Deloitte's CFO sentiment report. Australian CFO's net optimism about their own business prospects has lifted by 29 percentage points to 56% over the past six months, the first notable rise since late 2021. Net optimism about the economy at minus 7% is notably weaker than optimism about their own business prospects at 56% but has noticeably increased over the past six months. New Zealand's seasonally adjusted unemployment rate rose 0.2 percentage points quarter on quarter to 4.6% in the June 2024 quarter, according to Statistics New Zealand. The June 2023 unemployment rate was 3.6%.
00:09:01
Speaker
Average ordinary time hourly earnings in New Zealand increase 5% on an annualised basis in the quarter. However, average weekly earnings in New Zealand remain 23% below Australia's on a constant currency basis.
Intel's Strategic Shift
00:09:17
Speaker
Intel has announced it would cut more than 15% of its global workforce, some 17,500 people, and suspend its dividend starting in the fourth quarter as the chip maker pursues a turnaround focused on its money-losing manufacturing business. Intel's lagging position in the market for AI chips has sent its shares down more than 40% so far this year. I need less people at headquarters, more people in the field supporting customers, CEO Pat Gelsinger told Reuters in an interview, confirming most of the job cuts will be completed by the end of 2024.
AI Impact on Workload
00:09:50
Speaker
An Upwork survey of over 2,500 full-time workers, freelancers, and executives found that almost 80% of workers who use generative AI in their jobs said it has added to their workload and is hampering their productivity. Workers say they're spending more time reviewing or moderating AI-generated content and investing more of their time in learning how to use the tools, and their experiences are far apart from the perceptions of their employers.
00:10:17
Speaker
47% of employees using AI say they have no idea how to achieve the productivity gains their employer expects and 40% feel their company is asking too much of them when it comes to AI. Emily Rose McCray, Senior Director Analyst at Gartner said, what's happening is that this hype bubble is just huge and it's disproportionate to the actual impact that technology can have right now, especially the way it's being deployed.
00:10:46
Speaker
And that's the news for the week beginning the 12th of August, 2024. I'm Ross Clannett.
00:11:03
Speaker
Question of the week.
Identifying Bad Business Practices
00:11:05
Speaker
How do I say no to bad business? Adele. Well, we probably should define bad business to start with. I think, Ross, look at the factors that make business bad in recruitment. and Obviously, the obvious one that first stands out would be unfair payment terms. so yes Clients that are demanding restrictive and unfair terms that don't suit us. um Legal clauses hold harmless is one that's obviously been really sensitive over the years. Things that put the risk on the recruitment agency to hold the majority of the risk in the in the transaction.
00:11:43
Speaker
Things around safety and the environment in which the people are working make it bad business. Nobody wants to send somebody off to their, you know, to be injured or, or killed at work. So bad businesses, bad companies that are not safe. And then I think the final one would be around unprofitable business. yes So are you actually going to spend more than you'll make in delivering the service? And I think related to that is.
00:12:14
Speaker
not to conflate that with low margins and low prices because they're not necessarily unprofitable. But certainly if you have low fees and low margins and it takes a lot of time to fill the jobs and or a lot of time to support the assignment or assignments or to produce reports, then that will make it unprofitable.
00:12:44
Speaker
and I think that's a really good point. We need to be better as an industry about understanding the cost of delivery. you know We don't have a cost of goods like they would in ah in a manufacturing or retail environment, but there is a cost for us to deliver our service and we should probably understand that better. But you know we'll call it unprofitable business as part of this definition.
00:13:04
Speaker
Actually, there's something else that I'll add to that, which is probably um inherent in many of the things that you've listed, but that's when the customer treats us poorly, like treats the consultants disrespectfully, does not regard us as a partner.
00:13:22
Speaker
Because although that may not have a direct financial cost, it's certainly going to have a cost in terms of the morale of the recruiters and their confidence and their effectiveness in going out and filling those assignments and going out and winning new business. Yeah, there's certainly ah additional layers of factor that make it difficult to do business with certain organisations as well. Yeah, lack of communication and the relationship and all of those things on top of these legal requirements as well. Okay, well, let's let's look at how we discover
00:13:58
Speaker
that there's bad business. And for the sake of this discussion, let's delineate between we're asked to tender for a contract. So it might be a one or two or three year preferred supplier agreement as distinct from a singular piece of business. So Adil, how would you recommend ah attempting to understand or what should we ask or what should we look for to understand what might be bad business in both those cases? Well, that's a really interesting thing about this. When we talk about that definition of bad business, I mean, tender business fits all of that criteria. In most cases with tendered business, yeah we are being given the terms in which we'll work under. We've been given the payment terms, we've been given the clauses and
00:14:52
Speaker
the requirements and ah sometimes some very restrictive ways of of doing business from things like you know no temp to perm fees or refunds after a particular period of time. So tender business by nature is actually bad business, by de by our definition is bad business. But that doesn't necessarily mean you wouldn't actually bid for it. Obviously, tenders can be a very lucrative way and many agencies have made great success of having businesses under tended contracts. so I think it's about being very clear about understanding what you're getting into, and this is where somebody who really does understand tender business and contracts needs to be involved if you're going to bid. You need to really understand what is it that they're asking me for. Expect that it's bad business to start up with, but what parts of it are palatable? How could I make it work? Yeah. i think
00:15:46
Speaker
In any of those sorts of contracts, there's always tripwires. So inevitably one sentence or two sentences that may contain the the core of what makes it bad business. To your earlier example, it simply might be a statement that payment terms are 45 days.
00:16:10
Speaker
And if you're, you and this is for temp invoices, let's say, and if you're used to getting paid between seven and 14 days, then that can be in one sentence, all that you need to know to go, you know what, that's bad business. And no matter what else is available, I'm not accepting a client where they're paying on 45 days. The funny thing about this Ross, th though, is I want to give a personal example that might be a bit rare, but in my own career,
00:16:39
Speaker
I recall a tender piece of business that had a contract that was quite restricted. There were clauses in it. We were fully aware we were not prepared to sign. We actually chose not to negotiate it upfront. And I know this is a bit controversial. Probably most people would say go in and set stay upfront, what you will, and won't agree to before you even bid or decide if you're going to bid. But we strategically knew we were pretty um we were going to have a good chance at getting this business.
00:17:08
Speaker
at a good price and so we priced it well. We put in a great bid. We knew we would impress the client and we were fairly confident we would get the work and and that was the outcome. We were awarded the tender. But when we got to the signing of the contract, we took that opportunity to flex a bit of muscle there and say, okay, we've won and you want us, but this clause is unacceptable and we want it renegotiated.
00:17:31
Speaker
And you know, and we'll walk away if you don't. It was a bit ballsy. I'm not necessarily saying I would recommend doing it every time, but I did do it in my career and it was, it was successful. We were able to negotiate that clause out and roll on with the contract and, and have a good relationship with that client. We turned.
00:17:50
Speaker
what was actually bad business into good. Well, what I hear in that is you took a calculated risk and I think that's the ah lesson that I'd take out of that. You knew enough about the contract, the client, the potential competitors, the likelihood of being able to negotiate. I suppose ultimately your willingness to gamble, you know to risk the fact.
00:18:14
Speaker
that you could win it in Adverter Commerce and then a contract signing time actually lose it because the client would um decline to be flexible on the areas that you requested. So yeah, pretty ballsy and not something I'd recommend for all contracts, but in certain circumstances, clearly something that recruiters should consider doing.
00:18:38
Speaker
That other type of business we talk about where you're saying you know negotiated business or more of the one-off arrangement that we might see or define appears as bad business. What's the advice around telling the client or what what should you do and to walk away? How do you walk away from business when it's you know more individual? Well, let's let's just define bad business in that regard. Certainly in my experience, look, negotiating is part and parcel of dealing with clients with individual pieces of work or with a particular terms and conditions of business. What you really want to look for is
00:19:14
Speaker
Is the client willing to consider what you're putting forward and engage in give and take if they're simply going to be it's my way or the highway i'm not really interested in negotiating or if i do negotiate they see ground in a minor area.
00:19:34
Speaker
Then I think that's a warning sign for the type of relationship they're going to have with you going forward. In other words, they're going to be very black and white about candidates. They're going to be very black and white about guarantee periods. They're not going to or are unlikely to accept advice from you about the way the market's changing or any other aspect that a really good recruiter provides to their client. And I think that's the thing you don't want to have because really there's no enjoyment in recruiting for someone like that. And that's also probably a pretty big red flag as to the type of environment the candidate's going to be working in. And I suspect if you place good people with that sort of client, they're probably not going to last very long and you're probably going to have a lot of credits and having to refill jobs. And that will certainly make it a very unprofitable piece of business.
00:20:28
Speaker
And we haven't been good at this, though, Ross, as an industry. We've accepted bad business for too long. I mean, it's something that's been a known issue. Why do we keep doing this? What's a scarcity mentality, Adil? We're not prepared to walk away and risk the fact that the client will not come back to us. And that's always an element of walking away that the client won't come back to us. And my view is, well, that's part and parcel of negotiating.
00:20:52
Speaker
that if you are prepared to walk away and 50% of the time the client comes back, then I think that's that's a win. And frankly, a lot of recruiters are just scared to go on business develop to find another piece of new work. They'd rather lower their trousers on something they already have and undergo, or they don't have it actually, but they're negotiating something they've already found and they're negotiating on.
00:21:19
Speaker
rather than go out and find a better piece of business. And that's why the culture of business development is a critical part of agencies that are profitable because they don't feel that scarcity mentality. They don't feel like they have to negotiate. They have to give in for this particular contract or this particular client because they're thinking, you know what, plenty more fish in the sea.
00:21:43
Speaker
Clients are not prepared to be flexible. I'm sorry, I'm not going to agree to these terms because I'd rather go out and find a piece of new business. Most recruiters don't think like that. And so that might be our final bit of advice. You know, how do you say no to bad business? I think it's about being brave. Be brave enough to walk away when you really know you should. And if it comes back and you can renegotiate it, you may be in a much better position, but That's I guess the overarching message we want to get out there to all of you. Stop accepting the bad business. Be brave about this. That's right. Because ultimately it's unprofitable and even worse, it's demoralizing. No one wants to service bad business. It's not worth any amount of money because you're just compromising yourself professionally. And that's not why you want to come to work.
00:22:37
Speaker
To stay up to date with every episode of Recruitment News Australia, subscribe via our website recruitmentnewsaustralia.com.au, follow our LinkedIn page, Recruitment News Australia, and subscribe via your favourite podcast app. For more details about my services, simply go to rossclenet.com. And for more information about what's happening on my desk, you can visit carealassoo.com.
00:23:08
Speaker
or the captainstable dot.com.au website.